Amrit Paul Singh vs Tata Aig General Insurance Co. Ltd.

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 2253 OF 2018 (Arising out of S.L.P. (CIVIL) NO. 7692 of 2017)

Amrit Paul Singh & Anr. Appellant(s)

VERSUS

TATA AIG General Insurance Respondent(s)

Co. Ltd. & Ors.

J U D G M E N T

Dipak Misra, CJI.

The legal representatives of the deceased, Jagir Singh, the

husband of the second respondent, preferred a claim petition

being MACT Case No. 70 of 2013 under Section 166 of the Motor

Vehicles Act, 1988 (for brevity, ‘the Act’) before the Motor

Accident Claims Tribunal, Pathankot (for short, ‘the tribunal’)

claiming compensation to the tune of Rs. 36,00,000/­. The claim

petition was filed on the basis that on 19.02.2013, Jagir Singh Signature Not Verified Digitally signed by

was travelling to Pathankot on his motor cycle and at that DEEPAK GUGLANI Date: 2018.05.17 15:43:54 IST Reason:

juncture, the offending truck bearing temporary registration No. 2

PB­06­6894 belonging to the appellant No. 2 driven in a rash and

negligent manner hit the motor cycle of the deceased as a result

of which he sustained multiple injuries, and eventually,

succumbed to the same when being taken to the hospital. The

claim put forth was sought to be sustained on many a basis

which need not be adverted to.

2. The insurer, the first respondent herein, opposed the claim

on the ground that the vehicle in question was driven in violation

of the terms of the insurance policy and further the driver was

not having a valid and effective driving license and, therefore, it

was not obliged to indemnify the insured. That apart, a stand

was taken that the vehicle did not have the permit on the date of

the accident. On behalf of the owner of the vehicle and driver,

assertions were made that the vehicle was insured with the first

respondent as per the insurance policy, that the vehicle was

registered and the driver had the requisite driving licence.

Additionally, copy of the route permit of the offending truck was

brought on record.

3. The tribunal noted that the vehicle was purchased in

September 2012 and insured on 20.12.2012. It was registered on

26.02.2013. The accident, as stated earlier, occurred on 3

19.02.2013. The tribunal, placing reliance on the decision

rendered by this Court in National Insurance Co. Ltd. v.

Challa Bharathamma and others1, held that the insurer was

not liable and proceeded to quantify the amount of compensation

and determined the same at Rs. 15,63,120/­. The tribunal

directed the amount to be paid by the insurer along with interest

at the rate of 9% from the date of award till its realisation and

recover the same from the owner and driver of the vehicle. A

further direction was given for attachment of the truck in

question till the award was satisfied.

4. The award dated 20.11.2014 passed by the tribunal was

challenged in FAO No. 1702 of 2016 before the High Court of

Punjab and Haryana at Chandigarh. It was contended in appeal

that the appellant No. 2, the owner of the offending vehicle, had

deposited the necessary fees along with application on

19.02.2013 for issue of route permit and the same was issued on

27.02.2013. It was further urged that when the owner of the

vehicle had already submitted the documents in the transport

office for grant of permit along with the requisite fees, the

tribunal was in error in holding that the vehicle was being plied

1 (2004) 8 SCC 517 4

without a valid permit. In support of the submissions, reliance

was placed upon Ashok Kumar Khemaka v. Oriental

Insurance Company Ltd. and other2, National Insurance

Company Limited v. Kamlesh Kaur and others3 and Moti

Ram v. ICICI Lombard and others4.

5. The High Court scrutinized Annexure A­1 which was filed to

justify the stand that the application for issue of the route permit

was made to the competent authority and, on a scrutiny of the

same, came to hold that the owner had not been able to establish

that he had submitted the application for issue of permit before

the accident. Referring to Section 66 of the Act and placing

reliance on Challa Bharathamma case, the High Court opined

that even assuming that the owner had already applied for grant

of the permit before the accident, the same would not entitle the

owner to ply the vehicle. It is worthy to note that the learned

single Judge distinguished the decisions cited before him and,

resultantly, confirmed the award of the tribunal.

