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2004 (1) TMI 703 - SC - Indian LawsMotor Vehicle Claims Tribunal awards - Interpretation of Section 149(2)(a)(ii) vis-a-vis the proviso appended to Sub-sections (4) and (5) of the Motor Vehicles Act, 1988 - National Insurance Company Limited (Insurer) -Defences available to the insurer under Section 149(2)(a)(ii) - Validity of driving licences and their impact on insurer liability - HELD 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. We may, however, hasten to add that the Tribunal and the court must, however, exercise their jurisdiction to issue such a direction upon consideration of the facts and circumstances of each case and in the event such a direction has been issued despite arriving at a finding of fact to the effect that the insurer has been able to establish that the insured has committed a breach of contract of insurance as envisaged under Sub-clause (ii) of Clause (a) of Sub-section (2) of Section 149 of the Act, the insurance company shall be entitled to realise the awarded amount from the owner or driver of the vehicle, as the case may be, in execution of the same award having regard to the provisions of Sections 165 and 168 of the Act. However, in the event, having regard to the limited scope of inquiry in the proceedings before the Tribunal it had not been able to do so, the insurance company may initiate a separate action therefore against the owner or the driver of the vehicle or both, as the case may be. Those exceptional cases may arise when the evidence becomes available to or comes to the notice of the insurer at a subsequent stage or for one reason or the other, the insurer was not given opportunity to defend at all. Such a course of action may also be resorted when a fraud or collusion between the victim and the owner of the vehicle is detected or comes to the knowledge of the insurer at a later stage. Although, as noticed hereinbefore, there are certain special leave petitions wherein the persons having the vehicles at the time when the accidents took place did not hold any licence at all, in the facts and circumstances of the case, we do not intend to set aside the said awards. Such awards may also be satisfied by the petitioners herein subject to their right to recover the same from the owners of the vehicles in the manner laid down therein. But this order may not be considered as a precedent. Although in most of the case, we have not issued notices in view of the fact that the question of law has to be determined; we have heard counsel for the parties at length at this stage SUMMARY OF FINDINGS The summary of our findings to the various issues as raised in these petitions are as follows (i) Chapter XI of the Motor Vehicles Act, 1988 providing compulsory insurance of vehicles against third party risks is a social welfare legislation to extend relief by compensation to victims of accidents caused by use of motor vehicles. The provisions of compulsory insurance coverage of all vehicles are with this paramount object and the provisions of the Act have to be so interpreted as to effectuate the said object. (ii) Insurer is entitled to raise a defence in a claim petition filed u/s 163A or Section 166 of the Motor Vehicles Act, 1988 inter alia in terms of Section 149(2)(a)(ii) of the said Act. (iii) The breach of policy condition, e.g. disqualification of driver or invalid driving licence of the driver, as contained in Sub-section (2)(a)(ii) of Section 149, have to be proved to have been committed by the insured for avoiding liability by the insurer. Mere absence, fake or invalid driving licence or disqualification of the driver for driving at the relevant time, are not in themselves defences available to the insurer against either the insured or the third parties. To avoid its liability towards insured, the insurer has to prove that the insured was guilty of negligence and failed to exercise reasonable care in the matter of fulfilling the condition of the policy regarding use of vehicles by duly licensed driver or one who was not disqualified to drive at the relevant time, (iv) The insurance companies are, however, with a view to avoid their liability must not only establish the available defence(s) raised in the said proceedings but must also establish 'breach' on the part of the owner of the vehicle; the burden of proof where for would be on them. (v) The court cannot lay down any criteria as to how said burden would be discharged, inasmuch as the same would depend upon the facts and circumstance of each case. (vi) Even where the insurer is able to prove breach on the part of the insured concerning the policy condition regarding holding of a valid licence by the driver or his qualification to drive during the relevant period, the insurer would not be allowed to avoid its liability towards insured unless the said breach or breaches on the condition of driving licence is/are so fundamental as are found to have contributed to the cause of the accident. The Tribunals in interpreting the policy conditions would apply 'the rule of main purpose' and the concept of 'fundamental breach' to allow defences available to the insured u/sn 149(2) of the Act. (vii) The question as to whether the owner has taken reasonable care to find out as to whether the driving licence produced by the driver, (a fake one or otherwise), does not fulfil the requirements of law or not will have to be determined in each case. (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. (ix) The claims tribunal constituted u/s 165 read with Section 168 is empowered to adjudicate all claims in respect of the accidents involving death or of bodily injury or damage to property of third party arising in use of motor vehicle. The said power of the tribunal