Supreme Court of India
UTTAR PRADESH STATE ROAD TRANSPORT CORPORATIONversusKULSUM & ORS.
- Citation
- 2011 INSC 515
- Decided
- 25 July 2011
- Disposal
- Disposed off
- Bench
- DALVEER BHANDARI
Holding
When a privately owned vehicle is hired and placed under the control of a state transport corporation, the insurance policy is deemed transferred to the hirer, making the insurer liable to pay compensation to third‑party claimants.
Summary
The Uttar Pradesh State Road Transport Corporation (UPSRTC) hired a privately owned mini‑bus, which was insured by National Insurance Company, and the bus was involved in a fatal accident. The claimants sought compensation under the Motor Vehicles Act, 1988, and the Motor Accident Claims Tribunal held the corporation liable. The corporation appealed, arguing that the insurance company should bear the liability because the vehicle was insured and under the corporation's control, while the insurer contended that liability rested on the owner. The Supreme Court examined the definitions of "owner" under the 1988 Act, the provisions on compulsory third‑party insurance, and the principle of vicarious liability, concluding that the corporation effectively became the owner for the period and the insurance policy transferred with the vehicle. Consequently, the Court held that the insurer could not evade its statutory duty to pay compensation to third parties. The corporation's appeals were allowed and the insurer's appeal was dismissed.
Issues considered
- The liability of the insurance company to pay third‑party compensation when an insured vehicle is hired out to a state transport corporation under a contract.
- Whether the corporation, as the hirer and controller of the vehicle, becomes the "owner" for purposes of the Motor Vehicles Act, 1988.
- The applicability of the vicarious liability principle and the doctrine of transfer of insurance certificate under Section 157 of the Act.
Legislation cited
- Motor Vehicles Act, 1988s. 103(1A), s. 146, s. 149, s. 157, s. 196, s. 2(30)
Subjects
Motor Vehicles ActCompulsory third‑party insuranceVicarious liabilityTransfer of insurance certificateState road transport corporationThird‑party compensationInsurance liability
Judgment
(2011] 15 (ADDL.) S.C.R. 618
A UTTAR PRADESH STATE ROAD TRANSPOR-:-
CORPORATION
v.
KULSUM & ORS.
(CIVIL APPEAL NO. 5901 of 2011)
B
JULY 25, 2011
[DALVEER BHANDARI AND DEEPAK VERMA, JJ.]
MOTOR VEHICLES ACT, 1988:
c
ss. 146 and 149 rlw ss.2(30) and 103(1-A) - Insurance
policy - Third party risk - Insured vehicle of a private owner
plying under an agreement with State Road Transport
Corporation - Accident - Liability to pay compensation to
D victims - HELD: Is of the Insurance Company - The liability
to pay compensation is based on a statutory provision -
Compulsory Insurance of the vehicle is meant for the benefit
of the Third Parties' - The purpose of compulsory insurance
in the Act has been enacted with an object to advance social
E justice - The vehicle was given on hire by its owner - It would
be deemed that the vehicle was transferred with its insurance
policy - Thus, the Insurance Company cannot escape its
liability to pay the compensation - Insurance - Vicarious
liability - Social justice.
F In the instant appeals filed by the Uttar Pradesh State
Road Transport Corporation (the Corporation) and the
Insurance Company, the question of law for
consideration before the Court was: "If insured vehicle
(in this case a mini bus) is plying under an Agreement of
G Contract with the Corporation, on the route as per permit
granted in favour of the Corporation, in case of an
accident, whether the Insurance Company would be
liable to pay compensation or would it be the
responsibility of the Corporation or the owner?"
H 618
UTIAR PRADESH STATE ROAD TRANSPORT 619
CORPORATION v. KULSUM
Allowing the appeals of the Corporation and A
dismissing the appeal of the Insurance Company, the
Court
HELD: 1.1. By virtue of sub-s. (1A) of s. 103 of the
Motor Vehicles Act, 1988 the Corporation became entitled B
to hire any vehicle which could be plied on any route for
which permit had been issued by the Transport Authority
in its favour. [para 15] [627·D]
1.2. A critical eY.amination of both the definitions of
the 'owner', u/s 2(19) of the Motor Vehicles Act, 1939 and C
s.2(30) of the Motor Vehicles Act, 1988 would show that
it underwent a drastic change in the Act of 1988. In the
light of the distinct changes incorporated in the definition
of 'owner' in the old Act and the existing Act, Kai/ash Nath
Kothari's case* shall have no application to the facts of the D
instant case. [paras 26 & 27] [632-D-E]
*Rajasthan State Road Transport Corporation vs. Kai/ash
=
Nath Kothari and others 1997 (3) Suppl. SCR 724 (1997)
7 sec 481 - held inapplicable.
