Sunday, 23 June 2019

Guidelines of Supreme Court as when pay and recover can be ordered in case of motor accident

The question whether the insurer can avoid its liability in the
event it raises a defence as envisaged in sub section 2 of section 149 of

the Motor Vehicles Act, 1988 has been considered by the three Judge
Bench of the Supreme Court in Swarana Singh (Supra). The law laid
down in Swarna Singh has been reiterated in Shamanna v/s.
Divisional Manager, the Oriental Insurance Co. Ltd. (supra) as
under :6.
In the case of third party risks, as per the decision in
National Insurance Company Ltd. v. Swaran Singh and
others (2004) 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 visavis
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 thirdparty
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 163A
or Section 166 of the Motor Vehicles
Act, 1988, inter alia, in terms of Section 149(2)(a)(ii) of the
said Act.
(iii) The breach of policy condition e.g. disqualification of the
driver or invalid driving licence of the driver, as contained in
subsection
(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 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 subsection
(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 subsection
(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 subsection
(4) with the
proviso there under and subsection
(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 the
requirements of law or not will have to be determined in
each case. ”
15. In National Insurance Co. Ltd. Vs. Laxmi Narayan Dhut
(2007) 3 SCC 700, the Apex Court has drawn a distinction between
own damage claim not involving any third party visàvis
the liability in
respect of the third party risk. In the aforestated case the Supreme
Court relied upon the decision in Swarana Singh (supra) to hold that
even in cases of willful breach the insurer's liability visàvis
third party
was statutory and that it is for the Insurance Company to satisfy the
award and then recover the compensation from the insured.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
FIRST APPEAL NO. 50 OF 2016

National Insurance Co. Ltd. V/s.  Pallavi Anand Hegde & Ors. 

CORAM: SMT. ANUJA PRABHUDESSAI, J.

JUDGMENT PRONOUNCED ON: 21st JUNE, 2019.



By order dated 28th September, 2016 this Court had put the
parties to notice that the appeal would be heard finally at the stage of
admission. Accordingly, with consent of the parties, appeal is heard
finally.
2. This appeal is directed against the judgment and award dated
27/10/2014 in M.A.C.P. No.793/2012 made by the learned Member,
Motor Accident Claim Tribunal, Pune.
3. The respondent nos.1 to 5 , who are the original claimants, had
filed a claim petition under Section 166 of Motor Vehicles Act, 1988 for

compensation of Rs.1,50,00,000/on
account of death of Anand Hegde
in a motor vehicular accident. The respondent no.1 is the widow, the
respondent nos.2 and 5 are the minor children and respondent nos.3
and 4 are the parents of the deceased Anand Hegde. The deceased
Anand Hegde was 33 years of age. He was employed as a Senior
Design Engineer at Geometric Limited, Hinjewadi. On 11/08/2012A
while he was proceeding to his office, a Mini Truck bearing No.MH14
AZ 1370 dashed against his Honda Activa Scootor No.MH11AA3433.
Anand Hegde expired as a result of the injuries sustained in the said
motor vehicular accident. The offending truck was driven by Kishor
Gavai, owned by the respondent no.6 and insured by the appellant –
Insurance Company. The claimants alleged that said Anand Hegde had
expired as a result rash and negligent driving by the driver of the mini
truck. These respondents therefore claimed total compensation of
Rs.1,50,00,000/from
the respondent no.6 and the appellant Insurance
Company.
4. The respondent no.6 – the owner of the vehicle did not contest
the proceedings. The appellant – Insurance Company denied that the
accident was caused due to rash and negligent driving by the driver of
the truck. The appellant also claimed that the driver of the truck was

not holding a valid and effective driving license. The appellant claimed
that it is not liable to indemnify the insured in view of breach of terms
and conditions of the policy.
5. Upon considering the evidence adduced by the respondent nos.1
to 5 and the appellant – Insurance Company, the Claims Tribunal held
that the accident was caused due to rash and negligent driving by the
driver of the truck bearing No.MH14AZ1370
and awarded
compensation of Rs.81,25,000/with
interest at the rate of 7.5% p.a.
from the date of the claim petition till final realization of the amount.
6. The Claims Tribunal has recorded a finding that the driving
license of the driver Kishor
Gavai was valid till 09/12/2004. He had
not renewed the driving license since December, 2004. The vehicle
involved in the accident was driven without a valid and effective
driving license. The Tribunal held that the appellantInsurance
Company has proved that the insured had committed breach of policy
conditions. Relying upon the decision of the Apex Court in S. Iyyapan
v/s. M/s. United India Insurance Co. Ltd. and anr. AIR 2013 SC
2262 and the decision of this Court in Oriental Insurance Co. Ltd.
V/s. Suhas and ors. ACJ 935, the Claims Tribunal directed the

