FA/2042/2007 1/41 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD FIRST APPEAL No. 2042 of 2007 With FIRST APPEAL No. 5109 of 2007 With FIRST APPEAL No. 5315 of 2007 With FIRST APPEAL No. 5329 of 2007 With CIVIL APPLICATION No. 5847 of 2007 With CIVIL APPLICATION No. 14062 of 2007 With CIVIL APPLICATION No. 14893 of 2007 With CIVIL APPLICATION No. 14940 of 2007 For Approval and Signature: HONOURABLE MR.JUSTICE D.H.WAGHELA Sd/- ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 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 ? 5 Whether it is to be circulated to the civil judge ? 1 & 2 YES; 3 to 5 NO ========================================================= NEW INDIA ASSURANCE CO. LTD. - Appellant(s) Versus P. SAGUNA WD/O. P.BALAKRISHNA & 3 - Defendant(s) ========================================================= Appearance : MS MEGHA JANI, MR MEHUL SHARAD SHAH, MS LK BHAYA for Appellants MR DC DAVE, MR HS MUNSHAW, MR SHALIN MEHTA for Respondents NOTICE NOT RECD BACK FOR Respondents 1-3 & NOTICE SERVED for Respondent 4 in FA 2042 of 2007 ========================================================= FA/2042/2007 2/41 JUDGMENT CORAM : HONOURABLE MR.JUSTICE D.H.WAGHELA Date : 16/01/2008 CAV JUDGMENT 1. These appeals under section 173 of the Motor Vehicles Act, 1988 ("the Act" for short) are preferred by two insurance companies from the awards made under section 163-A of the Act and, having involved common question of law, they are disposed by this common judgment after hearing arguments in extenso at the admission stage. 2. In First Appeal No.2042 of 2007, the New India Assurance Co. Ltd. has challenged the award in MACP No.340 of 2001 awarding compensation of Rs.4,62,839/- with cost and interest @ 7.5% p.a. to the heirs of deceased P.Balakrishna, aged 29, who met with an accident on 19.11.2000 at 07.30 p.m. on Gandhidham-Kandla Highway while driving the scooter which slipped due to some obstruction on the road and who succumbed to his injuries on 23.11.2000. The Claims Tribunal turned down the plea of the insurance company that the deceased himself was a tortfeaser and, due to his own negligence, he sustained injuries and died even as the owner of the vehicle and the employer of the deceased did not contest the claim. It was FA/2042/2007 3/41 JUDGMENT also unsuccessfully argued that the employer had not paid additional premium of Rs.25/- for covering the risk of his employee and hence the insurance company was not liable to pay any amount of compensation. It was contended on behalf of the claimant that the accident had happened due to full lights of the vehicles coming from the opposite side and the scooter of the deceased had slipped due to some obstruction on the road which might not have been noticed. 3. In First Appeal No.5109 of 2007, the deceased was a driver and owner of a carrier rikshaw which rammed into a dumper which was parked on the road on 29.11.2004 on Porbandar- Kutiyana Highway. It was contended that opponent No.1 had so kept the dumper on the road as to make an obstruction. The present appeal is preferred by the insurance company of the dumper to challenge its liability to pay total compensation of Rs.4,15,000/-with cost and interest @ 7% p.a. 4. In First Appeal No.5315 of 2007, the National Insurance Co. Ltd. has challenged the award in MACP No.33 of 2006 whereunder it is held to be jointly and severally liable to pay to the claimant the sum of Rs.2,92,500/- with cost and interest @ 7.5% p.a. in a case in which, on 4.7.2005, deceased pillion rider on a motorcycle was killed on the National Highway No.8, Near FA/2042/2007 4/41 JUDGMENT Piplaj Chokdi where the jeep of opponent No.1 dashed with the motorcycle. The appellant as the insurance company for the motorcycle unsuccessfully contended that no premium was paid for pillion rider and hence it could not be held liable, jointly and severally, to indemnify the owner of the motorcycle, even as the driver of the motorcycle was not holding a valid licence and the accident had occurred due to sole negligence on the part of the driver. 5. In First Appeal No.5329 of 2007, the National Insurance Co. Ltd., has challenged the award and order in MACP No.259 of 2006 whereunder the opponents were ordered to jointly and severally pay Rs.3,42,552/- with cost and interest @ 7.5% p.a. for death of the pillion rider while his father was driving the vehicle on 6.9.2000 and a truck had come from behind and dashed with the motorcycle. It was contended by the insurance company that drivers of both the vehicles were not holding a valid licence. The owner of the truck had denied the allegation of ownership of the truck. 