UNITED INDIA INSURANCE CO. LTD.versusSHRI GIAN CHAND AND ORS.

               UNITED INDIA INSURANCE CO. LTD.                                  A
                                     v.
                    SHRI GIAN CHAND AND ORS.

                          SEPTEJviBER 2, 1997
                                                                                B
              [S.B. MAJMUDAR AND B.N. KIRPAL, JJ.)


      Motor Vehicles Act, 1939 :

       Sections 96(2)(b )(ii) & 110-A-Vehicle insured against third pmty
risk-Exclusion of liability by the Insurance Company under the Insurance        C
Policy in case insured allows the vehicle to be dliven by unlicensed
driver--Car allowed to be driven by an unlicensed driver killing a
scoote1ist-Insured did not step into the wimess box to prove his case that he
had sold and handed over the car to drive!'-f1eld, an adverse inference could
be drawn against the insured that the vehicle W{IS handed over by him for       D
being driven by an unlicensed driver-Thus the specified condition of the
Insurance Policy having been breached by the insured, insurance company
would be exonerated from its liability to meet the claim of the dependent of
the third pmty (victim of the accident).
                                                                                E
       A car insured by R-9 with the appellant against third party risk, met
with an accident killing a person. The dependents of deceased filed a claim
for compensation before the Motor Accident Claim Tribunal. The conten-
tion of the respondent-claimants was that the vehicle was driven by the
driver, R-1, in a rash and negligent manner and because of such driving
                                                                             F
fatal accident occurred to their bread winner. The defence of the owner of
the vehicle, R-9 was that he had already sold and hand.ed over his car to
R-1 and, therefore, he had nothing to do with the claim. However R-1.
repudiated the claim on the ground that he neither purchased the car nor
did he drive the car. R-1 also stated that he had no licence at the relevant
time to drive the vehicle. R-9 did not enter the witness box to prove his G
case.

      The defence of the appellant-Insurance Company was that whatever
be the liability of R-1 and R-9 regarding the claim of compensation, the
appellant stood exonerated by the exclusion clause in the Insurance Policy      H
                                   691
    692                   SUPREME COURT REPORTS [1997} SUPP. 3 S.C.R.

A which did not permit the insured to hand over the vehicle, for purpose of
    driving, to an unlicensed driver.

          The Tribunal found that the accident was caused due to rash and
    negligent driving of R-1 and that R-9 did not sell and hand over the car to
    R-1. The claim was computed and was made payable by R-1 and R-9.
B   Appellant-Insurance Company got exonerated on the ground of its defence,
    in view of Section 96(2)(b) of the Motor Vehicles Act. On appeal before the
    High Court by R-1, the Insurance Company was held liable jointly and
    severally to pay along with the insured and the driver relying upon the
    decision of this Court in Skandia Insurance Co. Ltd. v Kokilaben
C   Chandravandan & Ors., [1987] 2 SCC 654. Hence, this appeal by the
    Insurance Company.

          Allowing the appeal, this Court

          HELD: 1. It has been clearly held by the Tribunal as well as by the
D   High Court that Respondent 1 who was permitted to drive the vehicle, by
    Respondent 9, the insured, was admittedly not having any driving licence.
    It was not the case of Respondent 9, the insured, that he did not know that
    Respondent 1 to whom the vehicle was handed over was not having a valid
    licence. In fact, once he did not step into the witness box to prove his case,
E   an adverse inference had necessarily to be drawn against him to the effect
    that the vehicle had been handed over by him for being driven by an
    unlicensed driver, Respondent I. Under the Circumstances, when the in·
    sured had handed over the vehicle for being driven by an unlicensed driver,
    the Insurance Company would get exonerated from its liability to meet the
    claims of the third party who might have suffered on account of vehicular
F   accident caused by such unlicensed driver. [697-D-E]

          New India Assurance Co. Ltd. v. Manohar Madhav Tambe, [1996] 2
     SCC 328; Skandia Insurance Co. Ltd. v. Kokilaben Chandravadan, [1987] 2
     SCC 654; Kashiram Yadav v. Oriental Fire & General Insur(JITce Co., [1989]
G    4 SCC 128 and Sohan Lal Passi v. P. Sesh Reddy, discussed.

