Uttar Pradesh State Road Transport Corp vs Kulsum & Ors

this batch of appeals, six of which have been filed by

Uttar Pradesh State Road Transport Corporation,

C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)

2

(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 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

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

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.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)

3

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 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 appropriate to do so.

6. Thumbnail sketch of the facts is mentioned

hereinbelow:-

Ajai Vishen, the owner of mini bus, bearing

Registration 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 Act, 1988 (hereinafter

called 'the Act') vide Uttar Pradesh Amendment Act 5 of

1993; the Corporation is vested with right to take the

C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)

4

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 to be plied by the Corporation, on the routes as per

the permit issued by R.T.O. in its favour. Except for

the services of the 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

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), 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.

C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)

5

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 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 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 Tribunal alongwith interest @ 12% per annum

but, relying on a judgment of this Court in the case of

Rajasthan State Road Transport Corporation Versus Kailash

Nath Kothari and others reported in (1997) 7 SCC 481, the

liability of payment has been fastened on the Corporation

as, at the time of 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,

C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)

6

Corporation preferred appeals and the owner of the bus,

Ajai Vishan, filed cross objection against the finding on

issue No. 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 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.

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 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

C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)

7

defines the `owner':

"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 agreement, or an

agreement of lease or an agreement of

hypothecation, the person in possession

of the vehicle under that agreement."

14. Section 103 of the Act deals with the provision of

issue of permits to State Transport Undertakings. However,

vide Uttar Pradesh Amendment Act 5 of 1993, following

sub-Section (1A) 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

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 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

C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)

8

route for which permit had been issued by the Transport

Authority in its favour.

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 hereinbelow:

"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 may be, a

policy of insurance complying with the

requirements of this Chapter :

... ... ..."

147. Requirement of policies and limits

of liability. -(1) In 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

(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

C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)

9

death of or bodily injury to any

person, including owner of the goods

or his authorised 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 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)......

(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 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

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

following limits, namely :-

C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)

1

(a) save as provided in clause (b),

the amount of liability incurred.

(b) in respect of damage to any property

of a third party, a limit of rupees six

thousand :

... ... ..."

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:

"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 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.

[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

C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)

11

insurance.]

(2)The transferee shall apply within

fourteen 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

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, 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.

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.

21. In the matter of Kailash Nath Kothari and others

(supra), a question had arisen with regard to the

C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)

1

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 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 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 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 proper 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 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. The services of the

driver were transferred along with

C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)

1

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 Sanjay

Kumar was therefore not concerned with the

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 the

passengers of the ill-fated bus are

concerned, their privity 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

privity of contract with 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,

(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 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

C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)

1

rebuttable presumption."

22. In the light of the aforesaid judgment, learned

counsel 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.

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, Kailash

Nath's case (supra) has no application to the facts of

this case.

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 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.

C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)

1

25. Section 2 (19) of Motor Vehicles Act, 1939 is

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 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.

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.

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 Party' and owner Ajay Vishen has been

referred to as 'Second Party'.

C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)

1

Relevant clauses 2.1, 3.2, 4.2, 4.3 and 4.4 of

Annexure P-2 are reproduced hereinbelow:

"2.1 The Second Party shall be liable

and responsible to discharge all the legal

liabilities under the Motor Vehicle 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.

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,

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 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 restriction shall not

be applicable in the circumstances

mentioned in clause-31 of the agreement.

C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)

1

4.4 The conductor appointed and

deputed by the First Party shall have

total responsibility for issuing tickets

to the passengers, receiving fare and

completing various papers/ records in this

regard. The First Party shall

appoint/depute the conductors."

29. Critical examination thereof would show that the

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 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 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 that the driver had a valid driving licence

C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)

1

at the time of accident. It has also not been contended

by it 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.

30. During the course of hearing, we had asked the

following pertinent questions to Mr. Kishore Rawat,

learned counsel for the Insurance Company:

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 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 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

C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)

1

in the tariff in either of the aforesaid situation and it

is same for both.

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 Insurance Company

would have met the liability of compensation, in case of

an accident.

(iv) Lastly, we enquired from him as to under which

provision of the Act or the Rule, any statutory duty or

otherwise is cast on the owner to seek permission or give

an intimation 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 for the

insured to have informed about such a contract.

31. Thus, in the light of the aforesaid, it is clear

C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)

2

that Insurance Company is trying to evade its liability

on flimsy grounds or under misconception of law.

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.

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 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 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

supposed to drive the bus under the instructions of

C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)

2

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.

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 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

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 consent of the

C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)

2

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.

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.

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 to pay the

compensation payable to a third party on

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 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

C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)

2

independent contractor) to use his vehicle

in a public place 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.

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 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.

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."

40. In a recent judgment of this Court, in the case of

United India Insurance Company Limited v. Santro Devi and

Ors. (2009) 1 SCC 558 it has been held as under :-

"16.The provisions of compulsory insurance

have been framed to advance a social

object. It is in a way part of the social

C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)

2

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

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 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 (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

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. It is not in

dispute that quantum of premium paid for

renewal of the policy is in terms of the

provisions of the Insurance Act, 1938."

C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)

2

41. Perusal of the ratio of aforesaid judgments of this

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 reflect that compulsory

insurance is obviously for the benefit of 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

compensation. The relevant conditions are reproduced

hereinbelow :

"Rules with respect to use of the Vehicle

Use only for carriage of passengers

in accordance 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 speed testing.

2. Use whilst drawing a trailer except the

towing (other than to reward) of any one

C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)

2

disabled mechanically propellor vehicle.

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 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."

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. 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 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.

C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)

2

45. Thus, looking to the matter from every angle, we are

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 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, 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 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

C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)

2

dismissed with costs. Counsel's fee quantified at Rs.

10,000/- in each Appeal.

.........................J.

[DALVEER BHANDARI]

.........................J.

[DEEPAK VERMA]

New Delhi

July 25, 2011