Case: Pesumal Dhanmal Vs. New Asiatic Insurance- Company, Limited & Others

Patel, J.1. These two appeals Nos. 10 and 11 of 1962, arise out of two suits Nos. 70 and 71 of 1959 filed by the heirs of one Daooji Radhamohan Meherotra and by one Murli Dholandas respectively for damages in respect of a car accident which resulted in the death of Daooji and serious injury to Murli while the car was being driver by the defendant Pesumal.2. The short facts are that both the deceased Meherotra and Murli Dholandas accompanied the defendant on 13th March 1958 on a motor drive from Bombay to Poona by a motor car belonging to one Shamdas Nathumal Asvani. The defendant was in charge of the car and he was driving it with the consent and knowledge of Shamdas Nathumal Asvani. The plaintiffs allege that he was driving it rashly and negligently and while doing so, between Mile stones 93 and 94 there was a collision between the car and motor truck bearing No. BYT 2216 as a result of which Mehorotra died and Murli Dholandas suffered severe injuries. The heirs of Meherotra, and the injured Dholandas have filed these two suits respectively and claimed damages from the defendant.3. The Plaintiffs got a notice issued to the New Asiatic Insurance Co. Ltd., under S. 96(1) of the Motor Vehicles Act since tins Company had insured Aswani in respect of the car which was being driven by the defendant. After the notice was received, the New Asiatic insurance Co. took out a Chamber Summons for the Discharge the notice. It came before Mr. Justice Tarkunde who agreed with its contentions and discharged me notice. The Defendant Pesumal has appealed against the order of the learned Judge.4. The contention urged on behalf of the insurer was that the insurance policy did net cover the defendant because of the proviso contained in clause 3 which was a driver extension clause. Clause 3 reads thus:-"In terms of and subject to the limitations of the indemnity which is granted by this Section to the insured the company will indemnity any driver who is driving me Motor Car, on the Insureds order or with his permission provided that such Driver (3) is not entitled w indemnity under any other policy".We may call this proviso the avoidance clause. The insurer respondent places reliance on this clause, Clause 3 extends the insurance cover to any driver who is not ma owner of the car and indemnifies him if he is driving the motor car on the order of the insured or with his permission; provided that he is not entitled, to indemnity under any other policy. Clause 4 is the vehicle extension clause which indemnifies the insured, in the present case me owner of the car which was involved in the accident, whist he drove personally a private Motor Car not belonging to him and not hired to him under a Hire Purchase agreement. At the relevant time the defendant himself was insured in respect of a car owned by him with the Indian Trade and General insurance Co. Ltd. Whose policy also contained similar vehicle extension clause. Because of the indemnity provided by the vehicle extension clause in his policy in respect of his own vehicle with Indian Trade and General Insurance Co. Ltd. the respondent plausibly contended that it was discharged from all liability under clause 3 of the policy issued by it.The learned Judge relied upon the proviso contained in clause 3 of that policy and held that as the defendant was insured by the Indian Trade and General insurance Co., by its clause 4 in respect of a car not Belonging to him, the respondent Co., i.e. the New Asiatic insurance Co. Ltd., was relieved of its liability to indemnity the defendant.5. It may, however be noted that the attention of the learned Judge does not seem to have been invite to one important clause in the policy. That clause is contained in Section. III of the policy at p 70 of the paper Book in Appeal No. 10 of 1362 and reads as follows:-"Nothing in this Policy or any endorsement hereon shall affect the right of any person indemnified by the Policy or any other person to recover an amount under or by virtue of the provisions of the Motor Vehicles Act, 1939, Section 96.But the insured shall repay to the company an sums paid by the Company which the Company would not have been liable to pay but for the said provisions".We may advisedly call this clause the non-avoidance clause it is clear from this clause that if under S. 96 of the Motor Vehicles Act the respondent company is liable to the plaintiffs then nothing contained in the policy will relieve it of its liability. The question, therefore, whether the proviso in clause 3 of the policy is void is irrelevant. If we came to the conclusion that the respondent company is liable under S. 96.6. In order to consider the liability of the insurance Companies, one has to consider the scheme of Chapter VIII of the Motor Vehicles Act and particularly that of Sections 94, 95 and 95. Heading of the Chapter is "insurance of Motor Vehicles". S. 94 makes it an offence for any person who uses a vehicle except as a passenger or who causes or allows any other person to use a motor vehicle in a public place unless there is in force in relation to the use of the vehicle by that person or That other person a policy of insurance which complies with the requirements of that Chapter. By the very language the Section requires