Case: United India Insurance Company Ltd Vs. Lehru

4. By this appeal, the Insurance Company seeks to avoid its liability on the ground that the licence of the driver of the car was a fake licence. As is indicated hereafter the question whether an Insurance Company can avoid liability to a third party who is involved in the accident is no longer res integra. It is fully covered by decisions of this Court. We find that in spite of the point being fully covered, in a large number of maters the Insurance Companies are still seeking to get out of liability to third parties on the ground that the licence was fake. We have noticed that many matters are still being brought to this Court on this point. It is therefore necessary to again reiterate the legal position. In this case the Appellants have not even been able to prove that the licence was fake. Yet they have deprived the claimants of use of the money for all these years by filing unnecessary appeals.5. In this case, the driver, at time of accident was one Janu s/o Kallu. During trial he filed, before the Motor Accident Claims Tribunal, his original licence. The licence bore number 9195/MTR/96P dated 15th May, 1989. The AppellantInsurance Company sought to prove that a licence bearing No. 1595/MTR/96P had been issued in the name of one Kalpana Gupta and not in the name of the Driver. The Insurance Company get produced records of the concerned RTO for the year 1996. They made no efforts to get produced concerned records of 1989. To be noted that the year 1989 comes before 1996. Therefore even presuming there was some confusion whether the number of the licence was 5195 or 9195, still the records of 1989 were required to be produced. It is clear that the licence issued on 15th May, 1989 had nothing to do with the licence, if any, issued to Kalpana Gupta in 1996. If anything the licence issued in 1996 could have been a renewal of a fake licence. The Motor Accident Claims Tribunal did not accept that the licence was fake. It held that, even if the licence was fake, the law was that Insurance Company was liable to pay the compensation as they had failed to prove that the insured had deliberately committed any breach of any condition.6. The Appellants then filed an Appeal before the High Court. The High Court dismissed the Appeal without going into the question whether the licence was fake or not. The High Court held that even if the licence was fake, the settled law was that the Insurance Company had to first pay to the claimants and they could then recover from the owner, if in law they were entitled to do so. One would have thought that now that two Courts had pointed out the settled law the Insurance Company would honour its commitment. Alas better sense has still not prevailed.7. As stated earlier, in this case the Appellants have not proved that the licence was fake. For that reason itself they should have paid up the amount awarded to the claimant. But theCompany wants this Court to reconsider its earlier decisions and hold that the Insurance Company is absolved of its liability to pay to the claimant if it proves that the licence was fake.

Reasoning: If the vehicle is not insured any legal liability arising on account of third party risk will have to be borne by the owner of the vehicle. Why then has the legislature insisted on a person using a motor vehicle in a public place to insure against third party risk by enacting Section 94? Surely the obligation has not been imposed in order to promote the business of the insures engaged in the business of automobile insurance. The provision has been inserted in order to protect the members of the community travelling in vehicles or using the roads from the risk attendant upon the user of motor vehicles on the roads. The law may provide for compensation to victims of the accidents who sustain injuries in the course of an automobile accident or compensation to the dependants of the victims in the case of a fatal accident. However, such protection would remain a protection on paper unless there is a guarantee that the compensation awarded by the courts would be recoverable from the persons held liable for the consequences of the accident. A court can only pass an award or a decree. It cannot ensure that such an award or decree results in the amount awarded being actually recovered, from the person held liable who may not have the resources. The exercise undertaken by the law courts would then be an exercise in futility. And the outcome of the legal proceedings which by the very nature of things involve the time cost and money cost invested from the scare resources of the community would make a mokery of the injured victims, or the dependants of the deceased victim of the accident, who themselves are obliged to incur not inconsiderable expenditure of time, money and energy in litigation. The overcome this ugly situation the legislature has made it obligatory that no motor vehicle shall be used unless a third party insurance is in force. To use the vehicle without the requisite third party insurance being in force is a penal offence. The legislature was also faced with another problem. The insurance policy might provide for liability walled in by conditions which may be specified in the contract of policy. In order to make the protection real, the legislature has also provided that the judgment obtained shall not be defeated by the incorporation of exclusion clauses other than those authorised by Section 96 and by providing that except and save to the extent permitted by Section 96 it will be the obligation of the insurance company to satisfy the judgment obtained against the persons insured against third party risk (vide Section 96). In other words, the legislature has insisted and made it incumbent on the user of a motor vehicle to be armed with an insurance policy covering third party risks which is in conformity with the provisions enacted by the legislature. It is so provided in order to ensure that the injured victims of automobile accidents or the dependants of the victims of fatal accidents are really compensated in terms of the money and not in terms of promise. Such a benign provision enacted by the legislature having