Case Law Details

Case Name : National Insurance Co. Ltd. Vs Anjana Shyam & Ors (Supreme Court of India)
Appeal Number : Civil Appeal Nos. 2422-2459 of 2001
Date of Judgement/Order : 20/08/2007
Related Assessment Year :

National Insurance Co. Ltd. Vs Anjana Shyam & Ors (Supreme Court of India)

Supreme Court HELD THAT – ‘Insurance company can be made liable only in respect of the number of passengers for whom insurance can be taken under the Motor Vehicles Act and for whom insurance has been taken as a fact and not in respect of the other passengers involved in the accident in a case of overloading.

BRIEF FACTS

1. This is a batch of 41 appeals filed under section 173 of the Motor Vehicles Act, 1988,out of which 38 appeals are by the National Insurance Co. Ltd. and three by the claimants.

 2. The appeals arise out of the separate judgments and awards dated 27.3.1997, 31.7.97, 15.1.1999 and 10.5.1999 respectively, rendered by the Motor Accidents Claims Tribunals, Shimla and Rampur Bushehr in different claim petitions, whereby the compensation has been awarded in favour of the victims who received injuries and legal representatives/heirs of the persons who died in the motor vehicle accident occurred on 4.3.96.

 3. The facts and law involved in these appeals are identical and learned counsel for the respective parties advanced their arguments in common and, therefore, we propose to decide these appeals by this common judgment.

 4. On 4.3.1996 bus bearing registration No. HP-06-1245 owned by respondent No. 2, Secretary, Tehsil Co-operative Union, Nankhari, and being driven by respondent No. 3, Moti Ram, driver was going from Narkanda to Nankhari. The bus was insured with the appellant National Insurance Co. Ltd. (hereinafter for short ‘the insurance company’). On the way when the bus reached near a place known as ‘Gaman’, it went off the road and had fallen down into a nallah, as a result of which some of the passengers had died due to the injuries and many other passengers sustained injuries on their person.

 5. The injured were taken to Government Dispensary, Nankhari and subsequently, they were shifted to Indira Gandhi Medical College & Hospital, Shimla, where they remained under treatment in respect of the injuries which were sustained by them as a result of the accident. The victims of the accident and the legal representatives/heirs of the deceased had filed their respective claim petitions before the Motor Accidents Claims Tribunals, Shimla and Rampur Bushehr. The claimants in their claim petitions have alleged that the accident took place due to rash and negligent driving of the bus by the driver and they claimed different amounts of compensation.

 6. The respondent owner of the vehicle in question contested the claim petitions on the ground that the accident did not take place due to rash and negligent driving of the bus by the driver. It is stated that the accident had taken place due to mechanical defect but it is admitted that the bus in question had met with an accident on 4.3.96. It is further stated that the injured persons and the deceased persons were not travelling in the bus at the time of the accident.

 7. The respondent driver in his separate written statement has stated that he was not driving the bus in question at the time of the accident and it was one Mathu Ram who was driving the bus in question.

 8. The appellant insurance company in its preliminary objections pleaded that the vehicle in question was not driven by the authorised driver, that the vehicle did not have fitness certificate and the vehicle was being used for a purpose other than that specified in the route permit and it was also being used for the purpose not covered under the terms of the policy of the insurance and, therefore, the appellant insurance company was not liable to pay the amount of compensation. On merits, all the averments made in the claim petitions were denied for want of knowledge. However, the appellant insurance company alternatively pleaded that the amounts of compensation claimed by the claimants were highly exaggerated and there was no relevance between the loss suffered and the compensation claimed. Thus, the insured, driver and the appellant insurance company have stated that the claimants were not entitled for compensation.

9. On the controversial pleadings of the parties, the Tribunals below framed necessary issues. The parties went to trial and led their oral and documentary evidence. The Tribunals below on appreciation of the entire evidence on record found that the accident took place due to rash and negligent driving of the vehicle by the driver (Mathu Ram), who also died in the accident. Consequently, the compensation was awarded to the victims of the accident and the legal representatives/heirs of the deceased passengers, holding the appellant insurance company liable to pay the amounts of compensation so awarded.

 10. The appellant insurance company has filed 38 appeals challenging the correctness and validity of the awards on various grounds. The appellant insurance company has also Filed applications under Order 1, rule 10, Civil Procedure Code for impleadment of the State of Himachal Pradesh as party respondent in these appeals, applications under Order 6, rule 17, Civil Procedure Code for amendment of written statements stating that according to the route permit of the bus issued by the Regional Transport Authority, Shimla, the carrying capacity of the bus was 42 passengers and it has come to the knowledge of the appellant insurance company that the bus was overloaded by passengers at the time of the accident and in fact the bus was carrying 91 passengers and, therefore, the appellant insurance company may be permitted to amend its written statements taking the defence of overloading of the ill-fated bus.

11.  Applications under section 151, Civil Procedure Code read with section 170 of the Motor Vehicles Act, 1988,seeking permission to prosecute the appeal on merits in the name of the insured other than the defences available to the appellant insurance company have also been filed.

 12. Three appeals were filed by the claimants for enhancement of the amount of compensation awarded by the Tribunals below.

 13. We have heard Mr. R.M Suri, learned counsel for the appellant insurance company and learned counsel appearing on behalf of the respondents.