           2. The appellant-Insurance Company is not liable to meet the claim
     of the respondent-claimants. The claim petition will stand rejected against
     the appellant Insurance Company. The respondent·ciaimants will, however
     be entitled to recover the awarded amount of compensation from Respon·
H    dents 1 and 9. [699·B]
        UNITED INDIA INSURANCE CO. LTD. v. GIAN CHAND [S. B. MAJMUDAR, J.)   693

        CIVIL APPELLATE JURISDICTION : Civil Appeal No. 6081 of A
1997.

     From the Judgment and Order dated 12.9.96 of the Himachal
Pradesh High Court in P.A. No. 24 of 1993.

     P.P. Malhotra, Vineet Malhotra, Shalendra Sharma, Naresh K. Shar-             B
ma for the appellant.

        Rajesh Srivastava, Ujjwal Banerjee and H.K. Puri for the Respon-
dent.

        In-person for the Resondent (N.P.).                                        c
        The Judgment of the Court was delivered by

        S.B. MAJMUDAR, J. Leave granted.

     At the SLP stage itself, by order dated 25th March, 1997, this Court          D
had directed as under :

             "Delay condoned, Issue Notice for final disposal of the SLP in
          the light of decision of this Court in New India Assurance Co. Ltd.
          V. Mandar Madhav Tambe & Ors., (1996] 2 sec 328. Notice on               E
          application for stay wherein there shall be ad-intelim stay of the
          order of the High Court as against the petitioner, Insurance Co.
          only, till further orders".

      Pursuant to the notice for final disposal issued in the SLP, respon-
dent Nos. 1 and 9 who are duly served, have not thought it fit to appear           F
and contest these proceedings. The contest now, therefore, survives be-
tween the appellant - Insurance Company on the one hand and the
claimants who are represented by learned counsel Mr. H.K. Puri. Having
heard learned counsel for contesting parties, we are .disposing of this
appeal finally by this Judgment.
                                                                                   G
      A few facts leading to this appeal may be stated at the outset. A car
which was insured by respondent No. 9 - original owner, with the appellant
- Insurance Company against third party risk, met with an accident on 1st
January, 1988, at about 10.30 a.m. In the said accident, the deceased, who
was going on a scooter, got fatally injured. The contesting respondents are        H
    694                   SUPREME COURT REPORTS (1997] SUPP. 3 S.C.R.

A the claimants, being dependents of deceased. They filed a claim for com-
  pensation before the Motor Accident Claims Tribunal II, Una, in the State
  of Himachal Pradesh. The contention of the respondents claimants was
  that the vehicle was driven by the driver, respondent No. 1 herein, in a rash
  and negligent manner and because of such driving the fatal accident
B occurred to their bread winner. The defence of the owner of the vehicle,
  viz., respondent No. 9 was that he had already sold and handed over this
  vehicle to respondent No. 1 and therefore, he had nothing to do with this
  claim. Respondent No. 1, on the other hand, submitted before the Tribunal
  by filing his written statement and also by entering into witness box, that
  he had nothing to do with the vehicle. He neither purchased it nor had he
C driven the same. However, he stated that he had no licence to drive the
  vehicle at the relevant time when the accident occurred. So far as resondent
  No. 9, who is the insured, was concerned, he did not think it fit to enter
  the witness box. The defence of the appellant - Insurance Company was
  that whatever may be the liability of respondent Nos. 1 and 9 regarding the
D claim for compensation, so far as the appellant - Insurance Company is
  concerned, it stood exonerated by the exclusion clause in the Insurance
  Policy which did not permit the insured to hand over the vehicle for
  purpose of driving to an unlicensed driver. The Tribunal after recording
  evidence came to the conclusion that the accident was caused due to rash
E and negligent driving of the car by respondent No. 1, who was on the wheel
   at the relevant time. It did not believe the case of respondent No. 9 that
   he had sold and handed over the vehicle to respondent No. 1 and had
   nothing to do with the vehicle. This finding was reached especially in view
   of the fact that respondent No. 9 did not think it fit to come to the witness
   box to support his case. Consequently the claim for compensation was
F computed and was made payable by respondent Nos. 1 and 9. However,
   so far as the Insurance Company was concerned, the Tribunal took the
   view that the appellant - Insurance Company got exonerated from its
   liability on account of the fact that respondent No. 9, the insured, had
   permitted the vehicle to be driven by an unlicensed driver. viz., respondent
G No. 1 and therefore, he had committed breach of the relevant term of the
   Policy and that entitled the Insurance Company to get the benefit of the
   exclusion clause available as a defence to the Company under Section
   96(2)(b) of the Motor Vehicles Act, 1939. In the result, the Tribunal while
   awarding Rs. 58,400 as compensation, in favour of the respondents -
H claimants, against respondent No. 1 and the present respondent No. 9, who
      UNITED INDIA INSURANCE CO. LTD. v. GIAN CHAND [S. B. MAJMUDAR, J.]   695