2 2014 (3) RCR (Civil) 1018 3 2006 (3) RCR (Civil) 634 4 2015 ACJ 1793 5

6. We have heard Mr. Sudhir Walia, learned counsel for the

appellants, and Mr. Amit Kumar Singh, learned counsel for the

respondent­insurer.

7. The conclusions recorded by the tribunal and further

confirmed by the High Court clearly show that the accident

occurred on 19.02.2013 and the competent authority issued the

permit on 27.02.2013. In this regard, Sections 2(28) and 2(31) of

the Act that define “motor vehicle” or “vehicle” and “permit” are

reproduced below:­

“(28) “motor vehicle” or “vehicle” means any mechanically propelled vehicle adapted for use upon roads whether the power of propulsion is transmitted thereto from an external or internal source and includes a chassis to which a body has not been attached and a trailer; but does not include a vehicle running upon fixed rails or a vehicle of a special type adapted for use only in a factory or in any other enclosed premises or a vehicle having less than four wheels fitted with engine capacity of not exceeding twenty­five cubic centimetres; (31) “permit” means a permit issued by a State or Regional Transport Authority or an authority prescribed in this behalf under this Act authorising the use of a motor vehicle as a transport vehicle;” 6

On a perusal of both the definitions, it is quite clear that a

permit has to be issued by the competent authority under the Act

for use of a motor vehicle as a transport vehicle. The emphasis is

on the words “use” as well as “transport vehicle”.

8. Section 2(47) states that “transport vehicle” means a public

service vehicle, a goods carriage, an educational institution bus

or a private service vehicle. Section 66 stipulates necessity for

permits. Sub­section (1) thereof provides that no owner of a

motor vehicle shall use or permit the use of the vehicle as a

transport vehicle in any public place, whether or not such vehicle

is actually carrying any passengers or goods save in accordance

with the conditions of a permit granted or countersigned by a

Regional or State Transport Authority or any prescribed

authority. Various provisos have been appended to the main

provision stipulating conditions for use of the vehicle and

purpose of carriage of goods vehicle. Sub­section (2) states that

the holder of a goods carriage permit may use the vehicle for the

drawing of any trailer or semi­trailer not owned by him, subject

to such conditions as may be prescribed. It is necessary to

mention here that a proviso has been added by Act 54 of 1994

with effect from 14.11.1994 allowing the holder of a permit of any 7

articulated vehicle to use the prime­mover of that articulated

vehicle for any other semi­trailer. Section 2(2) defines “articulated

vehicle” to mean a motor vehicle to which a semi­trailer is

attached.

9. It is apt to note here that sub­section (3) of Section 66

carves out certain exceptions to sub­section (1). The relevant part

of sub­section (3) is extracted below:­

“(3) The provisions of sub­section (1) shall not apply—

(a) to any transport vehicle owned by the Central Government or a State Government and used for Government purposes unconnected with any commercial enterprise;

(b) to any transport vehicle owned by a local authority or by a person acting under contract with a local authority and used solely for road cleansing, road watering or conservancy purposes;

(c) to any transport vehicle used solely for police, fire brigade or ambulance purposes;

(d) to any transport vehicle used solely for the conveyance of corpses and the mourners accompanying the corpses;

(e) to any transport vehicle used for towing a disabled vehicle or for removing goods from a disabled vehicle to a place of safety;

(f) to any transport vehicle used for any other public purpose as may be prescribed by the State Government in this behalf;

(g) to any transport vehicle used by a person who manufactures or deals in motor vehicles or builds bodies for attachment to 8

chassis, solely for such purposes and in accordance with such conditions as the Central Government may, by notification in the Official Gazette, specify in this behalf;

(h) x x x x

(i) to any goods vehicle, the gross vehicle weight of which does not exceed 3,000 kilograms;

