Holding

A mere reference to another document does not import its arbitration clause unless the reference clearly shows an intention to make that clause part of the contract; therefore, no arbitration agreement existed between the parties.

Summary

The National Highway Authority of India awarded a BOT concession to a concessionaire, which in turn engaged an EPC contractor who contracted with the respondent to execute highway works. The respondent sub‑contracted the work to the appellant. A dispute arose and the appellant sought arbitration, alleging that the arbitration clause in the EPC contractor‑respondent agreement (clause 45) was incorporated into the subcontract by reference to clauses 2 and 9.10 of the subcontract and an annexure. The respondent contended that no arbitration agreement existed. The Supreme Court held that for an arbitration clause in an independent document to be incorporated, the contract must contain a clear reference indicating an intention to make that clause part of the agreement. The reference in the subcontract was limited to work‑related terms and did not expressly incorporate the arbitration clause, so no arbitration agreement existed. The appeal was dismissed.

Issues considered

Whether a reference to another document in a subcontract can incorporate an arbitration clause from that document under Section 7(5) of the Arbitration and Conciliation Act, 1996.
Whether clauses 2, 9.10 and annexure‑I of the subcontract demonstrate an intention to incorporate the arbitration clause of the EPC contract.

Legislation cited

Arbitration and Conciliation Act, 1996s. 7(5), s. 9

Subjects

arbitrationincorporation by referencearbitration agreementSection 7(5)contract interpretationconstruction contractsub‑contractSupreme Court

Judgment

[2018] 4 S.C.R. 585 585

M/S. ELITE ENGINEERING AND CONSTRUCTION (HYD.) A
PRIVATE LIMITED REP. BY ITS MANAGING DIRECTOR
v.
M/S. TEACHTRANS CONSTRUCTION INDIA PRIVATE
LIMITED REP. BY ITS MANAGING DIRECTOR
B
(Civil Appeal No. 2439 of 2018)
FEBRUARY 23, 2018
[A.K. SIKRI AND ASHOK BHUSHAN, JJ.]
Arbitration and Conciliation Act, 1996 – s. 7(5) –
C
Incorporation of arbitration clause in contract by reference – If
made out – National Highway Authority of India entered into
Concession agreement, whereby it awarded a contract to M/s. T.K.
(Concessionaire) for maintenance of the Project Highway on Build
Operate and Transfer (BOT) basis – Concessionaire vide EPC
agreement awarded that work to M/s. UE (EPC Contractor) – EPC D
Contractor, in turn, executed a Construction agreement with
respondent to execute the works as per terms and conditions entailed
in that agreement – Respondent sub-contracted the work to the
appellant – Some dispute arose between the appellant and
respondent in connection with execution of the said work – Appellant
E
invoked arbitration – Respondent contended that there was no
arbitration agreement – Appellant contended that the agreement
entered into between the parties (appellant and respondent), by
implication, incorporated the arbitration agreement contained in
the agreement entered into between the EPC Contractor and the
respondent – High Court held that there was only a reference to F
another document with no intention to incorporate the arbitration
clause thereof in a contract between the parties – Propriety of –
Held: Proper – In instant case, it was not intended to make the
arbitration clause as a part of the contract between the appellant
and the respondent – When the incorporation clause refers to certain
G
particular terms and conditions, only those terms and conditions
are incorporated and not the arbitration clause.
Dismissing the appeal, the Court
HELD: 1. As per sub-section (5) of section 7 of Arbitration
and Conciliation Act, 1996, an arbitration clause contained in an H
585
586 SUPREME COURT REPORTS [2018] 4 S.C.R.

A independent document can also be imported and engrafted in
the contract between the parties, by ref erence to such
independent document in the contract, even if there is no specific
provision for arbitration. However, such a recourse can be
adopted only ‘if the reference is such as to make the arbitration
clause in such document, a part of the contract.’ [Para 16] [593-
B
E-F]
2. The High Court has correctly held that, in the instant
case, it was not intended to make the arbitration clause as a part
of the contract between the appellant and the respondent. Clause
2 and clause 9.10 are given correct interpretation by the High
C Court. By these clauses, only those conditions and sub-conditions
of the contract, specification etc. which relate to the works and
quality are incorporated. Clause 9.10 only talks of ‘items’ which
are not mentioned in the contract and terms and conditions
relating to the execution of those items are to be taken from the
D main contracts. Reference to clause 8.7 is also inconsequential.
By this clause only, those terms contained in the main agreement
which relate to ‘terms of work’ are incorporated. Procedure
relating to ‘termination’ is altogether different from resolution of
disputes. Dispute may arise even de hors the termination of the
contract and is an altogether different aspect, not necessarily
E connected with the termination of work. [Para 18] [596-B-D]
M.R. Engineers and Contractors Private Limited v. Som
Datt Builders Ltd. (2009) 7 SCC 696 : [2009] 10
SCR 373; Groupe Chimique Tunisien SA v. Southern
Petrochemicals Industries Corpn. Ltd. (2006) 5 SCC
F 275 : [2006] 2 Suppl. SCR 954; Larsen & Toubro
Limited v. Mohan Lal Harbans Lal Bhayana (2015) 2
SCC 461 : [2014] 3 SCR 162; Sharma and Associates
Contractors Private Limited v. Progressive
Constructions Limited (2017) 5 SCC 743 – referred
G to.
Alimenta S. A. v. National Agricultural Coop. Mktg.
Federation of India Ltd. (1987) 1 SCC 615 : [ 1987] 1
SCR 957 – relied on.

H
M/S. ELITE ENGRG. & CONST. (HYD.) PVT. LTD. v. M/S. 587
TEACHTRANS CONST. INDIA PVT. LTD.

