ICICI Lombard General Insurance Co. Ltd. vs Aditya Kalra and Others

G.P. Mittal, J.—This appeal is directed against the judgment dated 19.5.2014 passed by the Motor Accident Claims Tribunal (the Claims Tribunal) whereby compensation of Rs. 2,02,620 was granted in favor of Respondent No. 1 for having suffered injuries in a motor vehicular accident which occurred on 7.1.2012. The quantum of compensation is not challenged by the Appellant Insurance Company. The only plea raised by the Appellant is that since Respondent Arun Gaur, who was the driver and the owner of the vehicle did not possess a valid and effective driving licence, the Appellant has no liability at all to pay the compensation. In the alternative, it is urged that even if the Insurance Company is made liable to pay the compensation, it is at least entitled to recover the compensation paid from the insured.

It was accepted by the Claims Tribunal that a notice under Order 12 Rule 8 of the Code of Civil Procedure, 1908 (CPC) was duly served upon Respondent Arun Gaur. In spite of this, relying on National Insurance Co. Ltd. Vs. Swaran Singh and Others, (2004) 1 ACC 1 : (2004) ACJ 1 : AIR 2004 SC 1531 : (2004) 118 CompCas 396 : (2004) 1 JT 109 : (2004) 136 PLR 510 : (2004) 1 SCALE 180 : (2004) 3 SCC 297 : (2004) 1 SCR 180 : (2004) AIRSCW 663 : (2004) 1 Supreme 243 and the judgment of this Court in Shiv Devi v. Manoj Kumar, MAC APP. 139/2010, decided on 5.10.2010, the Claims Tribunal held that it could not be said that the driver did not possess a valid driving licence. In my view, this finding of the Claims Tribunal cannot be sustained. The initial onus, of course, is on the Insurance Company to prove that there is conscious and willful breach of the terms and conditions of the Insurance Policy. Admittedly, Respondent Amit Gaur was challenged under Sections 3/181 of the Motor Vehicles Act, 1988 (the Act). However, that by itself may not be sufficient to prove that the driver did not possess a valid driving licence. But, once a notice under Order 12 Rule 8, CPC was served upon the driver-owner, it was incumbent upon him to come forward with the driving licence if he possesses any.

The owner-driver having chosen not to contest the proceedings an adverse inference has to be drawn against him that he did not possess valid and effective driving licence. In this connection, a reference may be made to the judgment of this Court in New India Assurance Company Ltd. v. Sanjay Kumar and Ors., ILR (2007) 11 Delhi 733, wherein it was held as under:

"23. Where the assured chooses to run away from the battle i.e., fails to defend the allegation of having breach the terms of the insurance policy by opting not to defend the proceedings, a presumption could be drawn that he has done so because of the fact that he has no case to defend. It is trite that a party in possession of best evidence, if he withholds the same, an adverse inference can be drawn against him that had the evidence been produced, the same would have been against said person. As knowledge is personal to the person possessed of the knowledge, his absence at the trial would entitle the Insurance Company to a presumption against the owner.

That apart, what more can the Insurance Company do other than to serve a notice under Order 12 Rule 8 of the Code of Civil Procedure calling upon the owner as well as the driver to produce a valid driving licence. If during trial such a notice is served and proved to be served, non response by the owner and the driver would fortify the case of the Insurance Company."

Thus, it is established that Respondent Arun Gaur did not possess a valid and effective driving licence at the time of the accident.

