THE HON’BLE SRI JUSTICE C.V. RAMULU C.M.A. No. 4286 of 2003 JUDGMENT: This appeal, under Section 173 of the Motor Vehicles Act, is directed against an order and decree made in O.P. No. 476 of 1998 dated 28.2.2003 on the file of learned Motor Accidents Claims Tribunal-cum-II Additional District Judge, West Godavari District at Eluru. Appellant is the petitioner-claimant. Respondents are respondents in the O.P. The parties are referred to, as arrayed in the O.P. It appears, petitioner laid O.P. No. 476 of 1998 under Section 166 and 163-A of the Motor Vehicles Act, read with Rule 455 of the Motor Vehicles Rules, claiming compensation of Rs.50,000/- for the injuries sustained by him in the accident that occurred on 5.6.1998. According to petitioner, himself and two other passengers were coming from Ravulapalem to Tanuku on Bajaj Tempo bearing No. AP 37 T 9383. The said vehicle was driven by 1st respondent, with high speed, in a rash and negligent manner. By the time, the said vehicle reached Annavarappadu Venkateswaraswamy temple, the tempo dashed against a lorry which was stopped on the left side of the road margin, facing towards Tanuku side. As a result, petitioner and others received grievous injuries. Petitioner suffered fracture on left side shoulder and injury to head, left and right eyes, lips and both the legs. He was immediately shifted to Government Hospital, Tanuku for treatment by the passengers on the road side and a case was registered with Peravali Police. According to petitioner, he spent Rs.5,000/- towards medical expenses, he was discharged on 28.6.1998 and he was under treatment even after his discharge from the hospital. Therefore, he filed O.P. against 1st respondent-driver of the Bajaj Tempo, 2nd respondent-owner of Bajaj Tempo and 3rd respondent-Insurance Company, claiming compensation of Rs.50,000/-. Respondents 1 and 2 remained ex parte. 3rd respondent alone filed counter, denying the allegation that the accident occurred on account of negligence on the part of 1st respondent and that the petitioner was earning Rs.1500/- per month. It was further stated that 1st respondent was not having valid driving licence, as such, petitioner is not entitled to claim any compensation. Even otherwise, compensation claimed by petitioner is excessive for the injuries suffered by him. On the basis of the above pleadings, the Tribunal framed the following issued for trial: 1. Whether the accident occurred due to rash and negligent driving of Bajaj Tempo bearing No. AP 37 5 9383 driven by 1st respondent? 2. Whether the petitioner is entitled for compensation, if so, to what amount and against which of the respondents? 3. To what relief? On behalf of petitioner, he examined himself as PW-1 and got marked Exs.A-1 to A-17. On behalf of 3rd respondent, no oral evidence was adduced; however, Exs.B-1 and B-2 were marked. The learned Chairman, Motor Accidents Claims Tribunal (II Additional District Judge), Eluru, after appreciation of the entire evidence on record, came to the conclusion that the driver of Bajaj Tempo, in which petitioner was traveling, was rash and negligent in driving the said vehicle. However, in the facts and circumstances of the case, the Tribunal held that respondents 1 and 2 alone are liable to pay compensation of Rs.50,000/- and 3rd respondent-Insurance Company is not liable to pay any compensation in view of the fact that the driver of Bajaj Tempo was not having valid licence at the time of accident. Aggrieved thereby, the present appeal is filed. Learned counsel for the appellant contended that the driving licence of 1st respondent was renewed subsequently and, hence, the same is deemed to be in force. Even if there is no valid driving licence, the Insurance Company is liable to pay compensation and recover the same from the owner of the vehicle. The Insurance Company cannot be absolved of its liability having issued the policy and it cannot be exempted from payment of compensation on technical grounds. In this case, admittedly, the vehicle in which petitioner was traveling was insured with 3rd respondent-Insurance Company. The only ground on which 3rd respondent sought to be absolved of its liability was that the driver of Bajaj Tempo was not having valid licence as on the date of accident. The licence held by the driver of the vehicle was not a fake one. Licence obtained by him was genuine one, but validity of the said licence expired on 30.10.1997 and it was renewed on 22.6.1998 and was valid up to 21.6.2001. But, since the accident occurred on 5.6.1998, the Tribunal held that as on the date of accident there was no valid licence held by the driver of the vehicle, therefore, the Insurance Company was absolved of its liability to pay compensation and that respondents 1 and 2 alone are liable to pay compensation, which is not proper. On the other hand, learned standing counsel appearing for 3rd respondent supported the award passed by the Tribunal and contended that since the driver of the vehicle was not having valid licence at the time of accident, the Insurance Company cannot be held liable to pay compensation and the Tribunal, therefore, rightly fastened the liability on respondents 1 and 2 alone. Heard both sides and perused the entire material made available on record. The main contention of the appellant is that since the licence was renewed subsequently on 22.6.1998 and the licence initially obtained by the driver of the vehicle was genuine and was valid up to 30.10.1997, merely because as on the date of accident i.e. on 5.6.1998 there was no renewal, the Insurance Company cannot be absolved of its liability. Of course, the Insurance Company, except stating that there is no valid licence as on the date of accident, had not placed any evidence to show that the breach on