14.  Mr. R.M Suri, learned counsel vehemently contended that the State of H.P is a necessary party for the reason that it has failed to provide sufficient number of buses on the route in question for carrying passengers and also in not keeping proper checking of overloading of buses and thus in eventuality of accident, the State of H.P is negligent in discharging the duty and, therefore, it being a contributory cause, is liable to pay the amounts of compensation. The learned counsel also contended that in the present cases, the liability of the insurance company was covered under the insurance policy for carrying 42 passengers and two driver and conductor and in excess to 42 passengers, the liability is of the State of H.P, who is negligent in not keeping proper checks upon the driver for overloading the bus. The learned counsel next contended that overloading of the vehicle snaps the relationship of the insurer and insured so as to exonerate the insurance company from liability under the policy. The learned counsel has taken the shelter of IMT-12 of the policy of insurance dealing with the legal liability to passengers including the liability for accidents to employees of the insured arising out of and in the course of their employment. Clause IMT-12 reads as under:

 “In consideration of an additional premium of Rs….and notwithstanding anything to the contrary contained in section II(1)(c) but subject otherwise to the terms, exceptions, conditions and limitation of this policy the company will indemnify the insured against liability at law for compensation (including law costs of any claimant) for death of or bodily injury to any person other than a person excluded under section II(1)(b) being carried in or upon or entering or mounting or alighting from the motor vehicle.

 Provided always that in the event of an accident occurring whilst the motor vehicle is carrying more than the number of persons mentioned in the Schedule hereto as being the licensed carrying capacity of that vehicle in addition to the conductor, if any, then the insured shall repay to the company rateable proportion of the total amount which would be payable by the company by reason of this endorsement if more than the said number of persons were carried in the motor vehicle.”

15. The learned counsel relied upon a judgment of the learned single Judge of the Punjab and Haryana High Court in New India Assurance Co. Ltd. v. Maj. Hans Raj Saini1989 ACJ 740(P&H), to contend that when it is a case of composite negligence and one tortfeasor has been made to pay the compensation, he can rateably ask for compensation from the other tortfeasor, but then again the court is required to apportion the negligence inter se to reimburse the tortfeasor who compensated the claimants and it is the duty of the Tribunal to determine the composite negligence and civil court in separate proceedings cannot determine it when the compensation is awarded under the Motor Vehicles Act.

 16. Per contra, the learned counsel for the other side more specifically the learned counsel for the insured vehemently contended that the applications for impleadment of the State of H.P and amendment of the written statements and permission to take other defences than permissible to the appellant insurance company are not maintainable as the averments made in those applications are not available to the appellant insurance company under section 149 of the Motor Vehicles Act. The learned counsel next contended that the route permit issued by the authority was for plying the passenger vehicle and not for carrying the limited number of passengers. The learned counsel for the respondents also contended that the IMT clause 12 in policy Exh. R-4, on which reliance has been placed by the learned counsel for the appellant insurance company is not found incorporated in the said policy which was filed and marked, as above, and that the appellant insurance company has filed only the copy of the first page of the policy of insurance in other claim petitions and not the full content of the policy and, therefore, the defence projected by the learned counsel for the appellant insurance company taking shelter under IMT-12 is not available to the appellant insurance company. The learned counsel for the respondents next contended that so far the applications of the insurance company for taking the defences which are not available to it under section 170 of the Act are concerned, those applications are not maintainable in appeal before this court.

17. We have given our careful consideration to the rival contentions of the learned counsel on both sides.

18. So far the impleadment of the State of H.P as party respondent in these appeals is concerned, we find no justification to allow those applications at this stage for the reason that it is not as though the appellant insurance company could not do this before the Tribunals below and this claim of the appellant insurance company is now made as a pure afterthought to drag on the proceedings, just to prolong the agony of the claimants who were awarded the amounts of compensation by the Tribunals below.

 19. If the factum of overloading of the bus in question remained unchecked by the law enforcing authority, even assuming it to be so, that cannot be a ground sufficient in law to make the State as party respondent as though it by any of its acts of commission/omission has contributed in any manner for the accident. It cannot be said that the State of H.P was directly involved or concerned in the accident, to us not even remotely appear to be the cause for the accident. It is practically impossible for the authorities of the State to keep a constant vigil or check upon overloading of buses at all times and at all places and, therefore, the authorities or the State as such cannot be saddled with any liability for the accident as a contributory of any cause for the same or payment of the compensation or any portion of it, awarded by the Tribunal.

Insurance company liable only in respect of passengers for whom insurance taken or can be taken

 20. Therefore, the State could not have been accused of contributory negligence and consequently there are no merits in the applications for impleadment of the State of H.P We have perused the stage carriage permit Exh. R-2, and on our perusal, we find that the vehicle in question was granted the route permit for the purpose of carrying passengers and against column 7(b) in respect of maximum number of passengers, which may be carried at any one time, the word ‘NA’ has been written. If the purpose for which the route permit was granted in favour of the insured is for carrying passengers and no number of passengers as such has been specified, it may depend upon the seating capacity of the bus only and it cannot also be said that the State or its officers were responsible for not checking the overloading of the passengers in the ill-fated bus or answerable in any manner for the accident or claims arising out of the same.

21. We find no legal duty or obligation on the State or its officers to depute some officials to see that every bus at all and every place or point of time is not overloaded. Carrying of more passengers in the ill-fated bus is not so fundamental cause of the accident even as per the evidence brought on record and the Tribunals below have found the driver of the bus to be negligent in driving the vehicle and causing the accident.

