S. IYYAPANversusM/S UNITED INDIA INSURANCE COMPANY LTD. AND ANOTHER

                       [2013] 7 S.C.R. 45


                    S. IYYAPAN                                          A
                         v.
 M/S UNITED INDIA INSURANCE COMPANY LTD. AND
                     ANOTHER
          (Civil Appeal No. 4834 of 2013)
                                                                        B
                         JULY 1, 2013.
   [SURINDER SINGH NIJJAR AND M.Y. EQBAL, JJ.]

     MOTOR VEHICLES ACT, 1988:
                                                                        c
     ss.149 read with ss.146 and 147- Insurer to satisfy awards
against third party risk - Fatal accident - Held: It is the statutory
right of a third party to recover the amount of compensation
from the insurer - Insurer cannot disown its liability on the
ground that although the driver was holding a licence to drive          D
a light motor vehicle,it contained no endorsement to drive
commercial vehicle - It is for the insurer to proceed against
the insured for recovery of the amount in the event there has
been violation of any condition of insurance policy - In the
instant case, driver was holding a valid driving licence to drive       E
light motor vehicle - Merely because he did not get any
endorsement in the driving licence to drive the Maxi Cab,
which is a light motor vehicle, High Court has committed
grave error of law in holding that insurer is not liable to pay
compensation because driver was not holding licence to drive
commercial vehicle - Judgment of High Court set aside --                F
Insurer is liable to pay compensation awarded.

    The husband of respondent no. 2-claimant died as a
result of the accident caused by a Maxi Cab. The Tribunal
held that the driver possessing licence to drive light                  G
motor vehicle was entitled to drive the said Maxi Cab, and
awarded compensation to be paid by the respondents
before it. In the appeal filed by the Insurance Company,
the High Court held that since the vehicle was being used
                             45                                         H
    46       SUPREME COURT REPORTS              (2013] 7 S.C.R.


A   as a taxi, i.e. a commercial vehicle, the driver was required
    to hold an appropriate licence.and, there being a breach
    of the condition of the contract of insurance, the
    Insurance Company was not liable to pay any
    compensation to the claimant.
B
       In the instant appeal, the question for consideration
  before the Court was: "can an Insurance Company
  disown its liability on the ground that the driver of the
  vehicle although duly licensed to drive light motor vehicle
C but there was no endorsement in the licence to drive light
  motor vehicle used as commercial vehicle".

         Allowing the appeal, the Court

         HELD: 1.1 The right of the victim of a road accident
0   to claim compensation is a statutory one. Section 149 of
    the Motor Vehicles Act, 1988 made it mandatory on the
    part of the insurer to satisfy the judgments and awards
    against persons insured in respect of third party risk.
    [para 2 and 9) [49-C; 53-F-G]

E      Skandia Insurance Co. Ltd. v. Koki/aben Chandravadan
  1987 (2) SCR 752 = (1987) 2 SCC 654; Sohan Lal Passi v.
  P. Sesh Reddy & Ors. 1996 (3) Suppl. SCR 647 = (1996) 5
  SCC 21; Ashok Gangadhar Maratha v. Oriental Insurance Co.
  Ltd. 1999 (2) Suppl. SCR 202 = 1999 (6) SCC 620; New India
F Assurance Company, Shim/a v. Kam/a & Others 2001 (2)
  SCR 797 = (2001) 4 SCC 342; National Insurance Co. Ltd.
  v. Swaran Singh & Ors. 2004 (1) SCR 180 = (2004) 3 SCC
  297; National Insurance Co. Ltd. v. Kusum Rai and Others,
  2006 (3) SCR 387 = (2006) 4 SCC 250; National Insurance
G Company Ltd. v. Annappa /rappa Nesaria alias Nesaragi and
  Others 2008 (1) SCR 1061 = 2008 (3) sec 464- relied on.

        Oriental Insurance Co. Ltd. v. Nanjappan 2004 (2) SCR
    365 = 2004 (13) sec 224 - referred to.
H
S. IYYAPAN v. UNITED INDIA INSURANCE COMPANY 47
               LTD. AND ANOTHER
     1.2 The heading "Insurance of Motor Vehicles A
against Third Party Risks" given in Chapter XI of the 1988
Act (Chapter VIII of 1939 Act) itself shows the intention
of the legislature to make third party insurance
compulsory and to ensure that the victims of accident
arising out of use of motor vehicles would be able to get B
compensation for the death or injuries suffered. The
provision has been inserted in order to protect the
persons travelling in vehicles or using the road from the
risk attendant upon the user of the motor vehicles on the
road. The legislature has made it obligatory that no motor c
vehicle shall be used unless a third party insurance is in
force. Sections 146 and 147 make it clear that in certain
circumstances the insurer's right is safegu~rded but in
any event the insurer has to pay compensation when a
valid certificate of insurance is issued notwithstanding D
the fact that the insurer may proceed against the insured
for recovery of the amount. [para 17-18) [67-D-H]

     1.3 Insurer cannot disown its liability on the ground
that although the driver was holding a licence to drive a
light motor vehicle but before driving light motor vehicle E
used as commercial vehicle, no endorsement to drive
commercial vehicle was obtained in the driving licence.
It is the statutory right of a third party to recover the
amount of compensation so awarded from the insurer.
Under s. 149, the insurer can defend the action inter alia F
on the grounds, namely, (i) the vehicle was not driven by
a named person, (ii) it was being driven by a person who
was not having a duly granted licence, and (iii) person
driving the vehicle was disqualified to hold and obtain a
driving licence. It is for the insurer to proceed against the G
insured for recovery of the amount in the event there has
been violation of any condition of the insurance policy.
[para 18) [67-H; 68-A-C]

    1.5 In the instant case, the driver was holding a valid
                                                              H
    48       SUPREME COURT REPORTS              [2013] 7 S.C.R.