E
1.3. The Corporation and the owner had specifically
agreed that the vehicle will be insured and a driver would
be provided by owner of the vehicle but overall control,
not only on the vehicle but also on the driver, would be
that of the Corporation. Thus, the vehicle was given on F
hire by its owner together with the existing and running
insurance policy. In view of the terms and conditions, the
Insurance Company cannot escape its liability to pay the
compensation. [para 29] [633-G-H; 634-A-B]
G
1.4. There is no denial of the fact by the Insurance
Company that at the relevant point of time the vehicle in
question was insured with it and the policy was very
much in force and in existence. It has also not been its
H
620 SUPREME COURT REPORTS (2011) 15 (ADDL.) S.C.R.
A case that there has been violation of the terms and
conditions of the policy or that the driver was not entitled
to drive the said vehicle. The Tribunal has also held that
the driver had a valid driving licence at the time of
accident [para 29] [634-A-C]
B
1.5. It has been admitted on behalf of the insurance
company that in normal circumstances, if the said vehicle
would not have been attached with the Corporation for
being plied by it on the route of permit granted to it, the
Insurance Company would have no option but to make
C the payment; that there is no difference in the tariff of
premium for the vehicle insured at the instance of owner
or for the vehicle which is being attached with the
Corporation for being plied by it and it is same for both;
that if an intimation would have been given to the
D Insurance Company that the vehicle is being attached
with the Corporation, the Insurance Company would have
met the liability of compensation, in case of an accident;
th<:t there is neither any statutory duty cast on the owner
under the Act or under any Rules to seek permission from
E the Insurance Company to attach the vehicle with the
Corporation nor is it under any of the orders issued by
the Insurance Company. Thus, it is clear that Insurance
Company is trying to tlvade its liability on ]imsy grounds
or under misconception of law. [paras 30 & 31] [634-D-H;
F 635-A-D]
1.6. In view of the definition of "Vicarious Liability", it
can be inferred that the person supervising the driver
through the principle of Respondeat Superior should pay
G for the damages of the victim. In the instant case, the
driver was employed by the owner of the bus but
evidently through Clause 4.4 of the Agreement, the driver
was supposed to drive the bus under the instructions of
conductor who was appointed by the Corporation. The
said driver was also bound by all orders of the
H
UTTAR PRADESH STATE ROAD TRANSPORT 621
CORPORATION v. KULSUM
Corporation. Thus, it can safely be inferred that effective A
control and command of the vehicle was that of the
Coproration. !paras 33-35] [635-E-H; 636-A)
Black's Law Dictionary's "Vicarious Liability" - referred to.
1.7. Thus, for all practical purposes, for the relevant B
period, the Corporation had become the owner of the
vehicle for the specific period; and the vehicle having
been insured at the instance of original owner, it will be
deemed that the vehicle was transferred along with the
insurance policy in existence to the Corporation and, C
therefore, the Insurance Company would not be able to
escape its liability to pay the amount of compensation.
[para 36] [636-8-C]
1.8, The liability to pay compensation is based on a 0
statutory provision. Compulsory Insurance of the vehicle
is meant for the benefit of the Third Parties. The liability
of the owner to have compulsory insurance is only in
regard to Third Party and not to the property. Once the
vehicle is insured, the owner as well as any other person E
can use the vehicle with the consent of the owner.
Section 146 of the Act does not provide that any person
who uses the vehicle independently, a separate
Insurance Policy should be taken. The purpose of
compulsory insurance in the Act has been enacted with
an object to advance social justice. [para 37] [636-0-E] F
Guru Govekar v. Filomena F. Lobo and Ors. 1988 (1)
=
Suppl. SCR 170 (1988 ACJ 585), 1988 AIR 1332 - relied
on.
G
1.9. Section 146 of the Act gives complete protection
to Third Party in respect of death or bodily injury or
damage to the property while using the vehicle in public
··place. For that purpose, insurance of the vehicle has been
H
622 SUPREME COURT REPORTS [2011) 15 (ADDL.) S.C.R.
A made compulsory to the vehicles or to the owners. This
would further reflect that compulsory insurance is
obviously for the benefit of Third Parties. [para 41] (638-
G-H; 639-A]
8 United India Insurance Company Limited v. Santro Devi
and Ors. 2008 (16) SCR 944 =
(2009) 1 sec 558 - relied
on
1.10. Certificate of Insurance, between the owner and
the Insurance Company contemplates, under what
C circumstances Insurance Company would be liable to
pay the amount of compensation. A perusal of the
relevant rules would show that there has not been any
violation of the terms and conditions of the policy.
Respondent-Insurance Company has also failed to point
D out violation of any Act, Rules or conditions of the
Insurance. Insurance Company has no legal justification
to deny the payment of compensation to the claimants.
[para 42-43] (639-8, G-H; 640-A]
E 1.11. The liability of the Insurance Company is
exclusive and absolute and it cannot escape its liability
of payment of compensation to Third Parties or claimants.
Admittedly, owner of the vehicle has not violated any of
the terms and conditions of the policy r,r provisions of
the Act. The owner had taken the insuram.e so as to meet
F such type of liability which may arise on account of use
of the vehicle. Thus, legally or otherwise liability has to
be fastened on the Insurance Company only. [para 44-
46] (640-B-E]
G 1.12. The impugned judgment and order passed by
High Court qua the Corporation is set aside and quashed
and it is held that the Insurance Company would be liable
to pay the amount of compensation to the claimants.
