* THE HON'BLE SRI JUSTICE B. SESHASAYANA REDDY AND THE HON’BLE SRI JUSTICE P.DURGA PRASAD MACMA No.3026 of 2007 And MACMAMP No.7309 of 2007 % Dt. 08-04-2011 # The Oriental Insurance Company Ltd., rep. by its Branch Manager, Branch Office II, Gajuwaka, Visakhapatnam. ... Appellant a n d 1. Kotani Varalakshmi & Ors. … Respondents ! COUNSEL FOR APPELLANT: SMT. A.ANASUYA ^COUNSEL FOR RESPONDENT Nos.1 TO 3: JAYANTI S.C. SEKHAR COUNSEL FOR RESPONDENT NO.4: D.SREEDEVI < Gist: > Head Note: ? CITATIONS: 1) (2002) 7 SCC 456 2) JT 1998 (4) SC 300 3) (2000) 5 SCC 113 4) (2002) 2 SCC 265 THE HON'BLE SRI JUSTICE B. SESHASAYANA REDDY AND THE HON’BLE SRI JUSTICE P.DURGA PRASAD MACMA No.3026 of 2007 And MACMAMP No.7309 of 2007 Date: 08th April, 2011 Between: The Oriental Insurance Company Ltd., rep. by its Branch Manager, Branch Office II, Gajuwaka, Visakhapatnam. ... Appellant a n d 1. Kotani Varalakshmi & Ors. … Respondents *** THE HON'BLE SRI JUSTICE B. SESHASAYANA REDDY AND THE HON’BLE SRI JUSTICE P.DURGA PRASAD MACMA No.3026 of 2007 and MACMAMP No.7309 of 2007 COMMON JUDGMENT: (Per Hon’ble Sri Justice B.Seshasayana Reddy) This appeal is directed against the judgment, dated 12.04.2004, passed in MVOP No.836 of 2001 on the file of VI Additional District Judge, Visakhapatnam, whereby and whereunder, the learned Additional District Judge allowed the claim of the respondents 1 to 3 herein in part and granted compensation of Rs.15,63,000/- with interest at the rate of 9% p.a. from the dte of petition i.e. 21.06.2001 till the date of deposit. 2. Background facts of the case, in a nutshell, leading to filing of this appeal by the insurer are:- a) Kotani Demudu along with R.Ganesh was coming from Pinagadi junction to his village Mogalipuram on foot. On nearing Kollivanikallulu on 16.05.2001 at about 8.45 P.M., an auto bearing No.AP31V 6562 came from behind driven in a rash and negligent manner and dashed him. As a result, K.Demudu fell on road and sustained head injury and became unconscious. He was shifted to CDR Hospital for treatment. While undergoing treatment in the said hospital, he succumbed to the injuries at 11.30 p.m. on the same day. A case in Crime No.51 of 2001 for the offence under Section 304-A IPC came to be registered against the driver of the auto. K.Demudu was working as a Line-picker in Visakhapatnam Custom Clearance Agents Association under dock labour board of Visakhapatnam Port Trust. He was earning Rs.15,000/- per month towards his salary apart from other allowances. He was contributing his entire earnings to the family. Claimant No.1 is the widow and claimants 2 and 3 are the children of K.Demudu. They filed claim petition under Section 166 of the Motor Vehicles Act, 1988, (for short, ‘the Act’) claiming compensation of Rs.17,00,000/- against the owner and insurer of the crime vehicle. The owner and insurer of the crime vehicle filed counters. They denied the accident and also rash and negligent driving of the driver of the auto. b) The Tribunal framed the following issues for trial: 1) Whether the accident occurred due to the rash and negligent driving of the auto bearing No.AP 31 V 6562 driven by its driver? 2) Whether the petitioners are entitled for compensation? If so, from which of the respondents? 3) To what relief? c) On behalf of the claimants, two witnesses were examined as PWs.1 and 2 and six documents were marked as Exs.A1 to A6. On behalf of the owner of the vehicle, he got himself examined as RW.1. d) The Tribunal, on considering the evidence brought on record and on hearing the counsel appearing for the parties, came to the conclusion that the accident occurred due to rash and negligent driving of the driver of the auto bearing No.AP31V 6562 and that the claimants are entitled to a compensation of Rs.15,63,000/- with interest at 9% p.a. from the date of petition till the date of deposit, by judgment dated 12.04.2004. Hence, this appeal by the insurer under Section 173 of the Act. 3. Pending the appeal, the appellant/insurer filed MACMAMP No.7309 of 2007 under Section 170 of the Act seeking permission to take all the necessary pleas that are available to the owner of the vehicle as contemplated by the Act. 4. Heard learned counsel appearing for the appellant/insurer and learned counsel appearing for the respondents 1 to 3/claimants. 