SHAMANNA AND ANOTHERversusTHE DIVISIONAL MANAGER THE ORIENTAL INSURANCE CO. LTD. AND ORS.

486                      [2018]REPORTS
               SUPREME COURT    9 S.C.R. 486              [2018] 9 S.C.R.


A                      SHAMANNA AND ANOTHER
                                       v.
                    THE DIVISIONAL MANAGER
            THE ORIENTAL INSURANCE CO. LTD. AND ORS.
B                    (Civil Appeal No. 8144 of 2018)
                              AUGUST 08, 2018
              [RANJAN GOGOI AND R. BANUMATHI, JJ.]
             Compensation: Motor Vehicles Accident – Third party risk –
      Liability of insurer – Son of appellants/claimants was travelling in
C
      a Jeep which was driven in a negligent manner due to which he
      sustained injuries and died in the hospital – Claim petition –
      Tribunal directed the insurance company to pay the compensation
      to claimants and granted liberty to the insurance company to
      recover the same from the owner of the offending vehicle –
D     Tribunal awarded compensation of Rs.3,55,500/-– High Court set
      aside the award passed by the Tribunal and held that only the owner
      of the offending vehicle was liable to make the payment of the
      compensation awarded by the Tribunal, and enhanced the
      compensation awarded by the Tribunal from Rs.3,55,500/- to
      Rs.4,94,700/- – On appeal, held: The award passed by the Tribunal
E
      directing the insurance company to pay the compensation amount
      awarded to the claimants and thereafter, recover the same from the
      owner of the vehicle in question, is in accordance with the
      Judgment passed by Supreme Court in Swaran Singh and Laxmi
      Narain Dhut cases – High Court ought not to have interfered with
F     the award passed by the Tribunal directing the first respondent to
      pay and recover from the owner of the vehicle – The impugned
      judgment of the High Court exonerating the insurance company
      from its liability and directing the claimants to recover the
      compensation from the owner of the vehicle set aside – However,
      order of the High Court enhancing the compensation from
G
      Rs.3,55,500/- to Rs.4,94,700/- affirmed – Award passed by the
      Tribunal restored.
             Partly allowing the appeal, the Court
             HELD: 1. Doctrine of “pay and recover” was considered
      by the Supreme Court in Swaran Singh case wherein the Supreme
H
                                    486
        SHAMANNA v. THE DIVISIONAL MANAGER                               487
            ORIENTAL INSURANCE CO. LTD.

Court examined the liability of the insurance company in cases of        A
breach of policy condition due to disqualifications of the driver or
invalid driving licence of the driver and held that in case of third
party risks, the insurer has to indemnify the compensation amount
to the third party and the insurance company may recover the
same from the insured. [Para 6] [490-D-E]
                                                                         B
       2. In the instant case, to deny the benefit of ‘pay and
recover’, what seems to have substantially weighed with the High
Court is the reference to larger Bench made by the two-Judge
Bench in National Insurance Co. Ltd. v. Parvathneni and another.
In Parvathneni case, the Supreme Court pointed out that Article
                                                                         C
142 of the Constitution of India does not cover such type of cases
and that “if the insurance company has no liability to pay at all,
then, it cannot be compelled by order of the court in exercise of its
jurisdiction under Article 142 of the Constitution of India to pay the
compensation amount and later on recover it from the owner of the
vehicle”. The above reference in Parvathneni case was disposed           D
of by the three-Judges Bench keeping the questions of law open
to be decided in an appropriate case. Since the reference to the
larger bench in Parvathneni case was disposed of by keeping the
questions of law open, therefore the decision in Swaran Singh
case followed in Laxmi Narain Dhut and other cases hold the
                                                                         E
field. [Paras 11 and 12] [494-B-F]

      3. Thus, the award passed by the Tribunal directing the
insurance company to pay the compensation amount awarded to
the claimants and thereafter, recover the same from the owner of
the vehicle in question, is in accordance with the judgment passed       F
by this Court in Swaran Singh and Laxmi Narain Dhut cases.
The High Court wrongly interfered with the award passed by the
Tribunal directing the first respondent to pay and recover
from the owner of the vehicle. The impugned judgment of the
High Court exonerating the insurance company from
its liability and directing the claimants to recover                     G
the compensation from the owner of the vehicle is set
aside and the award passed by the Tribunal is restored. [Para 12]
[494-F-H]

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488            SUPREME COURT REPORTS                      [2018] 9 S.C.R.