 The learned Chief Justice Mr. P.D Desai, as he then was, in Oriental Insurance Co. Ltd. v. Bishan Dass1988 ACJ 106 (HP), relying upon the judgment of the Apex Court in Skandia Insurance Co. Ltd. v. Kokilaben Chandravadan1987 ACJ 411 (SC), held that use of the insured vehicle in question on route for which there was no permit, would not attract the provisions of section 96(2)(b)(i)(c) of the Motor Vehicles Act, 1939, which had been pressed into service by the insurance company to deny the statutory liability. At the most, it was a case of breach of the condition of the permit which was not the same thing as breach of the purpose for which it was issued.

 In Shingara Ram v. Balak Ram Walia, 1988 ACJ 176 (HP), the same learned Chief Justice of this court, as he then was, while dealing with a case where the truck was parked on kucha portion of the road on the wrong side which rolled down into the khud when the road gave way on account of load which the truck was carrying, held that the State Government could not be said to have been contributorily negligent as joint tortfeasor. 

Learned Chief Justice proceeded further to hold that there was no liability for damage which was not of a foreseeable type within the scope of the duty of care. Foreseeability is the sole test of whether damages are recoverable in negligence. When wrongful act of a third party, who acts irresponsibly or unlawfully, intervenes as a new force between the negligent act of the original wrongdoer and the injury to the victims, the element of remoteness may come into play and the test of reasonable foreseeability may not be satisfied, unless the party seeking to fasten the liability upon the State Government establishes that the circumstances were such that the initial wrongdoer should have reasonably foreseen that the third party would act as he did in accordance with the human nature. 

22. In the present cases, we find no fault on the part of the State or its authorities who can be said to be negligent in checking the overloading of the passengers in the ill-fated bus.

 23. Carrying of more passengers than the number given in the insurance policy may be irregular but is not so fundamental a breach as to put an end to the contract of insurance and it cannot also be a defence open to the appellant insurance company to allege that the overloading of the passengers in the ill-fated bus was the direct cause of the accident for which the State Government is liable to contribute the amounts of compensation awarded by the Tribunals below.

 24. In B.V Nagaraju v. Oriental Insurance Co. Ltd., Divisional Officer, Hassan., 1996 ACJ 1178 (SC), it is held that when in terms of the insurance policy that the insured vehicle was entitled to carry 6 workmen, excluding the driver and if those 6 workmen when travelling in the vehicle, are assumed not to have increased any risk from the point of view of the insurance company on occurring of an accident, how could those added persons be said to have contributed to the causing of it is the poser, keeping apart the load it was carrying.

 Their Lordships further held that merely by lifting a person or two, or even three, by the driver or the cleaner of the vehicle, without the knowledge of owner, cannot be said to be Such a fundamental breach that the owner should, in all events, be denied indemnification. The misuse of the vehicle was somewhat irregular though but not so fundamental in nature so as to put an end to the contract of insurance, unless some special circumstances or factors existed which, by themselves had gone to contribute to the causing of the accident.

 25. In the cases on hand, the appellant insurance company has not proved that the accident was as a result of overloading of the vehicle in question. The learned counsel for the appellant insurance company has relied upon the report of the Sub-Divisional Magistrate, who was appointed Inquiry Officer by the State Government, marked Exh. RW-3.A, whereunder, it was found that the ill-fated bus had carried 90 passengers at the time of the accident. The proceedings of the Vidhan Sabha, Exh. RW-9.A, where the question was raised by one of the members of the Assembly about the payment of the amount of compensation to the victims and legal representatives/heirs of the deceased passengers would indicate that on the day of the accident, the ill-fated bus was carrying 90 passengers. We have observed that overloading of the ill-fated bus will not amount to violation of the route permit or any other law for which the State Government can be held to be contributorily negligent for not taking due care and caution in checking overloading or providing more route permits for plying more buses so as to prevent accidents.

The appellant insurance company in the claim petitions decided by the Motor Accidents Claims Tribunal, Rampur Bushehr, has filed applications for impleadment of the State Government as party and for amendment of the written statements which were rejected by the Tribunal. In other claim petitions, the appellant insurance company has not filed similar applications and thereby no opportunity was given to the respondents to controvert the claims of the appellant insurance company before the Tribunals below.

 Under section 149(2)(a)(i)(c) of the Motor Vehicles Act, 1988, the defence which the appellant insurance company can raise is in respect of the breach of specified or enumerated conditions of the insurance policy one of which being, viz., if the vehicle allowed by permit has been used for a purpose other than the specified purpose. As noticed above, the purpose of permit of the ill-fated bus was to carry the passengers and, therefore, there is no violation of the statutory provisions by the insured and as such the defence that more than 42 + 2 passengers specified under the policy of insurance were carried at the time of the accident in the ill-fated bus is not available under section 149(2)(a)(i)(c) of the Motor Vehicles Act to the appellant insurance company against third party risk as the vehicle was not used for the purpose not authorised by the permit.

 For taking this view, we are supported by a Division Bench judgment of the Madhya Pradesh High Court in Radhey Shyam Agarwal v. Gayatri Devi, 1998 ACJ 1177 (MP) and the judgment of the Apex Court in B.V Nagaraju v. Oriental Insurance Co. Ltd., Divisional Officer, Hassan., 1996 ACJ 1178 (SC).

