Case: SHAMANNA Vs. THE DIVISIONAL MANAGER THE ORIENTAL INSURANCE CO. LTD

(3) of Section 168 of the Act the insured fails to deposit the amount awarded in favour of the insurer within thirty days from the date of announcement of the award by the Tribunal. (xi) The provisions contained in sub-section (4) with the proviso there under and sub-section (5) which are intended to cover specified contingencies mentioned therein to enable the insurer to recover the amount paid under the contract of insurance on behalf of the insured can be taken recourse to by the Tribunal and be extended to claims and defences of the insurer against the insured by relegating them to the remedy before regular court in cases where on given facts and circumstances adjudication of their claims inter se might delay the adjudication of the claims of the victims, (Underlining added) 7. As per the decision in Swaran Singh case, onus is always upon the insurance company to prove that the driver had no valid driving licence and that there was breach of policy conditions. Where the driver did not possess the valid driving licence and there are breach of policy conditions, pay and recover can be ordered in case of third party risks. The Tribunal is required to consider as to whether the owner has taken reasonable care to find out as to whether the driving licence produced by the driver, does not fulfill the requirements of law or not will have to be determined in each case. 8. The Supreme Court considered the decision of Swaran Singh case in subsequent decision in National Insurance Co. Ltd. v. Laxmi Narain Dhut, (2007) 3 SCC 700 , wherein this Court held that the decision in Swaran Singh case has no application to cases other than third party risks and in case of third party risks the insurer has to indemnify the amount and if so advised, to recover the same from the insured The same principle was reiterated in Prem Kumari v. Prahlad Dev and others (2008) 3 SCC 193. 9. For the sake of completion, we may refer to few judgments where the breach of policy conditions was fundamental and the Supreme Court taking contrary view that the insurance companies were not liable to pay the compensation. In National Insurance Co., Ltd. v. Bommithi Subbhayamma and others, (2005) 12 SCC 243 , the Supreme Court reversed the judgment of Andhra Pradesh High Court in making the insurance company liable for payment of compensation in respect of gratuitous passengers carried in the goods vehicle. 10. In Oriental Insurance Co. Ltd. v. Brij Mohan and others (2007) 7 SCC 56 , the claimant was travelling in the trolley attached to tractor carrying earth to brick kiln. It was found that the tractor and the trolley were not used for agricultural works, the only purpose for which the tractor was insured, when the claimant sustained the injuries. The Supreme Court though held that the insurance company is not liable to pay compensation, however, invoked the power vested in the Supreme Court under Article 142 of the Constitution of India in directing the insurance company to satisfy the award by paying compensation to the insured/claimant and realise the same from the owner of the tractor. 11. In the present case, to deny the benefit of pay and recover, what seems to have substantially weighed with the High Court is the reference to larger Bench made by the two-Judge Bench in National Insurance Co. Ltd. v. Parvathneni and another (2009) 8 SCC 785 which doubted the correctness of the decisions which in exercise of jurisdiction under Article 142 of the Constitution of India directing insurance company to pay the compensation amount even though insurance company has no liability to pay. In Parvathneni case, the Supreme Court pointed out that Article 142 of the Constitution of India does not cover such type of cases and that if the insurance company has no liability to pay at all, then, it cannot be compelled by order of the court in exercise of its jurisdiction under Article 142 of the Constitution of India to pay the compensation amount and later on recover it from the owner of the vehicle The above reference in Parvathneni case has been disposed of on 17.09.2013 by the three-Judges Bench keeping the questions of law open to be decided in an appropriate case. 12. Since the reference to the larger bench in Parvathneni case has been disposed of by keeping the questions of law open to be decided in an appropriate case, presently the decision in Swaran Singh case followed in Laxmi Narain Dhut and other cases hold the field. The award passed by the Tribunal directing the insurance company to pay the compensation amount awarded to the claimants and thereafter, recover the same from the owner of the vehicle in question, is in accordance with the judgment passed by this Court in Swaran Singh and Laxmi Narain Dhut cases. While so, in our view, the High Court ought not to have interfered with the award passed by the Tribunal directing the first respondent to pay and recover from the owner of the vehicle. The impugned judgment of the High Court exonerating the insurance company from its liability and directing the claimants to recover the compensation from the owner of the vehicle is set aside and the award passed by the Tribunal is restored. 