IN THE HIGH COURT OF DELHI AT NEW DELHI MAC.APP.No.28/2005 # New India Assurance Co. Ltd. ....... Appellants ! through: Mr.S.L.Gupta, Advocate VERSUS $ Sanjay Kr. & Ors. ........ Respondents ^ through: Mr.S.N.Parashar, Adv. with Mr.S.P.Jain Adv. for respondents 1 and 2 MAC.APP.No.46/2005 # New India Assurance Co. Ltd. ....... Appellants ! through: Mr.S.L.Gupta, Advocate VERSUS $ Sanjay Kr. & Ors. ........ Respondents ^ through: Mr.S.N.Parashar, Adv. with Mr.S.P.Jain Adv. for respondents 1 and 2 MAC.APP.No.562/2005 # The Oriental Insurance Co. Ltd. ....... Appellants ! through: Mr.Kapil Chawla, Advocate VERSUS $ Jitender Garg & Anr. ........ Respondents MAC.APP.NO.28/05 page 1 of 53 ^ through: None MAC.APP.No.236/2005 # National Insurance Co. Ltd. ....... Appellants ! through: Mr.P.K.Seth,Advocate VERSUS $ Harish Kr. & Ors. ........ Respondents ^ through: None MAC.APP.No.378/2005 # Mrs.Vilasrani Kurup ....... Appellants ! through: Mr.Rajesh Gupta, Adv. with Mr.Harpreet Singh, Adv. VERSUS $ National Insurance Co. ........ Respondents ^ through: Mr.Manoj Ranjan Sinha for R-1 MAC.APP.No.154/2005 # The Oriental Insurance Co. Ltd. ....... Appellants ! through: Mr.A.K.Soni, Advocate VERSUS $ Udaiveer Singh & Ors. ........ Respondents ^ through: None. FAO No.476/2003 # National Insurance Co. Ltd. ....... Appellants ! through: Mr.Pradeep Gaur, Advocate. VERSUS MAC.APP.NO.28/05 page 2 of 53 $ Shri Hari Chand & Ors. ........ Respondents ^ through: Mr.Parbhat Kumar, Adv. for R-3 % D ATE OF DECISION: 17-04-2007 CORAM: * Hon'ble Mr.Justice Pradeep Nandrajog 1. Whether reporters of local papers may be allowed to see the judgment? 2. To be referred to the Reporter or not? 3. Whether judgment should be reported in Digest? : PRADEEP NANDRAJOG, J. 1. Common questions of law arose for consideration in the captioned 7 appeals and hence the same are being decided by a common order. The issue involved is, if it is established that the driver of the vehicle at the time of the accident was not holding a valid driving licence would entitle the insurance company to avoid liability under the policy to pay any money to the third party or are the rights of the insurance company to recover from the insured, after paying the sum awarded to the injured/claimants of the deceased. An ancillary question arises for consideration as to what should be the standard of proof for the insurance company to establish breach of the policy of insurance by the assured. 2. In FAO.No.476/03, MAC.APP.No.562/05, MAC.APP. MAC.APP.NO.28/05 page 3 of 53 No.28/05, MAC.APP.No.46/05 and MAC.APP.No.154/05 grievance of the insurance company is that no recovery rights have been granted. Save and except FAO No.476/2003, only contention urged is that the finding that the insurance company is liable to satisfy the award in favour of the claimants is contrary to law. In FAO No.476/2003 it is additionally urged that the finding by the Tribunal that the insurance company has failed to establish that the driver of the vehicle at the time when the vehicle met with the accident was not holding a valid driving licence is contrary to evidence on record. 3. In MAC.APP. No.236/2005 grievance of the insurance company is akin to the grievance in the other appeals. However, the facts of the said case are a little different as would be noted hereinafter. 4. Filtering the facts a little further, owners of the vehicles involved in the accident which are the subject matter of FAO No.476/2003 and MAC. APP. No.562/2005 failed to contest the proceedings before the learned Judge, MACT and in spite of a notice under Order 12 Rule 8 CPC issued by the insurance company during trial to the assured and the driver to produce the original driving licence held by the driver MAC.APP.NO.28/05 page 4 of 53 concerned, failed to respond to the notice. In MAC.APP.No.28/2005, MAC.APP. No.46/2005, MAC.APP.No.154/2005 and MAC.APP.No.236/2005 the owners appeared and gave testimony. 5. Same vehicle was the subject matter of the accident in MAC.APP.No.28/.2005 and MAC.APP.No.46/2005. The owner of the vehicle Shri Pawan Kumar Yadav examined himself as R2W1. His deposition reads as under :- “R2W1 Shri Pawan Kumar Yadav, S/o Sh.Prabhu Singh Yadav, R/o.WZ-1393A, Nangal Raya, New Delhi. on S.A. I know Sanjay Kumar S/o Sh. Shiv Kumar. He was my driver. On 3.2.01. I have seen the DL of my driver before handed over my truck No.DL 1GB 0148. I examined the driving licence about the category which is issued Transport Authority, Rohtak. I have brought the photocopy of the same which is Ex.R2W1/A. The original is sized by the police. Driving licence no.030452/S initially issued from Transport Authority, Sonepat. My driver taken the training fro heavy transport driving from Driver Training School, Haryana Roadways, Gurgaon. The training No. was 695. The heavy licence number is 835/TPT/Veh/99 RTU dated 6.8.99. This driving licence number is issued for HGV + HPV passed by MVI Rohtak. After expiring of DL. my driver renewed for the same licence from the Sonepat Authorities, Haryana. The complete record of DL of my driver is available with Sonepat Authorities. At present DL Number is 735 DTO/02 dt. 20.11.02. The photocopy of renewed driving MAC.APP.NO.28/05 page 5 of 53 licence is mark A which is shown the DL is category of HGV + HPV. The driver left the job from my office. xxxxx by Sh. Amar Singh, cl. for petitioner. My driver himself got his DL made. At the time of accident he was holding DL Ex.R2W1/A as per my knowledge.” 