25. In United India Insurance Co. Ltd. v. Member, Motor Accidents Claims Tribunal, Lakhimpur, 1993 ACJ 828 (Gauhati), the Full Bench of Gauhati High Court held that the insurance company cannot raise defences in appeal which are not available under section 149(2) of the Motor Vehicles Act, 1988unless, of course, the Tribunal has passed an order under section 170 or the insurance company has reserved in the policy the right to contest the claim on behalf of the insured.

26. In the cases on hand, the appellant insurance company has miserably failed to prove the exception clause IMT-12 in the policy Exh. R-4 on the file of the Tribunal below and on perusal of the policy, we find no such clause incorporated in the policy which was filed and marked in evidence. The learned counsel for the appellant insurance company has shown us a copy of the policy of the insurance in which IMT-12 clause has been incorporated but mere showing of policy of insurance containing IMT-12 clause for the first time at the time of hearing before us will not prove the contents of the documents relating to the contract entered into between the insured and insurer. As no attempt has been made by the appellant insurance company to properly prove this document on record, therefore, we cannot allow the appellant insurance company to rely upon clause IMT-12 in the present cases and also upon condition No. 2 incorporated in the policy under heading of conditions. Even otherwise, we find that the overloading does not have the effect of snapping the contracted relationship or exonerating the insurance company from liabilities for payment of compensation. If at all, it only reserves a right in the insurance company to proportionately recover from the insured for rendering the insurance company for greater liability than the one contracted for.

 27. The evidence on record does not permit us to decide about the rights of the parties, if any, in this regard. For all these reasons, we are not inclined to accept the submissions of the learned counsel for the appellant insurance company to allow the applications filed under Order 1, rule 10, Civil Procedure Code for impleadment of the State of H.P as also the applications under Order 6, rule 17, Civil Procedure Code for amendment of the written statements incorporating the defence of overloading of the ill-fated bus in these appeals, as a ground of their defence to avoid their liability in total or in part.

28. The applications filed under section 170 of the Motor Vehicles Act by the appellant insurance company to contest the claims of the claimants on merits cannot be entertained at this stage for the simple reason that the appellant insurance company has not filed such applications before the Tribunals below and unless the Tribunals have permitted the insurer to contest the claims on all or any other grounds that are available to persons against whom the claims have been made.

 In Shankarayya v. United India Insurance Co. Ltd., 1998 ACJ 513 (SC), their Lordships held that the insurance company when impleaded as a party by the court can be permitted to contest the proceedings on merits and on ground other than those permitted under the Act only if the conditions precedent mentioned in section 170 are found to be satisfied and for that purpose the insurance company has to obtain an order in writing from the Tribunal and that it should be a reasoned order by the Tribunal too. Their Lordships further proceeded to hold that unless the said procedure is followed, the insurance company cannot have a wider defence on merits than what is available to it by way of statutory defence.

 It is again said that it is true that the claimants themselves had joined insurance company in the claim petitions but that was done with a view to thrust the statutory liability on the insurance company on account of the contract of the insurance and that was not an order of the court itself permitting the insurance company which was impleaded to avail of a larger defence on merits on being satisfied on the conditions mentioned in section 170.

 Thus, it is well settled law of the Apex Court that unless the insurance company was allowed by the Motor Accidents Claims Tribunal to take all defences mentioned in section 170 by a reasoned order, such applications under section 170 of the Motor Vehicles Act are not maintainable in appeal before this court. Therefore, the applications also merit dismissal on this short ground.

29. The next submission of the learned counsel for the appellant insurance company was that under Order 41, rule 33 of the Code of Civil Procedure, this court has wide power to pass any decree or make any order to do justice to the parties and, therefore, the appellant insurance company may be allowed to raise all defences provided under section 170 challenging the awards on merits is equally untenable. If the contention of the learned counsel as projected is allowed, it will amount granting relief to the appellant insurance company in respect of the payment of compensation awarded by the Tribunals below under the third party risk against a party which was not legally liable to pay the whole or any part of compensation awarded. Allowing the claims of the appellant insurance company by granting relief as prayed for, in its favour, will amount to twisting of the facts of the present cases to abstract question based on niceties of law alone dehors the evidence on record and the law applicable.

 Therefore, we are afraid we cannot accept this submission of the learned counsel either. The provision of Order 41, rule 33, Civil Procedure Code was the subject-matter of interpretation in several judgments of the Supreme Court and their Lordships of the Apex Court were pleased to lay down the scope and extent of powers of the appellate court in this regard to lay down the limitation on their exercise and guidelines necessary for regulating the exercise of discretion conferred upon the appellate court.

 In Nirmala Bala Ghose v. Balai Chand GhoseAIR 1965 SC 1874, it was observed that though Order 41, rule 33 of the Code of Civil Procedure is expressed in terms which are wide, but it has to be applied with discretion, and to cases where interference in favour of the appellant necessitates interference also with a decree which has by acceptance or acquiescence become final, so as to enable the court to adjust the rights of the parties and that no unrestricted right can be at any rate said to have been conferred by the rule to re-open decrees which have become final merely because the appellate court does not agree with the opinion of the court appealed from. This power has also been held to be available to pass a decree which ought to have been passed by the court below meaning thereby which ought in law to have been passed was in fact not passed by the court below. [See Koksing v. Deokahai, (1976) 1 SCC 383 : AIR 1976 SC 634].

 In Nirmala Bala Ghose v. Balai Chand Ghose (supra), it has also been held that the powers under Order 41, rule 33, Civil Procedure Code can be exercised only if the court finds that the appeal on its merit must succeed and as a result of such interference it becomes necessary to readjust the rights of the parties.