13. So far as the recovery of the amount from the owner of the vehicle, the insurance company shall recover as held in the decision in Oriental Insurance Co. Ltd. v. Nanjappan and others (2004) 13 SCC 224 where this Court held that ….that for the purpose of recovering the same from the insured, the insurer shall not be required to file a suit. It may initiate a proceeding before the concerned 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.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]7. As per the decision in Swaran Singh case, onus is always upon the insurance company to prove that the driver had no valid driving licence and that there was breach of policy conditions. Where the driver did not possess the valid driving licence and there are breach of policy conditions, pay and recover can be ordered in case of third party risks. The Tribunal is required to consider as to whether the owner has taken reasonable care to find out as to whether the driving licence produced by the driver, does not fulfill the requirements of law or not will have to be determined in each case9. For the sake of completion, we may refer to few judgments where the breach of policy conditions was fundamental and the Supreme Court taking contrary view that the insurance companies were not liable to pay the compensation. In National Insurance Co., Ltd. v. Bommithi Subbhayamma and others, (2005) 12 SCC 243 , the Supreme Court reversed the judgment of Andhra Pradesh High Court in making the insurance company liable for payment of compensation in respect of gratuitous passengers carried in the goods vehicle10. In Oriental Insurance Co. Ltd. v. Brij Mohan and others (2007) 7 SCC 56 , the claimant was travelling in the trolley attached to tractor carrying earth to brick kiln. It was found that the tractor and the trolley were not used for agricultural works, the only purpose for which the tractor was insured, when the claimant sustained the injuries. The Supreme Court though held that the insurance company is not liable to pay compensation, however, invoked the power vested in the Supreme Court under Article 142 of the Constitution of India in directing the insurance company to satisfy the award by paying compensation to the insured/claimant and realise the same from the owner of the tractor11. In the present case, to deny the benefit of pay and recover, what seems to have substantially weighed with the High Court is the reference to larger Bench made by thee Bench in National Insurance Co. Ltd. v. Parvathneni and another (2009) 8 SCC 785  which doubted the correctness of the decisions which in exercise of jurisdiction under Article 142 of the Constitution of India directing insurance company to pay the compensation amount even though insurance company has no liability to pay. In Parvathneni case, the Supreme Court pointed out that Article 142 of the Constitution of India does not cover such type of cases and thatif the insurance company has no liability to pay at all, then, it cannot be compelled by order of the court in exercise of its jurisdiction under Article 142 of the Constitution of India to pay the compensation amount and later on recover it from the owner of the vehicleThe above reference in Parvathneni case has been disposed of on 17.09.2013 by thes Bench keeping the questions of law open to be decided in an appropriate case12. Since the reference to the larger bench in Parvathneni case has been disposed of by keeping the questions of law open to be decided in an appropriate case, presently the decision in Swaran Singh case followed in Laxmi Narain Dhut and other cases hold the field. The award passed by the Tribunal directing the insurance company to pay the compensation amount awarded to the claimants and thereafter, recover the same from the owner of the vehicle in question, is in accordance with the judgment passed by this Court in Swaran Singh and Laxmi Narain Dhut cases. While so, in our view, the High Court ought not to have interfered with the award passed by the Tribunal directing the first respondent to pay and recover from the owner of the vehicle. The impugned judgment of the High Court exonerating the insurance company from its liability and directing the claimants to recover the compensation from the owner of the vehicle is set aside and the award passed by the Tribunal is restored13. So far as the recovery of the amount from the owner of the vehicle, the insurance company shall recover as held in the decision in Oriental Insurance Co. Ltd. v. Nanjappan and others (2004) 13 SCC 224  where this Court held that….that for the purpose of recovering the same from the insured, the insurer shall not be required to file a suit. It may initiate a proceeding before the concerned 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.