Case: Oriental Insurance Co. Ltd Vs. Meena Variyal

One Suresh Chandra Variyal was employed as a Regional Manager in M/s Apace Savings and Mutual Benefits (India) Ltd., the owner of a motor vehicle, respondent No.3 herein. Variyal was provided with a car by the employer. The vehicle was insured with the appellant company in terms of the Motor Vehicles Act, 1988. There was no special contract. On 14.6.1999, the vehicle met with an accident. Suresh Chandra Variyal, died. The widow and daughter of Suresh Chandra Variyal, filed a claim petition under Section 166 of the Motor Vehicles Act, 1988, before the Motor Accidents Claims Tribunal, Nainital. Therein, they claimed compensation to the tune of Rs.15 lakhs. According to the claim, the deceased was driving along with his companion Mahmood Hasan after completing his work for the employer. At about 11.30 pm the car collided with a tree due to the rash and negligent driving of the driver. The car was being driven by Mahmood Hasan at the time of the accident. The deceased was an occupant of the car. The car was being used for the business and for the benefit of the employer of the deceased at the time of the accident. The deceased was earning Rs. 9,000/- per month. He had a bright career ahead. Mahmood Hasan had lodged a first information report the same day (reiterated in the counter affidavit filed in this Court) giving wrong facts to escape from any prosecution. It was not specified in the application as to what was the wrong fact or what were the wrong facts mentioned in the complaint filed by Mahmood Hasan. The claimants as dependants were entitled to compensation asclaim was filed against the employer, the owner of the motor vehicle and against the insurance company. Mahmood Hasan, who was allegedly driving the car and that too negligently, at the time of the accident, was not impleaded. No reason was given in the claim for his not being impleaded. The owner of the car, the company that employed the deceased, did not appear and did not file any written statement. The insurance company filed a written statement. It pleaded that the driver and the owner of the vehicle have colluded and the alleged driver of the car had not been impleaded. As a matter of fact, the deceased himself was driving the vehicle. Hence he was not entitled to claim any compensation since the accident occurred on account of his own negligence. The insurance company had no liability. The compensation claimed was exorbitant and the claim was liable to besupport of the claim, the wife of Variyal was examined as P.W.1 and another person, who was allegedly travelling in the car when it met with the accident, was examined as P.W. 2. P.W. 1 asserted that the vehicle was being driven at the time of the accident by Mahmood Hasan and her husband was travelling in the car. This was sought to be supported by P.W. 2 who claimed that he was also travelling in the same car at the time of the accident. He gave evidence that Variyal was employed as a Regional Manager with the owner of the car, M/s Apace Savings and Mutual Benefits (India) Ltd. P.W. 2 also gave evidence that sometimes Variyal himself used to drive the vehicle but Mahmood Hasan usually drove the car. Mahmood Hasan had lodged a First Information Report at 4.40 p.m. on the day of the accident. Therein, Mahmood Hasan had stated that Variyal was driving the car at the time of theindependent evidence was adduced to show what exactly was the salary that was being earned by Variyal from his employer. The employer was a limited liability company and in the normal course, should have been maintaining the relevant records showing the salary paid to a Regional Manager like Variyal. No attempt was made to get them produced. The widow contented herself by asserting in her oral evidence that Variyal was earning a salary of Rs. 9,000/- per month. The Motor Accident Claims Tribunal held that the evidence disclosed that Variyal was driving the vehicle since what was more acceptable was the first version regarding the accident and not the oral assertions of P.Ws. 1 and 2 in support of the claim. It also held that Variyal was not holding a valid driving licence when he drove the car. Purporting to accept the interested, unsupported version of P.W. 1 that the income of her husband was Rs. 9,000/- per month, the Tribunal calculated the dependency at Rs. 6,000/- per month and applying the multiplier of 10, arrived at the compensation payable as Rs. 7,20,000/-. The Tribunal held that the claimants were entitled to receive the amount from the owner of the vehicle, the employer, but the insurance company was not liable, since the vehicle was being driven by the deceased himself who was an employee of the owner of the car and the policy of insurance did not cover such an employee. Thus, the claim was ordered directing the owner