Insurance Company to satisfy the award with liberty to proceed
against the insured to recover the amount. Being aggrieved by these
directions the appellant – Insurance Company has filed this Appeal.
7. Mr. Amol Gatne, the learned counsel for the appellant contends
that under subsection
2 of Section 149, the insurer has an absolute
right to raise a defence that the vehicle was driven by a person who
was not duly licensed or was disqualified to hold a license. He
contends that having proved the statutory defence, the Claims Tribunal
had no jurisdiction to direct the appellant – Insurance Company to
satisfy the award, with liberty to recover the amount from the insured.
He contends that the directions to pay and recover given by the Apex
Court in National Insurance Co. Ltd. v/s. Swaran Singh (2004) 3
SSC 297 have been issued in exercise of powers under Article 142 of
the Constitution of India and that such discretionary power is not
vested with this court or the tribunal. He therefore contends that the
tribunal had no jurisdiction to issue such directions.
8. Mr. Gatne submits that in National Insurance Company Ltd v/s.
Parvatheneni and ors 2009 (8) SCC 785, it was observed 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 vehicle”. The Two Judge Bench
doubted the correctness of the decisions which in exercise of
jurisdiction under Article 142 of the Constitution of India directed
Insurance Company to pay the compensation amount even though
Insurance Company has no liability to pay and made a reference to a
larger Bench. He submits that though the above reference in
Parvathneni case has been disposed of on 17.09.2013 by the threeJudges
Bench, the issue has been kept open to be decided in an
appropriate case. He, therefore, contends that the issue of “ pay and
recover ” is still a subsisting question. He further contends that the
Division Bench of this Court in Traders Pvt. Ltd. V/s. Sunanda K.
Machivale 2009 (Supp) Bom.C.R.587 has confirmed the view of the
learned Single Judge in United India Insurance Company v/s. Anubai
G. Thakare 2007(5)BomCR 520 that no pay and recovery order can
be passed against insurer in the absence of any specific provision. He
contends that even if it is held that the Tribunal is empowered to pass
such an order, in the facts of the case, the Tribunal was not justified in
passing such an order as the evidence adduced by the Insurance
Company amply proves that as on the date of the accident, the driver

was not holding a license. In support of this contention, he has relied
upon the decision of the Apex Court in Rambabu Tiwari v/s. United
India Insurance Co. Ltd. 2008 (8) SCC 165.
9. As regards the quantum of compensation, he contends that the
Claims Tribunal has erred in considering the gross annual income of
the deceased in computing the compensation. He has further stated
that the Tribunal has not deducted the allowances towards special
allowance, transport allowance, monthly variable pay, LTA, club
membership, telephone amount. He, therefore, contends that the
amount awarded by the Tribunal is excessive and arbitrary.
10. Mr. Yuvraj P. Narvankar, the learned counsel for the respondent
nos.1 to 5 contends that the respondent nos.1 to 5 have proved that the
accident was caused due to rash and negligent driving by the driver of
the truck. He submits that the appellant had failed to plead and prove
that the breach of terms and conditions was willful or that it was the
cause of the accident. He further submits that the case in hand is not
covered by the exceptions carved out by the Apex Court in Swaran
Singh (supra). Hence, the Claims Tribunal was justified in directing
the insurer to pay the compensation and then to recover the sum from

