Holding

A Tribunal's permission to contest a claim under Section 170, even if unreasoned, is valid and cannot be set aside solely for lack of recorded reasons, and the compensation awards were modified as per proper principles of dependency loss calculation.

Summary

The insurer, National Insurance Company Ltd., appealed against the Gujarat High Court's dismissal of its challenges to Motor Accident Claims Tribunal awards, contending that the Tribunal had granted permission to contest the claims under Section 170 of the Motor Vehicles Act, 1988 without recording reasons. The Supreme Court held that a non‑reasoned order granting such permission is valid and cannot be set aside merely for lack of reasons, though a High Court may direct a reasoned order if the permission itself is contested. The Court also reassessed the compensation awards in two fatal‑accident cases, correcting the deduction for personal expenses to 50% in the first case and adjusting the assumed income and deduction to 25% in the second, while reducing the interest rate from 15% to 9% per annum. Accordingly, the awards were reduced to Rs.1,50,000 with 9% interest in the first case and to Rs.6,27,000 with 9% interest in the second, with the compensation apportioned among the dependents. Both appeals were allowed and the High Court orders set aside.

Issues considered

Whether a Motor Accident Claims Tribunal order granting permission to an insurer to contest a claim under Section 170 of the Motor Vehicles Act, 1988, is invalid for not recording reasons.
Whether the High Court can set aside such an order on the ground of lack of reasons.
How to compute compensation in motor accident claims: appropriate income estimation, deduction for personal expenses, multiplier, and interest rate.

Legislation cited

Motor Vehicles Act, 1988s. 149(2), s. 170

Subjects

Motor Vehicles ActSection 170Section 149Motor Accident Claims TribunalPermission to contestCompensation computationMultiplierInterest rateInsurer rightsCollusion

Judgment

[2009) 3 S.C.R. 875

• ,, NATIONAL INSURANCE COMPANY LTD. A
v.
MEGHJI NARAN SORATIYA & ORS.
(Civil Appeal No. 1171 of 2002)

FEBRUARY 26, 2009
B
[R. V. RAVEENDRAN AND H.L. DATTU, JJ.]

Motor Vehicles Act, 1988:

ss. 149(2) and 170 - Permission granted by Tribunal to c
insurer to contest the claim - HELD: On facts, does not call
for interference - If the order granting permission required
reasons to be recorded, on challenge, High Court could either
set aside the permission granted with a direction to Tribunal
., to pass a reasoned order or itself consider whether the case
D
warranted permission - But under no circumstance
permission by Tribunal to contest the claim can be equatetl
to or treated as denial of permission merely on the ground
that reasons were not recorded - Judicial notice can also be
taken of false claims by claimants in collusion with owners/
E
drivers of vehicle and/or police and/or doctors - In such
cases, it is the insurer which is to bear the liability statutorily
or contractually - Such matters invite serious consideration
by Parliament and Law Commission to give the insurer direct
"' right to contest the claim on merits without technical
requirement of permission - Legislation - Need for- Judicial F
...
Notice.

Fatal accident - Compensation - Computation of - Age
of deceased assessed 55-58 years - Claim by son and
daughter-in-law - Tribunal deducting 113rd of salary towards G
personal expenditure, applying multiplier of 10 and allowing
• interest at 15% - HELD: Multiplier of 10 justified - But 50%
and not 1!3rd to be deducted towards personal and living
expenses of deceased - Interest at 9% would be appropriate.
875 H
876 SUPREME COURT REPORTS [2009] 3 S.C.R.

A Fatal accident - Compensation - Computation of - ..
Deceased bus conductor earning Rs.36001- per month at the
time of accident - Pursuing Master's course - Tribunal
assuming higher monthly income at Rs. 50001- after
completing studies - Keeping in view the age of dependent
B wife as 22 years and minor children aged three and one year
and the parents, Tribunal applying multiplier of 16 - Interest
allowed at 15% - HELD: In view of the higher qualification,
Tribunal justified in assuming higher income instead of actual
income - But, such assessment should be realistic and should
c be close to actual income - On facts, income taken as
Rs.40001- per month - Multiplier of 17 to be applied - One-
fourth to be deducted towards personal and living expenses
- Interest reduced to 9%.