6. Owner of the vehicle which is subject matter of MAC.APP.No.154/2005 examined himself as R2W1. He deposed by way of an affidavit. Not a word has been spoken by him in his testimony as to what prudent steps were taken by him to check the driving skills of the driver engaged by him, namely, Uday Veer Singh. Not a word has been spoken that he saw the driving licence produced by the driver and on perusal thereof satisfied himself that the driver was authorised to drive the truck. 7. The owner of the vehicle concerned which is subject matter of MAC.APP.No.236/2005 stepped into the witness box as R3W1 and deposed that at the time of the accident, i.e., 1.9.2000 he entrusted the car for servicing to Goldie Car Scan. When he went to pick up the car in the evening from the service center he was informed that the same had met with an accident. The insurance company proved that the driving driving the vehicle when it met with an accident did not MAC.APP.NO.28/05 page 6 of 53 possess a valid driving licence. 8. The owner of the vehicle which is subject matter of MAC.APP.No.378/2005 chose not to defend the proceedings. Insurance company served upon her a notice under Order 12 Rule 8 of the Code of Civil Procedure calling upon her to produce the original driving licence. She failed to respond thereto. The insurance company successfully established that the driving licence held by the driver to whom she had entrusted the vehicle was a fake driving licence. 9. The issue has to be adjudicated with reference to the provisions of Section 149 of the Motor Vehicles Act, 1988. The same reads as under :- 149. Duty of insurers to satisfy judgments and awards against persons insured in respect of third party risks.-(1) If, after a certificate of insurance has been issued under sub-section (3) of Section 147 in favour of the person by whom a policy has been effected, judgment or award in respect of any such liability as is required to be converted by a policy under clause (b) of sub- section (1) of Section 147 (being a liability covered by the terms of the policy) or under the provisions of Section 163A is obtained against any person insured by the policy, then, notwithstanding that the insurer may be entitled to avoid or cancel or may have avoided or canceled the policy, the insurer shall, subject to the provisions of this section, pay to the person entitled to the benefit of the decree any sum and exceeding the sum assured payable thereunder, as if he were the judgment debtor, in respect of the liability, together with any amount MAC.APP.NO.28/05 page 7 of 53 payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any enactment relating to interest on judgments. (2) No sum shall be payable by an insurer under sub-section (1) in respect 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 duly licensed, or by any person who has been disqualified for holding or obtaining a driving licence during the period of disqualification; or MAC.APP.NO.28/05 page 8 of 53 (iii) a condition excluding liability for injury caused or contributed to by conditions of war, civil war, riot or civil commotion; or (b) that the policy is void on the ground that it was obtained by the non-disclosure of as material fact or by a representation of fact which was false in some material particular. (3) Where any such judgment as is referred to in sub-section (1) is obtained from a court in a reciprocating country and in the case of a foreign judgment is, by virtue of the provisions of Section 13 of the Code of Civil Procedure,1908 (5of 1908) conclusive as to any matter adjudicated upon by it, the insurer (being an insurer registered under the Insurance Act,1938 (4 of 1938) and whether or not he is registered under the corresponding law of the reciprocating country) shall be liable to the person entitled to the benefit of the decree in the manner and to the extent specified in sub-section (1), as if the judgment were given by a court in India: Provided that no sum shall be payable by the insurer in respect of any such judgment unless, before the commencement of the proceedings in which the judgment is given, the insurer had notice through the Court concerned of the bringing of the proceedings and the insurer to whom notice is so given is entitled under the corresponding law of the reciprocating country, to be made a party to the proceedings and to defend the action on grounds similar to those specified in sub-section (2). (4) Where a certificate of insurance has been issued under sub-section (3) of Section 147 to the person by whom a policy has been effected, so much of the policy as purports to restrict the insurance of the persons of the persons insured thereby by reference to any condition other than those in clause (b) of sub-section (2) shall, as respects such liabilities as are required to be covered by a policy under clause (b) of sub-section