of the car to pay the claimant a sum of Rs. 7,20,000/- with interestclaimants filed an appeal before the High Court. The insurance company, which had been exonerated by the Tribunal, alone resisted the appeal. The owner of the vehicle kept away. The claimants, the appellants before the High Court, contended that the Tribunal was in error in finding that the insurance company was not liable and in not granting them a decree against the insurance company. The insurance company pointed out that the deceased was not a third party covered by the insurance policy, was an employee of the owner of the vehicle and was not covered by the policy. Even otherwise, he was driving the car himself as found by the Tribunal and since the accident was caused by his own negligence, the insurance company was notonly argument attempted on behalf of the claimants, the appellants in the High Court, was that in the light of the decision of this Court in National Insurance Co. Ltd. Vs. Swaran Singh & Ors. [(2004) 3 S.C.C. 297], the insurance company was liable to pay the amount awarded even if there was breach of a policy condition and if there was a dispute between the insured and the insurer, it had to be fought elsewhere and they cannot be denied the benefit of the insurance. The insurance company pointed out that the ratio in Swaran Singh (supra) had no application to the case and in the face of the finding that the deceased was himself driving the vehicle belonging to his employer, the insurance company had no liability. There was no special contract and since it was only a policy in terms of the Motor Vehicles Act, the insurance company cannot be asked to pay the amount awarded which was even otherwise not supported by any admissible or acceptable evidence. The High Court, stating that they had in so many cases held, in view of the ratio in Swaran Singh (supra), that it is not open to the insurance company to avoid liability under the Act, simply directed the insurance company to pay the amount as ordered by the Tribunal, leaving it to the insurance company to take recourse to recover the amount from the insured in accordance with the directions of this Court in Swaran Singh

Reasoning: 11. The object of the insistence on insurance under Chapter XI of the Act thus seems to be to compulsorily cover the liability relating to their person or properties of third parties and in respect of employees of the insured employer, the liability that may arise under the Workmens Compensation Act, 1923 in respect of the driver, the conductor and the one carried in a goods vehicle carrying goods. On this plain understanding of Section 147, we find it difficulty to hold that the insurance company, in the case on hand, was liable to indemnify the owner, the employer Company, the insured, in respect of the death of one of its employees, who according to the claim, was not the driver. Be it noted that the liability is not one arising under the Workmens Compensation Act, 1923 and it is doubtful, on the case put forward by the claimant, whether the deceased could be understood as a workman coming within the Workmens Compensation Act, 1923. Therefore, on a plain reading of Section 147 of the Act, it appears to be clear that the insurance company is not liable to indemnify the insured in the case on hand.12. The argument that the proviso does not keep out employees from coverage though the claims under the Workmens Compensation Act are specified, cannot be accepted on the plain language of the proviso. The proviso enacts an exemption and carves out an exception to that exemption. The suggested interpretation would result in ignoring the effect of the language employed by the proviso, exempting the owner from covering his employees under insurance except in cases where the liability in respect of them is, one arising under the Workmens Compensation Act. Obviously, as determined by that Tribunal.13. We shall now examine the decision in Swaran Singh (supra) on which practically the whole of the arguments on behalf of the claimants was rested. On examining the facts, it is found that, that was a case which related to a claim by a third party. In claims by a third party, there cannot be much doubt that once the liability of the owner is found, the insurance company is liable to indemnify the owner, subject of course, to any defence that may be available to it under Section 149(2) of the Act. In a case where the liability is satisfied by the insurance company in the first instance, it may have recourse to the owner in respect of a claim available in that behalf. Swaran Singh (supra) was a case where the insurance company raised a defence that the owner had permitted the vehicle to be driven by a driver who really had no licence and the driving licence produced by him was a fake one. Their Lordships discussed the