1996 (7) TMI 561 - SC - Indian Laws

Summary

Issues Involved:
1. Liability of the Insurance Company.
2. Vicarious Liability of the Owner.
3. Interpretation of Section 96 of the Motor Vehicles Act, 1939.

Summary:

1. Liability of the Insurance Company:
The primary issue was whether the Insurance Company could be absolved of its liability to pay compensation when the vehicle was driven by a person not holding a driving licence at the time of the accident. The Tribunal and the High Court held that the Insurance Company was not liable as the bus was driven by Rajinder Pal Singh, who did not have a driving licence. However, the Supreme Court, referencing Section 96 of the Motor Vehicles Act, 1939, concluded that the Insurance Company cannot repudiate its liability solely on the ground that the vehicle was driven by an unlicensed person. The court emphasized that the insurer must prove that the insured willfully violated the policy condition.

2. Vicarious Liability of the Owner:
The appellant contended that since the regular driver, Gurbachan Singh, allowed Rajinder Pal Singh to drive the bus without the appellant's authority, the appellant should not be liable. The Supreme Court, citing Salmond's Law of Torts and Halsbury's Laws of England, held that the owner is liable for the acts of his employees done within the scope of their employment, even if done in an unauthorized manner. The court reiterated that the employer is responsible for the manner in which the employee executes his authority, ensuring that third parties are not deprived of compensation.

3. Interpretation of Section 96 of the Motor Vehicles Act, 1939:
The court examined whether the Insurance Company could defend itself under Section 96(2)(b)(ii) by proving a breach of policy conditions. It was held that the term "breach" implies a willful violation by the insured. If the insured had taken all necessary precautions, such as appointing a duly licensed driver, and it was not established that the insured allowed an unlicensed person to drive, the insurer could not repudiate its liability. The court affirmed the principles laid down in Skandia Insurance Co. Ltd. vs. Kokilaben Chandravadan, emphasizing that the insurer cannot escape liability unless it is proven that the insured willfully breached the policy condition.

Conclusion:
The Supreme Court allowed the appeals, modifying the orders of the Tribunal and the High Court. It held that the Insurance Company shall be jointly and severally liable to pay the compensation to the claimants, reinforcing the principle of vicarious liability and ensuring that third parties are compensated for their losses. There was no order as to costs.