UNITED INDIA INSURANCE CO. LTD.

SHRI GIAN CHAND AND ORS.

SEPTEJviBER 2, 1997 B

[S.B. MAJMUDAR AND B.N. KIRPAL, JJ.)

Motor Vehicles Act, 1939 :

Sections 96(2)(b )(ii) & 110-A-Vehicle insured against third pmty risk-Exclusion of liability by the Insurance Company under the Insurance C Policy in case insured allows the vehicle to be dliven by unlicensed driver--Car allowed to be driven by an unlicensed driver killing a scoote1ist-Insured did not step into the wimess box to prove his case that he had sold and handed over the car to drive!'-f1eld, an adverse inference could be drawn against the insured that the vehicle W{IS handed over by him for D being driven by an unlicensed driver-Thus the specified condition of the Insurance Policy having been breached by the insured, insurance company would be exonerated from its liability to meet the claim of the dependent of the third pmty (victim of the accident).

A car insured by R-9 with the appellant against third party risk, met with an accident killing a person. The dependents of deceased filed a claim for compensation before the Motor Accident Claim Tribunal. The contention of the respondent-claimants was that the vehicle was driven by the driver, R-1, in a rash and negligent manner and because of such driving fatal accident occurred to their bread winner. The defence of the owner of the vehicle, R-9 was that he had already sold and hand.ed over his car to R-1 and, therefore, he had nothing to do with the claim. However R-1. repudiated the claim on the ground that he neither purchased the car nor

did he drive the car. R-1 also stated that he had no licence at the relevant time to drive the vehicle. R-9 did not enter the witness box to prove his G case.

The defence of the appellant-Insurance Company was that whatever be the liability of R-1 and R-9 regarding the claim of compensation, the appellant stood exonerated by the exclusion clause in the Insurance Policy H 691

A which did not permit the insured to hand over the vehicle, for purpose of driving, to an unlicensed driver.

The Tribunal found that the accident was caused due to rash and negligent driving of R-1 and that R-9 did not sell and hand over the car to R-1. The claim was computed and was made payable by R-1 and R-9.

Appellant-Insurance Company got exonerated on the ground of its defence, in view of Section 96(2)(b) of the Motor Vehicles Act. On appeal before the High Court by R-1, the Insurance Company was held liable jointly and severally to pay along with the insured and the driver relying upon the decision of this Court in Skandia Insurance Co. Ltd. v Kokilaben C Chandravandan & Ors., [1987] 2 SCC 654. Hence, this appeal by the Insurance Company.

Allowing the appeal, this Court

HELD: 1. It has been clearly held by the Tribunal as well as by the D High Court that Respondent 1 who was permitted to drive the vehicle, by Respondent 9, the insured, was admittedly not having any driving licence.

It was not the case of Respondent 9, the insured, that he did not know that Respondent 1 to whom the vehicle was handed over was not having a valid licence. In fact, once he did not step into the witness box to prove his case, E an adverse inference had necessarily to be drawn against him to the effect that the vehicle had been handed over by him for being driven by an unlicensed driver, Respondent I. Under the Circumstances, when the in sured had handed over the vehicle for being driven by an unlicensed driver, the Insurance Company would get exonerated from its liability to meet the claims of the third party who might have suffered on account of vehicular F accident caused by such unlicensed driver. [697-D-E]

New India Assurance Co. Ltd. v. Manohar Madhav Tambe, [1996] 2 SCC 328; Skandia Insurance Co. Ltd. v. Kokilaben Chandravadan, [1987] 2 SCC 654; Kashiram Yadav v. Oriental Fire & General Insur(JITce Co., [1989] G 4 SCC 128 and Sohan Lal Passi v. P. Sesh Reddy, discussed.

2. The appellant-Insurance Company is not liable to meet the claim of the respondent-claimants. The claim petition will stand rejected against the appellant Insurance Company. The respondentciaimants will, however be entitled to recover the awarded amount of compensation from Respon H dents 1 and 9. [699B]

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 6081 of A 1997.

From the Judgment and Order dated 12.9.96 of the Himachal Pradesh High Court in P.A. No. 24 of 1993.

P.P. Malhotra, Vineet Malhotra, Shalendra Sharma, Naresh K. Shar- B ma for the appellant.

Rajesh Srivastava, Ujjwal Banerjee and H.K. Puri for the Respondent.

In-person for the Resondent (N.P.).