6. The arguments on behalf of the appellants could be summarised as under: (a) A tortfeaser or heirs of a tortfeaser himself are not entitled to compensation under the provisions of section 163-A of the Act; FA/2042/2007 5/41 JUDGMENT (b) The insurance company is an "authorized insurer" as far as risk of third party is concerned and, if risk of the deceased or insured person were not covered by the policy, the insurer cannot be held liable to pay to the person entitled to the benefit of the decree even if award were obtained against any person insured by the policy. The terms and conditions of the policy cannot be ignored since the liability is arising under a contract; (c) The intention of the legislature in enacting section 163-A is to see that the claimants are not required to prove negligence and not to make insurance company liable irrespective of the risk covered; (d) Where no liability arises for the insured, i.e. owner of the vehicle, the insurance company also has no liability. An owner of a vehicle, who is injured himself or whose driver or employee is injured in an accident, can claim compensation only if an insurance for personal accident were taken; (e) In case of death of or injury to an employee in an accident arising out of use of a motor vehicle, the liability of insurance company would be restricted to that arising under the FA/2042/2007 6/41 JUDGMENT Workmen's Compensation Act; (f) Insurance company owed no liability towards injuries suffered by a pillion rider where the policy was a statutory policy and did not cover the risk of death or bodily injury to a gratuitous passenger; (g) Insurer was entitled to raise all available defences in terms of section 149 (2) (a) (ii) of the Act; (h) Section 163-A of the Act makes provision for compensation only to third parties and cannot be extended to cases in which pillion rider or passengers in the vehicle of the insured were injured and compensation was claimed against authorized insurer of the vehicle. 7. Even as the above contentions are partly or indirectly covered in the judgments of this Court, learned counsel vehemently argued for adopting a difference course in view of recent judgments of the Supreme Court as discussed hereunder. Before alluding to the ratio and observations made in several judgments binding on this Court, it may be appropriate and advantageous to refer to the relevant provisions as under of the Act: " CHAPTER XI FA/2042/2007 7/41 JUDGMENT INSURANCE OF MOTOR VEHICLES AGAINST THIRD PARTY RISKS 145. Definitions.- In this Chapter, - (a) "authorised insurer" means an insurer for the time being carrying on general insurance business in India under the General Insurance Business (Nationalisation) Act, 1972 (57 of 1972), and any Government insurance fund authorised to do general insurance business under that Act; (b) ... ... ... (c) "liability", wherever used in relation to the death of or bodily injury to any person, includes liability in respect thereof under section 140; (d) ... ... ... (e) ... ... ... (f) ... ... ... (g) "third party" includes the Government. 146. Necessity for insurance against third party risk- (1) No person shall use, except as a passenger, or cause or allow any other person to use, a motor vehicle in a public place, unless there is in force in relation to the use of the vehicle by that person or that other person, as the case may be, a policy of insurance complying with the requirements of this Chapter: Provided ..... Explanation..... (2) ... ... ... (3) ... ... ... 147. Requirements of policies and limits of liability.- (1) In order to comply with the requirements of this chapter, a policy of insurance must be FA/2042/2007 8/41 JUDGMENT a policy which- (a) is issued by a person who is an authorised insurer; and (b) insures the person or classes of persons specified in the policy to the extent specified in sub-section (2)- (i) against any liability which may be incurred by him in respect of the death of or bodily injury to any person including owner of the goods or his authorised representative carried in the vehicle or damage to any property of a third party caused by or arising out of the use of the vehicle in a public place; (ii) against the death of or bodily injury to any passenger of a public service vehicle caused by or arising out of the use of the vehicle in a public place : Provided that a policy shall not be required- (i) to cover liability in respect of the death, arising out of and in the course of his employment, of the employee of a person insured by the policy or in respect of bodily injury sustained by such an employee arising out of and in the course of his employment other than a liability arising under the Workmen's Compensation Act, 1923 (8 of 1923), in respect of the death of, or bodily injury to, any such employee- (a) engaged in driving the vehicle, or (b) if it is a public service FA/2042/2007 9/41 JUDGMENT vehicle, engaged as a conductor of the vehicle or in examining tickets on the vehicle, or (c) if it is a goods carriage, being carried in the vehicle, or (ii)to cover any contractual liability. Explanation: ... ... ... (2) Subject to the proviso to sub-section (1), a policy of insurance