TaxTMI 
TaxTMI 
1959 (5) TMI 45
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....e plaintiff was negligent or that there was contributory negligence etc. When a person is joined as a party he has the right to take all defences permissible in law. [Subba Rao, J.-Did the insurer have a right to be joined as a party, apart from the statute ? Could he be joined under Order 1, Rule 10, of the Code of Civil Procedure ?] I am not basing my case on Order 1, Rule to of the Code of Civil Procedure. Apart from the statute, the insurer would not be liable to the third party, but only to the assured. [Das, J.-Is it not correct that the statute gives the insurer a right to be joined as a party which he did not have previously ? If so, the right cannot be extended beyond what the statute gives.] It is true that the statute gives a right to the insurer to become a party to the action by the injured person which he did not have previously, but the real question before the court is whether sub-s. (2) limits the right to defend on the grounds stated in that sub-section. In my submission, subS. (2) exhausts only the defences based on the conditions of the policy which the insurer may wish to take. If it was intended that these were to be the only defences open to the insu....
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....hose stated in sub-s.Otherwise the third party and the assured may collude and a judgment may be passed which the insurer would be bound to satisfy without having had 'an opportunity of defending himself. Or the case may go by default against the assured or may be compromised. The real party affected is the insurer and yet he is given no right to be heard except on the limited grounds stated in sub-s. (2). The assured is only a nominal party and is not likely to be interested in contesting the case, as the decree has to be satisfied by the insurer. The legislature could not have intended such a result. It is contrary to natural justice that a party likely to be affected by the proceedings should not be heard on the merits. T. P. S. Chawla (with him, Dipak Datta Choudhry) for the respondent. Chapter VIII of the Motor Vehicles Act, 1939, is based on various English Statutes (See Report of Motor Vehicles Insurance Committee 1936-37 known as the Roughton Committee). For a proper appreciation of s. 96 it is necessary to consider the historical development of the law relating to compulsory third party insurance in England. Before 1930, there, was no system of compulsory insurance in ....
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.... 3rd Edn., Vol. 22,PP. 374-5). This was the second action. It is doubtful if even the defence of collusion would be open to the insurer in the second action. (Sliawcross, P. 296). Then S. 10(2) of the Road Traffic Act of 1934, is substantially reproduced in s. 96(2)(a). By this provision in certain events the insurers liability ceases. To appreciate s. 96(2)(b) it is necessary to keep in mind s. 38 of the Road Traffic Act of 193o and S. 12 of the Road Traffic Act of 1934. Both these letter sections made certain conditions of the policy ineffective against third parties. Whilst drafting the Motor Vehicles Act the legislature reversed the manner of statement. In s. 96(2)(b) the legislature has stated affirmatively what are the conditions on which the insurer can rely as against a third party. This was done to avoid doubt and uncertainly. Then s. 10(3) of the Road Traffic Act, 1934, gave the insurer a right to obtain a declaration that he was not liable on the policy due to non-disclosure or misrepresentation as to a material fact. In this action a notice had to be sent to the third party injured who was given a right to join as a party ....
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....o go by default, could not the insurer have the judgment set aside or bring a suit to,have it set aside ?] In. my submission even a suit for this purpose is barred as that would contravene sub-s. (6). Such a suit would enable the insurer to avoid liability in a.' manner' which sub-s. (6) does not allow. There is no hardship caused by giving full effect to the section as it stands. The possibilities of collusion are remote, and indeed illusory. (Shawcross, P. 296). By- s. 96(3) the insurer is given a right to recover from the insured any sums paid, by him which he was not bound to pay due to breaches of conditions in the policy, but which conditions have been made ineffective as against the third party. Sub-section (4) of the same section gives the insurer the right to recover from the assured the excess which he is made to pay by virtue of s. 95, over his obligations in the policy. The judgment is still against the assured who is the party primarily liable. It is only made executable against the insurer. Apart from this, by s. 1(3) of the Motor Vehicles Act, 1939, the legislature gave insurers six years to insert provisions in their policies and take such other steps to ....
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....t be interpreted as to limit the defences available to the insurer. I wants show that view is wrong. (The Court disallowed this branch of the argument). In the case reported as Windsor v. Chalcraft [1939] 1 K.B. 279, the dissenting judgment of Slesser, L.J., states the correct position. The judgment of Greer, L.J., show-, that lie was in considerable doubt as to the correct position in law, but felt himself bound by the earlier judgments reported in jacques v. Harrison, 12 O.B.D. 165. Mckinnon, L.J., proceeded on the footing that the assured was only a nominal defendant. As already submitted this is not correct. Even in English Law the insurer could recover against the assured. (Halsbury, 3rd Edn,, Vol. 22, PP. 374, 379, 385). The case of Windsor V. Chalcraft was decided in May 1038. The Motor Vehicles Act was passed in February, 1939. It is legitimate to assume that the persons who drafted the Act were aware of this case. I submit that the real purpose of sub-s. (6) was to give effect to the view of Slesser, L.J. [Das, J.-That is rather far fetched.] I submit it is not. Even in England the, view of Slesser, T..J., seems to have been approved. Subsequent English cases show....
