National Insurance Company Limited, Chennai vs K. Vaijayanhtimala and Others

Ms. Aruna Jagadeesan, J.—The National Insurance Company Limited has preferred this civil miscellaneous appeal aggrieved by the award

dated 10.10.2006 made in M.C.O.P. No. 201 of 2002 by the learned Principal Subordinate Judge (MACT) Chengalput, whereby the Tribunal

directed the appellant Insurance Company to pay a compensation of Rs. 6,60,000/- with interest at 7.5 per cent p.a. as compensation to the

claimants on behalf of the 5th Respondent herein/owner of the offending vehicle. The brief facts are that on 15.10.2001, at about 1.30 p.m. the

deceased was proceeding in his bicycle on the Andiyappa Mudali Street and when he was near the junction of Royapuram Rangapillai Junction,

the Tractor Trailer Water Tanker Lorry owned by the 5th Respondent and insured with the Appellant Insurance Company hit against the deceased

causing fatal injuries to him. At the time of the accident, the Tractor Trailer Water Tanker Lorry was hired by the 6th Respondent, Chennai Metro

Water Supply and Sewerage Board (herein after referred to as CMWSSB) for supplying water to the public. During the inquiry, negligence on the

part of the driver of the trailer tractor water tanker lorry was proved. However, the Insurer sought exoneration from liability on the ground that as

the Tractor Trailer Water Tanker Lorry was hired by the 6th Respondent/CMWSSB, the 6th Respondent alone is liable to pay compensation,

which was disputed by the 6th Respondent/CMWSSB. On considering the evidence, the Tribunal came to the conclusion that the Tractor Trailer

Water Tanker Lorry was insured with the Appellant and in the absence of any clause in the policy that the vehicle could not be used for any other

purpose other than agricultural purpose, there was no violation of policy conditions and held that the Insurer was liable to pay compensation.

Mr. D. Bhaskaran, the learned counsel for the Appellant Insurance Company contended that when the Tractor Trailer Water Tanker Lorry was

hired by the 6th Respondent/CMWSSB and was fully under the custody and control of the 6th Respondent/CMWSSB and the driver of the

tractor-trailer which was used as water tanker lorry, was also under the control of the 6th Respondent/CMWSSB. The insured could not have

hired the vehicle to the 6th Respondent/CMWSSB contrary to the terms and conditions of the Insurance Policy. Referring to the terms and

conditions of the policy, the learned counsel submitted that the policy does not cover use of vehicle for hire or reward. The learned counsel would

also submit that Exhibit R-2 to R-4 prove that the vehicle was under the custody and control of the 6th Respondent/CMWSSB and the driver was

also under the control of the 6th Respondent/CMWSSB and the vehicle having been used contrary to the terms and conditions of the policy, it is

the 6th Respondent/CMWSSB, which has to be held vicariously liable and the liability put on the Insurance Company by the Tribunal is, therefore,

erroneous and against the law laid down by the Honourable Supreme Court.

The learned counsel also referred to the decision of the Honourable Supreme Court rendered in the case of Rajasthan State Road Transport

Corporation Vs. Kailash Nath Kothari and other etc., and submitted that in the said case, the liability of payment was fastened on the Corporation,

as at the time of the accident, the offending vehicle was being run by it under its control. The learned counsel pointed out that the Honourable

Supreme Court, after making reference to various provisions of the Act, held that when the offending vehicle is hired by RTC, they alone would be

liable to pay compensation for tort committed by driver, even though the driver is employee of registered owner.

The learned counsel for the A0ppellant also placed reliance on the decision of the Honourable Supreme Court in National Insurance Co. Ltd.

Vs. Deepa Devi and Others, wherein the contention of the Insurance Company that as the vehicle was not used for the purpose for which contract

of insurance was entered into, based on the principle laid down in Rajasthan State Transport Corporation v. Kailash Nath Kothari and Others

(supra), the insurer cannot be made liable, was accepted by the Honourable Supreme Court.