was respondent No. 2 before the Tribunal, exonerated the appellant - A
Insurance Company from its liability to meet the claim amount awarded in
favour of the claimants.

      That resulted into an appeal before the High Court by respondent
No.1, the driver of the vehicle. In that appeal it was contended by him,
amongst others, that the Insurance Company should have been made liable          B
to meet the claim and was wrongly exonerated by the Tribunal. That
contention of respondent No. 1 was accepted by the High Court in appeal,
though on other contention on merits the appeal was held to be liable to
be dismissed. It was only partly allowed to the extent that the appellant -
Insurance Company was held liable jointly and severally to pay along with        C
the insured and the driver the amount of compensation to the claimants.
For coming to the said conclusion against the appellant - Insurance Com-
pany, the High Court placed strong reliance on a decision of a Bench of
two learned Judges of this Court in Skandia Insurance Company Ltd. v.
Kokilaben C11andravadan & Ors., [1987) 2 SCC 654.
                                                                                 D
      The aforesaid decision of the High Court is on the anvil of scrutiny
before us in the present appeal.

       In support of the appeal, learned counsel for the appellant - In-
surance Company submitted that the High Court had committed a patent             E
error of law in passing the impugned order against the Insurance Company.
For his submission he placed reliance on two decisions of this Court in
New India Assurance Co. Ltd. v. Mandar Madhav Tambe & Ors., (1996] 2
SCC 328 as well as on an earlier decision-of this Court in Kashiram Yadav
& Anr. v. Oriental Fire & Insurance Co. & Ors., (1989) 4 SCC 128, while Mr.
Pur~ learned counsel appearing for the contesting respondents - claimants        F
pitched his faith strongly on the earlier decision of this Court in, [1987] 2
SCC supra as well as a latter decision of a Bench of three learned Judges
of this Court in Sohanlal Passi v. P. Sesh Reddy & Ors., (1996] 5 SCC 21.

      In order to resolve this controversy between the parties, it must be
observed at the outset that the aforesaid decisions clearly indicate two         G
distinct lines of cases. The first line of cases consists of fact situations
wherein the insured are alleged to have committed breach of the condition
of Insurance Policy, which required them not to permit the vehicle to be
driven by an unlicensed driver. Such a breach is held to be a valid defence
for the Insurance Company to get exonerated from meeting the claims of           H
     696                   SUPREME COURT REPORTS (1997) SUPP. 3 S.C.R.

