Sunday, 12 August 2018

Whether motor accident tribunal can apply doctrine of pay and recover?

Since the reference to the larger bench in Parvathneni case
has been disposed of by keeping the questions of law open to be
decided in an appropriate case, presently the decision in Swaran
Singh case followed in Laxmi Narain Dhut and other cases hold
the field. The award passed by the Tribunal directing the insurance
company to pay the compensation amount awarded to the
claimants and thereafter, recover the same from the owner of the
vehicle in question, is in accordance with the judgment passed by
this Court in Swaran Singh and Laxmi Narain Dhut cases. While
so, in our view, the High Court ought not to have interfered with the
award passed by the Tribunal directing the first respondent to pay
and recover from the owner of the vehicle. The impugned judgment
of the High Court exonerating the insurance company from its
liability and directing the claimants to recover the compensation
from the owner of the vehicle is set aside and the award passed by
the Tribunal is restored.

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 8144 OF 2018
[Arising out of SLP(C) No.26955 of 2017]

SHAMANNA AND ANOTHER Vs THE DIVISIONAL MANAGER THE ORIENTAL INSURANCE CO. LTD. AND ORS.
Dated:August 08, 2018


R. BANUMATHI, J.
Leave granted.
2. This appeal arises out of the judgment dated 14.09.2016
passed by the High Court of Karnataka at Dharwad Bench in MFA
No.24534 of 2010 in and by which the High Court reversed the
award passed by the Tribunal for “pay and recover” holding that the
owner of the vehicle is liable to pay the compensation to the
appellants/claimants. The High Court enhanced the compensation
from Rs.3,55,500/- to Rs.4,94,700/- with interest at the rate of 6%
per annum.
3. On 14.04.2008, Shankareppa Pattar son of the
appellants/claimants was travelling in a jeep bearing Reg.No.KA-
22/M-3805. The jeep was driven negligently due to which door of the
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jeep suddenly opened and Shankareppa was thrown out of the
vehicle and sustained grievous injuries and died in the hospital. In
the claim petition filed by the appellants/parents of the deceased
Shankareppa, the Tribunal awarded compensation of Rs.3,55,500/-
with interest at 6% per annum from the date of claim petition till
realisation. Since the driver of the jeep had no valid driving licence at
the time of the accident and since there was violation of the terms of
the insurance policy, the Tribunal directed the insurance company to
pay the compensation to the claimants and granted liberty to the
insurance company to recover the same from the owner of the
offending vehicle.
4. Being aggrieved by the award directing the insurer to pay the
compensation amount to the claimants and recover the same from
the owner of the vehicle, the insurance company filed appeal before
the High Court. The claimants have also filed appeal seeking
enhancement of compensation. The High Court referred to its own
judgment in the case of Oriental Insurance Co. Ltd. v. K.C.
Subramanyam MANU/KA/0945/2012 : ILR 2012 KAR 5241 and
held that the Supreme Court directed the insurance company to
make payment to the claimants and to recover the same from the
owner of the vehicle in exercise of its discretionary power under
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Article 142 of the Constitution of India. The High Court observed
that power under Article 142 of the Constitution is vested only with
the Supreme Court and such power is not vested with the High
Court or the Tribunal and set aside the award passed by the
Tribunal directing the insurance company to pay compensation to
the claimants and recover the same from the owner of the vehicle is
not sustainable. The High Court held that only the owner of the
offending vehicle is liable to make the payment of the compensation
amount awarded by the Tribunal. The High Court has enhanced the
compensation awarded by the Tribunal from Rs.3,55,500/- to
Rs.4,94,700/-. To determine the loss of dependency, the High Court
has taken into consideration the age of the deceased Shankareppa
and has adopted multiplier of ‘18’ instead of multiplier of ‘14’. Being
aggrieved by the judgment of the High Court setting aside the
direction to the insurance company to “pay and recover”, the
appellants/claimants have preferred this appeal.
5. We have heard the learned counsel for the parties. We have
gone through the impugned judgment and perused the materials
placed on record.
6. In the case of third party risks, as per the decision in National
Insurance Company Ltd. v. Swaran Singh and others (2004) 3
3
SCC 297, the insurer had to indemnify the compensation amount
payable to the third party and the insurance company may recover
the same from the insured. Doctrine of "pay and recover" was
considered by the Supreme Court in Swaran Singh case wherein
the Supreme Court examined the liability of the insurance company
in cases of breach of policy condition due to disqualifications of the
driver or invalid driving licence of the driver and held that in case of
third party risks, the insurer has to indemnify the compensation
amount to the third party and the insurance company may recover
the same from the insured. Elaborately considering the insurer's
contractual liability as well as statutory liability vis-a-vis the claims of
third parties, the Supreme Court issued detailed guidelines as to
how and in what circumstances, “pay and recover” can be ordered.
In para (110), the Supreme Court summarised its conclusions as
under:-
“110. The summary of our findings to the various issues as raised
in these petitions is as follows:
(i) Chapter XI of the Motor Vehicles Act, 1988 providing compulsory