The question of statutory liability to pay the compensation was discussed in detail by a two Judges Bench of the Supreme Court in Skandia Insurance Co. Ltd. Vs. Kokilaben Chandravadan and Others, (1987) 1 ACC 413 : (1987) ACJ 411 : (1987) 62 CompCas 138 : (1987) 2 JT 43 : (1987) 1 SCALE 648 : (1987) 2 SCC 654 : (1987) 2 SCR 752 , wherein it was held that an exclusion clause in the contract of Insurance must be read down being in conflict with the main statutory provision enacted for protection of the victims of motor accidents. It was laid down that the victim would be entitled to recover compensation from the insurer irrespective of the breach of any condition of Insurance Policy. Thereafter, the three Judges Bench of the Supreme Court in Sohan Lal Passi Vs. P. Sesh Reddy and others, (1996) 2 ACC 617 : (1996) ACJ 1044 : AIR 1996 SC 2627 : (1998) 91 CompCas 526 : (1996) 5 JT 728 : (1996) 114 PLR 311 : (1996) 5 SCALE 388 : (1996) 5 SCC 21 : (1996) 3 SCR 647 Supp : (1996) 2 UJ 525 analysed the corresponding provisions under the Motor Vehicles Act, 1939 and the Motor Vehicles Act, 1988 and approved the decision in Skandia (supra). In New India Assurance Co., Shimla Vs. Kamla and Others etc. etc., (2001) ACJ 843 : AIR 2001 SC 1419 : (2001) 105 CompCas 398 : (2011) 1 CPJ 10 : (2001) 4 JT 235 : (2001) 3 SCALE 18 : (2001) 4 SCC 342 : (2001) 2 SCR 797 : (2001) 2 UJ 1121 : (2001) AIRSCW 1340 : (2001) 3 Supreme 84 , the Supreme Court referred to the decision of the two Judges Bench in Skandia (supra) as well as the three Judges Bench decision in Sohan Lal Passi (supra) and held that the insurer who has been made liable to pay the compensation to third parties on account of certificate of insurance issued shall be entitled to recover the same if there was any breach of policy condition on account of the vehicle being driven without a valid driving licence. The relevant portion of the report is extracted hereunder:

"21. A reading of the proviso to Sub-section (4) as well as the language employed in Sub-section (5) would indicate that they are intended to safeguard the interest of an insurer who otherwise has no liability to pay any amount to the insured but for the provisions contained in Chapter XI of the Act. This means, the insurer has to pay to the third parties only on account of the fact that a policy of insurance has been issued in respect of the vehicle, but the insurer is entitled to recover any such sum from the insured if the insurer were not otherwise liable to pay such sum to the insured by virtue of the conditions of the contract of insurance indicated by the policy.

To repeat, the effect of the above provisions is this: when a valid insurance policy has been issued in respect of a vehicle as evidenced by a certificate of insurance the burden is on the insurer to pay to the third parties, whether or not there has been any breach or violation of the policy conditions. But the amount so paid by the insurer to third parties can be allowed to be recovered from the insured if as per the policy conditions the insurer had no liability to pay such sum to the insured.

It is advantageous to refer to a two-Judges Bench of this Court in Skandia Insurance Co. Ltd. Vs. Kokilaben Chandravadan and Others, (1987) 1 ACC 413 : (1987) ACJ 411 : (1987) 62 CompCas 138 : (1987) 2 JT 43 : (1987) 1 SCALE 648 : (1987) 2 SCC 654 : (1987) 2 SCR 752 . Though the said decision related to the corresponding provisions of the predecessor Act (Motor Vehicles Act, 1939) the observations made in the judgment are quite germane now as the corresponding provisions are materially the same as in the Act. Learned Judge pointed out that the insistence of the Legislature that a motor vehicle can be used in a public place only if that vehicle is covered by a policy of insurance is not for the purpose of promoting the business of the insurance company but to protect the members of the community who become sufferers on account of accidents arising from the use of motor vehicles. It is pointed out in the decision that such protection would have remained only a paper protection if the compensation awarded by the Courts were not recoverable by the victims (or dependants of the victims) of the accident. This is the raison d''etre for the Legislature making it prohibitory for motor vehicles being used in public places without covering third party risks by a policy of insurance.

The principle laid down in the said decision has been followed by a three-Judges Bench of this Court with approval in Sohan Lal Passi Vs. P. Sesh Reddy and others, (1996) 2 ACC 617 : (1996) ACJ 1044 : AIR 1996 SC 2627 : (1998) 91 CompCas 526 : (1996) 5 JT 728 : (1996) 114 PLR 311 : (1996) 5 SCALE 388 : (1996) 5 SCC 21 : (1996) 3 SCR 647 Supp : (1996) 2 UJ 525 .

