2007 (4) TMI 700 - SC - Indian Laws

Whether 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 insured, the owner of the vehicle?

Issues Involved:
1. Liability of the insurance company under the Motor Vehicles Act, 1988.
2. Whether the deceased was driving the vehicle at the time of the accident.
3. Applicability of the Swaran Singh case to the present case.
4. Requirement of proving negligence in claims under Section 166 of the Motor Vehicles Act, 1988.
5. Coverage of employees under the insurance policy.

Detailed Analysis:

1. Liability of the Insurance Company:
The insurance policy in question was in terms of the Motor Vehicles Act, 1988, and did not cover the employee of the owner who was driving the vehicle while attending to the business of the employer company. The deceased was not a "third party" under the policy or the Act. The insurance company argued that the policy did not cover the employee of the owner driving the vehicle, and the High Court erred in directing the insurance company to pay the compensation decreed by the Tribunal. The Supreme Court agreed, stating that the insurance company was not liable to indemnify the insured in this case.

2. Whether the Deceased was Driving the Vehicle:
The Tribunal found that the deceased was driving the vehicle at the time of the accident and did not hold a valid driving license. This finding was not reversed by the High Court. The Supreme Court noted that the High Court should have applied its mind better to the question arising and specifically answered the question of who was driving the vehicle at the time of the accident. The insurance company argued that without impleading Mahmood Hasan, who was allegedly driving the car, the claim should not have been entertained.

3. Applicability of the Swaran Singh Case:
The claimants argued that the insurance company was liable to pay the compensation even if there was a breach of a policy condition, citing the Swaran Singh case. However, the Supreme Court found that the Swaran Singh case related to third-party claims and was not applicable to the present case, which did not involve a third party. The Court stated that the whole protection provided by Chapter XI of the Act is against third-party risk, and the insurance company cannot be made automatically liable merely by resorting to the Swaran Singh ratio.

4. Requirement of Proving Negligence:
The Supreme Court reiterated that proof of negligence is necessary before the owner or the insurance company can be held liable for the payment of compensation in a motor accident claim case under Section 166 of the Act. The Court referred to the Minu B. Mehta case, which held that proof of negligence remained the lynchpin to recover compensation. The Court also noted that the Gujarat State Road Transport Corporation case did not jettison the requirement of proving negligence in claims under Section 166.

5. Coverage of Employees under the Insurance Policy:
The Supreme Court examined the provisions of Section 147 of the Motor Vehicles Act, 1988, and concluded that the insurance policy need not cover the liability in respect of death or injury arising out of and in the course of the employment of an employee of the insured, unless it is a liability arising under the Workmen's Compensation Act, 1923. The Court found that the deceased, being an employee not covered by the Workmen's Compensation Act, was not covered compulsorily under the Act, and only a special contract could bring such a person under coverage. There was no special contract in this case.

Conclusion:
The Supreme Court allowed the appeal, reversing the decision of the High Court, and restored the award of the Tribunal exonerating the insurance company from liability. The Court emphasized that the insurance company was not liable to indemnify the insured and was not obliged to satisfy the award of the Tribunal/Court and then have recourse to the insured, the owner of the vehicle. The claimants had to establish the negligence of the driver, and the deceased was not covered under the insurance policy as an employee of the insured.

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