Oriental Insurance Co. Ltd. vs Mohd. Wali Ahmed and Others

B.K. Somasekhara, J.—These four appeals are the products of the common award rendered in O.P. Nos. 255/88, 256/88, 258/88 and 257/88 respectively by the Motor Accidents Claims Tribunal, Warangal dated 6-11-1990 in the claim petitions u/s 10-A of the M.V. Act (in short, the Act) fastening the liability on the 3rd respondent/insurer/appellant to pay the compensation in all the cases. The insurer denied the liability to pay the compensation in view of the fact that gratutious passengers who were carried in the vehicle involved in the accident are not covered by the risk under the terms of the policy and the Tribunal was wrong in mulcting the insurer in liability "in paying the compensation. Mr. Kota Subba Rao, the learned Counsel for the appellant in all the appeals has tried to drive home such a contention by relying upon New India Assurance Co. Ltd. Vs. Smt. Shanti Bai and others, , Preniner Insurance Co. Ltd. v. V. Siromanamma and Ors. 1984 ACJ 760 and Oriental Fire and General Insurance Company Ltd. Vs. Bondili Sitharam Singh and others, .

Mr. P. Keshav Rao, the learned Counsel for the respondents/claimants has tried to support the award.

The accident occurred on 16-5-1988 at about 7.30 a.m., while the deceased Asiya Begum and the other claimants were travelling in the lorry AAG 4299 belonging to the 2nd respondent, insured with the third respondent and driven by the 1st respondent in the O.Ps. The claimants pleaded that the petitioner in O.P. No. 255/88 was travelling with the luggage of 2 cots, 2 chairs and one rice bag and 2 sevian bags and 3 suit cases containing clothes and beedings along with the other members of the family who are the claimants in the other O.Ps. The Tribunal found that the accident was due to the negligence of the driver of the vehicle. It was also found that the vehicle was insured with the appellant/insurer as evidenced by the certificate of insurance, Ex.B-1. The Tribunal pointed out that the policy does not say as to what is the liability and how these persons were travelling in the vehicle with their luggage. However, without going into the details of the basis on which the liability was imposed, the Tribunal made all the respondents jointly and severally liable to pay the compensation.

This Court, having heard the learned Counsel for both the sides and having gone through the common award |n the O.Ps., has found that there was no evidence to establish that the deceased were accompanying the goods as such. Even if they were accompanying their own luggage, it cannot be brought within the definition of ''goods'' in Section 2(7) of the Act muchless within the normal understanding of such an expression. The worst is that the driver had permitted the deceased and the other claimants to travel in the lorry along with their luggage. There is nothing to indicate that the driver collected any amount from them either to travel by themselves or to carry their luggage. In effect, it was a case of the driver carrying the non-fare paying passengers or gratuitous passengers in a goods vehicle. Now we have to test whether the insurer can be made liable or absolved of the liability to indemnify the owner of the vehicle to pay the compensation in a case like this.

Among the precedents relied upon by Mr. K. Subba Rao, Siromanamma''s case (supra) dealt with the question about the liability of the insurer in the case of death of a gratuitous passenger in a lorry and while holding that the insurer is liable under the compulsory insurance as evidenced under the Act, the matter remitted for perusal of the policy and determine the liability depending upon the terms of the policy. In Sitharam Singh''s case (supra) this Court was dealing with the liability of the insurer where a passenger was carried for hire or reward and it was held that the permit did not authorise for it and therefore there was no liability on the part of the insurer. It was also held therein that where the permit was not produced, there cannot be any adverse inference against the owner in that situation. In Oriental Fire and General Insurance Company Limited v. M. Bhanumathi 1990 (1) ALT 685 : 1990 ACJ 1165 where the question is about imposing the ''no fault laibility'' on the insurance company, it was held that the Tribunal has to find out whether the vehicle was covered by insurance policy and all the other questions can be decided at the trial and for that purpose the terms of the policy are to be looked into. The question involved therein is about the scope of enquiry u/s 92-A of the Act before imposing the liability on the insurer. It has nothing to do with the liability of the insurer where gratuitous passengers are carried in a goods vehicle. In Bhannmathi''s case (supra) it was held that the burden was on the owner to plead and prove, by producing the policy which is always with the owner, to establish that it is a covenant of policy noting the liability of the insurer. A clear understanding of the law settled so far in regard to the liability of insurer in a claim u/s 10-A of the Act in view of Sections 94, 95 and 96 of the Act needs no special emphasis. This Court in P. Naguru and Another Vs. S. Krishnama Raju and Another, had an occassion to deal with such a question in detail. While taking definite view in the matter with legal conclusions, reliance was placed on three pronouncements of the Supreme Court in Pushpabai Purshottam Udeshi and Others Vs. Ranjit Ginning and Pressing Co. (P) Ltd. and Another, , Skandia Insurance Company v. Kokilaben Chandravadan AIR 1987 SC 1187, and Sohan Lal Passi v. P. Seshi Reddy 1995 (6) SCC 21. It was also a case dealing with the question of liability of the insurer wherein a driver of the vehicle had carried the passengers in a goods vehicle. The law as such was summarised in para 4 as follows:-

".... when once the vehicle is entrusted to a driver, there is implied authority by the owner of the vehicle to drive the vehicle and to do all possible acts in connection with the using of the vehicle except to act fraudulently against the interest of the owner. The question is not whether there was express or implied authority of the owner to carry passengers. If he had carried the passengers without express or implied authority of the owner, it only means he was performing his legitimate duties in an irregular manner. That itself will not absolve the owner of the vehicle regarding the vicarious liability for the acts committed by the driver, the servant acting in his authority to drive the vehicle and to use the vehicle in all manner possible for that purpose...."