insured and/or from the driver. He submits that the reference to the
larger Bench has been disposed of and the Apex Court in Shamanna
v/s. Divisional Manager, The Oriental Insurance Co. Ltd. 2018 SCC
Online SC 849; has clearly observed that the decision in Swarana
Singh (supra) following in Laxmi Narayan Dhut (supra) and other
cases hold the field.
11. Mr. Narvankar, the learned counsel for the respondent nos.1 to 5
further contends that considering the beneficial object of the Act, the
appellant – Insurance Company cannot be absolved on its liability of
satisfying the award though in law it has no liability, with liberty to
recover the amount from the insured. In support of this contention, he
has relied upon the decision of the Apex Court in Manager National
Insurance Co. Ltd. Vs. Saju P. Paul and Anr. (2013) 2 SCC 41 and
National Insurance Co. Ltd. Vs. Savitri Devi and Ors. 2004) 1 SCC
596 and the decisions of this Court in Bajaj Allianz General Insurance
Co. Ltd. vs. Sangita wd/o Bhagwan Raut and Ors. 2015 (1) Mh.L.J.;
United India Insurance Co. Ltd. Vs. Godabai we/o Kisanrao Shinde
and Ors. 2018 (1) Mh.L.J., Oriental Insurance Co. Ltd. vs. Suhas
s/o. Sitaramji Tambe and Ors. 2012 (5) Mh.L.J., United India
Insurance Co. Ltd. vs. Sindhubai w/o. Kondiram Dawante and Ors.

2010 (3) Mh.L.J.
12. I have perused the record and considered the submissions
advanced by the learned counsel for the respective parties.
13. Undisputedly, Anand Hegde had expired as a result of the injuries
sustained in the accident involving Mini Truck bearing No.MH14
AZ1370.
The said Mini Truck was driven by Kishor Gavai, owned by the
respondent no.6 and insured by the appellant herein. Upon
considering the evidence adduced by the appellant – Insurance
Company, the Tribunal has recorded a finding that the driving license
of the driver was valid till 09/12/2004 and that the same was not
renewed thereafter. The findings recorded by the Claims Tribunal that
there is a breach of policy condition by the insured has not been
assailed either by the respondent no.6 – the insured or by the
respondent nos.1 to 5 – the original claimants. The only question
raised in this appeal is as regards the liability of the appellant –
Insurance Company to satisfy the award as against the third party.
14. The question whether the insurer can avoid its liability in the
event it raises a defence as envisaged in sub section 2 of section 149 of

the Motor Vehicles Act, 1988 has been considered by the three Judge
Bench of the Supreme Court in Swarana Singh (Supra). The law laid
down in Swarna Singh has been reiterated in Shamanna v/s.
Divisional Manager, the Oriental Insurance Co. Ltd. (supra) as
under :6.
In the case of third party risks, as per the decision in
National Insurance Company Ltd. v. Swaran Singh and
others (2004) 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 visavis
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 thirdparty
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 163A
or Section 166 of the Motor Vehicles
Act, 1988, inter alia, in terms of Section 149(2)(a)(ii) of the
said Act.
(iii) The breach of policy condition e.g. disqualification of the
driver or invalid driving licence of the driver, as contained in
subsection
(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 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 subsection
(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 subsection
(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 subsection
(4) with the
proviso there under and subsection
(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 the
requirements of law or not will have to be determined in
each case. ”
15. In National Insurance Co. Ltd. Vs. Laxmi Narayan Dhut
(2007) 3 SCC 700, the Apex Court has drawn a distinction between
own damage claim not involving any third party visàvis
the liability in
respect of the third party risk. In the aforestated case the Supreme
Court relied upon the decision in Swarana Singh (supra) to hold that
even in cases of willful breach the insurer's liability visàvis
third party
was statutory and that it is for the Insurance Company to satisfy the
award and then recover the compensation from the insured.

16. In Parvathneni (supra) a two Judge Bench of the Supreme Court
had doubted the correctness of the decision, which in exercise of
jurisdiction of ARticle 142 of the Constitution of India directed
Insurance Company to pay the compensation amount even though the
Insurance Company was not liable to indemnify the insured. The
reference in the said case has been disposed of by the three Judge
Bench by keeping open the questions of law to be decided in an
appropriate case. In Shamanna (supra) the Apex Court has observed
that since the reference to the larger Bench in Parvathneni case has
been disposed of by keeping the questions of law open, the decision in
Swarna Singh followed in Laxmi Narayan Dhut and other cases hold
the field.
17. The claim in United India Insurance Co. Ltd. And Ors. vs.
Anubai Gopichand Thakare and Ors. 2007 (5) Bom. C.R. 520 and
Traders Pvt. Ltd. & Anr. vs. Sunanda Krishna Machhiwale and Ors.
2009 (supp.) Bom. C.R. 587 was not involving third party and hence
these decisions are distinguishable and are not applicable to the facts of
the case. The decision in Shamanna (supra), also does not support
the contention of the learned counsel for the appellant that the
Tribunal has no powers to issue such directions. In fact, in the said

