Holding

The owner and the insurer are jointly and severally liable for compensation; the insurer cannot rely on the licence‑exclusion clause of Section 96(2)(b)(ii) where the insured had appointed a licensed driver and did not wilfully permit an unlicensed driver.

Summary

The owner of a bus (appellant) had insured the vehicle with Oriental Fire and General Insurance Co. A fatal accident occurred when the bus, driven by a cleaner without a licence who had been permitted by the regular driver, struck a scooter, killing Dr. P. Ramachandra Reddy. The claimants (heirs of the deceased) sought compensation from both the owner and the insurer. The insurer argued that Section 96(2)(b)(ii) of the Motor Vehicles Act excluded liability because the vehicle was driven by an unlicensed person. The Supreme Court held that the negligent act was performed in the course of employment, making the owner vicariously liable, and that the insurer could not escape liability unless the insured had wilfully breached the licence condition. Consequently, the owner and the insurer were held jointly and severally liable for compensation, and the orders of the lower courts were modified.

Issues considered

The extent of vicarious liability of the vehicle owner for the negligent act of a driver and a cleaner who drove the bus without a licence.
Whether the insurer can rely on Section 96(2)(b)(ii) of the Motor Vehicles Act to deny liability when the vehicle is driven by an unlicensed person.
The proper interpretation of Section 96(2)(b)(ii) – technical exclusion versus purposive reading in light of the Act's protective intent.
Whether the insurer becomes a judgment‑debtor under Section 96(1) when the insured has not wilfully breached the licence condition.

Subjects

Motor accident compensationVicarious liabilityInsurance liabilitySection 96 Motor Vehicles ActUnlicensed driverExclusion clauseJoint and several liability

Judgment

SOHAN LAL PASSI A
v.
P. SESH REDDY AND OTHERS

JULY 17, 1996

[N.P. SINGH, FAIZAN UDDIN AND SAGHIR AHMAD, JJ.]
B

Motor Vehicles Act, 198&-Sections 96(1), 96(2), (b) (ii)---Compensa-
tion-Motor accident-P1inciple of vicaiious liability-Authorised diiver at-
lowillg cleaner to drive-Jn the course of employmellt-Held, lnsural!ce
Compal!)' al!d owner jointly liable. c
The Appellant is the owner of a bus, insured with Respondent -
Insurance Company. On 8th June 1980 as a result of an accident between
the bus and scooter one R died on the spot. A claim was preferred by the
legal heirs of the deceased against the Appellant and the Insurance Com- D
pany which contested the claim on the ground that the accident was a
result of rash and negligent driving of the cleaner/conductor of the bus,
the Respondent No. 4, who did not have a valid licence.

The Appellant contended that at the time of accident the bus was
driven by the driver who had a licence and as such the Respondent - E
Insurance Company was liable for compensation.

The Insurance Company contended that since the bus was being
driven by a cleaner who was not holding the driving licence, they were not
liable under the terms of the policy. F
The Accident Claims Tribunal held that the accident was the result
of rash and negligent driving of the bus by the cleaner who did not have a
licence and discharged the liability of the Insurance Company and directed
the appellant-owner and Respondent No. 4 to pay the compensation.
G
The appellant as well as the claimants preferred Ap1ieals. The High
Court on Appeal enhanced the compensation and a\o\'arded interest. The
High Court dismissed the appeal filed by the Appellant holding that the
Insurance Company was not Hable. The High Court found that the driver
had allowed the cleaner to drive the vehicle. H
647
648 SUPREME COURT REPORTS [1996] SUPP. 3 S.C.R.

A On appeal, it was contendetl by the appellant that since he had
appointed a driver and it was driver who had allowed the cleaner to drive
the vehicle without licence and in that event he shall not be liable to pay
any compensation.