A           National Insurance Company Ltd. v. Swaran Singh and
            Others (2004) 3 SCC 297 : [2004] 1 SCR 180 ; National
            Insurance Co. Ltd. v. Laxmi Narain Dhut (2007) 3 SCC
            700 : [2007] 3 SCR 579 – relied on.

            Oriental Insurance Co. Ltd. v. K.C. Subramanyam
B           MANU/KA/0945/2012 ; Prem Kumari v. Prahlad Dev
            and Others (2008) 3 SCC 193 : [2008] 1 SCR 874 ;
            National Insurance Co., Ltd. v. Bommithi Subbhayamma
            and Others (2005) 12 SCC 243 ; Oriental Insurance
            Co. Ltd. v. Brij Mohan and Others (2007) 7 SCC 56 :
C           [2007] 6 SCR 843 ; National Insurance Co. Ltd. v.
            Parvathneni and Another (2009) 8 SCC 785 ; Oriental
            Insurance Co. Ltd. v. Nanjappan and Others (2004) 13
            SCC 224 : [2004] 2 SCR 365 – referred to.

                             Case Law Reference
D
            [2004] 1 SCR 180          relied on             Para 6

            [2007] 3 SCR 579          relied on             Para 8

            [2008] 1 SCR 874          referred to           Para 8
E           (2005) 12 SCC 243        referred to            Para 9

            [2007] 6 SCR 843          referred to           Para 10

            (2009) 8 SCC 785          referred to           Para 11

F           [2004] 2 SCR 365          referred to           Para 13

            CIVIL APPELLATE JURISDICTION : Civil Appeal No. 8144
      of 2018.

           From the Judgment and Order dated 14.09.2016 of the High Court
G     of Karnataka at Dharwad Bench in MFA No. 24534/2010(MV).

            Manjunath Meled, Anil Kumar, Ravinder Singh, Ms. Astha Sharma,
      Advs. for the appearing parties.


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        SHAMANNA v. THE DIVISIONAL MANAGER                                          489
     ORIENTAL INSURANCE CO. LTD. [R. BANUMATHI, J.]

       The Judgment of the Court was delivered by                                   A
       R. BANUMATHI, J. Leave granted.
        2. This appeal arises out of the judgment dated 14.09.2016 passed
by the High Court of Karnataka at Dharwad Bench in MFA No.24534
of 2010 in and by which the High Court reversed the award passed by
the Tribunal for “pay and recover” holding that the owner of the vehicle            B
is liable to pay the compensation to the appellants/claimants. The High
Court enhanced the compensation from Rs.3,55,500/- to Rs.4,94,700/-
with interest at the rate of 6% per annum.
       3. On 14.04.2008, Shankareppa Pattar son of the appellants/
claimants was travelling in a jeep bearing Reg.No.KA-22/M-3805. The                 C
jeep was driven negligently due to which door of the jeep suddenly opened
and Shankareppa was thrown out of the vehicle and sustained grievous
injuries and died in the hospital. In the claim petition filed by the appellants/
parents of the deceased Shankareppa, the Tribunal awarded
compensation of Rs.3,55,500/- with interest at 6% per annum from the                D
date of claim petition till realisation. Since the driver of the jeep had no
valid driving licence at the time of the accident and since there was
violation of the terms of the insurance policy, the Tribunal directed the
insurance company to pay the compensation to the claimants and granted
liberty to the insurance company to recover the same from the owner of
the offending vehicle.                                                              E
      4. Being aggrieved by the award directing the insurer to pay the
compensation amount to the claimants and recover the same from the
owner of the vehicle, the insurance company filed appeal before the
High Court. The claimants have also filed appeal seeking enhancement
of compensation. The High Court referred to its own judgment in the                 F
case of Oriental Insurance Co. Ltd. v. K.C. Subramanyam
MANU/KA/0945/2012 : ILR 2012 KAR 5241 and held that the Supreme
Court directed the insurance company to make payment to the claimants
and to recover the same from the owner of the vehicle in exercise of its
discretionary power under Article 142 of the Constitution of India. The             G
High Court observed that power under Article 142 of the Constitution is
vested only with the Supreme Court and such power is not vested with
the High Court or the Tribunal and set aside the award passed by the
Tribunal directing the insurance company to pay compensation to the

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490             SUPREME COURT REPORTS                            [2018] 9 S.C.R.


