[ENTITY] fa 50 2016 new.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION FIRST APPEAL NO. 50 OF 2016 [ENTITY] Appellant V/s. [ENTITY] & Ors. Respondents Mr. [ENTITY] for the appellant. Mr. [ENTITY] for respondent nos.1 to 5. CORAM: [ENTITY], J. JUDGMENT RESERVED ON : 21st FEBRUARY, 2019. JUDGMENT PRONOUNCED ON: 21st JUNE, 2019. ORAL JUDGMENT:
. By order dated 28th September, 2016 this Court had put the parties to notice that the appeal would be heard finally at the stage of admission. Accordingly, with consent of the parties, appeal is heard finally.
2. This appeal is directed against the judgment and award dated 27/10/2014 in [CASE NUMBER] made by the learned Member, Motor Accident Claim Tribunal, Pune.
3. The respondent nos.1 to 5 , who are the original claimants, had filed a claim petition under [SECTION] of [ACT] for [ENTITY] fa 50 2016 new.doc compensation of Rs.1,50,00,000/- on account of death of [ENTITY] in a motor vehicular accident. The respondent no.1 is the widow, the respondent nos.2 and 5 are the minor children and respondent nos.3 and 4 are the parents of the deceased [ENTITY]. The deceased [ENTITY] was 33 years of age. He was employed as a Senior Design Engineer at Geometric Limited, Hinjewadi. On 11/08/2012A while he was proceeding to his office, a Mini Truck bearing No.MH-14 AZ 1370 dashed against his Honda Activa Scootor No.MH-11AA3433. [ENTITY] expired as a result of the injuries sustained in the said motor vehicular accident. The offending truck was driven by [ENTITY], owned by the respondent no.6 and insured by the appellant - Insurance Company. The claimants alleged that said [ENTITY] had expired as a result rash and negligent driving by the driver of the mini truck. These respondents therefore claimed total compensation of Rs.1,50,00,000/- from the respondent no.6 and the appellant - Insurance Company.
4. The respondent no.6 - the owner of the vehicle did not contest the proceedings. The appellant - Insurance Company denied that the accident was caused due to rash and negligent driving by the driver of the truck. The appellant also claimed that the driver of the truck was [ENTITY] fa 50 2016 new.doc not holding a valid and effective driving license. The appellant claimed that it is not liable to indemnify the insured in view of breach of terms and conditions of the policy.
5. Upon considering the evidence adduced by the respondent nos.1 to 5 and the appellant - Insurance Company, the Claims Tribunal held that the accident was caused due to rash and negligent driving by the driver of the truck bearing No.MH-14AZ1370 and awarded compensation of Rs.81,25,000/- with interest at the rate of 7.5% p.a. from the date of the claim petition till final realization of the amount.
6. The Claims Tribunal has recorded a finding that the driving license of the driver - [ENTITY] was valid till 09/12/2004. He had not renewed the driving license since December, 2004. The vehicle involved in the accident was driven without a valid and effective driving license. The Tribunal held that the appellant-Insurance Company has proved that the insured had committed breach of policy conditions. Relying upon the decision of the Apex Court in [PRECEDENT] and the decision of this Court in [PRECEDENT], the Claims Tribunal directed the [ENTITY] fa 50 2016 new.doc Insurance Company to satisfy the award with liberty to proceed against the insured to recover the amount. Being aggrieved by these directions the appellant - Insurance Company has filed this Appeal.
7. Mr. [ENTITY], the learned counsel for the appellant contends that under [SECTION], the insurer has an absolute right to raise a defence that the vehicle was driven by a person who was not duly licensed or was disqualified to hold a license. He contends that having proved the statutory defence, the Claims Tribunal had no jurisdiction to direct the appellant - Insurance Company to satisfy the award, with liberty to recover the amount from the insured. He contends that the directions to pay and recover given by the Apex Court in [ENTITY] v/s. [ENTITY] (2004) 3 SSC 297 have been issued in exercise of powers under [SECTION] of the [ACT] and that such discretionary power is not vested with this court or the tribunal. He therefore contends that the tribunal had no jurisdiction to issue such directions.