insurance of vehicles against third-party risks is a social welfare
legislation to extend relief by compensation to victims of accidents
caused by use of motor vehicles. The provisions of compulsory
insurance coverage of all vehicles are with this paramount object
and the provisions of the Act have to be so interpreted as to
effectuate the said object.
(ii) An insurer is entitled to raise a defence in a claim petition filed
under Section 163-A or Section 166 of the Motor Vehicles Act,
1988, inter alia, in terms of Section 149(2)(a)(ii) of the said Act.
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(iii) The breach of policy condition e.g. disqualification of the driver
or invalid driving licence of the driver, as contained in sub-section
(2)(a)(ii) of Section 149, has to be proved to have been committed
by the insured for avoiding liability by the insurer. Mere absence,
fake or invalid driving licence or disqualification of the driver for
driving at the relevant time, are not in themselves defences
available to the insurer against either the insured or the third
parties. To avoid its liability towards the insured, the insurer has to
prove that the insured was guilty of negligence and failed to
exercise reasonable care in the matter of fulfilling the condition of
the policy regarding use of vehicles by a duly licensed driver or one
who was not disqualified to drive at the relevant time.
(iv) Insurance companies, however, with a view to avoid their
liability must not only establish the available defence(s) raised in
the said proceedings but must also establish "breach" on the part of
the owner of the vehicle; the burden of proof wherefore would be on
them, (v) The court cannot lay down any criteria as to how the said
burden would be discharged, inasmuch as the same would depend
upon the facts and circumstances of each case.
(vi) Even where the insurer is able to prove breach on the part of
the insured concerning the policy condition regarding holding of a
valid licence by the driver or his qualification to drive during the
relevant period, the insurer would not be allowed to avoid its liability
towards the insured unless the said breach or breaches on the
condition of driving licence is/are so fundamental as are found to
have contributed to the cause of the accident. The Tribunals in
interpreting the policy conditions would apply "the rule of main
purpose" and the concept of "fundamental breach" to allow
defences available to the insurer under Section 149(2) of the Act.
(vii) The question, as to whether the owner has taken reasonable
care to find out as to whether the driving licence produced by the
driver (a fake one or otherwise), does not fulfill the requirements of
law or not will have to be determined in each case.
(viii) If a vehicle at the time of accident was driven by a person
having a learner's licence, the insurance companies would be liable
to satisfy the decree.
(ix) The Claims Tribunal constituted under Section 165 read with
Section 168 is empowered to adjudicate all claims in respect of the
accidents involving death or of bodily injury or damage to property
of third party arising in use of motor vehicle. The said power of the
Tribunal is not restricted to decide the claims inter se between
claimant or claimants on one side and insured, insurer and driver
on the other. In the course of adjudicating the claim for
compensation and to decide the availability of defence or defences
to the insurer, the Tribunal has necessarily the power and
jurisdiction to decide disputes inter se between the insurer and the
insured. The decision rendered on the claims and disputes inter se
between the insurer and insured in the course of adjudication of
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claim for compensation by the claimants and the award made
thereon is enforceable and executable in the same manner as
provided in Section 174 of the Act for enforcement and execution of
the award in favour of the claimants.
(x) Where on adjudication of the claim under the Act the Tribunal
arrives at a conclusion that the insurer has satisfactorily proved its
defence in accordance with the provisions of Section 149(2) read
with sub-section (7), as interpreted by this Court above, the
Tribunal can direct that the insurer is liable to be reimbursed by the
insured for the compensation and other amounts which it has been
compelled to pay to the third party under the award of the Tribunal.
Such determination of claim by the Tribunal will be enforceable and
the money found due to the insurer from the insured will be
recoverable on a certificate issued by the Tribunal to the Collector
in the same manner under Section 174 of the Act as arrears of land
revenue. The certificate will be issued for the recovery as arrears of
land revenue only if, as required by sub-section (3) of Section 168
of the Act the insured fails to deposit the amount awarded in favour
of the insurer within thirty days from the date of announcement of
the award by the Tribunal.
(xi) The provisions contained in sub-section (4) with the proviso
there under and sub-section (5) which are intended to cover
specified contingencies mentioned therein to enable the insurer to
recover the amount paid under the contract of insurance on behalf
of the insured can be taken recourse to by the Tribunal and be
extended to claims and defences of the insurer against the insured
by relegating them to the remedy before regular court in cases
where on given facts and circumstances adjudication of their claims
inter se might delay the adjudication of the claims of the victims,”
(Underlining added)
7. As per the decision in Swaran Singh case, onus is always
upon the insurance company to prove that the driver had no valid