is not restricted to decide the claims inter se between claimant or claimants on one side and insured, insurer and driver on the other. In the course of adjudicating the claim for compensation and to decide the availability of defence or defences to the insurer, the Tribunal has necessarily the power and jurisdiction to decide disputes inter se between insurer and the insured. The decision rendered on the claims and disputes inter se between the insurer and insured in the course of adjudication of claim for compensation by the claimants and Se award made thereon is enforceable and executable in the same manner as provided in Section 174 of the Act for enforcement and execution of the award in favour of the claimants. (x) Where on adjudication of the claim under the Act the tribunal arrives at a conclusion that the insurer has satisfactorily proved its defence in accordance with the provisions of Section 149(2) read with Sub-section (7), as interpreted by this Court above, the Tribunal can direct that the insurer is liable to be reimbursed by the insured for the compensation and other amounts which it has been compelled to pay to the third party under the award of the tribunal Such determination of claim by the Tribunal will be enforceable and the money found due to the insurer from the insured will be recoverable on a certificate issued by the tribunal to the Collector in the same manner u/s 174 of the Act as arrears of land revenue. The certificate will be issued for the recovery as arrears of land revenue only if, as required by Sub-section (3) of Section 168 of the Act the insured fails to deposit the amount awarded in favour of the insurer within thirty days from the date of announcement of the award by the tribunal. (xi) The provisions contained in Sub-section (4) with proviso thereunder and Sub-section (5) which are intended to cover specified contingencies mentioned therein to enable the insurer to recover amount paid under the contract of insurance on behalf of the insured can be taken recourse of by the Tribunal and be extended to claims and defences of insurer against insured by, relegating them to the remedy before, regular court in cases where on given facts and circumstances adjudication of their claims inter se might delay the adjudication of the claims of the victims. Thus, these petitions are dismissed but without any order as to costs.
Issues Involved:
1. Interpretation of Section 149(2)(a)(ii) vis-a-vis the proviso appended to Sub-sections (4) and (5) of the Motor Vehicles Act, 1988. 2. Defences available to the insurer under Section 149(2)(a)(ii). 3. Liability of the insurer to satisfy the decree and recover from the owner or driver. 4. Validity of driving licences and their impact on insurer liability. 5. Jurisdiction and powers of the Claims Tribunal. Summary of Judgment: 1. Interpretation of Section 149(2)(a)(ii): The Supreme Court examined the interpretation of Section 149(2)(a)(ii) vis-a-vis the proviso appended to Sub-sections (4) and (5) of the Motor Vehicles Act, 1988. The Court noted that these provisions are part of a social welfare legislation aimed at providing relief to victims of motor vehicle accidents. The Court emphasized that the provisions must be interpreted to effectuate this objective. 2. Defences Available to the Insurer: The insurer raised several defences under Section 149(2)(a)(ii), including: - The driving licence was fake. - The driver did not have any licence. - The licence had expired and was not renewed. - The licence was for a different class of vehicle. - The driver had only a learner's licence. The Court held that the insurer has an absolute right to raise these defences. However, the insurer must prove that the insured was guilty of negligence and failed to exercise reasonable care in ensuring that the vehicle was driven by a duly licensed driver. 3. Liability of the Insurer to Satisfy the Decree: The Court held that the insurer is liable to satisfy the decree at the first instance and can recover the amount from the owner or driver of the vehicle. The insurer must establish that there was a breach on the part of the insured. The burden of proof lies on the insurer. 4. Validity of Driving Licences: The Court discussed various scenarios involving the validity of driving licences: - If the driver had a fake or expired licence, the insurer must prove that the insured was aware of this and still allowed the driver to operate the vehicle. - If the driver had a learner's licence, the insurer is still liable to satisfy the decree. - If the driver had a licence for a different class of vehicle, the insurer must prove that this was the cause of the accident. 5. Jurisdiction and Powers of the Claims Tribunal: The Claims Tribunal has the power to adjudicate all claims related to motor vehicle accidents, including disputes between the insurer and the insured. The Tribunal can direct the insurer to pay the compensation and then recover the amount from the insured. The Tribunal's decision is enforceable in the same manner as provided in Section 174 of the Act. Summary of Findings: 1. Chapter XI of the Motor Vehicles Act, 1988 is a social welfare legislation. 2. Insurer can raise defences under Section 149(2)(a)(ii). 3. Breach of policy conditions must be proved by the insurer. 4. Mere absence or invalidity of a driving licence is not a sufficient defence. 5. Insurer must prove negligence on the part of the insured. 6. The Tribunal can adjudicate disputes between the insurer and the insured. 7. The insurer can recover the amount from the insured if the breach is proved. 8. The Tribunal's decision is enforceable as arrears of land revenue. The petitions were dismissed without any order as to costs.
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