case the driver of the vehicle involved in the accident has no valid
driving license at the time of the accident and since there was violation
of the terms of the insurance policy, the tribunal has directed the
Insurance Company to pay the compensation with liberty to recover the
same from the owner of the offending vehicle. The Hon'ble Supreme
Court has held that the award passed by the Tribunal directing the
Insurance Company to pay and recover was in accordance with the
judgment passed in Swarana Singh (supra) and Laxmi Narayan
Dhut (supra).
18. Similarly, in Ram Babu Tiwari (supra) the driving license was
not renewed within a period of thirty days from the date of its expiry.
The driver of the offending vehicle did not hold a valid license as on
the date of the accident. The Tribunal had held that mere nonrenewal
of license does not constitute breach of terms and conditions of the
policy and consequently, the insurer cannot escape from its liability. In
an appeal against the said judgment, the High Court held that where
the driver of the vehicle did not hold any license and the owner
consciously allowed the vehicle to be driven by such person, the insurer
is entitled to succeed in its defence and avoid liability. Relying upon
the law laid down by the Apex Court in Swaran Singh (supra) the

High Court directed the Insurance Company to pay the compensation
and recover the same from the driver and the owner of the vehicle.
The Apex Court held that there was no infirmity in the judgment of the
High Court.
19. In S. Iyyapan (supra) the driver was holding a license to drive
light motor vehicle while the offending vehicle was a commercial
vehicle. The question before the Apex Court was whether the
Insurance Company can repudiate its liability to pay the compensation
by taking a defence that at the relevant time the vehicle was driven by
a person having no license. The Apex Court Court has held thus :“
16. The heading “Insurance of Motor Vehicles against Third
Party Risks” given in Chapter XI of the Motor Vehicles Act,
1988 (Chapter VIII of 1939 Act) itself shows the intention of
the legislature to make third party Insurance compulsory and
to ensure that the victims of accident arising out of use of
motor vehicles would be able to get compensation for the
death or injuries suffered. The provision has been inserted in
order to protect the persons travelling in vehicles or using the
road from the risk attendant upon the user of the motor
vehicles on the road. To overcome this ugly situation, the
legislature has made it obligatory that no motor vehicle shall
be used unless a third party Insurance is in force.
17. Reading the provisions of Sections 146 and 147 of the
Motor Vehicles Act, it is evidently clear that in certain
circumstances the insurer’s right is safeguarded but in any
event the insurer has to pay compensation when a valid
certificate of Insurance is issued notwithstanding the fact that
the insurer may proceed against the insured for recovery of the
amount. Under Section 149 of the Motor Vehicles Act, the

insurer can defend the action inter alia on the grounds,
namely, (i) the vehicle was not driven by a named person, (ii)
it was being driven by a person who was not having a duly
granted licence, and (iii) person driving the vehicle was
disqualified to hold and obtain a driving licence. Hence, in our
considered opinion, the insurer cannot disown its liability on
the ground that although the driver was holding a licence to
drive a light motor vehicle but before driving light motor
vehicle used as commercial vehicle, no endorsement to drive
commercial vehicle was obtained in the driving licence. In any
case, it is the statutory right of a third party to recover the
amount of compensation so awarded from the insurer. It is for
the insurer to proceed against the insured for recovery of the
amount in the event there has been violation of any condition
of the Insurance policy. ”
20. It is thus, well settled that in order to avoid its liability to
indemnify the insured, the insurer has to establish that there was
conscious and willful breach of the terms of the policy. Even when the
insurer proves such breach, it is under obligation to pay compensation
to the third parties and recover the same from the insured.
21 In the instant case, it is not in dispute that the appellant
Insurance
Company had issued a valid certificate of insurance to
indemnify the insured against third party risks. The appellantInsurance
Company therefore cannot be absolved of its liability of
paying the compensation to the third party. As stated earlier, the
Tribunal has recorded a finding that the appellantInsurance
Company

