Supreme Court of India
PREMKUMARI AND ORS.versusPRAHLAD DEV AND ORS.
- Citation
- 2008 INSC 69
- Decided
- 18 January 2008
- Disposal
- Disposed off
- Bench
- ARIJIT PASAYAT
Holding
The insurer is not absolved from liability unless it proves that the insured (owner) was aware of and permitted the driver to operate the vehicle with a fake or invalid licence.
Summary
The deceased, a carpenter, was killed when a truck owned by respondent No.1 and driven by respondent No.2 collided with his bicycle. The widow and minor children of the deceased filed a claim for compensation under the Motor Vehicles Act, 1988. The Motor Accident Claims Tribunal awarded compensation but exonerated the insurer, National Insurance Co., on the ground that the driver did not possess a valid licence, a view affirmed by the High Court. On appeal, the Supreme Court held that under s.149(2)(a)(ii) the insurer can escape liability only if it proves a breach of the licence condition by the insured (owner), which was not shown as the owner had satisfied himself that the driver held a licence. Consequently, the insurer remains liable to pay the claimants, but may recover the amount from the vehicle owner and driver. The Court also ordered that the claimants need not repay the Rs.50,000 already paid, while permitting the insurer to recover that sum from the owner.
Issues considered
- Whether the insurer is absolved from liability under s.149(2)(a)(ii) of the Motor Vehicles Act, 1988 when the driver of the offending vehicle did not hold a valid licence.
- Whether the burden of proving a breach of the licence condition lies on the insurer and what standard of proof is required.
Legislation cited
- Motor Vehicles Act, 1988s. 149(2)(a)(ii), s. 163-A, s. 165, s. 166, s. 168, s. 174, s. 96(2)(b)(ii)
Subjects
Motor Vehicles ActSection 149insurance liabilitydriver licencethird‑party compensationbreach of policy conditionrecovery from insured
Judgment
[2008) 1 S.C.R. 874
A PREMKUMARI AND ORS.
¥-
v.
PRAHLAD DEV AND ORS.
(C.A. No. 490 of 2008)
JANUARY 18, 2008
B
[DR. ARIJIT PASAYAT AND P. SATHASIVAM,JJ.]
Motor Vehicles Act, ~ 988 :
s.149(2)(a)(ii) - Breach of conditions of contract of
c insurance - Driver of offending vehicle not holding valid and
effective licence - Claim for compensation - Liability of
it;1surance company - Held : Not liable - On facts, claimants
being widow and minor children of deceased, need not refund
amount paid to them by insurance company - However,
D insurance company can recover such amount from the owner
of the offending vehicle.
The question which arose for consideration in the
instant appeal is : Whether the Insurance Company would
be absolved of liability to pay compensation to the
E
claimants-appellants on the ground that driver of the
offending vehicle was not holding valid and effective
driving licence on the date of accident?
Disposing of the appeal, the Court
;.-
F HELD: 1. When the owner after verification sat!sfied
himself that the driver has a valid licence and driving the
vehicle in question competently at the time of the accident
there would be no breach of s.149(2)(a)(ii) of Motor
Vehicles Act, 1988. In that event, the Insurance Company
G would not be absolved of liability. Even in case the licence <
~
was fake, the Insurance Company would continue to
remain liable unless they prove that the owner was aware
or noticed that the licence was fake and still permitted him
to drive. [Para 6) (880-E, F]
H 874
PREMKUMARI AND ORS. v. PRAHLAD DEV AND 875
ORS. [SATHASIVAM, J.]
National Insurance Co. Ltd. vs. Kusum Rai and Ors. .A
(2006) 4 sec 250 - relied on.
National Insurance Co. Ltd. v. Swaran Singh and Ors.
(2004) 3 SCC 297; United India Insurance Co. Ltd. v. Lehru
and Ors. (2003) 3 SCC 338; National Insurance Co. Ltd. v.
Laxmi Narain Dhut, (2007) 3 SCC 700; Oriental Insurance B
Co. Ltd. v. Meena Variyal and Ors. (2007) 5 SCC 428 -
referred to.
· 2. In the light of the various principles, the factual
finding of the tribunal that the driver was not holding a c
valid licence on the date of the licence and also of the fact
that the appellants are none other than widow and minor
children of the deceased, it is ordered that the appellants
need not' repay said amount of Rs.50,0001· inspite of
conclusion in favour of the insurance company. However, ·o
the Insurance company would recover the said amount
from the owner of the vehicle. The appellants are permitted
to proceed and recover the rest of the amount from the
owner and driver of the vehicle in accordance with law.
