National Insurance Company Limited vs G. Arumugam and Bismikamarthan Miyan

D. Hariparanthaman, J.—The appellant is the Insurance Company. A two-wheeler, namely, TVS 50 Moped, of the second respondent was

insured with the appellant. The second respondent rode the moped and hit the first respondent cyclist on 25.10.1996 and caused grievous injuries.

Due to the accident, the first respondent suffered fracture at the right leg. The first respondent filed M.C.O.P. No. 37 of 1997, on the file of the

Motor Accident Claims Tribunal(Sub-Court),Tuticorin, claiming a compensation of Rs. 1 lakh.

The Motor Accident Claims Tribunal(Sub-Court), Tuticorin, passed an order on 05.09.2002, granting a sum of Rs. 56,500/- as compensation,

with interest at 9% and costs. The appeal is against the said order.

Heard the learned Counsel appearing on the appellant as well as the first respondent. The second respondent remained ex-parte before the

Tribunal and here again, there is no representation.

The learned Counsel for the appellant submits that the appellant had specifically pleaded that the second respondent, who rode the TVS 50

Moped, did not have valid driving licence at the time of accident. Ex. R1 is the Learner''s Licence issued to the second respondent. Admittedly, he

did not have an Instructor and he contravened Rule 3 of the Central Motor Vehicle Rules, 1989. As per Ex. R2, Insurance Policy, the appellant

was not liable to pay compensation, since, the second respondent rode TVS 50 Moped without valid driving licence,

The learned Counsel for the appellant further submits that without considering the conditions stipulated in the policy and Ex. R1, the learner''s

driving licence, the Tribunal directed the appellant to pay compensation. It is submitted that when the appellant was successful in its defense u/s

149(2)(a)(ii) of the Motor Vehicles Act, the Tribunal ought to have held that the Insurance company was not liable to pay compensation.

On the other hand, the learned Counsel for the first respondent submits that it is true that the second respondent possessed only the learner''s

licence, and admittedly, the second respondent rode the TVS 50 Moped without any Instructor as contemplated under Rule 3 of the Central

Motor Vehicle Rules, 1989. However, the learned Counsel submits that even if the appellant was successful in its defence u/s 149(2)(a)(ii) of the

Motor Vehicles Rules, relating to the driving licence of the person, who rode the concerned vehicle that caused the accident, the appellant has to

pay compensation to the third party at the first instance and thereafter, to recover the same from the owner of the vehicle as held by the

Honourable Apex Court in Swaran Singh''s case reported in 2004 ACJ 1.

I have considered the submissions made by the learned Counsels appearing on either side and perused the records.

The learned Counsel for the appellant is not questioning the quantum of compensation. The learned Counsel submits that the appellant is not

liable to pay any compensation, since, the appellant was successful in its defence u/s 149(2)(a)(ii) of the Motor Vehicles Act. It is submitted that

the Tribunal did not consider that the second respondent contravened the conditions of Insurance Policy Ex. R2 as he to drove the TVS 50

Moped vehicle, without any instructor, when he possessed learner''s licence..

In fact, the learned Counsel for the first respondent is not seriously disputing about the error committed by the Tribunal in so far as the non-

consideration of the defence of the appellant relating to the possession of only learner''s licence by the second respondent when he rode the TVS

50 Moped and caused the accident. The Tribunal was not correct in simply stating that since the appellant issued Ex. R2, Insurance Policy, the

appellant is liable to pay compensation, without noticing that the appellant is entitled to have defence available u/s 149(2)(a)(ii) of the Motor

Vehicle Act. The Insurance Company is entitled to defend the action on the following ground mentioned in Section 149(2)(a)(ii) of the Motor

Vehicles Act among other grounds. Section 149(2)(a)(ii) is extracted hereunder:

Duty of insurers to satisfy judgments and awards against persons insured in respect of third party risks.-

(2)(a)(ii) a condition excluding driving by a named 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

Therefore, I am of the considered view that when the appellant establishes its defence that are available u/s 149(2)(a)(ii) of the Motor Vehicle

Act, the Tribunal should direct the appellantto pay the compensation at the first instance and thereafter, should have directed the appellant to

recover the same from the second respondent, as held by the Honourable Apex Court in National Insurance Co. Ltd. Vs. Swaran Singh and

Others, .

But, the learned Counsel for the appellant submits that the pay and recover principle could not be invoked in this case, in view of the decision

of the Honourable Apex Court in National Insurance Company Limited v. Parvathneni and Anr. reported in 2009 (2) TN MAC 241 (SC).

According to him, when the Insurance Company is not liable to pay the compensation, pay and recover principle should not be invoked.

According to him, the entire issue relating to the principle of pay and recover is to be decided by a Larger Bench in the Apex Court and that this

case should wait for the final outcome of the decision of the Larger Bench.

