Shriram General Insurance Co Ltd v. Hans Raj & Ors.

Delhi High Court · 07 Jan 2015 · 2015:DHC:72

G. P. Mittal

MAC. APP. No.530/2011

2015:DHC:72

civil appeal_dismissed Significant

AI Summary

The Delhi High Court upheld insurer liability to pay compensation to a motor accident victim despite breach of policy conditions, allowing insurer recovery from the insured.

Full Text

MAC. APP. No.530/2011 HIGH COURT OF DELHI
Date of Decision: 7th January, 2015

MAC.APP. 530/2011
SHRIRAM GENERAL INSURANCE CO LTD ..... Appellant
Through: Mr. Shomik Mazumdar, Advocate

VERSUS

HANS RAJ & ORS ..... Respondents
Through: Nemo.

CORAM:

HON'BLE MR. JUSTICE G.P.MITTAL

JUDGMENT

G. P. MITTAL, J.

(ORAL)

1. This appeal is directed against the judgment dated 23.02.2011 passed by the Motor Accident Claims Tribunal (the Claims Tribunal) whereby compensation of Rs.1,10,206/- along with interest @ 7.5% per annum was awarded in favour of Respondent no.1 for having suffered injuries in a motor vehicular accident which occurred on 10.10.2009 at 9:40 p.m. on account of the rash and negligent driving of delivery van bearing no.DL-1LL-1103 by its driver (Respondent Devender Kapoor). 2015:DHC:72

2. There is twin challenge to the judgment. First, that the compensation awarded is on the higher side and second, that since breach of the terms and conditions of the policy was established, the Appellant ought to have been exonerated completely instead of merely granting recovery rights to it.

3. Respondent Hans Raj in the earlier said accident suffered fracture of both bones of the right leg distal 1/3rd end. He was removed to RML Hospital immediately. He was operated upon and was discharged on 11.10.2009 and thereafter, he remained as an OPD patient.

4. Treatment papers running into 32 pages Ex.PW-1/3 collectively was proved before the Claims Tribunal. It is evident from the treatment record that Respondent no.1 was getting follow up treatment after his discharge from the hospital. The visits to the hospital were frequent since January, 2010 as can be seen from the OPD slips proved on record.

5. The Claims Tribunal awarded a sum of Rs.28,000/- towards treatment on the basis of the bills proved on record, an amount of Rs.21,000/towards special diet and conveyance, a sum of Rs.26,406/- towards six months wages of a matriculate as Respondent no.1 was confined to home for a period of six months and a sum of Rs.60,000/- towards pain and suffering.

6. The compensation awarded to say the least was just and reasonable rather than the Claims Tribunal being quite conservative in awarding the compensation.

7. It is further urged by the learned counsel for the Appellant that since the appellant has successfully proved the breach of the terms and conditions of the insurance policy as held by the Claims Tribunal, the Appellant ought to have been exonerated and the owner and the driver ought to have been made liable to pay the compensation.

8. I am not inclined to agree with the learned counsel for the Appellant.

9. The issue of satisfying the third party liability even in case of breach of the terms of insurance policy is settled by three Judge Bench report in Sohan Lal Passi v. P. Sesh Reddy, (1996) 5 SCC 21. As per Section 149(2) of the Motor Vehicles Act (the Act), an insurer is entitled to defend the action on the grounds as mentioned under Section 149(2)(a)(i)(ii) of the Act. Thus, the onus is on the insurer to prove that there is breach of the condition of the policy. It is well settled that the breach must be conscious and willful. Even if a conscious breach on the part of the insured is established, still the insurer has a statutory liability to pay the compensation to the third party and will simply have the right to recover the same from the insured/tortfeasor either in the same proceedings or by independent proceedings as the case may be, as ordered by the Claims Tribunal or the Court. The question of statutory liability to pay the compensation was discussed in detail by a two Judge Bench of the Supreme Court in Skandia Insurance Company Limited v. Kokilaben Chandravadan, (1987) 2 SCC 654 where it was held that exclusion clause in the contract of Insurance must be read down being in conflict with the main statutory provision enacted for protection of victim of accidents. It was laid down that the victim would be entitled to recover the compensation from the insurer irrespective of the breach of the condition of policy. The three Judge Bench of the Supreme Court in Sohan Lal Passi analyzed the corresponding provisions under the Motor Vehicles Act, 1939 and the Motor Vehicles Act, 1988 and approved the decision in Skandia. In New India Assurance Co., Shimla v. Kamla and Ors., (2001) 4 SCC 342, the Supreme Court referred to the decision of the two Judge Bench in Skandia, the three Judge Bench decision in Sohan Lal Passi and held that the insurer who has been made liable to pay the compensation to third parties on account of issuance of certificate of insurance, shall be entitled to recover the same if there was any breach of the policy condition on account of the vehicle being driven without a valid driving licence. The relevant portion of the report is extracted hereunder:

“21. A reading of the proviso to sub-section (4) as well as the language employed in sub-section (5) would indicate that they are intended to safeguard the interest of an insurer who otherwise has no liability to pay any amount to the insured but for the provisions contained in Chapter XI of the Act. This means, the insurer has to pay to the third parties only on account of the fact that a policy of insurance has been issued in respect of the vehicle, but the insurer is entitled to recover any such sum from the insured if the insurer were not otherwise liable to pay such sum to the insured by virtue of the conditions of the contract of insurance indicated by the policy. 22. To repeat, the effect of the above provisions is this: when a valid insurance policy has been issued in respect of a vehicle as evidenced by a certificate of insurance the burden is on the insurer to pay to the third parties, whether or not there has been any breach or violation of the policy conditions. But the amount so paid by the insurer to third parties can be allowed to be recovered from the insured if as per the policy conditions the insurer had no liability to pay such sum to the insured. 23. It is advantageous to refer to a two-Judge Bench of this Court in Skandia Insurance Company Limited v. Kokilaben Chandravadan, (1987) 2 SCC 654. Though the said decision related to the corresponding provisions of the predecessor Act (Motor Vehicles Act, 1939) the observations made in the judgment are quite germane

now as the corresponding provisions are materially the same as in the Act. Learned Judge pointed out that the insistence of the legislature that a motor vehicle can be used in a public place only if that vehicle is covered by a policy of insurance is not for the purpose of promoting the business of the insurance company but to protect the members of the community who become suffers on account of accidents arising from the use of motor vehicles. It is pointed out in the decision that such protection would have remained only a paper protection if the compensation awarded by the courts were not recoverable by the victims (or dependants of the victims) of the accident. This is the raison d’etre for the legislature making it prohibitory for motor vehicles being used in public places without covering third-party risks by a policy of insurance.

24. The principle laid down in the said decision has been followed by a three-Judge Bench of this Court with approval in Sohan Lal Passi v. P. Sesh Reddy, (1996) 5 SCC 21.

25. The position can be summed up thus: The insurer and the insured are bound by the conditions enumerated in the policy and the insurer is not liable to the insured if there is violation of any policy condition. But the insurer who is made statutorily liable to pay compensation to third parties on account of the certificate of insurance issued shall be entitled to recover from the insured the amount paid to the third parties, if there was any breach of policy conditions on account of the vehicle being driven without a valid driving licence………”

10. Again in United India Insurance Company Ltd. v. Lehru & Ors., (2003) 3 SCC 338, in para 18 of the report the Supreme Court referred to the decision in Skandia, Sohan Lal Passi and Kamla and held that even where it is proved that there was a conscious or willful breach as provided under Section 149(2)(a) (ii) of the Motor Vehicle Act, the Insurance Company would still remain liable to the innocent third party but may recover the compensation paid from the insured. The relevant portion of the report is extracted hereunder:

“18. Now let us consider Section 149(2). Reliance has been placed on Section 149(2)(a)(ii). As seen, in order to avoid liability under this provision it must be shown that there is a “breach”. As held in Skandia and Sohan Lal Passi cases the breach must be on the part of the insured. We are in full agreement with that. To hold otherwise would lead to absurd results. Just to take an example, suppose a vehicle is stolen. Whilst it is being driven by the thief there is an accident. The thief is caught and it is ascertained that he had no licence. Can the insurance company disown liability? The answer has to be an emphatic “No”. To hold otherwise would be to negate the very purpose of compulsory insurance……….” xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx 20. ……….If it ultimately turns out that the licence was fake, the insurance company would continue to remain liable unless they prove that the owner/insured was aware or had noticed that the licence was fake and still permitted that person to drive. More importantly, even in such a case the insurance company would remain liable to the innocent third party, but it may be able to recover from the insured. This is the law which has been laid down in Skandia, Sohan Lal Passi and Kamla cases. We are in full agreement with the views expressed therein and see no reason to take a different view.”

11,508 characters total

11. The three Judge Bench of the Supreme Court in National Insurance Company Limited v. Swaran Singh & Ors., (2004) 3 SCC 297 again emphasized that the liability of the insurer to satisfy the decree passed in favour of the third party was statutory. It approved the decision in Sohan Lal Passi, Kamla and Lehru. Paras 73 and 105 of the report are extracted hereunder:

“73. The liability of the insurer is a statutory one. The liability of the insurer to satisfy the decree passed in favour of a third party is also statutory. xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx 105. Apart from the reasons stated hereinbefore, the doctrine of stare decisis persuades us not to deviate from the said principle.”

12. This Court in Oriental Insurance Company Limited v. Rakesh Kumar and Others, 2012 ACJ 1268 and other Appeals decided by a common judgment dated 29.02.2012, noticed some divergence of opinion in National Insurance Company Limited v. Kusum Rai & Ors., (2006) 4 SCC 250, National Insurance Company Limited v. Vidhyadhar Mahariwala & Ors., (2008) 12 SCC 701; Ishwar Chandra & Ors. v. The Oriental Insurance Company Limited & Ors., (2007) 10 SCC 650 and Premkumari & Ors. v. Prahalad Dev & Ors., (2008) 3 SCC 193 and held that in view of the three Judge Bench decision in Sohan Lal Passi(supra) and Swaran Singh, the liability of the Insurance Company vis-à-vis the third party is statutory. If the Insurance Company successfully proves the conscious breach of the terms of the policy, then it would be entitled to recovery rights against the owner or driver, as the case may be.

13. The appeal is devoid of any merit; the same is accordingly dismissed with costs.

14. Counsel fees is assessed at Rs.11,000/-.

15. Pending applications, if any, also stand disposed of.

JUDGE JANUARY 07, 2015 vk

Shriram General Insurance Co Ltd v. Hans Raj & Ors.

AI Summary

Full Text

JUDGMENT

Contact Us for a Free Consultation