(j) subject to such conditions as the Central Government may, by notification in the Official Gazette, specify, to any transport vehicle purchased in one State and proceeding to a place, situated in that State or in any other State, without carrying any passenger or goods;

(k) to any transport vehicle which has been temporarily registered under section 43 while proceeding empty to any place for the purpose of registration of the vehicle;

(l) x x x x

(m) to any transport vehicle which, owing to flood, earthquake or any other natural calamity, obstruction on road, or unforeseen circumstances, is required to be diverted through any other route, whether within or outside the State, with a view to enabling it to reach its destination;

(n) to any transport vehicle used for such purposes as the Central or State Government may, by order, specify;

(o) to any transport vehicle which is subject to a hire­purchase, lease or hypothecation agreement and which owing to the default of the owner has been taken possession of by or on behalf of the person with whom the owner has entered into such agreement, to enable such motor vehicle to reach its destination; or

(p) to any transport vehicle while proceeding empty to any place for purpose of repair.” 9

10. In the case at hand, the findings would show that the

appellant No. 2 did not have a permit for the vehicle. There is no

dispute that the vehicle initially had a temporary registration and

eventually the permanent registration. It is the stand of the

appellants that the tribunal and the High Court did not

appreciate that the chasis of the vehicle was sent to the body

where the body of the truck was fabricated and when the vehicle

was driven out of the work shop at which point of time it met

with an accident. A contention has been made that the insurance

policy was in force at the relevant time and, hence, the insurer is

legally obliged to indemnify the insured. A distinction has to be

made between “route permit” and “permit” in the context of

Section 149 of the Act. Section 149(2) provides the grounds that

can be taken as defence by the insurer. It enables the insurer to

defend on the ground that there has been breach of a specific

condition of the policy, namely, (i) a condition that excludes the

use of the vehicle, ­ (a) 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 (b) for organized racing and

speed testing, or (c) for a purpose not allowed by the permit

under which the vehicle is used, where the vehicle is a transport 10

vehicle, or (d) without side­car being attached where the vehicle

is a motor cycle. That apart, it also entitles the insurer to raise

the issue pertaining to a condition that excludes 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 that excludes liability for injury caused or contributed to by

conditions of war, civil war, riot or civil commotion. A further

defence that can be availed of by the insurer is that the policy is

void on the ground that it has been obtained by non­disclosure of

the material fact or by representation of act which is false in the

material particular.

11. On a perusal of the written statement filed by the owner and

the driver, it is evident that the factum of accident having been

caused by the vehicle in question had been denied. That apart,

there is also a denial of liability that relates to the manner in

which the accident had occurred as alleged in the claim petition.

It was the specific assertion of the insurer before the tribunal

that the vehicle was running in contravention of the provisions of

the Act, for it did not possess a route permit. The tribunal, on the

basis of the materials brought on record to the effect that the 11

route permit was issued on 27.02.2013 and the accident

occurred on 19.02.2013, returned a finding that the vehicle in

question did not have the permit. As stated earlier, the High

Court has affirmed the same.

12. Learned counsel for the appellants would submit that in the

obtaining factual matrix, the breach would not exonerate the

insurer from satisfying the judgment and an award in terms of

Section 149 of the Act. He has drawn inspiration from the

decision of a three­Judge Bench in National Insurance Co. Ltd

v. Swaran Singh and others5. In the said case, the Court was

dealing with the interpretation of Section 149(2)(a)(ii) vis­à­vis

the proviso appended to sub­sections (4) and (5) of Section 149 of

the Act. The issue centrally pertained to the necessity of having

a driving licence. After adverting to various provisions, the Court

also delved into the fundamental concept of third party right.

Regard being had to the nature of the beneficial legislation, the

Court observed:­

“39. The question as to whether an insurer can avoid its liability in the event it raises a defence as envisaged in sub­section (2) of Section 149 of the Act corresponding to sub­ section (2) of Section 96 of the Motor

5 (2004) 3 SCC 297 12 Vehicles Act, 1939 had been the subject­ matter of decisions in a large number of cases.”