Allowing the Appeals, this Court
B
HELD : 1. The Appellant cannot escape the liability so f'ar as the
third parties are concerned on the ground that he had not actually
aufhorised the particular manner in which the act was done. It has been
established that the negligent act of the driver and cleaner was in the
C course of employment, and it was not an independent act for a purpose
\Vhich had no nexus or connection with the business of the appellant, so
as to absolve the appellant from the liability. [654-B-D)

Pushpabai Pur,,/wttam Udeshi v. Ranjit Ginning and Pressing Co. (P)
Ltd., [1977] 2 SCC 745 and State of Maharashtra and 01'. v. Kanchanmala
D Vijaysing Shirkc and o,,., [1995] 5 sec 659, relied on.

London County Council v. Cattennoles (Garages) Ltd., [1953) 2 All
ER 582; l/kiw v. Samuels, [1963) 2 All ER 879 and Staveley Iron and
Chemical Co. Ltd. v. Jones, [1956) 1 All ER 403, referred to.
E
Salmond's Law of Tmts (20th Edn) Page 458 and Halsbwy's Laws of
England, Fourth Edn. Vol. 16 Para 739, referred to.

2. Section 96 (2)(b)(ii) should not be interpreted in a technical
manner. It only enables the insurance company to defend itself in respect
F of the liability to pay compensation, on any of the grounds mentioned
therein. If the person who has got the vehicle insured, has allowed the
vehicle to be driven by a person ~'ho is not licensed then only that clause
shall be attracted. [659-E-F)

Skandia Insurance Co. Ltd. v.Kokilaben Chandravadan, [1987] 2 SCC
G 654, anirmed.

3. The Appellant bad done everything within bis power in as much
as he has engaged a licensed driver and had placed the vehicle in his
charge. Unless it is established that it was the insured who had wilfully
H violated the condition of the policy by allowing a person not duly licensed
SOl-IANLALPASS!v. P.S.REDDY[N.P.SINGH,J.] 649

to drive the vehicle when the accident took place, the insurer shall be A
deemed to be a judgment-debtor in respect of the liability in view of Section
96(1) of the Motor Vehicles Act. The Appellant shall be deemed to be liable
to pay compensation applying the principle of vicarious liability. [660-C-D]

Kashiram Yadav and Anr. v. Oliental Fire and General Insurance Co.,
[1989] 4 sec 128, af1irmed.
B

4. The orders of the Tribunal and the'High Court are modified. The
insurance company and the Appellant shall be jointly and severally liable
to pay the compensation to the claimants. [662-A-B]

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 9368-69
c
of 1996.

From the Judgment and Order dated 11.2.87 of the Bombay High
Court in F.C.A. No. 6 & 9 of 1985.
D
C.V. Francis, George Thomas, Arun Francis and Ramesh Babu,
M.R. for the Appellant.

Jitendra Sharma, Ms. G. Dara, Ms. Minakshi Vij, P. Gaur for the
Respondent No. 3.
E
V. Balaji and A.T.M. Sampath for the Respondent Nos. 1 & 2.

The Judgment of the Court was delivered by

N.P. SINGH, J. Leave granted.
F
An accident took place on 8th June 1980 at Panaji between a bus
bearing No. DLP-5843 and scooter bearing No. GDC-9713, as a result
whereof one Dr. P. Ramachandra Reddy who was driving the scooter fell
down and succumbed to the injuries, the same day. A claim petition was
filed before the Motor Accident Claims Tribunal by respondent Nos. 1 and G
2 claiming compensation. The appellant is the owner of the bus which had
been insured by respondent No. 3, the Oriental Fire and General Insurance
Company Limited (hereinafter referred to as the 'Insurance Company').

According to the claimants, the respondent No. 4, Rajinder Pal Singh
who was the cleaner/conductor of the bus was driving the bus at the H
650 SUPREME COURT REPORTS [1996] SUPP. 3 S.C.R.

A relevant time when the accident took place resulting into the death of Dr.
P. Ramachandra Reddy, on account of his rash and negligent driving. The
claim for compensation was resisted by the appellant (owner of the vehicle)
contending that when the accident took place the bus was driven by
Gurbachan Singh who was employed by him as a driver and who had the
B licence to drive the bus in question and as such the respondent Insurance
Company was liable to pay the compensation. The Insurance Company,
however, took the defence that as the bus was being driven by respondent
No. 4, Rajinder Pal Singh, ·cleaner/conductor of the bus who was not
holding the driving licence and, therefore, the Insurance Company cannot
C be held liable to pay compensation because under the terms of the policy
only person holding a driving licence could have driven the bus in question.