 30. The learned counsel for the appellant insurance company has also contended that in F.A.O (MVA) Nos. 333, 336 and 348 of 1997, the Motor Accidents Claims Tribunals have awarded higher amount of compensation and, therefore, compensation so awarded shall deserve to be reduced.

 31. As noticed above, the appellant insurance company is not entitled to challenge the quantum of compensation awarded by the Tribunals below to the claimants. The insurance company on account of the contract of insurance is liable to comply with the entire award amount of compensation and that precisely is the reason why the insured had not thought it fit to challenge the compensation in these proceedings.

 As held by the Supreme Court in Shankarayya v. United India Insurance Co. Ltd., 1998 ACJ 513 (SC), the insurer having not moved under section 170, before the Tribunal below is not entitled to challenge the compensation on merits, therefore, we have no justification to interfere with the awards of the Tribunals awarding the amount of compensation to the claimants in these appeals.

 32. The decisions rendered in New India Assurance Co. Ltd. v. Rajni, 1999 ACJ 1286 (P&H); New India Assurance Co. Ltd. v. Maj. Hans Raj Saini1989 ACJ 740(P&H); New India Assurance Co. Ltd.… v. Bimla Ahuja…S, AIR 1990 Delhi 68; and Unique Motor & Cenl. Ins. Co. Ltd. v. Kartar Singh, 1964 PLR 1083, relied upon by the learned counsel for the appellant insurance company are of no assistance to the appellant insurance company in the teeth of the well settled legal position as laid down by the Apex Court, referred to hereinabove.

33. In F.A.O (MVA) No. 7 of 1998, Nos. 188 and 288 of 1999, the claimants have filed appeals for enhancement of the amount of compensation. We have been taken through the evidence led by the parties and also the reasonings and findings of the Tribunals below awarding the amount of compensation. The conclusions arrived at by the Tribunals in this regard and the determination of the amount of compensation in these cases seem to be well justified and reasonable as also commensurate with the damage suffered. Nothing on the record has been brought to our notice to doubt the correctness of the determination made or which compels us to take a different view for the purpose of further enhancement of the compensation in favour of the claimants.

 Hence we find no justification to interfere with the same and in our view, the Tribunals below have awarded the amount of compensation on sound and proper appreciation of the entire evidence led by the claimants and have adopted reasonable multiplier(s) and, therefore, in our view the awards are just and reasonable and call for no interference in these appeals.

 34. No other point has been raised by the learned counsel on either side. In the result, for the above stated reasons and observations all these appeals and applications are without merit and are accordingly dismissed. In the facts and circumstances of the cases, we leave the parties to bear their own costs.

 35. Appeals dismissed.  

CONCLUSION:

The question in this case arose before the Bench was how to determine the compensation payable or how to quantify the compensation since there was no means of ascertaining who out of the overloaded passengers constituted the passengers covered by the insurance policy as permitted to be carried by the permit itself.

 Keeping in mind that the “purpose of the Act is to bring benefit to the third parties who are either injured or dead in an accident” and “that it serves a social purpose”, the Bench held that “the insurance company, in such a case, would be bound to cover the higher of the various awards and will be compelled to deposit the higher of the amounts of compensation awarded to the extent of the number of passengers covered by the insurance policy.

 As noticed above, the appellant insurance company is not entitled to challenge the quantum of compensation awarded by the Tribunals below to the claimants. The insurance company on account of the contract of insurance is liable to comply with the entire award amount of compensation and that precisely is the reason why the insured had not thought it fit to challenge the compensation in these proceedings. 

DISCLAIMER:  the case law presented here is only for sharing knowledge and information with readers. The views expressed here are personal and should not be considered as professional advice. In case of necessity do consult with professionals for more understanding and clarification on subject matter.

 Reference:

1. https://www.casemine.com/judgement/in/56092c30e4b01497111f8ffc#22

2. Section 149(2)(i)(c ) of Motor Vehicles Act, 1988

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

 (a) that there has been a breach of a specified condition of the policy, being one of the following conditions, namely:—

(i) a condition excluding the use of the vehicle—

(c) for a purpose not allowed by the permit under which the vehicle is used, where the vehicle is a transport vehicle, or

3. Section 170 of Motor Vehicles Act, 1988 – Impleading insurer in certain cases. Where in the course of any inquiry, the Claims Tribunal is satisfied that– (a) there is collusion between the person making the claim and the person against whom the claim is made, or (b) the person against whom the claim is made has failed to contest the claim, it may, for reasons to be recorded in writing, direct that the insurer who may be liable in respect of such claim, shall be impleaded as a party to the proceeding and the insurer so impleaded shall thereupon have, without prejudice to the provisions contained in sub-section (2) of section 149, the right to contest the claim on all or any of the grounds that are available to the person against whom the claim has been made.

 4. Order 41, rule 33 of the Code of Civil Procedure-The Appellate Court shall have power to pass any decree and make any order which ought to have been passed or made and to pass or make such further or other decree or order as the case may require, and this power may be exercised by the Court notwithstanding that the appeal is as to part only of the decree and may be exercised in favour of all or any of the respondents or parties, although such respondents or parties may not have filed any appeal or objection and may, where there have been decrees in cross-suits or where two or more decrees are passed in one suit, be exercised in respect of all or any of the decrees, although an appeal may not have been filed against such decrees:

Provided that the Appellate Court shall not make any order under section 35A, in pursuance of any objection on which the Court from whose decree the appeal is preferred has omitted or refused to made such order.