referred to in sub- section (1), shall cover any liability incurred in respect of any accident, up to the following limits, namely- (a) save as provided in clause (b), the amount of liability incurred; (b) in respect of damage to any property of a third party, a limit of rupees six thousand: Provided that ... ... ... (3) A policy shall be of no effect for the purposes of this Chapter unless and until there is issued by the insurer in favour of the person by whom the policy is effected a certificate of insurance in the prescribed form and containing the prescribed particulars of any condition subject to which the policy is issued and of any other prescribed matters; and different forms, particulars and matters may be prescribed in different cases. ... ... ... (4) ... ... ... (5) Notwithstanding anything contained in any law for the time being in force, an insurer issuing a policy of insurance under this section shall be liable to indemnify the person or classes of persons specified in FA/2042/2007 10/41 JUDGMENT the policy in respect of any liability which the policy purports to cover in the case of that person or those classes of persons. 148. ... ... ... 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 S. 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 covered by a policy under clause (b) of sub- section (1) of S. 147 (being a liability covered by the terms of the policy) or under the provisions of S. 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 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, together with any amount 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 :- FA/2042/2007 11/41 JUDGMENT (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 organised 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 (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 nondisclosure of a material fact or by a representation of fact which was false in some material particular. FA/2042/2007 12/41 JUDGMENT (3) ... ... ... (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 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 (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 only 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 in respect of that liability, the insurer shall be entitled to recover the excess from that person. (6) ... ... ... (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. Explanation: For the purposes of this section, "Claims Tribunal" means a Claims Tribunal constituted under section 165 and "award" means an award made by that Tribunal FA/2042/2007 13/41 JUDGMENT under section 167. 150 to 163 ... ... ... 163A Special provisions as to payment of compensation on structured-formula basis.- (1) Notwithstanding anything contained in this Act or in any other law for the time being in force or instrument having the force of law, the owner of the motor vehicle or the authorised insurer shall be liable to pay in the case of death or permanent disablement due to accident arising out of the use of motor vehicle, compensation, as indicated in the Second Schedule, to the legal heirs or the victim, as the case may be. Explanation.- ... ... ... (2) In any claim for compensation under sub- section (1), the claimant shall not be required to plead or establish that the death or permanent disablement in respect of which the claim has been made was due to any wrongful act or neglect or default of the owner of the vehicle or vehicles concerned or of any other person. (3) ... ... ... 163B. Option to file claim in certain cases.- Where a person is entitled to claim compensation under Section 140 and Section 163- A, he shall file the claim under either of the said sections and not under both." (underlines added) 8. The following judgments for the observations as under made therein were cited and discussed at the bar: FA/2042/2007 14/41 JUDGMENT (a) In Bajaj Allianz General Insurance Co. Ltd. v. Belaben @ Bhumikaben Yatinkumar in First Appeal No.4104 of 2006 (judgment dated 14.12.2006), it is held by Division Bench of this Court: "15. Seen in the above setting, it is not possible to accept the Insurance Company's contention that even after incorporating the no fault principle or absolute liability in Sections 140 and 163-A, the Parliament intended to introduce in Section 163A the fault principle in case of a driver who, according to the opponent/s, drove the vehicle in a rash and negligent manner. Our analysis in the preceding paras clearly shows that the Parliament intended to exclude altogether inquiry into the question of negligence. Once you retain that inquiry in a case where the driver or his heirs are claimants, the whole gamut of inquiry will surface introducing the elements of delay and uncertainty which the Parliament intended to exclude. What the Parliament has specifically thrown out from the front door cannot be permitted to be reintroduced through the back door. ... ... ... "18. At the fag