MAC.APP.NO.28/05 page 9 of 53 (1) of Section 147, be of no effect : Provided that any sum paid by the insurer in or towards the discharge of any liability of any person which is covered by the policy by virtue of this sub- section shall be recoverable by the insurer from that person. (5) If the amount which an insurer becomes liable under this section to pay in respect of a liability incurred 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 under the policy in respect of that liability, the insurer shall be 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 expressions “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 canceled 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 sub-section (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 reciprocating country, as the case may be.” 10. The forerunner of Section 149 of the M.V. Act, 1988 MAC.APP.NO.28/05 page 10 of 53 was Section 96 of the M.V.Act, 1939. 11. In the report published as 1996 (5) SCC 21 Sohan Lal Passi Vs. P.Shesh Reddy & Ors. the Supreme Court compared and contrasted the provisions of Section 96 of the M.V. Act, 1939 and Section 149 of the M.V.Act, 1988. Earlier decision of the Supreme Court reported as 1987 (2) SCC 654 Skandia Insurance Co. Vs. Kokilaben Chandravadan was also noticed in Sohan Lal Passi's case. In para 12 of the decision it was opined as under :- “12. Now it has to be examined as to whether the insurance company can be absolved of its liability to pay the compensation in a case where the owner of the vehicle had got the vehicle insured, but the accident took place when it was being driven by a person not holding the driving licence. In the present case the accident took place when the Motor Vehicles Act, 1939 was in force. Section 96 of that Act prescribed the duty of the insurers to satisfy the judgments against persons insured in respect of third party risks (the parallel provision being Section 149 in the Motor Vehicles Act, 1988). The relevant part of Section 96 provided: “96. Duty of insurers to satisfy judgments against persons insured in respect of third party risks.—(1) If, after a certificate of insurance has been issued under sub-section (4) of Section 95 in favour of the person by whom a policy has been effected, judgment in respect of any such liability as is required to be covered by a policy under clause (b) of sub-section (1) of Section 95 (being a liability covered by the terms of the policy) is MAC.APP.NO.28/05 page 11 of 53 obtained against any person insured by the policy, then, notwithstanding that the insurer may be entitled to avoid or cancel or may have avoided or cancelled the policy, the insurer shall, subject to the provisions of this section, pay to the person entitled to the benefit of the decree any sum not exceeding the sum assured payable thereunder, as if he were the judgment-debtor in respect of the liability. (2) No sum shall be payable by an insurer under sub-section (1) in respect of any judgment unless before or after the commencement of the proceedings in which the judgment is given the insurer had notice through the court of the bringing of the proceedings, or in respect of any judgment 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) * * * (b) that there has been a breach of a specified condition of the policy, being one of the following conditions, namely: (i) * * * (a) to (d) * * * (ii) a condition excluding driving by a named person or persons or by any person who is not duly licensed, or by any person who has been disqualified for holding or obtaining a driving licence during the period of disqualification; or * * *” MAC.APP.NO.28/05 page 12 of 53 In view of sub-section (1) of Section 96 if after the certificate of insurance has been issued in favour of the person by whom a policy has been effected, judgment in respect of any such liability as is required to be covered by a policy, the insurer shall subject to the provisions of the said section pay to the person entitled to the benefit of the decree any sum not exceeding the sum assured payable thereunder, as if he was the judgment-debtor, in respect of the liability. (emphasis supplied) Sub-section (2) of Section 96 enjoins that notice of the proceedings in which the judgment is given, has to be given to the insurer and such insurer shall be entitled to defend the action on any of the grounds mentioned in sub- section (2) of Section 96. We are concerned in the present case only with Section 96(2)(b)(ii), a condition excluding driving by any person who is not duly licensed. The question is as to whether the insurance company can repudiate its liability to pay the compensation in respect of the accident by a vehicle only by showing that at the relevant time it was being driven by a person having no licence. In the case of Skandia Insurance Co. Ltd. v. Kokilaben Chandravadan, in respect of this very defence by the insurance company, it was said: “The defence built on the exclusion clause cannot succeed for three reasons, viz.: (1) On a true interpretation of the relevant clause which interpretation is at peace with the conscience of Section 96, the condition excluding driving by a person not duly licensed