Case: Uttar Pradesh State Road Transport Corp Vs. Kulsum

to cover the liability arising out of such an accident. 13. ...This meant that once the insurer had issued a certificate of insurance in accordance with sub-section (4) of Section 95 of the Act the insurer had to satisfy any decree which a person receiving injuries from the use of the vehicle insured had obtained against any person insured by the policy. He was liable to satisfy the decree when he had been served with a notice under sub- section (2) of Section 96 of the Act about the proceedings in which the judgment was delivered. 14. ...Any other view will expose innocent third parties to go without compensation when they suffer injury on account of such motor accidents and will defeat the very object of introducing the necessity for taking out insurance policy under the Act. 40. In a recent judgment of this Court, in the case of United India Insurance Company Limited v. Santro Devi and Ors. (2009) 1 SCC 558 it has been held as under :- 16.The provisions of compulsory insurance have been framed to advance a social object. It is in a way part of the social justice doctrine. When a certificate of insurance is issued, in law, the insurance company is bound to reimburse the owner. There cannot be any doubt whatsoever that a contract of insurance must fulfil the statutory requirements of formation of a valid contract but in case of a third- party risk, the question has to be considered from a different angle. 17. Section 146 provides for statutory insurance. An insurance is mandatorily required to be obtained by the person in charge of or in possession of the vehicle. There is no provision in the Motor Vehicles Act that unless the name(s) of the heirs of the owner of a vehicle is/are substituted on the certificate of insurance or in the certificate of registration in place of the original owner (since deceased), the motor vehicle cannot be allowed to be used in a public place. Thus, in a case where the owner of a motor vehicle has expired, although there does not exist any statutory interdict for the person in possession of the vehicle to ply the same on road; but there being a statutory injunction that the same cannot be plied unless a policy of insurance is obtained, we are of the opinion that the contract of insurance would be enforceable. It would be so in a case of this nature as for the purpose of renewal of insurance policy only the premium is to be paid. It is not in dispute that quantum of premium paid for renewal of the policy is in terms of the provisions of the Insurance Act, 1938. 41. Perusal of the ratio of aforesaid judgments of this Court, shows that Section 146 of the Act gives complete protection to Third Party in respect of death or bodily injury or damage to the property while using the vehicle in public place. For that purpose, insurance of the vehicle has been made compulsory to the vehicles or to the owners. This would further reflect that compulsory insurance is obviously for the benefit of Third Parties. 42. Certificate of Insurance, between the owner and the Insurance Company contemplates, under what circumstances Insurance Company would be liable to pay the amount of compensation. The relevant conditions are reproduced hereinbelow : Rules with respect to use of the Vehicle Use only for carriage of passengers in accordance with permit (contract carriage or stage carriage) issued within the meaning of the Motor Vehicles Act, 1988. This policy does not cover: 1. Use for organised racing pace making reliability trial speed testing. 2. Use whilst drawing a trailer except the towing (other than to reward) of any one disabled mechanically propellor vehicle. Persons who are qualified to use the Vehicle: Any person including the insured provided that person driving holds an effective driving licence at the time of the accident and is not disqualified from holding or obtaining such licence. Provided also that a person holding an effective learners licence may also drive the vehicle when non used for transport of passenger at the time of the accident and such a person satisfies the requirement of rule No. 3 of this Central Motor Vehicle Rule, 1989. 43. Perusal thereof would show that there has not been any violation of the aforesaid terms and conditions of the policy. Respondent-Insurance Company has also failed to point out violation of any Act, Rules or conditions of the Insurance. Insurance Company has no legal justification to deny the payment of compensation to the claimants. 44. In the light of the foregoing discussions, the Appeal filed by Insurance Company fails, wherein it has been directed that the amount would first be paid by the Company, with right to it to recover the same from owner of the vehicle. This we hold so, as the liability of the Insurance Company is exclusive and absolute. 45. Thus, looking to the matter from every angle, we are of the considered opinion that Insurance Company cannot escape its liability of payment of compensation to Third Parties or claimants. Admittedly, owner of the vehicle has not violated any of the terms and conditions of the policy or provisions of the Act. The owner had taken the insurance so as to meet such type of liability which may arise on account of use of the vehicle. 46. Apart from the above, learned counsel for Insurance Company could not point out any legal embargo which may give right to it to deny the payment of compensation. Thus, legally or otherwise liability has to be fastened on the Insurance Company only. 47. In the light of the aforesaid discussion, the Appeals of the Corporation are allowed. The impugned judgment and order passed by High Court qua the Corporation are hereby set aside and quashed and we hold that the Insurance Company would be liable to pay the amount of compensation to the claimants.