the part of owner of the vehicle is intentional and, as such, the Insurance Company is liable to be absolved of its liability, as held in National Insurance Co. Ltd. v. Swaran Singh[1], which reads as under: "It may be true as has been contended on behalf of the petitioner that a fake or forged licence is as good as no licence but the question herein, as noticed hereinbefore, is whether the insurer must prove that the owner was guilty of the wilful breach of the conditions of the insurance policy or the contract of insurance. In Lehru case the matter has been considered in some detail. We are in general agreement with the approach of the bench but we intend to point out that the observations made therein must be understood to have been made in the light of the requirements of the law in terms whereof the insurer is to establish wilful breach on the part of the insured and not for the purpose of its disentitlement from raising any defence or for the owners to be absolved from any liability whatsoever. We would be dealing in some detail with this aspect of the matter a little later. " Further, in Oriental Insurance Co. Ltd. v. Zaharulnisha[2], the Supreme Court held: “The judgment (in Swaran Singh case1) proceeds to hold that under the MV Act, holding of a valid driving licence is one of the conditions of the contract of insurance. Driving of a vehicle without a valid licence is an offence. However, the question herein is whether a third party involved in an accident is entitled to the amount of compensation granted by the Motor Accidents Claims Tribunal although the driver of the vehicle at the relevant time might not have had a valid driving licence but would be entitled to recover the same from the owner or driver thereof. It is trite that where the insurers, relying upon the provisions of violation of law by the assured, take an exception to pay the assured or a third party, they must prove a wilful violation of the law by the assured. In some cases, violation of criminal law, particularly violation of the provisions of the MV Act, may result in absolving the insurers but, the same may not necessarily hold good in the case of a third party. In any event, the exception applies only to acts done intentionally or “so recklessly as to denote that the assured did not care what the consequences of his act might be”. The provisions of sub-sections (4) and (5) of Section 149 of the MV Act may be considered as to the liability of the insurer to satisfy the decree at the first instance. The liability of the insurer is a statutory one. The liability of the insurer to satisfy the decree passed in favour of a third party is also statutory”. Further, in National Insurance Co. Ltd. v. Baljit Kaur[3], the Supreme Court held: 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 decision of this Court in Satpal Singh1. The said decision has been overruled only in Asha Rani2. We, therefore, are of the opinion that the interest of justice will be subserved if the appellant herein is directed to satisfy the awarded amount in favour of the claimant, if not already satisfied, and recover the same from the owner of the vehicle. For the purpose of such recovery, it would not be necessary for the insurer to file a separate suit but it may initiate a proceeding before the executing court as if the dispute between the insurer and the owner was the subject- matter of determination before the Tribunal and the issue is decided against the owner and in favour of the insurer. We have issued the aforementioned directions having regard to the scope and purport of Section 168 of the Motor Vehicles Act, 1988, in terms whereof, it is not only entitled to determine the amount of claim as put forth by the claimant for recovery thereof from the insurer, owner or driver of the vehicle jointly or severally but also the dispute between the insurer on the one hand and the owner or driver of the vehicle involved in the accident inasmuch as can be resolved by the Tribunal in such a proceeding. No such ground was taken by the Insurance Company even in the counter filed in the O.P. that the owner of the vehicle (insured) was guilty of wilful breach of the conditions of the Insurance Policy or the contract of insurance nor any issue was framed and answered in this regard. However, learned counsel for the respondent – Insurance Company contended that the difficulty in this case is the language imported into Section 163-A of the Motor Vehicles Act, which reads as under: “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 of 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. (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) The Central Government may, keeping in view the cost of living by notification in the Official Gazette, from time to time amend the Second Schedule”, and submitted that it is clear that an application under Section 166 of the Act can be filed only as a third party claim. In this regard, learned counsel for the respondent – Insurance Company relied upon a decision of the Supreme Court in National Insurance Company Liited v. Geeta Bhat and others[4], wherein it was held: “Thus, whereas in a case where a third party has raised a claim, Swaran Singh [(2004) 3 SCC 297] would apply, in a claim made by the owner of the vehicle or other passengers of a vehicle, it would not”. The learned counsel for the respondent-Insurance Company further relied on a decision of the apex Court in Yallwwa v. National Insurance Co. Ltd.