A     claimants and recover the same from the owner of the vehicle is not
      sustainable. The High Court held that only the owner of the offending
      vehicle is liable to make the payment of the compensation amount
      awarded by the Tribunal. The High Court has enhanced the compensation
      awarded by the Tribunal from Rs.3,55,500/- to Rs.4,94,700/-. To determine
      the loss of dependency, the High Court has taken into consideration the
B
      age of the deceased Shankareppa and has adopted multiplier of ‘18’
      instead of multiplier of ‘14’. Being aggrieved by the judgment of the
      High Court setting aside the direction to the insurance company to “pay
      and recover”, the appellants/claimants have preferred this appeal.
            5. We have heard the learned counsel for the parties. We have
C     gone through the impugned judgment and perused the materials placed
      on record.
             6. In the case of third party risks, as per the decision in National
      Insurance Company Ltd. v. Swaran Singh and others (2004) 3 SCC
      297, the insurer had to indemnify the compensation amount payable to
D     the third party and the insurance company may recover the same from
      the insured. Doctrine of “pay and recover” was considered by the
      Supreme Court in Swaran Singh case wherein the Supreme Court
      examined the liability of the insurance company in cases of breach of
      policy condition due to disqualifications of the driver or invalid driving
      licence of the driver and held that in case of third party risks, the insurer
E
      has to indemnify the compensation amount to the third party and the
      insurance company may recover the same from the insured. Elaborately
      considering the insurer’s contractual liability as well as statutory liability
      vis-a-vis the claims of third parties, the Supreme Court issued detailed
      guidelines as to how and in what circumstances, “pay and recover” can
F     be ordered. In para (110), the Supreme Court summarised its conclusions
      as under:-
             “110. The summary of our findings to the various issues as raised
             in these petitions is as follows:
             (i) Chapter XI of the Motor Vehicles Act, 1988 providing
G            compulsory insurance of vehicles against third-party risks is a
             social welfare legislation to extend relief by compensation to victims
             of accidents caused by use of motor vehicles. The provisions of
             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.
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   SHAMANNA v. THE DIVISIONAL MANAGER                                        491
ORIENTAL INSURANCE CO. LTD. [R. BANUMATHI, J.]

 (ii) An insurer is entitled to raise a defence in a claim petition filed    A
 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 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          B
 by the insured for avoiding liability by the insurer. Mere absence,
 fake or invalid driving licence or disqualification of the driver for
 driving at the relevant time, are not in themselves defences
 available to the insurer against either the insured or the third parties.
 To avoid its liability towards the insured, the insurer has to prove
                                                                             C
 that the insured was guilty of negligence and failed to exercise
 reasonable care in the matter of fulfilling the condition of the policy
 regarding use of vehicles by a duly licensed driver or one who
 was not disqualified to drive at the relevant time.
 (iv) Insurance companies, however, with a view to avoid their               D
 liability must not only establish the available defence(s) raised in
 the said proceedings but must also establish “breach” on the part
 of the owner of the vehicle; the burden of proof wherefore would
 be on them, (v) The court cannot lay down any criteria as to how
 the said burden would be discharged, inasmuch as the same would
 depend upon the facts and circumstances of each case.                       E

 (vi) Even where the insurer is able to prove breach on the part of
 the insured concerning the policy condition regarding holding of a
 valid licence by the driver or his qualification to drive during the
 relevant period, the insurer would not be allowed to avoid its liability
 towards the insured unless the said breach or breaches on the               F
 condition of driving licence is/are so fundamental as are found to
 have contributed to the cause of the accident. The Tribunals in
 interpreting the policy conditions would apply “the rule of main
 purpose” and the concept of “fundamental breach” to allow
 defences available to the insurer under Section 149(2) of the Act.          G
 (vii) The question, as to whether the owner has taken reasonable
 care to find out as to whether the driving licence produced by the
 driver (a fake one or otherwise), does not fulfill the requirements
 of law or not will have to be determined in each case.
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492      SUPREME COURT REPORTS                            [2018] 9 S.C.R.