Case Law Reference A
[2009] 10 SCR 373 referred to Para 10
[2006] 2 Suppl. SCR 954 referred to Para 12
[2014] 3 SCR 162 referred to Para 13
(2017) 5 SCC 743 referred to Para 13
B
[1987] 1 SCR 957 relied on Para 19
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2439
of 2018.
From the Judgment and Order dated 18.09.2015 by the High Court
of Judicature at Madras in Original Petition No. 203 of 2014.
C
Sridhar Potaraju, Prabhat Kumar, Ms. Sindeora VNL, Ms. Ankita
Sharma, Udai Khanna, Advs. for the Appellant.
A. K. Ganguli, Sr. Adv., Dr. Amit George, R. Sathish, Mohan Das
K. K., Rajesh Kumar, Ms. S. Geetha, Ms. Smitha Rani, Ms. Sonia
Vasudev, Advs. for the Respondent. D
The Judgment of the Court was delivered by
A. K. SIKRI, J. 1. Leave granted.
2. National Highway Authority of India (NHAI) had entered into
agreement dated July 19, 2007 (hereinafter referred to as the ‘Concession
Agreement’) whereby it had awarded a contract to M/s. T.K. Toll Road E
Pvt. Ltd. (hereinafter referred to as the ‘Concessionaire’) for undertaking,
inter alia, the design, engineering, financing, procurement, construction,
operation and maintenance of the Project Highway on Build Operate
and Transfer (BOT) basis on the National Highway 67 connecting
Coimbatore and Nagapattinam. The Concessionaire vide EPC agreement
(Engineering, Procurement and Construction Agreement) dated January F
31, 2008 awarded the said work on a fixed lump sum turnkey basis to M/
s. Utility Energytech and Engineers Private Limited (hereinafter referred
to as the ‘EPC Contractor’). EPC Contractor, in turn, executed a
Construction Agreement dated March 14, 2008 with the respondent herein
(M/s. Techtrans Construction India Pvt. Ltd.) to execute the works as G
per terms and conditions entailed in that agreement. Clause 8 of that
agreement permitted the respondent to sub-contract the structural work.
Pursuant thereto, the respondent floated a tender for sub-contracting
their work in which the appellant also submitted its bid and was ultimately
awarded the said work by the respondent vide agreement dated July 29,
2009. H
588 SUPREME COURT REPORTS [2018] 4 S.C.R.

A 3. Some disputes arose between the appellant and the respondent
in connection with the execution of the said work and the appellant vide
its letter dated March 25, 2013 raised certain claims against the
respondent. The appellant also filed Original Petition under Section 9 of
the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the
‘Act’) on the file of Principal Judge, Karur. This petition was contested
B
by the respondent who in its reply denied all the allegations raised by the
appellant and also submitted that since there was no arbitration agreement
between the parties, the petition under Section 9 of the Act was not
maintainable. While this was pending, the appellant moved application
under Section 11(3) and (5) of the Act for appointment of an arbitrator in
C the High Court of Judicature at Madras on January 28, 2014. Notice in
this petition was issued by the High Court. In the meantime, on June 30,
2014, the Principal Judge, Karur allowed the petition of the appellant
under Section 9 of the Act, but left open the issue of existence of
arbitration agreement.
D 4. Insofar as the appellant’s petition under Section 11 of the Act is
concerned, it was contested by the respondent taking the objection to
the maintainability of the petition on the ground of absence of any
agreement. The High Court has vide impugned orders dated September
18, 2015 dismissed the said petition of the appellant upholding the
contention of the respondent that there is no arbitration agreement
E between the parties and, therefore, remedy under the Act for appointment
of arbitrator or constitution of Arbitral Tribunal is not available.
5. It may be clarified at this juncture that Agreement dated July
29, 2009 entered into between the appellant and the respondent does not
contain any arbitration clause. There is no independent arbitration
F agreement between the parties either. However, case set up by the
appellant was that this Agreement dated July 29, 2009 entered into between
the parties, by implication, incorporates the arbitration agreement that is
contained in the Agreement dated March 14, 2008 that was entered into
between the EPC Contractor and the respondent.
G 6. Indubitably, clause 45 of the Agreement dated March 14, 2008
between EPC Contractor and the respondent contains procedure for
resolution of disputes and sub-clause (3) thereof refers to arbitration
procedure. In case of any dispute, as per clause 45.1, first attempt is for
‘amicable resolution’. Thereafter, under clause 45.2, process of
H
M/S. ELITE ENGRG. & CONST. (HYD.) PVT. LTD. v. M/S. 589
TEACHTRANS CONST. INDIA PVT. LTD. [A. K. SIKRI, J.]

‘mediation’ is to be resorted to and if that also fails then the ‘arbitration A
procedure’ is provided. Clause 45.3 and clause 45.4 read as under:
“45.3.Arbitration Procedure:
Subject to the provisions of Article 45.1 and 45.2, any dispute,
which is not resolved by amicable resolution between the parties
or by a reference to mediation, shall be finally settled by binding B
arbitration under the Arbitration and Conciliation Act, 1996. The
arbitration shall be by a panel of three arbitrators, one to be
appointed by each Party and the third to be appointed by the two
arbitrators appointed by the Parties. The Party requiring arbitration
shall appoint an arbitrator in writing, inform the other party about C
such appointment and call upon the other party to appoint its
arbitrator. If within 15 days of receipt of such intimation the other
party fails to appoint its arbitrator, the Party seeking appointment
of arbitrator may take further steps in accordance with Arbitration
Act.
D
45.4. Place of Arbitration:
The place of arbitration shall be Mumbai for all Disputes.”
7. According to the appellant, this clause gets incorporated in the
Agreement dated July 29, 2009 that was entered into between the
respondent and the appellant, by virtue of following clauses in the said E
agreement:
“2.Subcontractor hereby agrees, undertakes to execute the said
value of work, and is responsible for the efficient and successful
execution of the work and is to be completed as per the contract
period specified in the contract document. F
a........
b........
All the conditions and special conditions of contract, specifications
(general and additional clauses relating to the works and quality G
specified in the relevant agreement between the Construction
Contractor and the Employer are binding on the Subcontractor.”
Annexure-I specifying the ‘Terms and Conditions’ Annexed thereto
inter alia provides Clause - 9.10 as under:
H
590 SUPREME COURT REPORTS [2018] 4 S.C.R.

A “9.10. For items which are not mentioned in this Agreement Clauses,
terms and conditions of Agreement between Contractor and EPC
Concessionaire will be applicable.’’
8. It is, thus, argued by the learned counsel for the appellant that
as per the aforesaid clause, when the appellant had agreed and undertaken
B to execute the work as per contract specified in the contract document
and the said clause also specifically provided that all the special conditions
of the contract, specifications etc. relating to the works and qualities
specified in the relevant agreement between the construction contractor
and the employer are binding on the respondent, the clause relating to
arbitration agreement i.e. 45 entered into between EPC Contractor and
C the respondent also became applicable by incorporation. It was submitted
that the aforesaid clause read with clause 9.10 of Annexure 1 which
categorically mentions that in respect of items which are not mentioned
in the Agreement clauses, terms and conditions of the Agreement between
the Contractor and EPC Concessionaire will be applicable, would also
D lead to same result.
9. These very arguments were raised before the High Court. The
appellant had also referred to certain communications addressed by it to
the respondent before invoking legal remedy wherein it has stated that
the parties had agreed for settlement of disputes in accordance with
E clause 45.3. The respondent, on the other hand, had drawn attention of
the High Court to paragraph 23 of the petition filed by the appellant
under Section 9 of the Act wherein it had categorically stated that the
appellant would be constrained to initiate legal proceedings against the
respondent for recovery of amount by approaching the competent civil
court. The High Court, thus, opined that from the communications only,
F it could not be said that parties had agreed for arbitration and, in fact, the
appellant in his petition filed under Section 9 of the Act had professed
ignorance of the agreement between the respondent and the employer.
As it had gone to the extent of making an averment to the effect that
‘the petitioner is totally kept in dark about the terms and conditions of
G the agreement till now’. The High Court thereafter construed clauses 2
and 9.10 of the Agreement that was entered into between the appellant
and the respondent and came to the conclusion that those clauses never
meant to incorporate arbitration agreement into the Agreement dated
July 29, 2009 executed between the parties. On this aspect, discussion
goes as follows:
H
M/S. ELITE ENGRG. & CONST. (HYD.) PVT. LTD. v. M/S. 591
TEACHTRANS CONST. INDIA PVT. LTD. [A. K. SIKRI, J.]