that there must be an insurance policy in relation to the vehicle which is being used and not that a driver is insured against claims for damages in respect of any vehicle-whether used or unused. S. 95 which lays down the requirements of the policy, by clause (b) of sub-section (1), requires that the policy must insure the person or classes of persons against any liability which may be incurred by them in respect of death or bodily injury to any person caused by or arising out of the use of we vehicle in a public place.Again, the emphasis is on the use of the vehicle and not en the use of any vehicle. Sub-Section (2) provides the nature of the liability that is required to be covered by the Insurance Policy. Sub-Section (5) of S. 95 creates an absolute liability in the insurer to indemnify the persons insured in respect of the liability covered by the policy notwithstanding anything contained anywhere in any law. S. 96 makes the insurer liable on judgment as if he were a judgment-debtor, if recovered against the insured or against the class of persons insured by the policy in respect of liability covered by S. 95(1)(b) on certain conditions being satisfied. Sub-Section (2) of S. 96 lays flown the conditions for such liability and also enumerates the defences which are open to the insurer to take if it brings itself on record as a defendant in pursuance of a notice to be issued under the earlier part of Sub-Section (2).7. Reading the Sections together it is dear that the insurance is required by S. 95(1) to be in respect of the vehicle which is being used and while driving which the accident is committed. Mere insurance of the driver or a vehicle without reference to the use of any particular vehicle against claims made against him by reason of an accident that he may commit does not, in our opinion, make the insurer liable directly to the person who has suffered the injury. The liability of the insurer arises only it has insured the driver in respect of the vehicle by the use or which the accident is committed. That being so. inasmuch as the policy issued by the Indian. Trade and General Insurance Co. Ltd. by clause (4) insured the defendant not in respect of the vehicle which was involved in the accident but in respect of another vehicle it would not be covered by S. 95(1) and consequently by S. 96(1), and that company would not be affected by the notice issued under Sub-Section (2) of Section 96. The statutory liability under Section 96, in our opinion, attaches only to the respondent company.Thus, the respondent Company being liable under S. 96 the non-avoidance clause applies notwithstanding me avoidance clause contained in the proviso to clause 3 of the policy. It is possible that as between the respondent and the appellant deferent, the latter may be liable to repay any sum which the respondent Company may be required to pay to the pontiffs in these suits. That, however, is not a matter to be decided in the present proceeding and we do not express any opinion on that question.8. Even apart from this non-avoidance clause, S. 96(3) is a complete answer to the respondent Companys challenge to the notice. Sec. 96(3) provides :"Where a certificate of insurance has been issued under sub-section (4) to Section by to the person by whom a policy has been effected, so much of the policy as purports as restrict the insurance of the- persons insured thereby by reference to any conditions other than those in- cl, (b) of Sub-S.-(2) shall, as respects such liabilities as are required to be covered by a policy under cl. (b) of Sub-Section (1) of Section 95, be of no effect;"It is clear from the wording of this clause that any condition restricting or avoiding the statutory liability of the insurer as provided in clause (1) of Sub-Section (1) of Section 95 which is not one of the conditions specified in clause (b) of Section 95(2) must be regarded as interactive for the purposes of the Act, though it may be binding between the company and the persons insured. Now, the only conditions mentioned in clause (b) of Sub-Section (2) of S. 96 are three : (i) that which excludes the use of the vehicle for hire or reward if the policy does not cover the risk and use for organised racing or speed testing; in the case of public service a purpose not permitted by the permit; (ii) that which excludes driving by a names person or persons or by any person who is not duly licences or by a disqualified person during the period of disqualification; (iii) that which excludes liability for injury which is caused by or is contributed to by conditions of war, not or civil commotion. It cannot be gainsaid that the avoidance clause in the policy in the present case is not covered by any of these conditions and that is net even me contention of the respondent Company, since that clause seeks to avoid a liability covered by Section 95(1)(b). It is ineffective, so far as the plaintiffs are concerned.9. Mr. Advani, however, argued that sub-section (3) of S. 96 swirled such conditions as were contrary to those contained in S. 96(2)(b) and that the clause with whom we are concerned was not in any manner in conflict will any of those conditions and that, therefore, Sub-Section (3) of S. 96 could not apply.We are afraid, wd cannot accept this condition for the obvious reason that the clause-in question provides a condition "other than those in cl. (b) of Sub-Sec. (2) of Sec. 96." in order to accept the argument we will have to substitute different words for the words actually used in the provision for which there is no justification.10. it was then contended that the proviso created a situation similar to the one where a person was not insured at all and. therefore the respondent was not liable. According to the learned Counsel, it is not compulsory under S. S4 or s. 95 for the Insurance. Company to insure a driver of a vehicle while insuring the motor car and its owner and the effect of the avoidance clause in cl.