The position can be summed up thus:

"The insurer and the insured are bound by the conditions enumerated in the policy and the insurer is not liable to the insured if there is violation of any policy condition. But the insurer who is made statutorily liable to pay compensation to third parties on account of the certificate of insurance issued shall be entitled to recover from the insured the amount paid to the third parties, if there was any breach of policy conditions on account of the vehicle being driven without a valid driving licence........."

Again in United India Insurance Company Ltd. Vs. Lehru and Others, (2003) 1 ACC 611 : (2003) ACJ 611 : AIR 2003 SC 1292 : (2003) 2 JT 595 : (2003) 3 SCALE 181 : (2003) 3 SCC 338 : (2003) 2 SCR 495 : (2003) 1 UJ 679 : (2003) AIRSCW 1695 : (2003) 2 Supreme 768 of the report, the Supreme Court referred to the decisions in Skandia (supra), Sohan Lal Passi (supra) and Kamla (supra) and held that even where it is proved that there was a conscious or willful breach as provided under Section 149(2)(a)(ii) of the Motor Vehicles Act, 1988, the Insurance Company would still remain liable to the innocent third party but it may recover the compensation paid from the insured. The relevant portion of the report is extracted hereunder:

"18. Now let us consider Section 149(2). Reliance has been placed on Section 149(2)(a)(ii). As seen, in order to avoid liability under this provision it must be shown that there is a "breach". As held in Skandia and Sohan Lal Passi cases the breach must be on the part of the insured. We are in full agreement with that. To hold otherwise would lead to absurd results. Just to take an example, suppose a vehicle is stolen. Whilst it is being driven by the thief there is an accident. The thief is caught and it is ascertained that he had no licence. Can the Insurance Company disown liability? The answer has to be an emphatic "No". To hold otherwise would be to negate the very purpose of compulsory insurance.........."

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20...........If it ultimately turns out that the licence was fake, the Insurance Company would continue to remain liable unless they prove that the owner/insured was aware or had noticed that the licence was fake and still permitted that person to drive. More importantly, even in such a case the Insurance Company would remain liable to the innocent third party, but it may be able to recover from the insured. This is the law which has been laid down in Skandia, Sohan Lal Passi and Kamla cases. We are in full agreement with the views expressed therein and see no reason to take a different view."

The three-Judge Bench of the Supreme Court in National Insurance Co. Ltd. Vs. Swaran Singh and Others, (2004) 1 ACC 1 : (2004) ACJ 1 : AIR 2004 SC 1531 : (2004) 118 CompCas 396 : (2004) 1 JT 109 : (2004) 136 PLR 510 : (2004) 1 SCALE 180 : (2004) 3 SCC 297 : (2004) 1 SCR 180 : (2004) AIRSCW 663 : (2004) 1 Supreme 243 , again emphasised that the liability of the insurer to satisfy the decree passed in favor of the third party was statutory. It approved the decisions in Sohan Lal Passi (supra), Kamla (supra) and Lehru (supra). Paras 73 and 105 of the report are extracted hereunder:

"73. The liability of the insurer is a statutory one. The liability of the insurer to satisfy the decree passed in favour of a third party is also statutory.

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Apart from the reasons stated hereinbefore, the doctrine of stare decisis persuades us not to deviate from the said principle."