A third parties who suffer on account of vehicular accidents which may injure
     them personally or which may deprive them of their bread winner on
     account of such accidents caused by the insured vehicles. The other line of
     cases deals with the insured owners of offending motor vehicles that cause
     such accidents wherein the insured' owners of the vehicles do not themsel-
B    ves commit breach of any such condition and hand over the vehicles for
     driving to. licensed drivers who on their own and without permission,             •
     express or implied, of the insured, hand over vehicles or act in such a way
     that the vehicles get available to unlicensed drivers for being driven by the
     latter and which get involved in vehicular accidents by the driving of such
     unlicensed drivers. In such cases the insurance company cannot get benefit
C    of the exclusionary clause and will remain liable to meet the claims of third
     parties for accidental injuries, whether fatal or otherwise. The decisions of
     this Court in Skandia Insurance Co. (supra) and in So/tan Lal Passi (supra)
     represent this second line of cases while the decisions of this Court in New
     India Assurance Co. (supra) and in Kashiram Yadav (supra) represent the
D    first line of cases.

           In the case of Skandia Insurance Co. Ltd. v. Kokilaben Chandravadan
     & Ors., [1987] 2 SCC 654 (supra), a Bench of two learned Judges of this
     Court speaking through Thakkar; J. held that when the insured had handed
     over vehicle to be driven by licensed driver and even if the licensed driver
E    on his own and because of his neg!i'gence had allowed an unlicensed
     Cleaner to drive the vehicle it could not be said that there was any breach
     committed by the insured, so as to attract the exclusion clause in favour of
     the Insurance Company as contemplated under Section 96(2)(b) of the
     Motor Vehicles Act, 1939. In paragraph 14 of the Report it was observed
     that:
F
                  "The word 'breach' in the expression "breach of a specified
              condition of the policy' in Section 96(2)(b) is of great significance.
              'Breach' means infringement or violation of a promise or
              obligation'. This induces an inference that the violation or infringe-
G             ment on the part of the promisor must be wilful infringement or
              violation: Sub-clause (ii) of clause (b) of Section 96(2) enjoins the
              insurer to establish that the breach was on the part of the insured
              and that it was the insured who was guilty of violating the promise
              or infringement of the contract. It is only when the insured himself
 H            places the vehicle in charge of a person who does not hold a driving
      UNITED INDIA INSURANCE CO. LTD. v. GIAN CHAND [S. B. MAJMUDAR, J.]   697

        licence, that it can be said that he is 'quilty' of the breach of the A
        promise that the vehicle will be driven by a licensed driver. The
        insurer cannot escape from the obligation to indemnify the insured
        when some mishap occurs by some mis.chance. When the insured
        has done everything within his power inasmuch as he has engaged
        a licensed driver and has placed the vehicle in charge of the B
        licensed driver, with the express or implied mandate to drive
        himself, it cannot be said that the insured is guilty of any breach.
        In a way the question is as to whether the promise made by the
        insured is an absolute promise or whether he is exculpated on the
        basis of some legal doctrine". ·
                                                                                 c
       We fail to appreciate how the aforesaid decision can be of any avail
to learned counsel for the respondents - claimants on the peculiar facts of
the present case. It has been clearly held by the Tribunal as well as by the
High Court that respondent No. 1 who was permitted to drive the vehicle
by respondent No. 9, the insured, was admittedly not having any driving D
licence. It was not the case of respondent No.9, the insured, that he did
not know that respondent No. 1 whom the vehicle was being handed over
was not having a valid licence. In fact, once he did not step in the witness
box to prove his case, an adverse inference had necessarily to be drawn
against him to the effect that the vehicle had been handed over by him for
being driven by .an unlicensed driver, respondent No. 1. That finding E
reached by the Tribunal as well as by the High Court must result in
exonerating the Insurance Company of its obligation as the statutory
defence became available to it. The High Court, even though agreeing with
the finding of fact reached by the Tribunal, has in our view, by misconstru-
ing the ratio of the decision of this Court in Skandia Insurance Co. Ltd. v. F
Kokilaben Chandravadan & Ors., [1987) 2 SCC 654, (supra), erroneously
held that the said defence was not available to the Insurance Company on
the facts of the present case.