A
  driving licence to drive light motor vehicle. Merely
  because the driver did not get any endorsement in the
  driving licence to drive the Maxi Cab, which is a light
  motor vehicle, the High Court has committed grave error
  of law in holding that the insurer is not liable to pay
8 compensation because the driver was not holding the
  licence to drive the commercial vehicle. The judgment of
  the High Court is set aside and it is held that the insurer
  is liable to pay the compensation so awarded to the
  dependants of the victim of the fatal accident. [para '19-
C 20] [68-D-G]
        New India Assurance Company Ltd. v. Prabhu Lal
                       =
    2007(12) S'CR 724 2008 (1) SCC 696; and Sardari & Ors.
    v. Sushi/ Kumar & Ors. 2008 ACJ 1307 - cited.
D
                          Case Law Reference:
          2007(12) SCR 724          cited             para 5
          2008 ACJ 1307             cited             Para 5
E         1987 (2) SCR 752          relied on         para 8
          1996 (3) Suppl. SCR 647   relied on         Para 11
          1999 (2) Suppl. SCR 202   relied on         para 12

F
          2001 (2) SCR 797          relied on         para 13
          2004 (1) SCR 180          relied on         para 14
          2006 (3) SCR 387          relied on         para 15
          2004 (2) SCR 365          referred to       para 15
G
         . 2008 (1) SCR 1061        relied on         para 15
        CIVIL APPELLATE JURISDICTION : Civil Appeal No.
    4834 of 2013.

H
S. IYYAPAN v. UNITED INDIA INSURANCE COMPANY 49
               LTD. AND ANOTHER

.   From the Judgment and Order dated 31.10.2008 of the A
High Court of Judicature of Madras, bench at Madurai in Civil
Miscellaneous Appeal No. 1016 of 2012.

    T.RB. Sivakumar, K.V. Vijayakumar for the Appellant.

   Ravi Bakshi, Rajeev Kumar Bansal,Akshay K. Ghai for the 8
Respondents.

    The Judgment of the Court was delivered by

    M.Y. EQBAL, J. 1. Leave granted,                               c
     2. The right of the victim of a road accident to claim
compensation is a statutory one. The Parliament in its wisdom
inserted the relevant provisions in the Motor Vehicles Act in
order to protect the victims of road accident travelling in the
vehicle or using the road and thereby made it obligatory that D
no motor vehicle shall be used unless the vehicle is
compulsorily insured against third party risk. In this background,
can an Insurance Company disown its liability on the ground that
the driver of the vehicle although duly licensed to drive light motor.
vehicle but there was no endorsement in the licence to drive E
light motor vehicle used as commercial vehicle. This is the sole
question arises for consideration in this appeal. ·

     3. This appeal by special leave arises in the following
circumstances.
                                                                    F
     4. On 23.5.1998, at about 8.30 P.M., when the deceased
named Charles was riding his bicycle from east to west and
reached in front of one house, one Sivananayaitha Perumal
(driver of the vehicle who remained ex parte in the proceedings)
came from west to east direction driving a Mahindra van at high G
speed and dashed against Charles and ran away without
stopping the vehicle. Charles, who was admitted in a hospital,
succumbed to the injuries sustained by him. It is evident from
the Motor Vehicle Inspector's Report that the accident did not
occur due to mechanical defect. On the claim petition filed by H
    50        SUPREME COURT REPORTS                 [2013) 7 S.C.R.


A   deceased's wife (respondent No.2 herein), the Motor Accidents
    Claims Tribunal (Principal District Judge) at Kanyakumari (in
    short, "Tribunal"). after considering the evidence on record,
    awarded a compensation of Rs.2,42,400/- with interest at 12%
    p.a. from the date of petition - to be paid by the respondents
B   before the Tribunal jointly and severally. The Tribunal was of the
    view that the person possessing licence to drive light motor
    vehicle is entitled to drive Mahindra maxi cab.

         5. Insurance company preferred an appeal before the High
C  Court challenging the judgment and award of the Tribunal. The
   Insurance Company did not dispute the quantum of
  ·compensation, but questioned the liability itself submitting that
   the driver of the vehicle was not having a valid driving licence
   to drive the vehicle on that day. Insurance company referred the
  decisions of this Court in New India Assurance Company Ltd.
D v. Prabhu Lal 2008 (1) SCC 696 and Sardari & Ors. v. Sushi/
   Kumar & Ors. 2008 ACJ 1307 and submitted that a person
   having licence to drive light motor vehicle is not authorized to
  drive a commercial vehicle.

E        6. Per contra, on behalf of the claimant, this Court's
    decisions in Ashok Gangadhar Maratha v. Oriental Insurance
    Co. Ltd. AIR 1999 SC 3181 and National Insurance Co. Ltd.
    v. Annappa lrappa Nesaria alias Nesaragi and Ors., 2008 (3)
    sec 464 were referred and it was contended that a person
F   who is having a licence to drive light motor vehicle can drive
    the commercial vehicle also.