“18. On a careful perusal of the pleadings and documents as also A
submissions of the learned counsel for the parties, more specifically
the reading of the clauses, this court is of the view that part of
clause-2 of the agreement dated 29.07.2009 extracted aforesaid
refers to only ‘’works and quality specified in the relevant
agreement between the construction contractor and the
B
employer’’. All the conditions and the sub-conditions of contract
are binding on the sub contractor/petitioner, but the unambiguous
reference is only to ‘’work and quality specified’’ without any
refence to the arbitration clause. It is not a case of only absence
of a reference to arbitration clause, but the reference being specific
to the ‘’work and quality specified.’’ An expanded meaning cannot C
be given to this Clause. It is in this context that Clause-9.10 of
Annexure-I specifying the terms and conditions has to be read.
Once again, it refers to ‘’Items’’ which are not mentioned in the
agreement clauses where conditions of the earlier agreement
would be applicable. Thus, this would refers to the items to be
D
used.
10. The High Court also drew distinction between the reference
to the another document and incorporation of another document in a
contract by reference, which has been explained by this Court in M.R.
Engineers and Contractors Private Limited v. Som Datt Builders
Ltd.1 and held that, in the instant case, there was only a reference to E
another document with no intention to incorporate the arbitration clause
thereof in a contract between the parties.
11. Questioning the aforesaid approach of the High Court, learned
counsel for the appellant submitted that when the appellant was required
to execute the work on the terms and conditions contained in the principal F
agreement, it was clear intention to incorporate all the terms including
clause 45.3. Additionally, he referred to clause 8.7 of the agreement
between the parties which stipulates as under:
“8.7 Other terms related to Termination of work will be same as
Agreement between EPC, Concessionaire and Construction G
contractor.”
12. His submission was that when the terms related to termination
of work contained in the Agreement between EPC, Concessionaire and
1
(2009) 7 SCC 696
H
592 SUPREME COURT REPORTS [2018] 4 S.C.R.

A the respondent were to govern their agreement as well, these would
include settlement of disputes on termination of work through arbitration
which was the term provided in the contract between the employer and
the respondent. Relying upon the judgment in the case of Groupe
Chimique Tunisien SA v. Southern Petrochemicals Industries Corpn.
Ltd.2, he submitted that mere fact that appellant had mentioned about
B
filing suit against the respondent in his petition under Section 9 of the Act
would not enure to the benefit of the respondent who said so on account
of mistaken understanding of law. Para 9 reads as under:
“9. It is true that the petitioner had contended before the Jordanian
court that there was no arbitration agreement between the parties.
C But the said contention was not accepted and the suit filed by the
petitioner has been dismissed on the ground of want of jurisdiction.
Thereafter, on reconsidering the matter and taking legal advice,
with reference to the contentions of the respondent, the petitioner
has now proceeded on the basis that an arbitration agreement
D exists between the parties. If, on account of mistake or wrong
understanding of law, a party takes a particular stand (that is,
there is no arbitration agreement), he is not barred from changing
his stand subsequently or estopped from seeking arbitration.
[See U.P. Rajkiya Nirman Nigam Ltd. v. Indure (P) Ltd. [(1996)
2 SCC 667] where the contention based on estoppel was negatived
E while considering a reserve (sic reverse) situation [Ed.: Para
12] .]”
13. Mr. Ganguli, the learned senior counsel appearing for the
respondent, on the other hand, submitted that clause 2 of the Agreement
entered into between the appellant and the respondent clearly evinced
F that there was only a qualified incorporation of those terms and conditions
of the contract between the employer and the respondent which related
to the works and the quality. Insofar as clause 45 is concerned, there
was no conscious acceptance thereof between the parties and that was
the reason that even the respondent had no knowledge about the said
G clause and, therefore, he did not mention so even in his petition filed
under Section 9 of the Act. He, therefore, submitted that the High Court
has rightly relied upon M.R. Engineers and Contractors Private Limited
case in dismissing the petition of the petitioner. He also placed reliance
upon the judgments of this Court in Larsen & Toubro Limited v. Mohan

H 2
(2006) 5 SCC 275
M/S. ELITE ENGRG. & CONST. (HYD.) PVT. LTD. v. M/S. 593
TEACHTRANS CONST. INDIA PVT. LTD. [A. K. SIKRI, J.]

Lal Harbans Lal Bhayana3 and Sharma and Associates Contractors A
Private Limited v. Progressive Constructions Limited4.
14. After considering the respective submissions, we are inclined
to agree with the respondent and, therefore, do not find any fault with
the impugned judgment of the High Court.
15. In M.R. Engineers and Contractors Private Limited case, B
this Court considered the true intent and scope of Section 7 of the Act
which deals with ‘arbitration agreement’. Relevant portion of Section 7
reads as under:
“7. Arbitration agreement.—(1) In this Part, ‘arbitration
agreement’ means an agreement by the parties to submit to C
arbitration all or certain disputes which have arisen or which may
arise between them in respect of a defined legal relationship,
whether contractual or not.
xxx xxx xxx
D
(5) The reference in a contract to a document containing an
arbitration clause constitutes an arbitration agreement if the
contract is in writing and the reference is such as to make that
arbitration clause part of the contract.”
16. As per sub-section (5), an arbitration clause contained in an E
independent document can also be imported and engrafted in the contract
between the parties, by reference to such independent document in the
contract, even if there is no specific provision for arbitration. However,
the Court noted that such a recourse can be adopted only ‘if the reference
is such as to make the arbitration clause in such document, a part of the
contract.’ This interpretation to sub-section (5) of Section 7 was F
elaborated in the following manner:
“14. The wording of Section 7(5) of the Act makes it clear that a
mere reference to a document would not have the effect of making
an arbitration clause from that document, a part of the contract.
The reference to the document in the contract should be such G
that shows the intention to incorporate the arbitration clause
contained in the document, into the contract. If the legislative intent
was to import an arbitration clause from another document, merely
3
(2015) 2 SCC 461
4
(2017) 5 SCC 743 H
594 SUPREME COURT REPORTS [2018] 4 S.C.R.

