Bajaj Allianz General, Insurance Company Ltd. vs Muthu and Others

K.B.K. Vasuki, J.—The present appeal is filed by the insurer against the award of compensation of Rs. 2,76,167/-with interest at 9% per annum in favour of LRs. of one Durairaj Nadar @ Poosari, who is the victim of the fatal accident occurred at 1.00 a.m. on 24.12.2007 near Kalkurichi on Aruppukottai -Madurai Road. The two vehicles involved in the accident are one Mahindra Van owned by the first Respondent and insured with the second Respondent and one Maruthi Van in which the deceased was travelling owned by the third Respondent and insured with the fourth Respondent. The date, time and place of the accident, the involvement of the vehicles in the accident resulting in the death of Durairaj Nadar @ Poojari, the age of the deceased, his avocation and monthly earning, the relationship of the deceased with the claimants and the dependency of the claimants upon his income are not denied.

The claim petition was filed by the claimants u/s 163-A of the Motor Vehicles Act, 1988 (hereinafter referred to as "the Act") by contending that the annual income of the deceased was Rs. 40,000/-as vegetable vendor and poojari. The Tribunal has under the structured formula specified in the second schedule of the Act, awarded compensation of Rs. 2,76,167/-to the Petitioners 1 to 5 being the wife, married and unmarried daughters of the deceased.

Though the claim petition was not contested by the Respondents 1 to 3 therein, it is contested by the 4th Respondent, who is the insurer of Maruthi Van. On the failure of the insured to contest the claim petition, the insurer has filed an application u/s 170 of the Motor Vehicles Act, thereby obtained permission to contest the claim on all the grounds available to the insured.

The learned Counsel for the insurer has raised both legal and factual objections by way of defence against the claim. The legal objection raised is by questioning the very maintainability of the claim u/s 163-A of the Act. The learned Counsel for the insurer has by relying upon the law laid down in the judgments reported in a) Deepal Girishbhai Soni and Others Vs. United India Insurance Co. Ltd., Baroda, , b) 2008 (3) TAC 20 (SC) (New India Assurance Company Ltd., v. Roshanben Rahemansha Fakir and Anr.) and c) The Divisional Manager, The New India Assurance Company Limited Vs. Vinayaga Moorthi and Others, contended that the Provisions of Section 163-A of the Act can be invoked only for those persons whose annual income is up to Rs. 40,000/-and all other claims are required to be determined in terms of Chapter 12 of the Act. On facts the insurer/4th Respondent has sought to contest the claim petition by questioning his liability to indemnify the insured on the ground that the driver of the vehicle, who is none else than the brother of the owner/insured, has No. effective driving licence to drive the said category of the vehicle and the owner of the vehicle has allowed his brother to drive the public service vehicle carrying passengers without any specific endorsement and the driving of the commercial vehicle without due endorsement amounts to breach of policy condition and only the Supreme Court in exercise of its extraordinary jurisdiction under Article 142 of the Constitution of India can apply the pay and recovery theory and the same cannot be exercised by the Tribunal and other Courts and No. direction, directing the Insurance Company to answer the award at the first instance and to recover the same from the owner, can be issued by the Tribunal. However, the Tribunal negatived such defence raised on the side of the insurer on the ground that the benefit available u/s 163-A cannot be restricted to victims who has income only up to Rs. 40,000/-and such classification is hit by Article 14 of the Constitution of India and the insurer is not permitted to raise any defence u/s 149(2) of the Act in the petition filed u/s 163-A of the Act and such defence is available to the insurer only in the petition filed u/s 166 of the Motor Vehicles Act. Hence this appeal by the insurer. The insurer has in this appeal not questioned the quantum of compensation fixed by the Tribunal, but canvassed the validity and enforceability of the award on the grounds as above referred to.

The learned Counsel for the insurer has also in the course of his argument before this Court cited the following authorities for the legal proposition that the insurer is entitled to raise the defence inter alia u/s 149(2)(a) of the Act in the claim petition filed either under Sections 163-A or 166 of the Act and the benefit of Section 163-A of the Act can be invoked only for the victims whose income is up to Rs. 40,000/-:

a) 2004 (1) TN MAC 104 (SC) (National Insurance Company Ltd., v. Swaran Singh and Ors.)

b) 2009 (2) TN MAC 53 (DB) (New India Assurance Company Ltd., v. K.Jothilingam and Ors.)

Before going into the grounds of objection raised in this appeal on merits, it is but necessary to extract Section 149(1) and (2) of the Act for better appreciation;

Duty of insurers to satisfy judgments and awards against persons insured in respect of third party risks.-(1) if, after a certificate of insurance has been issued under Sub-section (3) of Section 147 in favour of the person by whom a policy has been effected, judgment or award in respect of any such liability as is required to be covered by a policy under Clause (b) of Sub-section (1) of Section 147 (being a liability covered by the terms of the policy) or under the provisions of Section 163-A is obtained against any person insured by the policy then, notwithstanding that the insurer may be entitled to avoid or cancel or may have avoided or cancelled the policy, the insurer shall, subject to the provisions of this Section, pay to the person entitled to the benefit of the decree any sum not exceeding the sum assured payable there under, as if he were the judgment debtor, in respect of the liability, together with any amount payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any enactment relating to interest on judgment.