is not absolute and the promisor is absolved once it is shown that he has done everything in his power to keep, honour and fulfil the MAC.APP.NO.28/05 page 13 of 53 promise and he himself is not guilty of a deliberate breach. (2) Even if it is treated as an absolute promise, there is substantial compliance therewith upon an express or implied mandate being given to the licensed driver not to allow the vehicle to be left unattended so that it happens to be driven by an unlicensed driver. (3) The exclusion clause has to be ‘read down’ in order that it is not at war with the ‘main purpose’ of the provisions enacted for the protection of victims of accidents so that the promisor is exculpated when he does everything in his power to keep the promise.” To examine the correctness of the aforesaid view this appeal was referred to a three-Judge Bench, because on behalf of the insurance company, a stand was taken that when Section 96(2)(b)(ii) has provided that the insurer shall be entitled to defend the action on the ground that there has been breach of a specified condition to the policy i.e. the vehicle should not be driven by a person who is not duly licensed, then the insurance company cannot be held to be liable to indemnify the owner of the vehicle. In other words, once there has been a contravention of the condition prescribed in sub- section (2)(b)(ii) of Section 96, the person insured shall not be entitled to the benefit of sub-section (1) of Section 96. According to us, Section 96(2)(b)(ii) should not be interpreted in a technical manner. Sub-section (2) of Section 96 only enables the insurance company to defend itself in respect of the liability to pay compensation on any of the grounds mentioned in sub-section (2) including that there has been a contravention of the condition excluding the vehicle being driven by any person who is not duly licensed. This bar on the face of it operates on the person insured. If the person who has got the vehicle insured has allowed the vehicle to be driven MAC.APP.NO.28/05 page 14 of 53 by a person who is not duly licensed then only that clause shall be attracted. In a case where the person who has got insured the vehicle with the insurance company, has appointed a duly licensed driver and if the accident takes place when the vehicle is being driven by a person not duly licensed on the basis of the authority of the driver duly authorised to drive the vehicle whether the insurance company in that event shall be absolved from its liability? The expression ‘breach’ occurring in Section 96(2)(b) means infringement or violation of a promise or obligation. As such the insurance company will have to establish that the insured was guilty of an infringement or violation of a promise. The insurer has also to satisfy the Tribunal or the Court that such violation or infringement on the part of the insured was willful. If the insured has taken all precautions by appointing a duly licensed driver to drive the vehicle in question and it has not been established that it was the insured who allowed the vehicle to be driven by a person not duly licensed, then the insurance company cannot repudiate its statutory liability under sub-section (1) of Section 96. In the present case far from establishing that it was the appellant who had allowed Rajinder Pal Singh to drive the vehicle when the accident took place, there is not even any allegation that it was the appellant who was guilty of violating the condition that the vehicle shall not be driven by a person not duly licensed. From the facts of the case, it appears that the appellant had done everything within his power inasmuch as he has engaged a licensed driver Gurbachan Singh and had placed the vehicle in his charge. While interpreting the contract of insurance, the tribunals and courts have to be conscious of the fact that right to claim compensation by heirs and legal representatives of the victims of the accident is not defeated on technical grounds. Unless it is established on the materials on record that it was the insured who had willfully violated the condition of the policy by allowing a person not duly licensed to drive the vehicle when the accident took place, MAC.APP.NO.28/05 page 15 of 53 the insurer shall be deemed to be a judgment- debtor in respect of the liability in view of sub- section (1) of Section 96 of the Act. It need not be pointed out that the whole concept of getting the vehicle insured by an insurance company is to provide an easy mode of getting compensation by the claimants, otherwise in normal course they had to pursue their claim against the owner from one forum to the other and ultimately to execute the order of the Accident Claims Tribunal for realisation of such amount by sale of properties of the owner of the vehicle. The procedure and result of the execution of the decree is well known.” 12. Decision in Skandia Insurance Co.'s case and Sohan Lal Passi's case were revisited by the Supreme Court in the decision reported as 2001 (4) SCC 342 New India Assurance Co. Vs. Kamla & Ors. In paras 17 to 25 it was observed as under :- “17. The details regarding the requirements of the policy including the