FA/564020/2008 1/36 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD FIRST APPEAL No. 5640 of 2008 With CIVIL APPLICATION No. 14305 of 2008 In FIRST APPEAL No. 5640 of 2008 For Approval and Signature: HONOURABLE MR.JUSTICE H.K.RATHOD Sd/- ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? YES 2 To be referred to the Reporter or not ? YES 3 Whether their Lordships wish to see the fair copy of the judgment ? YES 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? NO 5 Whether it is to be circulated to the civil judge ? NO ========================================================= NATIONAL INSURANCE CO LTD - Appellant(s) Versus JASHUBEN BALABHAI KOLI (VAGHANI) & 1 - Defendant(s) ========================================================= Appearance : MR NAGESH C SOOD for Appellant(s) : 1, None for Defendant(s) : 1 - 2. ========================================================= CORAM : HONOURABLE MR.JUSTICE H.K.RATHOD Date : 22/12/2008 ORAL JUDGMENT 1. Heard learned advocate Mr. Sood appearing on behalf of appellant – National Insurance Company FA/564020/2008 2/36 JUDGMENT Limited. 2. The appellant – Insurance Company has challenged the award passed by MACT, Morbi in MACP No.154 of 2005 dated 3rd April 2008. The Claims Tribunal has awarded Rs.45,360/- being a compensation in favour of claimant with 7.5% interest. The claims tribunal has directed to insurance company to pay amount to claimant and then to recover the same from owner of vehicle. This direction is challenged by insurance company before this Court. 3. Learned advocate Mr. Sood relied upon three decisions of Apex Court; (i) in case of Oriental Insurance Co. Ltd. v. Sudhakaran K.V. & Ors. reported in 2008 (8) Scale 402; (ii) in case of Oriental Insurance Company Limited v. Rajni Devi and Others reported in (2008) 5 SCC 736; (iii) in case of Kaushalya Devi in SLP No.10694 of 2008. After relying upon aforesaid decisions, he submitted that a deceased was travelling as a pillion rider. 4. In case of Sudhakarn, the deceased was travelling as a pillion rider on a scooter and fell down from scooter and succumbed to injuries sustained by her. The contention raised by insurance company that the deceased being a pillion rider, insurance policy did not cover risk of injury or death of such a passenger and, thus, it was not liable to reimburse to owner of scooter. The contract of insurance was 'a policy for act liability' in FA/564020/2008 3/36 JUDGMENT aforesaid. Therefore, Apex Court has come to conclusion by allowing the appeal of insurance company that whether pillion rider would be third party within a meaning of section 147 of the Act and this covered by the contract of insurance between owner and the vehicle. The answer has given 'No' only on the ground that Act policy is between only insured and insurer. 5. In this case, undisputedly, the policy was comprehensive and therefore, this decision is not applicable. 6. In second decision of Rajni Devi (supra), the deceased was owner of motor vehicle and deceased was riding on a motorcycle along with one. Who was actually on driver's seat is not known. The appellant insurance company resisted claim contending that although owner of vehicle deposited an extra amount of Rs.50/- covering his personal insurance, same would not cover case of pillion rider and in any event, owner of vehicle is not a third party. The Tribunal allowed claim holding that claimants are entitled compensation because evidence is silent as to who was driving offending vehicle. The Apex Court come to conclusion that in regard to accident wherein owner of the motor vehicle is himself is involved, therefore, Apex Court has allowed the appeal while observing it that it is now a well settled principles of law that in case when third party insurance is involved, the liability of FA/564020/2008 4/36 JUDGMENT insurance company would be unlimited. Therefore, in present case deceased was traveling as a pillion rider not as an owner of the vehicle. Looking to the facts of the present case and facts of Rajni Devi (supra) case, this decision is also not applicable. 7. In case of Kaushalya Devi (supra), one of objection taken by insurance company that driver of the truck did not possess any valid or effective driving licence and when deceased was travelling as an unauthorised passenger in a truck which was goods carriage, the tribunal has allowed claim and thereafter matter went upto Apex Court and Apex Court has considered question as whether passenger who was travelling as a gratuitous or not and whether insurance company is liable for payment of compensation to gratuitous passenger sitting in vehicle or not. The answer is naturally given by Apex Court that insurance company is not liable. As that aspect is squarely covered in case of Brijmohan reported in 2007(7) Scale 753 and in case of Asharani reported in 2002(2) SCC 223. In this case of Kaushalya Devi also, facts are totally different looking to facts of present case. Therefore, this decision is not applicable. One more decision is now relied upon by learned advocate Mr. Sood in case of Sardari & Ors. v. Sushilkumar & Ors of Apex Court. In this case, insurance company raised contention that driver of said tractor did not held any valid and effective licence and it was accepted by driver that he had even never applied for licence. This admitted FA/564020/2008 5/36 JUDGMENT facts have been taken into account by Apex Court and Tribunal has also come to conclusion that insurance company is not liable. 