A on reference to such document in the contract, sub-section (5)
would not contain the significant later part which reads: “and the
reference is such as to make that arbitration clause part of the
contract”, but would have stopped with the first part which reads:
“7. (5) The reference in a contract to a document containing
B an arbitration clause constitutes an arbitration agreement if
the contract is in writing….”
15. Section 7(5) therefore requires a conscious acceptance of
the arbitration clause from another document, by the parties, as a
part of their contract, before such arbitration clause could be read
C as a part of the contract between the parties. But the Act does
not contain any indication or guidelines as to the conditions to be
fulfilled before a reference to a document in a contract can be
construed as a reference incorporating an arbitration clause
contained in such document into the contract. In the absence of
such statutory guidelines, the normal rules of construction of
D contracts will have to be followed.
16. There is a difference between reference to another document
in a contract and incorporation of another document in a contract,
by reference. In the first case, the parties intend to adopt only
specific portions or part of the referred document for the purposes
E of the contract. In the second case, the parties intend to incorporate
the referred document in entirety, into the contract. Therefore
when there is a reference to a document in a contract, the court
has to consider whether the reference to the document is with the
intention of incorporating the contents of that document in entirety
F into the contract, or with the intention of adopting or borrowing
specific portions of the said document for application to the
contract.”
17. After some further discussion on this aspect with reference to
the existing case law as well as extracts from Russell on arbitration, the
G Court summed up the position as under:
“24. The scope and intent of Section 7(5) of the Act may therefore
be summarised thus:
(i) An arbitration clause in another document, would get
incorporated into a contract by reference, if the following
H conditions are fulfilled:
M/S. ELITE ENGRG. & CONST. (HYD.) PVT. LTD. v. M/S. 595
TEACHTRANS CONST. INDIA PVT. LTD. [A. K. SIKRI, J.]

(1) the contract should contain a clear reference to the documents A
containing arbitration clause,
(2) the reference to the other document should clearly indicate
an intention to incorporate the arbitration clause into the
contract,
(3) the arbitration clause should be appropriate, that is capable of B
application in respect of disputes under the contract and should
not be repugnant to any term of the contract.
(ii) When the parties enter into a contract, making a general
reference to another contract, such general reference would not
have the effect of incorporating the arbitration clause from the C
referred document into the contract between the parties. The
arbitration clause from another contract can be incorporated into
the contract (where such reference is made), only by a specific
reference to arbitration clause.
(iii) Where a contract between the parties provides that the
D
execution or performance of that contract shall be in terms of
another contract (which contains the terms and conditions relating
to performance and a provision for settlement of disputes by
arbitration), then, the terms of the referred contract in regard to
execution/performance alone will apply, and not the arbitration
agreement in the referred contract, unless there is special E
reference to the arbitration clause also.
(iv) Where the contract provides that the standard form of terms
and conditions of an independent trade or professional institution
(as for example the standard terms and conditions of a trade
association or architects association) will bind them or apply to F
the contract, such standard form of terms and conditions including
any provision for arbitration in such standard terms and conditions,
shall be deemed to be incorporated by reference. Sometimes the
contract may also say that the parties are familiar with those terms
and conditions or that the parties have read and understood the
said terms and conditions. G
(v) Where the contract between the parties stipulates that
the conditions of contract of one of the parties to the contract
shall form a part of their contract (as for example the general
conditions of contract of the Government where the
Government is a party), the arbitration clause forming part H
596 SUPREME COURT REPORTS [2018] 4 S.C.R.

A of such general conditions of contract will apply to the
contract between the parties.”
18. When we apply the aforesaid ratio, we find that the High
Court has correctly held that, in the instant case, it was not intended to
make the arbitration clause as a part of the contract between the appellant
B and the respondent. Clause 2 and clause 9.10 are given correct
interpretation by the High Court and discussion in this behalf has already
been extracted above. By these clauses, only those conditions and sub-
conditions of the contract, specification etc. which relate to the works
and quality are incorporated. Clause 9.10 only talks of ‘items’ which
C are not mentioned in the contract and terms and conditions relating to
the execution of those items are to be taken from the main contracts.
Reference to clause 8.7 is also inconsequential. By this clause only,
those terms contained in the main agreement which relate to ‘terms of
work’ are incorporated. Procedure relating to ‘termination’ is altogether
different from resolution of disputes. Dispute may arise even de hors
D the termination of the contract and is an altogether different aspect, not
necessarily connected with the termination of work.
19. In Alimenta S.A. v. National Agricultural Coop. Mktg.
Federation of India Ltd.5, the question was as to whether the arbitration
clause in Fosfa-20 was incorporated in the first contract by way of clause
E 11 and in the second contract by virtue of clause 9. The Court held that
while the arbitration clause was incorporated in the first contract, the
same was not incorporated in the second contract. How the matter has
to be looked into, for determining the same, was discussed in the following
manner:
F “13. … There is a good deal of difference between Clause 9 of
this contract and Clause 11 of the first contract. Clause 11 has
been couched in general words, but Clause 9 refers to all other
terms and conditions for supply. The High Court has taken the
view that by Clause 9 the terms and conditions of the first contract
G which had bearing on the supply of HPS were incorporated into
the second contract, and the term about arbitration not being
incidental to supply of goods, could not be held to have been
lifted as well from the first contract into the second one.

5
(1987) 1 SCC 615
H
M/S. ELITE ENGRG. & CONST. (HYD.) PVT. LTD. v. M/S. 597
TEACHTRANS CONST. INDIA PVT. LTD. [A. K. SIKRI, J.]

14. It is, however, contended on behalf of the appellant that the A
High Court was wrong in its view that a term about arbitration is
not a term of supply of goods. We do not think that the contention
is sound. It has been rightly pointed out by the High Court that
the normal incidents of terms and conditions of supply are
those which are connected with supply, such as, its mode and
B
process, time factor, inspection and approval, if any, reliability
for transit, incidental expenses, etc. We are unable to accept
the contention of the appellant that an arbitration clause is a term
of supply. There is no proposition of law that when a contract is
entered into for supply of goods, the arbitration clause must form
part of such a contract. The parties may choose some other C
method for the purpose of resolving any dispute that may arise
between them. But in such a contract the incidents of supply
generally form part of the terms and conditions of the contract.
The first contract includes the terms and conditions of supply and
as Clause 9 refers to these terms and conditions of supply, it is
D
difficult to hold that the arbitration clause is also referred to and,
as such, incorporated into the second contract. When the
incorporation clause refers to certain particular terms and
conditions, only those terms and conditions are incorporated
and not the arbitration clause. In the present case, Clause 9
specifically refers to the terms and conditions of supply of E
the first contract and, accordingly, only those terms and
conditions are incorporated into the second contract and not
the arbitration clause. The High Court has taken the correct
view in respect of the second contract also.”
(emphasis supplied) F
20. This judgment is noted in M.R. Engineers and Contractors
Private Limited case as well and in the facts of M.R. Engineers and
Contractors Private Limited, the Court held that there was no
incorporation of arbitration clause. Following discussion throws light to
decide the issue in this case as well: G
“37. In the present case the wording of the arbitration clause in
the main contract between the PW Department and the contractor
makes it clear that it cannot be applied to the sub-contract between
the contractor and the sub-contractor. The arbitration clause in
H
598 SUPREME COURT REPORTS [2018] 4 S.C.R.