[Para 11) [885-G; 886-A, B, CJ
E
Oriental Insurance Co. Ltd. v. Nanjappan (2004) 13
sec 224 - relied on.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 490
~ of 2008. ·
F
From the final Judgment and Order dated 22.04.2004 of
the High Court of Madhya Pradesh, Bench at Indore in review
application M.C.C. No. 41 of 2004.
Vikrant Singh Bais and Ni~aj Sharma for the Appellants.
G
ManjeetChawla and P.K. Seth for the Respondents.
The Judgment of the Court was deliyered by
P. SATHASIVAM, J. 1) Leave granted.
2) Whether the Tribunal was right in holding that the insurer H
876 SUPREME COURT REPORTS [2008] 1 S.C.R.
A was not liable as the driver had a fake licence is the question to r-
be decided in this appeal?
3) BACKGROUND FACTS:
One Ramdhan, who was husband of appellant No.1 and
B father of appellant Nos. 2 and 3 who were minor children, died
in a motor vehicle accident while he was going on his bicycle
and hit by a truck bearing Registration No. CPW 7344 which
was being driven in a rash and negligent manner by respondent
No.2 herein, owned by respondent No.1 herein and was insured
c by respondent No.3 herein - National Insurance Company.
According to the appellants/claimants at the time of accident,
the deceased was aged about 36 years and working as a
carpenter and he was getting an income of Rs.125/- to Rs.150/
- per day. The claimants filed claim case No. 154 of 1997 before
the Motor Accident Claims Tribunal, Indore claiming a total
D
compensation of Rs. 7 lacs under Sections 166A and 140 of
the Motor Vehicles Act, 1988. Respondent No.3 filed a written
statement denying the claim and also pleaded that the driver of
the offending vehicle did not have a valid and effective driving
licence on the date of the accident. The Tribunal based on the
E materials placed and the evidence on record found that death
was caused due to rash and negligent driving of respondent
No.2. On 08.02.2000, the Tribunal awarded a compensation of
Rs.2,56,000/- to the appellants along with interest @ 9% p.a.
from the date of filing of the claim application. The respondent ,.
F No.3-lnsurance Company was exonerated from its liability to
pay compensation on the ground that the driver of the offending
vehicle did not have a valid and effective driving licence on the
date of accident.
G
4) Aggrieved by the award of the Tribunal, the claimants
filed !'vlisc. Appeal No. 1665/2002 in the High Court of Madhya
Pradesh, Bench at Indore challenging the quantum of the award
t ...
as well as exoneration of respondent No.3-lnsurance Company
from its liability of making payment of compensation to ther.1.
The High Court, considering the merits of the case and fir.dir.g
H
PREMKUMARI AND ORS. v. PRAHLAD DEV AND 877
ORS. [SATHASIVAM, J.]
~'f that duplicate licence was issued to respondent No.2 who is A
not having a valid and effective licence on the date of the
accident, held that Insurance Company was not liable for the
compensation amount as determined. However, considering the
merits of the case, age and income of the deceased and
dependents being wife and minor children enhanced the B
compensation amount to Rs.3,50,000i- and directed
respondent Nos. 1 and 2 i.e. owner and driver of the vehicle to
pay the same. The review petition filed by the appellants in Misc.
Civil Case No. 4 :1 of 2004 exonerating respondent No.3 from
its liability has been dismissed by the High Court by order dated c
22.04.2004. Questioning those orders, the claimants filed the
present appeal after obtaining leave.
5) Heard Mr. Vikrant Singh Sais, learned counsel for the
appellants and Ms. Manjeet Chawla, learned counsel for the 3rd
respondent and none appeared for respondent Nos. 1 and 2 D
perused the materials placed before us and the annexures filed.