[para 47] (640-F]
H
UTTAR PRADESH STATE ROAD TRANSPORT 623
CORPORATION v. KULSUM
Case Law Reference A
1997 (3) Suppl. SCR 724 held inapplicable para 9
and 21
1988 (1) Suppl. SCR 170 relied on para 39
8
2008 (16) SCR 944 relied on para 40
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
5901 of 2011.
From the Judgment & Order dated 12.4.2007 of the High c
Court of Judicature at Allahabad, Lucknow Bench, at Allahabad
in FAFO No. 65 of 2001.
I
WITH
C.A. Nos. 5902, 5903, 5904, 5905, 5906, 5907 of 2011. D
Garima Prashad, Laxmibai Leitanthem, Pradeep Kumar,
Shadab Khan, Kishore Rawat, M.K. Dua, Rajeev Mishra,
Sanand Ramakrishnan (for Parmanand Pandey, J.P. Dhanda,
Shrish Kumar Misra, for the appearing parties. E
The Judgment of the Court was delivered by
DEEPAK VERMA, J. 1. Leave granted.
2. Since common questions of law and facts are involved F
in this batch of appeals, six of which have been filed by Uttar
Pradesh State Road Transport Corporation, (hereinafter
referred to as 'Corporation'), and one has been preferred by
Insurance Company, against the identical judgments and orders
passed by High Court of Allahabad, it is proposed to dispose G
of the same by this common judgment. For the sake of brevity
and convenience, facts of appeal arising out of
S.L.P .(C)No.1969 of 2008 have been taken into consideration.
3. The Appellant herein (UPSRTC) had challenged the
award passed by Motor Accident Claims Tribunal (hereinafter H
624 SUPREME COURT REPORTS [2011] 15 (ADDL.) S.C.R.
A referred to as the 'MACT'), Barabanki in claim case therein,
holding the Appellant - Corporation along with Ajai Vishen and
Narottam, owner and driver of the mini bus, respectively, liable
to pay compensation to the claimants.
4. In appeal before the High Court of Allahabad, it awarded
8
compensation to the claimants vide impugned judgment and
order dated 12.04.2007, recording the findings against the
Appellant. The question of law that arises for consideration in
the instant and connected appeals is formulated as under:
C If insured vehicle (in this case a mini bus) is plying under
an Agreement of Contract with the Corporation, on the route
' as per permit granted in favour of the Corporation, in case of
an accident, whether the Insurance Company would be liable
to pay compensation or would it be the responsibility of the
D Corporation or the owner?
5. Since it is a vexed question, with no unanimity in the
judgments of various High Courts and as it has not been
considered directly so far by this Court, we deem it fit and
E appropriate to do so.
6. Thumbnail sketch of the facts is mentioned
hereinbelow:-
Ajai Vishen, the owner of mini bus, bearing Registration
F No. UP 32T/7344 entered into an Agreement of Contract with
the Corporation on 07 .08.1997 for allowing it to ply mini bus.
as per the permit issued in favour of Corporation, by the
concerned Road Transport Office (R.T.O.). On account of State
amendment incorporated in Section 103 of the Motor Vehicles
G Act, 1988 (hereinafter called 'the Act') vide Uttar Pradesh
Amendment Act 5 of 1993; the Corporation is vested with right
to take the vehicles on hire as per the contract and to ply the
same on the routes as per the permit granted to it. According
to the terms and conditions of the Agreement, the mini bus was
H to be plied by the Corporation, on the routes as per the permit
UTTAR PRADESH STATE ROAD TRANSPORT 625
CORPORATION v. KULSUM [DEEPAK VERMA, J.]
issued by R.T.O. in its favour. Except for the services of the A
driver, which were to be provided by the owner, all other rights
of owner were to be exercised by the Corporation only. The
conductor was to be an employee of the Corporation, and he
was authorised and entitled to collect money after issuing tickets
to the passengers and had the duty to perform all the incidental B
and connected activities as a conductor on behalf of the
Corporation. The collection so made was to be deposited with
the Corporation.
7. While the mini bus was running on the specified route
on 13.06.1998, at about 9.00 a.m., Vijay Pal Singh (deceased), C
along with his minor children namely, Km. Rupa (deceased),
Rohit (deceased) and Km. Laxmi (deceased), was present
·near Gumti shop of a Barber at the side of National Highway,
near Swastic Biscuit Factory, Police Chauki Mohammadpur,
Post Safedabad, District Barabanki. D
8. The Mini Bus, plying under the contract of the
Corporation, driven by Narottam, suddenly rammed into the
Gumti causing injuries to Vijay Pal, his children and also to the
Barber- Majeed, owner of the Gumti shop. On account of severe E
bodily injuries suffered by them, they died.