A the main contract states that the disputes which are to be referred
to the committee of three arbitrators under Clause 67.3 are disputes
in regard to which the decision of the Engineer (“Engineer” refers
to person appointed by the State of Kerala to act as Engineer for
the purpose of the contract between the PW Department and the
respondent) has not become final and binding pursuant to Clause
B
67.1 or disputes in regard to which amicable settlement has not
been reached between the State of Kerala and the respondent
within the period stated in Clause 67.2. Obviously neither Clause
67.1 nor 67.2 will apply as the question of “Engineer” issuing any
decision in a dispute between the contractor and the sub-contractor,
C or any negotiations being held with the Engineer in regard to the
disputes between the contractor and the sub-contractor does not
arise. The position would have been quite different if the
arbitration clause had used the words “all disputes arising
between the parties” or “all disputes arising under this
contract”. Secondly, the arbitration clause contemplates a
D
committee of three arbitrators, one each to be appointed
by the State of Kerala and the respondent and the third
(Chairman) to be nominated by the Director General, Road
Development, Ministry of Surface Transport, Roads Wing,
Government of India. There is no question of such
E nomination in the case of a dispute between the contractor
and the sub-contractor.”
21. In view of the aforesaid, the appeal stands dismissed.

Ankit Gyan Appeal dismissed.
F

G

H
[2018] 4 S.C.R. 599 599

SHIVAWWA AND ANR. A
v.
THE BRANCH MANAGER, NATIONAL INDIA INSURANCE
CO. LTD. AND ANR.
(Civil Appeal No. 2247 of 2018) B
MARCH 28, 2018
[DIPAK MISRA, CJI AND A.M. KHANWILKAR, J.]
Motor Vehicles Act, 1988 – s.166 – Person died after falling
off from the tractor-trailer owned by respondent No.2 – Claim
C
petition filed by appellant No.1, father of the deceased before
Tribunal seeking compensation from respondent No.1-insurance
company, respondent No.2 and the driver (employee of respondent
no.2) – Tribunal passed award against the respondents, jointly and
severally, to compensate the family members of the deceased with a
sum of Rs.3,20,000/- with interest @ 6% p.a. – High Court in appeal D
held that respondent No.1 insurance company could not be saddled
with any liability as the deceased had not travelled along with his
goods in the tractor-trailer and therefore, it could not be made liable
to pay any compensation – Held: Tribunal analysed the evidence in
its entirety and also took into account the charge-sheet filed in
E
respect of the accident in question for accepting the factum that
deceased had travelled in the tractor along with his goods to
Holealur where he had gone to unload the foodgrains of Maize
loaded on the tractor belonging to respondent No.2 and while
returning therefrom met with the accident – High Court by a sweeping
observation proceeded to reverse the finding of fact recorded by F
the Tribunal – Conclusion reached by the Tribunal is a possible
view, which could not have been disturbed by the High Court in a
casual manner – Finding of the Tribunal that the deceased had
travelled along with his goods, affirmed and restored – Insurance
policy brought on record was a valid policy in respect of the
G
offending tractor and thus, insurer would be obliged to satisfy the
compensation amount awarded to the claimants– Award passed by
Tribunal restored.

H
599
600 SUPREME COURT REPORTS [2018] 4 S.C.R.

A Allowing the appeal, the Court
HELD: 1.1 The Tribunal had analysed the evidence of PW-
2 (eye-witness) and PW-1 (mother of the deceased) in its entirety
and also took into account other evidence in the shape of charge-
sheet filed by the Investigating Officer, in respect of the accident
B in question for accepting the factum that deceased had travelled
in the tractor along with his goods to Holealur where he had gone
to unload the foodgrains of Maize loaded on the tractor belonging
to respondent No.2, which was driven by employee of respondent
No.2 and while returning from Holealur, met with the accident.
When cross-examined, PW-2 stated that on the date of accident
C they had taken maize crop in the said tractor. Notably, the fact
that the deceased had loaded his agricultural produce on the
tractor and also accompanied the tractor for unloading the same
to Holealur and while returning met with an accident, has gone
unchallenged. [Para 7] [604-B-C, H; 605-A]
D 1.2 The High Court by a sweeping observation proceeded
to reverse the finding of fact recorded by the Tribunal. The
conclusion reached by the Tribunal is a possible view, which could
not have been disturbed by the High Court in the appeal filed by
the insurer, much less in such a casual manner, as has been done
E by the High Court. [Para 9] [608-C-E]
1.3 The High Court based its conclusion that the insurer
cannot be saddled with the liability to satisfy the award, on the
finding that the deceased was not travelling along with his goods
at the time of accident. No more and no less. However, as the
F said finding recorded by the High Court cannot be sustained, the
finding of the Tribunal on the factum that the deceased had
travelled along with his goods is affirmed and restored. It would
necessarily follow that the insurer was not absolved of its liability
to pay the compensation amount awarded to the claimants. The
Tribunal had found, as of fact, that the insurance policy brought
G on record was a valid policy in respect of the offending tractor.
Assuming that the insurance company was not liable to pay
compensation amount awarded to the claimants as the offending
tractor was duly insured, the insurer would be still liable to pay
the compensation amount in the first instance with liberty to
H
SHIVAWWA v. THE BRANCH MANAGER, NATIONAL INDIA 601
INSURANCE CO. LTD.

recover the same from the owner of the vehicle owner A
(respondent No.2). However, in the facts of the present case,
consequent to affirmation and restoration of the finding of fact
recorded by the Tribunal regarding the factum that deceased had
travelled along with his goods at the time of accident, the insurer
would be obliged to satisfy the compensation amount awarded to
B
the claimants. [Paras 10, 11 and 12] [608-F-H; 609-A-B; 610-G]
National Insurance Co. v. Swarn Singh and Ors. (2004)
3 SCC 297 – relied on.
Case Law Reference
(2004) 3 SCC 297 relied on Para 11 C

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2247
of 2018.
From the Judgment and Order dated 09.07.2015 of the High Court
of Karnataka, Dharwad Bench in M. F. A. No. 4401 of 2008(MV). D
Sharanagouda Patil, Ms. Supreeta Sharanagouda, Advs. for the
Appellants.
Ms. Meenakshi Midha, Kapil Midha, Bhavya Lakhwara, Chander
Shekhar Ashri, Advs. for the Respondents.
E
The Judgment of the Court was delivered by
A. M. KHANWILKAR, J. 1. This appeal th
emanates from the
judgment of the High Court of Karnataka dated 9 July, 2015 in M.F.A.
No.4401/2008 (MV) which had allowed the appeal filed by respondent
No.1 (Insurance Company) and set aside the award of the Motor Accident
Claims Tribunal (for short “the Tribunal”) granting compensation to the F
appellants.
2. A claim petition was filed in reference to the death of one
Chanabasayya Sidramayya Hiremath, rd
son of appellant No.1 and brother
of appellant No.2 herein. On 23 January, 2001, the deceased was
returning, after unloading food-grains, on tractor-trailer bearing No. KA- G
29/T-1651/T-1652 belonging to respondent No.2, and being driven by an
employee of respondent No.2, one Mallikarjuna Beemappa Ganiger. At
around 1.00 AM, it is alleged that owing to the rash and negligent driving
of the said Mallikarjuna Beemappa Ganiger, the deceased fell off the
H
602 SUPREME COURT REPORTS [2018] 4 S.C.R.

