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CASE NO.: Appeal (civil)  6295 of 2003

PETITIONER: United India Insurance Co. Ltd.                                  

RESPONDENT: Jyotsnaben Sudhirbhai Patel & Ors.                               

DATE OF JUDGMENT: 11/08/2003

BENCH: K.G. Balakrishnan & P. Venkataramma Reddi.  

JUDGMENT:

J U D G M E N T

(Arising out of SLP[C] No. 13002 of 2002)

K.G. BALAKRISHNAN, J.

       Leave granted.

       Aggrieved by the order passed by the Division Bench of the Gujarat High  Court, the United India Insurance Company has come up in appeal by way of  special leave.   The appellant was the third respondent in a motor accident claim  preferred by respondents 1 to 3 herein, who are legal heirs of one Sudhirbhai  Jayrambhal Patel who died in a motor accident on 27.8.1994.  Respondents 1 to  3 claimed a total compensation of Rs.80 lacs and the Motor Accident Claims  Tribunal (Special), Vadodra, passed an award for RS.32,50,000/- with interest at  the rate of 12% per annum from the date of application till realisation.  From the  impugned judgment of the Tribunal dated 15.5.1999, it appears that the first  respondent, the driver of the offending vehicle and the second respondent, the  owner of the vehicle appeared before the Tribunal, but did not file any written  statement refuting the allegations made in the petition.   The Tribunal has stated  that these respondents did not step into the witness box to explain the  circumstances and the manner in which the actual mishap took place.   It was  further stated that in view of that, the Tribunal was compelled to draw an adverse  inference against them.   These observations have been made in paragraph 18  of the judgment of the Tribunal.

       Before the Tribunal, the appellant Insurance Company filed a petition  under Section 170 of the Motor Vehicles Act, 1988 (hereinafter referred to as ’the  Act’) praying that the appellant herein be allowed to contest the proceedings.    That application was granted by the Tribunal by a cryptic order; "Granted as  prayed for".   After the award was passed by the Tribunal, the appellant filed an  appeal before the Gujarat High Court impleading the legal heirs of the deceased  and also the driver and owner of the offending vehicle as respondents.  When the  appeal came up for consideration, the Division Bench was of the view that in  view of Section 149(2) of the Act, the appeal under  Section 170 was not  maintainable, especially in view of the observations made by this   Court   in   Shankarayya   vs   United   India   Insurance   Co. Ltd. AIR 1998 SC 2968,    and the appeal preferred by the appellant was dismissed.  Aggrieved by the  same, the present appeal is filed by the United India Insurance Company  Limited.

       We heard the appellant’s counsel and also counsel for the respondents.    

The short question that arises for consideration is whether the appeal  preferred by the appellant before the High Court was maintainable or whether it  was barred by the provisions of the Motor Vehicles Act. It is now a settled  position that an insurer can contest the proceedings before the Motor Accident

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Claims Tribunal only on any of the grounds prescribed under Section 149 (2) of  the Act and unless a specific order is passed by the Tribunal under Section 170,  the insurer cannot contest the claim on grounds other than the grounds  mentioned in sub-section (2) of Section 149 of the Act.   It is relevant to extract  Section 149 and 170 of the Motor Vehicles Act. Sub-section (2) of Section 149 of  the Motor Vehicles Act, 1988 reads as under:

"(2) No sum  shall be payable by an insurer under sub-section (1) in  respect of any judgment or award unless, before the  commencement of the proceedings in which the judgment or award  is given the insurer had notice through the Court or, as the case  may be, the Claims Tribunal of the bringing of the proceedings, or  in respect of such judgment or award so long as execution is  stayed thereon pending an appeal; and an insurer to whom notice  of the bringing of any such proceedings is so given shall be entitled  to be made a party thereto and to defend the action on any of the  following grounds, namely:-

(a)     that there has been a breach of specified condition of the  policy, being one of the following conditions, namely:-

(i)     a condition excluding the use of the vehicle---

(a)     for hire or reward, where the vehicle is on the date of the  contract of insurance a vehicle not covered by a permit to ply for  hire or reward, or  

(b)     for organised racing and speed testing, or

(c)     for a purpose not allowed by the permit under which the  vehicle is used, where the vehicle is a transport vehicle, or

(d)     without side-car being attached where the vehicle is a motor  cycle; or

(ii)    a condition excluding driving by a named person or persons or  by any person who is not duly licenced, or by any person who has  been disqualified for holding or obtaining a driving licence during  the period of disqualification; or

(iii)   a condition excluding liability for  injury caused or contributed to  by conditions of war, civil war, riot or civil commotion, or

(b) that the policy is void on the ground that it was obtained by the  non-disclosure of a material fact or by a representation of fact  which was false in some material particular."

