M/s. National Insurance Company Ltd. vs S.V. Adimoorthy and 7 others

K. Govindarajan, J.—On 19.8.1989 at about 14:00 hrs. an accident had taken place near Kattakulam Sholavandan, Madurai District. The

van bearing Registration No. TA.U. 5573 in which the first respondent in C.R.P. No. 574 of 1993, the first respondent in C.M.A. No. 84 of 1993

and the husband of the first respondent in C.M.A. No. 83/1993 traveled, was involved in the accident. According to the first respondent in

C.M.A. No. 84 of 1993, he was employed by one Kamatchi, son of Chelliah Nadar, to load and unload tamarind bundles from Palamedu"" to

Chekkanurani and to assist him in the market at Chekkanurani. The said van was proceeding from Palamedu to Chekkanurani with 48 tamarind

bundles and the first respondent was traveling in the said vehicle, for the safety of the articles as employed by the said Kamatchi, the owner of the

goods. The driver of the said vehicle was driving the van in a rash and negligent manner without observing the traffic rules. So, it was involved in

the accident. The first respondent''s left side hip bone was fractured and so he was not able to wall, run or to do any other work. On that basis be

claimed a compensation of Rs.50,000/- with interest at 12% by filing M.C.O.P. No.308 of 1990 on the file of the Motor Accidents Claims

Tribunal, Madurai. The appellant/insurance company filed an objection denying the fact that the claimant was employed by one Kamatchi to load

and unload tamarind bundles and he traveled in the said van in that capacity. It is also denied that the driver of the said vehicle was driving the

vehicle in a rash and negligent manner. It is further stated that the vehicle is a goods vehicle entitled to carry goods alone and not the passengers

and so the insured violated the terms and conditions and so the insurance company is not liable to pay the said compensation to the first

respondent. They have disputed the quantum of compensation claimed by the first respondent.

The first respondent in C.R.P. No. 574 of 1993 filed the claim petition on the ground that he was traveling in the said van. He was working as a

labourer in building construction. According to him, the petitioner/insurance company is liable to pay the compensation to the first respondent for

the, negligent act of the driver in the course of his employment under the first respondent in the said M.C.O.P., and the second respondent therein

is also liable to pay the compensation to the first respondent herein, as the insurer as well as the indemnifier. He claimed a compensation of

Rs.30,000/- by filing the claim petition in M.C.O.P. No.651 of 1991.

The respondents 1 to 5 in C.M.A. No. 83 of 1993 filed the claim petition in A.C.O.P. No. 55 of 1992 on the file of the IV Additional Sub-

Judge/Motor Accidents Claims Tribunal, Madurai stating that they are the legal representatives of the deceased Ayyavu, who traveled in the said

van and died due to the accident. The claimant has further stated that Ayyavu traveled in the said van as a load man and so they are entitled for

compensation, and the second respondent herein is also liable to indemnify the payment of the said compensation of Rs. 1,50,000/-. On the basis

of the abovesaid fact and pleadings, the claim petition was resisted by the appellant before the said Tribunal by taking the same defence as that of

the one M.A.C.O.P. No. 308 of 1990.

The Court below in its order dated 11.8.1992 granted compensation of Rs.21,500/- plus interest at the rate of 12% to the first respondent in

C.M.A. No. 84 of 1993, a sum of Rs.3,000/- with interest at 12% for the first respondent in C.R.P. No. 574 of 1993, and a sum of Rs.92,000/-

plus interest at 12% for the respondents 1 to 5 in C.M.A. No. 83 of 1993 Aggrieved against the same, the Insurance Company has filed the above

revision and the appeals.

According to the learned counsel appearing for the insurance Company, the claimants and the deceased were traveling in the said vehicle

without any authorisation from the owner of the vehicle and the driver is not authorised to take passengers and so the insurance policy did not

permit to carry as such, and there was gross violation of the permit conditions and therefore the Insurance Company is not liable, ass per the Act,

and the terms and conditions of the insurance policy.

The question that has to be decided in this case is whether the persons who traveled in the said vehicle are authorised passengers, and the

Insurance company is liable to indemnify the insured in respect of the compensation claimed.

In so far as the claimant in C.M.A. No. 84 of 1993 is concerned, he examined himself as P.W.2. According to him, he accompanied the goods

of one Kamatchi, the owner of the goods. R.W.1 has deposed that he does not know anybody, who traveled in the van, and nobody was

permitted to travel by getting charges. R.W.2, the driver of the said vehicle has also deposed that one Ayyavu, and Adhimurthi were permitted to

travel as load men. He has also stated in his chief examination that no permission is granted to take passengers. He has also stated about the

claimant in M.C.O.P No.308 of 1990. According to him, the claimant traveled along with the goods of one Kamatchi. The claimant in M.C.O.P.