       7. After hearing the learned counsel on either side and
  considering the aforesaid decisions, the High Court relying
  upon Sardari's case (supra), observed that since the vehicle
G was being used as a taxi, which is a commercial vehicle, the
  driver of the said .vehicle was required to hold an appropriate
  licence. Hence, there being a breach of the condition of the
  contract of insurance, the Insurance Company is not liable to
  pay any compensation to the claimant. The view taken by the
H High Court is quoted hereinbelow:-
S. IYYAPAN v. UNITED INDIA INSURANCE COMPANY 51
       LTD. AND ANOTHER [M.Y. EQBAL, J.]

    "It has not been disputed that the vehicle was being used A
    as a taxi, which is a commercial vehicle. The driver of the
    said vehicle was required to hold an appropriate license
    therefore. The third respondent herein, who was driving the
    said vehicle at the relevant time, was holder of a license
    to drive a light motor vehicle only. He did not possess any B
    license to drive a commercial vehicle. In the present case,
    R.W.2 has deposed that the driver of the vehicle was not
    having the license to drive a commercial vehicle on the
    date of accident. Therefore, it is clear that the driver was
    not having the driving license to drive commercial vehicle        c
    on the date of accident. Evidently, therefore, there was a
    breach of the condition of the contract of insurance. Having
    tested the present case in the light of the Supreme court
    Judgment in the case of Sardari and Others v. Sushi/
    Kumar and Others, cited supra, this court is of the D
    considered view that, since the driver was not possessing
    the driving license to drive a commercial vehicle, the
    Insurance Company is not liable to pay any compensation
    to the claimant and the owner of the vehicle is alone liable
    to pay t~,e compensation to the claimant."                   E

     8. Time and again this Court on various occasions
considered the aim and object of making the insurance
compulsory before a vehicle is put on the road. Indisputably a
new chapter was inserted in the Motor Vehicles Act only with
an intention of welfare measure to be taken to ensure and             F
protect the plight of a victim of a road accident. In Skandia
Insurance Co. Ltd. v. Kokilaben Chandravadan, (1987) 2 SCC
654, this Court observed as under:-

    "13. In order to divine the intention of the legislature in the   G
    course of interpretation of the relevant provisions there can
    scarcely be a better test than that of probing into the motive
    and philosophy of the relevant provisions keeping in mind
    the goals to be achieved by enacting the same. Ordinarily
    it is not the concern of the legislature whether the owner
                                                                      H
    52       SUPREME COURT REPORTS                   (2013) 7 S.C.R.


A        of the vehicle insures his vehicle or not. If the vehicle is not
         insured any legal liability arising on account of third party
         risk will have to be borne by the owner of the vehicle. Why
         then has the legislature insisted on a person using a motor
         vehicle in a public place to insure against third party risk
B        by enacting Section 94? Surely the obligation has not been
         imposed in order to promote the business of the insurers
         engaged in the business of automobile insurance. The
         provision has been inserted in order to protect the
         members of the community travelling in vehicles or using
c        the roads from the risk attendant upon the user of motor
         vehicles on the roads. The law may provide for
         compensation to victims of the accidents who sustain
         injuries in the course of an automobile accident or
         compensation to the dependants of the victims in the case
         of a fatal accident. However, such protection would remain
D
         a protection on paper unless there is a guarantee that the
         compensation awarded by the courts would be
         recoverable from the persons held liable for the
         consequences of the accident. A court can only pass an
         award or a decree. It cannot ensure that such an award or
E        decree results in the amount awarded being actually
         recovered, from the person held .liable who may not have
         the resources. The exercise undertaken by the law courts
         would then be an exercise in futility. And the outcome of
         the legal proceedings which by the very nature of things
F        involve the time cost and money cost invested from the
         scarce resources of the community would make a mockery
         of the injured victims, or the dependants of the deceased
         victim of the accident, who themselves are obliged to incur
         not inconsiderable expenditure of time, money and energy
G        in litigation. To overcome this ugly situation the legislature
         has made it obligatory that no motor vehicle shall be used
          unless a third party insurance is in force. To use the vehicle
         without the requisite third party insurance being in force is
         a penal offence. The legislature was also faced with
H        another problem. The insurance policy might provide for
S. IYYAPAN v. UNITED INDIA INSURANCE COMPANY                  53
       LTD. AND ANOTHER [M.Y. EQBAL, J.]
    liability walled in by conditions which may be specified in     A
    the contract of policy. In order to make the protection real,
    the legislature has also provided that the judgment
    obtained shall not be defeated by the incorporation of
    exclusion clauses other than those authorised by Section
    96 and by providing that except and save to the extent          B
    permitted by Section 96 it will be the obligation of the
    insurance company to satisfy the judgment obtained
    against the persons insured against third party risk (vide
    Section 96). In other words, the legislature has insisted
    and made it incumbent on the user of a motor vehicle to         c
    be armed with an insurance policy covering third party risks
    which is in conformity with the provisions enacted by the
    legislature. It is so provided in order to ensure that the
     injured victims of automobile accidents or the dependants
     of the victims of fatal accidents are really compensated in    D
     terms of money and not in terms of promise. Such a benign
     provision enacted by the legislature having regard to the
     fact that in the modern age the use of motor vehicles
     notwithstanding the attendant hazards, has become an
    inescapable fact of life, has to be interpreted in a
    meaningful manner which serves rather than defeats the          E
    purpose of the legislation. The provision has therefore to
    be interpreted in the twilight of the aforesaid perspective."

