IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED 04.11.2011 CORAM THE HONOURABLE MR.JUSTICE R.SUBBIAH CIVIL MISCELLANEOUS APPEAL NO.84 OF 2010 The United India Insurance Company Ltd., Third Party Claims Office, No.38, Anna Salai, Chennai-2. ..Appellant/2nd Respondent ..vs.. 1. M.Thangavel 2. K.S.Kumar ..Respondents/Petitioner & Ist Respondent Civil Miscellaneous Appeal filed under section 173 of Motor Vehicles Act, 1988, against the award and decree dated 12.09.2008 made in MCOP.No.24 of 2006 on the file of Motor Accidents Claims Tribunal (Subordinate Judge), Ponneri. For Appellant : Mr.D.Bhaskaran For Respondents: Mr.R.Thiagarajan, Senior Counsel for Ms.M.Malar for R1 JUDGMENT The United India Insurance Company Limited has come up with the present appeal, feeling aggrieved by the award dated 12.09.2008 passed by the Motor Accidents Claims Tribunal (Subordinate Judge), Ponneri, in M.C.O.P.No.24 of 2006, whereby the Tribunal has directed the insurance company to pay compensation to the victim, indemnifying the owner of the vehicle in question. 2. The case, in brief, is as follows: The 1st respondent is the claimant before the Tribunal and according to him, on 01.04.2005, he travelled in a lorry bearing registration No.TME 2777 insured with the appellant insurance company and the driver stopped the lorry in a junction in order to facilitate the appellant to get down from the lorry. While he was getting down from the lorry, the driver moved the vehicle in a rash and negligent manner and in that process, the victim lost the balance and fell down and sustained injuries. Hence, the claimant has filed a claim https://hcservices.ecourts.gov.in/hcservices/ petition before the Tribunal, claiming a sum of Rs.3,00,000/- as compensation contending that the driver of the lorry was solely responsible for the accident and as such, the owner of the vehicle, the 2nd respondent herein and the insurer of the vehicle, the appellant herein, are jointly and severally liable to pay compensation. 3. The case of the claimant was resisted by the insurance company, which contended that the victim was an unauthorised passenger in the goods vehicle. Moreover, the driver of the lorry did not have a valid licence and hence, there is a statutory violation on the part of the owner of the vehicle since he had allowed the 1st respondent to travel in the goods vehicle as an unauthorised passenger. Therefore, the insurance company is not liable to pay compensation. 4. The Tribunal framed necessary issues and the claimant examined himself as P.W.1 besides examining one doctor as P.W.2 and marked Exs.P-1 to P-9 and on the side of the insurance company, neither oral nor documentary evidence was adduced. The Tribunal rejected the plea raised by the insurance company and held that the claimant was entitled for compensation. The Tribunal awarded a total compensation of Rs.1,52,500/- together with interest at 7.5% and directed the insurance company to pay the same on behalf of the owner of the vehicle. This award is subject matter of challenge in this appeal. 5. Learned counsel appearing for the appellant insurance company submitted that Ex.P-1, copy of the first information report marked on the side of the 1st respondent/claimant would show that the victim had travelled as a passenger in the goods carriage, which is in violation of the provisions of Section 147(b)(1) of the Motor vehicles Act. But the Tribunal has not chosen to consider the contents of the first information report while fixing liability on the part of the appellant insurance company. In this regard, the learned counsel further submitted that under section 147 of the Motor Vehicles Act, the insurance company is not statutorily liable to pay compensation to the passengers travelling in the goods vehicle since it is an admitted fact that the victim was a passenger in goods vehicle, the appellant insurance company is not liable to pay compensation in this case. In support of his contentions, the learned counsel has relied on the decisions reported in NEW INDIA ASSURANCE CO.LTD., .vs. ASHA RANI AND OTHERS (2003 ACJ 1), ORIENTAL INSURANCE CO.LTD., .vs. DEVIREDDY KONDA REDDY AND OTHERS ((2003) 2 SCC 339), M/s.NATIONAL INSURANCE CO.LTD., .vs. BALJIT KAUR AND OTHERS (2004(1) CTC 210), NEW INDIA ASSURANCE CO.LTD., .vs. VEDWATI AND OTHERS (2007 ACJ 1043), ORIENTAL INSURANCE CO.LTD., .vs. MEENA VARIYAL AND OTHERS (2007(3) SUPREME 136), THOKCHOM ONGBI SANGEETA @ SANGI DEVI .vs. ORIENTAL INSURANCE CO.LTD., (CDJ 2007 SC 1163), NATIONAL INSURANCE CO.LTD., .vs. PREMA DEVI & OTHERS (CDJ 2008 SC 354), NATIONAL https://hcservices.ecourts.gov.in/hcservices/ INSURANCE CO.LTD., .vs. RATTANI AND OTHERS (2009 ACJ 925), SHANKER RAJU .vs. UNION OF INDIA (2011) 2 SCC 132), BRANCH MANAGER, UNITED INDIA INSURANCE CO.LTD.,DHARMAPURI TOWN .vs. NAGAMMAL AND OTHERS (2009 (1) TN MAC 1) and NEW INDIA ASSURANCE CO.LTD., THANJAVUR .vs. VINAYAGA MOORTHI AND OTHERS (CDJ 2008 MHC 4293). 