5. Section 151 of Code of Civil Procedure ,1908- Nothing in this Code shall be deemed to limit or otherwise affect the inherent power of the Court to make such Orders as may be necessary for the ends of justice or to prevent abuse of the process of the Court.

FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER

1. Delay condoned and leave granted in SLP(C) 14167 of 2001.

2. A bus bearing registration No. HP-06-1245, owned by the Tehsil Cooperative Union and insured with the appellant met with an accident on 4.3.1996. The vehicle had a carrying capacity of 42 passengers, one driver and one conductor and in terms of Section 147(1)(b)(ii) of the Motor Vehicles Act (hereinafter “the Act”) was insured for the 42 passengers. It goes without saying that the route permit of the vehicle was for carrying 42 passengers other than the driver and the

3. On the day of the accident, the materials indicate that the bus was overloaded. There were at least 90 passengers. The bus fell off the road into a nullah leading to the death of 26 including the one who was driving the vehicle and injuring 63 persons. The legal representatives of the deceased and the injured, all approached the Motor Accident Claims Tribunal claiming compensation and seeking its adjudging on applications made under Section 166 of the Motor Vehicles Act, 1988. The claim was resisted by the owner, the insured and by the insurance company. The insurance company mainly contended that the bus was overloaded; that it was being driven not by an authorized driver at the time of the accident; and that the insurance company had no liability. Alternatively, it was sought to be pleaded that the owner having permitted the vehicle to be overloaded had committed a fundamental breach of the contract of insurance and therefore the insurance company could repudiate the policy and hence was not liable for the compensation that may be adjudged. The Tribunal had brushed aside these objections and passed various awards on the various claims and made the insurance company liable for paying the amounts covered by all the awards exceeding the 42 covered by the insurance. Feeling aggrieved, the insurance company filed 38 appeals challenging the awards. In the appeals, an  application was made seeking impleadment of the State of Himachal Pradesh. This was on the basis that the authorities under the State had failed to check the overloading of the bus and it was due to the negligence of the authorities of the State in not checking overloading and adherence to the conditions of the permit by the owner of the vehicle and the relevant provisions of the Act that the accident had occurred and hence the State must be found to be liable in contributory negligence and for that purpose it was just and necessary to implead the State as a party to the proceedings. An amendment of the written statement of the company was also sought for to introduce the plea that the bus carried 90 passengers at the time of the accident as against the sitting capacity of 42 including the driver and the conductor and in that situation the liability should be apportioned between the insurance company, the owner and the State and the insurance company could be found liable only to the extent of the insurance it had provided and it was bound to provide in terms of Section 147 of the Act and in terms of the conditions of the permit held by the owner of the bus. The Insurance Company also sought permission to raise other contentions which were not normally open to it, by invoking Section 170 of the Act. The High Court taking the view that overloading of the bus which had a permit to ply on the route with only 42 passengers, did not amount to violation of the route permit or any other law for which the State Government could be held to be contributorily negligent and that the insurance company was liable to pay the amounts as awarded by the Tribunal since it could not also question the quantum of compensation awarded. Thus, the High Court dismissed the appeals filed by the insurance company. It also dismissed the three appeals filed by three different claimants seeking enhancement of compensation in their respective cases. The insurance company has filed Civil Appeal Nos.2422-2459 of 2001 challenging the decision of the High Court.

4. In the accident giving rise to C.A. Nos.5992- 6026/2002, the vehicle had only the capacity to carry 42 passengers but at the time of the accident, there were 70 passengers in the bus. The stand of the insurance company is that only 42 passengers were insured and they cannot be compelled to meet the award beyond the contract of insurance itself. The appeals actually challenge only the interim awards made in respect of the claims, even beyond the insured 42.

5. In the accident giving rise to C.A. 4288/2006 the vehicle was insured for 38 passengers and two more including the driver and the conductor. There were more than 70 passengers at the time of the accident. The insurance company contends that its liability is limited to the claim of 38 passengers.

6. In the civil appeal arising from SLP(C) 14167 of 2001, the claim was one arising out of the accident that has given rise to Civil Appeal Nos.2422-2459/2001. The appeal before the High Court was disposed of in the light of the earlier judgment from out of which C.A. Nos. 2422-2459 have arisen.

7. Learned counsel for the insurance company did not pursue his argument before us that overloading the bus was a breach of a specified condition of the insurance in that it was a user of the insured vehicle for a purpose not allowed by the permit under which the vehicle is used where the vehicle is a transport vehicle. His only contention in all these appeals was that the insurance company having insured 42 passengers in two of the cases and 38 passengers in another, the liability of the insurance company cannot be enlarged and the liability is confined only to the 42 passengers insured. It was submitted that there is nothing in the Act which justifies the imposing of the liability on the insurance company in respect of persons who were not at all covered by the insurance policy and in respect of whom there was no obligation on the owner of the vehicle to take coverage of insurance in terms of Section 147 of the Act. Counsel submitted, however much we may keep in mind that the relevant provisions of the Motor Vehicles Act are for the benefit of third parties or passengers of a transport vehicle injured in an accident, the same did not contain any provision which could enlarge the liability of the insurance company compelling it to cover  more persons than it had contracted to cover.