That settles the question of liability on the part of the owner of the vehicle. This is a case wherein the vehicle is placed in charge of the driver who was duly licensed and by carrying the passengers in a goods vehicle, possibly he acted in an irregular manner while performing his legitimate duties. Dealing with the implications flowing from the precedents from Skandia''s case (supra) to Passi''s case (supra) and the implications of Sections 95(2) and 96(1) of the Act, it was held that when once the vehicle had been insured, the liability of the insurer is basically established to be in the status of a Judgment-Debtor, liable to indemnify the owner of the vehicle in paying the compensation except to avoid such liability by proving that the risk of such passengers was not covered by the terms of the policy by producing the policy and secondly by avoiding it by taking up one or other defences available Under Sections 95 and 96 of the Act. It was also conclusively recorded with the guidelines by the Supreme Court in the precedents supra that mere technical violation of the terms of the policy will not automatically absolve the insurer from satisfying the award passed in such a situation. There must be a clear plea and proof that there has been a wilful violation of the terms of the policy by the owner. Furthermore, it was also held that all the violations cannot by themselves absolve the insurer from paying the compensation. Sometimes even the prohibition clause in a insurance policy has to be read down depending upon the facts and circumstances of the case. Therefore, the question is not whether the liability of the insurer is absolved just because passengers are carried in a goods vehicle. In fact in B.V. Nagaraju Vs. M/s. Oriental Insurance Co. Ltd., Divisional Officer, Hassan, , the Supreme Court went to the extent of declaring the law that just because the number of passengers more than three permitted were carried in a goods vehicle, it cannot be taken as the breach of terms of the policy. Relying on Skandia''s case (supra) and also the reasoning of the State Commission, the Supreme Court pointed out as follows:-

"It is plain from the terms of the Insurance Policy that the insured vehicle was entitled to carry 6 workmen, excluding the driver. If those 6 workmen when travelling in the vehicle are assumed not to have increased any risk from the point of view of the Insurance Company on occurring of an accident, how could those added persons be said to have contributed to the causing of it, is poser, keeping apart the load it was carrying. Here, it is nobody''s case that the driver of the insured vehicle was responsible for the accident. In fact, it was not disputed that the oncoming vehicle had collided head-on against the insured vehicle, which resulted in the damage. Merely by lifting a person or two, or even three, by the driver or the cleaner of the vehicle, without the knowledge of owner, cannot be said to be such a fundamental breach that the owner should, in all events, be denied indemnification. The misuse of the vehicle was somewhat irregular though, but not so fundamental in nature so as to put an end to the contract, unless some factors existed which, by themselves, had gone to contribute to the causing of the accident....."

Mr. K. Subba Rao, the learned Counsel for the appellant has done his best to show that such expressions were made only in the context of deciding whether such a situation resulted in the damage to the vehicle. This Court on a careful reading of the precedent is not able to appreciate such an understanding of the expression made by the Supreme Court. The true understanding of the matter is whether by violating the terms of the policy by carrying passengers in a goods vehicle in excess of the permit, it would have contributed in any manner for the driver to cause the accident leading to the damage to the property, injury to persons and death of them. The logical and legal reasoning in that situation cannot be but what is stated above.

In the present case, there is nothing to indicate that the driver of the vehicle did not possess valid driving licence nor it was pleaded nor proved. There was also nothing to indicate that the owner of the vehicle had not entrusted it to a duly licenced or authorised driver. The accident occurred in the course of employment. The vehicle had been insured at the time of the accident as evidenced by Ex.B-1. There was nothing to indicate that the accident was due to carrying of the passengers/claimants and the deceased, in question adding to the negligence of the driver in driving the vehicle. Although Ex.B-1, certificate of insurance, was produced, the insurer did not choose to produce the copy of the policy or the policy itself to establish from the terms that the non-fare paying passengers were not covered by the terms of the policy. Thereby, the insurer in this case has violated the mandatory directions and caution issued by the Supreme Court in Jugal Kishore''s case (1988 ACJ 842). In spite of it, the insurer is contending that it is not liable to indemnify the owner in paying the compensation. Mr. Kota Subba Rao has tried to distinguish the facts of the case in judging the correctness of the award of the Tribunal on the ground that it was not a case of ACT Policy and it was a case of carrying passengers in a goods vehicle which was not one of the terms under the terms of the policy to be operated upon the insurer to be liable to pay the compensation by virtue of the indemnity clause. Such a contention could have had some weight or basis if the policy had come before the Tribunal to judge whether the non-fare paying passengers were covered by the policy or not and whether there had been a specific prohibition to carry such persons in the goods vehicle. In the absence of all this, in the first place the insurer is open for adverse inference that if the policy had been produced the contents would go against it and in the second place it failed to discharge the burden required on it to show that it could avoid the liability either under one or the other grounds available Under Sections 95 and 96 of the Act or by proving that the risk of such passengers had not been covered by the policy.

The precedents relied upon by the learned Counsel for the appellant has nothing to do with the true questions involved in the case nor can be taken as laying down the law based on what the Supreme Court has declared in the precedents supra and if that is so, they may not hold the floor as precedents muchless binding precedents.

Judged in any manner, the Appeals have no merit.

The Appeals are dismissed. No costs.