No. 651 of 1991 examined himself as P.W.4. He has deposed that he traveled in the said van as a load man at the request of the driver. That has

been admitted by the driver as R.W.2. The deceased in C.M.A. No. 83 of 1993 was also engaged as a load man, even according to R.W.2. the

driver.

On the basis of the abovesaid pleadings and evidence, the learned counsel appearing for the Insurance Company has submitted that in view of

the decision in Kanniappa Nadar v. Jayapandi & 10 others (1997 - I-.L.W. 174), the Insurance Company is not liable for payment of any

compensation as held by the Tribunal. Since the learned counsel has solely relied on the decision of the Division Bench cited supra, it is necessary

for me to consider about the scope of the said decision. In the said decision the claimants were traveling in a lorry with the paddy bags and in the

accident that took place some persons lost their lives and other sustained injuries. The legal representatives of the deceased persons claimed

various amounts as compensation alleging that the lorry involved in the accident was driven rashly and negligently by its driver and that has caused

the accident and therefore, the compensation should be awarded to them. The owner of the vehicle has pleaded that he was not liable for payment

of any compensation. The Insurance Company also contested the same stating that the persons accompanying the goods were not covered under

the terms of the policy issued by the insurance company and therefore the company was not liable to pay any compensation. The Tribunal found

that the persons who traveled in the lorry had sustained injuries or lost their lives have not been established to have traveled on payment of hire

charge and that they were in the lorry only for the purpose of safeguarding their paddy bags and for loading and unloading purposes. In the view so

taken, the Tribunal fastened liability on the insurance company for payment of compensation to the claimants. Aggrieved against the said award, the

insurance company filed appeals and mainly contended that the permit in respect of the lorry did not permit carrying of passengers in the goods

vehicle and there was gross violation of the permit conditions and therefore the insurance company was not liable as per the Act and the terms and

conditions of the insurance policy Accepting this arguments made on behalf of the insurance company, the learned single judge allowed the appeals

and directed the owner of the lorry to pay the amount. Aggrieved against the judgment of the learned single Judge the owner of the vehicle

preferred Letters Patent Appeals before the Division Bench. Before the Bench, contention was raised on behalf of the owner of the vehicle that the

learned single judge has not appreciated that mere breach of the exclusion clause in the policy does not absolve the liability and the onus is on the

insurer to establish that the insured himself is guilty of committing the breach of contract of insurance and the learned Judge ought to have held that

the immunity sought under S. 96(2)(B)(ii) of the Act was not available to the insurance company in respect of the issue governing the claim in

question. It was further argued that there can be no breach of violation of the promise on the part of the insured so as to enable the insurer to take

shelter under the umbrella of the exclusion clause and when the insured had not committed any wilful infringement or violation of the terms and

conditions of the policy and unless it is established that the insured was at fault and was guilty of a breach, the insurer cannot escape from its

obligation to indemnify the insured. After considering the arguments, the Division Bench has held as follows:-

In our opinion, the principles laid down by the Supreme Court in the aforesaid Sohan Lal Passi''s case would squarely apply to the case on hand.

In the instant case, the owner of the vehicle had appointed the licensed driver to the vehicle and the accident-in-question as taken place when the

vehicle was transporting goods. There is no evidence adduced by the insurer that the owner of the vehicle authorised or permitted the owners of

the goods which was being transported in the vehicle at the time of the accident, to travel in the transport vehicle-in-question, nor is, there any

evidence to show that the driver was authorised to carry the owners of the goods along with the goods in the transport vehicle in question. There is

no evidence to infer that there was even an implied consent for doing it by the owner of the vehicle. There is also no evidence to show that with the

knowledge of the owner of the vehicle the owners of the goods were taken along with the goods in the vehicle. Further, it is also not proved that

they are the gratuitous passengers. Then, this is a case in which the driver on his own accord appears to have allowed the owners of the goods to

travel in the transport vehicle along with their goods. There is no evidence to show that the owner of the vehicle wilfully allowed the transport

vehicle in question to be used for the purpose which was not allowed by the permit. S. 96(2)(b)(i)(c) provides thus:-

96.(2)0 No sum shall be payable by an insurer under Sub-Section (1) in respect of any judgment unless, before or after the commencement of the

proceedings in which the judgment is given, the insurer had notice through the Court of the bringing of the proceedings, or in respect of any

judgment 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....

b. that there has been a breach of specified condition of the policy being one of the following conditions, namely;

....

a. ....

b. ....

c. for a purpose not allowed by the permit; under which the vehicle is used, where the vehicle is a transport vehicle"".