6) In this appeal, the appellants mainly concerned about
the orders of the Tribunal and the High Court exonerating the
Insurance Company from its liability. Before considering the
relevant decisions of this Court and the issue in question, let us E
--1
note certain factual details. The first respondent is the owner of
the offending vehicle and respondent No.2 is the driver of the
· said vehicle, who is none other than the brother of the first
respondent. Before the Tribunal, the Insurance Company
_, --i contended that the driver was not having a valid and effective F
driving licence. Considering the materials in the form of oral
and documentary evidence placed by the Insurance Company
the Tribunal found that opposite party No.2, namely, driver of
the offending vehicle did not have a valid and effective licence
- ~
on the date of the accident. Based on the said conclusion, it G
exonerated the Insurance Company from its liability. When this
specific finding was challenged by way of review application
before the High Court, the judgment of this Court in United India
Insurance Co. Ltd. vs. Lehru and Others, (2003) 3 SCC 338
was pressed into service. In the said judgment, after considering H
878 SUPREME COURT REPORTS (2008] 1 S.C.R.
A Section 96(2)(b)(ii) of the old Motor Vehicles Act and similar f'-
provision i.e. 149(2)(a)(ii) in the Motor Vehicles Act, 1988, this
Court held as under:-
"17. xxx xxx xxx
B Thus under sub-section (1) the insurance company must
pay to the person entitled to the benefit of the decree,
notwithstanding that it has become "entitled to avoid or
cancel or may have avoided or cancelled the policy''. The
words "subject to the provisions of this section" mean that
c the insurance company can get out of the liability only on
grounds set out in Section 149. Sub-section (7), which
has been relied on, does not state anything more or give
any higher right to the insurance company. On the contrary,
the wording of sub-section (7) viz. "no insurer to whom the
notice referred to in sub-section (2) or sub-section (3) has
D
been given shall be entit1°r1 +,., avoid his liability" indicaleL
that the legislature wanted to clearly indicate that insurance
companies must pay unless they are absolved of liability
on a ground specified in sub-section (2). This is further
clear from sub-section (4) which mandates that conditions,
E in the insurance policy, which purport to restrict insurance
would be of no effect if they are not of the nature specified
in sub-section (2). The proviso to sub-section (4) is very
illustrative. It shows that the insurance company has to
pay to third parties but it may recover from the person who
F was primarily liable to pay. The liability of the insurance
company to pay is further emphasised by sub-section (5).
This also shows that the insurance company must first
pay, then it can recover. If Section 149 is read as a whole
it is clear that sub-section (7) is not giving any additional
G right to the insurance company. On the contrary it is
emphasising that the insurance company cannot avoid t
liability except on the limited grounds set out in sub-section
(2).
18. Now let us consider Section 149(2). Reliance has
H
PREMKUMARI AND ORS. v. PRAHLAD DEV AND 879
,
..
ORS. [SATHASIVAM, J.]
been placed on Section 149(2)( a)( ii). As seen, in order A
to avoid liability under this provision it must be shown that
there is a "breach". As held in Skandia (1987) 2 SCC 654
and Sohan Lal Passi (1996) 5 SCC 21 cases the breach
must be on the part of the insured. We are in full agreement
with that. To hold otherwise would lead to absurd results. B
Just to take an example, suppose a vehicle is stolen. Whilst
it is being driven by the thief there is an accident. The thief
is caught and it is ascertained that he had no licence. Can
the insurance company disown liability? The answer has
to be an emphatic "No". To hold otherwise would be to c
negate the very purpose of compulsory insurance. The
injured or relatives of the person killed in the accident may
find that the decree obtained by them is only a paper
decree as the owner is a man of straw. The owner himself
would be an innocent sufferer. It is for this reason that the
D
legislature, in.its wisdom, has made insurance, at least
...,, third-party insurance, compulsory. The aim and purpose
being that an insurance company wouid be available to
pay. The business of the company is insurance. In all .
businesses there is an element of risk. All persons carrying
on business must take risks associated with that business. E
~
Thus it is equitable that the business which is run for making
profits also bears the risk associated with it. At the same
time innocent parties must not be made to suffer or loss.
These provisions meet these requirements. We are thus
..., ~ in agreement with what is laid down in the aforementioned F
cases viz. that in order to avoid liability it is not sufficient
to show that the person driving at the time of accident was
not duly licensed. The insurance company must establish
that the breach was on the part of the insured."