(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

(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 organised 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 vehicle, or

(d)without side-car being attached where the vehicle is a motor cycle; or

(ii)a condition excluding driving by a names 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

(iii)a condition excluding liability for injury caused or contributed to by conditions of war, civil war, riot or civil commotion; or

(b)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 is some material particular.

While Section 149 deals with the liability of insurer to satisfy the award made in favour of any person entitled to get benefit of decree as if he was the judgment debtor, Section 149(2) deals with the right of the insurer to raise the defence on any of the grounds mentioned therein. The combined appreciation of both Sections 149(1) and (2) makes it abundantly clear that the right of defence as provided u/s 149(2) can be invoked by the insurer in the application filed u/s 163-A of the Act also. The same is also legally upheld by the three Judges Larger Bench of the Supreme Court in the judgment reported in 2004 (1) TN MAC 104 (SC), cited above, wherein the Supreme Court has, while dealing with the interpretation of Section 149(2)(a)(ii), clearly laid down various guidelines and has answered the questions involved in the case and the findings rendered by the Supreme Court on various issues raised in the petitions are summarized in para 102 of the said judgment. One of the questions raised therein is "as to whether the insurer is entitled to raise the defence in the claim petition filed u/s 163-A or Section 166 of the Act, in terms of Section 149(2)(a)(ii) of the Act" and in the same paragraph 102(ii), the question is answered by the Apex Court in favour of the insurer that the insurer is entitled to raise the defence in the claim petition filed u/s 163-A or Section 166 of the Act, in terms of Section 149(2)((a)(ii) of the Act. That being the statutory provision and legal position, the finding of the Tribunal is totally contra to the statute and the law laid down by the Supreme Court in the judgment above cited and is hence legally unsustainable.

As far as the other finding regarding the maintainability of the claim petition u/s 163-A of the Act by the victims whose income is up to Rs. 40,000/-per annum is concerned, the same is also answered by the Supreme Court in Deepal Girishbhai Soni and Others Vs. United India Insurance Co. Ltd., Baroda, wherein the Apex Court, after detailed analysis of relevant provision of law, has in paras 51 and 67 clearly held that the law laid down in the case reported in The Oriental Insurance Co. Ltd. etc. Vs. Hansrajbhai V.Kodala and Others etc. etc., to the effect that if a person invokes provision of Section 163-A of the Act, the annual income of Rs. 40,000/-per annum shall be treated as a cap, is not good law and the proceeding u/s 163-A of the Act being a special security provision, providing for a distinct scheme, only those whose annual income is up to Rs. 40,000/-can take the benefit thereof and all other claims are required to be determined in terms of Chapter XII of the Act. The same is also followed by the Division Bench of our High Court in the judgment reported in 2009 (2) TN MAC 53 (DB). That being the legal position laid down by the Apex Court, the finding of the Tribunal to the effect the benefit cannot be limited only to the persons whose annual income up to Rs. 40,000/-and such restriction is hit by Article 14 of the Constitution of India, is legally and factually unsustainable and cannot be allowed to stand.

On merits, the evidence available herein would reveal that the driver of the vehicle did not have specific endorsement to drive the commercial vehicle and the owner happened to be the brother of the driver of the vehicle cannot be said to be ignorant of the fact that the person who is entrusted with the vehicle for driving is not having effective driving licence to drive a particular type of vehicle. However, as it is not a fundamental breach of condition, the insurer cannot, on the ground available u/s 149(2) of the Act, avoid the liability to indemnify the insured and the insurer can be by applying the pay and recovery theory at the first instance directed to answer the award on behalf of insured/third Respondent therein and shall have the right to recover the same from the insured/third Respondent therein.

Regarding the quantum of compensation, the fourth Respondent/insurer, except questioning the rate of interest awarded, has not raised any grievance against the quantum of compensation awarded in favour of the claimants. Hence, the rate of 9% per annum interest awarded by the Tribunal is reduced to 7.5% per annum from the date of the petition. As both the drivers are found fault with for the accident and as the liability is apportioned between the owners of both the vehicles, the insurer of both the vehicles are directed to answer the award as per the ratio fixed and the respective insurer shall have the right to recover the amount from the respective owners.

In the result, the award dated 16.12.2009 passed in M.C.O.P. No. 688 of 2008 by the Motor Accident Claims Tribunal/Additional District cum Fast Track Court No. II, Madurai, is modified by reducing the rate of interest at 7.5% from the date of petition till the date of payment and by upholding the liability of the owners of the vehicles to pay the award of compensation jointly and severally and in equal proportion and by directing the insurers of the vehicles, by applying the pay and recovery theory to answer the award on behalf of the respective owners at the first instance and to recover the same from the respective owners. The award is confirmed in other respects. On deposit of the compensation amount into Court by the insurers, the claimants are permitted to withdraw the amount in proportion to their shares with proportionate costs and interest. The excess amount in deposit, if any, shall be refunded to the insurers. The appeal is disposed of accordingly. Consequently, connected miscellaneous petitions are closed. No. costs.