(3) is much the same as if the Insurance Company had not agreed to indemnify the driver in which case, it is argued, no notice could have been sent to the insurance Company. It seems the argument found favour with the learned Judge.We may, however, answer it by an analogy that no Insurance Company is bound to insure any owner of a motor vehicle. It an owner drives a motor vehicle which is not insured, he is liable to penalty but in the nature of things, no insurance company can be made liable. That, however, is not the question. The question is, having issued the policy, whether the respondent is entitled to impose any condition in the policy which in any manner restricts the cover of the insurance, and if it cannot be permitted to do so in the case of the owner of the car, it cannot certainly be. asserted that it can be permitted to do so in the case of any other class of drivers in respect of whom the policy covers the risk, in both cases by reason of S. 96(3).11. The learned Judge says in his judgment: "If the defendant had been one of the persona insured by the Policy issued by the Petitioners............Sub-Section (3) of S.96 might have prevented them from having recourse to those conditions ,...." With respect, it may be that the Policy was issued to Aswani but as a driver of the vehicle, the defendant has been insured by the respondent. If the defendant had not got a car of his own end did not hold air indemnity in respect or such a car it could not have been said that the respondent had not insured the defendant. The Section itself distinguishes between the "person to whom policy is issued" and "persons insured" End the defendant falls in the latter class me learned Judge further en says mat Section 95 does not require that the policy must extend w other drivers.It must be noted that S.94 refers to the persons to be insured and S.95 refers to the liability required to be covered. Both "enable the insurer to extend the indemnity to other driver and if the indemnity is so extended the case falls within S.96(1) and the Company becomes liable and Section 95(1)(b) is not relevant except for determining whether the indemnity under the policy tails within the ambit of that Section.The contention that the defences available to the insurer control the terms of the policy is also unsound. It does not affect the question of liability. Under Section 96(3) requirements for its applicability are that (1) a certificate must have been issued to the person who has effected the insurance, and (2) restrictions of the insurance of the persons insured other than those in clause (b) of Sub-Section (2) of S.96. As we have pointed OUT, the defendant is one of the class of persons insured and avoidance cause being not one of the conditions in cl. 103 of S.96(2) Section 96(3) applies.12. It was strenuously urged by Mr. Advani on behalf of his client that the scheme of Ss. 94, 95 and 96 was rot to require the insurance of any particular class of persons in connection with the vehicle causing me accident but if there was an insurance which indemnified either the rarer or the driver against liability irrespective of the vehicle, then the conditions of trig Section were satisfied. To accept this argument would require our substituting for the word "the" appearing in the words "use of the vehicle in a public place" in clause (b) of Section 95(1) the word "A" or "any". We have not been pointed out either from the scheme of the Chapter or any part of the Motor vehicles Act anything which could persuade us to do such violence to the language of the statute. Reasonably and fairly read, Sections 94 and 95 mean that the owner and the person who drives the car have to be insured in respect of the vehicle by the use of which accident or death occurs. We cannot, therefore, be justified in reading the Section as contended for by Advani.13. Mr. Advani relied upon the view taken by the English Courts under Sections 35, 36 and 38 of the Road Traffic Act, 1930. The view is mat the extension in connection with a driver of a vehicle is qualified by a permissible provision requiring that the permitted Driver does not himself hold a personal insurance policy, it is sufficient in this connection to point out that though Ss. 33 and 36 of the English Act so far as relevant are almost in similar terms is Ss. 94 and 95 of our Motor vehicles Act, S.38 is materially different from S. 96(3) of our Act. S.38 of the English Act renders ineffective any condition in a policy providing for the avoiding of the liability in the event of specified thing being dons or omitted to be done after the happening of the event giving rise to a claim under the policy in connection with the claims as