National Insurance Co. Ltd. vs Ellappa and Others

S. Palanivelu, J.—The allegations as regards the accident, as contained in all the petitions, in a nutshell, are as follows:

On 21.06.1991, the petitioner and others were travelling by a tempo bearing Registration No. TN-29 Y-1724 towards Thenkanikottai,

Kelamangalam-Parandur Road, near Koottur diversion road, at about 9.00 a.m., since the driver of the tempo vehicle drove the same in a rash

and negligent manner, it capsized resulting in the accident by means of which this petitioner and others got injured and some individuals died. Only

due to the negligence on the part of the driver, the accident occurred. The first respondent in the claim petition is owner-cum-driver of the vehicle

and the second respondent is the insurance company which has insured the vehicle of the first respondent, hence both the respondents are liable to

pay compensation to the petitioners. The allegations as to the nature of injuries, avocation and probable monthly income, compensation in various

petitions are denied.

In the counter filed by the first respondent, the following are stated:

This respondent possessed valid license to drive tempo vehicle and duly insured the vehicle with the second respondent. There was no negligence

on the part of this respondent. Due to unavoidable circumstances, the accident took place. Since he had driven the vehicle cautiously, he was able

to save so many lives. At any angle, the insurance company alone is responsible to compensate the victims. The claims found in claim petitions are

excessive and hence the petitions have to be dismissed.

The averments contained in the counter filed by the second respondent are as follows:

a) These petitions are not maintainable. It is true that the goods vehicle belonging to the first respondent involved in the accident, was insured with

this respondent. But, as per the policy conditions, passengers could not be carried in a goods vehicle and such travel is not authorised by the

policy. The first respondent received payment from 52 persons and asked them to travel in his vehicle as passengers, which is violative of the

policy conditions and hence this respondent is not liable to pay compensation. Excepting the averments in MCOP No. 430/1996 to 432/1996, the

other claimants and the three other deceased persons by name Govindappa, Sikkalamma and Iyanarappa had gone to attend the marriage of the

brother-in-law of first respondent and on return in the vehicle of first respondent, the accident happened. Since the first respondent has allowed

passengers to travel in a goods vehicle, the insurance company is not liable to pay compensation. The allegations as regards the nature of injuries,

disablement, pain and suffering, avocation, age and income are denied. Hence the petitions have to be dismissed.

b) In the additional counter filed by the second respondent, it is stated thus, at the time of the accident, first respondent did not have any valid

licence to drive the vehicle and on this ground, the petitions should be dismissed.

The following are the particulars of claim in each claim petition and quantum of compensation awarded by the Tribunal.

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Sl.No. MCOP No. Compensation Compensation awarded by

claimed the Tribunal

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1 226/1996 30,000/- 13,000/-

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2 264/1996 50,000/- 7,000/-

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3 263/1996 50,000/- 23,000/-

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4 240/1996 30,000/- 9,000/-

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5 239/1996 30,000/- 10,000/-

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6 430/1996 1,00,000/- 64,000/-

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7 265/1996 50,000/- 12,000/-

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8 432/1996 50,000/- 40,000/-

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9 271/1996 30,000/- 7,000/-

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10 227/1996 30,000/- 9,000/-

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11 431/1996 50,000/- 40,000/-

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The learned Tribunal has accepted the oral evidence on record with regard to the accident as well as the possession of licence by the first

respondent. It has recorded a finding that since the insurance company has deposited a portion of compensation as interim relief as per the order of

the Tribunal in MCOP No. 431/1996 and 432/1996, it could not be stated that the insurance company is not liable to pay compensation. It is

further observed that by conduct, the insurance company has agreed to deposit the amount and so it cannot refuse to pay compensation.

The Tribunal has also candidly held that the first respondent held two capacities as the owner and driver of the vehicle, knowing fully well that he

was not authorised to take passengers in a goods vehicle, took them in the vehicle and made them to travel and he has to pay the compensation.

However, placing reliance upon the decisions in New India Assurance Company Vs. Smt. Shakuntla Devi and Others, and 1997 TNLJ 172 -

Muthu Thangiah Thevar Rice Mill, Corenipuram, Orathanadu Taluk, Thanjavur v. Mariyayee and Ors., it is observed that the insurance company

cannot be imposed the liability of paying compensation, but, however having deposited the interim relief, as per the order of the court, without

making any demur or objection by not preferring any appal or revision, the insurance company shall also be made liable to compensate the

claimants. The learned Tribunal finally held that both the respondent/owner and the insurance company have to pay compensation to the claimants.

The above said observations and the conclusion of the Tribunal face scathing attack from the appellant insurance company.