has proved the breach of terms and conditions of the policy. These
findings are not assailed by the insured. Under these circumstances,
the appellantInsurance
Company is at liberty to recover the same from
the insured.
22. As regards the quantum of compensation, the learned counsel for
the Appellant submits that the Tribunal has not deducted conveyance
and food allowance while determining the loss of dependency. He has
relied upon the decision in National Insurance Co. Ltd. Vs. Vaishali
Harish Devare 2013 (1) Mh.L.J. 411 wherein the Division Bench of
this Court, after considering the pronouncement in National Insurance
Co. Vs. Indira Shrivastava and Ors. (2008) 2 SCC 763 and National
Insurance Co. Ltd. Vs. Saroj (Smt.) and Ors. (2009) 13 SCC 508 has
held that the amounts, which were paid to the deceased by way of
perks should be taken into consideration for computation of monthly
income provided the perks were for the benefit of the family of the
deceased. It is held that the allowances, which were meant only for his
personal benefit cannot be taken into consideration.
23. The evidence adduced by the claimants particularly the
appointment letter (Exhibit56)
and the evidence of A.W. 2Amol

Arvind Wagh, Assistant Manager of Human Resource of Geometric Ltd.
amply proves that the deceased was working as a Senior Design
Engineer in Geometric Ltd. The claimants had relied upon a salary
certificate at Exhibit58,
produced through A.W.2Amol
Arvind Wagh,
to prove that the deceased was drawing salary of Rs.59,779/per
month. The said salary certificate indicates that the deceased was paid
basic salary of Rs.22,032/per
month with allowances including Lunch
allowance of Rs.2,000/and
Conveyance allowance of Rs.800/.
The
salary slip at Exhibit58
indicates that the deceased was drawing gross
salary of the deceased was Rs.59,779/per
month, which works out to
Rs.7,17,357/per
annum.
24. The Claims Tribunal has not relied upon the salary slip (Exhibit58)
for the purpose of determining the annual income of the deceased.
The Claims Tribunal has assessed the annual income on the basis of
income tax returns (Exhibit41)
for the financial year 20112012.
The
tax returns (Exhibit41)
show the gross annual income of the deceased
as Rs.4,58,881/.
The Tribunal has deducted Rs.19,955/towards
income tax and considered the net income of the deceased as
Rs.4,38,926/per
annum. The gross income shown in the tax return is
less than the income shown in the salary certificate at Exhibit58.

There is no evidence on record to indicate that the income shown in
the tax returns also includes lunch and conveyance allowance. In the
absence of such evidence the Tribunal was not required to make any
further deductions from the annual income of the deceased.
25. Considering the annual income of the deceased as Rs.4,38,926/and
adding 50% of the income towards future prospect, the yearly
income works out to Rs.6,58,389/.
Since there were five dependents,
1/4th amount is required to be deducted towards personal expenses of
the deceased. Upon deducting the amount towards personal expenses,
the loss of dependency works out to Rs.4,93,791/per
annum. The
deceased was 34 years of age and applying the multiplier of 16 the
total loss of dependency works out to Rs. 79,00,656/.
As per the
judgment of the Apex Court in National Insurance Co. Ltd vs Pranay
Sethi on 31 October, 2017 in Special Leave Petition Civil no. 25590
of 2014 the claimants are entitled for compensation of Rs.15,000/towards
loss of estate, Rs.40,000/loss
of consortium, and Rs.15,000/towards
funeral expenses. In the instant case the Tribunal has awarded
Rs.1,00,000/towards
loss of consortium, Rs.1,00,000/towards
loss
of care and guidance to the minor children and Rs.25,000/towards
funeral expenses. The Tribunal has thus awarded total amount of

2,25,000/on
the aforesaid conventional heads. The excess amount of
Rs. 1,55,000/,
awarded under these conventional heads needs to be
reduced from the total compensation of Rs. 81,25,668/.
Thus, upon
reducing the said amount of Rs.1,55,000/from
the total compensation
of Rs.81,25,000/the
compensation payable to the Respondents/
original claimants works out to Rs.79,70,668/,
which is rounded upto
Rs.79,71,000/,
which in my considered view is just and fair
compensation. The award to that extent has to be modified.
26. Under the circumstances and in view of discussion supra, the
appeal is disposed of by passing the following order :(
i) The compensation payable to the Respondent Nos. 1 to 5 is
reduced to Rs.79,71,000/.
The rate of interest and other
directions including the order of cost is maintained.
(ii) The excess amount of Rs.1,55,000/deposited
by the
AppellantInsurance
Company before the Claims Tribunal be
refunded alongwith the proportionate interest accrued
thereon.
(SMT. ANUJA PRABHUDESSAI, J.)

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