are mentioned in paragraph (b) of Sub-Section (1) of S.36, which is entirety different from saying that no condition which is not one of those in S.96(2)(b) shall be elective in displacing the liability under S.95(1). In our opinion, the view of the British courts as aforesaid can, therefore, be of no assistance in the interpretation of the relevant provisions of the Indian statute.14. Lastly it is argued, which is almost an argument of dispair, that the appeal by the defendant is incompetent It is contended that the notice was got issued by the plaintiff on the respondent company which was discharged by the order of the learned Judge, that the defendant could not in any way be said to be affected in ms rights by the discharge of that notice and that, therefore, he had no right to appeal. In this connection it is necessary to refer to the defendants affidavit in answer to the Chamber Summons taken out by the respondent, in answer to a contention on behalf of the respondent, in paragraph 7 he denied that the defendant was not entitled to an indemnity from the respondent or that he was not included within the class or persons insured by it. He claimed to reader both the respondent company as also his own Insurance Company liable for any Decree or judgment that might be passed against him. Since to discharge the notice as against the respondent Company would render his position very insecure in relation to the ultimate decree, it must be held that he is a Person who is aggrieved by the order made by the learned Judge and, therefore, entitled to appeal.

Decision:
0[ds]We may advisedly call this clause theclause it is clear from this clause that if under S. 96 of the Motor Vehicles Act the respondent company is liable to the plaintiffs then nothing contained in the policy will relieve it of its liability.In order to consider the liability of the insurance Companies, one has to consider the scheme of Chapter VIII of the Motor Vehicles Act and particularly that of Sections 94, 95 and 95. Heading of the Chapter is "insurance of Motor Vehicles". S. 94 makes it an offence for any person who uses a vehicle except as a passenger or who causes or allows any other person to use a motor vehicle in a public place unless there is in force in relation to the use of the vehicle by that person or That other person a policy of insurance which complies with the requirements of that Chapter. By the very language the Section requires that there must be an insurance policy in relation to the vehicle which is being used and not that a driver is insured against claims for damages in respect of anyused or unused. S. 95 which lays down the requirements of the policy, by clause (b) of(1), requires that the policy must insure the person or classes of persons against any liability which may be incurred by them in respect of death or bodily injury to any person caused by or arising out of the use of we vehicle in a public place.Again, the emphasis is on the use of the vehicle and not en the use of any vehicle.(2) provides the nature of the liability that is required to be covered by the Insurance Policy.(5) of S. 95 creates an absolute liability in the insurer to indemnify the persons insured in respect of the liability covered by the policy notwithstanding anything contained anywhere in any law. S. 96 makes the insurer liable on judgment as if he were aif recovered against the insured or against the class of persons insured by the policy in respect of liability covered by S. 95(1)(b) on certain conditions being satisfied.(2) of S. 96 lays flown the conditions for such liability and also enumerates the defences which are open to the insurer to take if it brings itself on record as a defendant in pursuance of a notice to be issued under the earlier part of(2).7. Reading the Sections together it is dear that the insurance is required by S. 95(1) to be in respect of the vehicle which is being used and while driving which the accident is committed. Mere insurance of the driver or a vehicle without reference to the use of any particular vehicle against claims made against him by reason of an accident that he may commit does not, in our opinion, make the insurer liable directly to the person who has suffered the injury. The liability of the insurer arises only it has insured the driver in respect of the vehicle by the use or which the accident is committed. That being so. inasmuch as the policy issued by the Indian. Trade and General Insurance Co. Ltd. by clause (4) insured the defendant not in respect of the vehicle which was involved in the accident but in respect of another vehicle it would not be covered by S. 95(1) and consequently by S. 96(1), and that company would not be affected by the notice issued under(2) of Section 96. The statutory liability under Section 96, in our opinion, attaches only to the respondent company.Thus, the respondent Company being liable under S. 96 theclause applies notwithstanding me avoidance clause contained in the proviso to clause 3 of the policy. It is possible that as between the respondent and the appellant deferent, the latter may be liable to repay any sum which the respondent Company may be required to pay to the pontiffs in these suits. That, however, is not a matter to be decided in the present proceeding and we do not express any opinion on thatis