1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE SIDE JURISDICTION FIRST APPEAL NO. 364 OF 1997 AND FIRST APPEAL NO. 365 OF 1997 F.A. NO. 364 OF 1997 The United India Insurance Co. Ltd. .. ) Appellant (Org. Respondent No.3) Versus 1. Sindhubai wife of Kondiram Darwante ) 2. Gopaldas son of Kanhyalal Bhagat, ) 3. Mangusingh son of Fulsingh Rathod, ).. Respondents ( No.1 Original Petitioner and Nos.2 and 3 Original Respondents Nos.1 and 2.) F.A. NO. 365 OF 1997 The United India Insurance Co. Ltd. .. ) Appellant (Org. Respondent ) Versus 1. Kalabai W/o. Vithal Lahane, ) 2. Gopaldas son of Kanhiyalal Bhagat, ) 3. Mangusingh son of Fulsingh Rathod, ).. Respondents (Nos.1 & 2 Org. Petitioners No.3 Opp. Party. ) -- Shri S.R. Singh for the Appellant. Shri Ashutosh Gole i/by Shri R.S. Apte for Respondent No.1. Shri Mendon, appointed to assist the Court. -- 2 CORAM : A.S. OKA, J DATE ON WHICH THE SUBMISSIONS WERE HEARD : 19TH NOVEMBER, 2009. DATE ON WHICH THE JUDGMENT IS PRONOUNCED: 12TH MARCH, 2010. JUDGMENT : Though these two First Appeals were heard earlier , the judgment was reserved as in some other appeals, learned counsel appearing for the parties were desirous of making further submissions on the point involved in these appeals. The said appeals were either not prosecuted or were settled. Therefore, I am proceeding to deliver the judgment. 2. These two appeals were taken up together as they arise of the same accident. One Kalabai Vithal Lahane ( the 1st Respondent in F.A. No.365 of 1997 ) filed a Claim Petition under Section 110-A of the Motor Vehicles Act, 1939 ( hereinafter referred to as “the said Act of 1939”) on account of death of one Vithal in a motor accident on 8th September, 1985. The said Vithal was the husband of the 1st Respondent. 3. One Sindhubai Kondiram Darwante ( the 1st Respondent in 3 F.A. No.364 of 1997 ) filed a Claim Petition under Section 110-A of the said Act of 1939 on account of death of one Kondiram who was her husband. 4. The accident occurred on 8th September, 1985. The deceased Vithal boarded the truck No.MHV-5936 for coming to Talavade. The deceased Kondiram boarded the said truck at Loni Khurd for going Babultel. The case made out in the Claim Petition is that they had paid fare charges to the 3rd Respondent in both the Appeals who was at the relevant time driver of the said truck. The 2nd Respondent in both the appeals was the owner of the truck. The allegation in the claim petition is that the driver was driving the truck in a rash and negligent manner .As a result, at a distance of about 9 kms from Nandgaon, the truck turned turtle. There were bundles of steel plates in the said truck. The bundles were kept loose and as a result of the impact, the said bundles were thrown on the road and the deceased Vithal as well as the deceased Kondiram were crushed under the said bundles and died on the spot. 5. The owner and the driver of the truck did not contest the claim petitions. The contest was made by the Appellant who was admittedly the insurer of the truck on the date of accident. The contention raised by the Appellant-Insurer was that the vehicle was a goods carrier having Public Carrier Permit. In such a vehicle, the passengers cannot be carried and therefore, there was a breach of terms 4 and conditions of the policy on the part of the owner and the truck. 6. The Tribunal found that the accident occurred due to rash and negligent driving of the truck by the 3rd Respondent. In the claim Petition filed by Kalabai, the compensation of Rs.1,00,000/- with interest thereon at the rate of 12% per annum was granted under the impugned award. The same compensation was granted to the other claimant Sindhubai. The Tribunal held that even the law prohibits carrying of passengers in a goods vehicle and the terms and conditions of the policy prohibit carrying of passengers in such vehicle. However , the Tribunal proceeded to pass a joint and several award against the Appellant , the owner and the driver of the truck. 7. The learned counsel appearing for the Appellant-insurer relied upon a decision of the Apex Court in the case of Mallawwa & Others v. Oriental Insurance Company Limited & Others [(1999) ACJ 1 ]. He submitted that the Apex Court held that that the Insurance Company is not liable to pay compensation on account of death and injuries sustained by a person travelling in a goods vehicle who had paid fare or who was travelling gratuitously. He submitted that the same position of law has been reiterated in a decision of the Apex Court in the case of United India Insurance Company Limited v. A.N. Subbulakshmi & Others [(2008) 9 SCC 354]. 5 8. The learned counsel appearing for the 1st Respondent supported the impugned judgment and awards. He submitted that even if the Court comes to a conclusion that there was a breach of terms and conditions of the policy of insurance , the Appellant-Insurer will have to pay compensation and will have to recover the same from the Insured. This Court had requested Mr.Mendon, learned counsel to assist this Court. He has invited attention of the Court to several decisions where it has been held that in such a case, there is a power vesting the Tribunal and this Court to direct the insurer to pay compensation and to permit the insurer to recover the compensation from the insured by executing the same award. He has placed on record several decisions. 