position and held ultimately that a defence under Section 149(2)(a)(ii) of the Act was available to an insurer when a claim is filed either under Section 163A or under Section 166 of the Act. The breach of a policy condition has to be proved to have been committed by the insured for avoiding liability by the insurer. Mere absence of or production of fake or invalid driving licence or disqualification of the driver for driving at the relevant time, are not in themselves defences available to the insurer against either the insured or the third party. The insurance company to avoid liability, must not only establish the available defence raised in the concerned proceeding but must also establish breach on the part of the owner of the vehicle for which the burden of proof would rest with the insurance company. Whether such a burden had been discharged, would depend upon the facts and circumstances of each case. Even when the insurer, is able to prove breach on the part of the insured concerning a policy condition, the insurer would not be allowed to avoid its liability towards the insured unless the said breach of condition is so fundamental as to be found to have contributed to the cause of thethe vehicle at the time of the accident was driven by a person having a learners licence, the insurance company would be liable to satisfy the award. The amount that may be awarded to the insurance company against the insurer in an appropriate case could be recovered even by way of the enforcement of the very award. The insurance company had to satisfy the claim of the insured in cases where a defence under Section 149(2) has been established by the Company in terms of a fake licence or the learners licence. Their Lordships distinguished Malla Prakasarao Vs. Malla Janaki & Ors. [(2004) 3 S.C.C. 343] wherein it was held that the insurance company had no liability to pay any compensation where an accident resulted by a vehicle being driven by a driver without a driving licence. In other words, a distinction between a case of no licence and a case of licence which turned out to be fake or deficient was drawn and the liability was held to stand on different footings.We are thus satisfied that based on the ratio in Swaran Singh (supra), the insurance company cannot be made liable in the case on hand to pay the compensation first and to recover it from the insured, the owner of the vehicle. The deceased being an employee not covered by the Workmens Compensation Act, of the insured, the owner of the vehicle, has not to be covered compulsorily under the Act and only by entering into of a special contract by the insured with the insurer could such a person be brought under coverage. There is no case that there is any special contract in that behalf in this case.21. It was argued by learned counsel for the appellant that since on the finding that the deceased was himself driving the vehicle at the time of the accident, the accident arose due to the negligence of the deceased himself and hence the insurer is not liable for the compensation. Even if the case of the claimant that the car was driven by Mahmood Hasan was true, then also, the claimant had to establish the negligence of the driver before the insured could be asked to indemnify the insured. The decision in Minu B. Mehta & Anr. Vs. Balkrishna Ramchandra Nayan & Anr. [(1977) 2 S.C.R. 886], of a three Judge Bench of this Court was relied on in support.22. In that decision, this Court considered the question whether in a claim for compensation under the Motor Vehicles Act, 1939, proof of negligence was essential to support a claim for compensation. On the facts in that case, their Lordships found that the appeal was liable to be dismissed subject to certain directions issued therein. But their Lordships, in the light of the fact that the High Court had discussed the law on the question and it was of some importance, felt that it was necessary to state the position in law. Noticing that the liability of the owner of the car to compensate the victim in a car accident due to negligent driving of his servant is based on the law of tort, the court discussed the scheme of the Act of 1939 and the law on the question.Learned counsel for the respondent contended that there was no obligation on the claimant to prove negligence on the part of the driver. Learned counsel relied on Gujarat State Road Transport Corporation, Ahmedabad vs. Ramanbhai Prabhatbhai and another (1987 (3) SCC 234 ) in support. In that decision, this Court clarified that the observations in Minu B. Mehtas case (supra) are in the nature of obiter dicta. But, this Court only proceeded to notice that departures had been made from the law of strict liability and the Fatal Accidents Act by introduction of Chapter VIIA of the 1939 Act and the introduction of Section 92A providing for