end of arguments, Mr Nanavati for the appellant – insurance company submitted that since the owner of the motor cycles in the two cases had not paid extra premium for covering the risk of the driver of the motor-cycle in question, the appellant-insurance company was not liable to pay even the compensation under Section 163A of the Act. The owner/driver of the vehicle was covered under the policy for personal accident cover of Rs.1 lakh on account of payment of premium of Rs.50/- and, therefore, there would be no liability to pay compensation under Section 163A of the Act. FA/2042/2007 15/41 JUDGMENT "19. This contention was not urged before the Tribunal and, therefore, cannot be allowed to be raised in this appeal. Even otherwise in view of our finding that the insurer's liability under Section 163A encompasses the liability to pay compensation on the basis of no fault principle even in case of a driver who is alleged to be responsible for causing the accident in question and that the liability under Section 163A is an independent statutory liability and is a social security scheme as held in Deepal Girishbhai Soni vs. United India Insurance Co. Ltd., 2004 (5) SCC 385, the contention cannot be accepted." (b) In National Insurance Co. Ltd. v. Rukhshanaben Salimbhai Vora [2006 (3) GLR 2561], the Division Bench of this Court observed: "The non-obstante clause with which Sec.163A (1) begins makes it clear that the liability of the insurance company to satisfy the award is not dependent upon any other provisions of the Act and therefore, the question whether the passenger in the motorcycle was a gratuitous passenger or whether he can be said to be a third party or not would not be relevant. The contention, therefore, must be rejected." (c) In New India Assurance Co. Ltd. v. Muna Maya Basant [2001 ACJ 940], another Division Bench of this Court observed: "10. ....The opposite parties in other words have no right to challenge the claim under section 163-A on any ground except on the ground FA/2042/2007 16/41 JUDGMENT of involvement of the vehicle or any limitation or grounds recognised by section 163-A, namely, income of the victim, deduction to be made, age, locus standi, no insurance or cessation of insurance, ownership of vehicle, mode of assessment as per structured formula, and the like, or to seek the order directing the victim to prefer the application under section 166 for fullfledged hearing. The provision of section 163-A, to put differently makes the opposite parties liable to pay the lump sum amount as ex gratia payment to be calculated as per structured formula with no right to challenge on the grounds available in the petition filed under section 166 of the Act; and payment under section 163-A is not made subject to the inquiry contemplated under section 166 of the Act. The appellant, therefore, cannot be allowed to lament on the ground that it does not get a right to challenge or defend putting forth a case it desires to, or contend that the application under section 166 when not filed and ordered to pay under section 163-A of the Act, its right to defend is jeopardised. In view of such law and position of section 163-A, the compensation under no fault liability on pre- determined formula has to be awarded and for such award of compensation, petition under section 166 of the Act is not a condition precedent. Irrespective of one's own stand except permissible as aforesaid, the party liable has to pay as per pre-determined formula under section 163-A of the Act so as to assuage the miseries and woes or distress of the victims of the motor accident. The contention raised in FA/2042/2007 17/41 JUDGMENT this regard, therefore, cannot sustain. 11, 12 ... ... ... "13. The anxiety is also expressed in the next contention submitting what the insurance company should do if it is made liable to pay under section 163-A though in fact it may not be liable to pay because the driver of the vehicle involved in the accident may not have the licence or might have driven the heavy vehicle though having the licence for a light vehicle, or what the insurance company should do if it is made liable to pay more under the pre-determined formula than the limits of the liability fixed in the policy because under section 163-A the insurance company will have no scope to challenge on such grounds, while under section 166 if the petition is filed, it will have the scope to challenge putting forth its defence and may avoid to pay more than its contractual liability otherwise a question of recovery may arise and insurance company will have to, if ordered to pay more, sustain loss. "14. Under the Act, the liability of the insurance company is statutory and that can be spelt out from section 147. Charging extra premium, the insurance company may prefer to cover higher liability or risk or unlimited liability. In any case, therefore, the contractual liability will not be