     9. The defence which the insurer is entitled to take in a
case for compensation arising out of the motor vehicles             F
accident was provi~ed under Section 96 of the old Act which
is now Section 149 of the Act of 1988. Section 149 of the Motor
 Vehicles Act, 1988 made it mandatory on the pan of the insurer
to satisfy the judgments and awards against persons insured
in respect of third party risk. For better appreciation, Section    G
149 is reproduced herein below:-

    "(1) If, after a certificate of insurance has been issued
    under sub-section (3) of section 147 in favour of the person
    by whom a policy has been effected, judgment or award
                                                                    H
    54        SUPREME COURT REPORTS                 [2013) 7 S.C.R.


A        in respect of any such liability as is required to be covered
         by a policy under clause (b) of sub-section (I) of section
         147 (being a liability covered by the terms of the policy)
         or under the provisions of section 163A is obtained
         against any person insured by the policy, then,
B        notwithstanding that the insurer may be entitled to avoid
         or cancel or may have avoided or cancelled the policy, the
         insurer shall, subject to the provisions of this section. pay
         to the person entitled to the benefit of the decree any sum
         not exceeding the sum assured payable thereunder, as if
c        he were the judgment debtor, in respect of the liability,
         together with any amount payable in respect of costs and
         any sum payable in respect of interest on that sum by virtue
         of any enactment relating to interest on judgments.

         (2) No sum shall be payable by an insurer under sub-
D        section (1) in respect of any judgment or award unless,
         before the commencement of the proceedings in which the
         judgment or award is given the insurer had notice through
         the Court or, as the case may be, the Claims Tribunal of
         the bringing of the proceedings, or in respect of such
E        judgment or award so long as execution is stayed thereon
         pending an appeal; and an insurer to whom notice of the
         bringing of any such proceedings is so given shall be
         entitled to be made a party thereto and to defend the action
         on any of the following grounds, namely:-
F
                (a) that there has been a breach of a specified
                condition of the policy, being one of the following
                conditions, namely:-

                       (i) a condition excluding the use of the
G                      vehicle-

                       (a) for hire or reward, where the vehicle is on
                       the date of the contract of insurance a vehicle
                       not covered by a permit to ply for hire or
H                      reward, or
S. IYYAPAN v. UNITED INDIA INSURANCE COMPANY 55
       LTD. AND ANOTHER [M.Y. EQBAL, J.]
                (b) for organised racing and speed testing, A
                or

                (c) for a purpose not allowed by the permit
                under which the vehicle is used, where the
                vehicle is a transport vehicle, or          8
                (d) without side-car being attached where the
                vehicle is a motor cycle; or

                (ii) a condition excluding driving by a named
                person or persons or by any person who is C
                not duly licensed, or by any person who has
                been disqualified for holding or obtaining a
                driving licence during the period of
                disqualification; or

                (iii) a condition excluding liability for injury D
                caused or contributed to by conditions of war,
                civil war, riot or civil commotion; or

   (b) that the policy is void on the ground that it was obtained
   by the non- disclosure of a material fact or by a E
   representation of fact which was false in some material
   particular.

    (3) Where any such judgment as is referred to in sub-
   section (1) is obtained from a Court in a reciprocating F
   country and in the case of a foreign judgment is, by virtue
   of the provisions of section 13 of the Code of Civil
    Procedure, 1908 (5 of 1908) conclusive as to any matter
    adjudicated upon by it, the insurer (being an insurer
    registered under the insurance Act, 1938 (4of1938) and
   whether or not he is registered under the corresponding G
   law-of the reciprocating country) shall be liable to the
   person entitled to the benefit of the decree in the manner
   and to the extent specified in sub-section (1), as if the
   judgment were given by a Court in India:
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    56          SUPREME COURT REPORTS               [2013] 7 S.C.R.


A          Provided that no sum shall be payable by the insurer in
           respect of any such judgment unless, before the
           commencement of the proceedings in which the judgment
           is given, the insurer had notice through the Court
         · concerned of the bringing of the proceedings and the
B          insurer to wbom notice is so given is entitled under the
           corresponding law of the reciprocating country, ·to be made
           a party to the proceedings and to defend the action on
           grounds similar to those specified in sub-section (2).

          (4) Where a certificate of insurance has been issued under
c         sub-section (3) of section 147 to the person by whom a
          policy has been effected, so much of the policy as purports
          to restrict the insurance of the persons insured thereby by .
          reference to any condition other than those in clause (b)
          of sub-section (2) shall, as respects such liabilities as are
D         required to be covered by a policy under clause (b) of sub-
          section (1) of section 147, be of no effect:

          Provided that any sum paid by the insurer in or towards
          the discharge of any liability of any person which is covered
E         by the policy by virtue only of this sub-section shall be
          recoverable by the insurer from that person.

          (5) ....... .