6. Per contra, Mr.Thyagarajan, learned Senior Counsel appearing for the 1st respondent/claimant submitted that as on date, there is an award in favour of the 1st respondent/claimant by the Tribunal. When there is an award in favour of the claimant by the Tribunal, under section 149, the insurer shall pay to the person entitled to the benefit of the decree and even if there is any violation, the appellant, after paying the amount to the victim, recover the same from the owner of the vehicle. Under such circumstances, the scope of the interference in the award is very limited. In support of his contentions, the learned senior counsel has relied upon the judgment reported in B.C.CHATURVEDI .vs. UNION OF INDIA AND OTHERS ((1995) 6 SCC 749), NEW INDIA ASSURANCE CO.LTD., .vs. SATPAL SINGH (I(2000) ACC 1 (SC), NATIONAL INSURANCE CO.LTD., .vs. SWARAN SINGH AND OTHERS (2004(1) TN MAC 104 (SC) and PREMKUMARI AND OTHERS .vs. PRAHLAD DEV AND OTHERS ((2008) 3 MLJ 568 (SC). 7. By way of reply, the learned counsel appearing for the appellant submitted that the principle of 'pay and recover' will arise only in the circumstances where the insurance company is successful in its defence available to them under section 149, it may yet be required to pay the amount to the victim and thereafter to recover the same from the owner of the vehicle. If there is any statutory violation under section 147 by allowing a person to travel in a goods carriage vehicle as an unauthorised passenger, then absolutely there is no contract between the insured and the insurer to pay the amount. Therefore, the doctrine of 'pay and recover' does not arise in the cases of statutory violation. The learned counsel for the appellant further submitted that the Supreme Court in certain cases under Article 142, on discretion, directed the insurance company to pay the amount and recover the same from the owner of the vehicle. Therefore, the same cannot be followed by this Court in all the cases. 8. Per contra, the learned senior counsel for the 1st respondent, by relying upon the decision reported in (1995) 6 SCC 749 (supra) submitted that in the said judgment, it has been held that though there is no provision parallel to Article 142 relating to the High Courts, the High Court too can exercise power of review, which inhers in every court of plenary jurisdiction and, hence, this Court, by exercising its inherent power, can order for payment of the amount to the victim and recover the same from the owner of the vehicle. 9. Heard the learned counsel for the parties and perused the materials. https://hcservices.ecourts.gov.in/hcservices/ 10. It is the submission of the learned counsel for the appellant that the owner of the vehicle, by permitting the 1st respondent to travel in the goods carriage vehicle as an unauthorised passenger, has committed statutory violation. Therefore, under section 147(b)(1) of the Motor Vehicles Act, the insurance company cannot be held responsible to pay the compensation, whereas it is the submission of the learned senior counsel for the 1st respondent, as on date, there is an award in favour of the 1st respondent/claimant and hence, under section 149, it is the duty of the insurer to satisfy the award. In these circumstances, the scope to make an interference in the award is very limited. Therefore, the insurance company could be directed to recover the award amount from the owner of the vehicle, after making payment to the respondent/claimant. 11. In view of the submissions made by the learned counsel on either side, now the question that arises for consideration is, whether, in case of injuries sustained by the unauthorised passenger while travelling in the goods carriage vehicle, can a direction be given to the insurance company to pay the amount to the victim and recover the same from the owner of the vehicle ? 12. Before discussing the issue with regard to the doctrine of 'pay and recover', it could be appropriate to extract the relevant provisions of the Motor Vehicles Act. "S.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 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". 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 covered 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 163-A 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 https://hcservices.ecourts.gov.in/hcservices/ 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 judgment. (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 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 non-disclosure of a material fact or by a representation of fact which was false is some material particular. ... (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 conditions 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: https://hcservices.ecourts.gov.in/hcservices/ 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". 