9. Smt. Lallan Devi, w/o deceased Vijay Pal Singh and
mother of the three deceased children filed four claim petitions
claiming compensation. Smt. Kulsum w/o deceased Majeed,
filed a separate claim petition for awarding compensation for F
death of Majeed in the said accident before the aforesaid
M.A.C.T.
10. Although, all the above five claim petitions were allowed
and different amounts of compensation were awarded by the G
Tribunal alongwith interest@ 12% per annum but, relying on a
judgment of this Court in the case of Rajasthan State Road
Transport Corporation Versus Kai/ash Nath Kothari and
others reported in (1997) 7 sec 481, the liability of payment
has been fastened on the Corporation as, at the time of H
626 SUPREME COURT REPORTS [2011] 15 (ADDL.) S.C.R.
A accident, the offending vehicle, i.e., the mini bus was being run
by it under the contract.
11. Feeling aggrieved by the awards of the Tribunal,
Corporation preferred appeals and the owner of the bus, Ajai
Vishan, filed cross objection against the finding on issue No.
8
4 recorded by the Tribunal, holding therein that Insurance
Company was not liable to make payment and fastening the
liability on the owner also. on account of alleged breach of
Insurance Policy. However, it had a caveat that liability of the
owner would arise only in case the Corporation fails to make
C the payment. The National Insurance Company Ltd., with which
admittedly the said bus was insured for the relevant period, has
been exonerated from payment of any compensation. Hence,
the appeals.
D 12. We have accordingly heard Ms. Garima Prashad, Mr.
Laxmibai Leitanthem, Mr. Pradeep Kumar, and Mr. Shadab
Khan, learned counsel for Appellant, Mr. Kishore Rawat, learned
counsel for the Respondent Insurance Company and Mr. J.P.
Dhanda, Mr. Rajeev Mishra for Ajai Vishen, owner of the Mini
E Bus and perused the records.
13. However, before we proceed to decide the question
formulated hereinabove, it is necessary to look into some of
the provisions of the Act. Section 2 (30) of the Act defines the
'owner':
F
"Owner" means a person in whose name a motor
vehicle stands registered, and where such person is a
minor, the guardian of such minor, and in relation to a
motor vehicle which is the subject of a hire-purchase
G agreement, or an agreement of lease or an agreement of
hypothecation, the person in possession of the vehide
under that agreement."
14. Section 103 of the Act deals with the provision of issue
H of permits to State Transport Undertakings. However, vide Uttar
UTTAR PRADESH STATE ROAD TRANSPORT 627
CORPORATION v. KULSUM [DEEPAK VERMA, J.]
Pradesh Amendment Act 5of1993, following sub-Section (1A) A
was inserted after sub-section (1) thereof, w.e. f. 16.1.1993
reproduced hereinbelow:
"(1A) It shall be lawful for a State transport undertaking to
operate on any route as stage carriage, under any permit
8
issued therefor to such undertaking under sub-section (1),
any vehicle placed at the disposal and under the control
of such undertaking by the owner of such vehicle under any
arrangement entered into between such owner and the
undertaking for the use of the said vehicle by the C
undertaking."
15. By virtue of the aforesaid incorporated sub-section (1A)
to Section 103 of the Act, the Corporation became entitled to
hire any vehicle which could be plied on any route for which
permit had been issued by the Transport Authority in its favour. D
16. Chapter XI of the Act deals with the provisions of
insurance of Motor Vehicles against third party risks. Relevant
Portions of sections 146 and 147 thereof are reproduced
herein below:
E
"146. Necessity for insurance against third party risk.-(1)
No person shall use, except as a passenger, or cause or
allow any other person to use, a motor vehicle in a public
place, unless there is in force in relation to the use of the
vehicle by that person or that other person, as the case F
may be, a policy of insurance complying with the
requirements of this Chapter :
•
147. Requirement of policies and limits of liability. -(1) In G
order to comply with the requirements of this Chapter, a
policy of insurance must be a policy which -
(a) is issued by a person who is an authorised insurer; and
H
628 SUPREME COURT REPORTS [2011) 15 (ADDL.) S.C.R.
A (b) insures the person or classes of persons specified in
the policy to the extent specified in sub - section (2) -
(i) against any liability which may be incurred by him in
respect of the death of or bodily injury to any person,
including owner of the goods or his authorised
B
representative carried in the vehicle or damage to any
property of a third party caused by or arising out of the use
of the vehicle in a public place;
(ii) against the death of or bodily injury to any passenger
c of a public service vehicle caused by or arising out of the
use of the vehicle in a public place;
Provided that a policy shall not be required -
(i) ..... .
D
(ii) to cover any contractual liability.
Explanation. - For the removal of doubts, it is hereby
declared that the death of or bodily injury to any person or
damage to any property of a third party shall be deemed
E
to have been caused by or to have arisen out of, the use
of a vehicle in a public place notwithstanding that the
person who is dead or injured or the property which is
damaged was not in a public place at the time of the
accident, if the act or omission which led to the accident
F occurred in a public place.