          (6) ........ "
F
         10. Section 149(2)(a)(ii) gives a right to the insurer to take·
    a defence that person driving the vehicle at the time of accident
    was not duly licensed. In other words, Section 149(2)(a)(ii) puts
    a condition excluding driving by any person who is not duly
G   licensed. The question arose before this Court as to whether
    the Insurance Company can repudiate its liability to pay the
    compensation in respect of the accident by a vehicle taking a
    defence that at the relevant time it was being driven by a person
    having no licence. While considering this point, this Court in the
H   case of Skandia Insurance Co. ltd. (supra) observed:-
S. IYYAPAN v. UNITED INDIA INSURANCE COMPANY                   57
       LTD. AND ANOTHER [M.Y. EQBAL, J.)

     "12. The defence built on the exclusion clause cannot            A
     succeed for three reasons, viz.:

          . (1) On a true interpretation of the relevant clause
     which interpretation is at peace with the conscience of
     Section 96, the condition excluding driving by a person not      B
     duly licensed is not absolute and the promisor is absolved
     once it is shown that he has done everything in his power
     to keep, honour and fulfil the promise and he himself is not
     guilty of a deliberate breach.

            (2) Even if it is treated as an absolute promise, there   C
    ~ is substantial compliance therewith upon an express or
      implied mandate being given to the licensed driver not to
      allow the vehicle to be left unattended so that it happens
      to be driven by an unlicensed driver.
                                                                      D
           (3) The exclusion clause has to be "read down" in
     order that it is not at war with the "main purpose" of tl}_e
     provisions enacted for the protection of victims of
     accidents so that the promisor is exculpated when he
     does everything in his power to keep the promise."               E

      11. To examine the correctness of the aforesaid view, the
matter was referred to a 3-Juage Bench because of the stand
taken by the Insurance Company that the insurer shall be
entitled to defend the action on the ground that there has been
a breach of specified condition of policy i.e. the vehicle should     F
not be driven by a person who is not duly licensed and in that
case the Insurance Company cannot be held to be liable to
indemnify the owner of the vehicle. The 3-Judge Bench of this
Court in the case of Sohan Lal Passi v. P. Sesh Reddy & Ors.,
(1996) 5 SCC 21 after interpreting the provisions of Section          G
96(2)(b)(iifof the Act corresponding to Section 149 of the new
Act, observed as under:-

     "12 .....
                                                                      H
    58        SUPREME COURT REPORTS                 (2013) 7 S.C.R.


A        ...... According to us, Section 96(2)(b)(ii) should not be
         interpreted in a technical manner. Sub-section (2) of
         Section 96 only enables the insurance company to defend
         itself in respect of the liability to pay compensation on any
         of the grounds mentioned in sub-section (2) including that
B        there has been a contravention of the condition excluding
         the vehicle being driven by any person who is not duly
         licensed. This bar on the face of it operates on the person
         insured. If the person who has got the vehicle insured has
         allowed the vehicle to be driven by a person who is not
c        duly licensed then only that clause shall be attracted. In a
         case where the person who has got insured the vehicle with
         the insurance company, has appointed a duly licensed
         driver and if the accident takes place when the vehicle is
         being driven by a person not duly licensed on the basis of
         the authority of the driver duly authorised to drive the
D
         vehicle whether the insurance company in that event shall
         be absolved from its liability? The expression 'breach'
         occurring in Section 96(2)(b) means infringement or
         violation of a promise or obligation. As such the insurance
         company will have to establish that the insured was guilty
E        of an infringement or violation of a promise. The insurer
         has also to satisfy the Tribunal or the Court that such
         violation or infringement on· the part of the insured was
         wilful. If the insured has taken all precautions by appointing
         a duly licensed driver to drive the vehicle in question and
F        it has not been established that it was the insured who
         allowed the vehicle to be driven by a person not duly
         licensed, then the insurance company cannot repudiate its
         statutory liability under sub-section (1) of Section 96 ....."

G        12. In the case of Ashok Gangadhar Maratha v. Oriental
    Insurance Co. Ltd., 1999 (6) SCC 620, the appellant was the
    owner of a truck weighing less than the maximum limit
    prescribed in Section 2(21) of the Motor Vehicles Act. The said
    truck was, therefore, a light motor vehicle. It was registered with
H   the respondent insurer for a certain amount and for a certain
S. IYYAPAN v. UNITED INDIA INSURANCE COMPANY 59
       LTD. AND ANOTHER [M.Y. EQBAL, J.]
period. Within the period of insurance, the truck met with an         A
accident and got completely damaged. The appellant's claim
against the respondent was rejected by the National Consumer
Disputes Redressal Commission. The National Commission
accepted the respondent's contention that the truck was a
goods ~rriage or a transport car~age and that the driver of           B
the truck, who was holding a driving licence in Form 6 to drive
light motor vehicles only, was not a·uthorized to drive a transport
vehicle and, therefore, the insured having committed breach
of the terms of insurance policy and the provisions of the Act,
the respondent insurer was not liable to indemnify the insured.       c
Allowing the appeal, this Court held as under:-