8. Learned advocate Mr. Sood submitted that ratio of this judgment is that if the driver is not having any valid licence then insurance company is not held liable. He also relied upon one decision of Apex Court in case of Oriental Insurance Company Limited v. Zaharulnisha & Ors. reported in 2008 (7) Scale 310. He submitted that here also Apex Court has held that driver is not having any valid licence then insurance company is not liable, but, looking to peculiar facts, he also submitted that Apex Court has directed to recover from owner and to pay to claimant by insurance company. Now, learned advocate Mr. Sod submitted that he has argued peacefully completely and no argument is remained to be pending with him before this Court in respect of facts of this case. Except that as referred above, no other decision is relied upon and cited by learned advocate Mr. Sood before this Court. 9. I have considered submissions made by learned advocate Mr. Sood and I have also perused award passed by Claims Tribunal. 10. The accident occurred on 7th August 2005 at 3-00 p.m. noon on Morbi-Halvad road near village Nichi Mandal. At that occasion, Hero-Honda Bike was driven by applicant belonging to opponent No.1 FA/564020/2008 6/36 JUDGMENT bearing registration No.GJ-3-PP-6388 and his wife was sitting as a pillion rider on Hero Honda bike and husband was driven the vehicle, at that occasion, near Pir Dargah on the curve when they were passing through, the husband has lost the control of vehicle and vehicle was turned turtle. Ultimately, husband received injury and his wife has also received injury on left hand and fractured and thereafter he admitted in Parth Hospital of Dr. Nitin A. Budhdhadeve at Morbi and then shifted to H.J. Doshi Sarvajanik Hospital, Rajak between 8th August 2005 to 10th august 2005 as an indoor patient. The applicant was earning Rs.2500/- while working in Ceramic Factory and aged 45 years. The claim was made for Rs.1 lakh by claimant. Before Claims Tribunal, owner not remained present and insurance company has filed reply Exh.15 and contention is raised that application is got up by applicant. Such accident was not occurred and denying averments made in claim petition. Vide Exh.16, issues were framed by claims tribunal and before claims tribunal, applicant was examined vide Exh.20. Exh.21 FIR, Exh.23-24 injury certificates, Exh.30 charge-sheet, Exh.31 – panchnama are produced by claimants before tribunal. Opponent No.1 not remained present before claims tribunal who is owner of vehicle. The claims tribunal has considered evidence of claimant Exh.20 and disability certificate 7% permanent disability as agreed by claimant and on that basis, 11 multiplier applied, Rs.105/- is considered monthly loss and Rs.13,860/- future loss of income has been awarded. Rs.7,500/- FA/564020/2008 7/36 JUDGMENT for pain, shock and suffering and actual loss of Rs.3,000/- and Rs.17,870.98 ps., for medical expenses vide Exh.28, in all, it has been awarded Rs.18,000/- for medical expenses, Rs.3,000/- for attendance charges. Therefore, total amount comes to Rs.45,360/- with 7.5% interest. 11. In Para 17, from RTO Office, one Jr. Clerk Mr. Harish Naranbhai was examined by insurance company vide Exh.36. He produced certificate vide Exh.37 and according to this witness, Balabhai Jerambhai is having licence to drive Atul Auto Rickshaw and not motor cycle. The witness admitted that Balabhai has not obtained licence to drive motor cycle and witness was not aware about facts, but, advocate of insurance company raised contention that if Balabhai is having a licence to drive motorcycle then he should have to produce it but not produced by him. Therefore, presumption is that Balabhai was not having licence to drive motorcycle. Exh.33, insurance policy produced by insurance company where opponent No.1 is an owner and period of insurance policy is 27th September 2004 to 26th Sept 2005 and considering decision relied upon by advocate of insurance company in case of National Insurance Company v. Kusumray and Ors. reported in 2006 ACJ 1336 (SC) that if terms and conditions of insurance policy is violated and if driver of motorcycle was found without having any licence to drive vehicle, then, insurance company is not held liable. But, Claims Tribunal has considered that let insurance company may pay compensation to FA/564020/2008 8/36 JUDGMENT claimant and then to recover form owner. This direction is objected seriously by insurance company raising contention mainly on basis of Balabhai was not having driving licence of motorcycle. No doubt, Balabhai was having a licence of Atul Auto Rickshaw. 