(2) Subject to the proviso to sub-section (1), a policy of
insurance referred to in sub-section (1 ), shall cover any
liability incurred in respect of any accident, up to the
G following limits, namely :-
(a) save as provided in clause (b), the amount of liability
incurred.
(b) in respect of damage to any property of a third party,
H a limit of rupees six thousand :
UTTAR PRADESH STATE ROAD TRANSPORT 629
CORPORATION v. KULSUM [DEEPAK VERMA, J.]
" A
17. Section 149 of the Act casts a duty on the insurer to
satisfy the judgment and award against persons insured in
respect of third party risks. Section 157 of the Act deals with
Transfer of Certificate of Insurance, reproduced hereinbelow: B
"157. Transfer of certificate of insurance.- (1) Where a
person in whose favour the certificate of insurance has
been issued in accordance with the provisions of this
Chapter transfers to another person the ownership of the
motor vehicle in respect of which such insurance was taken C
together with the policy of insurance relating thereto, the
certificate of insurance and the policy described in the
certificate shall be deemed to have been transferred in
favour of the person to whom the motor vehicle is
transferred with effect from the date of its transfer. D
[Explanation. - For the removal of doubts, it is hereby
declared that such deemed transfer shall include transfer
of rights and liabilities of the said certificate of insurance
and policy of insurance.] E
(2) The transferee shall apply within fou[\een days from the
date of transfer in the prescribed form to the insurer for
making necessary changes in regard to the fact of transfer
in the certificate of insurance and the policy described in
the certificate in his favour and the insurer shall make the F
necessary changes in the certificate and the policy of
insurance in regard to the transfer of insurance."
18. It is relevant to mention here that under Section 196 of
the Act, Insurance of vehicle is mandatory and compulsory, G
otherwise it exposes the driver and owner to criminal liability.
19. In the light of the aforesaid provisions of the Act, we
shall now consider various judgments of this Court and High
Courts to reach our conclusion.
H
630 SUPREME COURT REPORTS [2011) 15 (ADDL.) S.C.R.
A 20. Even though several judgments have been cited by both
sides, but the question which arises in the instant case is unique
in nature and we would answer the same taking cue and help
of the various judgments of this Court and High Courts.
B 21. In the matter of Kai/ash Nath Kothari and others
(supra), a question had arisen with regard to the liability of
Insurance Company, where the bus plied as per the contract
with Rajasthan State Road Transport Corporation. However, the
said case was dealing with earlier Motor Vehicle Act of 1939.
Taking into consideration the definition of 'owner' as it existed
C then in Section 2 (19) of the old Act, it has been held in para
17 as under:
"17. The definition of owner under Section 2(19) of the Act
is not exhaustive. It has, therefore to be construed, in a
D wider sense, in the facts and circumstances of a given
case. The expression owner must include, in a given case,
the person who has the actual possession and control of
the vehicle and under whose directions and commands the
driver is obliged to operate the bus. To confine the
E meaning of "owner" to the registered owner only would in
a case where the vehicle is in the actual possession and
control of the hirer not be prop~r for the purpose of
fastening of liability in case of an accident. The liability of
the "owner" is vicarious for the tort committed by its
F employee during the course of his employment and it would
be a question of fact in each case as to on whom can
vicarious liability be fastened in the case of an accident.
In this case, Shri Sanjay Kumar, the owner of the bus could
not ply the bus on the particular route for which he had no
permit and he in fact was not plying the bus on that route.
G
The services of the driver were transferred along with
complete "control" to RSRTC, under whose directions,
instructions and command the driver was to ply or not to
ply the ill-fated bus on the fateful day. The passengers were
being carried by RSRTC on receiving fare from them. Shri
H
UTTAR PRADESH STATE ROAD TRANSPORT 631
CORPORATION v. KULSUM [DEEPAK VERMA, J.]
Sanjay Kumar was therefore not concerned with the A
passengers travelling in that bus on the particular route on
payment of fare to RSRTC. Driver of the bus, even though
an employee of the owner, was at the relevant time
performing his duties under the order and command of the
conductor of RSRTC for operation of the bus. So far as B
the passengers of the ill-fated bus are concerned, their
privily of contract was only with the RSRTC to whom they
had paid the fare for travelling in that bus and their safety
therefore became the responsibility of the RSRTC while
travelling in the bus. They had no privily of contract with c
Shri Sanjay Kumar, the owner of the bus at all..Had it been
a case only of transfer of services of the driver and not of
transfer of control of the driver from the owner to RSRTC,
the matter may have been somewhat different. But on facts
in this case and in view of Conditions 4 to 7 of agreement, D
(supra), the RSRTC must be held to be vicariously liable
for the tort committed by the driver while plying the bus
under contract of the RSRTC. The general proposition of '
law and the presumption arising therefrom that an
employer, that is the person who has the right to hire and E
fire the employee, is generally responsible vicariously for
the tort committed by the employee concerned during the
course of his employment an within the scope of his
authority, is a rebuttable presumption."
