2018 (5) TMI 2189 - SC - Indian Laws

Insurer must pay accident victims despite vehicle lacking valid route permit under Section 66 but can recover from owner-driver

Amrit Paul Singh and Ors. Versus TATA AIG General Insurance Co. Ltd. and Ors.

The SC held that an insurer is not liable to indemnify when a vehicle lacks a valid route permit at the time of accident. The vehicle operated without ... Liability of insurer to indemnify the insured when the vehicle involved in the accident did not possess a valid route permit at the time of the accident - HELD THAT:- In the case at hand, it is clearly demonstrable from the materials brought on record that the vehicle at the time of the accident did not have a permit. The Appellants had taken the stand that the vehicle was not involved in the accident. That apart, they had not stated whether the vehicle had temporary permit or any other kind of permit. The exceptions that have been carved out Under Section 66 of the Act, needless to emphasise, are to be pleaded and proved. The exceptions cannot be taken aid of in the course of an argument to seek absolution from liability. Use of a vehicle in a public place without a permit is a fundamental statutory infraction. We are disposed to think so in view of the series of exceptions carved out in Section 66. The said situations cannot be equated with absence of licence or a fake licence or a licence for different kind of vehicle, or, for that matter, violation of a condition of carrying more number of passengers. Nothing has been brought on record by the insured to prove that he had a permit of the vehicle. In such a situation, the onus cannot be cast on the insurer. Therefore, the tribunal as well as the High Court had directed the insurer was required to pay the compensation amount to the claimants with interest with the stipulation that the insurer shall be entitled to recover the same from the owner and the driver. The said directions are in consonance with the principles stated in Swaran Singh (supra) and Ors. cases pertaining to pay and recover principle. Conclusion - i) The insurer was not liable to indemnify the insured due to the absence of a valid permit. ii) The insurer is directed to pay the compensation amount to the claimants and subsequently recover it from the owner and driver. There are no merit in the appeal - appeal dismissed. 1. Issues Presented and ConsideredThe core legal issues considered in this judgment were:Whether the insurer was liable to indemnify the insured when the vehicle involved in the accident did not possess a valid route permit at the time of the accident.Whether the tribunal and the High Court were correct in directing the insurer to pay the compensation amount to the claimants with the right to recover the same from the owner and driver of the vehicle.Interpretation and application of relevant provisions of the Motor Vehicles Act, 1988, particularly Sections 66 and 149, in the context of the absence of a route permit.2. Issue-Wise Detailed AnalysisIssue 1: Liability of the Insurer in Absence of a Valid Route PermitRelevant Legal Framework and Precedents: The case hinged on the interpretation of Sections 66 and 149 of the Motor Vehicles Act, 1988. Section 66 mandates that no vehicle can be used as a transport vehicle in any public place without a valid permit. Section 149 outlines the conditions under which an insurer can avoid liability.Court's Interpretation and Reasoning: The Court emphasized that a valid permit is a statutory requirement for using a vehicle as a transport vehicle. The absence of such a permit constitutes a fundamental statutory infraction, which the insurer can use as a defense to avoid liability.Key Evidence and Findings: The tribunal and the High Court found that the vehicle did not possess a valid permit at the time of the accident. The permit was issued after the accident date, and the owner failed to prove otherwise.Application of Law to Facts: The Court applied the statutory requirements of the Motor Vehicles Act and concluded that the absence of a permit was a breach of statutory conditions, thereby absolving the insurer from liability to indemnify the insured.Treatment of Competing Arguments: The appellants argued that they had applied for a permit before the accident and that the insurer should be liable. However, the Court held that merely applying for a permit does not equate to having one, and the statutory requirement was not fulfilled.Conclusions: The Court concluded that the insurer was not liable to indemnify the insured due to the absence of a valid permit at the time of the accident.Issue 2: Direction to Insurer to Pay and RecoverRelevant Legal Framework and Precedents: The Court referred to the principle of 'pay and recover' as established in previous judgments, including National Insurance Co. Ltd. v. Swaran Singh, which allows the insurer to pay the compensation to the third party and then recover it from the insured.Court's Interpretation and Reasoning: The Court reasoned that the insurer could be directed to pay the compensation amount to the claimants initially, given the beneficial nature of the Motor Vehicles Act, which aims to protect third-party rights.Key Evidence and Findings: The tribunal and the High Court had directed the insurer to pay the compensation with the right to recover from the owner and driver, which was consistent with the established legal principles.Application of Law to Facts: The Court applied the 'pay and recover' principle, emphasizing the need to protect third-party interests while allowing the insurer to recover the amount from the insured.Treatment of Competing Arguments: The appellants contended that the insurer should not be liable at all. However, the Court maintained that the insurer's initial payment to the claimants was justified under the 'pay and recover' doctrine.Conclusions: The Court upheld the direction for the insurer to pay the compensation amount to the claimants and recover it from the owner and driver of the vehicle.3. Significant HoldingsPreserve Verbatim Quotes of Crucial Legal Reasoning: The Court stated, 'Use of a vehicle in a public place without a permit is a fundamental statutory infraction,' highlighting the critical nature of having a valid permit.Core Principles Established: The judgment reinforced the principle that the absence of a permit constitutes a fundamental breach of statutory conditions, absolving the insurer from indemnifying the insured. It also reaffirmed the 'pay and recover' principle to protect third-party rights.Final Determinations on Each Issue: The Court determined that the insurer was not liable to indemnify the insured due to the absence of a valid permit. However, it upheld the direction for the insurer to pay the compensation amount to the claimants and subsequently recover it from the owner and driver.