5. Learned counsel appearing for the appellant/insurer submits that in the trial Court the owner of the vehicle contested the matter and therefore, there was no occasion for the appellant/insurer for filing the petition under Section 170 of the Act seeking permission to take all the defences available to the insured. A further submission has been made that the appellant/insurer came to know the collusion of the claimants with the insured after disposal of the claim petition, which necessitated the appellant/insurer to approach this Court by filing the application under Section 170 of the Act seeking permission to take all the pleas available to the insured. 6. Learned counsel appearing for the respondents 1 to 3/claimants submits that the appellant/insurer has to approach the Court before adducing evidence and such application cannot be maintained after disposal of the claim petition by the Tribunal. In support of his submissions, reliance has been placed on the decisions of the Supreme Court in National Insurance Co. Ltd. Chandigarh v. Nicolletta Rohtagi & Ors.[1] and Shankarayya & Anr. V. United India Insurance Co. Ltd. & Anr.[2]. 7. The issue involved in this appeal is, whether the appellant-insurer can challenge the award with regard to the quantum of amount without obtaining permission from the Tribunal under Section 170 of the Act? 8. Section 170 of the Act reads as hereunder:- 170. Impleading insurer in certain cases.- Where in the course of any inquiry, the Claims Tribunal is satisfied that---- (a) there is collusion between the person making the claim and the person against whom the claim is made, or (b) the person against whom the claim is made has failed to contest the claim it may, for reasons to be recorded in writing, direct that the insurer who may be liable in respect of such claim, shall be impleaded as a party to the proceeding and the insurer so impleaded shall thereupon have, without prejudice to the provisions contained in sub-section (2) of Section 149, the right to contest the claim on all or any of the grounds that are available to the person against whom the claim has been made. 9. A plain reading of the above-referred provision, indicates that an insurance company when impleaded as a party by the Court can be permitted to contest the proceedings on merits only if the conditions precedent mentioned in Section 170 of the Act are found to be satisfied and for that purpose the insurance company has to obtain an order in writing from the Tribunal and which should be a reasoned order by the Tribunal. Unless this procedure is followed, the insurance company cannot have a wider defence on merits than what is available to it by way of statutory defences. It is true that the claimants had joined respondent No.1, insurance company in the claim petition but that was done with a view to thrust the statutory liability on the insurance company on account of the contract of the insurance. That was not an order of the Court itself permitting the insurance company which was impleaded to avail a larger defence on merits on being satisfied on the aforesaid two conditions mentioned in Section 170. There was some contradictory opinion expressed by the Supreme Court in Rita Devi v. New India Assurance Co. Ltd.,[3] and United India Insurance Co. Ltd v. Bhushan Sachdev[4]. 10. The Supreme Court on noticing the contradictory view, referred the matter to a three Judge Bench in National Insurance Co. Ltd. Chandigarh v. Nicolletta Rohtagi & Ors. (1 supra). The Supreme Court on through analysis of the provisions of Sections 147, 149 of the Act held that an application by the insurer seeking permission to take all the pleas available to the insured has to be moved when the insured is required to lead his evidence. Para.31 of the judgment needs to be noted and it is thus: “31. We have already held that unless the conditions precedent specified in Section 170 of the 1988 Act are satisfied, an insurance company has no right of appeal to challenge