The learned Counsel for the appellant Mr. S. Vadivel would submit that inasmuch as the Tribunal has found the owner of the vehicle liable, it

should not have fastened the liability on the insurance company and the award passed by the Tribunal in this regard is not in consonance with the

settled principles of the Supreme Court.

The learned Counsel for the appellant placed much reliance upon the decisions of the Hon''ble Supreme Court of India wherein it has expressed

a view that carrying of passengers in goods carriage is not contemplated in the Act. He has stressed upon the point that the Supreme court has

been repeatedly holding that the provisions of the Motor Vehicles Act do not mulct any responsibility on the insurance company to pay

compensation for the passengers who travel in a goods vehicle and consequently there would be no question of liability of the insurance company

to indemnify the victims who travelled as passengers in a goods vehicle.

Conversely, the learned Counsel for the respondent would submit that inasmuch as the Tribunal has rendered appropriate findings in its award

as to the liabilities of the owner and the insurance company, on the strength of the decisions of the High Court, the award has to be confirmed.

In 2008 (2) TN MAC 29(SC) between National Insurance Co. Ltd. and Cholleti Bharatamma and Ors., Their Lordships have elaborately

dealt with the subject by referring to earlier decision of the Supreme Court and finally concluded that travel in the goods vehicle by the passengers

not being the owner of any goods carried thereon, are not expected to be covered by the policy and the insurance company could not be anchored

with the liability to pay compensation. The Supreme Court has also clarified the earlier positions settled already and laid down law in this regard.

In the above case, the earlier decision of the Supreme Court rendered by a larger bench in 2003(2)SCC 223 - New India Assurance Co. Ltd.

v. Asha Rani and Ors. has been followed and the view has been expressed in paragraph 10 as follows:

The effect of the 1994 Amendment came up for consideration in National Insurance Co. Ltd. Vs. Baljit Kaur and Others, , wherein this Court

following Asha Rani 2004(2) TN MAC 387 (SC) (supra) opined that the words ""injury to any person"" would only mean a third party and not a

passenger travelling on a goods carriage whether gratuitous or otherwise. The question came up for consideration again in National Insurance Co.

Ltd. Vs. Bommithi Subbhayamma and Others, , wherein upon taking into consideration a large number of decisions, the said view was reiterated.

In New India Assurance Co. Ltd. Vs. Vedwati and Others, , the Hon''ble Supreme court has held as follows:

The difference in the language of ""goods vehicle"" as appearing in the old Act and ""goods carriage"" in the Act is of significance. A bare reading

of the provisions makes it clear that the legislative intent was to prohibit goods vehicle from carrying any passenger. This is clear from the

expression ""in addition to passengers"" as contained in the definition of ""goods vehicle"" in the old Act. The position becomes further clear because

the expression used ""goods carriage"" is solely for the carriage of goods. Carrying of passengers in a goods carriage is not contemplated in the Act.

There is no provision similar to Clause (ii) of the proviso appended to Section 95 of the old Act prescribing requirement of insurance policy. Even

Section 147 of the Act mandates compulsory coverage against death of or bodily injury to any passenger of ""public service vehicle"". The proviso

makes it further clear that compulsory coverage in respect of drivers and conductors of public service vehicle and employees carried in goods

vehicle would be limited to liability under the Workmen''s Compensation Act, 1923 (in short ""W.C. Act""). There is no reference to any passenger

in ""goods carriage.

The inevitable conclusion, therefore, is that provisions of the Act do not enjoin any statutory liability on the owner of a vehicle to get his vehicle

insured for any passenger travelling in a goods carriage and the insurer would have no liability therefor.

The learned Counsel for the appellant also garnered support from another decision of Supreme Court in 2008 (1) TNMAC 59 (SC) - Smt.

Thokchom Ongbi Sangeeta alias Sangi Devi and Anr. v. Oriental Insurance Co. Ltd. and Ors., in which, Their Lordships had held that the

passenger travelling in a goods vehicle is not deemed to have been covered by insurance since there is no statutory liability upon the insurer to

compensate him since there is no contract to that effect. The operative portion of the judgment is extracted hereunder:

The inevitable conclusion, therefore, is that provisions of the Act do not enjoin any statutory liability on the owner of a vehicle to get his vehicle

insured for any passenger travelling in a goods carriage and the Insurer would have no liability therefor.

Similar view has been highlighted in Oriental Insurance Company Ltd. Vs. Devireddy Konda Reddy and Others etc. etc. and Jogi Subbamma

and Others etc. etc., and National Insurance Co. Ltd. Vs. Ajit Kumar and Others, .