13. The Court posed the question as to whether an insurer can

avoid its liability in the event it raised the defence as envisaged in

sub­section (2) of Section 149 of the Act corresponding to sub­

section (2) of Section 96 of the Motor Vehicles Act, 1939. The

Court analysed the language employed in sub­section (2) of

Section 149, specifically clause (a), and, after scrutinizing the

same and referring to various authorities, opined:­

“69. The proposition of law is no longer res integra that the person who alleges breach must prove the same. The insurance company is, thus, required to establish the said breach by cogent evidence. In the event the insurance company fails to prove that there has been breach of conditions of policy on the part of the insured, the insurance company cannot be absolved of its liability. (See Sohan Lal Passi6)

70. Apart from the above, we do not intend to lay down anything further i.e. degree of proof which would satisfy the aforementioned requirement inasmuch as the same would indisputably depend upon the facts and circumstances of each case. It will also depend upon the terms of contract of insurance. Each case may pose a different problem which must be resolved having regard to a large number of factors 6 Sohan Lal Passi v. P. Sesh Reddy and others, (1996) 5 SCC 21 13

governing the case including conduct of parties as regards duty to inform, correct disclosure, suppression, fraud on the insurer etc. It will also depend upon the fact as to who is the owner of the vehicle and the circumstances in which the vehicle was being driven by a person having no valid and effective licence. No hard­and­fast rule can, therefor, be laid down. If in a given case there exists sufficient material to draw an adverse inference against either the insurer or the insured, the Tribunal may do so. The parties alleging breach must be held to have succeeded in establishing the breach of conditions of the contract of insurance, on the part of the insurer by discharging its burden of proof. The Tribunal, there cannot be any doubt, must arrive at a finding on the basis of the materials available on records.

71. In the aforementioned backdrop, the provisions of sub­sections (4) and (5) of Section 149 of the Motor Vehicles Act, 1988 may be considered as to the liability of the insurer to satisfy the decree at the first instance.

x x x

83. Sub­section (5) of Section 149 which imposes a liability on the insurer must also be given its full effect. The insurance company may not be liable to satisfy the decree and, therefore, its liability may be zero but it does not mean that it did not have initial liability at all. Thus, if the insurance company is made liable to pay any amount, it can recover the entire amount paid to the third party on behalf of the assured. If this interpretation is not 14

given to the beneficent provisions of the Act having regard to its purport and object, we fail to see a situation where beneficent provisions can be given effect to. Sub­ section (7) of Section 149 of the Act, to which pointed attention of the Court has been drawn by the learned counsel for the petitioner, which is in negative language may now be noticed. The said provision must be read with sub­section (1) thereof. The right to avoid liability in terms of sub­ section (2) of Section 149 is restricted as has been discussed hereinbefore. It is one thing to say that the insurance companies are entitled to raise a defence but it is another thing to say that despite the fact that its defence has been accepted having regard to the facts and circumstances of the case, the Tribunal has power to direct them to satisfy the decree at the first instance and then direct recovery of the same from the owner. These two matters stand apart and require contextual reading.” [Emphasis supplied]

14. We may fruitfully note that the three­Judge Bench adverted

to situations where the driver does not have a licence and the

same has been allowed to be driven by the owner of the vehicle

by such person, the insurer would be entitled to succeed in

defence and avoid liability, but the position would be different

where the disputed question of fact arises as to whether the

driver had a valid licence and where the owner of the vehicle

committed a breach of the terms of the contract of insurance as 15

also the provisions of the Act by consciously allowing any person

to drive a vehicle who did not have a valid driving licence.

15. The Court held that if, on facts, it is found that the accident

was caused solely because of some other unforeseen or

intervening causes like mechanical failures and similar other

causes having no nexus with the driver not possessing the

requisite type of licence, the insurer will not be allowed to avoid

its liability merely for technical breach of conditions concerning

driving licence. That apart, minor and inconsequential deviations

with regard to licensing conditions would not constitute sufficient

ground to deny the benefit of coverage of insurance to third

parties. The other category of cases that the Court addressed to

included cases where the licence of the driver is found to be fake.