22. In the light of the aforesaid judgment, learned counsel F
for Respondent Insurance Company, Mr. Kishore Rawat,
strenuously contended before us that the question has already
been answered against the Appellant - Corporation, thus,
nothing survives in this and the connected appeals filed by the
Corporation. G
23. In our considered opinion, in the light of drastic and
distinct changes incorporated in the definition of 'owner' in the
old Act and the present Act, Kai/ash Nath's case (supra) has
no application to the facts of this case.
H
632 SUPREME COURT REPORTS [2011] 15 (ADDL.) S.C.R.
A 24. However, we were unable to persuade ourselves with
the specific question which arose in this and connected
appeals as the question projected in these appeals was neither
directly nor substantially in issue, in Kailash Nath's case
(supra). Thus, reference to the same may not be of much help
B to us. Admittedly, in the said case, this Court was dealing with
regard to earlier definition of owner as found in Section 2 (19)
of the old Act.
25. Section 2 (19) of Motor Vehicles Act, 1939 is
C reproduced hereinbelow:
"2(19) 'owner' means, where the person in possession of
a motor vehicle is a minor, the guardian of such minor, and
in relation to a motor vehicle which is the subject of a hire-
purchase agreement, the person in possession of the
D vehicle under that Agreement."
26. Critical examination of both the definitions of the
'owner', would show that it underwent a drastic change in the
Act of 1988, already reproduced hereinabove.
E 27. In our considered opinion, in the light of the distinct
changes incorporated in the definition of 'owner' in the old Act
and present Act, Kailash Nath Kothari's case shall have no
application to the facts of this case.
F 28. Before we proceed further to decide the aforesaid
question of law, it is necessary to refer to some of the relevant
clauses in the Agreement entered into between the Appellant
and the owner of the vehicle on 07.08 1997. In the said
Agreement, the Appellant has been referred to as the 'First
G Party' and owner Ajay Vishen has been referred to as 'Second
Party'.
Relevant clauses 2.1, 3.2, 4.2, 4.3 and 4.4 of Annexure P-
2 are reproduced hereinbelow:
H "2.1 The Second Party shall be liable and responsible to
UTIAR PRADESH STATE ROAD TRANSPORT 633
CORPORATION v. KULSUM [DEEPAK VERMA, J.)
discharge all the legal liabilities under the Motor Vehicle A
Act, 1988 or any other Acts, Registration, payment of taxes
of the vehicle. Comprehensive Insurance and all such
liabilities as may be fixed from time to time by any law on
the owner of vehicle and the First Party shall be deemed
to have no liability whatsoever. B
3.2. The driver shall remain and shall be deemed to be the
employee of Second Party. That driver shall not under any
circumstances be treated as employee of First Party. The
Second Party shall be fully liable to procure driving licence, C
etc. and to meet all other legal requirements under Motor
Vehicle Act 1988 or any other Act.
4.2. The driver of the bus under contract will drive the bus
carefully. He shall stop the bus at every designated spot
to enable passenger to board/get down from the bus and D
shall get in-out entries of the bus recorded wherever
required. Driver of Bus shall ensure that tickets are issued
to all the passengers and only after that would drive the bus
at its next destination.
4.3. Bus driver shall not himself sell the tickets but this E
restriction shall not be applicable in the circumstances
mentioned in clause-31 of the agreement.
4.4. The conductor appointed and deputed by the First
Party shall have total responsibility for issuing tickets to the F
passengers. receiving fare and completing various papers/
records in this regard. The First Party shall appoinVdepute
the conductors."
•
29. Critical examination thereof would show that the G
Appellant and the owner had specifically agreed that the vehicle
will be insured and a driver would be provided by owner of the
vehicle but overall control, not only on the vehicle but also on
the driver, would be that of the Corporation. Thus, the vehicle
was given on hire by the owner of the vehicle together with its H
634 SUPREME COURT REPORTS [2011] 15 (ADDL.) S.C.R.
A existing and running insurance policy. In view of the aforesaid
terms and conditions, the Insurance Company cannot escape
its liability to pay the amount of compensation. There is no
denial of the fact by the insurance company that at the relevant
point of time the vehicle in question was insured with it and the
B policy was very much in force and in existence. It is also not
the case of the insurance company that the driver of the vehicle
was not holding a valid driving licence to drive the vehicle. The
Tribunal has also held f~at the driver had a valid driving licence
at the time of accident. It has also not been contended by it that
C there has been violation of the terms and conditions of the
policy or that the driver was not entitled to drive the said vehicle.
30. During the course of hearing, we had asked the
following pertinent questions to Mr. Kishore Rawat, learned
counsel for the Insurance Company:
D
(i) Since the Insurance Company had admittedly received
the amount of premium for the period when the mini bus had
met with the accident then why should it not be made liable to
make the payment of compensation? According to him, in
E normal circumstances, if the said vehicle would not have been
attached with the Corporation for being plied by it on the route
of permit granted to it, then of course, the Insurance Company
would have no option but to make the payment.