The Judgment of the Court was delivered by

S.B. MAJMUDAR, J. Leave granted.

At the SLP stage itself, by order dated 25th March, 1997, this Court D had directed as under :

"Delay condoned, Issue Notice for final disposal of the SLP in the light of decision of this Court in New India Assurance Co. Ltd.

V. Mandar Madhav Tambe & Ors., (1996] 2 sec 328. Notice on E application for stay wherein there shall be ad-intelim stay of the order of the High Court as against the petitioner, Insurance Co. only, till further orders".

Pursuant to the notice for final disposal issued in the SLP, respondent Nos. 1 and 9 who are duly served, have not thought it fit to appear F and contest these proceedings. The contest now, therefore, survives between the appellant - Insurance Company on the one hand and the claimants who are represented by learned counsel Mr. H.K. Puri. Having heard learned counsel for contesting parties, we are . disposing of this appeal finally by this Judgment.

A few facts leading to this appeal may be stated at the outset. A car which was insured by respondent No. 9 - original owner, with the appellant

- Insurance Company against third party risk, met with an accident on 1st January, 1988, at about 10.30 a.m. In the said accident, the deceased, who

was going on a scooter, got fatally injured. The contesting respondents are H

A the claimants, being dependents of deceased. They filed a claim for compensation before the Motor Accident Claims Tribunal II, Una, in the State of Himachal Pradesh. The contention of the respondents claimants was that the vehicle was driven by the driver, respondent No. 1 herein, in a rash and negligent manner and because of such driving the fatal accident B occurred to their bread winner. The defence of the owner of the vehicle, viz., respondent No. 9 was that he had already sold and handed over this vehicle to respondent No. 1 and therefore, he had nothing to do with this claim. Respondent No. 1, on the other hand, submitted before the Tribunal by filing his written statement and also by entering into witness box, that he had nothing to do with the vehicle. He neither purchased it nor had he C driven the same. However, he stated that he had no licence to drive the vehicle at the relevant time when the accident occurred. So far as resondent No. 9, who is the insured, was concerned, he did not think it fit to enter the witness box. The defence of the appellant - Insurance Company was that whatever may be the liability of respondent Nos. 1 and 9 regarding the D claim for compensation, so far as the appellant - Insurance Company is concerned, it stood exonerated by the exclusion clause in the Insurance Policy which did not permit the insured to hand over the vehicle for purpose of driving to an unlicensed driver. The Tribunal after recording evidence came to the conclusion that the accident was caused due to rash E and negligent driving of the car by respondent No. 1, who was on the wheel at the relevant time. It did not believe the case of respondent No. 9 that he had sold and handed over the vehicle to respondent No. 1 and had nothing to do with the vehicle. This finding was reached especially in view of the fact that respondent No. 9 did not think it fit to come to the witness box to support his case. Consequently the claim for compensation was F computed and was made payable by respondent Nos. 1 and 9. However, so far as the Insurance Company was concerned, the Tribunal took the view that the appellant - Insurance Company got exonerated from its liability on account of the fact that respondent No. 9, the insured, had permitted the vehicle to be driven by an unlicensed driver. viz., respondent G No. 1 and therefore, he had committed breach of the relevant term of the

Policy and that entitled the Insurance Company to get the benefit of the exclusion clause available as a defence to the Company under Section 96(2)(b) of the Motor Vehicles Act, 1939. In the result, the Tribunal while awarding Rs. 58,400 as compensation, in favour of the respondents - H claimants, against respondent No. 1 and the present respondent No. 9, who

was respondent No. 2 before the Tribunal, exonerated the appellant - A Insurance Company from its liability to meet the claim amount awarded in favour of the claimants.

That resulted into an appeal before the High Court by respondent No.1, the driver of the vehicle. In that appeal it was contended by him, amongst others, that the Insurance Company should have been made liable B to meet the claim and was wrongly exonerated by the Tribunal. That contention of respondent No. 1 was accepted by the High Court in appeal, though on other contention on merits the appeal was held to be liable to be dismissed. It was only partly allowed to the extent that the appellant - Insurance Company was held liable jointly and severally to pay along with C the insured and the driver the amount of compensation to the claimants.

For coming to the said conclusion against the appellant - Insurance Company, the High Court placed strong reliance on a decision of a Bench of two learned Judges of this Court in Skandia Insurance Company Ltd. v.