8. Counsel for the respondents in these appeals submitted that the victims of an accidents are not to be driven to chase the mirage of recovery of compensation or damages from the owner of the vehicle and it is to ensure that the victims are paid compensation, whatever might be the inter se rights and obligations of the owner of the vehicle and the insurance company, that the relevant provisions are made. Counsel relied on Section 149 of the Act to contend that once an award is passed, it was the duty of the insurer to satisfy the judgment and award and viewed from that angle, the insurance company was bound to pay the victims the entire amount covered by the various awards.

9. Before us, there were attempts by learned counsel for the insurance company to suggest the adoption of a formula in cases of over-loaded vehicles meeting with the accidents and more people than those covered by the policy getting killed or injured. Counsel for the respondent submitted that that was not an acceptable formula and it was not practicable to adopt the same. We shall consider that aspect at a later stage if it becomes necessary.

9. Under Section 146 of the Motor Vehicles Act, 1988, no vehicle can be plied on the road without taking out an insurance against third party risk. Section 147(1)(b)(ii) provides that in order to comply with the requirements of Chapter XI of the Act, a policy of insurance must be a policy which insures persons or classes of persons, specified in the policy to the extent specified in sub-section (2) of that Section against the death of or bodily injury to any passenger of a public service vehicle caused by or arising out of the use of the vehicle in a public place. The limit in terms of Section 147(2)(a) of the Act is the amount of liability incurred. Under Section 149(1) of the Act, the insurance company has the obligation, subject to the provisions of that Section, to satisfy the decree or award made by the
concerned court or Tribunal on claims by third parties.  Section 149(2) of the Act provides that no sum shall be payable by an insurer unless notice of the proceedings had been given to the insurance company before the commencement of the proceedings through the court or the Claims Tribunal, and that it shall not be liable if there has been a breach of a specified condition of the policy as indicated in that sub-section. These cover use of the vehicle for hire or reward where the vehicle is on the date of the contract of insurance a vehicle not covered by a permit to ply for hire or reward, or use for organized racing and speed testing, or use for a purpose not allowed by the permit under which the vehicle is used where the vehicle is a transport vehicle, or use without side-car being attached where the vehicle is a motor cycle, or there is a breach of a condition excluding driving by a named person or persons or by any person who is not duly licensed, or by any person who has been disqualified for holding or obtaining a driving licence during the period of disqualification, or a condition excluding liability for injury caused or contributed to by conditions of war, civil war, riot or civil commotion, or that the policy is void on the ground that it was obtained by the non-disclosure of a material fact or by a representation of fact which was false in some material particular.   Under sub-section (5), it is provided that if the amount which an insurer becomes liable to pay under this Section in respect of a liability incurred by a person insured by a policy exceeds the amount for which the insurer would, apart from the provisions of this Section be liable under the policy in respect of that liability, the insurer shall be entitled to recover the excess from that person. Therefore, on the scheme of the Act, the insurance company, if it is not able to establish that there is a fundamental breach of a condition which would enable it to disclaim liability, it may have to pay the amount of compensation adjudged by a Claims Tribunal subject of course to its rights to recover from  the insured, the owner of the vehicle such excess as it is obliged to pay.

11. Section 149 of the Act speaks of the judgment or award in respect of the liability as is required to be covered by a policy under clause (b) of sub-section (1) of Section 147 of the Act having to be satisfied. Section 147(1)(b) compels insuring the person or classes of persons specified in the policy to the extent specified in sub-section (ii) of that Section. The case on hand will come under sub-clause (ii) of clause (b) of Section 147 (1) of the Act which obliges the owner to take out insurance compulsorily against the death of or bodily injury to any passenger of a public service vehicle caused by or arising out of the use of the vehicle in a public place.

12. Section 58 of the Act makes special provisions in regard to transport vehicles. Sub-Section (2) provides that a registering authority, when registering a transport vehicle, shall enter in the record of registration and in the certificate of registration various particulars. Clause (d) provides that if the vehicle is used or adapted to be used for carriage of passengers, the number of passengers for whom accommodation is provided. Thus the registration of the vehicle, which alone makes it usable on the road, records the number of passengers to be carried and the certificate of registration also contains that entry. So, an insurance company insuring the  passengers carried in a vehicle in terms of Section 147(1)(b)(ii) of the Act, can only insure such number of passengers as are shown in the certificate of registration.  The position is reinforced by Section 72 of the Act, which  deals with grant of stage carriage permits. Sub-Section (2) provides that when a permit is decided to be granted for a stage carriage, the Regional Transport Authority can attach to the permit one or more of the conditions specified therein. Clause (vii) is the condition regarding the maximum number of passengers that may be carried in a stage carriage. Overloading also invites a consequence which can be termed penal. Section 86 of the Act provides for cancellation of a permit if any condition contained in the permit is breached. Therefore, the apparent wide words of Section 147(1)(b)(ii) of the Act have to be construed harmoniously with the other provisions of the Act, namely, Sections 58 and 72 of the Act. As early as in 1846, Dr. Lushington in Queen V. Eduljee Byramjee [(1846) 3 MIA 468] posited that to ascertain the true meaning of a clause in a statute the court must look at the whole statute, at what precedes and at what succeeds and not merely at the clause itself. This Court has accepted this approach in innumerable cases. Thus, the expression ’any passenger’ must be understood as passenger authorized to be carried in the vehicle and ’use of the vehicle’ as permitted use of the vehicle. Affording of insurance for more number of passengers than permitted, would be illegal since in that case the manifest intention would be the overloading of the vehicle, something not contemplated by law. Thus, it is not possible to accept a contention that the insurance can be taken to cover more passengers than permitted by the certificate of registration and the permit as a stage carriage and that it will cover all the passengers overloaded. Of course, in these cases, there is no dispute that the insurance cover took in only the permitted number of passengers.