8. Mr. [ENTITY] submits that in [PRECEDENT], it was observed that "if the Insurance Company has no liability to pay at all, then, it cannot be [ENTITY] fa 50 2016 new.doc compelled by order of the court in exercise of its jurisdiction under [SECTION] of the [ACT] to pay the compensation amount and later on recover it from the owner of the vehicle". The Two Judge Bench doubted the correctness of the decisions which in exercise of jurisdiction under [SECTION] of the [ACT] directed Insurance Company to pay the compensation amount even though Insurance Company has no liability to pay and made a reference to a larger Bench. He submits that though the above reference in [ENTITY] case has been disposed of on 17.09.2013 by the three- Judges Bench, the issue has been kept open to be decided in an appropriate case. He, therefore, contends that the issue of " pay and recover " is still a subsisting question. He further contends that the Division Bench of this Court in [PRECEDENT] has confirmed the view of the learned Single Judge in [PRECEDENT] that no pay and recovery order can be passed against insurer in the absence of any specific provision. He contends that even if it is held that the Tribunal is empowered to pass such an order, in the facts of the case, the Tribunal was not justified in passing such an order as the evidence adduced by the Insurance Company amply proves that as on the date of the accident, the driver [ENTITY] fa 50 2016 new.doc was not holding a license. In support of this contention, he has relied upon the decision of the Apex Court in [PRECEDENT].
9. As regards the quantum of compensation, he contends that the Claims Tribunal has erred in considering the gross annual income of the deceased in computing the compensation. He has further stated that the Tribunal has not deducted the allowances towards special allowance, transport allowance, monthly variable pay, LTA, club membership, telephone amount. He, therefore, contends that the amount awarded by the Tribunal is excessive and arbitrary.
10. Mr. [ENTITY], the learned counsel for the respondent nos.1 to 5 contends that the respondent nos.1 to 5 have proved that the accident was caused due to rash and negligent driving by the driver of the truck. He submits that the appellant had failed to plead and prove that the breach of terms and conditions was willful or that it was the cause of the accident. He further submits that the case in hand is not covered by the exceptions carved out by the Apex Court in [ENTITY] (supra). Hence, the Claims Tribunal was justified in directing the insurer to pay the compensation and then to recover the sum from [ENTITY] fa 50 2016 new.doc insured and/or from the driver. He submits that the reference to the larger Bench has been disposed of and the Apex Court in [PRECEDENT]; has clearly observed that the decision in [ENTITY] (supra) following in [ENTITY] (supra) and other cases hold the field.
11. Mr. [ENTITY], the learned counsel for the respondent nos.1 to 5 further contends that considering the beneficial object of the Act, the appellant - Insurance Company cannot be absolved on its liability of satisfying the award though in law it has no liability, with liberty to recover the amount from the insured. In support of this contention, he has relied upon the decision of the Apex Court in Manager [ENTITY] Vs. Saju P. Paul and Anr. (2013) 2 SCC 41 and [ENTITY] Vs. Savitri Devi and Ors. 2004) 1 SCC 596 and the decisions of this Court in [PRECEDENT] wd/o [ENTITY] and Ors. 2015 (1) Mh.[PRECEDENT]. 2018 (1) [PRECEDENT] s/o. [ENTITY] and Ors. 2012 (5) [PRECEDENT] w/o. [ENTITY] and Ors.
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12. I have perused the record and considered the submissions advanced by the learned counsel for the respective parties.
13. Undisputedly, [ENTITY] had expired as a result of the injuries sustained in the accident involving Mini Truck bearing No.MH-14 AZ- 1370. The said Mini Truck was driven by [ENTITY], owned by the respondent no.6 and insured by the appellant herein. Upon considering the evidence adduced by the appellant - Insurance Company, the Tribunal has recorded a finding that the driving license of the driver was valid till 09/12/2004 and that the same was not renewed thereafter. The findings recorded by the Claims Tribunal that there is a breach of policy condition by the insured has not been assailed either by the respondent no.6 - the insured or by the respondent nos.1 to 5 - the original claimants. The only question raised in this appeal is as regards the liability of the appellant - Insurance Company to satisfy the award as against the third party.
