Hdfc Bank Ltd vs Kumari Reshma And Ors

Leave granted in both the Special Leave Petitions.

Filtering the unnecessary details, the facts which are requisite to be stated are that on 20.12.2002 about 12.30 p.m. the claimant was going on a scooter bearing registration No. MP09Q92 from Shastri Bridge to Yashwant Square and at that time the Motor Cycle belonging to 2nd respondent and driven by the respondent No.3 herein, in a rash and negligent manner dashed against the scooter as a consequence of which she sustained a fracture in the right hand superacondylar fracture and humerus bone fracture and certain other injuries. She availed treatment at various hospitals as she had to undergo an operation and thereafter advised to take physiotherapy regularly. Keeping in view, the injuries suffered and the amount she had spent in availing the treatment, she filed a claim petition putting forth the claim for Rs.4,50,000/-. The tribunal as stated earlier awarded a sum of Rs.1,75,000/- with 6% interest and opined that all the non-applicants to the claim petition were jointly and severally liable to pay the compensation amount. It is apt to state here the stand and stance put forth by the predecessor-in-interest the appellant bank that it had only advanced a loan and the hypothecation agreement was executed on 1.11.2002 by it. As per the terms of the agreement, the owner of the vehicle was responsible to insure the vehicle at his own costs. Reliance was placed on Clause 16 and 17 of the loan agreement which stipulated that the bank was required to get the vehicle insured if the borrower failed to or neglected to get the vehicle insured. The accident as stated earlier had taken place on 20.12.2002 and the vehicle was insured by the owner on 16.1.2003. It was further put forth by the bank that the owner deposited Rs.6,444/- with the dealer of the motor cycle i.e. Patwa Abhikaran Pvt. Ltd., whereas it was required to pay Rs.9,444/-. Despite the same, he obtained the possession of the vehicle on the same day itself which was not permissible.

It was urged before the tribunal the financer was not liable to pay the compensation and it was the exclusive liability of the borrower. The tribunal on scrutiny of the clauses opined that as the financer had a duty to see that borrower does not neglect to get the vehicle insured, it was also liable along with the owner and accordingly fastened the liability both jointly and severally.

In appeal, it was contended that the financer could not have been fastened with the liability to pay the compensation. The High Court referred to the definition clause in Section 2 (30) of the Motor Vehicles Act, 1988 (for brevity "the Act"), took note of the language employed in Clause 16 of the agreement that if the owner neglects to get the vehicle insured the bank was required to get it insured, and the fact that the financer and the borrower were the registered owners and, accordingly opined that the bank was liable to pay. Being of this view the learned Judge dismissed the appeal preferred by the bank and partly allowed the appeal preferred by the claimants. Be it stated, the application for review filed by the Bank did not meet with success.

We are obliged to mention here that while issuing notice we had directed that the appellant-bank shall deposit the awarded sum before the tribunal which would be at liberty to disburse the same in favour of the claimant. Mr. Subramaniam submitted that the bank does not intend to recover anything from the claimant but the legal position should be made clear so that the bank, which is the financer, is not unnecessarily dragged into this kind of litigation.

As we find from the judgment of the High Court, it has placed reliance on Mohan Benefit Pvt. Ltd. V. Kachraji Rayamalji & Ors.[1]. In the said case, the 2nd respondent was the registered owner of the truck and the appellant was the "legal owner of the vehicle as per hire-purchase agreement". The claim petition stated that at the time of the accident, the 1st respondent was driving the truck owned by the 2nd respondent and the appellant and they had become liable, jointly and severally, to pay the damages claimed. The tribunal, on the basis of the evidence led before it came to the conclusion that hire-purchase agreement was not the only document executed between the appellant and the second respondent. It had awarded damages against the appellant and the second respondent. The award passed by the tribunal was affirmed by the High Court holding that real documents executed between the parties at the time of the alleged loan had been kept back from the Court with ulterior motives and in that situation, all possible adverse inference should be drawn against the appellant therein; and that the hire purchase agreement that was produced could not be made the basis for deciding the relationship between the parties nor could it be pressed into service for proving that the transaction was only of hypothecation in the garb of hire purchase agreement. Affirming the view expressed by the High Court, this Court held "Having heard the counsel and read the evidence adduced in the case, we have no doubt that the hire-purchase agreement produced by the appellant does not spell the true relationship between the appellant and the second respondent. The High Court, therefore, was right in coming to the conclusion that, had the documents which reflected the true relationship between them been produced, they would have "exploded" the case of the appellant. Consequently, the adverse inference drawn by the High Court was justified".

In this context, another decision is apposite to be taken note of. In Uttar Pradesh State Road Transport Coporation V. Kulsum and others[13], the question arose if an insured vehicle is plying under an agreement or contract with the Corporation, on the route as per permit granted in favour of the Corporation, in case of an accident, whether the Insurance Company would be liable to pay the compensation or would it be the responsibility of the Corporation or the owner. The Court referred to Section 103 of the 1988 Act (Uttar Pradesh Amendment Act of 1993) wherein the Corporation has been vested with the right to take vehicles on hire as per the contract and to ply the same on the roads as the permit granted to it. In the said case, according to the terms and conditions of the agreement, the mini-bus was to be plied by the Corporation on the routes as per the permit issued by the Regional Transport Officer in his favour. Except for the services of the driver which were to be provided by the owner, all other rights of the owner were to be exercised by the Corporation only. The conductor was to be an employee of the Corporation and he was authorised and entitled to collect the money after issuing tickets to the passengers and had the duty to perform all the incidental and connected activities as a conductor on behalf of the Corporation. When a claim was lodged before the Tribunal, it allowed the claim petition placing reliance on Kailash Nath Kothari's case. Being aggrieved, the Corporation preferred appeal and the owner of the bus also filed a cross-objection against the finding recorded by the tribunal holding therein that the insurance company was not liable to make the payment and had fastened the liability on the owner on account of alleged breach of insurance policy. The Court analysed the definition under Section 2(30) of the 1988 Act, Section 103(1-A) which has been inserted by the Uttar Pradesh Amendment Act 5 of 1993, Sections 146 and 149 of the 1988 Acts and thereafter referred to the authority in Kailash Nath Kothari (supra) and distinguished the same by holding thus:-

In view of the aforesaid premises, we allow the appeals and hold that the liability to satisfy the award is that of the owner, the respondent no. 2 herein and not that of the financier and accordingly that part of the direction in the award is set aside. However, as has been conceded to by the learned senior counsel for the appellant, no steps shall be taken for realisation of the amount. There shall be no order as to costs.