clear from the wording of this clause that any condition restricting or avoiding the statutory liability of the insurer as provided in clause (1) of(1) of Section 95 which is not one of the conditions specified in clause (b) of Section 95(2) must be regarded as interactive for the purposes of the Act, though it may be binding between the company and the persons insured. Now, the only conditions mentioned in clause (b) of(2) of S. 96 are three : (i) that which excludes the use of the vehicle for hire or reward if the policy does not cover the risk and use for organised racing or speed testing; in the case of public service a purpose not permitted by the permit; (ii) that which excludes driving by a names person or persons or by any person who is not duly licences or by a disqualified person during the period of disqualification; (iii) that which excludes liability for injury which is caused by or is contributed to by conditions of war, not or civil commotion. It cannot be gainsaid that the avoidance clause in the policy in the present case is not covered by any of these conditions and that is net even me contention of the respondent Company, since that clause seeks to avoid a liability covered by Section 95(1)(b). It is ineffective, so far as the plaintiffs areare afraid, wd cannot accept this condition for the obvious reason that thequestion provides a condition "other than those in cl. (b) of(2) of Sec. 96." in order to accept the argument we will have to substitute different words for the words actually used in the provision for which there is nomay, however, answer it by an analogy that no Insurance Company is bound to insure any owner of a motor vehicle. It an owner drives a motor vehicle which is not insured, he is liable to penalty but in the nature of things, no insurance company can be made liable. That, however, is not themust be noted that S.94 refers to the persons to be insured and S.95 refers to the liability required to be covered. Both "enable the insurer to extend the indemnity to other driver and if the indemnity is so extended the case falls within S.96(1) and the Company becomes liable and Section 95(1)(b) is not relevant except for determining whether the indemnity under the policy tails within the ambit of that Section.The contention that the defences available to the insurer control the terms of the policy is also unsound. It does not affect the question of liability. Under Section 96(3) requirements for its applicability are that (1) a certificate must have been issued to the person who has effected the insurance, and (2) restrictions of the insurance of the persons insured other than those in clause (b) of(2) of S.96. As we have pointed OUT, the defendant is one of the class of persons insured and avoidance cause being not one of the conditions in cl. 103 of S.96(2) Section 96(3)accept this argument would require our substituting for the word "the" appearing in the words "use of the vehicle in a public place" in clause (b) of Section 95(1) the word "A" or "any". We have not been pointed out either from the scheme of the Chapter or any part of the Motor vehicles Act anything which could persuade us to do such violence to the language of the statute. Reasonably and fairly read, Sections 94 and 95 mean that the owner and the person who drives the car have to be insured in respect of the vehicle by the use of which accident or death occurs. We cannot, therefore, be justified in reading the Section as contended for byview is mat the extension in connection with a driver of a vehicle is qualified by a permissible provision requiring that the permitted Driver does not himself hold a personal insurance policy, it is sufficient in this connection to point out that though Ss. 33 and 36 of the English Act so far as relevant are almost in similar terms is Ss. 94 and 95 of our Motor vehicles Act, S.38 is materially different from S. 96(3) of our Act. S.38 of the English Act renders ineffective any condition in a policy providing for the avoiding of the liability in the event of specified thing being dons or omitted to be done after the happening of the event giving rise to a claim under the policy in connection with the claims as are mentioned in paragraph (b) of(1) of S.36, which is entirety different from saying that no condition which is not one of those in S.96(2)(b) shall be elective in displacing the liability under S.95(1). In our opinion, the view of the British courts as aforesaid can, therefore, be of no assistance in the interpretation of the relevant provisions of the Indianthis connection it is necessary to refer to the defendants affidavit in answer to the Chamber Summons taken out by the respondent, in answer to a contention on behalf of the respondent, in paragraph 7 he denied that the defendant was not entitled to an indemnity from the respondent or that he was not included within the class or persons insured by it. He claimed to reader both the respondent company as also his own Insurance Company liable for any Decree or judgment that might be passed against him. Since to discharge the notice as against the respondent Company would render his position very insecure in relation to the ultimate decree, it must be held that he is a Person who is aggrieved by the order made by the learned Judge and, therefore, entitled to appeal.