General Manager, Kera/a State Road Transport Corpn.
D v. Susamma Thomas 1994 (2) SCC 176; U.P. State Road
Transport Corpn. v. Trilok Chandra 1996 (4) SCC 362 and
Sara/a Dixit v. Ba/want Yadav AIR 1996 SC 1274, referred
to.

E Case Law Reference:

1994 (2) sec 116 referred to para 12

1996 (4) sec 362 referred to para 12
AIR 1996 SC 1274 referred to para 16
F
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
.
1171 of 2002.

From the Judgment & Order dated 28.12.1999 of the High
G Court of Gujarat at Ahmedabad in First Appeal No. 4994 of
1999.

Minakshi Vij for the Appellant.

The following Order of the Court was delivered :
H
NATIONAL INSURANCE COMPANY LTD. v. MEGHJI 877
NARAN SORATIYA & ORS.

R.V. RA VEENDRAN, J. 1. The insurer has challenged the A
dismissal of its appeals (against the awards of Motor Accident
Claims Tribunal), by the Gujarat High Court on the sole ground
that the Tribunal while granting permission to the insurer to
contest the claim under Section 170 of the Motor Vehicles Act,
1988 ('Act' for short) did not assign reasons for granting B
permission.

2. Chapter XII of the Act relates to Claims Tribunals.
Chapter XI relates to insurance of motor vehicles against third
party risks. The scheme, in particular, the provisions of section
170 read with section 149, contemplate the claimants in a motor C
accident claim filing the claim petition against the driver and
owner of the motor vehicle. The claimants are required to
furnish the particulars relating to insurance and the name and
address of the insurer, but are not required to implead the
insurer as a party to the proceedings. Having regard to the D
statutory obligation imposed on the insurer to satisfy judgments '
and awards against persons insured in respect of third party
risks, the tribunal is required to issue notice to the insurer about
the initiation of the claim proceedings. When such notice is
given, the insurer can seek impleadment only for the limited E
purpose of defending the action on the grounds mentioned in
sub-section (2) of section 149, that is, breach of a specified
condition of the policy by the insured (owner of the vehicle) or
voidness/invalidity of the policy by reason of the policy having
been obtained by non-disclosure of material facts or by F
representation of any fact which was false in some material
particular. An insurer is not entitled to contest the claim on
merits when it received such notice under section 149(2).

3. However, section 170 of the Act requires the Tribunal
to implead the insurer as a party to contest the claim in the G
following two circumstances, where it is satisfied that: (a) there
is collusion between the persons making the claim and the
person against whom the claim is made; or (b) the person

H
878 SUPREME COURT REPORTS [2009] 3 S.C.R.

A against whom claim is made, failed to contest the claim. The
Tribunal is required to record the reasons in writing while
directing the insurer who may be liable in respect of such claim
to be impleaded as a party to the proceedings. On being so
impleaded in pursuance of an order under section 170 of the
B Act, the insurer, without prejudice to the provisions contained
in sub-section (2) of section 149, has the right to contest the
claim on all or any of the grounds that are available to the
person against whom the claim has been made.

4. Thus, the insurer has two distinct and
C compartmentalised rights, while defending against claims. First
is where it wants to repudiate or deny liability as insurer, either
on the ground that there is a breach of a specified condition of
the policy or on the ground that the policy itself is void.
Participation under section 149(2) is only to repudiate or deny .
D its liability under the insurance policy. Neither the issue of liability
of the driver/owner nor the issue of quantum of compensation
can be the subject matter of contest by the insurer who is served
a notice under section 149(2). Second is where the insurer is
impleaded as a respondent with the right to contest the claim
E even on merits, either on account of the Tribunal being satisfied
that there is collusion between the claimants and the owner/
driver, or on account of the owner/driver who have been
impleaded as respondents, failing to contest the proceedings.
When the insurer is impleaded and permitted to contest under
F section 170 of the Act, it can contest either the quantum of
compensation claimed or even the liability of the driver/owner
to pay compensation. This is in addition to, and without
prejudice to its statutory right under section 149(2) to repudiate
or deny its liability.
G
5. Section 170 therefore proceeds on the assumption that
the insurer will not be a party to the claim proceedings and
requires for the Tribunal to implead it as a party to contest the
claim on merits in the two circumstances mentioned therein,
namely (a) collusion between claimants and driver/owner; and
H
NATIONAL INSURANCE COMPANY LTD. v. MEGHJI 879
NARAN SORATIYA & ORS. [R.V. RAVEENDRAN, J.]
,
(b) non-contest by driver/owner. Where the insurer is not a party, A
and it becomes necessary to implead the insurer as a party-
respondent under section 170 of the Act, with right to contest
the claim on merits, either on the application of the insurer or
suo moto, the Tribunal has to make a brief order recording
reasons showing that either of the two conditions mentioned B
in the section are satisfied for impleading the insurer as a party.