9. Learned counsel appearing for the Appellant submitted that in certain decisions, the Apex Court has given directions to the insurer to pay and thereafter to recover from the insured. He submitted that all such directions have been issued by the Apex Court in exercise of powers under Article 142 of the Constitution of India. He submitted that such directions are given in certain decisions of the Apex Court considering the peculiar facts and circumstances of the case and therefore, the said decisions cannot be read as biding precedents laying down that the Tribunal or this Court has power to issue such directions. He placed reliance on a decision of the Apex Court in the case of Delhi Administration ( NCT of Delhi ) v. Manohar Lal, [ (2002)7 SCC 222 ]. He also invited attention of the Court to a decision of the Apex Court in the case of Oriental Insurance 6 Co. Ltd. v. Smt. Raj Kumari & Ors., ( AIR 2008 SC 403 ). He submitted that the decision of the Apex Court containing a direction to the insurer to pay first and thereafter recover from the insured cannot be read as binding precedent. Lastly he pointed out that the order dated 31st August, 2009 passed by the Apex Court in the National Insurance Company Limited v. Parvathneni & Another, [ (2009)8 SCC 785 ] shows that the issue has been referred to a larger bench of the Apex Court. He also invited my attention to the decision of the Division Bench of this Court dated 22nd August, 2008 in LPA No.121 of 2000. 10. I have given careful consideration to the submissions. It is not in dispute that the truck in question was a goods carrier and that the deceased were fare paying passengers. Reliance has been placed on the decision of the Apex Court in the case of Mallawwa & Others (supra). In Paragraph 1 of the decision, the Apex Court observed that: “These appeals were earlier placed for hearing before a Divi- sion Bench consisting of our learned brothers Bharucha and Majmudar, JJ. on 20-2-1996. Upon hearing the counsel, the Division Bench passed the following order: “What we are concerned with in these matters is the correct interpretation of Section 95 of the Motor Vehicles Act, 1939. The question arises, specifically, in the context of the death of the owner of goods being carried in a goods vehicle, and the question is whether the insurer of the goods vehicle is liable to pay the compensation awarded to his legal heirs. We note that there are divergent views expressed by the High Courts. Apart from that, in our view, a de- cision of a Bench of two learned Judges in Pushpabai Purshottam Udeshi v. Ranjit Ginning & Pressing Co. (P) Ltd.1 needs to be reconsidered in greater detail. In 7 these circumstances, it is appropriate that these matters should be heard and disposed of by a Bench of three learned Judges.” (emphasis added) 11. The Apex Court considered Section 95 of the said Act of 1939 as well as Section 147 of the Motor Vehicles Act, 1988 ( hereinafter referred to as “the said Act of 1988”). In Paragraph 10, the Apex Court has observed thus: - “For the purposes of Section 95, ordinarily a vehicle could have been regarded as a vehicle in which passen- gers were carried if the vehicle was of that class. Keeping in mind the classification of vehicles by the Act, the re- quirement of registration with particulars including the class to which it belonged, requirement of obtaining a permit for using the vehicle for different purposes and compulsory coverage of insurance risk, it would not be proper to consider a goods vehicle as a passenger vehicle on the basis of a single use or use on some stray occa- sions as a vehicle for carrying passengers for hire or re- ward. For the purpose of construing a provision like pro- viso (ii) to Section 95(1)(b), the correct test to determ- ine whether a passenger was carried for hire or reward, would be whether there has been a systematic carrying of passengers. Only if the vehicle is so used then that vehicle can be said to be a vehicle in which passengers are carried for hire or reward. The High Courts have ex- pressed divergent views on the question whether a pas- senger can be said to have been carried for hire or re- ward when he travels in a goods vehicle either on pay- ment of fare or along with his goods. It is not necessary to refer to those decisions which were cited at the Bar as we find that all the relevant aspects were not taken into consideration while expressing one view or the other. We may only refer to the decision of the Orissa High Court in New India Assurance Co. Ltd. v. Kanchan Bewa ................” 12. The Apex Court quoted with approval a portion of the aforesaid decision of Orissa High Court with approval as under: 8 “22. Thus, to find out whether an insurer would be liable to indemnify an owner of a goods vehicle in a case of the present nature, the mere fact that the passen- ger was carried for hire or reward would not be enough; it shall have to be found out as to whether he was the owner of the goods, or an employee of such an owner, and then whether there were more than six persons in all in the goods vehicle and whether the goods vehicle was being habitually used to carry passengers. The position would thus become very uncertain and would vary from case to case. Production of such result would not be condu- cive to the advancement of the object sought to be achieved by requiring a compulsory insurance policy. 