A     (viii) If a vehicle at the time of accident was driven by a person
      having a learner’s licence, the insurance companies would be liable
      to satisfy the decree.
      (ix) The Claims Tribunal constituted under Section 165 read with
      Section 168 is empowered to adjudicate all claims in respect of
B     the accidents involving death or of bodily injury or damage to
      property of third party arising in use of motor vehicle. The said
      power of the Tribunal is not restricted to decide the claims inter
      se between claimant or claimants on one side and insured, insurer
      and driver on the other. In the course of adjudicating the claim for
      compensation and to decide the availability of defence or defences
C     to the insurer, the Tribunal has necessarily the power and jurisdiction
      to decide disputes inter se between the insurer and the insured.
      The decision rendered on the claims and disputes inter se between
      the insurer and insured in the course of adjudication of claim for
      compensation by the claimants and the award made thereon is
D     enforceable and executable in the same manner as provided in
      Section 174 of the Act for enforcement and execution of the award
      in favour of the claimants.
      (x) Where on adjudication of the claim under the Act the Tribunal
      arrives at a conclusion that the insurer has satisfactorily proved
E     its defence in accordance with the provisions of Section 149(2)
      read with sub-section (7), as interpreted by this Court above, the
      Tribunal can direct that the insurer is liable to be reimbursed by
      the insured for the compensation and other amounts which it has
      been compelled to pay to the third party under the award of the
      Tribunal. Such determination of claim by the Tribunal will be
F     enforceable and the money found due to the insurer from the
      insured will be recoverable on a certificate issued by the Tribunal
      to the Collector in the same manner under Section 174 of the Act
      as arrears of land revenue. The certificate will be issued for the
      recovery as arrears of land revenue only if, as required by sub-
G     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.
      (xi) The provisions contained in sub-section (4) with the proviso
      there under and sub-section (5) which are intended to cover
H     specified contingencies mentioned therein to enable the insurer to
       SHAMANNA v. THE DIVISIONAL MANAGER                                     493
    ORIENTAL INSURANCE CO. LTD. [R. BANUMATHI, J.]

      recover the amount paid under the contract of insurance on behalf       A
      of the insured can be taken recourse to by the Tribunal and be
      extended to claims and defences of the insurer against the insured
      by relegating them to the remedy before regular court in cases
      where on given facts and circumstances adjudication of their claims
      inter se might delay the adjudication of the claims of the victims,”
                                                                              B
                                                   (Underlining added)
      7. As per the decision in Swaran Singh case, onus is always
upon the insurance company to prove that the driver had no valid driving
licence and that there was breach of policy conditions. Where the driver
did not possess the valid driving licence and there are breach of policy
conditions, “pay and recover” can be ordered in case of third party risks.    C
The Tribunal is required to consider as to whether the owner has taken
reasonable care to find out as to whether the driving licence produced
by the driver, does not fulfill the requirements of law or not will
have to be determined in each case.
      8. The Supreme Court considered the decision of Swaran Singh            D
case in subsequent decision in National Insurance Co. Ltd. v. Laxmi
Narain Dhut, (2007) 3 SCC 700, wherein this Court held that “the
decision in Swaran Singh case has no application to cases other
than third party risks and in case of third party risks the insurer
has to indemnify the amount and if so advised, to recover the same            E
from the insured”. The same principle was reiterated in Prem Kumari
v. Prahlad Dev and others (2008) 3 SCC 193.
       9. For the sake of completion, we may refer to few judgments
where the breach of policy conditions was fundamental and the Supreme
Court taking contrary view that the insurance companies were not liable       F
to pay the compensation. In National Insurance Co., Ltd. v. Bommithi
Subbhayamma and others, (2005) 12 SCC 243, the Supreme Court
reversed the judgment of Andhra Pradesh High Court in making the
insurance company liable for payment of compensation in respect of
gratuitous passengers carried in the goods vehicle.
                                                                              G
       10. In Oriental Insurance Co. Ltd. v. Brij Mohan and others
(2007) 7 SCC 56, the claimant was travelling in the trolley attached to
tractor carrying earth to brick kiln. It was found that the tractor and the
trolley were not used for “agricultural works”, the only purpose for which
the tractor was insured, when the claimant sustained the injuries. The
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494            SUPREME COURT REPORTS                          [2018] 9 S.C.R.