13. It is to be noted that in Section 147(b)(1), the expression "injury to any person including, owner of the goods or his authorised representative carried in the vehicle" was substituted by Act 54 of 1994 with effect from 14.11.1994. In view of the said amendment, the insurance company is liable to pay compensation in respect of the persons travelling in goods vehicle accompanying the goods or the authorised representative. Except the 'persons' classified in the said clause, the insurance company is not statutorily liable to pay the compensation. In I (2000) ACC 1 (SC), which was decided on 02.12.1999, when the question came up before the Hon'ble Supreme Court in the case of NEW INDIA ASSURANCE COMPANY .vs. SATPAL SINGH AND OTHERS with regard to the liability of insurance company in paying the compensation to the gratuitous passengers under section 147(2), the Hon'ble Supreme Court has held as follows: "8. Proviso to Section 147 (1) of the new Act shows that it is a recast provision by placing the erstwhile clause (iii) as the present clause (ii). In other words, clause (ii) of the proviso in Section 95(1) of the old Act is totally non-existent in the proviso to Section 147 (1) of the new Act. 9. Under Section 147 of the new Act, the policy must be a policy which 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. 10. The proviso to the said sub-section is not relevant here as it pertains to death or bodily injury to the employee mentioned therein. Sub-section (2) provides that a policy of insurance shall cover any liability incurred in respect of any accident, up to the following limits, namely:- (i) save as provided in clause (b) the amount of liability incurred; https://hcservices.ecourts.gov.in/hcservices/ (ii) in respect of damage to any property of a third party, a limit: of rupees six thousand: Provided that any policy of insurance issued with any limited liability and in force, immediately before the commencement of this Act, shall continue to be effective for a period of four months after such commencement or till the date of expiry of such policy whichever is earlier. Hence, under sub-section(2), there is no upper limitation for the insurer regarding the amount of compensation awarded in respect of death or bodily injury of a victim of the accident. It is therefore, apparent that the limit contained in the old Act has been removed and the policy should insure the liability incurred and cover injury to any person including owner of the goods or his authorised representative carried in the vehicle. The Legislature has also taken care even the policies which were in force on the date of commencement of the Act by specifically providing that any policy of insurance containing any limit regarding insurer's liability shall continue to be effective of a period of four months from commencement of the Act or till the date of expiry of such policy, whichever is earlier. This means, after the said period of four months a new insurance policy consistent with the new Act is required to be obtained. 11. The result is that under the new Act an insurance policy covering third party risk is not required to exclude gratuitous passengers in a vehicle, no matter that the vehicle is of any type or class. Hence the decisions rendered under the old Act vis-a-vis gratuitous passengers are of no avail while considering the liability of the insurance company in respect of any accident which occurred or would occur after the new Act came into force". 14. In the above case, the Supreme Court has held that under the new Act, an insurance policy covering third party risk is not required to exclude gratuitous passengers in vehicle of any type or class. Following the said dictum, the Tribunals, in the case of gratuitous passengers travelling in a goods vehicle, directed the insurance company to pay the compensation to the victims and permit them to recover the same from the owner of the vehicle. But, subsequently, the Hon'ble Supreme Court in the case of NEW INDIA ASSURANCE CO.LTD., .vs. ASHA RANI AND OTHERS (2003(I) ACC 1) has held that the decision rendered in SATPAL SINGH's case has not laid down the correct law and thus, overruled the same. The dictum laid down in the ASHA RANI's case was upheld as a correct law in the judgment reported in M/s.NATIONAL INSURANCE CO.LTD., .vs. BALJIT KAUR AND OTHERS (2004(1) CTC 210) delivered by a Full Bench of the Supreme Court, wherein the relevant paragraphs are extracted hereunder: "17. By reason of the 1994 Amendment what was added as "including the owner of the goods or his authorised https://hcservices.ecourts.gov.in/hcservices/ representative carried in the vehicle". The liability of the