$~37 * IN THE HIGH COURT OF DELHI AT NEW DELHI Date of decision:16th May, 2012 + MAC. APP. No.159/2012 & [CASE NUMBER] NEW INDIA ASSURANCE CO. LTD. Appellant Through: Mr.[ENTITY], Advocate Versus DEEPIKA & ORS Respondents Through: Mr. [ENTITY], Advocate CORAM: HON'BLE MR. JUSTICE G.P.MITTAL JUDGMENT
G. P. MITTAL, J. (ORAL)
1. The file is taken up today as an application ([CASE NUMBER]) has been moved by the Respondents No.1 to 3 for withdrawal of the amount. However, the learned counsel for the parties submit that it is a short matter and the Appeal can be disposed of today itself. The Appeal is thus taken for final disposal.
2. The Appellant [ENTITY] impugns a judgment dated 20.10.2011 whereby a compensation of `29,31,900/- was awarded in favour of the Respondents No.1 to 3 for the death of [ENTITY] who died in an accident which occurred on 24.02.2011.
3. The main grounds taken up by the Appellant are that since the driver did not possess the licence for LMV(transport) and he possessed a licence to drive only a motorcycle, jeep, car etc., he was not entitled to drive the vehicle involved in the accident. It is urged that the Appellant Insurance Company was entitled to be exonerated and the recovery rights can only be granted by the Supreme Court in its power under [SECTION] of the [ACT].
4. The Appeal filed by the Appellant on these grounds is mis-
conceived. The issue of satisfying the third party liability even in a case of breach of the terms of insurance policy is settled by the three Judge Bench report in [ENTITY] v. P. Sesh Reddy, (1996) 5 SCC 21 and National Insurance Company Limited v. [ENTITY] & Ors., (2004) 3 SCC 297. As per [SECTION] of the [ACT] (the Act), an insurer is entitled to defend the action on the grounds as mentioned under [SECTION] 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 [ENTITY] 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 [ENTITY]) analyzed the corresponding provision under the [ACT] and the [ACT] and approved the decision in [ENTITY] (supra). In New India Assurance Co., Shimla v. [ENTITY] and Ors., (2001) 4 SCC 342, the Supreme Court referred to the decision of the two Judge Bench in [ENTITY](supra), the three Judge Bench decision in [ENTITY]) and held that the insurer who has been made liable to pay the compensation to third parties on account of certificate of insurance issued, 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 [SECTION] 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 [ENTITY] Insurance Company Limited v.
Kokilaben Chandravadan, (1987) 2 SCC 654. Though the said decision related to the corresponding provisions of the predecessor Act ([ACT] 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 [ENTITY] 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 "
5. Again in United India Insurance Company Ltd. v. [ENTITY] & Ors., (2003) 3 SCC 338, in para 18 of the report the Supreme Court referred to the decision in [ENTITY](supra), [ENTITY]) and [ENTITY](supra) and held that even where it is proved that there was a conscious or willful breach as provided under [SECTION] of the [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]. Reliance has been placed on [SECTION]. As seen, in order to avoid liability under this provision it must be shown that there is a "breach". As held in [ENTITY] and [ENTITY] 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 "
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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 [ENTITY], [ENTITY] and [ENTITY] cases. We are in full agreement with the views expressed therein and see no reason to take a different view."
6. The three Judge Bench of the Supreme Court in National Insurance Company Limited v. [ENTITY] & 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 [ENTITY] (supra), [ENTITY] (supra) and [ENTITY] (supra). Paras 73, 103 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.
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105. Apart from the reasons stated hereinbefore, the doctrine of stare decisis persuades us not to deviate from the said principle."
7. This Court in [PRECEDENT] decided by a common judgment dated 29.02.2012, noticed some divergence of opinion in [PRECEDENT]; [PRECEDENT]; [PRECEDENT] and [PRECEDENT] and held that in view of the three Judge Bench decision in [ENTITY]) and [ENTITY]), the liability of the Insurance Company vis 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.
8. Right from [ENTITY](supra), [ENTITY]), [ENTITY] (supra) and [ENTITY] (supra), the recovery rights were not granted by the Supreme Court under [SECTION] of the [ACT], rather it was stated that the liability of the Insurance Company to satisfy the award was statutory even in case of breach of the terms of the policy by the insured.
9. In view of this, the Appeal is accordingly dismissed with costs of `10,000/- to be deposited by the Appellant Insurance Company with the Registrar General which shall be payable to the Respondents No.1 to 3 (Claimants) through their counsel.
10. The amount of compensation deposited shall be released in favour of the Respondents No.1 to 3 in terms of the order passed by the Claims Tribunal.
11. Pending application, if any, stands disposed of.
12. The statutory amount of `25,000/- shall be refunded to the Appellant Insurance Company on payment of costs to Respondents No.1 to 3.
13. The next date of hearing 13.08.2012 fixed hereby is cancelled.
([ENTITY]) JUDGE MAY 16, 2012 pst