The Tribunal on consideration of materials on record came to the
conclusion that accident was the result of rash and negligent driving of the
bus by respondent No. 4 who did not have a driving licence. On that finding
D the Tribunal discharged the liability of the Insurance company and directed
the owner and the driver i.e. appellant and respondent No. 4 to pay an
amount of Rs. 66,000 along with interest at the rate of 6% per annum to
the claimants as compensation. One appeal was filed on .behalf of the
Claimants for enhancement of the amount of the compensation, whereas
E the other appeal was filed on behalf of the appellant along with respondent
No. 4 for settiog aside the award of the Tribunal. The High Court enhanced
the amount of compensation from Rs. 66,000 to Rs. 1,57,500 and directed
payment of interest at the rate of 12% per annum to the claimants. In
respect of the dispute regarding the liability to pay the compensation
F between the appellant, the owner of the bus, vis-a-vis the Insurance Com-
pany, the High Court came to the conclusion that the Insurance Company
was not liable because the vehicle was being driven by a person at the time
of the accident, who was not holding a driving licence. The High Court
rejected the claim of the appellant holding that at the time of the accident
the vehicle was beiog driven by Gurubachan Singh who was holding the
G driving licence.

From the orders of the Tribunal and the High Court, it appears that
Gurubachan Singh was the regular driver of the bus, but at the time of the
accident Rajinder Pal Singh who was cleaner/conductor of the bus was
H driving the bus - obviously with the consent and authority of the regular
SOHANLALPASS!v. P.S.REDDYfN.P.SINGH,J.] 651

driver Gurubachan Singh. Gurubachan Singh was examined as a witness A
bn behalf of the appellant and he asserted that it was he who was driving
the bus and had not allowed Rajinder Pal Singh, the cleaner/conductor to
drive the bus when the accident took place. But on basis of the materials
on record the Tribunal and the High Court, have rightly come to the
conclusion that Gurubachan Singh, the duly appointed driver having B
licence had allowed Rajindcr Pal Singh to drive the said vehicle and and
it was due to rash and negligent driving of Rajinder Pal Singh, the accident
took place resulting into the death of Dr. P. Ramachandra Reddy.

On behalf of the appellant a stand was taken that as he had ap-
pointed Gurubachan Singh to drive the vehicle in question and if the said C
driver allowed Rajinder Pal Singh to drive the vehicle without any authority
from the appellant then in that event the appellant shall not be liable to
pay any compensation to the heirs and legal representatives of the victim.

In Sa/mond's Law of T01ts (Twentieth Edn.) at page 458 it has been. D
said:

"On the other hand it has been held that a servant who is
authorised to drive a motor vehicle, and who permits an un-
authorised person to drive it in his place, may yet be acting within
the scope of his employment. The act of permitting another to E
drive may be a mode, albeit an improper one, of doing the
_authorised work. The master may even be responsible if the servant
impliedly, and not expressly, permits an unauthorised person to
drive the vehicle, as where he leaves it unattended in such a manner
that it is reasonably foreseeable'tfi..t.the third party will attempt F
to drive it, at least if the driver retains notional control of the
11
vehicle.

It has been said in Halsbwy's Laws of England, Fourth Edn., Vol. 16,
paragraph 739:
G
"Where the act which the employee is expressly authorised to
do is lawful, the employer is nevertheless responsible for the
manner in which the employee executes his authority. If therefore,
the employee does the act in such a manner as to occasion injury
to a third person, the employer cannot escape liability .on the H
652 SUPREME COURT REPORTS [1996j SUPP. 3 S.C.R.

A ground that he did not actually authorise the particular manner in
which the act was done, or even on the ground that the employee
was acting on his own behalf and not on that of his employer".