Even that apart, a, Bench of three learned Judges of this Court in. [1996)
5 sec 21 (supra) while upholding the ratio of the decision of this Court G
in Skandia Insurance Co. Ltd. v. Kokliben Chandravadan & Ors., [1987) 2
sec 654 (supra) has also taken the same view.
      Even apart from these Judgments, which do not improve the case of
the respondents, strong reliance was placed on two other Judgments of this H
    698                   SUPREME COURT REPORTS (1997) SUPP. 3 S.C.R.

A Court by the leaned counsel for the appellant. As noted earlier they
    represent the first line of cases. In Kashiram Yadav & Anr. v. Oriental Fire
    & General Insurance Co. & 01:1., (1989) 4 SCC 128, a bench of two learned
    Judges of°this Court, speaking through Jagannatha Shetty, J. distinguished
    the decision in Skandia Insurance Co. Ltd. v. Kokilaben Chandravadan &
    Ors., (1987) 2 SCC 654 (supra) and took the view that when the insured
B   had handed over the vehicle to an unlicensed driver, the Insurance Com-
    pany would get exonerated and the ratio of the decision in Skandia
    Insurance Co. Ltd. v. Kokilaben Chandravandan & Ors., (1987) 2 SCC 654
    (supra), would be of no assistance to the claimants in such a case. The fact
    situation in the present case is almost parallel to the fact situation which
C   was examined by this Court in Kashi Ram Yadav v. Oriental Fire & General
    Insurance Co. & Ors., (1989) 4 SCC 128 (supra). There is also a latter
    decision of this Court in New India Assurance Co., Ltd. v. Mandar Madhav
    Tambe & Ors., (1996) 2 SCC 328, wherein a Bench of two learned Judges
    of this Court, to which one of us. B.N. Kirpal, J. was a party, examined a
D   similar fact situation and came to the conclusion that "the exclusion clause
    in the Insurance Policy makes it clear that the Insurance Company, in the
    event of an accident, would be liable only if the vehicle was being driven
    by a person holding a valid driving licence or a permanent driving licence
    "other than a learner's licence". The use of the words "permanent driving
    licence" in the insurance policy was to emphasise that a temporary or a
E    learner's licence-holder would not be covered by the insurance policy''.

        Under the circumstances, when the insured had handed over the
  vehicle for being driven by an unlicenced driver, the Insurance Company
  would get exonerated from its liability to meet the claims of third party
F who might have suffered on account of vehicular accident caused by such
  unlicensed driver. In view of the aforesaid two sets of decisions of this
  Court, which deal with different fact situations, it cannot be said that the
  decisions rendered by this Court in Skandia Insurance Co. Ltd. v. Koki/aben
  Chandravadan & Ors., (1987) 2 SCC 654 (supra) and the decision of tht
  Bench of 3 learned Judges in, (1996) 5 SCC 21 (supra) in any way conflict
G with the decisions rendered by this Court in the cases of New India
  Assurance Company Ltd. v. Mandar Madhav Tambe & Ors., (1996) 2 SCC
  328 (supra) and Kashiram Yadav & Anr. v. 01iental Fire & General In-
                                                                                   .
  surance Co. & Anr., [1989) 4 SCC 128.

H         In the result, therefore, this appeal is allowed. The decision of the
     UNITED !NDJA INSURANCE CO. LTD. v. GIAN CHAND [S. B. MAJMUDAR, J.J   699

High Court under appeal to the extent it refused to exonerate the In-           A
surance Company will stand set aside and it is held that the appellant -
Insurance Company is not liable to meet the claim of the respondent
claimants. The claim petition will stand rejected against appellant - In-
surance Company. The respondent - claimants will however be entitled to
recover the awarded amount of compensation from respondent Nos. 1 and           B
9.

      As there was already a stay in favour of the appellant pending these
proceedings and consequently claimants have not been paid any amount
by the appellant, no further question arises in so far as the claim of the
Insurance Company in the present appeal is concerned.                           C

R.K.S.                                                       Appeal allowed.