23. There is another aspect of the matter which had led us to differ from the Full Bench decision of the Ra- jasthan High Court. The same is what finds place in sub-section (2) of Section 95. That sub-section spe- cifies the limits of liability and clause (a) deals with goods vehicle; and insofar as the person travelling in goods vehicle is concerned, it has confined the li- ability to the employees only. This is an indicator, and almost a sure indicator, of the fact that the le- gislature did not have in mind carrying of either the hirer of the vehicle or his employee in the goods vehicle, otherwise, clause (a) would have provided a limit of liability regarding such persons also.” 13. In Paragraph 11 of the decision, the Apex Court held thus : “11. Though the conclusion was arrived at after taking into consideration the Orissa Motor Vehicles Rules, in our opinion the said view is correct, even otherwise also. In view of what we have said, the contrary view expressed by other High Courts has to be regarded as incorrect.” 14. Thus, the view taken by the Apex Court is that in such a case, the insurance company cannot not be held to be liable. Even on plain reading of Section 95 of the said Act of 1939, it is apparent that the insurer is not liable to indemnify the insured against the risk of passengers 9 travelling in a goods vehicle either gratuitously or by paying hire charges. However, the Apex Court did not consider the question whether in such a case , the Tribunal has a power to direct the insurer to pay compensation and thereafter to recover the same from the insured. 15. Going by the findings recorded by the Tribunal on facts, it is obvious that the Appellant was not liable under the contract of Insurance as it is nobody’s case that extra premium was paid for the liability of gratuitous or fare paying passengers. The only question remains to be decided in these appeals is whether the Appellant can be directed to pay compensation amount and thereafter recover the same from the Insured. 16. In the case of New India Assurance Company Limited v. Kusum and Others, [ 2009 ACJ 2655 ], the Claims Tribunal had passed an award in favour of the Claimants by granting compensation. The Tribunal held that the driver of the offending vehicle was not possessing a valid driving license. It was held that the primary liability to pay compensation was that of the owner and the driver of the vehicle. However, the insurer who was the Appellant before the Apex Court was directed to pay compensation amount and recover the same thereafter from the owner (insured). An execution application was filed by the appellant-insurer after depositing the amount of compensation. The prayer in the said execution application was for recovery of compensation amount from the owner and the driver together with interest thereon. An objection was 10 raised by the owner (insured) on the ground that the execution application was not maintainable as there was no award in favour of the Appellant-insurer. The said objection was accepted and the execution application was dismissed. The matter was taken to the High Court. A Writ Petition filed by the Appellant-Insurer was dismissed. The Apex Court allowed an appeal preferred by the Insurer. In Paragraph 9, the Apex Court observed thus: - “9. Whenever, thus, a direction has been issued by the Tribunal, it must be held to have been done in exercise of its inherent power. It would be travesty of justice, if the insurance company which is directed to pay the amount and then face immense difficulties in executing a decree.” (emphasis added) 17. Thus, the Apex Court held that whenever the Tribunal passes an order of directing the insurer to pay compensation amount and thereafter to recover the same from the insured, the Tribunal exercises inherent power. At this stage, it will be necessary to consider a decision of the Apex Court in the case of Oriental Insurance Company Limited v. Raj Kumari & Ors., ( AIR 2008 SC 403 ). This was a case where the Tribunal allowed the claim application by granting compensation of Rs.1,40,000/- but restricted the liability of the insurer to Rs.50,000/-. An appeal was preferred against the said award before the High Court. The High Court held that the entire amount will have to be paid by the insurer and the amount paid in excess of Rs.50,000/- by the insurer will have to be 11 recovered from the insured. The said award was challenged by the Insurer before the Apex Court. The Apex Court discussed the law relating to precedents and in Paragraph 16, the Apex Court held thus :- “16. In the instant case the insurer was a private limited company doing transport business. There was no material placed before the High Court to show that the claimants would have any difficulty in recovering the awarded amount from it. That being so, the High Court’s order is modified to the extent that the insurer shall pay an amount of Rs.50,000/- with interest awarded to claimants. The balance has to be paid by the insured.” 