     "14. Now the vehicle in the present case weighed 5920
     kilograms and the driver had the driving licence to drive a
     light motor vehicle. It is not that, therefore, the insurance
     policy covered a transport vehicle which meant a goods           D
     carriage. The whole case of the insurer has been built on
     a wrong premise. It is itself the case of the insurer that in
     the case of a light motor vehicle which is a non-transport
     vehicle, there was no statutory requirement to have a
     specific authorisation on the licence of the driver under        E
     Form 6 under the rules. It has, therefore, to be held that
     Jadhav was holding an effective valid licence on the date
     of the accident to drive a light motor vehicle bearing
     Registration No. KA-28-567."
                                                                      F
      13. In the case of New India Assurance Company, Shim/a
 v. Kam/a & Others, (2001) 4 SCC 342, a fake licence had
 happened to be renewed by the statutory authorities and the
question arose as to whether Insurance Company would be
liable to pay compensation in respect of motor accident which         G
occurred while the vehicle was driven by a person holding such
a fake licence. Answering the question, this Court discussed
the provisions of Sections 146, 147 and 149 of the Act and
observed:-

                                                                      H
•



        60       SUPREME COURT REPORTS                  [2013] 7 S.C.R.


    A        "21. A reading of the proviso to sub-section (4) as well as
             the language employed in sub-section (5) would indicate
             that they are intended to safeguard the interest of an
             insurer who otherwise has no liability to pay any amount
             to the insured but for the provisions contained in Chapter
    B        XI of the Act. This means, the insurer has to pay to the third
             parties only on account of the fact that a policy of insurance
             has been issued in respect of the vehicle, but the insurer
             is entitled to recover any such sum from the insured if the
             insurer were not otherwi$e liable to pay such sum to the
    c        insured by virtue of the conditions of the contract of
             insurance indicated by the policy.

             22. To repeat, the effect of the above provisions is this:
             when a valid insurance policy has been issued in respect
             of a vehicle as evidenced by a certificate of insurance the
    D        burden is on the insurer to pay to the third parties, whether
             or not there has been any breach or violation of the policy
             conditions. But the amount so paid by the insurer to third
             parties can be allowed to be recovered from the insured
             if as per the policy conditions the insurer had no liability
    E        to pay such sum to the insured.

             23. It is advantageous to refer to a two-Judge Bench of
             this Court in Skandia Insurance Co. Ltd. v. Koki/aben
             Chandravadan (1987 )2 SCC 654. Though the said
    F        decision related to the corresponding provisions of the
             predecessor Act (Motor Vehicles Act, 1939) the
             observations made in the judgment are quite germane now
             as the corresponding provisions are materially the same
             as in the Act. Learned Judges pointed out that the
             insistence of the legislature that a motor vehicle can be
    G
             used in a-public place only if that vehicle is covered by a
             policy of insurance is not for the purpose of promoting the
             business of the insurance company but to protect the
             members of the community who become sufferers on
             account of accidents arising from the use of motor
    H
S. IYYAPAN v. UNITED INDIA INSURANCE COMPANY 61
       LTD. AND ANOTHER [M.Y. EQBAL, J.]

    vehicles. It is pointed out in the decision that such protection A
    would have remained only a paper protection if the
    compensation awarded by the courts were not recoverable
    by the victims (or dependants of the victims) of the
    accident. This is the raison d'etre for the legislature making
    it prohibitory for motor vehicles being used in public places B
    without covering third-party risks by a policy of insurance.

    24. The principle laid down in the said decision has been
    followed by a three-Judge Bench of this Court with approval
    in Sohan Lal Passi v. P. Sesh Reddy (1996) 5 SCC 21. C

    25. The position can be summed up thus:
     The insurer and the insured are bound by the conditions
      enumerated in the policy and the insurer is not liable to the
      insured if there is violation of any policy condition. But the    D
      insurer who is made statutorily liable to pay compensation
     to third parties on account of the certificate of insurance
      issued shall be entitled to recover from the insured the
   · amount paid to the third parties, if there was any breach
      of policy conditions on account of the vehicle being driven       E
     without a valid driving licence. Learned counsel for the
      insured contended that it is enough if he establishes that
      he made all due enquiries and believed bona fide that the
     driver employed by him had a valid driving licence, in which
      case there was no breach of the policy condition. As we
      have not decided on that contention it is open to the insured     F
     to raise it before the Claims Tribunal. In the present case,
     if the Insurance Company succeeds in establishing that
     there was breach of the policy condition, the Claims
     Tribunal shall direct the insured to pay that amount to the
     insurer. In default the insurer shall be allowed to recover that   G
     amount (which the insurer is directed to pay to the claimant
     third parties) from the insured person."

    14. In the case of National Insurance Co. Ltd. v. Swaran
Singh & Ors., (2004) 3 SCC 297, a 3-Judge Bench of this Court H
    62         SUPREME COURT REPORTS                   [2013] 7 S.C.R.


A   held as under:-

         "47. If a person has been given a licence for a particular
         type of vehicle as specified therein, he cannot be said to
         have no licence for driving another type of vehicle which
         is of the same category but of different type. As for
B
         example; when a person is granted a licence for driving a
         light motor vehicle, he can drive either a car or a jeep and
         it is not necessary that he must have driving licence both
         for car and jeep separately.