13. In this situation, the insurance taken out for the number of permitted passengers can alone determine the liability of the insurance company in respect of those passengers. In terms of Section 149 of the Act, the duty of the insurer is only to satisfy judgments and awards against persons insured in respect of the third party risk. Obviously, this is to the extent the third party risk is coverable and is covered. Section 149 of the Act speaks of judgment or award being obtained against any person insured by the policy and the liability of the insurer to pay to the person entitled to the benefit of the decree any sum not exceeding the sum assured payable thereunder subject to any claim the insurer may have against the owner of the vehicle.   Section 149 could not be understood as compelling an insurance company to make payment of amounts covered by decrees not only in respect of the number of persons covered by the policy itself but even in respect of those who are not covered by the policy and who have been loaded into the vehicle against the terms of the permit and against the terms of the condition of registration of the vehicle and in terms of violation of a statute.

14. It is true that the provisions in Chapter XI of the Act are intended for the benefit of third parties with a view to ensure that they receive the fruits of the awards obtained by them straightaway with an element of certainty and not to make them wait for a prolonged recovery proceeding as against the owner of the vehicle. But from that, it would not be possible to take the next step and find that the insurance company is bound to cover liabilities not covered by the contract of insurance itself. The Act only imposes an obligation to take out insurance to cover third party risks and in the case of stage carriages, the passengers to be carried in the vehicle and the passengers to be carried in the vehicle can be understood only as passengers authorized or permitted to be carried in the vehicle.

15. In spite of the relevant provisions of the statute, insurance still remains a contract between the owner and the insurer and the parties are governed by the terms of their contract. The statute has made insurance obligatory in public interest and by way of social security and it has also provided that the insurer would be obliged to fulfil his obligations as imposed by the contract and as overseen by the statute notwithstanding any claim he may have against the other contracting party, the owner, and meet the claims of third parties subject to the exceptions provided in Section 149(2) of the Act. But that does not mean that an insurer is bound to pay amounts outside the contract of insurance itself or in respect of persons not covered by the contract at all. In other words, the insured is covered only to the extent of the passengers permitted to be insured or directed to be insured by the statute and actually covered by the contract. The High Court has considered only the aspect whether by overloading the vehicle, the owner had put the vehicle to a use not allowed by the permit under which the vehicle is used. This aspect is different from the aspect of determining the extent of the liability of the insurance company in respect of the passengers of a stage carriage insured in terms of Section 147(1)(b)(ii) of the Act. We are of the view that the insurance company can be made liable only in respect of the number of passengers for whom insurance can be taken under the Act and for whom insurance has been taken as a fact and not in respect of the other passengers involved in the accident in a case of overloading.

16. Then arises the question, how to determine the compensation payable or how to quantify the compensation since there is no means of ascertaining who out of the overloaded passengers constitute the passengers covered by the insurance policy as permitted to be carried by the permit itself. As this Court has indicated, the purpose of the Act is to bring benefit to the third parties who are either injured or dead in an accident. It serves a social purpose. Keeping that in mind, we think that the practical and proper course would be to hold that the insurance company, in such a case, would be bound to cover the higher of the various awards and will be compelled to deposit the higher of the amounts of compensation awarded to the extent of the number of passengers covered by the insurance policy. Illustratively, we may put it like this. In the case on  hand, 42 passengers were the permitted passengers and they are the ones who have been insured by the insurance company. 90 persons have either died or got injured in the accident. Awards have been passed for varied sums. The Tribunal should take into account, the higher of the 42 awards made, add them up and direct the insurance company to deposit that lump sum. Thus, the liability of the insurance company would be to pay the compensation awarded to 42 out of the 90 passengers. It is to ensure that the maximum benefit is derived by the insurance taken for the passengers of the vehicle, that we hold that the 42 awards to be satisfied by the insurance company would be the 42 awards in the descending order starting from the highest of the awards. In other words, the higher of the 42 awards will be taken into account and it would be the sum total of those higher 42 awards that would be the amount that the insurance company would be liable to deposit. It will be for the Tribunal thereafter to direct distribution of the money so deposited by the insurance company proportionately to all the claimants, here all the 90, and leave all the claimants to recover the balance from the owner of the vehicle. In such cases, it will be necessary for the Tribunal, even at the initial stage, to make appropriate orders to ensure that the amount could be recovered from the owner by ordering attachment or by passing other restrictive orders against the owner so as to ensure the satisfaction in full of the awards that may be passed ultimately.

17. In these cases, we find that this Court has not issued notices to the claimants. We are therefore not in a position to vary the decision of the High Court as regards the claimants. But, we have clarified the law on the question and we grant the insurance company a decree to recover the excess amount that it has deposited, from the owner, who has been issued notice and who has contested these appeals. Obviously, the principle indicated by us here will have to be applied by the Tribunal in the case from which the appeal against the interim award has been filed by the insurance company.

18. Thus, the appeals are allowed to the extent indicated above. There will be no order as to costs.

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A Qualified Company Secretary, LLB , LIII , Bsc( Maths) BHU, Certification in Insurance Risk Management ( ICSI-III) have completed Limited Insolvency Examination and having more than 20 years of experience in the field of Secretarial Practice, Project Finance, Direct Taxes ,GST, Accounts & F View Full Profile

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