owner of the vehicle to insure it compulsorily, thus, by reason of the aforementioned amendment included only the owner of the goods or his authorised representative carried in the vehicle besides the third parties. The intention of the Parliament, therefore, could not have been that the words 'any person' occurring in Section 147 would cover all persons who were travelling in a goods carriage in any capacity whatsoever. If such was the intention there was no necessity of the Parliament to carry out an amendment inasmuch as expression 'any person' contained in sub-clause (i) of clause (b) of sub-section (1) of Section 147 would have included the owner of the goods or his authorised representative besides the passengers who are gratuitous or otherwise. 18. The observations made in this connection by the Court in Asha Rani case (supra) to which one of us, Sinha, J, was a party, however, bear repetition: "26. In view of the changes in the relevant provisions in the 1988 Act vis-a-vis the 1939 Act, we are of the opinion that the meaning of the words "any person" must also be attributed having regard to the context in which they have been used i.e. "a third party". Keeping in view the provisions of the 1988 Act, we are of the opinion that as the provisions thereof do not enjoin any statutory liability on the owner of a vehicle to get his vehicle insured for any passenger traveling in a goods vehicle, the insurers would not be liable therefor." 19. In Asha Rani (supra), it has been noticed that sub- clause (i) of clause (b) of sub-section (1) of Section 147 of the 1988 Act speaks of liability which may be incurred by the owner of a vehicle in respect of death of or bodily injury to any person or damage to any property of a third party caused by or arising out of the use of the vehicle in a public place. Furthermore, an owner of a passenger-carrying vehicle must pay premium for covering the risks of the passengers travelling in the vehicle. The premium in view of the 1994 Amendment would only cover a third party as also the owner of the goods or his authorised representative and not any passenger carried in a goods vehicle whether for hire or reward or otherwise. 20. It is therefore, manifest that in spite of the amendment of 1994, the effect of the provision contained in Section 147 with respect to persons other than the owner of the goods or his authorized representative remains the same. Although the owner of the goods or his authorized representative would now be covered by the policy of insurance in respect of a goods vehicle, it was not the intention of the legislature to provide for the liability of the insurer with respect to https://hcservices.ecourts.gov.in/hcservices/ passengers, especially gratuitous passengers, who were neither contemplated at the time the contract of insurance was entered into, nor any premium was paid to the extent of the benefit of insurance to such category of people. 21. The upshot of the aforementioned discussions is that instead and in place of the insurer the owner of the vehicle shall be liable to satisfy the decree. The question, however, would be as to whether keeping in view the fact that the law was not clear so long such a direction would be fair and equitable. We do not think so. We, therefore, clarify the legal position which shall have prospective effect. The Tribunal as also the High Court had proceeded in terms of the decisions of this Court in Satpal Singh (supra). The said decision has been overruled only in Asha Rani (supra)". 15. The Hon'ble Supreme Court, in ORIENTAL INSURANCE CO.LTD., . vs. DEVIREDDY KONDA REDDY AND OTHERS ((2003) 2 SCC 339), has also held that the Tribunal and the High Court were not justified in holding that the insurer had the liability to satisfy the award in the case of persons travelling in a goods carriage. The relevant paragraph reads as follows: "11. Our view gets support from a recent decision of a three-Judge Bench of this Court in New India Assurance Co.Ltd. vs. Asha Rani ((2003) 2 SCC 223) in which it has been held that Satpal Singh case ((2000) 1 SCC 237) was not correctly decided. That being the position, the Tribunal and the High court were not justified in holding that the insurer had the liability to satisfy the award. 16. Subsequently, the issue with regard to the liability of the insurance company in paying compensation to the persons travelling in a goods vehicle is settled in the case of NEW INDIA ASSURANCE CO.LTD., .vs. VEDWATI AND OTHERS (2007 ACJ 1043), wherein the Hon'ble Apex Court has held as follows: "14. The inevitable conclusion, therefore, is that provisions of the Act do not enjoin any statutory liability on the owner of a vehicle to get his vehicle insured for any passenger travelling in a goods carriage and the insurer would have no liability therefor. 15. Our view