c        48. Furthermore, the insurance ccmpany with a view to
         avoid its liabilities is not only required to show that the
         conditions laid down under Section 149(2)(a) or (b) are
         satisfied but is further required to establish that there has
         been a breach on the part of the insured. By reason of the
0        provisions contained in the 1988 Act, a more extensive
         remedy has been conferred upon those who have obtained
         judgment against the user of a vehicle and after a certificate
         of insurance is delivered in terms of Section 147(3). After
         a third party has obtained a judgment against any person
E        insured by the policy in respect of a liability required to be
         covered by Section 145, the same must be satisfied by
         the insurer, notwithstanding that the insurer may be entitled
         to avoid or to cancel the policy or may in fact have done
         so. The same obligation applies in respect of a judgment
         against a person not insured by the policy in respect of
F
         such a liability, but who would have been covered if the
         policy had covered the liability of all persons, except that
         in respect of liability for death or bodily injury.

         xxx           xxx              xxx
G
         73. The liability of the insurer is a statutory one. The liability
         of the insurer to satisfy the decree passed in favour of a
         third party is also statutory.

         xxx           xxx               xxx
H
S. IYYAPAN v. UNITED INDIA INSURANCE COMPANY 63
       LTD. AND ANOTHER [M.Y. EQBAL, J.]
   110. The summary of our findings to the various issues as A
   raised in these petitions is as follows:

   (i) Chapter XI of the Motor Vehicles Act, 1988 providing
   compulsory insurance of vehicles against third-party risks
   is a social welfare legislation to ~xtend relief by 8
   compensation to victims of accidents caused by use of
   motor vehicles. The provisions of compulsory insurance
   coverage of all vehicles are with this paramount object and
   the provisions of the Act have to be so interpreted as to
   effectuate the said object.
                                                                 c
   (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.
                                                                 D
   (iii) The breach of policy condition e.g. disqualification of
   the driver or invalid driving licence of the driver, as
   contained in sub-section (2)(a)(ii) of Section 149, has to
   be proved to have been committed by the insured for
   avoiding liability by the insurer. Mere absence, fake or E
   invalid driving licence or disqualification of the driver for
   driving at the relevant time, are not in themselves defences
   available to the insurer against either the insured or the third
   parties. To avoid its liability towards the insured, the insurer
   has to prove that the insured was guilty of negligence and
   failed to exercise reasonable care in the matter of fulfilling F
   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 G
   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.
                                                                 H
    64        SUPREME COURT REPORTS                 (2013] 7 S.C.R.


A        (v) The court cannot lay down any criteria as to how the
         said burden would be discharged, inasmuch as the same
         would depend upon the facts and circumstances of each
         case.

         (vi) Even where the insurer is able to prove breach on the
B
         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
c        condition of driving licence is/are so fundamental as are
         found to have contributed to the cause of the accident. The
         Tribunals in interpreting the policy conditions would apply
         "the rule of main purpose" and the concept of
         ,;fundamental breach" to allow defences available to the
D        insurer under Section 149(2) of the Act.

         (vii) The question, as to whether the owner has taken
         reasonable care to find out as to whether the driving licence
         produced by the driver (a fake one or otherwise), does not
E        fulfil the requirements of law or not will have to be
         determined in each case.

         (viii) If a vehicle at the time of accident was driven by a
         person having a learner's licence, the insurance companies
         would be liable to satisfy the decree.
F
         (ix) The Claims Tribunal constituted under Section 165
         read with Section 168 is empowered to adjudicate all
         claims in respect of the accidents involving death or of
         bodily injury or damage to property of third party arising in
G        use of motor vehicle. The said power of the Tribunal is not
         restricted to· decide the claims inter se between claimant
         or claimants on one side and insured, insurer and driver
         on the other. In the course of adjudicating the claim for
         compensation and to decide the availabilitY of defence or
H        defences to the insurer, the Tribunal has necessarily the
S. IYYAPAN v. UNITED INDIA INSURANCE COMPANY 65
       LTD. AND ANOTHER [M.Y. EQBAL, J.]
   power and jurisdiction to decide disputes inter se between A
   the insurer and the insured. The decision rendered on the
   claims and disputes inter se between the insurer and
   insured in the course of adjudication of claim for
   compensation by the claimants and the award made
   thereon is enforceable and executable in the same B
   manner as provided in Section 174 of the Act tor
   enforcement and execution of the award in favour of the
   claimants.
   (x) Where on adjudication of the claim under the Ad the
   Tribunal arrives at a conclusion that the insurer has C
   satisfactorily proved its defence in accordance with the
   provisions of Section 149(2) read with sub-section (7). as
   intetpreted by this Court above, the Tnbunal can direct that
   the insurer is liable to be reimbursed by the insured for the
   compensation and other amounts which it has been D
   compelled to pay to the third party under the award of the
   Tribunal. Such detennination of claim by the Tnbunal will
   be enforoeable 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 E
    Section 174 of the Ad as arrears of land revenue. The
    certificate wm be issued for the recovery as anears 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 F
   date of announcement of the award by the Tribunal.

   (>a) The provisions contained in sub-section (4) with the
   proviso thereunder and sub-section (5) which are intended
   to cover specified contingencies mentioned ·therein to        G
   enable the insurer to recover the amount paid under the
   contract of insurance on behalf of the insured can be taken
   recourse to by the Tribunal and be extended to claims and
   defences of the insurer against the insured by relegating
   them to the remedy before regular court in cases where        H
    66       SUPREME COURT REPORTS                [2013) 7 S.C.R.


A        on given facts and circumstances adjudication of their
         claims inter se might delay the adjudication of the claims
         of the victims."

