Barrala Ramaswamy vs Bhamidipati Satyanarayana and another

Umamaheswaram, J.—The plaintiff is the appellant. He filed a suit for recovery of Rs. 5,300/- as damages sustained by him on account of the rash and negligent driving of the motor bus belonging to the first defendant by his driver as a result of which the bus fell into a canal and the plaintiff received very serious and grievous injuries. It is found by the Court below in paragraph 8 of the judgment that the accident was true and that the plaintiff received the injuries as a result of the rash and negligent driving of the first defendant''s driver. The suit was, however, dismissed by the learned Subordinate Judge on the ground that it was barred by time.

Two questions arise for decision in the appeal (1) Whether the suit as against the second defendant, the Insurance Company, is barred by limitation; and (2) Whether the suit is maintainable directly as against the Insurance Company. It is the case of both parties that the accident took place on 26-3-1947 and that the suit was instituted on 27-3-1950, 26th March being a public holiday. It is clear that, under Art. 22 of the Limitation Act, the suit as against the first defendant (the owner of the bus) is barred by limitation.

The main question that arises for consideration in the appeal is whether the plaintiff, who was travelling by the bus and who sustained the injuries, has direct recourse as against the Insurance Company, under the insurance policy effected by the first defendant with the second defendant. The plaintiff relied on Art. 86 (b) of the Limitation Act and contended that, as the suit was instituted within three years from the date of the accident, the suit is in time.

Article 86 (a) relates to a suit on a policy of insurance when the sum insured is payable after proof of the death has been given to or received by the insurers. Columns 2 and 3 provide a period of three years from the date of the death of the deceased. Article 86 (b) on which reliance is placed runs as follows:

insured as against the Insurance Company. The third party, who sustained the injury and who obtained a judgment as against the insured, may execute the decree as against the insured and not proceed as against the Insurance Company under S. 96 of the Motor Vehicles Act, in which event, the insured has a right to proceed as against the Insurance Company and enforce the policy of insurance. It is in such cases that a period of three years is. provided. It does not apply to suits by third parties as against the Insurance Company.

Sri Chandrasekhara Sastry, the learned Advocate for the appellant, relied upon the omission of the word ''assured'' in Art. 86 (b). I do not think that the omission of the word ''assured'' makes any difference. I am inclined to take the view that Art. 86 (b) relates only to suits by the assured or in the right of the assured. I therefore agree with the Court below that the suit by the third party is not covered by Art. 86 (b) of the Act. As the suit as against the first defendant is barred by limitation, the suit as against the Insurance Company would also be barred.

Apart from resting my judgment on the question of Imitation, I hold that the suit as against the Insurance Company, by the third party is not maintainable. Though an issue in specific terms has not bees, raised on this point, I am inclined to take the view, on a reading of Ss. 96 and97of the Motor Vehicles Act that the suit by the third party is" unsustainable. Section 96 (1) provides that if, after a certificate of insurance has been issued under S. 95 (4) in favour of the person by whom a policy has been effected, judgment in respect of any such liability is obtained against the person insured by the policy, then the insurer shall pay to the person entitled to the benefit of the decree any sum not exceeding the sum assured, as if he were the judgment debtor, in respect of the liability together with any amount payable in respect of interest on that sum by virtue of any enactment relating to interest on judgments.

So, it is clear from the language of S. 96 (1) that the suit must be filed as against the insured and a judgment obtained against him. It is only after the judgment is obtained against the insured that the sum is recoverable from the insurer, i.e., the Insurance Company. Section 96 (2) provides for the issue or notice to the Insurance Company and the defences that might be raised by the Insurance Company if made a party. From the terms of S. 96 (2), it is implicit that no suit as against the Insurance Company can be maintained by the third party taking-advantage of the Insurance policy. Section 97 supports this conclusion.

If the insured becomes an insolvent the rights against the insurer stand transferred to and vest in the third party to whom the liability was so incurred. Section 97 (4) enacts that upon a transfer under Sub-s. (1) or sub-s. (2) the insurer shall be under the same liability to the third party as he would have been to the insured person. So if the insured becomes an insolvent, the third party would be entitled, under the provisions of S. 97, to have a direct recourse as against the insurance company under the terms of the policy of insurance.

I am therefore clear, on the reading of the terms of Sections 96 and 97, that the third party would not be entitled to maintain (sic) suit as against the Insurance Company except in the case of the insolvency of the insured. A aforesaid if a decree is obtained against the insured, the decree may be executed against the Insurance Company treating it as a judgment debtor under the terms of S. 96. This view o(sic) mine is supported by the decision of the Bom bay High Court in British India General Insurance Co., Ltd. Vs. Janardan Vishwanath Naik, and of the Punjab High Court in Des Raj Pahw v. The Concord of India Insurance Co. Ltd. Calcutta, AIR 1951 Punj 114 (B). In AIR 193 Bom 217 (A), at page 218, Norman J. repelle the argument of Mr. Gokhale in the follow in terms :

Mr. Gokhale argues that this clause co(sic)stitutes the passengers the beneficiaries, the insurance company being the trustee and the insured the author of the trust. I am unable to agree. What is insured against is the (sic)sured''s legal liability and that shows that the policy is taken out for his benefit and not for the benefit of any passenger.

I agree with the learned Judge that the contract of insurance entered into between the fi(sic) and second defendants cannot be taken advantage of by the plaintiff, the passenger, as he not a party to the contract of ''insurance. P(sic)rights are limited to the rights provided under the Motor Vehicles Act, 1939. In AIR 19(sic) Punj 114 (B). the question arose whether third party is entitled to avail himself of (sic) clause for reference of any dispute arising between the owner of the car and the company arbitration. It was held that the third party w(sic) not entitled to take advantage of the arbitration clause. At page 115, the learned Judge observed as follows:

There is no doubt that in the insurance contract between Mr. Tawakley and the Company there was a clause for reference of a dispute arising between them out of the pol(sic) to be referred to arbitration (sic) but the (sic)pute is not between Mr. Tawakley and the company, the claimants being a third party. Under the Ordinary law the only persons who can the legal steps to enforce the terms of contract the parties to the contract.

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At page 116, the learned Judge negatived argument that, in a contract of insurance third party risks, there was a kind of trust cr(sic)ed for the benefit of any third party who m(sic) suffer injury or loss. I agree with him that trust can be spelled out and that the t(sic) party cannot be regarded as a cestui que t(sic) on whose behalf the policy was effected follow the two decisions aforesaid and hold the suit as against the Insurance Company not maintainable. In the result, the appeal and is dismissed, but I make no order as to cost(sic).