A tractor-trailer and suffered fatal injuries. A claim petition under Section
166 of the Motor Vehicles Act, 1988 was subsequently filed before the
Tribunal, Bagalkot, by the legal representatives of the deceased seeking
compensation of Rs. 8 lakh from respondent No.1 - insurance company,
respondent No.2 - owner and the driver, Mallikarjuna Beemappa Ganiger.
After considering the facts and evidence on record, the Tribunal rejected
B
the respondents’ contention that the deceased had himself been negligent
by standing on a tractor hook which connected the tractor and the trailer
and concluded that the accident had occurred due to the negligence of
the driver of the motor vehicle. The Tribunal, thus, passed an award
against the respondents, jointly and severally, to compensate the family
C members of the deceased with a sum of Rs.3,20,000/- (Rupees three
lakh twenty thousand only) with interest at the rate of 6% per annum,
from 3.7.2001 to 29.4.2003 and from 11.7.2007 till date of realisation of
the award amount.
3. Aggrieved, respondent No.1 insurance company assailed the
D Tribunal’s award before the High Court of Karnataka, contending that
the deceased had not travelled along with his goods in the tractor-trailer
and therefore, it could not be made liable to pay any compensation. The
High Court found merit in the contention raised by respondent No.1, that
the deceased was not travelling along with his goods at the time of the
accident and thus held that respondent No.1 insurance company could
E not be saddled with any liability in that regard.
4. The appellants have challenged the impugned judgment
including on the ground that the High Court failed to appreciate the
evidence on record and the fact that the deceased was the sole earning
member of the family without whom, the family had no other source of
F income. The appellants also submit that the quantum of compensation
awarded by the Tribunal was meager and unjustifiable and therefore,
also seek enhancement of the Tribunal’s award.
5. We have heard Mr. Sharanagouda Patil, learned counsel for
the appellants and Ms. Meenakshi Midha, learned counsel for the
G respondents. Be it noted, the driver of the offending vehicle has not
been arrayed as a party either before the High Court or before this
Court and the claim of the appellants is only against respondent No.1 -
Insurance Company and the respondent No.2 – owner of the vehicle.

H
SHIVAWWA v. THE BRANCH MANAGER, NATIONAL INDIA 603
INSURANCE CO. LTD. [A. M. KHANWILKAR, J.]

6. The High Court has held that the insurer (respondent No.1) A
cannot be saddled with the liability to satisfy the award and on that
finding, allowed the appeal preferred by respondent No.1. The reason
which weighed with the High Court for arriving at that conclusion, as
can be discerned from the impugned judgment, is based on the selective
reading of evidence of PW-2 (eye-witness) who had stated that the
B
deceased was standing on the hook connecting the tractor and trailer
and the deceased fell down due to rash driving of the tractor, which ran
over his head and chest. The High Court has also selectively adverted to
the evidence of PW-1, mother of the deceased and opined that even her
evidence was to the same effect. Additionally, she has stated that the
deceased was studying in B.A. and running a Pan-Beedi shop. After so C
noting, the High Court jumped to a conclusion that a combined reading
of the evidence of these witnesses leads to an inference that the victim
was not travelling with his goods at the time of accident which occurred
at about 01.00 Hours in the night. On recording this opinion, the High
Court absolved the insurer. The analysis by the High Court is in the
D
following words:
“6. Per contra, learned counsel for the respondents strongly relies
on the evidence of P.W.2 and contends that P.W.2 is an eyewitness
and deposed before the Court that while returning from Holealur,
the driver of the tractor was driving the vehicle in a rash and
negligent manner and caused the accident in which the deceased E
died on the spot. Ex. P-1 is the complaint given by the father of
the deceased. It is stated therein that on 22.01.2001 his son had
gone to Holealur in the tractor belonging to respondent No.1 and nd
while returning
rd
at about 01:00 hours in the night intervening 22
and 23 January, 2001 has son sustained fatal injuries in the F
accident. It is also clearly stated therein that the deceased was
standing in the hook which connects tractor to the trailer and the
victim fell down due to rash driving and the tractor ran over his
head and the chest. The evidence of P.W.1, mother is also to the
same effect. She has also stated in her evidence that the deceased
was studying in B.A. and running a Pan Beedi shop. G

7. A combined reading of all witnesses leads to an inference that
the victim was not travelling with his goods at the time of accident.
The accident has occurred at about 00:01 hours in the night. In
the circumstances, the insurer cannot be saddled with the liability
H
604 SUPREME COURT REPORTS [2018] 4 S.C.R.

A to satisfy the award. The appeal merits consideration and
accordingly allowed.”
7. On the other hand, a perusal of the judgment of the Tribunal
reveals that the Tribunal had analysed the evidence of PW-2 and PW-1
in its entirety and also took into account other evidence in the shape of
B charge-sheet filed by the Investigating Officer, in respect of Crime No.12/
2001 registered in respect of the accident in question for accepting the
factum that deceased had travelled in the tractor along with his goods to
Holealur where he had gone to unload the foodgrains of Maize loaded
on the tractor belonging to respondent No.2, which was driven by
Mallikarjuna Beemappa Ganiger and while returning from Holealur, met
C with the accident. In her examination-in-chief, PW-1 deposed as follows:
“On the fatal day of accident i.e., on 23.01.2001 in the evening at
about 5:00 p.m., my son deceased Chanabasayya gone to Hole-
Alur for unloading the foodgrains in Commission Agent shop for
sale of the same in a TT Unit bearing No.KA, 29/T-1651 T-1652
D belongs to Basanagouda Hireniganagoudar, after unloading the
foodgrains belongs to us while returning to the village by my son
in the said TT unit the driver of the said T.T. unit was driving the
vehicle in rash and Regulations and caused the accident near
Heballi village at anappana halls (stream) due to this negligent
E driving of the driver, my son fell down from the T.T. unit and the
said vehicle passed on the head of my and due to gracious injuries
to head my son was succumbed on the spot, and P.M. was
conducted at Govt. Hospital Badami.”
PW-2 in his examination-in-chief stated as follows:
F “On 23.11.2001 Lt. chanabasayya and myself together went
to Rone in the tractor of Basanagouda Hireninganagouder by
loading the maize in the said tractor and while returning back near
our city near Ganapan village the driver of the tractor drove a
tractor in very rash and negligent manner and in a high speed
G endangering the human life and injured Lt. Chanabasayya and he
died on the spot. I have witnessed the said accident. Like me
others were also in the tractor.”
When cross-examined, PW-2 stated that on the date of accident they
had taken maize crop in the said tractor. Notably, the fact that the
deceased had loaded his agricultural produce on the tractor and also
H
SHIVAWWA v. THE BRANCH MANAGER, NATIONAL INDIA 605
INSURANCE CO. LTD. [A. M. KHANWILKAR, J.]