G
-• "20. When an owner is hiring a driver he will therefore
have to check whether the driver has a driving licence. If
the driver produces a driving licence which on the face of
it looks genuine, the owner is not expected to find out
whether the licence has in fact been issued by a competent
H
880 SUPREME COURT REPORTS [2008] 1 S.C.R.
A authority or not. The owner would then take the test of the
driver. If he finds that the driver is competent to drive the
vehicle, he will hire the driver. We find it rather strange that
insurance companies expect owners to make enquiries
with RTOs, which are spread all over the country, whether
B the driving licence shown to them is valid or not. Thus
where the owner has satisfied himself that the driver has
a licence and is driving competently there would be no
breach of Section 149(2)( a)( ii). The insurance company
would not then be absolved of liability. If it ultimately turns
c out that the licence was fake, the insurance company would
continue to remain liable unless they prove that the owner/
insured was aware or had noticed that the licence was
fake and still permitted that person to drive. More
importantly, even in such a case the insurance company
would remain liable to the innocent third party, but it may
D
be able to recover from the insured. This is the law which
has been laid down in Skandia (1987) 2 SCC 654, Sohan ~ .
Lal Passi (1996) 5 SCC 21 and Kam/a (2001) 4 SCC
342 cases. We are in full agreement with the views
expressed therein and see no reason to take a different
E view."
,,.
It is clear from the above decision when the owner after :
verification satisfied himself that the driver has a valid licence
and driving the vehicle in question competently at the time of
F the accident there would be no breach of Section 149(2)(a)(ii),
in that event, the Insurance Company would not then be absolved ,.
of liability. It is also clear that even in the case that the licence
was fake, the Insurance Company would continue to remain liable
unless they prove that the owner was aware or noticed that the
G licence was fake and still permitted him to drive.
7) Learned counsel for the appellants placing reliance on
a three-Judge Bench decision of this Court in National t -
Insurance Co. Ltd. vs. Swaran Singh and Others, (2004) 3
SCC 297 contended that in view of marshalling of the case laws
H and principles arrived therein, the Insurance Company cannot
PREMKUMARI AND ORS. v. PRAHLAD DEV AND 881
ORS. [SATHASIVAM, J.]
escape its liability to indemnify the owner even in the case of A
breach of licence conditions. After analyzing the relevant
provisions in the old Motor Vehicles Act as well as the 1988 Act
and the entire case laws, this Court summarized its findings as
under:
"110. The summary of our findings to the various issues B
as raised in these petitions is as follows:
(1) 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 c
compensation tq 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.
D
-j (ii) An insurer is entitled to raise a defence in a claim
petition filed under Section 163-A or Section 166 of the
Motor Vehicles Act, 1988, inter alia, in terms of Section
149(2)(a)(ii) of the said Act.
(iii) The breach of policy condition e.g. disqualification of E
the driver or invalid driving licence of the driver, as
contained in sub-section (2)( a)( ii) of Section 149, has
to be proved to have been committed by the insured for
-, .. avoiding liability by the insurer. Mere absence, fake or
invalid driving licence or disqualification of the driver for F
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 G
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
H
882 SUPREME COURT REPORTS [2008] 1 S.C.R.
A 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
wherefor would be on them.
(v) The court cannot lay down any criteria as to. how the
B said burden would be discharged, inasmuch as the same
would depend upon the facts and circumstances of each
case. · ·-
(vt) Even where the insurer is able to prove breach on the
c 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
D
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.
E
(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
fulfil the requirements of law or not will have to be
F determined in each case.
(vii1) 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
G
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
H
PREMKUMARI AND ORS. v. PRAHLAD DEV AND 883
ORS. [SATHASIVAM, J.]
__,
or claimants on one side and insured, insurer and driver A
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 B
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 c
execution of the award in favour of the claimants.
(x) Where on adjudication of the claim under the Act the
Tribunal arrives at a conclusion that the insurer has
satisfactorily proved its defence in accordance with the
provisions of Section 149(2) read with sub-section (7), as D
· 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 E
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
't certificate will be issued for the recovery as arrears of F
land revenue only if, as required by sub-section (3) of
Section 168 of the Act the insured fails to deposit the
amount awarded in favour of the insurer within thirty days
from the date of announcement of the award by the Tribunal.
(x1) The provisions contained in sub-section (4) with the G
) proviso thereunder and sub-section (5) which are intended
to cover specified contingencies mentioned therein to
enable the insurer to recover the amount paid under the
contract of insurance on behalf of the insured can be taken
recourse to by the Tribunal and be extended to claims and H
884 ' SUPREME COURT REPORTS (2008) 1 S.C.R.
t- ~
A 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."