In that connection reference can be made to the cases of London County
B Counci! v. Cattennoles (Garages) Ltd., [1953] 2 All ER 582; llkiw v.
Samuels, [1963] 2 All ER 879; Staveley Iron and Chemical Co. Ltd. v. Jones,
[1956] 1 All ER 403 and the ease of Pushpabai Purshottam Udeshi v. Ranjit
Ginning and Pressing Co. (P) Ltd., [1977] 2 SCC 745. The crucial test is
whether the initial act of the employee was expressly authorised and lawful.
Then the employer shall nevertheless be responsible for the manner in
C which the employees that is, the driver and the respondent no. 4 executed
the authority. This is necessary to ensure so that the injured third parties
who are not directly involved or concerned with the nature of authority
vested by the master to his servant are not deprived from getting compen-
r,ation. If the dispute revolves around the mode or manner of execution of
D the authority of the master by the servant, the master cannot escape the
liability so far third parties are concerned on the ground that he had not
actually authorised the particular manner in which the act was done. This
aspect of the. matter has been recently examined by a Bench of this Court
of which one of us (N.P. Singh, J) was a member, in the case of State of
Maharashtra & Ors. v. Kanchanmala Vijaysing Shirke & Ors., [1995] 5 SCC
E 659. From the facts of that case it shall appear that the jeep which caused
the accident belonged to the State of Maharashtra, the appellant in that
case. The regular driver of the jeep allowed respondent No. 4 of that
appeal who was a clerk in the Department of the State Government to
drive the jeep when the accident took place. The High Court in that case
F recorded a finding that respondent No. 4 of that appeal, was driving the
jeep while on official duty. This Court held that a master is liable even for
acts which he had not authorised provided they are so connected with the
acts which he had authorised. If the act of the servant on the other hand
is not even remotely connected within the scope of the employment and is
an independent act, the master shall not be responsible because the servant
G is not acting iu the course of his employment but has gone' outside.

It was said in the aforesaid case of State of Maharashtra v. Kanchamnal
Vijaysing Shirke (supra) :

H "........... Tbe High Court has also found that the respondent who
SO HAN LAL PASSI v. P.S. REDDY [N.P. SINGH, J.) 653

was the clerk iri the office of Appellant No. 2 was driving the A
vehicle under the authority of the driver who was in charge of the
said vehicle and as the driver had consumed more liquor on that
day he permitted the respondent to drive the vehicle that night.
The facts of the present case disclose and demonstrate that an
authorised act was being done in an unauthorised manner. The B
accident took place when the act authorised was being perfo1 med
in a mode which may not be proper but nonetheless it was directly
connected with "in the course of employment" - it was not an
independent act for a purpose or business which had no nexus or
connection with the business of the State Government so as to . C
absolve the appellant-State from the liability".

In the case of Pushpabai Purshottam Udeshi v. Ranjit Ginning and
Pressing Co. (P) Ltd., [1977] 2 SCC 745, it was said:

"........... we would like to point out that the recent trend in law D
is to make the master liable for acts which do not slrictly fall within
the term 'in course of the employment' as ordinarily understood.
We have ref~rred to Sitaram Motilal Kalal v. Santanuprasad
Jaishanakar Bhatt where this Court accepted the law laid down by
Lord Denning in Onnrod v. Crosville Motor Services Ltd. that the E
owner is not only liable for the negligence of the driver if that
driver is his servant acting in the course of his employment but
also when the driver is with the owner's consent, driving the car
on the O\vner's business or for the owner's purposes. This extension
has been accepted by this Court. The law as laid down by Lord F
Denning in Young v. Edward Box and Co. Ltd. already referred to
i.e. the first question is to see whether the servant is liable and if
the answer is yes, the second question is to see whether the
employer must shoulder the servant's liability,' has been uniformly
accepted as stated in Salmond's Law of Torts, 15th Edn., p.606, in
Crown Proceedings Act, 1947 and approved by the House of Lords G
in Staveley Iron and Chemical Co. Ltd. v. Jons and !CI Ltd. v.
Shatwell."