An identical view has been echoed by a Full Bench decision of this court in a decision rendered in Branch Manager, United India Insurance

Co. Ltd. Vs. Nagammal, Unnamalai and V.B. Krishnan, . The decision is outcome of the following reference, made by a learned single judge of

this court raising some doubts regarding applicability of the ratio contained in a Division Bench decision of this court reported in United India

Insurance Company Ltd. Vs. Selvam and A. Govindarajan, . The reference is as follows:

In the light of the latest decisions of the Supreme Court, exonerating the Insurance Company from its liability to pay compensation for the

death/injury to the gratuitous passenger travelling in a goods vehicle, substantial doubt arises whether the decision of the Division Bench of this

Court made in United India Insurance Company Ltd. Vs. Selvam and A. Govindarajan, could be followed.

In view of the latest decisions of the Supreme Court, in my considered view, the decision of the Division Bench of this Court made in United

India Insurance Company Ltd. Vs. Selvam and A. Govindarajan, is to be clarified.

In Selvam''s case supra, it was decided by the Division Bench that eventhough the liability to pay compensation was fastened upon the owner

of the vehicle, in whose vehicle certain passengers were travelling, who are the claimants, direction was issued to the effect that for the claims

which occurred as regards the accident which took place before 06.01.2004, in case of gratuitous passengers, the insurance company shall pay

and recover from the owner of the vehicle. The Full Bench of this court, after referring and following various decisions of the Supreme Court on

this point, concluded that the insurance company is not liable to cover the liability in respect of a passenger travelling in a goods vehicle. Full Bench

has followed the ratio laid down in the decisions of the Apex court and formulated guidelines.

The principle laid down in New India Assurance Company Vs. Shri Satpal Singh and Others, with reference to the requirement of coverage of

liability for a passenger travelling in goods vehicle, was discussed in Asha Rani''s case supra and ratio is laid down by the Supreme Court and in

subsequent decisions of the Supreme Court also the same view has been expressed. Hence the proposition of law is that the person/persons who

are travelling in goods vehicle, whether they are gratuitous or non-gratuitous, are not entitled to get compensation from the insurance company. The

insurance company is not statutorily expected to extend the cover of insurance to such persons inasmuch as there is no scope for any contract

between the insured and the insurance company. The insured is also not required to pay any premium to this class of persons and the policy issued

by the company would cover those persons who are specifically mentioned therein. Other persons who may be gratuitous passengers travelling in a

goods vehicle are not at all covered by the policy and it has to be necessarily held that such persons cannot plead that they are being indemnified

by the insurance company. The insurer is not liable to pay compensation to such passenger since the statute has not imposed any duty or liability

upon it for that purpose. In such view of this matter, it is also held that the owner-cum-driver of the vehicle, namely the first respondent in MCOPs

has to pay compensation to the claimants.

The next aspect to be decided in this case is whether there could be a direction on the principle of ""pay and recover"". In New India Assurance

Co., Shimla Vs. Kamla and Others etc. etc., , the Apex Court has held that if the insurance company succeeds in establishing that there was

breach of policy conditions, the Claims Tribunal shall direct the insured to pay that amount to the insurer and in default the insurer shall (sic - not?)

be allowed to recover the amount (which the Insurer is directed to pay the claimant third parties) from the insured person.

The Supreme Court has also held in National Insurance Co. Ltd. Vs. Swaran Singh and Others, that the Tribunal has power to direct the

insurance company to satisfy the decree at the first instance and then direct the recovery from the same owner.

In Oriental Insurance Co. Ltd. Vs. Shri Nanjappan and Others, the Supreme Court has observed that before release of the amount to the

claimants, owner of the vehicle shall be issued a notice and he shall be required to furnish security for the entire amount which the Insurer will pay

to the claimants and the offending vehicle shall be attached as a part of the security. It is also held therein that the insurer shall pay the quantum of

compensation fixed by the Claims Tribunal and for the recovery of money, the insurer shall not be required to file a suit. It may initiate a proceeding

before the executing Court as if it is the dispute between the insured and the insurer and the subject matter was of determination before the

Tribunal and the issue is decided against the owner and in favour of the insurer.

So also it is held as such in National Insurance Co. Ltd. v. Kusum Rai and Ors. reported in 2006 (4) SCC 2005.

However, in Vedwati''s case cited supra, in National Insurance Co. Ltd. Vs. Kaushalaya Devi and Others, and National Insurance Co. Ltd.

Vs. Prema Devi and Others, , the Supreme Court had not issued any such direction as to ""pay and recover"". In The Oriental Insurance Company

Limited Vs. Meena Variyal and Others, , it is decided that the appellant insurance company is not liable to indemnify the insured and is also not

obliged to satisfy the award of the Tribunal/Court and then have recourse to the owner of the vehicle and the High Court was in error in modifying

the award of the Tribunal in that regard.