18. At this stage, a reference will have to be made to certain decisions of this Court. In the case of United India Insurance Company Limited v. Kamal Maruti Darekar & Ors., [ 2007(6) ALL MR 392, this Court had occasion to consider the question whether the insurer can be directed to deposit the amount of compensation though a defence under Section 149(2) of the said Act of 1988 was proved by the Insurer. This Court relied upon a decision of the Apex Court in the case of National Insurance Company Limited v. Swaran Singh, [ 2004(3) S C C 297]. After considering the said decision, in Paragraph 16, this Court held thus:- “16. From the above observations, it is amply clear that the insurer may legally establish defence to avoid liability and cannot be held jointly liable to pay compensation amount to the claimants, if such defence is duly proved within the meaning of Section 149(2), but even in such a case the insurer is statutorily liable to satisfy the award in the first instance qua the claimants, who are third parties. In view of the fact that special protection is made 12 available to third parties under statutory provisions of the Motor Vehicles Act, third parties are not concerned with terms of the contract between insurer and insured. They cannot be, therefore, denied fruits of the award rendered by the Tribunal and cannot be compelled to seek recovery only from the owner of the vehicle, due to absence of legal liability of the insurer or on account of faults committed by the insured.” (emphasis added) 19. Similar view has been taken by this Court in the case of United India Insurance Company Limited v. Branch Office at Rial Toly & Ors., [ 2008(4) Bom. C.R. 851]. This Court relied upon a decision of three Judge Bench of the Apex Court in the case of National Insurance Co. Ltd. v. Baljit Kaur, [2004(2) SCC 1 ]. 20. Learned counsel appearing for the Appellant has placed reliance on an unreported judgment of a Division Bench of this Court in LPA No.121 of 2000. After considering the law on this aspect in Paragraph 65, the Division Bench held thus: - “65. The question which arises is what is the effect of section 96(3) and (4) of the said Act and section 149(4) and (5) of the Motor Vehicles Act, 1988. Can it be said that because of these provisions, the insurance company can be compelled to make payment of the awarded amount and recover it from the insured in all cases ? We have carefully considered these provisions. On the basis of these provisions, we are unable to lay down a broad proposition that in all cases, the insurer must be made to pay the entire compensation amount and then recover it from the owner of the offending vehicle.” 13 21. In the case of National Insurance Co. Ltd. v. Swaran Singh, (2004) 3 SCC 297, Apex Court dealt with the said question. In paragraph 104 of the decision it was held thus: 104. It is, therefore, evident from the discussions made hereinbefore that the liability of the in- surance company to satisfy the decree at the first instance and to recover the awarded amount from the owner or driver thereof has been holding the field for a long time. 105. Apart from the reasons stated hereinbefore, the doctrine of stare decisis persuades us not to devi- ate from the said principle. 106. It is a well-settled rule of law and should not or- dinarily be deviated from. (See Bengal Immunity Co. Ltd. v. State of Bihar36, SCR at pp. 630-32, Keshav Mills Co. Ltd. v. CIT37, SCR at pp. 921-22, Union of India v. Raghubir Singh38, SCR at pp. 323, 327, 334, Gannon Dunkerley and Co. v. State of Rajasthan39, Belgaum Gardeners Coop. Production Supply and Sale Society Ltd. v. State of Karnataka40 and Hanumantappa Krish- nappa Mantur v. State of Karnataka41.) 107. We may, however, hasten to add that the Tribunal and the court must, however, exercise their jurisdiction to issue such a direction upon consideration of the facts and circum- stances of each case and in the event such a direction has been issued, despite arriving at a finding of fact to the effect that the insurer has been able to establish that the insured has committed a breach of contract of insurance as envisaged under sub-clause (ii) of clause (a) of sub-section (2) of Section 149 of the Act, the insurance company shall be entitled to realise the awarded amount from the owner or driver of the vehicle, as the case may be, in execution of the same award having regard to the provisions of Sections 165 and 168 of the Act. However, in the event, having regard to the limited scope of inquiry in the proceedings before the Tribunal it had not been able to do so, the in- surance company may initiate a separate action therefor against the owner or the driver of the vehicle or both, as the case may be. Those excep- tional cases may arise when the evidence be- 14 comes available to or comes to the notice of the insurer at a subsequent stage or for one reason or the other, the insurer was not given an opportun- ity to defend at all. Such a course of action may also be resorted to when a fraud or collusion between the victim and the owner of the vehicle is detected or comes to the knowledge of the in- surer at a later stage. (emphasis added) 22. In the same decision , it was ultimately held by the Apex Court that: “ix) The Claims Tribunal constituted under Section 165 read with Section 168 is empowered to adju- dicate all claims in respect of the accidents in- volving 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 re- stricted 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 de- cision 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 en- forceable and executable in the same manner as provided in Section 174 of the Act for enforce- ment 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 de- fence in accordance with the provisions of Section 149(2) read with sub-section (7), as interpreted by this Court above, the Tribunal can direct that the insurer is liable to be reim- bursed by the insured for the compensation and other amounts which