In that context, the Court expressed its general agreement with

United India Insurance Co. Limited v. Lehru7 and stated

thus:­

“92. … In Lehru case the matter has been considered in some detail. We are in general agreement with the approach of the Bench but we intend to point out that the observations made therein must be understood to have been made in the light of the requirements of the law in terms whereof the insurer is to establish wilful 7 (2003) 3 SCC 338 16

breach on the part of the insured and not for the purpose of its disentitlement from raising any defence or for the owners to be absolved from any liability whatsoever ..”

16. The three­Judge Bench summed up its conclusions and we

think it appropriate to reproduce the relevant part of the same:­

“110. (iii) The breach of policy condition e.g. disqualification of the driver or invalid driving licence of the driver, as contained in sub­section (2)(a)(ii) of Section 149, has to be proved to have been committed by the insured for avoiding liability by the insurer. Mere absence, fake or invalid driving licence or disqualification of the driver for driving at the relevant time, are not in themselves defences available to the insurer against either the insured or the third parties. To avoid its liability towards the insured, the insurer has to prove that the insured was guilty of negligence and failed to exercise reasonable care in the matter of fulfilling the condition of the policy regarding use of vehicles by a duly licensed driver or one who was not disqualified to drive at the relevant time.

x x x x

(vi) Even where the insurer is able to prove breach on the part of the insured concerning the policy condition regarding holding of a valid licence by the driver or his qualification to drive during the relevant period, the insurer would not be allowed to avoid its liability towards the insured unless the said breach or breaches on the 17

condition of driving licence is/are so fundamental as are found to have contributed to the cause of the accident. The Tribunals in interpreting the policy conditions would apply “the rule of main purpose” and the concept of “fundamental breach” to allow defences available to the insurer under Section 149(2) of the Act.

(vii) The question, as to whether the owner has taken reasonable care to find out as to whether the driving licence produced by the driver (a fake one or otherwise), does not fulfil the requirements of law or not will have to be determined in each case.”

17. Learned counsel for the appellants would submit that there

has been no fundamental breach of the policy conditions. In this

context, we may profitably refer to the decision in Challa

Bharathamma (supra) wherein a two­Judge Bench squarely

dealt with the absence of a permit and ruled that plying a vehicle

without a permit is an infraction and insurer is not liable.

18. In Lakhmi Chand v. Reliance General Insurance8, the

Court was concerned with an order passed by the National

Consumer Disputes Redressal Commission (NCDRC) that had

declined the relief to the petitioner therein. The insurer in the

said case had taken the plea that the complainant had violated

the terms and conditions of the policy, for five passengers were

8 (2016) 3 SCC 100 18

travelling in the goods carrying vehicle at the time of the

accident, whereas the permitted seating capacity of the motor

vehicle of the appellant was only 1 + 1. The two­Judge Bench

referred to Oriental Insurance Co. Ltd. v. Meena Variyal and

others9 and expressed the view that in order to avoid liability, the

insurer must establish that there was breach on the part of the

insured.

19. The obtaining fact situation is sought to be equated with the

factual score in the said case. In this regard, it is useful to refer

to the Bench decision in HDFC Bank Limited v. Reshma and

others10. The issue that arose before the Court was whether the

financier was liable to pay the compensation or it was the liability

of the borrower. The tribunal had returned the finding that the

duty of the financier was to see that the borrower did not neglect

to get the vehicle insured and, therefore, it was jointly and

severally liable along with the owner. The High Court had

concurred with the said conclusion. The Court referred to

Purnya Kala Devi v. State of Assam and other11 that has dealt

with the definition of the term “owner” as contained in

9 (2007) 5 SCC 428 10 (2015) 3 SCC 679 11 (2014) 14 SCC 142 19 Section 2(30) of the Act. In the said case, the vehicle in question