(ii) We had also enquired if there exists different tariffs of
F premium for the vehicle insured at the instance of owner or for
the vehicle which is being attached with the Corporation for
being plied by it. He categorically admitted that there is no such
difference in the tariff in either of the aforesaid situation and it
is same for both.
G
(iii) We further enquired from him that if an intimation would
have been given to the Insurance Company that the vehicle is
being attached with the Corporation then what would have been
the position? He again informed us that in that case, the
H
UTIAR PRADESH STATE ROAD TRANSPORT 635
CORPORATION v. KULSUM [DEEPAK VERMA, J.]
Insurance Company would have met the liability of A
compensation, in case of an accident.
(iv) Lastly, we enquired from him as to under which
provision of the Act or the ~ule, any statutory duty or otherwise
is cast on the owner to seek permission or give an intimation B
to the Insurance Company in case the vehicle is attached with
the Corporation for being plied by it? He candidly conceded
that there is neither any statutory duty cast on the owner under
the Act or under any Rules to seek permission from the
Insurance Company nor it is under any of the orders issued by
the Company. According to him, it would have been desirable C
for the insured to have informed about such a contract.
31. Thus, in the light of the aforesaid, it is clear that
Insurance Company is trying to evade its liability on flimsy
grounds or under misconception of law. D
32. On account of the aforesaid discussions, it is crystal
clear that actual possession of the vehicle was with the
Corporation. The vehicle, driver and the conductor were under
the direct control and supervision of the Corporation.
E
33. Black's Law Dictionary defines "Vicarious Liability" as
follows:
"Liability that a supervisory party (such as an
employer) bears for the actionable conduct of a F
subordinate or associate (such as an employee) because
of the relationship between the two parties". (Page 927,
Black's Law Dictionary, 7th Edition).•
34. So, through the above definition, it can be inferred that G
the person supervising the driver through the principle of
. Respondeat Superior should pay for the damages of the victim.
· 35. In the instant case, the driver was employed by Ajay
Vishen, the owner of the bus but evidently through Clause 4.4.
of the Agreement, reproduced hereinabove, driver was H
636 SUPREME COURT REPORTS [2011] 15 (ADDL.) S.C.R.
A supposed to drive the bus under the instructions of conductor
who was appointed by the Corporation. The said driver was
also bound by all orders of the Corporation. Thus, it can safely
be inferred that effective control and command of the bus was
that of the Appellant.
B
36. Thus, for all practical purposes, for the relevant period,
the Corporation had become the owner of the vehicle for the
specific period. If the Corporation had become the owner even
for the specific period and the vehicle having been insured at
C the instance of original owner, it will be deemed that the vehicle
was transferred along with the Insurance Policy in existence to
the Corporation and thus Insurance Company would not be able
to escape its liability to pay the amount of compensation.
37. The liability to pay compensation is based on a
D statutory provision. Compulsory Insurance of the vehicle is
meant for the benefit of the Third Parties. The liability of the
owner to have compulsory insurance is only in regard to Third
Party and not to the property. Once the vehicle is insured, the
owner as well as any other person can use the vehicle with the
E consent of the owner. Section 146 of the Act does not provide
that any person who uses the vehicle independently, a separate
Insurance Policy should be taken. The purpose of compulsory
insurance in the Act has been enacted with an object to
advance social justice.
F 38. Third Party rights have been considered by this Court
in several judgments and the law on the said point is now fairly
well settled.
39. The Apex Court in the case of Guru Govekar v.
G Filomena F. Lobo and Ors. (1988 ACJ 585), 1988 AIR 1332
has held that:
"8 ....Thus, if a policy is taken in respect of a motor vehicle
from an insurer in compliance with the requirements of
Chapter VIII of the Act, the insurer is under an obligation
H
UTTAR PRADESH STATE ROAD TRANSPORT 637
CORPORATION v. KULSUM [DEEPAK VERMA, J.]
to pay the compensation payable to a third party on A
account of any injury to his/her person or property or
payable to the legal representatives of the third party in
case of death of the third party caused by or arising out of
the use of the vehicle at a public place. The liability to pay
compensation in respect of death of or injury caused to the B
person or property of a third party undoubtedly arises when
such injury is caused when the insured is using the vehicle
in a public place. It also arises when the insured has
caused or allowed any other person (including an
independent contractor) to use his vehicle in a public place c
and the death of or injury to the person or property of a third
party is caused on account of the use of the said vehicle
during such period, unless such other person has himself
taken out a policy of insurance to cover the liability arising
out of such an accident.
D
13 .... This meant that once the insurer had issued a
certificate of insurance in accordance with sub-section (4)
of Section 95 of the Act the insurer had to satisfy any
decree which a person receiving injuries from the use of
the vehicle insured had obtained against any person E
insured by the policy. He was liable to satisfy the decree
when he had been served with a notice under sub-section
(2) of Section 96 of the Act about the proceedings in which
the judgment was delivered.