accompanied the tractor for unloading the same to Holealur and while A
returning met with an accident, has gone unchallenged.
8. In light of the entire evidence, the Tribunal found thus:
“7. …..This fact has been denied by respondent no.3 and as such
the burden of proving of issue No.1 is on the petitioner and in
order to prove issue No.1 second petitioner is examined as PW-1 B
who has filed her affidavit evidence and PW-1 deposed in her
evidence regarding the accident caused to her son deceased
Chanabasayya on 23.1.2001 involved with tractor and trailer
belongs to respondent no.1 driven by respondent no.2 on the date
of accident. Through counsel for respondent no.3 cross examined C
PW-1, but PW-1 has not given admissions in order to discard her
evidence. Even PW-1 has denied the suggestion that deceased
was standing on a hook portion in the tractor trailer which connects
the tractor Engine and trailer portion of the vehicle and travelling
on that day, but PW-1 has denied this suggestion. In order to prove
the accident an independent witness PW-2 is examined by the D
petitioner wherein this witness has also filed affidavit evidence
and stated regarding the accident caused to deceased
Chanabasayya on 23.1.2001 involved with tractor and trailer unit
belongs to respondent no.1. This witness is also cross-examined
by counsel for respondent no.3, but nothing is elicited to discard E
the evidence of PW-2. The petitioners have relied upon police
documents, which are marked through PW-1 as per Exp-1 to Ex.P-
5. ExP-1 is the true copy of FIR registered before Badami P.S in
Crime No.12/2001 as per the complaint filed by first petitioner i.e,
father of the deceased u/sec.279 and 304 (A) of IPC. The Copy
of complaint is also annexed to the FIR wherein petitioner no.1 F
has filed this complaint before the Badami P.S. on 23.1.2001 against
the driver of T.T. Unit. ExP-2 is the charge sheet filed by the I.O.
against respondent no.2, driver of the T.T. unit before JMFC
Badami wherein a criminal case bearing C.C.No.314 of 2001 was
registered against driver of T.T. unit for the offence punishable G
u/Secs. 279 and 304 (A) of IPC. Ex.P3 is the spot mahazar and
contents of Ex.P-3 clearly proves the spot and accident and also
it corroborated with spot of accident as relief by the petitioners in
their claim petitioner. ExP-4 is the IMV report filed by the Motor
Vehicle Inspector after examination of T.T. unit involved in the
H
606 SUPREME COURT REPORTS [2018] 4 S.C.R.

A accident and this document proves that accident in question did
not cause due to any mechanical defect in the vehicle. ExP-5 is
the post mortem examination report of the deceased Chanabasayya
conducted by M.O. Community Health Center at Badami and as
per P.M. report the death had occurred due to head injuries and
also damage to the vital organs of brain of the deceased.”
B
The Tribunal also considered the plea taken by the insurer
(respondent No.1) which was sought to be established through evidence
of its officer working as an administrative officer, in the following words:
“8. Respondent No.3 has examined its officer who is working as
C Administrative officer in the office of respondent no.3 and this
witness has filed affidavit evidence accepted u/0 18 rule 4 of
CPC wherein RW-1 stated that, deceased Chanabasayya died as
he was standing on a hook portion of Tractor Trailer and died due
to his negligence on the date of accident. But in support of this
contention RW-1 has not produced any rebuttal documents to that
D of Ex.P-1 to Ex.P-5. However, RW-1 in his cross examination
clearly admitted that in the complaint marked at Ex.P-1 it is not
recited with deceased obtained T.T. unit from respondent no.1 on
hire basis and RW-1 has denied the suggestion made to him during
cross examination that he is deposing false evidence regarding
E deceased was standing on a tractor hook which connects the
engine and trailer portion. After considering the evidence of RW-
1 though respondent no.3 in its petition filed to the claim petition
and also RW-1 in his oral evidence stated that the accident had
occurred due to the gross negligence of deceased himself, but to
support this contention there is no cogent and oral evidence nor
F documentary evidence placed on record by the respondent no.3.
On the contrary, there is evidence of PW-1 and 2 and also Ex.P-
1 to Ex.P-5 which are the documents obtained from C.C. file
wherein as per the complaint filed by the petitioner No.1, a crime
was registered against the accused i.e., driver of T.T. unit and
G I.O. after due investigation has filed charge sheet against
respondent no.2 who was driver of the T.T. unit on the date of
accident and hence there documents are not denied by the
respondent no.3. on the contrary, Ex.P-1 to Ex.P-5 clearly establish
that the accident in question was occurred due to actionable
negligence of driver of T.T. unit wherein respondent No.2 was
H
SHIVAWWA v. THE BRANCH MANAGER, NATIONAL INDIA 607
INSURANCE CO. LTD. [A. M. KHANWILKAR, J.]

driving the said tractor and trailer on 23.1.2001 and caused accident A
at 1.00 a.m. near Ganappan Halla just 1.00 k.m. away from
Hebballi village on Cholchagudda-Govankoppa PWD road and
the gross negligence of driver caused the death of Chanabasayya
who succumbed to injuries and died on the spot as he was travelling
in the said T.T. unit on that day and hence the negligence is clearly
B
attributed on the part of driver of T.T. unit and death of
Chanabasayya was the proximate cause of road traffic accident
which comes under the preview of Sec. 166 of M.V. Act and this
positive evidence lead by the petitioners is proved by the
documentary evidence, but the contention of respondent no.3 has
to be rejected and also there is no cogent evidence to hold that the C
death of Chanabasayya was due to his own negligence. Hence,
after appreciation of evidence of PW-1 and 2 and RW-1 and by
perusal of Ex.P-1 to Ex.P-51 I hold that, the petitioners have prove
issue No.1 as against respondent no.1 to 3. Accordingly, issued
no.1 is answered in affirmative.”
D
And again in paragraph 11, on the issue of entitlement of compensation
it noted thus:-
“…The petitioners claimed compensation from respondent No.1
to 3 jointly and severally wherein respondent No.1 is owner of
offending vehicle respondent No.2 driver of vehicle and respondent E
No.3 is the insurer, but RW-1 representing insurance company
has given evidence denying its liability contending that, there is
breach of policy conditions particularly there is violation of
condition clause “A” of Ex.R-1 wherein deceased had hired the
vehicle of respondent No.1 in order to load maize corns to dump
at hole Alur in Commission Agent shop. In the evidence of RW-1 F
insurance cover note is produced and it is marked at Exhp-1. The
contention of respondent No.3 is rejected by this Tribunal regarding
the defence taken that death of Chanabasayya was due to his
gross negligence. On perusal of Ex. R1 it is valid policy obtained
from respondent No.1 over his T.T. unit wherein policy period G
commences from 12.2.2000 to 11.2.2001. In view of admission of
RW-1 in cross examination wherein RW-1 admitted in his cross
reads as follows:-
“…..On the contrary, the deceased had went to dump maize
corns belongs to them in the vehicle owned by respondent No.1. H
608 SUPREME COURT REPORTS [2018] 4 S.C.R.