was under the requisition of the State of Assam under the

provisions of law. In that context, the Court has expressed that:­

“16. … The High Court failed to appreciate that at the relevant time the offending vehicle was under the requisition of Respondent 1 State of Assam under the provisions of the Assam Act. Therefore, Respondent 1 was squarely covered under the definition of ‘owner’ as contained in Section 2(30) of the 1988 Act. The High Court failed to appreciate the underlying legislative intention in including in the definition of ‘owner’ a person in possession of a vehicle either under an agreement of lease or agreement of hypothecation or under a hire­purchase agreement to the effect that a person in control and possession of the vehicle should be construed as the ‘owner’ and not alone the registered owner. The High Court further failed to appreciate the legislative intention that the registered owner of the vehicle should not be held liable if the vehicle was not in his possession and control. The High Court also failed to appreciate that Section 146 of the 1988 Act requires that no person shall use or cause or allow any other person to use a motor vehicle in a public place without an insurance policy meeting the requirements of Chapter XI of the 1988 Act and the State Government has violated the statutory provisions of the 1988 Act.”

20. Be it noted, in the said case, the liability was fixed on the

State keeping in view the legislative intention behind Section 146 20

of the Act, no person shall use or cause or allow any other person

to use a motor vehicle in a public place without an insurance

policy as that is the mandatory statutory requirement under the

Act. Emphasis was laid on possession and control of the vehicle

and accordingly liability was fixed on the State of Assam.

21. In HDFC Bank Limited (supra), the three­Judge Bench

opined that the hypothecation agreement did not convey that the

appellant financier had become the owner and was in control and

possession of the vehicle. It was the absolute fault of the

respondent No. 2 to take the vehicle from the dealer without full

payment of the insurance, more so when nothing had been

brought on record that the said fact was known to the appellant

financier or that it was done in collusion with the financier.

22. The Court held that when the intention of the legislature is

quite clear to the effect that a registered owner of the vehicle

should not be held liable if the vehicle is not in his possession

and control and there was evidence on record that the

respondent No. 2, plied the vehicle without the insurance in

violation of the statutory provision contained in Section 146 of

the Act, the High Court could not have mulcted the liability on 21

the financier and finally, the financer was absolved of the

liability.

23. In the case at hand, it is clearly demonstrable from the

materials brought on record that the vehicle at the time of the

accident did not have a permit. The appellants had taken the

stand that the vehicle was not involved in the accident. That

apart, they had not stated whether the vehicle had temporary

permit or any other kind of permit. The exceptions that have

been carved out under Section 66 of the Act, needless to

emphasise, are to be pleaded and proved. The exceptions cannot

be taken aid of in the course of an argument to seek absolution

from liability. Use of a vehicle in a public place without a permit

is a fundamental statutory infraction. We are disposed to think

so in view of the series of exceptions carved out in Section 66.

The said situations cannot be equated with absence of licence or

a fake licence or a licence for different kind of vehicle, or, for that

matter, violation of a condition of carrying more number of

passengers. Therefore, the principles laid down in Swaran

Singh (supra) and Lakhmi Chand (supra) in that regard would

not be applicable to the case at hand. That apart, the insurer had

taken the plea that the vehicle in question had no permit. It does 22

not require the wisdom of the “Tripitaka”, that the existence of a

permit of any nature is a matter of documentary evidence.

Nothing has been brought on record by the insured to prove that

he had a permit of the vehicle. In such a situation, the onus

cannot be cast on the insurer. Therefore, the tribunal as well as

the High Court had directed the insurer was required to pay the

compensation amount to the claimants with interest with the

stipulation that the insurer shall be entitled to recover the same

from the owner and the driver. The said directions are in

consonance with the principles stated in Swaran Singh (supra)

and other cases pertaining to pay and recover principle.

24. In view of the aforesaid analysis, we do not perceive any

merit in the appeal and, accordingly, the same stands dismissed

without any order as to costs.

……………………….....CJI.

(Dipak Misra)

………………………….….J. (A.M. Khanwilkar)

New Delhi;

May 17, 2018