regard to the fact that in the modern age the use of motor vehicles notwithstanding the attendant hazards, has become an inescapable fact of life, has to be interpreted in a meaningful manner which serves rather than defeats the purpose of the legislation. The provision has therefore to be interpreted in the twilight of the aforesaidconstrue the provision differently would be to rewrite the provision by engrafting a rider to the effect that in the event of the motor vehicle happening to be driven by an unlicensed person, regardless of the circumstances in which such a contingency occurs, the insured will not be liable under the contract of insurance. It needs to be emphasised that it is not the contract of insurance which is being interpreted. It is the statutory provision defining the conditions of exemption which is being interpreted. These must therefore be interpreted in the spirit in which the same have been enacted accompanied by an anxiety to ensure that the protection is not nullified by the backward looking interpretation which serves to defeat the provision rather than to fulfil itsTo do otherwise would amount to nullifying the benevolent provision by reading it with aeye and with a mind not tuned to the purpose and philosophy of the legislation without being informed of the true goals sought to be achieved. What the legislature has given, the Court cannot deprive of by way of an exercise in interpretation when the view which renders the provision potent is equally plausible as the one which renders the provision impotent. In fact it appears that the former view is more plausible apart from the fact that it is more desirable. When the option is between opting for a view which will relieve the distress and misery of the victims of accidents or their dependants on the one hand and the equally plausible view which will reduce the profitability of the insurer in regard to the occupational hazard undertaken by him by way of business activity there is hardly any choice. The Court cannot but opt for the former view. Even if one were to make a strictly doctrinaire approach, the very same, conclusion would emerge in obeisance to the doctrine of "reading down" the exclusion clause in the light of the "main purpose" of the provision so that the "exclusion clause" does not cross swords with the "main purpose" highlighted earlier. The effort must be to harmonize the two instead of allowing the exclusion clause to snipe successfully at the main purpose.Thus Section 96 has been interpreted keeping in mind the object and purpose of Legislature in providing for compulsory insurance. It has been held that Insurance Company gets absolved of its liability only if it establishes that the breach is by the insured. It is held that if the insured is not at fault and has not done anything he should not have done or is not amiss then he cannot be held to have committed asee no substance in this submission. A plain reading of Section 149 would show that an insurance company would continue to be liable to third persons.The question was again considered by a three Judge Bench of this Court in the case of Sohan Lal Passi vs. P. Sesh Reddy and Ors. reported in (1996) 5 SCC 21. In this case the bus was being driven by the cleaner, an employee of the owner, at the time of accident. The cleaner did not have a valid licence. The Insurance Company sought to avoid liability on the ground that there was breach of Section 96(2)(b)(ii) of the Motor Vehicles Act 1939 inasmuch as the vehicle was being driven by a person who was not duly licensed. The Insurance Company questioned the correctness of the view taken in Skandias case. Hence this case was placed before a three Judge Bench. The Bench held ason behalf of the Insurance Company, a stand was taken that when Section 96(2)(b)(ii) has provided that the insurer shall be entitled to defend the action on the ground that there has been breach of a specified condition to policy i.e. the vehicle should not be driven by a person who is not duly licensed, then the insurance company cannot be held to be liable to indemnify the owner of the vehicle. In other words, once there has been a contravention of the condition prescribed in(2)(b)(ii) of Section 96, the person insured shall not be entitled to the benefit of(1) of Section 96. According to us, Section 96(2)(b)(ii) should not be interpreted in a technical manner.(2) of Section 96 only enables the insurance company to defend itself in respect of the liability to pay compensation on any of the grounds mentioned in(2) including that there has been a contravention of the condition excluding the vehicle being driven by any person who is not duly licensed. This bar on the face of it operates on the person insured. If the person who has got the vehicle insured has allowed the vehicle to be driven by a person who is not duly licensed then only that clause shall be attracted. In a case where the person who has got insured the vehicle with the insurance company, has appointed a duly licensed driver and if the accident takes place when the vehicle is being driven by a person not duly licensed on the basis of the authority of the driver duly authorised to drive the vehicle whether the insurance company in that event shall be absolved from its liability? The expression breach occurring in Section 96(2)(b) means infringement or violation of a promise or obligation. As such the insurance company will have to establish that the insured was guilty of an infringement or violation of a promise. The insurer has also to satisfy the Tribunal or the Court that such violation or infringement on the part of the insured was wilful. If the insured has taken all precautions by appointing a duly licensed driver to drive the vehicle in question and it has not been established that it was the insured who allowed the vehicle to be driven by a person not duly licensed, then the insurance company cannot repudiate its statutory liability under(1) of Section 96. In the present case far from establishing that it was the appellant who had allowed Rajinder Pal Singh to drive the vehicle when the accident took place, there is not even any allegation that it was the appellant who was guilty of