A Hence, the contention of respondent No.3 that vehicle and its use
was for hire and reward is not proved by any cogent evidence on
record. On the contrary, the offending vehicle T.T. unit was used
for carrying foodgrains to each the sale point i.e., Commission
Agent shop at Hole-Alur which an agricultural produce of
petitioners family carried called Tractor- Trailer. Therefore this
B
decision relied by the petitioners is aptly applicable wherein the
use of vehicle is for agricultural purpose and not for any other
commercial purpose. Once it is held use of vehicle by the deceased
for agricultural purpose then question of violating any policy
conditions by respondent No.1 will not arise…..”
C 9. As mentioned earlier, the High Court by a sweeping observation
proceeded to reverse the finding of fact recorded by the Tribunal.
Whereas, the Tribunal had duly considered the evidence of PW-1, PW-
2 and the material accompanying the charge-sheet filed in respect of
Crime No.12/2001 as also the plea taken by the insurer and the evidence
D of RW-1. In our opinion, the conclusion reached by the Tribunal is a
possible view, which could not have been disturbed by the High Court in
the appeal filed by the insurer, much less in such a casual manner, as has
been done by the High Court.
10. Notably, the High Court has not even adverted to the other
E findings recorded by the Tribunal as regards the manner in which accident
occurred and, in particular, about the rash and negligent act of the driver
of the tractor which had caused the accident resulting into the death of
Chanabasayya on the spot due to grievous injuries suffered by him.
The High Court has also not adverted to the finding recorded by the
Tribunal in respect of Issue Nos.2 and No.3 regarding the proof of age,
F occupation and income of the deceased and the quantum of just and
reasonable compensation. The High Court based its conclusion that the
insurer cannot be saddled with the liability to satisfy the award, on the
finding that the deceased was not travelling along with his goods at the
time of accident. No more and no less. However, as the said finding
G recorded by the High Court cannot be sustained, the finding of the Tribunal
on the factum that the deceased had travelled along with his goods will
have to be affirmed and restored. It would necessarily follow that the
insurer was not absolved of its liability to pay the compensation amount
awarded to the claimants. We say so because the Tribunal has found, as
of fact, that the insurance policy brought on record was a valid policy in
H
SHIVAWWA v. THE BRANCH MANAGER, NATIONAL INDIA 609
INSURANCE CO. LTD. [A. M. KHANWILKAR, J.]

respect of the offending tractor for the period commencing from A
12.02.2000 to 11.02.2001.
11. Assuming for the sake of argument that the insurance company
was not liable to pay compensation amount awarded to the claimants as
the offending tractor was duly insured, the insurer would be still liable to
pay the compensation amount in the first instance with liberty to recover B
the same from the owner of the vehicle owner (respondent No.2), in
light of the exposition in the case of National Insurance Co. Vs. Swarn
Singh and Ors.1 In paragraph 110 of the said decision, a three-Judge
Bench of this Court observed thus:
“110. The summary of our findings to the various issues as raised C
in these petitions are 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 D
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) Insurer is entitled to raise a defence in a claim petition filed
under Section 163A or Section 166 of the Motor Vehicles Act, E
1988 inter alia in terms of Section 149(2)(a)(ii) of the said Act.
(iii) xxx
(iv) The insurance companies are, 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 F
part of the owner of the vehicle; the burden of proof where for
would be on them.
(v) xxx
(vi) xxx
G
(vii) xxx
(viii) xxx
(ix) xxx
1
(2004) 3 SCC 297
H
610 SUPREME COURT REPORTS [2018] 4 S.C.R.

A (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
B
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
C 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
D
date of announcement of the award by the tribunal.
(xi) The provisions contained in Sub-section (4) with proviso
thereunder and Sub-section (5) which are intended to cover
specified contingencies mentioned therein to enable the
insurer to recover amount paid under the contract of
E insurance on behalf of the insured can be taken recourse
of by the Tribunal and be extended to claims and defences
of insurer against 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
F delay the adjudication of the claims of the victims.”
(emphasis supplied)
12. However, in the facts of the present case, we have no hesitation
in taking a view that consequent to affirmation and restoration of the
finding of fact recorded by the Tribunal regarding the factum of deceased
G had travelled along with his goods at the time of accident, the insurer
would be obliged to satisfy the compensation amount awarded to the
claimants.
13. Reverting to the argument of the appellants that the Tribunal
committed manifest error in computing the compensation amount, we
H
SHIVAWWA v. THE BRANCH MANAGER, NATIONAL INDIA 611
INSURANCE CO. LTD. [A. M. KHANWILKAR, J.]

find that the appellants (claimants) did not file an appeal for enhancement A
of compensation amount against that part of the award passed by the
Tribunal nor chose to file any cross-objection in the First Appeal filed by
the insurer before the High Court. Moreover, from the judgment of the
High Court there is no indication that any attempt was made on behalf
of the appellants to ask for enhanced compensation amount on the
B
grounds as would have been available to the appellants in that behalf.
Significantly, in the present appeal also, the appellants have not asked
for any “relief” against that part of the award passed by the Tribunal,
regarding the quantum of compensation. The relief claimed in this appeal
is only to set aside the decision of the High Court passed in the First
Appeal preferred by the insurer. In this backdrop, it will not be appropriate C
for this Court to consider the argument regarding the quantum of
compensation at the instance of the appellants (claimants).
14. As a result, the appeal would succeed only to the extent of
setting aside the impugned judgment of the High Court passed in the
First Appeal filed by the insurer (respondentst No.1) as prayed and D
consequently, by restoring the Award dated 21 January, 2008 passed
by the Motor Accident Claims Tribunal, Badalkot. We order accordingly.
15. The appeal is allowed in the above terms with costs.

E
Divya Pandey Appeal allowed.

F

G

H