Same is the position in the present case. The appellant had authorised
Gurubachan Singh to drive the vehicle, but Gurubachan Singh allowed H
654 SUPREME COURT REPORTS [1996] SUPP. 3 S.C.R.

A Rajindcr Pal Singh, the cleaner/conductor who was also the employee of
the appellant to drive the vehicle because of which the accident took place.
lt is not the stand of the appellant that Rajinder Pal Singh was driviug the
vehicle without the knowledge or consent of Gurubachan Singh, for his
personal pursuit. He was driving the bus for the business of the appellant,
B that is to carry on the passengers. In this background, the appellant cannot
escape the liability so far the third parties are concerned on the ground
that he had not actually authorised the particular manner in which the act
was done. As it has been established that the negligent act of Gurubachan
Singh and respondent Rajinder Pal Singh was "in the course of employ-
ment" the appellant shall he liable for the same. In the present case, the
C accident took place when the act authorised was being performed in a
mode which may not be proper but nonetheless it was directly connected
within the course of employment. It was not an independent act for a
purpose which had no nexus or connection with the business of the
appellant so as to absolve the appellant from the liability.
D
The road accidents in India have touched a new height. In majority
of cases because of the rash and negligent driving, innocent persons
become victims of such accidents because of which their dependants in
many cases are virtually on the streets. In this background, the question of
E payment of compensation in respect of motor accidents has assumed great
importance for public as well as for courts. Traditionally, before the Court
directed payment of tort compensation, it had to be established by the
claimants that the accident was due to the fault of the person causing injury
or damage. Now from different judicial pronouncements, it shall appear
that even in western countries fault is being read and assumed as someone's
F negligence or carelessness. The Indian Parliament, being conscious of the
magnitude of the plight of the victims of the accidents, have introduced
several beneficial provisions to protect the interest of the claimants and to
enable them to claim compensation from the owner or the insurance
company in conn,;ction with the accident. In the Motor Vehicles Act, 1939
G Chapter VII-A was introduced by the Motor Vehicles (Amendment) Act,
1982. Sub- section (1) of Section 92-A provides that where the death or
permanent disablement of any person has resulted from an accident, the
owner of the vehicle shall be liable to pay compensation in respect of such
death or disablement in accordance with the provisions of the said section.
H Sub-section (2) specifies a fixed amount for such liability without fault. In
SO HAN LAL PASS! v. P.S. REDDY [N.P. SINGH, J.) 655

view of sub-section (3), the claimant is not required to plead and establish A
that the death or permanent disablement in respect of which the claim has
been filed was the result of the wrongful act, neglect or default of the owner
of the vehicle. Sub-section ( 4) of that section pro;1des that claim for
compensation under sub-section (1) of that section shall not be defeated
by reason of any wrongfol act, neglect or default of the person in respect B
of whose death or permanent disablement the. claim has been made.
Section 92-B, makes it clear that the right to claim compensation under
Section 92-A in respect of death or permanent disablement of any person
shall be in addition to any other right i. e. the right to claim compensation
on principle of fault. lt can be said that Parliament by introducing the
aforesaid Chapter in the Motor Vehicles Act, 1939 provided for payment
c
of compensation within certain limits ignoring the principle of fault. Same
is the position in the Motor Vehicles Act, 1988 and similar provisions have
been retained in Chapter X of the said Act. In that connection, it may
further be mentioned that the Motor vehicles Act, 1988 which repealed the
Motor Vehicles Act, 1939 and came in force w.e.f. 1.7.1989 prescribed a D
period of limitation for making claims before the Tribunal in sub-section
(3) of Section 166 of the Act. The said sub-~ection provided :

"No application for such compensation shall be entertained
unless it is made within six months of the occurrence of the E
accident.