In another decision of the Supreme Court in National Insurance Co. Ltd. Vs. Anjana Shyam and Others, , the Apex Court is of the view that it

will be necessary for the Tribunal, even at the initial stage, to make an appropriate orders to ensure that the amount could be recovered from the

owner by ordering attachment or by passing other restrictive orders against the owner so as to ensure the satisfaction in full of the awards that may

be passed ultimately.

In the recent decision of the Supreme Court in 2008(2) Supreme 451 (Sardari and Ors. v. Sushil Kumar and Ors.), option is left to the

discretion of the court which deals with the matter with reference to the situations available therein. It is held in the judgment as follows:

Where the breach of conditions of contract is ex-facie apparent from the records, the Court will not fasten the liability on the Insurance Company.

In certain situations, however, the Court while fastening the liability on the owner of the vehicle may direct the Insurance Company to pay to the

claimants the awarded amount with liberty to it to recover the same from the owner.

The Full Bench of this court in Nagammal and Ors. case supra, after referring the above said decisions and following the principles laid down

thereon, has formulated the following principles/guidelines to be followed in the like matters. They are as follows:

(i) The Insurance Policy is required to cover the liability envisages u/s 147, but wider risk can always be undertaken.

(ii) Section 149 envisages the defences which are open to the Insurance Company. Where the Insurance Company is not successful in its defence,

obviously it is required to satisfy the decree and the award. Where it is successful in its defence, it may yet be required to pay the amount to the

claimant and thereafter recover the same from the owner under such circumstance envisaged and enumerated in Section 149(4) and Section

149(5).

(iii) u/s 147 the Insurance Company is not statutorily required to cover the liability in respect of a passenger in a goods vehicle unless such

passenger is the owner or agent of the owner of the goods accompanying such goods in the concerned goods vehicle.

(iv) Since there is no statutory requirement to cover the liability in respect of a passenger in a goods vehicle, the principle of ""pay and recover"", as

statutorily recognised in Section 149(4) and Section 149(5), is not applicable ipso facto to such cases and, therefore, ordinarily the Court is not

expected to issue such a direction to the Insurance Company to pay to the claimant and thereafter recover from the owner.

(v) Where, by relying upon the decision of the Supreme Court in Satpal Singh''s case, either expressly or even by implication, there has been a

direction by the Trial Court to the Insurance Company to pay, the appellate court is obviously required to consider as to whether such direction

should be set aside in its entirety and the liability should be fastened only on the driver and the owner or whether the Insurance Company should be

directed to comply with the direction regarding payment to the claimant and recover thereafter from the owner.

(vi) No such direction can be issued by any trial court to the Insurance Company to pay and recover relating to liability in respect of a passenger

travelling in a goods vehicle after the decision in Baljit Kaur''s case merely because the date of accident was before such decision. The date of the

accident is immaterial. Since the law has been specifically clarified, no trial court is expected to decide contrary to such decision.

(vii) Where, however, the matter has already been decided by the trial court before the decision in Baljit Kaur''s case, it would be in the discretion

of the appellate court, depending upon the facts and circumstances of the case, whether the doctrine of ""pay and recover"" should be applied or as

to whether the claimant would be left to recover the amount from the person liable i.e., the driver or the owner, as the case may be.

Now the discretion to pass direction to the insurance company to ""pay and recover"" remains with the discretion of this Court. The claimants

appeared to be poor village residents who had already been engaged in the litigation right from 1996. If they are to execute the award for recovery

of compensation from the first respondent in the MCOPs, much time will be lost and they cannot enjoy the fruits of the award. The object behind

the direction to ""pay and recover"" is on a principle that adjudication of their claims inte rse might delay the claim of the victims, as held in

Swaransingh''s case supra. In order to shorten the litigation and as the claimants, being the beneficiaries receiving the benefits flowing from the

Motor Vehicles Act, a Social Welfare Legislation, are entitled to get their compensation without undergoing cumbersome legal proceedings, a

direction of ""pay and recover"" is inevitable. Bearing in mind the plight of the claimants, under the circumstances available in these proceedings, this

court is of the considered view that the appellant be directed to pay the compensation first to claimants and to recover the same from the owner of

the vehicle/first respondent in the MCOPs.

As far as the quantum of compensation made available to each of the claimants is concerned, this court does not find any infirmity in the

observations of the Tribunal. The common award as to the quantum of compensation is confirmed. The appellant insurance company is at liberty to

institute execution proceedings against the owner of the vehicle/first respondent in the MCOPs directly before the court concerned as per the

procedure set out in Nanjappa''s case. With the above said observations and directions, these civil miscellaneous appeals have to be disposed of

and the common award passed by the Tribunal is modified in this regard.

In the result, all the civil miscellaneous appeals are disposed of with the directions as contained in this judgment. Consequently all the

connected miscellaneous petitions are closed. Time for deposit is eight weeks. No cost.