compensation and the expansion of the provision as to who could make a claim, noticing that the application under Section 110A of the Act had to be made on behalf of or for the benefit of all the legal representatives of the deceased. This Court has not stated that on a claim based on negligence there is no obligation to establish negligence. This Court was dealing withliability and the departure made from the Fatal Accidents Act and the theory of strict liability in the scheme of the Act of 1939 as amended. This Court did not have the occasion to construe a provision like Section 163A of the Act of 1988 providing for compensation without proof of negligence in contradistinction to Section 166 of the Act. We may notice that Minu B. Mehtas case was decided by three learned Judges and the Gujarat State Road Transport Corporation case was decided only by two learned Judges. An obiter dictum of this Court may be binding only on the High Courts in the absence of a direct pronouncement on that question elsewhere by this Court. But as far as this Court is concerned, though not binding, it does have clear persuasive authority. On a careful understanding of the decision in Gujarat State Road Transport Corporation (supra) we cannot understand it as having held that in all claims under the Act proof of negligence as the basis of a claim is jettisoned by the scheme of the Act. In the context of Sections 166 and 163A of the Act of 1988, we are persuaded to think that the so called obiter observations in Minu B. Mehtas case (supra) govern a claim under Section 166 of the Act and they are inapplicable only when a claim is made under Section 163A of the Act. Obviously, it is for the claimant to choose under which provision he should approach the Tribunal and if he chooses to approach the Tribunal under Section 166 of the Act, we cannot see why the principle stated in Minu B. Mehtas case should not apply to him. We are, therefore, not in a position to accept the argument of learned counsel for the respondents that the observations in Minu B. Mehtas case deserve to be ignored.24. We think that the law laid down in Minu B. Mehta & Anr. Vs. Balkrishna Ramchandra Nayan & Anr. (supra) was accepted by the legislature while enacting the Motor Vehicles Act, 1988 by introducing Section 163A of the Act providing for payment of compensation notwithstanding anything contained in the Act or in any other law for the time being in force that the owner of a motor vehicle or 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 the motor vehicle, compensation, as indicated in the Second Schedule, to the legal heirs or the victim, as the case may be, and in a claim made under(1) of Section 163A of the Act, 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 concerned. Therefore, the victim of an accident or his dependants have an option either to proceed under Section 166 of the Act or under Section 163A of the Act. Once they approach the Tribunal under Section 166 of the Act, they have necessarily to take upon themselves the burden of establishing the negligence of the driver or owner of the vehicle concerned. But if they proceed under Section 163A of the Act, the compensation will be awarded in terms of the Schedule without calling upon the victim or his dependants to establish any negligence or default on the part of the owner of the vehicle or the driver of the vehicle.25. In Pushpabai Purshottam Udeshi & Ors. Vs. M/s Ranjit Ginning & Pressing Co. (P) Ltd. & Anr. [(1977) 3 S.C.R. 372], two of the learned judges who constituted the Bench in Minu B. Mehta (supra) held that when a car is driven by the owners employee on owners business, the normal rule was that it was for the claimant for compensation to prove negligence. When the Manager of the owner while driving the car on the business of the owner took in a passenger, it would be taken that he had the authority to do so, considering his position unless otherwise shown. If due to his negligent driving an accident occurred and the passenger died, the owner would be liable for compensation. The court noticed that the modern trend was to make the master liable for acts of his servant which may not fall within the expression "in the course of his employment" as formerly understood. With respect, we think that the extensions to the principle of liability has been rightly indicated in this decision.26. On the facts of this case, there is no finding that Mahmood Hasan, another employee of the owner was driving the vehicle. Even if he was, there is no finding of his negligence. The victim was the Regional Manger of the Company that owned the car. He was using the car given to him by the Company for use. Whether he is treated as the owner of the vehicle or as an employee, he is not covered by the insurance policy taken in terms of theany special contract