Provided that the Claims. Tribunal may entertain the applica-
tion after the expiry of the said period of six months but not later
than twelve months, if it is satisfied that the applicant was
prevented by sufficient cause from making the application in time." F
As sub-section (3) of Section 166 by its proviso fixed a limit of 12 months
before which the application for compensation must be filed, it left no
discretion in the claims Tribunal to extend the period beyond 12 months.
This used to cause hardship and injury to many claimants who could not
approach the Tribunal for compensation within the period of 12 months G
from the date of the accident for one reason or the other. The aforesaid
sub- section (3) of Section 166 of the Motor Vehicles Act, 1988 has been
omitted by Section 53 of the Motor Vehicles (Amendment) Act, 1994
which came in force w.e.f. 14.11.1994. The effect of the aforesaid amend-
ment is that there is no limitation for filing claims before the Tribunal in H
656 SUPREME COURT REPORTS [1996] SUPP. 3 S.C.R.

A respect of an accident. It can be said that Parliament realise the grave
injustice and injury which was being caused to the heirs and legal repre-
sentatives of the victims who died in accidents by rejecting their claim
petitions only on the ground of limitation. An other amendment which can
be referred to in this connection, whieh has been introduced by the
B aforesaid Amendment Aet of 1994 as sub-section (6) to Section 158
provides :

"As soon as any information regarding any accident involving
death or bodily injury to any person is recorded or report under
this section is completed by a police officer, the officer-in-charge
c of the police station shall forward a copy of the_ same within thirty
days from the date of recording of information or, as the case may
be, on completion of such report to the Claims Tribunal having
jurisdiction and a copy thereof to the concerned insurer, and where
a copy is made available to the owner he shall also within thirty
days of receipt of such report, forward the same to such Claims
D Tribunal and Insurer."

Because of sub-section (6) of Section 158 of the Act, the officer incharge
of the police station is enjoined to forward a copy of information/report
regarding the accident to the Tribunal having jurisdiction. A copy thereof
E has als(' to be forwarded to the concerned insurer. The same Amendment
Act has also substituted sub-section (2) of Section 166 because of which
an application for compensation under sub-section (1) of Section 166 now
can be made, at the option of the claimants either to the claims Tribunal
having jurisdiction over the area in which the accident occurred or to the
F claims Tribunal within the local limits of whose jurisdiction the claimant
resides or carries on business or within the local limits of whose jurisdiction
the defendant resides. Orit,<inally, such application used to be filed before
the claims Tribunal having jurisdiction over the area in which the accident
occurred. This used to cause great hardship and in many cases it became
impo55ible for the claimants to approach such claims Tribunal, the distance
G being beyond their reach from the place of their residence.

Some of the aforesaid significant amendments introduced in the
Motor Vehicle Act, 1939 and Motor Vehicles Act, 1988 have been referred
to above only to indicate that even parliament is conscious that right to
H claim compensation by the claimants in connection with the motor vehicles
SO HAN LAL PASSI v. P.S. REDDY [N.P. S!NGH,J.] 657

accident> should not be defeated on technical grounds. A
Now it has to be examined as to whether the insurance company can
be absolved of its liability to pay the compensation in a case where the
owner of the vehicle had' got the vehicle insured, but the accident took
place when it was being driven by a person not holding the driving licence.
In the present case the accident took place when the Motor Vehicles Act, B
1939 was in force. Section 96 of that act prescribed the duty of the insurers
to satisfy the judgment against persons insured in respect of third party
risks (the parallel provision being Section 149 in the Motor Vehicles Act,
1988). The relevant part of Section 96 provided :

96. Duty of insurers to satisfy judgments against persons insured
c
in respect of third party risk.- (1) If, after a certificate of insurance
has been issued under sub-section (4) of Section 95 in favour of
the person by whom a policy has been _effected, judgment in respect
of any such liability as is required to be covered by a policy under
clause (b) of sub- section (l) of Section 95 (being a liability covered D
by the terms of the policy) is obtained against any person insured
by the policy, then, 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 E
exceeding the sum assured payable thereunder, as if he were the
judgment-debtor, in respect of the liability.

(2) No sum shall be payable by an insurer under sub-section
. (1) in respect of any judgment unless before or after the commen-
cement of the proceedings in which the judgment is given the F
insurer had notice through the court of the bringing of the proceed-
ings, or in respect of any judgment so long as executiOn is stayed
thereon pending an appeal and an insurer to whom notice of the
bringing of any such proceeding is so given shall be entitled to be
made a party thereto and to defend the action on any of the G
following grounds, namely:

(a) ..................... .