On the other hand, Mr. T. Gunasekar, the learned counsel for the 6th Respondent Board would support the impugned Judgement and Decree,

contending that even if the vehicle remained in possession of a third party, the registered owner of the vehicle shall continue to be the owner within

the provisions of the 1988 Act and thus, the registered owner and the Insurance Company would be liable to pay compensation to the victims of

the accident. The learned counsel placed reliance on the decision of the Honourable Supreme Court Uttar Pradesh State Road Transport

Corporation Vs. Kulsum and others, 2011 ACJ 2145 and contended that the offending vehicle was insured by the registered owner and the

insurance policy was also in force as on the date of the accident and the: the 6th Respondent/CMWSSB had only hired the vehicle from the

registered owner on certain terms and conditions as per the agreement entered into between them and therefore, it is the Insurance Company

which will have to be held liable to pay compensation and not the 6th Respondent/CMWSSB. The learned counsel would submit that the

agreement Exhibit R-3 clearly specified that the owner of the offending vehicle alone shall be liable to pay compensation to third party due to

accident or damage caused by the vehicle while transporting water on behalf of the 6th Respondent/CMWSSB. Referring to the said clause, the

learned counsel argued that it is the Insurance Company which is liable to pay compensation.

The learned counsel referred to the definition of ''owner'' as discussed in UP State Road Transport Corporation v. Kulsum and Others (supra)

and contended that the Act only contemplated the registered owner of the vehicle as the ''owner'' an therefore, it is the liability of the registered

owner which is to be indemnified by the Insurance Company. The learned counsel would contend that as the driver of the Tractor Trailer Water

Tanker Lorry was under the employment of the registered owner/5th Respondent and not under the 6th Respondent Board, the question of Board

becoming the owner of the vehicle cannot arise and moreover, it is for the registered owner to maintain the vehicle as per the terms and conditions

of the contract.

Mr. V. Jagannathan, the learned counsel appearing for the claimants would submit that u/s 147 of the Motor Vehicles Act, it is the liability of the

Insurance Company to pay the compensation, once an Insurance Policy is in force.

This Court heard the learned counsel on either side and perused the materials on record and the impugned Judgement and award.

In the light of the contentions put forward and the decisions cited and in particular, in view of the law laid down by the Honourable Supreme

Court in Rajasthan State Transport Corporation v. Kailash Nath Kothari and Others (supra), the point for consideration is as to whether the 6th

Respondent/CMWSSB can be said to be the owner of the vehicle in question and hence, liable or the registered owner should be held liable to

pay compensation, which is to be indemnified by the Appellant Insurance Company.

The facts, which are not in dispute, are that the 6th Respondent Board had hired the Tractor Trailer Water Tanker Lorry involved in the

accident and the 5th Respondent/ registered owner had entered into an agreement with the 6th Respondent in that regard. The vehicle in question

was hired by the 6th Respondent for transporting water and there is no proof that the vehicle was granted necessary permit by the competent

authority. Except the fact that the bus was owned by the registered owner, for all purposes, the possession was with the 6th Respondent and the

driver of the vehicle though an employer under the registered owner, yet was to drive the vehicle under the instructions of the 6th Respondent

Board. Therefore, the actual control of the vehicle was with the 6th Respondent Board and its driver could not have run the vehicle without

following the instructions and directions given to him by the 6th Respondent/CMWSSB, insofar as the operation of the vehicle in the road specified

by the 6th Respondent is concerned. As such, not only the possession was with the 6th Respondent/ CMWSSB pursuant to the agreement it had

entered into with the registered owner, but also the entire control was with the 6th Respondent/CMWSSB and the manner of control exercised by

the 6th Respondent/CMWSSB is evident from the terms and conditions of the agreement.

In the light of the above facts and the circumstances of the case and in the light of the agreement entered into between the 5th Respondent and

the 6th Respondent herein, the next point that arises for consideration is as to whether it can be said that the 6th Respondent Board is the ''owner''

of the vehicle in question. This takes to the meaning of ''owner'' u/s 2(30) of the Motor Vehicles Act which reads as under:

owner'' means a person in whose name a motor vehicle stands registered, and where such person is a minor, the guardian of such minor, and in

relation to a motor vehicle which is the subject of a hire purchase agreement, or an agreement of lease or an agreement of hypothecation, the

person in possession of the vehicle under that agreement.

Reading together the law laid down by the Honourable Supreme Court in the aforementioned cases, it is clear that though a person may be a

registered owner, yet for the purpose of awarding compensation, the Courts will have to find out from the facts of each case as to who is the real

owner. Applying the above principles to the case on hand and also in view of the conclusions reached that the vehicle in question was under the

control of the 6th Respondent Board, in the light of the terms and conditions of the agreement entered into by it, it is the 6th Respondent which is

to be held as the owner of the vehicle in question for the purpose of the Motor Vehicles Act in the light of the definition as contained u/s 2(30) of

the Act and the interpretation given to it by the Honourable Supreme Court.

