Oriental Insurance Co. vs Sangeeta and Others

B.A. Khan, J.—What is the true nature of an insurer's liability under the Motor Vehicles Act ? Does he incur the liability independent of the

liability of the insured or is it dependent and conditional on the later ? In other words, is the insurer liable to indemnify a claimant who has not

impleaded the insured as respondent and has not obtained a judgment against him?

This is precisely the controversy in this appeal which arises out of a Car - Truck collision. The Car belonged to a partnership Firm called M/s.

Dharm Steel Industries and was also insured in its name. Claimant's husband, one Romesh Kumar was a partner of the firm. The couple was

travelling in the ill-fated car with the driver Chhote Lal at the wheel when it collided with a Truck on Jammu-Pathankot National Highway. Romesh

Kumar died in the accident and so did Chhote Lai. Sangeeta, however, survived suffering multiple injuries in the process.

Three claim petitions (Nos. 79, 81 and 83 of 1988) came to be filed before MACT, Kathua as a result. In petition No. 79 of 1988, filed by

L.Rs. of Romesh Kumar, Tribunal recorded a finding of composite negligence by the two drivers and awarded compensation of Rs. 1,73,000/-. It

imposed the whole liability upon the insurer of the offending Truck and exonerated the appellant-Company. In Sangeeta's petition (No. 83 of

1988), Tribunal awarded a compensation of Rs. 88,000/- for the injuries suffered by her and fastened the part liability (Rs. 40,000/-) on the

appellant Company. This is what has sparked off the present controversy with the Company claiming immunity on the plea that it could not be held

liable in the absence of the insured who had not been impleaded a respondent and against whom there was no judgment.

Whether the Company can be held liable is the question. The answer calls for an examination of the genesis and nature of a contract of

insurance. It is elementary that the principle of indemnity constitutes the very foundation of such contract, wherein the insurer promises to indemnify

the insured for any loss or liability caused to him by his own conduct or the conduct of any other persons. The privity of contract exists only

between the insurer and the insured who mutually bind themselves and no rights or liability accrue thereunder to any third party. An insurer has no

direct liability qua the claimant. His liability springs from that of the insured and is secondary and conditional to it. Where no liability is imposed

upon the insured, it cannot be fastened on the insurer either. To put it in the words of Sandhawalia (CJ) as he then was, speaking for a Full Bench

of Punjab and Haryana High Court 1982 ACJ 211

It can now be said as a dictum that no judgment against the insured no judgment against the insurer.

This position in common Law is fortified by the relevant statutory provisions. Section 96 of the M.V. Act make it plain that the Insurer's liability

arises only when there is a judgment against the Insured person who has taken out the Insurance policy. The provision makes it obligatory for the

insurer to satisfy the judgment passed against the insured. But where there is no judgment against the insured there is correspondingly no obligation

on the Insurance Company to satisfy anything. In other words, if no judgment is passed against the insured determining his liability for the wrong

committed, nothing can be enforced against the insurer.

This position stands fully settled and reference in this regard can be made to a long line of decisions on the point (refer to 1982 ACJ 211 and

ACJ 118. It is, however, unnecessary to extract the ratio laid down therein or to reproduce the provisions of Section 96 because doing so would

be only burdening this judgment.

The matter requires examination in the face of this settled legal position and if it can be held that Tribunal has passed no judgment or award

against the insured, the company will have to be exonerated from the liability. Therefore, it first requires to be seen as to who is the insured.

There is no dispute about the ownership of the car involved in the accident. Its ownership admittedly vested in M/s. Dharm Steel Industries and

it was also insured in the name of this Firm. Therefore, every partner of the firm including deceased Romesh Kumar was its owner as well as the

insured. It is also admitted that neither the firm nor any of its partners was arrayed as respondent in the claim petition. It may not have been

necessary to implead deceased Romesh Kumar (one of the owner/insured) and driver Chhote Lal as respondents, as both had died in the

accident. But nothing prevented the claimant to implead the firm and its partners and to invite a judgment against them as she could still maintain

and enforce her claim against them. Her failure to do so has resulted in there being no judgment against the insured and that being so, no liability

could or would fall on the insurer.

It is true that the Tribunal has found the drivers of the two vehicles jointly negligent and responsible for the accident. But that, in my view, is not

enough to pass on the liability to the owner-insured who was not before the Tribunal and had no occasion to set up his case admitting or

disclaiming his liability.

I, therefore, hold that claimants failure to implead the insured as respondent and to obtain a judgment against him has disentitled her to be

indemnified by the appellant-Company. However, since the Tribunal has found it to be a case of composite negligence wherein liability of

tortfeasor is joint and several, the compensation amount awarded by the Tribunal becomes wholly recoverable from the insurer of the offending

Truck (respondent No. 4) I consequently, allow this appeal and modify the award to the extent indicated. The awarded amount shall be paid by

respondent No. 4 within three months from today.