Kokilaben C11andravadan & Ors., [1987) 2 SCC 654.

The aforesaid decision of the High Court is on the anvil of scrutiny before us in the present appeal.

In support of the appeal, learned counsel for the appellant - Insurance Company submitted that the High Court had committed a patent E error of law in passing the impugned order against the Insurance Company.

For his submission he placed reliance on two decisions of this Court in New India Assurance Co. Ltd. v. Mandar Madhav Tambe & Ors., (1996] 2 SCC 328 as well as on an earlier decision-of this Court in Kashiram Yadav & Anr. v. Oriental Fire & Insurance Co. & Ors., (1989) 4 SCC 128, while Mr.

Pur~ learned counsel appearing for the contesting respondents - claimants F pitched his faith strongly on the earlier decision of this Court in, [ 1987] 2 SCC supra as well as a latter decision of a Bench of three learned Judges of this Court in Sohanlal Passi v. P. Sesh Reddy & Ors., (1996] 5 SCC 21.

In order to resolve this controversy between the parties, it must be observed at the outset that the aforesaid decisions clearly indicate two G distinct lines of cases. The first line of cases consists of fact situations wherein the insured are alleged to have committed breach of the condition of Insurance Policy, which required them not to permit the vehicle to be driven by an unlicensed driver. Such a breach is held to be a valid defence for the Insurance Company to get exonerated from meeting the claims of H

A third parties who suffer on account of vehicular accidents which may injure them personally or which may deprive them of their bread winner on account of such accidents caused by the insured vehicles. The other line of cases deals with the insured owners of offending motor vehicles that cause ' such accidents wherein the insured owners of the vehicles do not themsel- B ves commit breach of any such condition and hand over the vehicles for driving to. licensed drivers who on their own and without permission, express or implied, of the insured, hand over vehicles or act in such a way that the vehicles get available to unlicensed drivers for being driven by the latter and which get involved in vehicular accidents by the driving of such unlicensed drivers. In such cases the insurance company cannot get benefit C of the exclusionary clause and will remain liable to meet the claims of third parties for accidental injuries, whether fatal or otherwise. The decisions of this Court in Skandia Insurance Co. (supra) and in So/tan Lal Passi (supra) represent this second line of cases while the decisions of this Court in New India Assurance Co. (supra) and in Kashiram Yadav (supra) represent the D first line of cases.

In the case of Skandia Insurance Co. Ltd. v. Kokilaben Chandravadan & Ors., [1987] 2 SCC 654 (supra), a Bench of two learned Judges of this Court speaking through Thakkar; J. held that when the insured had handed over vehicle to be driven by licensed driver and even if the licensed driver E on his own and because of his neg!i'gence had allowed an unlicensed Cleaner to drive the vehicle it could not be said that there was any breach committed by the insured, so as to attract the exclusion clause in favour of the Insurance Company as contemplated under Section 96(2)(b) of the Motor Vehicles Act, 1939. In paragraph 14 of the Report it was observed

that:

"The word 'breach' in the expression "breach of a specified condition of the policy' in Section 96(2)(b) is of great significance. 'Breach' means infringement or violation of a promise or obligation'. This induces an inference that the violation or infringement on the part of the promisor must be wilful infringement or violation: Sub-clause (ii) of clause (b) of Section 96(2) enjoins the insurer to establish that the breach was on the part of the insured and that it was the insured who was guilty of violating the promise or infringement of the contract. It is only when the insured himself places the vehicle in charge of a person who does not hold a driving

licence, that it can be said that he is 'quilty' of the breach of the A promise that the vehicle will be driven by a licensed driver. The insurer cannot escape from the obligation to indemnify the insured when some mishap occurs by some mis.chance. When the insured has done everything within his power inasmuch as he has engaged a licensed driver and has placed the vehicle in charge of the B licensed driver, with the express or implied mandate to drive himself, it cannot be said that the insured is guilty of any breach.