12. Learned advocate Mr. Sood submitted that once the terms and conditions of insurance policy is violated, then, insurance company is not liable to pay compensation. 13. In this case, it is necessary to consider by this Court that fact of licence not possessed by Balabhai to drive motorcycle is proved on the basis of evidence of Harishbhai Naranbhai Exh.36. The advocate of insurance company has not proved that condition incorporated in insurance policy which requires a valid licence from driver of vehicle. The submission made by lawyer of insurance company on presumption that driver must have possess valid legal licence to drive vehicle, otherwise, it amounts to breach of condition but nowhere it has been pointed out by advocate of insurance company before claims tribunal that which condition has been violated. It is duty of insurance company to point out to claims tribunal that valid legal licence is necessary condition precedent for driver of vehicle at the time of accident if he does not possess, then, it amounts to breach of condition, but, for that, it is further duty of insurance company to prove that which condition has been violated by owner and FA/564020/2008 9/36 JUDGMENT driver of vehicle for not having valid licence of vehicle. So, there was no sufficient evidence on record produced by insurance company from insurance policy Exh.33 that this condition has been violated. 14. Therefore, according to my opinion, insurance company has not sufficiently discharged his burden to prove before claims tribunal that specific condition of insurance policy has been violated. But, apart from that claims tribunal has relied upon insurance policy and directed to pay amount of compensation to the claimant and then to recover from owner. So, merely, harping on driving licence which was not possessed by driver, circular of Tariff Advisory Committee dated 2nd June 1986 has been forgotten by advocate of insurance company that pillion rider in case of comprehensive policy is considered to be a third party. In this case, there is no dispute that insurance policy issued by insurance company having a comprehensive policy, a risk of the pillion rider is covered in basic premium and pillion rider is considered to be a third party not gratuitous passengers because motorcycle is a private vehicle. The Tariff Advisory circular dated 2nd June 1986 directed to insurance company to reward as under : 15. Section II(1)(a) of the policy “Death or bodily injury to any person including person conveyed in or on the Motor Cycle provided such person is not carried for hire or reward.” FA/564020/2008 10/36 JUDGMENT 16. In this case, it is not the case of insurance company before claims tribunal that wife of driver of motorcycle was travelling on hire or reward. Meaning thereby, this circular is squarely covered the case of pillion rider considered to be a third party and this being a circular of Tariff Advisory Board binding to each insurance company as a mandate and standard form of condition of comprehensive policy and package policy is to be rewarded as referred above covered risk of pillion rider. Therefore, this Court had an occasion to consider the same question in First Appeal No.5561 of 2008 with Civil Application No.14059 of 2008 dated 15th December 2008 and judgment delivered by Apex Court in case of Zaharulnishs (supra) relied upon by learned advocate Mr. Sood is basically against him. Sometime, such occasion happened that lawyer without reading the whole decision cited before the Court as a precedent. In case of Zaharulnisha (supra), the observations made by Apex Court in Para 14 that “Sub- section 91) of Section 149 casts a liability upon the insurer to pay the person entitled to the benefit of the decree “as if he was the judgment debtor”, that is, the Statute raises a legal fiction to the effect that for the said purpose the insurer would be deemed to be a judgment-debtor in respect of the liability of the insurer in respect of third party risks.” This Court has considered said question in First Appeal No.5561 of 2008 with Civil Application No.14059 of 2008 dated 15th December 2008. The relevant Para 8 to FA/564020/2008 11/36 JUDGMENT 11 are quoted as under : “8. Apart from that, this contention is raised before this Court that risk of pillion rider is not covered in the insurance policy issued by Insurance Co. Learned advocate Ms.Megha Jani has admitted before this Court that policy issued in