the award on merits. However, in a situation where there is a collusion between the claimant and the insured or the insured does not contest the claim and, further, the Tribunal does not implead the insurance company to contest the claim, in such cases it is open to an insurer to seek permission of the Tribunal to contest the claim on the ground available to the insured or to a person against whom a claim has been made. If permission is granted and the insurer is allowed to contest the claim on merits, in that case it is open to the insurer to file an appeal against an award on merits, if aggrieved. In any case where an application for permission is erroneously rejected the insurer can challenge only that part of the order while filing appeal on ground specified in sub-section (2) of Section 149 of the 1988 Act. But such application for permission has to be bona fide and filed at the stage when the insured is required to lead his evidence. So far as obtaining compensation by fraud by the claimant is concerned, it is no longer res integra that fraud vitiates the entire proceeding and in such cases it is open to an insurer to apply to the Tribunal for rectification of award.” 11. In Shankarayya & Anr. V. United India Insurance Co. Ltd. & Anr.’s case (2 supra), the Supreme Court held that the appeal filed by the insurance company in the absence of any application being moved before the Tribunal under Section 170 of the Act for reduction of compensation is not maintainable. 12. It is well settled that the insurer in the absence of application under Section 170 of the Act, cannot be permitted to challenge the award on merits. In view of the settled proposition of law laid down by the three Judge Bench judgment of the Supreme Court, an insurer, if aggrieved against an award may file an appeal only on those grounds specified in Section 149(2) of the Act. However, by virtue of Section 170 of the 1988 Act, where in course of an enquiry the Claims Tribunal is satisfied that (a) there is a collusion between the person making a claim and the person against whom the claim has been made or (b) the person against whom the claim has been made has failed to contest the claim, the Tribunal may, for reasons to be recorded in writing, implead the insurer and in that case it is permissible for the insurer to contest the claim also on the grounds which are available to the insured or to the person against whom the claim has been made. Thus, unless an order is passed by the Tribunal permitting the insurer to avail the grounds available to an insured or any other person against whom a claim has been made on being satisfied of the two conditions specified in Section 170 of the Act, it is not permissible to the insurer to contest the claim on the grounds which are available to the insured or to a person against whom a claim has been made. Thus where conditions precedent embodied in Section 170 are satisfied and award is adverse to the interest of the insurer, the insurer has a right to file an appeal challenging the quantum of compensation or negligence or contributory negligence of the offending vehicle even if the insured has not filed any appeal against the quantum of compensation. 13. Indisputably, the appellant-insurance company had not sought for permission from the Tribunal under Sec.170 of the Act to contest the claim on the grounds which are available to the insured. No acceptable grounds have been made out by the appellant-insurer to grant such permission at the appellate stage. In view of the above discussion, we find that the appeal is not maintainable. 14. Accordingly, the appeal and MACMAMP No.7309 of 2007 are dismissed. No costs. _________________________ B. SESHASAYANA REDDY, J. ___________________ P.DURGA PRASAD, J. Date:08th April, 2011. Note: L.R. copy to be marked B/O cs THE HON'BLE SRI JUSTICE B. SESHASAYANA REDDY AND THE HON’BLE SRI JUSTICE P.DURGA PRASAD MACMA No.3026 of 2007 AND MACMAMP No.7309 of 2007 (Judgment of the Division Bench delivered by Hon’ble Sri Justice B.Seshasayana Reddy) Date:08th April, 2011 [1] (2002) 7 SCC 456 [2] JT 1998 (4) SC 300 [3] (2000) 5 SCC 113 [4] (2002) 2 SCC 265