6. But in practice, virtually in all claim petitions, the insurer
is impleaded as a party respondent alongwith the driver and
owner. Consequently, many Tribunals instead of issuing the
special notice under section 149(2) notifying the insurer of the c
lodging of a claim against the insured (so as to give the insurer
... an option to deny the validity of the policy or repudiate its
liability under the policy under any of the grounds mentioned in
section 149(2) of the Act), issues regular notice to the insurer.
As a result, in practice the insurers file their reply in all claim D
petitions. They raise the grounds available under section
149(2), if such grounds exist. Otherwise they generally traverse
the averments in the claim statement, though not permitted to
contest on merits. But where one of the two circumstances
mentioned in section 170 exists, that is collusion or non-contest E
on the part of driver/owner, then the insurer who is already a
party, files an application under section 170 of the Act seeking
permission to contest, which is routinely granted. Where the
insurer is already a party respondent in the claim petition and
,. . it makes an application seeking permission to contest the claim F
on merits on the ground that the driver and owner have failed
to contest the claim, even a one-line order or non-reasoned
order may be sufficient as the Tribunal can satisfy itself about
the need to grant the permission by a perusal of the record,
without anything n·· :-re. But where the driver/owner are G
~

~
defending the claim, but the insurer seeks permission on the
ground that there is collusion between the claimants and the
driver/owner, it may be necessary for the tribunal to record
reasons to show that it is satisfied that there is collusion, before
granting permission. Where applications under section 170 of
H
880 SUPREME COURT REPORTS [2009] 3 S.C.R.

A the Act filed by the insurer specifically alleged that the driver/
owner failed to contest the claim and therefore it was seeking
permission, the same is verifiable from the record. On such
verification, the Tribunal may pass a separate order or even
endorse the order "granted" on the application itself. Even if any
B reason was to be recorded, all that the Tribunal is required to
say is : "Permission is granted as driver/owner have failed to
contest the claim". In such cases, failure to record reasons can
not render the order invalid or illegal as the record on the face
of it would show the claim was not being defended by the driver/
c owner. Procedural requirements should not be stretched to
absurd levels to defeat the ends of justice itself.

.7. There is a prevalent view that a rethink on sections 149
..
and 170 of the Act is necessary. As noticed above, Sections
149 contemplates claim petitions being filed only against'the
D driver and the owner, and the driver/owner alone contesting the
claim on merits. The insurer is required to satisfy the award
made by the Tribunal, even if it is not impleaded as a party to
the claim proceedings. But in practice, the insurer is invariably
made a party to the claim proceedings, presumably to avoid
E any kind of delay. It is also a reality that drivers who are primarily
liable seldom contest the proceedings either because of their
financial incapacity or because they know that the burden will
be borne vicariously by the owner and by the insurer under the
policy of insurance. It is also a reality that many of the owners
F do not appear and contest the claim proceeding, or even if they
appear and file a reply, do not defend the claim by effectively
cross-examining the claimant's witnesses and by leading
defence evidence. Owners are complacent as they have an
insurance cover and know that the insurer will bear the liability.
G In practice therefore the insurer has to keep on goading the
owner to contest the matter and place necessary evidence.
Section 170 provides that if the driver/owner fail to contest the
claim, the Tribunal may permit the insurer to contest the claim.
But what, if the driver/owner file a reply but fail to effectively
H participate in the proceedings? What if the counsel for driver/
NATIONAL INSURANCE COMPANY LTD. v. MEGHJI 881
NARAN SORATIYA & ORS. [RV. RAVEENDRAN, J.)
,. owner are present but resort to only cursory cross-examination? A
What if the driver/owner do not at all lead defence evidence?
What if there is a well-planned collusion that does not meet the
eye? Where the insurer does not get permission under section
170, there is a reasonable chance of the defence to the claim
being far from satisfactory. Judicial notice can also be taken B
of the fact that there have been several false claims by
claimants in collusion with the owners/drivers of vehicle and/or
Police and/or doctors. The question raised is whether it is
proper to prohibit the insurer, which is to bear the liability
statutorily and contractually, from participating in the process c
of adjudication of liability and assessment of compensation?
Or the statute having made the insurer directly liable to the
claimants, should the insurer be given a direct right to contest
the claim on merits without the technical requirement of
permission? Should the insurer always be at the mercy of the D
owner to contest the claim ? These are matters that invite
serious consideration, particularly by the Parliament and Law
Commission and other stake-holders. Be that as it may.