favour of insured being a comprehensive policy. The date of accident is 30.9.2006. The Tarrif Advisory Committee has issued the circular dated 24.6.1986 in respect to reworded the comprehensive policy, Sheet No.59 of the IMT which covered any person including person conveyed in or on the Motor Cycle provided such person is not carried for hire or reward. It is not the case of the Insurance Co. before this Court and even before the claims Tribunal that pillion rider was carried for hire or reward on the date of accident. The aforesaid circular is quoted as under : “THE ORIENTAL INSURANCE CO. LTD. HEAD OFFICE : ORIENTAL HOUSE, A-25/27, ASAF ALI ROAD, NEW DELHI – 110 002. Regional office 3rd floor, Kalidas Chambers, Nr.Dinbai Tower, Laldarwaja, Ahmedabad-380 001. Dt. 24th June, 1986. ERO Circular no.ERO/tech/Mot/22/86/MR Our circular no. ARO/Accdt/22/86 FA/564020/2008 12/36 JUDGMENT To all Divisional Officers/Branch Offices Re : Compensation to Pillion Riders. We produce below the clarification received from Tarrif Advisory Committee, Bombay on the subject. You will find the contents of the circular reproduce below self – explanatory. No.MOT/GEN/10 dated 2.6.86. Insurer's attention is invited to Section II(1)(a) of Standard Form for Motor Cycle, Comprehensive Policy, Sheet 59 of the IMT. It has now been decided that the Standard Motor Cycle Comprehensive Policy should cover liability to Pillion Passengers treating them as occupants in the Motor Cycle and provide indemnity to such persons who are not carried for hire or reward. Accordingly, Extra Benefit No. 2 granting legal liability to cover side car passengers will stand deleted and Standard Cover under Section 2(1)(a) of the Policy are worded as under:- "Death or bodily injury to any person including person conveyed in or on the Motor Cycle provided such person is not carried for hire or reward." sd/- REGIONAL MANAGER” 9. This Court had an occasion to consider the same contention raised by learned advocate Ms.Megha Jani in FA No.5007 of 2008 decided on 20.10.2008 wherein this Court has considered aforesaid circular. Relevant observations made by this Court in aforesaid decision are in Para.13 to 21 which are quoted as under : “13. In view of the aforesaid law as referred by this Court and relied upon by learned advocate FA/564020/2008 13/36 JUDGMENT Ms.Megha Jani, the question is that whether pillion rider in private vehicle covered by definition of 'any person / third party/ occupant, so Insurance Co. is held to be liable for payment of compensation to the claimants. The decision which has been relied upon by her where nowhere direction of the Tariff Advisory Committee has been considered by Apex Court. In the decision of Sudhakaran K.V. (supra) also, Apex Court has examined issue whether pillion rider is covered as a third party or any person under Section 147 of the MV Act. In decision of Tilak Singh (supra), Apex Court has considered Section 147 of the MV Act and terms of insurance policy where risk of pillion rider is not covered because additional premium was not paid by insured. But before Apex Court, direction of Tariff Advisory Committee issued to all the insurer that Tariff Advisory Committee has taken the decision relating to clause-1 of Section- II(a) is to be substituted by way of amendment in respect of 'any person' such occupants is to be included. 14. In this matter, this court has examined whether insurance company is liable to pay compensation to claimant or not in case of an accident wherein pillion rider has received injury or has expired in such an accident. In decision of apex court which has been relied upon by learned Advocate Ms. Megha Jani, apex court has considered only scope of section 147 of Motor Vehicles Act and in light of that fact, whether pillion rider is to be considered third party or not, only that question has been examined by Hon'ble Supreme Court in decision referred to and relied upon by learned Advocate Ms.Megha Jani. The Apex Court has come to conclusion that pillion rider is not considered to be third party, therefore, insurance company is not liable to pay compensation to claimant. Owner is not a third party. If motor cycle is driven by owner and his wife is sitting on motor cycle as pillion rider and accident occurs, then, though owner has paid premium for obtaining insurance, then also, as per interpretation of section 147 made by apex court, result is that owner of motor cycle and his wife both are not considered to be third party when accident occurred without involvement of opposite vehicle. Therefore, owner is FA/564020/2008 14/36 JUDGMENT not third party, pillion rider is also not a third party, then, for whom insurance was taken by owner and for what and why amount of insurance was paid by owner to insurance company. According to my opinion, insurance company plays trick with its