The learned counsel for the 6th Respondent Board, while admitting that the vehicle in question was under the control of the 6th

Respondent/CMWSSB, yet he strongly contended that in view of the agreement entered into between the registered owner and the 6th

Respondent/CMWSSB and in view of one of the conditions in the agreement making it clear that in the event of any accident or injury being

caused to any person, it is the registered owner who will have to shoulder the liability, even if it is taken that the 6th Respondent/CMWSSB is the

owner at the relevant point of time, yet in view of the terms and conditions of the agreement, it is the registered owner who will have to be held

liable and therefore, the liability cannot be passed on to the 6th Respondent/CMWSSB.

At this juncture, it is relevant to refer to the position in law having regard to the provisions of the Motor Vehicles Act, 1988. Section 147 of the

Act reads thus:

Requirements of policies and limits of liability: (I) In order to comply with the requirements of this Chapter, a policy of insurance must be a

policy which-

(a) is issued by a person who is an authorised insurer; and

(b) insures the person or classes of persons specified in the policy to the extent specified in sub-section (2)-

(i) against any liability- which may be incurred by him in respect of the death of or bodily injury to any person, including owner of the goods or his

authorised representative carried in the vehicle or damage to any property of a third party caused by or arising out of the use of the vehicle in a

public place;

(ii) against the death of or bodily injury to any passenger of a public service vehicle caused by or arising out of the use of the vehicle in a public

place:

Provided that a policy shall not be required-

(i) to cover liability in respect of the death, arising out of and in the course of his employment of the employee of a person insured by the policy or

in respect of bodily in-jury sustained by such an employee arising out of and in the course of his employment other than a liability arising under the

Workmen''s Compensation Act, 1923 (8 of 1923) in respect of the death of, or bodily injury to, any such employee-

(a) engaged in driving the vehicle, or

(b) if it is a public service vehicle engaged as a conductor of the vehicle or in examining tickets on the vehicle, or

(c) if it is a good carriage being carried in the vehicle, or

(ii) to cover any contractual liability.

Explanation: For the removal of doubts, it is hereby declared that the death of or bodily injury to any person or damage to any property of a third

party shall be deemed to have been caused by or to have arisen out of, the use of a vehicle in a public place notwithstanding that the person who is

dead or injured or the property which is damaged was not in a public place at the time of the accident, if the act or omission which led to the

accident occurred in a public place.

(2) Subject to the proviso to sub-section (1) a policy of insurance referred to in sub-section (1) shall cover any liability incurred in respect of any

accident, up to the following limits, namely:

(a) save as provided in clause (b), the amount of liability incurred;

(b) in respect of damage to any property of a third party, a limit of rupees six thousand:

Provided that any policy of insurance issued with any limited liability and in force, immediately before the commencement of this Act, shall continue

to be effective for a period of four months after such commencement or till the date of expiry of such policy whichever is earlier.

(3) A policy shall be of no effect for the purposes of this Chapter unless and until there is issued by the Insurer in favour of the person by whom the

policy is effected a certificate of insurance in the prescribed particulars of any condition subject to which the policy is issued and of any other

prescribed matters; and different forms, particulars and matters may be prescribed in different Considering the arguments of the learned counsel on

either side,.

(4) Where a cover note issued by the insurer under the provisions of this Chapter or the rules made thereunder is not followed by a policy of

insurance within the prescribed time, the insurer shall, within seven days of the expiry of the period of the validity of the cover note, notify the fact

to the registering authority in whose records the vehicle to which the cover note relates has been registered or to such other authority as the State

Government may prescribe.

(5) Notwithstanding anything contained in any law for the time being in force, an insurer issuing a policy of insurance under this Section shall be

liable to indemnify the person or classes of persons specified in the policy in respect of any liability which the policy purports to cover in the case of

that person or those classes of persons.

A plain reading of the above provisions of Section 147 makes it clear that the policy of insurance will have to insure the person (the owner)

against any liability which may be incurred by him (owner). Therefore, unless there is a liability fixed on the owner, the question of the Insurance

Company indemnifying the owner will not arise. In other words, the Act presupposes that before calling upon the insurance company to satisfy the

Judgement and award, it is a precondition that there must be actual liability being case on the insured and unless such a liability exists, the question

of the Insurance Company being saddled with the responsibility to satisfy the Judgement and award does not arise.

In the case on hand, the tractor trailer in question was under the control of the 6th Respondent Board and it was the 6th Respondent which

was the owner of the vehicle at the relevant point of time and the vehicle was run by the driver under the instructions and directions given by the 6th

Respondent/CMWSSB and as such, the question of the registered owner of the vehicle having anything to do with the manner of driving the

vehicle does not arise. Once no liability is there on the registered owner of the vehicle, calling upon the insurer to satisfy the award also cannot be

construed as a possibility in law having regard to the above provision of the Motor Vehicles Act, 1988.