(b) that there has been a breach of a specified condition of the
policy, being one of the following conditions, namely; H
658 SUPREME COURT REPORTS [1996] SUPP. 3 S.C.R.

A (i) ··························
(a) to (d) .................. .

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

C In view of sub-section (1) of Section 96 if after the certificate of insurance
has been issued in favour of the person by whom a policy has been effected,
judgment in respect of any such liability as is required to be covered by a
policy, the insurer shall subject to the provisions of the said section pay to
the person entitled to the benefit of the decree any sum not exceeding the
sum assured payable thereunder, as if he was the judgment-debtor, in
D respect of the liability. (emphasis supplied). Sub-section (2) of Section 96
enjoins that notice of the proceedings in which the judgment is given, has
to be given to the insurer and such insurer shall be entitled to defend the
action on any of the grounds mentioned in sub-section (2) of Section 96.
We are concerned in the present case only with Section 96(2) (b)(ii), a
E condition excluding driving by any person who is not duly licensed. The
question is as to whether the insurance company can repudiate its liability
to pay the compensation in respect of the accident by a vehicle only by
showing that at the relevant time it was being driven by a person having no
licence. In the case of Skandia Insurance Co. Ltd. v. Kokilaben
F Chandravadan, [1987] 2 sec 654, in respect of this very defence by the
insurance company, it was said :

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

G (1) On a true interpretation of the relevant clause which inter-
pretation is at peace with the conscience of Section 96, the condi-
tion excluding driving by a person not 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
H he himself is not guilty of a deliberate breach.
SOHAN LALPASS!v. P.S.REDDY[N.P.SINGH,J.] 659

(2) Even if it treated as an absolute promise, there is substantial A
compliance therewith upon an express or implied mandate being
given lo the licensed driver not to allow the vehicle to be left
unattended so that it happens to be driven by an unlicensed driver.

. (3) The exclusion clause has to be 'read down' in order that it B
is not at war with the 'main purpose' of the provisions enacted for
the protection of victims of accidents so that the promiser is
exculpated when he does everything in his power to keep the
promise. 11

To examine the correctness of the aforesaid view this appeal was referred
c
to a three Judges' Bench, because on behalf of the insurance company, a
stand was taken that when Section 96(2)(b )(ii) hac provided that the
insurer shall be entitled to defend the action on the ground that there has
been breach of a specified condition lo the policy i.e. the vehicle should D
not be driven by a person who is not duly licensed, then the insurance
company cannot be held to be liable to indemnify the owner of the vehicle.
In other V.'ords, once there has been a contravention of the condition
prescribed in sub-section (2)(b)(ii) of Section 96, the person insured shall
not be entitled to the benefit of sub-section (1) of Section 96. Acconling
lo us, Section 96(2)(b)(ii) should not be interpreted in a technical manner. E
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 there has been a contravention
of the condition excluding the vehicle being driven by any person is not
duly licensed. This bar on face of it operates on the person insured. If the F
person who has got the vehicle insured has allowed the vehicle to be driven
by a person who is not duly licensed then only that clause shall be attracted.
In a case \Vhere the person \Vho has got insured the vehicle with the
insurance company, has appointed a duly licensed driver and if the acci-
dent takes place when the vehicle is being driven by a person not duly G
licensed on the basis of the authority of the driver duly authorised to drive
the vehicle whether the insurance company in that event shall be absolved
from its liability? The expression "breach" occuring 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 of an H
infringement or violation of a promise. The insurer has also to satisfy the
•
660 SUPREME COURT REPORTS [1996] SUPP. 3 S.C.R.