14. The question whether the insurer can avoid its liability in the event it raises a defence as envisaged in [SECTION] of [ENTITY] fa 50 2016 new.doc the [ACT] has been considered by the three Judge Bench of the Supreme Court in [ENTITY] (Supra). The law laid down in [ENTITY] has been reiterated in [PRECEDENT] (supra) as under :-
6. In the case of third party risks, as per the decision in National Insurance Company Ltd. v. [ENTITY] and others (2004) 3 SCC 297, the insurer had to indemnify the compensation amount payable to the third party and the Insurance Company may recover the same from the insured.
Doctrine of "pay and recover" was considered by the Supreme Court in [ENTITY] case wherein the Supreme Court examined the liability of the Insurance Company in cases of breach of policy condition due to disqualifications of the driver or invalid driving licence of the driver and held that in case of third party risks, the insurer has to indemnify the compensation amount to the third party and the Insurance Company may recover the same from the insured.
Elaborately considering the insurer's contractual liability as well as statutory liability vis-a-vis the claims of third parties, the Supreme Court issued detailed guidelines as to how and in what circumstances, "pay and recover" can be ordered. In para (110), the Supreme Court summarised its conclusions as under:-
"110. The summary of our findings to the various issues as raised in these petitions is as follows:
(i) [SECTION] of the [ACT] 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) An insurer is entitled to raise a defence in a claim petition [ENTITY] fa 50 2016 new.doc filed under [SECTION] or [SECTION] of the [ACT], inter alia, in terms of [SECTION] of the said Act.
(iii) The breach of policy condition e.g. disqualification of the driver or invalid driving licence of the driver, as contained in [SECTION], 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 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 the 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 insurer under [SECTION] 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 fulfill the requirements of law or not will have to be [ENTITY] fa 50 2016 new.doc 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 under [SECTION] read with [SECTION] 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 the 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 the award made thereon is enforceable and executable in the same manner as provided in [SECTION] 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] 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 under [SECTION] 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 [SECTION] 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.
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(xi) The provisions contained in sub-section (4) with the proviso there under 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 might delay the adjudication of the claims of the victims,"
(Underlining added)
7. As per the decision in [ENTITY] case, onus is always upon the Insurance Company to prove that the driver had no valid driving licence and that there was breach of policy conditions. Where the driver did not possess the valid driving licence and there are breach of policy conditions, "pay and recover" can be ordered in case of third party risks. The Tribunal is required to consider as to whether the owner has taken reasonable care to find out as to whether the driving licence produced by the driver, does not fulfill the requirements of law or not will have to be determined in each case. "
15. In [ENTITY] Vs. [ENTITY] (2007) 3 SCC 700, the Apex Court has drawn a distinction between own damage claim not involving any third party vis vis the liability in respect of the third party risk. In the aforestated case the Supreme Court relied upon the decision in [ENTITY] (supra) to hold that even in cases of willful breach the insurer's liability vis vis third party was statutory and that it is for the Insurance Company to satisfy the award and then recover the compensation from the insured.
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16. In [ENTITY] (supra) a two Judge Bench of the Supreme Court had doubted the correctness of the decision, which in exercise of jurisdiction of [SECTION] of the [ACT] directed Insurance Company to pay the compensation amount even though the Insurance Company was not liable to indemnify the insured. The reference in the said case has been disposed of by the three Judge Bench by keeping open the questions of law to be decided in an appropriate case. In [PRECEDENT] (supra) the Apex Court has observed that since the reference to the larger Bench in [ENTITY] case has been disposed of by keeping the questions of law open, the decision in [ENTITY] followed in [ENTITY] and other cases hold the field.
17. The claim in [PRECEDENT] and [PRECEDENT] Bom. C.R. 587 was not involving third party and hence these decisions are distinguishable and are not applicable to the facts of the case. The decision in [PRECEDENT] (supra), also does not support the contention of the learned counsel for the appellant that the Tribunal has no powers to issue such directions. In fact, in the said [ENTITY] fa 50 2016 new.doc case the driver of the vehicle involved in the accident has no valid driving license at the time of the accident and since there was violation of the terms of the insurance policy, the tribunal has directed the Insurance Company to pay the compensation with liberty to recover the same from the owner of the offending vehicle. The Hon'ble Supreme Court has held that the award passed by the Tribunal directing the Insurance Company to pay and recover was in accordance with the judgment passed in [ENTITY] (supra) and [ENTITY] (supra).