       Section 170 of the Motor Vehicles Act reads as under:

"170.  Impleading insurer in certain cases. â\200\223 Where in the  course of any inquiry, the Claims Tribunal is satisfied that â\200\223

(a)     there is collusion between the person making the claim and  the person against whom the claim is made, or

(b)     the person against whom the claim is made has failed to contest  the claim, it may for reasons to be recorded in writing, direct that  the insurer who may be liable in respect of such claim, shall be  impleaded as a party to the proceeding and the insurer so  impleaded shall thereupon have, without prejudice to the provisions  contained in sub-section (2) of section 149, the right to contest the  claim on all or any of the grounds that are available to the person  against whom the claim has been made.

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       This Court in  Shankarayya’s case (supra) held that the Insurance  Company when impleaded as a party by the Tribunal can be permitted to contest  the proceedings on merits only if the conditions precedent mentioned in Section   170  are found to be satisfied and for that purpose the Insurance Company has  to obtain order in writing from the Tribunal which should be a reasoned order by  the Tribunal and unless that procedure is followed the Insurance Company  cannot have a wider  defence on merits than what is available to it by way of  statutory   defence.

       In a series of other decisions too, the same view was taken.  In  Rita Devi    (Smt.)   &   Ors.   vs.    New    India   Assurance    Co. Ltd. & Anr. (2000) 5  SCC 113, this Court held that if the Insurance Company had not obtained leave  from the Tribunal before filing the appeal, the appeal preferred by the Insurance  Company before the High Court would not be maintainable in law.

       In    Chinnama   George   &   Ors. vs.   N. K. Raju & Anr.      (2000) 4  SCC 130, it was held that the insurer can defend the proceedings before the  Claims Tribunal only on certain limited grounds mentioned in Section 149(2) of  the Act and if these grounds are not available to the insurer, then a joint appeal  by the owner of the motor vehicle and the Insurance Company may not be of any  avail and the Insurance Company is legally bound to satisfy the award and it  cannot be termed as ’a person aggrieved by the award’ and therefore the insurer  would be barred from filing an appeal against the award of the Tribunal.

H.S.  Ahammed Hussain & Anr. vs.   Irfan Ahammed  & Another  (2002) 6 SCC 52 was a case where the insurer and the insured jointly filed an  appeal.   This Court held that even though the appeal filed by the Insurer was not  maintainable, the appeal need not be dismissed and the insured may proceed  with the appeal.   This Court stated as under :

"Thus, the decision of this Court in the case of Chinnama Gerorge  can be of no avail to the appellant and we do not find any merit in  the submission that joint appeal by the insurer as well as the  insured was not maintainable.  In such an eventuality, the course  which a court should adopt is as noticed in the case of Narendra  Kumar to delete the name of the insurer from the cause title and  proceed with the appeal of the insured and decide the same on  merit."

       The lone dissenting view was expressed by this Court in United    India      Insurance    Co. Ltd. vs.    Bhushan   Sachdeva  & Ors. (2002) 2 SCC 265.   There, it was held that it is open to the Insurance Company to invoke the right  under Section 173 of the Act and maintain an appeal against the award made by  the Tribunal.       It was held that the insurer shall be treated as a person  aggrieved by the award as the amount of compensation is to be paid by the  Insurance Company.   The Court also went on to observe that failure to file an  appeal by the insurer would amount to ’failed to contest’ and therefore, the  Insurer can maintain an appeal under Section 173 of the Act.