        15. In the case of National Insurance Co. Ltd. v. Kusum
  Rai and Others, (2006) 4 sec 250, the respondent was the
8
  owner of a jeep which was admittedly used as a taxi and thus
  a commercial vehicle. One Ram Lal was working as a Khalasi
  in the said taxi and used to drive the vehicle some times. He
  had a driving licence to drive light motor vehicle. The taxi met
C with an accident resulting in the death of a minor girl. One of
  the issues raised was as to whether the driver of the said jeep
  was having a valid and effective driving licence. The Tribunal
  relying on the decision of this Court in New India Assurance
  Co. v. Kam/a (supra) held that the insurance company cannot
  get rid of its third party liability. It was further held that the
D insurance company can recover this amount from the owner of
  the vehicle. Appeal preferred by the insurance company was
  dismissed by the High Court. In appeal before this Court, the
  insurance company relying upon the decision in Oriental
  Insurance Co. Ltd. v. Nanjappan, 2004 (13) SCC 224 argued
E that the awarded amount may be paid and be recovered from
  the owner of the vehicle. The Insurance Company moved this
  Court in appeal against the judgment of the High Court which
  was dismissed.

F      16. In the case of National Insurance Company Ltd. v. -
  Annappa lrappa Nesaria alias Nesaragi and Others, 2008 (3)
  sec 464, the vehicle involved in the accident was a matador
  having a goods carriage permit and was insured with the
  insurance company. An issue was raised that the driver of the
G vehicle did not possess an effective driving licence to drive a
  transport vehicle. The Tribunal held that the driver was, having
  a valid driving licence and allowed the claim. In appeal filed by
  the insurance company, the High Court dismissed the appeal
  holding that the claimants are third parties and even on the
  ground that there is violation of terms and conditions of the
H
S. IYYAPAN v. UNITED INDIA INSURANCE COMPANY                    67
       LTD. AND ANOTHER [M.Y. EQBAL, J.]
policy the insurance company cannot be permitted to contend           A
that it has no liability. This Court after considering the relevant
provisions of the Act and definition and meaning of light goods
carriage, light motor vehicles, heavy goods vehicles, finally
came to conclusion that the driver, who was holding the licence
duly granted to drive light motor vehicle, was entitled to drive      B
the light passenger carriage vehicle, namely, the matador. This
Court observed as under:

     "20. From what has been noticed hereinbefore, it is evident
     that "transport vehicle" has now been substituted for
     "medium goods vehicle" and "heavy goods vehicle". The            C
     light motor vehicle continued, at the relevant point of time
     to cover both "light passenger carriage vehicle" and "light
     goods carriage vehicle". A driver who had a valid licence
     to drive a light motor vehicle, therefore, was authorized to
     drive a light goods vehicle as well."                            D

      17. The heading "Insurance of Motor Vehicles against
Third Party Risks" given in Chapter XI of the Motor Vehicles
Act, 1988 (Chapter VI II of 1939 Act) itself shows the intention
of the legislature to make third party insurance compulsory and       E
to ensure that the victims of accident arising out of use of motor
vehicles would be able to get compensation for the death or
injuries suffered. The provision has been inserted in order to
protect the persons travelling in vehicles or using the road from
the risk attendant upon the user of the motor vehicles on the         F
road. To overcome this ugly situation, the legislature has made
it obligatory that no motor vehicle shall be used unless a third
party insurance is in force.

     18. Reading the provisions of Sections 146 and 147 of the
Motor Vehicles Act, it is evidently clear that in certain             G
circumstances the insurer's right is safeguarded but in any event
the insurer has to pay compensation when a valid certificate
of insurance is issued notwithstanding the fact that the insurer
may proceed against the insured for recovery of the amount.
Under Section 149 of the Motor Vehicles Act, the insurer can          H
    68       SUPREME COURT REPORTS                [2013] 7 S.C.R.

A  defend the action inter alia on the grounds, namely, (i) the
   vehicle was not driven by a named person, (ii) it was being
  ·driven by a person who was not having a duly granted lic:ence,
   and (ii) person driving the veh:de was disqualified to hold and
   obtain a driving licence. Hence, in our considered opinion. the
a insurer cannot disown its liability on the ground that although
   the driver was holding a licence to drive a light motor vehicle
   but before driving light motor vehide used as commercial
   vehicle, no endorsement to drive commercial vehicle was
   obtained in the driving licence. In any case, it is the statutory
c  right of a third party to recover the amount of oompensation so
   awarded from the insurer. It is for the insurer to proceed against
   the insured for recovery of the amount in the event there has
   been violation of any oondition of the insurance policy.

         19. In the instant case, admittedly the driver was holding
D a valid driving licence to drive light motor vehicle. There is no
  dispute that the motor vehicle in question, by which accident
  took place, was Mahindra Maxi Gab. Merely because the driver
  did not get any endorsement in the driving licence ·to drive.
  Mahindra Maxi Cab, which is a fight motor vehicle, the High
E Court has committed grave error of law in holding that the
  insurer is not liable to pay compensation because the driver
  was not holding the licence to drive the commercial vehicle. The
  impugned judgment is, therefore, liable to be set aside.

F        20. We, therefore, allow this appeal, set aside .the
    impugned judgment of the High Court and hold that the insurer
    is liable to pay the co~pensation so awarded to the
    dependants of the victim of the fatal accident. However, there
    shall be no order as to costs.
G R.P.                                             Appeal allowed.