A 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 appoint-
ing a duly licensed driver to drive the vehicle in question and 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
B repudiate its statutory liability under sub-section (1) of section 96. In the
present case far from establishing that it was the appellant who had allowed
Rajinder Pal Singh to drive the vehicle when the accident took place, there
is not even any allegation that it was the appellant who was guilty of
violating the condition that the vehicle shall not be driven by a person not
C duly licensed. From the facts of the case, it appears that the appllant had
done everything within his power inasmuch as he has engaged a licensed
driver Gurubachan Singh and had placed the vehicle in his charge. While
interpreting the contract of insurance, the Tribunal and Courts have to be
conscious of the fact tliat right lo claim compensation by heirs and legal
representatives of the victims of the accident is not defeated on technical
D grounds. Unless it is established on the materials on record that it was the
insured who had wilfully violated the condition of the policy by allowing a
person not duly licensed lo drive the vehicle when the accident took place,
the insurer shall be deemed to be a judgment-debtor in respect of the
liability in view of sub-section (1) of Section 96 of the Act. It need not be
E pointed out that the whole concept of getting the vehicle insured by an
insurance company is to provide an easy mode of getting compensation by
the claimants, otherwise in normal course they had to pursue their claim
against the owner from one forum to the other and ultimately to execute
the order of the Accident Claims Tribunal for realisation of such amount
p by sale of properties of the owner of the vehicle. The procedure and result
of the execution of the decree is well known.

This Court in the case of Kashiran1 Yadav and Another v. 01iental
Fire and General Insurance Co. and Othe1', (1989) 4 SCC 128 reiterated
the views expressed in Skandia Insurance Co. Ltd. v. Kokilaben
G Chandravadan, (supra). While referring to that case it was said :

"............... There the facts found were quite different. the vehicle
concerned in that case was undisputedly entrusted to the driver
who had a valid licence. In transit the driver stopped the vehicle
H and went to fetch some snacks from the opposite shop leaving the
•
SO HAN LALPASS!v. P.S.REDDY[N.P.SINGH,J.] 661

engine on. The ignition key was at the ignition lock and not in the A
cabin of the truck. The driver had asked the cleaner to take care
of the truck. In fact the driver had left the truck in care of the
cleaner. The cleaner meddled with the vehicle and caused the
accident. The question arose whether the insured (owner) had
committed a breach of the condition incorporated in the certificate B
of insurance since the cleaner operated the vehicle on the fatal
occasion without driving licence. This Court expressed the view
that it is only when the insured himself entrusted the vehicle to a
person who does not hold a driving licence, he could be said to
have committed breach of the condition of the policy. It must be
established by the Insurance Company that the breach is on the
c
part of the insured. Unless the insured is at fault and is guilty of
a breach of the condition, the insurer cannot escape from the
obligation to indemnify the insured. It was also observed that when
the insured has done everything within his power inasmuch as he
has engaged the licensed driver and has placed the vehicle in his D
charge with the express or implied mandate to drive himself, it
cannot be said that the insured is guilty of any breach.

We affirm and reiterate the statement of law laid down in the above
case. We may also state that without the knowledge of the insured, if by E
driver's acts or omission others meddle with the vehicle and .cause an
accident, the insurer would be liable to indemnify the insured. The insurer
in such a case cannot take the defence of a breach of the condition in the
certificate of insurance."

F
We are in respectful agreement with the view expressed in the case of
Skandia Insurance Co. Ltd. v. Koki/aben Chandravadan, (supra).

As in the facts of the present case, the appellant shall be deemed to
be liable to pay compensation applying the principle of vicarious liability
because the accident took place when the act authorised was being per- G
formed in a mode which may not be proper but was directly connected
with in the course of employment, sub-section (1) of Section 96 of the Act
shall come into play and the insurance company shall be deemed to be the
judgment-debtor, so far the claim made by the heirs and legal repre-
sentatives of the deceased is concerned. H
662 SUPREME COURT REPORTS [1996] SUPP. 3 S.C.R.

A Accordingly, the appeals are allowed and the orders of the claims
Tribunal and the High Court are modified where only the appellant has
been held to be liable to pay the compensation and the respondent-in-
surance company has been absolved of the liability. The respondent-in-
surance company shall be jointly and severally liable to pay the
B compensation to the claimants. There shall be no order as to costs.
V.M. Appeals allowed.