[5], wherein it was observed: “The recent decisions of this Court are authorities for the proposition that the insurance company would not be liable in cases where passengers of a vehicle are not third parties”. However, on a perusal of the above decisions, I am of the considered opinion that the same may not have any relevance for the purpose of deciding the case on hand. In this case, admittedly the appellant was traveling as a third party and the driver of the vehicle was not having valid licence at the time of accident i.e. on 5.6.1998. The licence obtained by the driver was valid up to 30.10.1997 and the appellant got it renewed only on 22.6.1998. But, the fact remains that Policy No. 150604/31/50/11/047/0186/1997 indicates that the passengers traveling in the Bajaj Auto are also covered by the said policy, that is to say, seven in all, including the driver. Thus, the vehicle involved in the accident in which the claimant was traveling was a passenger vehicle and the passengers in the vehicle are also covered by the policy. Therefore, it cannot be said that the claim in this case is a third party claim and it can be claimed against 3rd party and not against the insured of the vehicle in which he was traveling as held in Swaran Singh’s case (referred (1) supra). For the purpose of better appreciation of the case, it may be necessary to have a look at Section 149 of the Motor Vehicles Act, 1988, which reads as under: “149. Duty of insurers to satisfy judgments and awards against persons insured in respect of third party risks.— (1) If, after a certificate of insurance has been issued under sub-section (3) of Section 147 in favour of the person by whom a policy has been effected, judgment or award in respect of any such liability as is required to be covered by a policy under clause (b) of sub-section (1) of Section 147 (being a liability covered by the terms of the policy) 1[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 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:— (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 in some material particular. (3) Where any such judgment as is referred to in sub-section (1) is obtained from a Court in a reciprocating country and in the case of a foreign judgment is, by virtue of the provisions of Section 13 of the Code of Civil Procedure, 1908 (5 of 1908) conclusive as to any matter adjudicated upon by it, the insurer (being an insurer registered under the Insurance Act, 1938 (4 of 1938) and whether or not he is registered under the corresponding law of the reciprocating country) shall be liable to the person entitled to the benefit of the decree in the manner and to the extent specified in sub-section (1), as if the judgment were given by a Court in India: Provided that no sum shall be payable by the insurer in respect of any such judgment unless, before the commencement of the proceedings in which the judgment is given, the insurer had notice through the Court concerned of the bringing of the proceedings and the insurer to whom notice is so given is entitled under the corresponding law of the reciprocating country, to be made a party to the proceedings and to defend the action on grounds similar to those specified in sub-section (2). (4) Where a certificate of insurance has been issued under sub- section (3) of Section 147 to the person by whom a policy has been effected, so much of the policy as purports to restrict the insurance of the persons 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: 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”. Sub-Section (4) of Section149, as noticed above, would reveal that 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: Further, Section 147 (1)(b) reads as under: 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 1[, 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 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.—For the removal of doubts, it is hereby declared that the death of or bodily injury to any person or damage to any property of a third party shall be deemed to have been caused by or to have arisen out of, the use of a vehicle in a public place notwithstanding that the person who is dead or injured or the property which is damaged was not in a public place at the time of the accident, if the act or omission which led to the accident occurred in a public place. The sum and substance of the above provisions, in my opinion, is that there are three types of liability on the part of the insurer against the insured, namely, (1) the Insurance Company is liable, in toto, if the policy covers the passengers traveling in a vehicle insured, (2) the Insurance Company is not liable though the passenger traveling in the vehicle is insured by the policy and the driver of the vehicle has no valid licence. In such circumstance, the Insurance Company is not completely absolved of its liability. First it must pay compensation to the victim/claimant and then recover the same from the insured (Section 149 (4) of the M.V. Act), and (3) the Insurance Company, however, is completely absolved of its liability even if a passenger is traveling in a vehicle whereunder the victim/passenger is not covered under the policy. They shall be treated as gratuitous passengers. Against such claimants only the owner and the driver of the vehicle are liable to pay compensation awarded. Thus, in the light of the discussion made above, this Court is of the considered opinion that the Court below, though not erred in saddling responsibility on respondents 1 and 2, it cannot be said that 3rd respondent-Insurance Company is not liable to pay compensation awarded by the Court below, on behalf of respondents 1 and 2. The 3rd respondent-Insurance Company shall first pay compensation and then recover the same from other respondents, as its liability to pay compensation is not completely absolved. The appeal is accordingly allowed. No order as to costs. JUSTICE C.V. RAMULU. Date: 30-4-2010. MVB. [1] (2004) 3 SCC 297 [2] (2008) 12 SCC 385, at page 389 [3] (2004) 2 SCC 1, at page 8 [4] (2008) 12 SCC 426 [5] (2007) 6 SCC 657