Sohan Lal Passi''s case was referred to a three judge bench, in the light of the stand taken by the Insurance Company that when S. 96(2)(b)(ii) has

provided that the insurer shall be entitled to defend the action on the ground that there has been breach of a specified condition to the policy it viz,

the vehicle should not be driven by a person who is not duly licensed, the insurance company cannot be held to be liable to indemnify the owner of

the vehicle. On this point the view taken in Skandia Insurance Co. Ltd. (1987) 2 SCC 654 ; 100 L.W. 75) was against the insurer. The relevant

portion of the judgment in Skandia Insurance Co. Ltd.''s case is as follows:-

The defence built on the exclusion clause cannot succeed for three reasons, viz.

On a true interpretation of the relevant clause which interpretation is at peace with the conscience of S. 6, the condition excluding driving by a

person not duly licensed is not absolute and the promisor is, absolved once it is shown that he has done everything in his power to keep, honour

and fulfil the promise and he himself is not guilty of a deliberate breach.

Even if it is treated as an absolute promise,, there is substantial compliance therewith upon an express or implied mandate being given to the

licensed driver not to allow the vehicle to be left unattended to that it happens to be driven by an unlicensed driver.

The exclusion clause has to be ''read down'' in order that it is not at war with the ''main purpose'' of the provisions enacted for: the protection of

victims of accidents so that the promisor is exculpated when he does everything in his power to keep the promise''. It was to examine the

correctness of the aforesaid view as pointed out above, the Sohan Lal Passi''s case was referred to a larger Bench of three judges, in which it was

held thus:-

According to us, S. 96(2)(b)(ii) should not be interpreted in a technical manner, Sub-Section (2) of S. 96 only enables the insurance company to

defend itself in respect of the liability to pay compensation on any of the grounds mentioned in Sub-Section (2) including that there has been a

contravention of the condition excluding the vehicle being driven by any person who is not duly licensed. This bar on the facts of it operates on the

person insured. If the person who has got the vehicle insured has allowed the vehicle to be driven by a person who is not duly licensed when only

that clause shall be attracted. In a case where the person who has got insured the vehicle with the insurance company, has appointed a duly

licensed driver and if the accident takes place when the vehicle is being driven by a person not duly licensed on the basis of the authority of the

driver duly authorised to drive the vehicle whether the insurance company in that event shall be absolved from its liability? The expression ''breach''

occurring in S. 96(2)(b) means infringement or violation of a promise or obligation. As such the insurance company will have to establish that the

insured was guilty of an infringement or violation of a promise. The Insurer has also to satisfy the Tribunal or the Court that such violation or

infringement on the part of the insured was wilful. If the insured has taken all precautions by appointing a duly licensed driver to drive the vehicle in

question and it has not been established that it was the insured who allowed the vehicle to be driven by a person not duly licensed, then the

insurance company cannot repudiate its statutory liability under its statutory liability under Sub-Section (1) of S. 96.''

Therefore, It is clear from the rule laid down in Sohan Lal Passi''s case that the burden of proving the breach of condition of permit or the contract

of insurance by the insured is on the insurer, viz., the insurance company. In the instant case, that burden has not been discharged. Therefore, the

Insurance Company cannot absolve from its liability to pay the compensation to the claimants. In the view we take, the contention of the learned

counsel for the Insurance Company based on the exclusive clause contained in the contract of insurance has fail. It is accordingly rejected, what is

said about the appeals will also apply to the C.R.P. 2655 of 1990-in-question"".

Since the insurance company has not discharged its burden of establishing that the insured himself is guilty of committing breach of contract of

insurance, the insurance company cannot absolve its liability from paying the compensation. Even in the present case there is no evidence adduced

by the insurer that the owner of the vehicle wilfully authorised or permitted the owner of the goods which were being transported in the vehicle at

the time of accident, nor is there any evidence to show that the driver was authorised to carry the owner of the goods along with the goods, and

others to travel in the vehicle in question. In the absence of any such evidence, as held by the Division Bench of this Court, the insurance company

cannot absolve its liability from paying the compensation to the claimants. In view of the above, I do not find any merits in the revision and the

appeals, and thereby they are dismissed. No costs. Consequently, C.M.P. Nos. 1170, 1171 of 1993. & 7086 of 1996 in CM.As.83 and 84 of

1993 are closed.