This Court in MAC APP. No. 329/2010, Oriental Insurance Co. Ltd. Vs. Rakesh Kumar and Others and other Appeals decided by a common judgment dated 29.2.2012, noticed some divergence of opinion in Malla Prakasarao Vs. Malla Janaki and Others, (2006) 1 ACC 300 : (2004) 3 SCC 343 ; National Insurance Co. Ltd. Vs. Kusum Rai and Others, (2006) 2 ACC 19 : (2006) ACJ 1336 : AIR 2006 SC 3440 : (2006) 131 CompCas 391 : (2006) 2 CPJ 8 : (2006) 2 CTC 347 : (2006) 4 JT 9 : (2006) 143 PLR 246 : (2006) 3 SCALE 519 : (2006) 4 SCC 250 : (2006) AIRSCW 1649 : (2006) 3 Supreme 272 ; National Insurance Co. Ltd. Vs. Vidhyadhar Mahariwala and Others, (2008) ACJ 2860 : AIR 2009 SC 208 : (2008) 152 PLR 746 : (2008) 12 SCALE 577 : (2008) 12 SCC 701 ; Ishwar Chandra and Others Vs. The Oriental Insurance Co. Ltd. and Others, (2007) 2 ACC 63 : AIR 2007 SC 1445 : (2007) 4 SCALE 292 : (2007) 10 SCC 650 : (2007) 3 SCR 720 : (2007) AIRSCW 1889 : (2007) 3 Supreme 65 and Premkumari and Others Vs. Prahlad Dev and Others, (2008) ACJ 776 : AIR 2008 SC 1073 : (2008) 1 CLT 246 : (2008) 149 PLR 241 : (2008) 1 SCALE 531 : (2008) 3 SCC 193 : (2008) AIRSCW 682 , on the one hand and Sohan Lal Passi v. P. Sesh Reddy, (supra); New India Assurance Co., Shimla v. Kamla and Ors. (supra); United India Insurance Company Ltd. v. Lehru and Ors. (supra); National Insurance Company Limited v. Swaran Singh and Ors. (supra); Oriental Insurance Co. Ltd. Vs. Zaharulnisha and Others, (2008) ACJ 1928 : AIR 2008 SC 2218 : (2008) 151 PLR 252 : (2008) 7 SCALE 310 : (2008) 12 SCC 385 : (2008) AIRSCW 3251 ; National Insurance Co. Ltd. Vs. Geeta Bhat and Others, (2008) ACJ 1498 : AIR 2008 SC 1837 : (2008) CLT 935 : (2008) 4 JT 425 : (2008) 150 PLR 784 : (2008) 4 SCALE 757 : (2008) 12 SCC 426 : (2008) AIRSCW 2534 and National Insurance Co. Ltd. Vs. Laxmi Narain Dhut, (2007) 2 ACC 28 : (2007) ACJ 721 : AIR 2007 SC 1414 : (2007) 136 CompCas 678 : (2007) 4 JT 169 : (2007) 146 PLR 510 : (2007) 4 SCALE 36 : (2007) 3 SCC 700 : (2007) 3 SCR 579 : (2007) AIRSCW 1782 : (2007) 2 Supreme 800 , on the other hand and held that in view of the three Judges Bench decisions in Sohan Lal Passi (supra) and Swaran Singh (supra), the liability of the Insurance Company vis-a-vis the third party is statutory. If the Insurance Company successfully proves the conscious breach of the terms of the policy, it would be entitled to recovery rights against the owner or the driver, as the case may be.

Thus, the Insurance Company cannot escape its liability to satisfy the award with regard to third party but it will have right to recover the compensation from the insured.

The appeal is allowed to the extent that the Appellant Insurance Company will first pay the compensation to Respondent Aditya Kalra and will then have a right to recover the amount so paid from Respondent No. 2 Arun Gaur, owner and driver of the offending vehicle.

The execution of the award was stayed by the learned Predecessor Judge by an order dated 15.7.2014. It is directed that the entire awarded amount along with upto date interest shall be deposited by the Appellant Insurance Company with UCO Bank, Delhi High Court Branch, New Delhi within six weeks from today, failing which Respondent No. 1 shall be entitled to claim interest @ 12% per annum from the date of this order.

A compliance report shall be filed by the Appellant within eight weeks. On filing of compliance report, statutory amount, if any, shall be refunded to the Appellant Insurance Company.

The compensation awarded shall be disbursed/held in fixed deposit in favor of the Claimant Respondent No. 1 in terms of the order passed by the Claims Tribunal. The appeal is allowed in above terms.