driving licence and that there was breach of policy conditions.
Where the driver did not possess the valid driving licence and there
are breach of policy conditions, “pay and recover” can be ordered in
case of third party risks. The Tribunal is required to consider as to
whether the owner has taken reasonable care to find out as to
whether the driving licence produced by the driver, does not fulfill
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the requirements of law or not will have to be determined in each
case.
8. The Supreme Court considered the decision of Swaran
Singh case in subsequent decision in National Insurance Co. Ltd.
v. Laxmi Narain Dhut, (2007) 3 SCC 700, wherein this Court held
that “the decision in Swaran Singh case has no application to
cases other than third party risks and in case of third party risks the
insurer has to indemnify the amount and if so advised, to recover
the same from the insured”. The same principle was reiterated in
Prem Kumari v. Prahlad Dev and others (2008) 3 SCC 193.
9. For the sake of completion, we may refer to few judgments
where the breach of policy conditions was fundamental and the
Supreme Court taking contrary view that the insurance companies
were not liable to pay the compensation. In National Insurance
Co., Ltd. v. Bommithi Subbhayamma and others, (2005) 12 SCC
243, the Supreme Court reversed the judgment of Andhra Pradesh
High Court in making the insurance company liable for payment of
compensation in respect of gratuitous passengers carried in the
goods vehicle.
10. In Oriental Insurance Co. Ltd. v. Brij Mohan and others
(2007) 7 SCC 56, the claimant was travelling in the trolley attached
to tractor carrying earth to brick kiln. It was found that the tractor
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and the trolley were not used for “agricultural works”, the only
purpose for which the tractor was insured, when the claimant
sustained the injuries. The Supreme Court though held that the
insurance company is not liable to pay compensation, however,
invoked the power vested in the Supreme Court under Article 142 of
the Constitution of India in directing the insurance company to
satisfy the award by paying compensation to the insured/claimant
and realise the same from the owner of the tractor.
11. In the present case, to deny the benefit of ‘pay and recover’,
what seems to have substantially weighed with the High Court is the
reference to larger Bench made by the two-Judge Bench in
National Insurance Co. Ltd. v. Parvathneni and another (2009) 8
SCC 785 which doubted the correctness of the decisions which in
exercise of jurisdiction under Article 142 of the Constitution of India
directing insurance company to pay the compensation amount even
though insurance company has no liability to pay. In Parvathneni
case, the Supreme Court pointed out that Article 142 of the
Constitution of India does not cover such type of cases and that “if
the insurance company has no liability to pay at all, then, it cannot
be compelled by order of the court in exercise of its jurisdiction
under Article 142 of the Constitution of India to pay the
compensation amount and later on recover it from the owner of the
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vehicle”. The above reference in Parvathneni case has been
disposed of on 17.09.2013 by the three-Judges Bench keeping the
questions of law open to be decided in an appropriate case.
12. Since the reference to the larger bench in Parvathneni case
has been disposed of by keeping the questions of law open to be
decided in an appropriate case, presently the decision in Swaran
Singh case followed in Laxmi Narain Dhut and other cases hold
the field. The award passed by the Tribunal directing the insurance
company to pay the compensation amount awarded to the
claimants and thereafter, recover the same from the owner of the
vehicle in question, is in accordance with the judgment passed by
this Court in Swaran Singh and Laxmi Narain Dhut cases. While
so, in our view, the High Court ought not to have interfered with the
award passed by the Tribunal directing the first respondent to pay
and recover from the owner of the vehicle. The impugned judgment
of the High Court exonerating the insurance company from its
liability and directing the claimants to recover the compensation
from the owner of the vehicle is set aside and the award passed by
the Tribunal is restored.
13. So far as the recovery of the amount from the owner of the
vehicle, the insurance company shall recover as held in the decision
in Oriental Insurance Co. Ltd. v. Nanjappan and others (2004)
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13 SCC 224 where this Court held that “….that for the purpose of
recovering the same from the insured, the insurer shall not be
required to file a suit. It may initiate a proceeding before the
concerned Executing Court as if the dispute between the insurer
and the owner was the subject matter of determination before the
Tribunal and the issue is decided against the owner and in favour of
the insurer.”
14. In the result, the impugned judgment of the High Court insofar
as enhancement of the compensation to Rs.4,94,700/- is affirmed.
Insofar as direction of the impugned judgment directing the
appellants/claimants to recover the compensation from the owner of
the vehicle is set aside and the appeal is partly allowed. The first
respondent insurance company shall pay the enhanced
compensation to the appellants/claimants along with the accrued
interest and the insurance company shall recover the same from the
owner of the vehicle. No costs.
.…….…………...………J.
[RANJAN GOGOI]
…………….……………J.
[R. BANUMATHI]
New Delhi;
August 08, 2018

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