customers by not giving total details which are necessary and in the interest of insured while entering into contract of insurance with owner of vehicle. According to my opinion, owner who is purchasing and owning motor cycle worth Rs.40,000/- to Rs.50,000/- would be having no problem to make payment of additional premium of petty amount of Rs.100.00 or so while getting vehicle insured to cover risk in all respects. But complete details are not given to owner whether his risk is covered in all respects or not by insurance company and insurance company while entering into contract of insurance, not providing complete details that for covering risks in all respects, this much additional premium is necessary so as to cover risk of owner/person driving motor cycle and pillion rider. This is the business approach or trick which is being played by insurance companies with customers who are approaching insurance company for getting their motor cycle insured in all respects. Initially, insurance company will get business by playing such tricks and then, when claim is lodged, insurance company will defend such claim by teeth and nail and in such a situation, ultimate suffer is injured and pillion rider. It cannot be presumed that in motor cycle, pillion rider is taken by driver or owner of motor cycle on hire or reward. This is impossible even to imagine and pillion rider of motor cycle would ordinarily be a friend or relative or it would be a social service rendered by owner/driver of motor cycle. Therefore, according to my opinion, while getting business, insurance company must disclose true and correct picture before owner of motor cycle but unfortunately being business tactics, these facts are not being disclosed by insurance company before owner of motor cycle who is approaching insurance company for getting their vehicle insured in all respects. Normally persons would not be aware about such tactics which are being adopted by insurance company, so, ultimately, insurance company will deny FA/564020/2008 15/36 JUDGMENT responsibility and ultimate suffer will be pillion rider. According to my opinion, such type of approach and business tactics adopted by insurance company is required to be condemned. This Court has gathered facts from number of such instances where such type of defences are always being raised by insurance company by placing reliance upon decision of apex court wherein apex court has interpreted only section 147 of Motor Vehicles Act. Considering whether insurance company is statutorily liable to pay compensation to claimant in respect of claim of pillion rider and owner, answer given by apex court in negative but according to my opinion, in said decision relied upon by learned Advocate Ms.Megha Jani, the Apex Court has considered only statutory liability of insurance company in above said decisions. However, I am considering whether this liability of insurance company is arising from contractual liability means as per terms and conditions incorporated in insurance policy or not. If insurance company is contractually liable to cover risk of pillion rider, then, insurance company is liable to discharge liability on the basis of terms and conditions incorporated in insurance policy, therefore, I am examining this matter only on the basis of fact whether insurance company is contractually liable or not in respect of pillion rider, to pay compensation to claimant of pillion rider. For that, I am relying upon Tariff Advisory Committee which had issued Circular dated 2nd June, 1986 which is relating to compensation to pillion riders. By said circular dated 2nd June, 1986, Insurer's attention was invited to section II (1) (a) of standard form for motor cycle, comprehensive policy, sheet 59 of the IMT. Under said Circular, it was decided that the standard motor cycle comprehensive policy should cover liability to pillion passengers treating them as occupants in the motor cycle and provide indemnity to such persons who are not carried for hire or reward. Accordingly, the extra benefit No.2 granting legal liability to cover side car passengers was deleted and the standard cover under section 2(1) (a) of the policy was worded like “Death or bodily injury to any person including any person conveyed in or on the motor cycle FA/564020/2008 16/36 JUDGMENT provided such person is not carried for hire or reward.” And thereafter, Insurers are requested to issue necessary instructions to their Divisional / Branch offices accordingly. Said Circular dated 2nd June, 1986 is also applicable in Gujarat State, Ahmedabad. According to my opinion, said direction or circular issued by Tariff Advisory Committee is having statutory binding force upon the insurance companies but insurance companies are not amending their terms and conditions incorporated in policy of insurance in respect to motor cycle and