18. Similarly, in [PRECEDENT] (supra) the driving license was not renewed within a period of thirty days from the date of its expiry. The driver of the offending vehicle did not hold a valid license as on the date of the accident. The Tribunal had held that mere non-renewal of license does not constitute breach of terms and conditions of the policy and consequently, the insurer cannot escape from its liability. In an appeal against the said judgment, the High Court held that where the driver of the vehicle did not hold any license and the owner consciously allowed the vehicle to be driven by such person, the insurer is entitled to succeed in its defence and avoid liability. Relying upon the law laid down by the Apex Court in [ENTITY] (supra) the [ENTITY] fa 50 2016 new.doc High Court directed the Insurance Company to pay the compensation and recover the same from the driver and the owner of the vehicle. The Apex Court held that there was no infirmity in the judgment of the High Court.
19. In [PRECEDENT] (supra) the driver was holding a license to drive light motor vehicle while the offending vehicle was a commercial vehicle. The question before the Apex Court was whether the Insurance Company can repudiate its liability to pay the compensation by taking a defence that at the relevant time the vehicle was driven by a person having no license. The Apex Court Court has held thus :-
" 16. The heading "Insurance of Motor Vehicles against Third Party Risks" given in [SECTION] of the [ACT] itself shows the intention of the legislature to make third party Insurance compulsory and to ensure that the victims of accident arising out of use of motor vehicles would be able to get compensation for the death or injuries suffered. The provision has been inserted in order to protect the persons travelling in vehicles or using the road from the risk attendant upon the user of the motor vehicles on the road. To overcome this ugly situation, the legislature has made it obligatory that no motor vehicle shall be used unless a third party Insurance is in force.
17. Reading the provisions of [SECTION] and [SECTION] of the [ACT], it is evidently clear that in certain circumstances the insurer's right is safeguarded but in any event the insurer has to pay compensation when a valid certificate of Insurance is issued notwithstanding the fact that the insurer may proceed against the insured for recovery of the amount. Under [SECTION] of the [ACT], the [ENTITY] fa 50 2016 new.doc insurer can defend the action inter alia on the grounds, namely, (i) the vehicle was not driven by a named person, (ii) it was being driven by a person who was not having a duly granted licence, and (iii) person driving the vehicle was disqualified to hold and obtain a driving licence. Hence, in our considered opinion, the insurer cannot disown its liability on the ground that although the driver was holding a licence to drive a light motor vehicle but before driving light motor vehicle used as commercial vehicle, no endorsement to drive commercial vehicle was obtained in the driving licence. In any case, it is the statutory right of a third party to recover the amount of compensation so awarded from the insurer. It is for the insurer to proceed against the insured for recovery of the amount in the event there has been violation of any condition of the Insurance policy. "
20. It is thus, well settled that in order to avoid its liability to indemnify the insured, the insurer has to establish that there was conscious and willful breach of the terms of the policy. Even when the insurer proves such breach, it is under obligation to pay compensation to the third parties and recover the same from the insured. 21 In the instant case, it is not in dispute that the appellant- Insurance Company had issued a valid certificate of insurance to indemnify the insured against third party risks. The appellant- Insurance Company therefore cannot be absolved of its liability of paying the compensation to the third party. As stated earlier, the Tribunal has recorded a finding that the appellant-Insurance Company [ENTITY] fa 50 2016 new.doc has proved the breach of terms and conditions of the policy. These findings are not assailed by the insured. Under these circumstances, the appellant-Insurance Company is at liberty to recover the same from the insured.