In Rajasthan State Transport Corporation v. Kailash Nath Kothari and Others (supra) the Honourable Supreme Court dealt with a case and

after considering the facts which revealed that the vehicle was in possession and under the control of the Corporation for the purpose of running on

the specified route and was being used for carrying passengers on hire by the Corporation and further their driver was to carry out instruction,

orders and directions of the Corporation, the Honourable Supreme Court held that the Privity of contract of the passengers of the bus was only

with the Corporation and in the light of the said facts, the Honourable Supreme Court went on to observe thus:

The general proposition of law and the presumption arising therefrom that an employer that is the person who has the right to hire and fire the

employee, is generally responsible vicariously for the tort committed by the concerned employee during the course of his employment and within

the scope of his authority, is a rebuttable presumption. If the original employer is able to establish that when the servant was lent, the effective

control over him was also transferred to the hirer, as the case may be, must be held vicariously liable for the tort committed by the concerned

employee in the course of his employment while under the command and control of the hirer notwithstanding the fact that the driver would continue

to be on the payroll of the original owner.

In the case of National Insurance Co. Limited v. Deepa (supra) the Honourable Supreme Court was seized with a case where the facts

revealed that a private car (Maruti Gypsy) was requisitioned by the State for the purpose of deploying the same for election duty and the car as

requisitioned by the Sub Divisional Magistrate, Rampur, through the Deputy Commissioner, Shimla and the vehicle was in the possession of the

said officer and on 17.11.1993 the said vehicle met with an accident. When the question arose as to who is liable to pay the compensation., the

Honourable Supreme Court after considering the law laid down in Rajasthan State Transport Corporation v. Kailash Nath Kothari and Others

(supra) ultimately held that the State shall be liable to pay the compensation to the claimants and not the registered owner of the vehicle.

In the decision of the Honourable Supreme Court UP State Road Transport Corporation v. Kulsum and Others (supra) referred to by the

learned counsel for the 6th Respondent Board, the Honourable Supreme Court has taken note of the fact that there has not been any violation of

the terms and conditions of the Insurance Policy and it held that the Insurance Company has no legal justification to deny the payment of

compensation to the claimants. In this case, there is no denial of the fact that there has been violation of the terms and conditions of the policy,

inasmuch as there is a clause that the vehicle should not be hired. It cannot be said that the 6th Respondent Board had no knowledge of the said

terms and conditions of the policy.

That apart, proviso to Section 147 makes it clear that the policy shall not be required to cover any contractual liability. When the Act does not

require the- Insurance Company to cover the risk arising out of contractual liability and when the said agreement is only between the 6th

Respondent/CMWSSB and the registered owner and the Insurance Company is not a party, the Insurance Company cannot be burdened with the

liability.

Having thus analyzed the position in law as regards the liability vis-a-vis the hirer and the registered owner, the inevitable conclusion based on

the ruling of the Honourable Supreme Court in the decisions mentioned earlier and taking into account the facts and circumstances of the case, is

that the 6th Respondent Board is liable to pay compensation and not the Insurance Company.

Coming to the quantum of compensation, the learned counsel for the Respondents did not raise any grievance in regard to award of

compensation of Rs. 6,60,000/- to the claimants. Therefore, no interference is called for as regards the quantum of compensation. For the forgoing

reasons, this civil miscellaneous appeal is allowed and the impugned judgment and decree of the Tribunal fastening liability on the Insurance

Company is set aside and the impugned award of compensation, the apportionment and interest awarded by the Tribunal are confirmed. The

compensation will have to be paid by the 6th Respondent Chennai Metro Water Supply and Sewerage Board. The entire award amount with

interest deposited by the Appellant Insurance Company shall be disbursed to the claimants as apportioned by the Tribunal. The 6th Respondent

Chennai Metro Water Supply and Sewerage Board is directed to pay the entire award amount with interest and costs to the Appellant Insurance

Company directly within a period of eight weeks from the date of receipt of a copy of this order. The claimants 1 and 4 are permitted to withdraw

their respective award amounts with proportionate interest as apportioned by the Tribunal. The share of the minor claimants 2 and 3 shall be

invested in any one of the Nationalized Banks, till they attain majority. The 1st claimant is entitled to withdraw the interest from the deposit of the

share of the minor claimants once in three months. No costs.