B Among the above findings, for our purpose clause (iii) and
(iv) are relevant.
._
8) The effect and implication of the principles laid down in
Swaran Singh's case (supra) has been considered and
c explained by one of us (Dr. Justice Arijit Pasayat) in National
Insurance Co. Ltd. vs. Laxmi Narain Dhut, (2007) 3 SCC
700. The following conclusion in para 38 are relevant:
"38. In view of the above analysis the following situations
emerge:
D
1. The decision in Swaran Singh case has no application ,.
to cases other than third-party risks.
2. Where originally the licence was a fake one, renewal
cannot cure the inherent fatality.
E
3. In case of third-party risks the insurer has to indemnify
the amount, and if so advised, to recover the same from
the insured.
4. The concept of purposive interpretation has no
F application to cases relatable to Section 149 of the Act."
9) In the subsequent decision Oriental Insurance Co. Ltd.
vs. Meena Variyal and Others, (2007) 5 SCC 428 which is
also a two-Judge Bench while considering the ratio laid down
in Swaran Singh's case (supra) concluded that in a case where
G a person is not a third party within the meaning of the Act. the
Insurance Company cannot be made automatically liable merely
by resorting to Swaran Singh's case (supra). While arriving at
such a conclusion the Court extracted the analysis as mentioned
in para 38 of Laxmi Narain Dhut (supra) and agreed with the
H same. In view of consistency, we reiterate the very same principle
PREMKUMARI AND ORS. v. PRAHLAD DEV AND 885
ORS. [SATHASIVAM, J.]
-~ enunciated in Laxmi Narain Dhut (supra) with regard to A
interpretation and applicability of Swaran Singh's case (supra).
10) In the case of National Insurance Co. Ltd. vs. Kusum
Rai and Others, (2006) 4 sec 250, the vehicle was being
used as a taxi. It was, therefore, a commercial vehicle. The driver
of the said vehicle was required to hold an appropriate licence B
therefore. Ram Lal, who allegedly was driving the said vehicle
at the relevant time, was holder of a licence to drive light motor
vehicle only. He did not possess any licence to drive a
commercial vehicle. Therefore, there was a breach of condition
of the contract of insurance. In such circumstances, the Court c
observed that the appellant-National Insurance Co. Ltd.,
therefore, could raise the said defence while considering the
stand of the Insurance Company. This Court, pointing out the
law laid down in Swaran Singh (supra) concluded that the owner
of the vehicle cannot contend that he has no liability to verify the D
fact as to whether the driver of the vehicle possessed a valid
licence or not. However, taking note of the fact that the owner
has not appeared, the victim was aged only 12 years, the
claimants are from a poor background and to avoid another
round of litigation applying the decision in Oriental Insurance E
Co. Ltd. vs. Nanjappan, (2004) 13 SCC 224 and finding that
though the appellant-Insurance Company was not liable to pay
the claimed amount as the driver was not possessing a valid
licence and the High Court committed an error in holding
~ otherwise, in the peculiar facts and circumstances of the case F
and in exercise of jurisdiction under Article 136 of the
Constitution declined to interfere with the impugned judgment
therein and permitted the appellant-Insurance Company to
recover the amount from the owner of the vehicle.
11) In the light of the various principles, the factual finding G
r of the Tribunal, namely, the second respondent, driver was not
holding a valid licence on the date of the accident and also of
the fact that the appellants are none else than widow and minor
children of the deceased, we pass the following order:-
H
886. SUPREME COURT REPORTS [2008] 1 S.C.R.
A (i) In view pf the order of this Court dated 08.12.2006
granting stay of further proceedings of.the recovery
initiated by the Insurance Company for refund of the
amount of Rs.50,000/- with interest claimed to have
been paid to the appellants, we make it clear that the
B appellants need not repay the said amount in spite
of our conclusion which is in favour of the Insurance
Company. However, we permit the third respondent-
Insurance Company to recover the said amount from
the owner of the vehicle in the same manner as was
c directed in Nanjappan (supra);
(ii) The appellants are permitted to proceed and recover
the rest of the amount from the owner and driver of
the vehicle - respondent Nos. 1 and 2 herein in
accordance with law.
D
· 12) The appeal is disposed of with the above directions.
No costs.
D.G. Appeal disposed of.
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