On the other hand, the learned Counsel for the first respondent submits that the judgment cited by the learned Counsel for the appellant is not

applicable to cases that arise u/s 149(2)(a)(ii) of the Motor Vehicles Act and those cases are covered under the Judgment of the Honourable Apex

Court in National Insurance Co. Ltd. Vs. Swaran Singh and Others, .

In the judgement in National Insurance Company Limited v. Parvathneni and Anr. reported in 2009 (2) TN MAC 241 the Honourable Apex

court took note of the directions issued under Article 142 of the Constitution of India, directing the Insurance Companies to pay the compensation

at the first instance and thereafter, to recover the same from the owner of the vehicle, though the Insurance Company is not liable to pay the

compensation. In those circumstances, the Learned Judges of the Honourable Supreme Court directed the papers to be placed before the

Honourable The Chief Justice of India for constituting a Larger Bench to decide the issue as to whether the direction could be given under Article

142 of the Constitution of India, if there is no liability on the Insurance Company to pay the compensation. In this regard, paragraph 8 of the

aforesaid judgment is extracted hereunder:

We have some reservations about the correctness of the aforesaid decisions of this Court. If the Insurance Company has no liability to pay at all,

then, in our opinion, it cannot be compelled by order of the Court in exercise of its jurisdiction under Article 142 of the Constitution of India, 1950

to pay the compensation amount and later on recover it from the owner of the vehicle. In our view, Article 142 of the Constitution of India, 1950

does not cover such type of cases. When a person has no liability to pay at all how can it be compelled to pay? It may take years for the Insurance

Company to recover the amount from the owner of the vehicle, an it is also possible that for some reason the recovery my not be possible at all.

Therefore, as rightly contended by the learned Counsel for the first respondent, aforesaid judgement does not cover the present case that falls

u/s 149(2)(a)(ii) of the Motor Vehicle Act, and the Honourable Apex Court in Swaran Singh''s case has categorically held that the Insurance

Company has to pay compensation at the first instance to the third parties and thereafter, to recover the same from the owner of the vehicle, in

cases that fall u/s 149(2)(a)(ii) of the Motor Vehicles Act. The decision of the Apex Court in Swaran Singh''s Case was not a direction issued

under Article 142 of the Constitution of India and on the other hand, it was a decision by a Larger Bench relating to Section 149(2)(a)(ii) of the

Motor Vehicles Act.

In this case, the first respondent is a third party. The appellant was successful in its defence u/s 149(2)(a)(ii) of the Motor Vehicles Act, in view

of Ex. R1 r/w Ex. R2, Policy. In Ex. R2 it is stated as follows:

Person or classes of person entitled to drive."" any person including insured, PROVIDED that a person driving holds an effective driving licence of

the time of the accident and is not disqualified from holding or obtaining such a licence. Provided also that the person holding an effective learner''s

licence may also drive the vehicle and such a person satisfied the requirement of Rule 3 of the Central Motor Vehicle Rules, 1989.

Admittedly, the second respondent did not have an Instructor as contemplated under Rule 3 of the Central Motor Vehicle Rules and the Rule

3 is extracted hereunder:

General.-- The provisions of Sub-section (1) of Section 3 shall not apply to a person while receiving instructions or gaining experience in driving

with the object of presenting himself for a test of competence to drive, so long as--

(a) such person is the holder of an effective learner''s licence issued to him in Form 3 to drive the vehicle;

(b) such person is accompanied by an instructor holding an effective driving licence to drive the vehicle and such instructor is sitting in such a

position to control or stop the vehicle; and

(C) there is painted, in the front and the rear of the vehicle or on a plate or card affixed to the front and the rear, the letter ""L"" in red on a while

background as under

Note:.-- The painting on the vehicle or on the plate or card shall not be less than 18 centimetres squares and the letter ""L"" shall not be less than 10

Centimetres high, 2 centimetres thick and 9 centimetres wide at the bottom:

Provided that a person, while receiving instructions or gaining experience in driving a motor cycle(with or without a side-car attached), shall not

carry any other person on the motor cycle except for the purpose and in the manner referred to in clause(b).

Therefore, the appellant was successful in establishing its defence available u/s 149(2)(a)(ii) of the Motor Vehicle Act.

The supreme Court has considered in the Swaran Singh''s case, about the defences u/s 149(2)(a)(ii) of the Motor vehicles Act with reference

to the compensation payable to third parties. Para 4 of the Judgment is extracted hereunder:

Defences raised by the petitioner company in the claim petitions purported to be in terms of Section 149(2)(a)(ii) of the Motor Vehicles Act,

1988 (hereinafter referred to as ''the Act'') were:(a) driving licence produced by the driver or owner of the vehicle was a fake one:(b) driver did

not have any licence whatsoever; (c) licence, although was granted to the concerned driver but on expiry thereof, the same had not been renewed;

(d) licence granted to the drivers being for one class or description of vehicle but the vehicle involved in the accident was of different class or

description; and (e) the vehicle in question was driven by a person having a learner''s licence.