In a way the question is as to whether the promise made by the insured is an absolute promise or whether he is exculpated on the basis of some legal doctrine". ·

We fail to appreciate how the aforesaid decision can be of any avail to learned counsel for the respondents - claimants on the peculiar facts of the present case. It has been clearly held by the Tribunal as well as by the High Court that respondent No. 1 who was permitted to drive the vehicle

by respondent No. 9, the insured, was admittedly not having any driving D licence. It was not the case of respondent No.9, the insured, that he did not know that respondent No. 1 whom the vehicle was being handed over was not having a valid licence. In fact, once he did not step in the witness box to prove his case, an adverse inference had necessarily to be drawn against him to the effect that the vehicle had been handed over by him for being driven by .an unlicensed driver, respondent No. 1. That finding E reached by the Tribunal as well as by the High Court must result in exonerating the Insurance Company of its obligation as the statutory defence became available to it. The High Court, even though agreeing with the finding of fact reached by the Tribunal, has in our view, by misconstruing the ratio of the decision of this Court in Skandia Insurance Co. Ltd. v. F Kokilaben Chandravadan & Ors., [1987) 2 SCC 654, (supra), erroneously held that the said defence was not available to the Insurance Company on the facts of the present case.

Even that apart, a, Bench of three learned Judges of this Court in. [1996) 5 sec 21 (supra) while upholding the ratio of the decision of this Court G in Skandia Insurance Co. Ltd. v. Kokliben Chandravadan & Ors., [1987) 2 sec 654 (supra) has also taken the same view.

Even apart from these Judgments, which do not improve the case of the respondents, strong reliance was placed on two other Judgments of this H

A Court by the leaned counsel for the appellant. As noted earlier they represent the first line of cases. In Kashiram Yadav & Anr. v. Oriental Fire & General Insurance Co. & 01:1., (1989) 4 SCC 128, a bench of two learned Judges of°this Court, speaking through Jagannatha Shetty, J. distinguished the decision in Skandia Insurance Co. Ltd. v. Kokilaben Chandravadan &

B Ors., (1987) 2 SCC 654 (supra) and took the view that when the insured had handed over the vehicle to an unlicensed driver, the Insurance Company would get exonerated and the ratio of the decision in Skandia Insurance Co. Ltd. v. Kokilaben Chandravandan & Ors., (1987) 2 SCC 654 (supra), would be of no assistance to the claimants in such a case. The fact situation in the present case is almost parallel to the fact situation which C was examined by this Court in Kashi Ram Yadav v. Oriental Fire & General Insurance Co. & Ors., (1989) 4 SCC 128 (supra). There is also a latter decision of this Court in New India Assurance Co., Ltd. v. Mandar Madhav Tambe & Ors., (1996) 2 SCC 328, wherein a Bench of two learned Judges of this Court, to which one of us. B.N. Kirpal, J. was a party, examined a D similar fact situation and came to the conclusion that "the exclusion clause in the Insurance Policy makes it clear that the Insurance Company, in the event of an accident, would be liable only if the vehicle was being driven by a person holding a valid driving licence or a permanent driving licence "other than a learner's licence". The use of the words "permanent driving licence" in the insurance policy was to emphasise that a temporary or a E learner's licence-holder would not be covered by the insurance policy''.

Under the circumstances, when the insured had handed over the vehicle for being driven by an unlicenced driver, the Insurance Company would get exonerated from its liability to meet the claims of third party F who might have suffered on account of vehicular accident caused by such unlicensed driver. In view of the aforesaid two sets of decisions of this Court, which deal with different fact situations, it cannot be said that the decisions rendered by this Court in Skandia Insurance Co. Ltd. v. Koki/aben Chandravadan & Ors., (1987) 2 SCC 654 (supra) and the decision of tht Bench of 3 learned Judges in, (1996) 5 SCC 21 (supra) in any way conflict G with the decisions rendered by this Court in the cases of New India Assurance Company Ltd. v. Mandar Madhav Tambe & Ors., (1996) 2 SCC 328 (supra) and Kashiram Yadav & Anr. v. 01iental Fire & General Insurance Co. & Anr., [1989) 4 SCC 128.

H In the result, therefore, this appeal is allowed. The decision of the

UNITED !NDJA INSURANCE CO. LTD. v. GIAN CHAND [S. B. MAJMUDAR, J.J 699

High Court under appeal to the extent it refused to exonerate the In- A surance Company will stand set aside and it is held that the appellant - Insurance Company is not liable to meet the claim of the respondent claimants. The claim petition will stand rejected against appellant - Insurance Company. The respondent - claimants will however be entitled to recover the awarded amount of compensation from respondent Nos. 1 and B 9.

As there was already a stay in favour of the appellant pending these proceedings and consequently claimants have not been paid any amount by the appellant, no further question arises in so far as the claim of the Insurance Company in the present appeal is concerned.

R.K.S.

Appeal allowed.