2008 (2) TMI 855 - SC - Indian Laws

Insurance Company Must Pay Compensation, Can Recover from Owner; Statutory Limits & Policy Breach Emphasized

THE NEW INDIA INSURANCE COMPANY Versus DARSHANA DEVI & ORS

The Supreme Court upheld the Tribunal's decision that the insurance company must pay compensation but could recover it from the vehicle owner. The Court ... Whether the insurance company need not file a separate execution petition against the owner? Whether deceased being a passenger in the said tractor, was not a third party within the meaning of the provisions of Section 147 of the Motor Vehicles Act? Whether Ajay Kumar, being the son of one of the owners of the tractor and having no licence to drive the same, the case comes within the purview of the exeption as regards the liability of the insurer as envisaged under sub-section (2) of Section 149 of the Motor Vehicles Act? Issues Involved:1. Liability of the insurance company under Section 147 of the Motor Vehicles Act, 1988.2. Validity of the driver's license at the time of the accident.3. Breach of insurance contract conditions.4. Applicability of Article 136 of the Constitution of India.Issue-Wise Detailed Analysis:1. Liability of the Insurance Company under Section 147 of the Motor Vehicles Act, 1988:The primary issue was whether the insurance company was liable to pay compensation under Section 147 of the Motor Vehicles Act, 1988, given that the deceased was traveling on the mudguard of the tractor, which is not typically covered under third-party insurance. The Tribunal found that although the owners had contravened the contracts of insurance, the insurance company could not escape its liability regarding third-party risk but was entitled to recover the compensation amount from the owner of the offending vehicle. The Supreme Court noted that the statutory liability of the insurance company is to indemnify the insured against liabilities incurred towards a third party. However, it was highlighted that the deceased was not considered a third party under the Act, as he was traveling on the mudguard, which is not a permissible passenger position.2. Validity of the Driver's License at the Time of the Accident:The Tribunal established that Ajay Kumar, who was driving the tractor, did not possess a valid driving license, which constitutes a breach of insurance policy conditions. The Supreme Court referred to previous judgments, including National Insurance Company v. Swaran Singh & Ors., which held that in cases where the driver does not have a valid license, the insurance company is not liable. This principle was reiterated, emphasizing that the insurer's liability does not extend to cases where the driver is unlicensed.3. Breach of Insurance Contract Conditions:The insurance company argued that the deceased was traveling in breach of the insurance contract conditions, as he was on the mudguard of the tractor, which was being used for purposes other than agricultural, for which it was insured. The Supreme Court discussed the extent of the insurance company's liability in cases of breach of specified conditions of the policy, such as using the vehicle for hire or reward without proper permits, or driving by an unlicensed person. The Court cited various precedents, including Oriental Insurance Co. Ltd. v. Sunita Rathi and United India Insurance Co. Ltd., Shimla v. Tilak Singh & Ors., to support the position that the insurance company is not liable in such breaches.4. Applicability of Article 136 of the Constitution of India:The respondent's counsel argued that the case did not warrant the Supreme Court's discretionary jurisdiction under Article 136 of the Constitution of India. The Supreme Court agreed, noting that the deceased was a laborer dealing in Safeda wood, and his income was modest. The Court decided not to exercise its discretionary jurisdiction under Article 136, citing the need to do complete justice under Article 142. The Court directed that the insurance company could recover the compensation amount from the vehicle owner without initiating separate proceedings, thus ensuring that the claimants received the awarded compensation promptly.Conclusion:The Supreme Court dismissed the appeal, upholding the Tribunal's decision that the insurance company must pay the compensation but could recover it from the vehicle owner. The Court emphasized the statutory limitations on the insurer's liability and the breach of policy conditions, while also ensuring justice for the claimants by leveraging its powers under Article 142 of the Constitution. The appeal was disposed of with no costs, and the Tribunal was directed to facilitate the recovery process for the insurance company.