In paragraph 64, it is stated as follows by the Honourable Supreme Court in Swaran Singh case:-:

In the aforementioned backdrop, the provisions of Sub-sections (4) and (5) of Section 149 of the Motor Vehicles Act, 1988 may be

considered as the liability of the insurer to satisfy the decree at the first instance.

Therefore, the Honorable Apex Court had categorically held that when the Insurance Company was successful in its defence u/s 149(2)(a)(ii)

of the Motor Vehicles Act, Provision u/s 149(4) and (5) should be applied therein and the Insurance Company would have to pay the

compensation at the first instance and thereafter they have to recover the same from the owner of the vehicle. While recording its findings, the

Apex Court has held as follows in paragraph 96 and 97 of the judgment in Swaran Singh Case:

It is, therefore, evident from the discussions made hereinbefore that the liability of the insurance company to satisfy the decree at the first

instance and to recover the awarded amount from the owner or driver thereof has been holding the field for a long time.

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

Further while summarising its finding in paragraph 102(viii), it is held as follows:

(viii) If a vehicle at the time of accident was driven by a person having a learner''s licence, the insurance companies would be liable to satisfy the

decree.

Taking into account the plight of the victims of the motor accident, the Apex Court categorically held in Swaran Singh''s case that whenever

third party risk is involved, the Insurance Company has to pay the compensation at the first instance and thereafter, they have to recover the same

from the owner of the vehicle, if they were successful in its defence available u/s 149(2)(a)(ii) of the Motor Vehicles Act.

The Division Bench Judgment of this Court in United India Insurance Company Limited v. S. Saravanan and Anr. reported in 2009 (2) TN

MAC 103 (DB) has considered all the judgment that arose u/s 149(2)(a)(ii) of the Motor Vehicles Act and held that in the case of compensation

payable to the third parties, the Insurance Company has to pay at the first instance and thereafter, they have to recover the same from the owner of

the vehicle if they were successful in its defence available u/s 149(2)(a)(ii) of the Motor Vehicles Act. Para 9 of the judgment of the Division Bench

of this Court in United India Insurance Company Limited v. S. Saravanan and Anr. reported in 2009 (2) TN MAC 103 (DB) is relevant for the

purpose of the case which is extracted hereunder:

...It was said that the assured might be a man of straw and the Insurer might not be able to recover anything from him. But the answer to that is

that it is the Insurer''s bad luck. In such circumstances the injured person also would not have been able to recover the damages suffered by him

from the assured, the person causing the injuries. The loss had to fall one some one and the statute has thought fit that it shall be borne by the

Insurer. That also seems to us to be equitable for the loss falls on the Insurer in the course of his carrying on his business, a business out of which

he makes profit, and he could so arrange his business that in the net result he would never suffer a loss. On the other hand, if the loss fell on the

injured person, it would be due to no fault of his, it would have been a loss suffered by him arising out of an incident in the happening of which he

had no hand at all.

In fact, the Insurance Company can directly proceed against the owner of the vehicle by filing execution petition as held by the Honourable

Apex Court in Oriental Insurance Co. Ltd. Vs. Shri Nanjappan and Others, . Instead of directing the third parties to recover the compensation

from the owner of the vehicle, the Apex Court thought it fit to direct the Insurance Company to pay the compensation at the first instance and to

recover the same from the owner of the vehicle directly, in case, wherein Section 149(2)(a)(ii) is involved.

Hence, I am not inclined to accede to the request of the appellant to postpone the decision in this matter until a Larger Bench is constituted as

per the direction of the Honourable Apex Court in National Insurance Company Limited v. Parvathneni and Anr. reported in 2009 (2) TN MAC

241 (SC) when the matter is squarely covered under Swaran Singh''s case and more particularly, when the accident took place in the year 1996

before 14 years back.

Further, the appellant deposited the entire award amount with interest as directed by this Court for granting interim stay and that the first

respondent was also permitted to withdraw 50% of the award amount with proportionate accrued interest and costs. In these circumstances, I am

of the considered view that following the decision of the Apex Court in Swaran Singh''s Case, the appellant is permitted to recover the

compensation amount paid by them from the second respondent and the first respondent is permitted to withdraw the balance amount that is

deposited with the Tribunal. The award of the Tribunal is modified to the extent as indicated above.

In the result, the Civil Miscellaneous Appeal is disposed of in the above terms. No costs.