violating the condition that the vehicle shall not be driven by a person not duly licensed. From the facts of the case, it appears that the appellant had done everything within his power inasmuch as he has engaged a licensed driver Gurbachan Singh and had placed the vehicle in his charge. While interpreting the contract of insurance, the tribunals and courts have to be conscious of the fact that right to claim compensation by heirs and legal representatives of the victims of the accident is not defeated on technical grounds. Unless it is established on the materials on record that it was the insured who had wilfully violated the condition of the policy by allowing a person not duly licensed to drive the vehicle when the accident took place, the insurer shall be deemed to be a judgment debtor in respect of the liability in view of(1) of Section 96 of the Act. It need not be pointed out that the whole concept of getting the vehicle insured by an insurance company is to provide an easy mode of getting compensation by the claimants, otherwise in normal course they had to pursue their claim against the owner from one forum to the other and ultimately to execute the order of the Accident Claims Tribunal for realisation of such amount by sale of properties of the owner of the vehicle. The procedure and result of the execution of the decree is well known.13. This Court in the case of Kashiram Yadav vs. Oriental Fire and General Insurance Co. (1989) 4 SCC 128 reiterated the views expressed in Sikandia Insurance Co. Ltd. vs. Kakilaben Chandravadan (1987) 2 SCC 654. While referring to that case it was said : (SCC ppre the facts found were quite different. The vehicle concerned in that case was undisputedly entrusted to the driver who had a valid licence. In transit the driver stopped the vehicle and went to fetch some snacks from the opposite shop leaving the engine on. The ignition key was at the ignition lock and not in the cabin of the truck. The driver had asked the cleaner to take care of the truck. In fact the driver had left the truck in care of the cleaner. The cleaner meddled with the vehicle and caused the accident. The question arose whether the insured (owner) had committed a breach of the condition incorporated in the certificate of insurance since the cleaner operated the vehicle on the fatal occasion without driving licence. This Court expressed the view that it is only when the insured himself entrusted the vehicle to a person who does not hold a driving licence, he could be said to have committed breach of the condition of the policy. It must be established by the Insurance Company that the breach is on the part of the insured. Unless the insured is at fault and is guilty of a breach of the condition, the insurer cannot escape from the obligation to indemnify the insured. It was also observed that when the insured has done everything within his power inasmuch as he has engaged the licensed driver and has placed the vehicle in his charge with the express or implied mandate to drive himself, it cannot be said that the insured is guilty of any breach.We affirm and reiterate the statement of law laid down in the above case. We may also state that without the knowledge of the insured, if by drivers acts or omission others meddle with the vehicle and cause an accident, the insurer would be liable to indemnify the insured. The insurer in such a case cannot take the defence of a breach of the condition in the certificate of insurance."We are in respectful agreement with the view expressed in the case of Sikandia Insurance Co. Ltd. vs. Kokilaben Chandravadan.In spite of above enunciation of law the Insurance Companies still continue to disclaim liability on the ground that the licence was fake. In the case of New India Assurance Co., Shimla vs. Kamla and others reported in 2001 (4) SCC 342  the question was whether by virtue of Section 149(2)(a)(ii) an Insurance Company could avoid liability if it is proved that the driving licence was fake. This Court considered, in detail, Section 149 of the Motor Vehicles Act, 1988 and held that the insurer has to pay to third parties on account of the fact that a policy of insurance has been issued in respect of the vehicle. It is held that the insurer may be entitled to recover such sum from the insured if the insurer was not otherwise liable to pay such sum to the insured by virtue of the contract of insurance. The question as to whether or not the insured would be protected if he had made all enquiries was left open. However, this point has been squarely dealt with in Skandias and Sohan Lal Passis casesheld in Skandias and Sohan Lal Passis cases (supra) the breach must be on part of the insured. We are in full agreement with that. To hold otherwise would lead to absurd results. Just to take an example, suppose a vehicle is stolen. Whilst it is being driven by the thief there is an accident. The thief is caught and it is ascertained that he had no licence. Can the Insurance Company disown liability? The answer has to be an emphatic "No". To hold otherwise would be to negate the very purpose of compulsory insurance. The injured or relative of person killed in the accident may find that the decree obtained by them is only a paper decree as the owner is a man of straw. The owner himself would be an innocent sufferer. It is for this reason that the Legislature, in its wisdom, has made insurance, at least third party insurance, compulsory. The aim and purpose being that an Insurance Company would be available to pay. The business of the Company is to insurance. In all businesses there is an element of risk. All persons carrying on business must take risks associated with that business. Thus it is equitable that the business which is run for making profits also bears the risk associated with it. At the same time innocent parties must not be made to suffer or loss. These provisions meet these requirements. We are thus in agreement with what is laid down in aforementioned cases viz that in order to avoid liability it is not sufficient to show that the person driving at the time of accident was not duly licensed. The Insurance Company must establish that the breach was on the part of the insured.