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....AR J.-These two appeals arise out of two suits and have been heard together. The suits had been filed against owners of motor cars for recovery of damages suffered by the plaintiffs as a result of the negligent driving of the cars. The owners of the cars were insured against third party risks and the insurers were subsequently added as defendants to the suits under the provisions of sub-s. (2) of s. 96 of the Motor Vehicles Act, 1939. The terms of that subsection will have to be set out later, but it may now be stated that it provided that an insurer added as a party to an action under it was entitled to defend on the grounds enumerated in it. On being added as defendants, the insurers filed written statements taking defences other than those mentioned in that sub-section. The plaintiffs contended that the written statements should be taken off the records as the insurers could defend the action only on the grounds mentioned in the sub-section and on no others. A question thereupon arose in the suits as to what defences were available to the insurers. In one of the suits it was held that the insurer could take only the defences specified in that sub-section and in the other suit th....
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....spect of the liability, together with any amount payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any enactment relating to interest on judgments. (2) No sum shall be payable by an insurer under sub-section (1) in respect of any judgment unless before or after the commencement of the proceedings in which the judgment is given the insurer had notice through the Court of the bringing of the proceedings, or in respect of any judgment so long as execution is stayed thereon pending an appeal; and an insurer to whom notice of the bringing of any such proceeding is so given shall be entitled to be made a party thereto and to defend the action on any of the following grounds, namely:- (a) that the policy was cancelled by mutual consent or by virtue of any provision contained therein before the accident giving rise to the liability, and 23 that either the certificate of insurance was surrendered to the insurer or that the person to whom the certificate was issued has made an affidavit stating that the certificate has been lost or destroyed, or that either before or not later than fourteen days after the happening of the accident ....
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....r the policy in respect of that liability, the insurer shall be entitled to recover the excess from that person. (5)....................................................... (6) No insurer to whom the notice referred to in sub-section (2) has been given shall be entitled to avoid his liability to any person entitled to the benefit of any such judgment as is referred to in subsection (1) otherwise than in the manner provided for in sub-section (2)." It may be stated that the policies that were effected in these cases were in terms of the Act and the certificate of insurance mentioned in s. 96 had been duly issued. It will have been noticed that sub-s. (1) of s. 96 makes an insurer liable on the judgment obtained by the injured person against the assured. Sub-section (2) provides that no sum shall be payable by the insurer under sub-s. (1) unless he has been given notice of the proceedings resulting in that judgment, and that an insurer who has been given such a notice shall be entitled to be made a party to the action and to defend it on the grounds enumerated. The contention of the appellants is that when an insurer becomes a party to an action under sub-s. (2), he ....
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....provides that an insurer made a defendant to the action is not entitled to take any defence which is not specified in it. Three reported decisions were cited at the bar and all of them proceeded on the basis that an insurer had no right to defend the action except on the grounds mentioned in sub-s. (2). These are Sarup Singh v. Nilkant Bhaskar (I.L.R. [1953] Bom. 296), Royal Insurance Co. Ltd. v. Abdul Mahomed (I.L.R. [1954] Bom. 1422.) and The Proprietor, Andhra Trading Co. v. K. Muthuswamy (A.I.R. 1956 Mad. 464.). It does not appear however to have been seriously contended in any of these cases that the insurer could defend the action on a ground other than one of those mentioned in sub-s. (2). The learned counsel for the respondents, the plaintiffs in the action, referred us to the analogous English statute, The Road Traffic Act, 1934, in support of the view that the insurer is restricted in his defence to the grounds set out in sub-s. (2). But we do not think it necessary to refer to the English statute for guidance in the interpretation of the section that we have to construe. We proceed now to consider the arguments advanced by the learned Solicitor-General who appeared fo....
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....to it. The learned Solicitor-General concedes this and says that the only word that has to be added is the word " also" after the word "grounds". But even this the rules of interpretation do not permit us to do unless the section as it stands is meaningless or of doubtful meaning, neither of which we think it is. The addition suggested will, in our view, make the language used unhappy and further effect a complete change in the meaning of the words used in the sub-section. As to sub-s. (6) the learned Solicitor-General contended that the proper reading of it was that an insurer could not avoid his liability except by way of a defence upon being made a party to the action under sub-s. (2). He contended that the word it manner " in sub-s. (6) did not refer to the defences specified in sub.s. (2) but only meant, by way of defending the suit the right to do which is given by sub-s. (2). We think that this is a very forced construction of sub-s. (6) and we are unable to adopt it. The only manner of avoiding liability provided for in sub-s. (2) is through the defences therein mentioned. Therefore when sub-s. (6) talks of avoiding liability in the manner provided in sub-s. (2), it nece....