       The view taken in the above decision was not accepted by a three Judge  bench of this Court in  National Insurance Co. Ltd., Chandigarh vs. Nicolletta  Rohtagi & Ors. (2002) 7 SCC 456,  which considered the question elaborately  and held that the right of appeal is not an inherent right and as the Insurance  Company is permitted to contest only on the grounds stated in Section 149(2) of  the Motor Vehicles Act, the insurer cannot file an appeal on any other ground,  except in accordance with the procedure prescribed under Section 170 of the  Act.  In that case,  this Court observed as follows :

       "The aforesaid provisions show two aspects.    Firstly, that  the insurer has only statutory defences available as provided in  sub-section (2) of Section 149 of the 1988 Act and secondly, where

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the Tribunal is of the view that there is a collusion between the  claimant and the insured, or the insured does not contest the claim,  the insurer can be made a party and on such impleadment the  insurer shall have all defences available to it.  Then comes the  provision of Section 173 which provides for an appeal against the  award given by the Tribunal.  Under Section 173, any person  aggrieved by an award is entitled to prefer an appeal to the High  Court.   Very often the question has arisen as to whether an insurer  is entitled to file an appeal on the grounds available to the insured  when either there is a collusion between the claimants and the  insured or when the insured has not filed an appeal before the High  Court questioning the quantum of compensation.   The consistent  view of this Court had been that the insurer has no right to file an  appeal to challenge the quantum  of compensation or finding of the  Tribunal as regards the negligence or contributory negligence of  offending vehicle."

       In view of the aforesaid decisions on the point and on a consideration of  the relevant provisions under the Motor Vehicles Act, it is plain and clear that the  Insurance Company can contest the claim preferred before the Tribunal only on  the statutory grounds prescribed under Section 149(2) of the Act, but, if there is  collusion between the person making the claim and the person resisting the claim  or if the person against whom the claim is made has failed to contest the claim,  the Insurance Company can step in and seek permission of the  Tribunal and  make a prayer   for getting  itself   impleaded as a party to the proceeding and  the insurer so impleaded  can  then contest the proceeding on grounds other  than the grounds enumerated in sub-section 2 Section 149 of the Act.   This is an  enabling provision in the event of a collusion between the claimant and the  insured or the tortfeaser.

       In the instant case, the Insurance Company was impleaded as third  respondent.   The driver and owner of the vehicle, though appeared before the  Tribunal, did not contest the proceedings.   They did not file the written statement  nor did they choose to give evidence before the Tribunal.   Admittedly, the  appellant filed an application under Section 170 of the Act seeking permission of  the Tribunal to contest the proceedings giving the necessary details. The award  passed by the Tribunal also evidently shows that pursuant to this permission, the  counsel for the appellant-Insurance Company cross-examined the witnesses  produced by the claimant to prove the negligence of the offending vehicle.        Unfortunately, however, the Tribunal, while passing its orders on the petition filed  under Section 170 of the Act only stated that the prayer was granted, though the  mandate of Section 170 (b) of the Motor Vehicles Act states that the Tribunal  while passing an order shall record its reasons.      This Court in Shankarayya’s  case (supra) had emphasised this aspect.   But it is very much evident in this  case that the driver and the owner of the motor vehicle did not file the written  statement and failed to contest the proceedings.   The Tribunal could have  merely recorded that fact while allowing the application.  In a situation  contemplated by clause (b) of Section 170, nothing more was required than  recording that indisputable fact.   For failure to do so, the appellant shall not  suffer prejudice.  Therefore,  the appellant-Insurance Company was justified in  contesting the proceedings on the grounds other than those enumerated under  sub-Section (2) of Section 149 of the Act, pursuant to the permission granted by  Court.  For the same reason, the Insurance Company can be legitimately  considered to be ’person aggrieved’ within the meaning of Section 173 of the Act.

       Having regard to the above facts, we are constrained to hold that the High  Court should not have dismissed the appeal on the sole ground that the appellant  had not obtained reasoned order permitting it to contest under Section 170 of the  Act.    In the result, we allow this appeal, set aside the judgment and order  passed by the Division Bench of the High Court and remand the matter to the  High Court.    We request the High Court to hear and dispose of the appeal on  merits in accordance with law.

       There will be no order as to costs.  

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