22. As regards the quantum of compensation, the learned counsel for the Appellant submits that the Tribunal has not deducted conveyance and food allowance while determining the loss of dependency. He has relied upon the decision in [ENTITY] Vs. Vaishali Harish Devare 2013 (1) Mh.L.J. 411 wherein the Division Bench of this Court, after considering the pronouncement in [PRECEDENT] and [ENTITY] Vs. Saroj (Smt.) and Ors. (2009) 13 SCC 508 has held that the amounts, which were paid to the deceased by way of perks should be taken into consideration for computation of monthly income provided the perks were for the benefit of the family of the deceased. It is held that the allowances, which were meant only for his personal benefit cannot be taken into consideration.
23. The evidence adduced by the claimants particularly the appointment letter (Exhibit-56) and the evidence of A.W. 2- [ENTITY] [ENTITY] fa 50 2016 new.doc [ENTITY], Assistant Manager of Human Resource of Geometric Ltd. amply proves that the deceased was working as a Senior Design Engineer in Geometric Ltd. The claimants had relied upon a salary certificate at Exhibit-58, produced through A.W.2-[ENTITY], to prove that the deceased was drawing salary of Rs.59,779/- per month. The said salary certificate indicates that the deceased was paid basic salary of Rs.22,032/- per month with allowances including Lunch allowance of Rs.2,000/- and Conveyance allowance of Rs.800/-. The salary slip at Exhibit-58 indicates that the deceased was drawing gross salary of the deceased was Rs.59,779/- per month, which works out to Rs.7,17,357/- per annum.
24. The Claims Tribunal has not relied upon the salary slip (Exhibit-
58) for the purpose of determining the annual income of the deceased. The Claims Tribunal has assessed the annual income on the basis of income tax returns (Exhibit-41) for the financial year 2011-2012. The tax returns (Exhibit-41) show the gross annual income of the deceased as Rs.4,58,881/-. The Tribunal has deducted Rs.19,955/- towards income tax and considered the net income of the deceased as Rs.4,38,926/- per annum. The gross income shown in the tax return is less than the income shown in the salary certificate at Exhibit-58.
[ENTITY] fa 50 2016 new.doc There is no evidence on record to indicate that the income shown in the tax returns also includes lunch and conveyance allowance. In the absence of such evidence the Tribunal was not required to make any further deductions from the annual income of the deceased.
25. Considering the annual income of the deceased as Rs.4,38,926/- and adding 50% of the income towards future prospect, the yearly income works out to Rs.6,58,389/-. Since there were five dependents, 1/4th amount is required to be deducted towards personal expenses of the deceased. Upon deducting the amount towards personal expenses, the loss of dependency works out to Rs.4,93,791/- per annum. The deceased was 34 years of age and applying the multiplier of 16 the total loss of dependency works out to Rs. 79,00,656/-. As per the judgment of the Apex Court in [PRECEDENT] on 31 October, 2017 in [CASE NUMBER] the claimants are entitled for compensation of Rs.15,000/- towards loss of estate, Rs.40,000/-loss of consortium, and Rs.15,000/- towards funeral expenses. In the instant case the Tribunal has awarded Rs.1,00,000/- towards loss of consortium, Rs.1,00,000/- towards loss of care and guidance to the minor children and Rs.25,000/- towards funeral expenses. The Tribunal has thus awarded total amount of [ENTITY] fa 50 2016 new.doc 2,25,000/- on the aforesaid conventional heads. The excess amount of Rs. 1,55,000/-, awarded under these conventional heads needs to be reduced from the total compensation of Rs. 81,25,668/-. Thus, upon reducing the said amount of Rs.1,55,000/- from the total compensation of Rs.81,25,000/- the compensation payable to the Respondents/ original claimants works out to Rs.79,70,668/-, which is rounded upto Rs.79,71,000/-, which in my considered view is just and fair compensation. The award to that extent has to be modified.
26. Under the circumstances and in view of discussion supra, the appeal is disposed of by passing the following order :-
(i) The compensation payable to the Respondent Nos. 1 to 5 is reduced to Rs.79,71,000/-. The rate of interest and other directions including the order of cost is maintained.
(ii) The excess amount of Rs.1,55,000/-deposited by the Appellant-Insurance Company before the Claims Tribunal be refunded alongwith the proportionate interest accrued thereon.
([ENTITY], J.)