8. Coming to these cases, we are satisfied that the grant
of permission by the Tribunal to the insurer to contest the E
proceedings does not call for interference. In the first case, both
the driver and owner, though served, remained absent and did
not contest the claim. In the second case, the driver was deleted
from the array of parties as he could not be served and the
owner entered appearance, but did not file statement of F
.....
objections or contest the claim. The insurer specifically alleged
in the applications under section 170 that the driver/owner
failed to contest the claim and therefore it was seeking
permission.
G
9. Even assuming that order granting permission required
recording of reasons, if the order failed to record reasons on
• being challenged, the High Court could either set aside the
permission granted, with a direction to the Tribunal to
reconsider the applications and pass a reasoned order, or in
H
882 SUPREME COURT REPORTS [2009] 3 S.C.R.

A special circumstances, itself consider whether the case
warranted the grant of permission and decide the question. But
under no circumstances, the Tribunal's permission to contest
the claim, can be equated to or treated as denial of permission
to contest the claim, merely on the ground that reasons were
B not recorded. Further, where the order granting the permission
to contest is not challenged at all, the High Court can not
dismiss the appeal filed by the insurer on merits, on the ground
that Tribunal did not assign reasons while granting permission
under Section 170 of the Act. Consequently, the orders of the
c High Court dismissing the appeals only on the ground that the
Tribunal did not record reasons for granting permission, are
liable to be set aside.

10. Having regard to the fact that the two appeals relate
to accidents which took place in the years 1991 and 1996 and
0 the appeals have been pending in this Court for nearly seven
years, we propose to consider and dispose of the appeals on
merits, instead of relegating the parties to one more round of
litigation before the High Court.

E Civil Appeal No. 1171/2002

11. The claim related to the death of a mason aged 58
years in a motor accident which occurred in the year 1991. His
son and daughter-in-law were the claimants and claimed a
F compensation of Rs. 3 lakhs. The Tribunal after considering the
evidence, held that the deceased was aged 55 to 58 years,
that his income was Rs. 2,250/- per month and that he was
contributing Rs.1500/- per month to the family. It however
restricted the annual loss of dependency to Rs.15,000/- instead
G of Rs.180.00/- and by applying a multiplier of 10, arrived at the
loss of dependency as Rs. 1,50,000/-. It awarded Rs. 15,000/
- towards loss of estate, Rs. 5,000/- for funeral expenses,
Rs.5,000/- towards medicines/treatment (as the deceased
underwent treatment for a short period in a hospital before
death). Thus it determined the compensation payable as Rs.
H
NATIONAL INSURANCE COMPANY LTD. v. MEG HJ I 883
NARAN SORATIYA & ORS. [R.V. RAVEENDRAN, J.]

. ~ 1, 75,000/- and awarded the same with interest @ 15% per A
annum from the date of petition.