A     Supreme Court though held that the insurance company is not liable to
      pay compensation, however, invoked the power vested in the Supreme
      Court under Article 142 of the Constitution of India in directing the
      insurance company to satisfy the award by paying compensation to the
      insured/claimant and realise the same from the owner of the tractor.
B            11. In the present case, to deny the benefit of ‘pay and recover’,
      what seems to have substantially weighed with the High Court is the
      reference to larger Bench made by the two-Judge Bench in National
      Insurance Co. Ltd. v. Parvathneni and another (2009) 8 SCC 785
      which doubted the correctness of the decisions which in exercise of
      jurisdiction under Article 142 of the Constitution of India directing
C     insurance company to pay the compensation amount even though
      insurance company has no liability to pay. In Parvathneni case, the
      Supreme Court pointed out that Article 142 of the Constitution of India
      does not cover such type of cases and that “if the insurance company
      has no liability to pay at all, then, it cannot be compelled by order
D     of the court in exercise of its jurisdiction under Article 142 of the
      Constitution of India to pay the compensation amount and later on
      recover it from the owner of the vehicle”. The above reference in
      Parvathneni case has been disposed of on 17.09.2013 by the three-
      Judges Bench keeping the questions of law open to be decided in an
      appropriate case.
E
             12. Since the reference to the larger bench in Parvathneni case
      has been disposed of by keeping the questions of law open to be decided
      in an appropriate case, presently the decision in Swaran Singh case
      followed in Laxmi Narain Dhut and other cases hold the field. The
      award passed by the Tribunal directing the insurance company to pay
F     the compensation amount awarded to the claimants and thereafter, recover
      the same from the owner of the vehicle in question, is in accordance
      with the judgment passed by this Court in Swaran Singh and Laxmi
      Narain Dhut cases. While so, in our view, the High Court ought not to
      have interfered with the award passed by the Tribunal directing the first
G     respondent to pay and recover from the owner of the vehicle. The
      impugned judgment of the High Court exonerating the insurance company
      from its liability and directing the claimants to recover the compensation
      from the owner of the vehicle is set aside and the award passed by the
      Tribunal is restored.

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       SHAMANNA v. THE DIVISIONAL MANAGER                                       495
    ORIENTAL INSURANCE CO. LTD. [R. BANUMATHI, J.]

       13. So far as the recovery of the amount from the owner of the           A
vehicle, the insurance company shall recover as held in the decision in
Oriental Insurance Co. Ltd. v. Nanjappan and others (2004) 13 SCC
224 where this Court held that “….that for the purpose of recovering
the same from the insured, the insurer shall not be required to file a
suit. It may initiate a proceeding before the concerned Executing
                                                                                B
Court as if the dispute between the insurer and the owner was the
subject matter of determination before the Tribunal and the issue is
decided against the owner and in favour of the insurer.”
       14. In the result, the impugned judgment of the High Court insofar
as enhancement of the compensation to Rs.4,94,700/- is affirmed. Insofar
as direction of the impugned judgment directing the appellants/claimants        C
to recover the compensation from the owner of the vehicle is set aside
and the appeal is partly allowed. The first respondent insurance company
shall pay the enhanced compensation to the appellants/claimants along
with the accrued interest and the insurance company shall recover the
same from the owner of the vehicle. No costs.                                   D


Ankit Gyan                                             Appeal partly allowed.



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