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

Explanation:
1[ds]Critical examination thereof would show that the Appellant and the owner had specifically agreed that the vehicle will be insured and a driver would be provided by owner of the vehicle but overall control, not only on the vehicle but also on the driver, would be that of the Corporation. Thus, the vehicle was given on hire by the owner of the vehicle together with its existing and running insurance policy. In view of the aforesaid terms and conditions, the Insurance Company cannot escape its liability to pay the amount of compensation. There is no denial of the fact by the insurance company that at the relevant point of time the vehicle in question was insured with it and the policy was very much in force and in existence. It is also not the case of the insurance company that the driver of the vehicle was not holding a valid driving licence to drive the vehicle. The Tribunal has also held that the driver had a valid driving licence at the time of accident. It has also not been contended by it that there has been violation of the terms and conditions of the policy or that the driver was not entitled to drive the said vehicle30. During the course of hearing, we had asked the following pertinent questions to Mr. Kishore Rawat, learned counsel for the Insurance Company:i) Since the Insurance Company had admittedly received the amount of premium for the period when the mini bus had met with the accident then why should it not be made liable to make the payment of compensation? According to him, in normal circumstances, if the said vehicle would not have been attached with the Corporation for being plied by it on the route of permit granted to it, then of course, the Insurance Company would have no option but to make the paymentii) We had also enquired if there exists different tariffs of premium for the vehicle insured at the instance of owner or for the vehicle which is being attached with the Corporation for being plied by it. He categorically admitted that there is no such difference in the tariff in either of the aforesaid situation and it is same for bothiii) We further enquired from him that if an intimation would have been given to the Insurance Company that the vehicle is being attached with the Corporation then what would have been the position? He again informed us that in that case, the Insurance Company would have met the liability of compensation, in case of an accident(iv) Lastly, we enquired from him as to under which provision of the Act or the Rule, any statutory duty or otherwise is cast on the owner to seek permission or give an intimation to the Insurance Company in case the vehicle is attached with the Corporation for being plied by it? He candidly conceded that there is neither any statutory duty cast on the owner under the Act or under any Rules to seek permission from the Insurance Company nor it is under any of the orders issued by the CompanyAccording to him, it would have been desirable for the insured to have informed about such a contract31. Thus, in the light of the aforesaid, it is clear that Insurance Company is trying to evade its liability on flimsy grounds or under misconception of lawThe liability to pay compensation is based on a statutory provision. Compulsory Insurance of the vehicle is meant for the benefit of the Third Parties. The liability of the owner to have compulsory insurance is only in regard to Third Party and not to the property. Once the vehicle is insured, the owner as well as any other person can use the vehicle with the consent of the owner. Section 146 of the Act does not provide that any person who uses the vehicle independently, a separate Insurance Policy should be taken. The purpose of compulsory insurance in the Act has been enacted with an object to advance social justicePerusal thereof would show that there has not been any violation of the aforesaid terms and conditions of the policy. Respondent-Insurance Company has also failed to point out violation of any Act, Rules or conditions of the Insurance. Insurance Company has no legal justification to deny the payment of compensation to the claimants44. In the light of the foregoing discussions, the Appeal filed by Insurance Company fails, wherein it has been directed that the amount would first be paid by the Company, with right to it to recover the same from owner of the vehicle. This we hold so, as the liability of the Insurance Company is exclusive and absolute45. Thus, looking to the matter from every angle, we are of the considered opinion that Insurance Company cannot escape its liability of payment of compensation to Third Parties or claimants. Admittedly, owner of the vehicle has not violated any of the terms and conditions of the policy or provisions of the Act. The owner had taken the insurance so as to meet such type of liability which may arise on account of use of the vehicleApart from the above, learned counsel for Insurance Company could not point out any legal embargo which may give right to it to deny the payment of compensation. Thus, legally or otherwise liability has to be fastened on the Insurance Company only47. In the light of the aforesaid discussion, the Appeals of the Corporation are allowed. The impugned judgment and order passed by High Court qua the Corporation are hereby set aside and quashed and we hold that the Insurance Company would be liable to pay the amount of compensation to the claimants