12. The learned counsel for the appellant submitted that
when there was no clear and conclusive evidence that the
married son and daughter-in-law were dependent on the
8
deceased, the Tribunal erred in restricting the deduction
towards the living/personal expenses of the deceased to only
one-third. He also submitted that award of Rs. 15,000/- towards
loss of estate was excessive. There is some merit in the said
contentions. We will therefore reassess the compensation. The
Tribunal found that the income of the deceased was Rs. 2,250/ C
- per month or Rs.27,000/- per annum. There is no serious
challenge to this finding. On the facts and circumstances of the
case, 50% should have been deducted towards the personal
and living expenses of the deceased and not one-third. Thus,
the contribution to the family (or the saving by the deceased D
even assuming that the claimants were fully dependant) would
have been Rs. 13,500/- per annum. There is nothing wrong in
the multiplier applied (that is 10) as it is in consonance with the
principles laid down in General Manager, Kera/a State Road
Transport Corpn. v. Susamma Thomas [1994 (2) SCC 176] E
and U.P. State Road Transport Corpn. v. Tri/ok Chandra
[1996 (4) SCC 362]. Therefore, the total loss of dependency
would be Rs. 1,35,000/-. By adding Rs.5,000/- each under the
heads of loss of estate, funeral expenses and cost of treatment,
the total compensation is determined as Rs. 1,50,000/-. F

13. We find that the award of interest at 15% per annum
was excessive. We are of the view that award of interest at 9%
1 per annum would be appropriate, just and reasonable.

14. We therefore, allow the appeal, set aside the order of G
the High Court and reduce the award to Rs. 1,50,000/- with
interest at 9% per annum from the date of petition to date of
deposit.
884 SUPREME COURT REPORTS [2009) 3 S.C.R.

A Re : CA No. 1172/2002 ' '

15. The claim related to the death of a bus conductor aged
23 years in a motor accident in 1996. The claimants were his
widow aged 22 years, two minor children aged three years and
one year and parents. The claimants stated that the deceased
B
was earning Rs. 3,000/- per month plus Rs.600/- as bhatta
charges; that the deceased was pursuing his studies for
Master's degree, and that he would have earned Rs. 5,000/-
to 6,0001- by securing other employment, after completing his
studies. The Tribunal held that the deceased would have earned
c at least Rs. 5,000/- per month on completing his studies. After
deducting one-third towards personal and living expenditure of
the deceased, it arrived at the contribution to the family as Rs.
3334/- per month or Rs.48,008/- per annum. It applied a
multiplier of 16 and arrived at the total loss of dependency as ..
D Rs. 6,40, 128/-. By adding Rs. 20,000/- towards loss of estate,
Rs. 10,000/- towards loss of consortium and Rs. 2,000/-
towards funeral expenses, the Tribunal determined the total
compensation as Rs. 6,72,128/- and awarded the same with
interest at Rs. 15% from the date of petition till the date of
E deposit.

16. The learned counsel for the insurer submitted that in
view of the admissions and evidence that deceased was
getting a salary of Rs. 3,000/- , the Tribunal ought not to take "
F the income at a figure more than Rs. 3,000/- per month. But .
having regard to the fact that the claimants had produced
evidence to show that the deceased had passed 8.A. and was
studying for securing a M.A. degree, we are of the view that
the Tribunal was justified in assuming a higher income at the
time of death instead of the actual earning at the time of his
,!"

G
death. But the amount assessed as income cannot be a fancy
figure. It should be .realistic and should be close to the actual "'
earning (vide Susamma Thomas (supra) and Sara/a Dixit v.
Ba/want Yadav, AIR 1996 SC 1274). On the facts and
circumstances, we are of the view that the income should be
H
NATIONAL INSURANCE COMPANY LTD. v. MEG HJ I 885
NARAN SORATIYA & ORS. [R.V. RAVEENDRAN, J.]

taken as Rs. 4,000/- per month (Rs. 48,000/- per annum). Only A
one-fourth of the income (instead of the standard one-third) has
to be deducted towards personal and living expenses of the
deceased, having regard to his larger family. Thus the
contribution to the family would have been Rs. 36,000/- per
annum. By applying a multiplier of 17, the loss of dependency B
would be Rs. 6, 12,000/-. By adding Rs, 5,000/- each under the
heads of loss of estate, loss of consortium and funeral
expenses, the total compensation would be Rs. 6,27,000/-. As
the rate of interest awarded (15% per annum) is excessive, we
reduce it to 9% per annum.
c
17. We accordingly allowed this appeal, set aside the order
of the High Court and modify the award by reducing it to Rs.
6,27,000/- with interest at 9% per annum from the date of
petition till date of relief. We direct that the compensation be
apportioned in the ratio of 40% to the widow, 20% e~ch to the D
two minor children and the mother. The Tribunal shall make
appropriate consequential directions relating to bank deposits.

RP. Appeal allowed.