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TMI Blog2007 (3) TMI 663X X X X Extracts X X X X X X X X Extracts X X X X ..... s identical questions are involved and therefore the appeals are disposed of by this common judgment. In each of the impugned judgments the concerned High Court held that the principles laid down by this Court in National Insurance Co. Ltd. v. Swaran Singh (2004 (3) SCC 297) is applicable even to claims other than third party claims. Some of these appeals also relate to orders passed by the National Consumer Disputes Redressal Commission, New Delhi (in short the Commission ) where a similar view has been taken. Since there has been elaborate analysis of the factual position it would be appropriate to decide the basic principles in law and ask the High Courts/Commissions to decide the cases afresh keeping in mind the view expressed in the present judgment. The decision in Swaran Singh s case (supra) applied to claims which involved only the insurance company and the owner of the vehicle i.e. where there was no third party involved. It has been highlighted by learned counsel for the appellants that Swaran Singh s case (supra) was rendered in the background of Section 149 of the Motor Vehicles Act, 1988 (in short the Act ) which has no application to cases where there is no th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of any judgment or award unless, before the commencement of the proceedings in which the judgment or award is given the insurer had notice through the Court or, as the case may be, the Claims Tribunal of the bringing of the proceedings, or in respect of such judgment or award so long as execution is stayed thereon pending an appeal; and an insurer to whom notice of the bringing of any such proceedings is so given shall be entitled to be made a party thereto and to defend the action on any of the following grounds, namely:- (a) that there has been a breach of a specified condition of the policy, being one of the following conditions, namely: (i) a condition excluding the use of the vehicle- (a) for hire or reward, where the vehicle is on the date of the contract of insurance a vehicle not covered by a permit to ply for hire or reward, or (b) for organized racing and speed testing, or (c) for a purpose not allowed by the permit under which the vehicle is used, where the vehicle is a transport vehicle, or (d) without side-car being attached where the vehicle is a motor cycle; or (ii) a condition excluding driving by a named person or persons or by any person who is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncurred by a person insured by a policy exceeds the amount for which the insurer would apart from the provisions of this section be liable under the policy in respect of that liability, the insurer shall he entitled to recover the excess from that person. (6) In this section the expression "material fact" and "material particular" means, respectively a fact or particular of such a nature as to influence the judgment of a prudent insurer in determining whether he will take the risk and, if so, at what premium and on what conditions, and the expression "liability covered by the terms of the policy" means a liability which is covered by the policy or which would be so covered but for the fact that the insurer is entitled to avoid or cancel or has avoided or cancelled the policy. (7) No insurer to whom the notice referred to in sub-section (2) or sub-section (3) has been given shall be entitled to avoid his liability to any person entitled to the benefit of any such judgment or award as is referred to in subsection (1) or in such judgment as is referred to in sub-section (3) otherwise than in the manner provided for in sub-section (2) or in the corresponding law of the reciprocatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iver, as contained in subsection (2)(a)(ii) of Section 149, has 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 the 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 a duly licensed driver or one who was not disqualified to drive at the relevant time. (iv) Insurance companies, 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 wherefore would be on them. (v) The court cannot lay down any criteria as to how the said burden would be discharged, inasmuch as the same would depend upon the facts and circumstances of each case. (vi) Even where the insurer is able to prove breach on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 under Section 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 the proviso thereunder and sub-section (5) which are intended to cover specified contingencies mentioned therein to enable the insurer to recover the amount paid under the contract of insurance on behalf of the insured can be taken recourse to by the Tribunal and be extended to claims and defences of the insurer against the insured by relegating them to the remedy before regular court in cases where on given facts and circumstances adjudication of their claims inter se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sight, appear to run counter to what 1 might call the common-sense view of the proceedings. None the less it is necessary for us to administer the law as it stands, and if any alteration is to be made in it that must be made by the proper authorities and by the proper means. On careful consideration of the authorities I would only say that that view, however cogent it might at first sight appear, is untenable. The company had insured themselves against what are commonly called third party risks with the Universal Automobile Insurance Company, and they had paid the premiums. The liquidation of a company or the bankruptcy of an individual bars the right of a creditor to proceed any further against the company or the bankrupt. There is an absolute break in the relationship between the creditor who has suffered the accident and the insurance company, and there cannot be a privity under which, when the bankruptcy or liquidation supervenes, you can cancel out the defendants and then say that a privity arises between the creditor and the insurance company and that the latter has to make good this principal sum to the former It is, therefore, clear to my mind, after considering the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant had a real grievance; but the general rule of law was too strong to allow the Court to make any exception, however the Court might sympathize with the appellant. The position in law was quite clear, and it was that the appellant had no right or claim against the insurance company or against money paid by the insurance company. The assured had a direct right of recourse against the insurance company, but a third party had no such right, because there was no privity between him and the insurance company, and it was difficult to see how a special right could be said to exist against the insurance company, or any right to claim money paid over by the insurance company, merely because the assured happened to be in financial difficulties. Upon what grounds of equity or legal logic can it be argued that, because the law, on grounds of public policy, compels the creditor, the liability to whom is the event upon which the right of a bankrupt or of an insolvent company to payment of the sum covered by the contract arises, to be content with such share of the assets of the bankrupt or the company in liquidation as a pari passu distribution between creditors will give, these asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hird Parties". A significant factor which needs to be noticed is that there is no contractual relation between the insurance company and the third party. The liabilities and the obligations relatable to third parties are created only by fiction of Sections 147 and 149 of the Act. It is also to be noted that the terms of the policy have to be construed as it is and there is no scope for adding or subtracting something. However liberally the policy may be construed, such liberalism cannot be extended to permit substitution of words which are not intended. (See United India Insurance Co. Ltd. V Harchand Rai Chandan Lal (2004 (8) SCC 644 and Polymat India (P) Ltd. V. National Insurance Company Ltd. and Ors. (2005 (9) SCC 174). The primary stand of the insurance company is that the person driving the vehicle did not have a valid driving license. In Swaran Singh s case (supra) the following situations were noted: (i) the driver had a license but it was fake; (ii) the driver had no license at all; (iii) the driver originally had a valid license but it had expired as on the date of the accident and had not been renewed; (iv) the license was for a class of vehicles other than th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... public place, unless there is in force in relation to the use of the vehicle by that person or that other person, as the case may be, a policy of insurance complying with the requirements of this chapter". Of course this provision does not apply to vehicles owned by the Central or State Government and used for Government purposes not connected with any commercial enterprise. This provision corresponds to Section 94 of the old Act. Section 147 provides that the policy of insurance to be issued by the authorized insurer must insure the specified person or classes of persons against any liability incurred in respect of death of or bodily injury to any person or damage to any property of a third party as well as against the death of or bodily injury caused to any passenger of a public service vehicle caused by or arising out of the use of the vehicle in a public place. This provision is akin to Section 95 of the old Act. It will be seen that the liability extends to damage to any property of a third party and not damage to the property of the owner of the vehicle, i.e., the insured. Sub-section (2) stipulates the extent of liability and in the case of property of a third party the lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limit of liability fixed for damage to property of a third party is Rupees six thousand only as pointed out earlier. That is why even the Claims Tribunal constituted under Section 165 is invested with jurisdiction to adjudicate upon claims for compensation in respect of accidents involving death of or bodily injury to persons arising out of the use of motor vehicles, or damage to any property of a third party so arising, or both. Here also it is restricted to damage to third-party property and not the property of the insured." The restrictions relating to appeal in terms of Section 173 (2) does not apply to own damage cases. A plea has been taken about the desirability of purposive construction. "Golden Rule" of interpretation of statutes is that statutes are to be interpreted according to grammatical and ordinary sense of the word in grammatical or liberal meaning unmindful of consequence of such interpretation. It was the predominant method of reading statutes. More often than not, such grammatical and literal interpretation leads to unjust results which the Legislature never intended. The golden rule of giving undue importance to grammatical and literal meaning of late gav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch of this Court observed as under: "The primary principle of interpretation is that a constitutional or statutory provision should be construed 'according to the intent of they that made it' (Code). Normally, such intent is gathered from the language of the provision. If the language of the phraseology employed by the legislation is precise and plain and thus by itself, proclaims the legislative intent in unequivocal terms, the same must be given effect to, regardless of the consequences that may follow. But if the words used in the provision are imprecise, protean, or evocative or can reasonably bear meaning more than one, the rule of strict grammatical construction ceases to be a sure guide to reach at the real legislative intent. In such a case, in order to ascertain the true meaning of the terms and phrases employed, it is legitimate for the court to go beyond the arid literal confines of the provision and to call in aid other well-recognised rules of construction such as its legislative history, the basic scheme and framework of the statute as a whole, each portion throwing light on the rest, the purpose of the legislation, the object sought to be achieved and the conse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Courts is only to expound and not to legislate. Legislation in a modern State is actuated with some policy to curb some public evil or to effectuate some public benefit. The legislation is primarily directed to the problems before the Legislature based on information derived from past and present experience. It may also be designed by use of general words to cover similar problems arising in future. But, from the very nature of things, it is impossible to anticipate fully the varied situations arising in future in which the application of the legislation in hand may be called for, and, words chosen to communicate such indefinite referents are bound to be in many cases lacking in clarity and precision and thus giving rise to controversial questions of construction. The process of construction combines both literal and purposive approaches. In other words the legislative intention i.e., the true or legal meaning of an enactment is derived by considering the meaning of the words used in the enactment in the light of any discernible purpose or object which comprehends the mischief and its remedy to which the enactment is directed. (See District Mining Officer and Ors. v. Tata Iron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansform a fake licence as genuine. Any counterfeit document showing that it contains a purported order of a statutory authority would ever remain counterfeit albeit the fact that other persons including some statutory authorities would have acted on the document unwittingly on the assumption that it is genuine". As noted above, the conceptual difference between third party right and own damage cases has to be kept in view. Initially, the burden is on the insurer to prove that the license was a fake one. Once it is established the natural consequences have to flow. In view of the above analysis the following situations emerge: 1. The decision in Swaran Singh's case (supra) has no application to cases other than third party risks. 2.Where originally the license was a fake one, renewal cannot cure the inherent fatality. 3. In case of third party risks the insurer has to indemnify the amount and if so advised to recover the same from the insured. 4. The concept of purposive interpretation has no application to cases relatable to Section 149 of the Act. The High Courts/Commissions shall now consider the matter afresh in the light of the position in law as delineated above. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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