F
14 ....Any other view will expose innocent third parties to
go without compensation when they suffer injury on account
of such motor accidents and will defeat the very object of
introducing the necessity for taking out insurance policy
under the Act." G
40. In a recent judgment of this Court, in the case of United
India Insurance Company Limited v. Santro Devi and Ors.
(2009) 1 sec 558 ithas been held as under :-
"16.The provisions of compulsory insurance have been H
638 SUPREME COURT REPORTS [2011] 15 (ADDL.) S.C.R.
A framed to advance a social object. It is in a way part of
the social justice doctrine. When a certificate of insurance
is issued, in law, the insurance company is bound to
reimburse the owner. There cannot be any doubt
whatsoever that a contract of insurance must fulfil the
B statutory requirements of formation of a valid contract but
in case of a third-party risk, the question has to be
considered from a different angle.
17. Section 146 provides for statutory insurance. An
insurance is mandatorily required to be obtained by the
c person in charge of or in possession of the vehicle. There
is no provision in the Motor Vehicles Act that unless the
name(s) of the heirs of the owner of a vehicle is/are
substituted on the certificate of insurance or in the
certificate of registration in place of the original owner
D (since deceased), the motor vehicle cannot be allowed to
be used in a public place. Thus, in a case where the
owner of a motor vehicle has expired, although there does
not exist any statutory interdict for the person in possession
of the vehicle to ply the same on road; but there being a
E statutory injunction that the same cannot be plied unless a
policy of insurance is obtained, we are of the opinion that
the contract of insurance would be enforceable. It would
be so in a case of this nature as for the purpose of renewal
of insurance policy only the premium is to be paid .. t is not
F in dispute that quantum of premium paid for renewal of the
policy is in terms of the provisions of the Insurance Act,
1938."
41. Perusal of the ratio of aforesaid judgments of this
G Court, shows that Section 146 of the Act gives complete
protection to Third Party in respect of death or bodily injury or
damage to the property while using the vehicle in public place.
For that purpose,. insurance of the vehicle has been made
compulsory to the vehicles or to the owners. This would further
H
UTIAR PRADESH STATE ROAD TRANSPORT 639
CORPORATION v. KULSUM [DEEPAK VERMA, J.)
reflect that compulsory insurance is obviously for the benefit of A
Third Parties.
42. Certificate of Insurance, between the owner and the
Insurance Company contemplates, under what circumstances
Insurance Company would be liable to pay the amount of
8
compensation. The relevant conditions are reproduced
hereinbelow :
"Rules with respect to use of the Vehicle
Use only for carriage of passengers in accordance c
with permit (contract carriage or stage carriage) issued
within the meaning of the Motor Vehicles Act, 1988. This
policy does not cover:
1. Use for organised racing pace making reliability trial D
speed testing.
2. Use whilst drawing a trailer except the towing (other than
to reward) of any one disabled mechanically propellor
vehicle.
E
Persons who are qualified to use the Vehicle:
Any person including the insured provided that
person driving holds an effective driving licence at the time
of the accident and is not disqualified from holding or
obtaining such licence. Provided also that a person F
holding an effective learner's licence may also drive the
vehicle when non used for transport of passenger at the
time of the accident and such a person satisfies the
requirement of rule No. 3 of this Central Motor Vehicle Rule,
1989." G
43. Perusal thereof would show that there has not been any
· violation of the aforesaid terms and conditions of the policy.
Respondent-Insurance Company has also failed to point out
violation of any Act, Rules or conditions of the Insurance. H
640 SUPREME COURT REPORTS (2011] 15 (ADDL.) S.C R.
A Insurance Company has no legal justification to deny the
payment of compensation to the claimants.
44. In the light of the foregoing discussions, the Appeal filed
by Insurance Company fails, wherein it has been directed that
B the amount would first be paid by the Company, with right to it
to recover the same from owner of the vehicle. This we hold
so. as the liability of the Insurance Company is exclusive and
absolute.
45. Thus, looking to the matter from every angle, we are
C of the considered opinion that Insurance Company cannot
escape its liability of payment of compensation to Third Parties
or claimants. Admittedly, owner of the vehicle has not violated
any of the terms and conditions of the policy or provisions of
the Act. The owner had taken the insurance so as to meet such
D type of liability which may arise on account of use of the vehicle.
46. Apart from the above, learned counsel for Insurance
Company could not point out any legal embargo which may
give right to it to deny the payment of compensation. Thus,
E legally or otherwise liability has to be fastened on the Insurance
Company only.
47. In the light of the aforesaid discussion, the Appeals of
the Corporation are allowed. The impugned judgment and order
passed by High Court qua the. Corporation are hereby set aside
F and quashed and we hold that the Insurance Company would
be liable to pay the amount of compensation to the claimants.
48. Appeals filed by the Corporation thus stand allowed
and the Appeal filed by the Insurance Company stands
G dismissed with costs. Counsel's fee quantified at Rs. 10,000/
- in each Appeal.
R.P Appeals disposed of.
H
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