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Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1171 OF 2002
NATIONAL INSURANCE COMPANY LTD. ....... Appellant(s)
Vs.
MEGHJI NARAN SORATIYA & ORS. ....... Respondent(s)
WITH
CIVIL APPEAL NO. 1172/2002
O R D E R
R.V. Raveendran, J.
The insurer has challenged the dismissal of its
appeals (against the awards of Motor Accident Claims
Tribunal), by the Gujarat High Court on the sole ground
that the Tribunal while granting permission to the insurer
to contest the claim under Section 170 of the Motor
Vehicles Act, 1988 (`Act’ for short) did not assign reasons
for granting permission.
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2. Chapter XII of the Act relates to Claims Tribunals.
Chapter XI relates to insurance of motor vehicles against
third party risks. The scheme, in particular, the
provisions of section 170 read with section 149,
contemplate the claimants in a motor accident claim filing
the claim petition against the driver and owner of the
motor vehicle. The claimants are required to furnish the
particulars relating to insurance and the name and address
of the insurer, but are not required to implead the insurer
as a party to the proceedings. Having regard to the
statutory obligation imposed on the insurer to satisfy
judgments and awards against persons insured in respect of
third party risks, the tribunal is required to issue notice
to the insurer about the initiation of the claim
proceedings. When such notice is given, the insurer can
seek impleadment only for the limited purpose of defending
the action on the grounds mentioned in sub-section (2) of
section 149, that is, breach of a specified condition of
the policy by the insured (owner of the vehicle) or
voidness/invalidity of the policy by reason of the policy
having been obtained by non-disclosure of material facts or
by representation of any fact which was false in some
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material particular. An insurer is not entitled to contest
the claim on merits when it received such notice under
section 149(2).
3. However, section 170 of the Act requires the Tribunal
to implead the insurer as a party to contest the claim in
the following two circumstances, where it is satisfied
that : (a) there is collusion between the persons making
the claim and the person against whom the claim is made; or
(b) the person against whom claim is made, failed to
contest the claim. The Tribunal is required to record the
reasons in writing while directing the insurer who may be
liable in respect of such claim to be impleaded as a party
to the proceedings. On being so impleaded in pursuance of
an order under section 170 of the Act, the insurer, without
prejudice to the provisions contained in sub-section (2) of
section 149, has the right to contest the claim on all or
any of the grounds that are available to the person against
whom the claim has been made.
4. Thus, the insurer has two distinct and
compartmentalised rights, while defending against claims.
First is where it wants to repudiate or deny liability as
insurer, either on the ground that there is a breach of a
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specified condition of the policy or on the ground that the
policy itself is void. Participation under section 149(2)
is only to repudiate or deny its liability under the
insurance policy. Neither the issue of liability of the
driver/owner nor the issue of quantum of compensation can
be the subject matter of contest by the insurer who is
served a notice under section 149(2). Second is where the
insurer is impleaded as a respondent with the right to
contest the claim even on merits, either on account of the
Tribunal being satisfied that there is collusion between
the claimants and the owner/driver, or on account of the
owner/driver who have been impleaded as respondents,
failing to contest the proceedings. When the insurer is
impleaded and permitted to contest under section 170 of the
Act, it can contest either the quantum of compensation
claimed or even the liability of the driver/owner to pay
compensation. This is in addition to, and without prejudice
to its statutory right under section 149(2) to repudiate or
deny its liability.
5. Section 170 therefore proceeds on the assumption that
the insurer will not be a party to the claim proceedings
and requires for the Tribunal to implead it as a party to
contest the claim on merits in the two circumstances
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mentioned therein, namely (a) collusion between claimants
and driver/owner; and (b) non-contest by driver/owner.
Where the insurer is not a party, and it becomes necessary
to implead the insurer as a party-respondent under section
170 of the Act, with right to contest the claim on merits,
either on the application of the insurer or suo moto, the
Tribunal has to make a brief order recording reasons
showing that either of the two conditions mentioned in the
section are satisfied for impleading the insurer as a party.
6. But in practice, virtually in all claim petitions, the
insurer is impleaded as a party respondent alongwith the
driver and owner. Consequently, many Tribunals instead of
issuing the special notice under section 149(2) notifying
the insurer of the lodging of a claim against the insured
(so as to give the insurer an option to deny the validity
of the policy or repudiate its liability under the policy
under any of the grounds mentioned in section 149(2) of the
Act), issues regular notice to the insurer. As a result, in
practice the insurers file their reply in all claim
petitions. They raise the grounds available under section
149(2), if such grounds exist. Otherwise they generally
traverse the averments in the claim statement, though not
permitted to contest on merits. But where one of the two
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circumstances mentioned in section 170 exists, that is
collusion or non-contest on the part of driver/owner, then
the insurer who is already a party, files an application
under section 170 of the Act seeking permission to contest,
which is routinely granted. Where the insurer is already a
party respondent in the claim petition and it makes an
application seeking permission to contest the claim on
merits on the ground that the driver and owner have failed
to contest the claim, even a one-line order or non-reasoned
order may be sufficient as the Tribunal can satisfy itself
about the need to grant the permission by a perusal of the
record, without anything more. But where the driver/owner
are defending the claim, but the insurer seeks permission
on the ground that there is collusion between the claimants
and the driver/owner, it may be necessary for the tribunal
to record reasons to show that it is satisfied that there
is collusion, before granting permission. Where
applications under section 170 of the Act filed by the
insurer specifically alleged that the driver/owner failed
to contest the claim and therefore it was seeking
permission, the same is verifiable from the record. On such
verification, the Tribunal may pass a separate order or
even endorse the order “granted” on the application itself.
Even if any reason was to be recorded, all that the
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Tribunal is required to say is : “Permission is granted as
driver/owner have failed to contest the claim”. In such
cases, failure to record reasons can not render the order
invalid or illegal as the record on the face of it would
show the claim was not being defended by the driver/owner.
Procedural requirements should not be stretched to absurd
levels to defeat the ends of justice itself.
7. There is a prevalent view that a rethink on sections
149 and 170 of the Act is necessary. As noticed above,
Sections 149 contemplates claim petitions being filed only
against the driver and the owner, and the driver/owner
alone contesting the claim on merits. The insurer is
required to satisfy the award made by the Tribunal, even if
it is not impleaded as a party to the claim proceedings.
But in practice, the insurer is invariably made a party to
the claim proceedings, presumably to avoid any kind of
delay. It is also a reality that drivers who are primarily
liable seldom contest the proceedings either because of
their financial incapacity or because they know that the
burden will be borne vicariously by the owner and by the
insurer under the policy of insurance. It is also a reality
that many of the owners do not appear and contest the claim
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proceeding, or even if they appear and file a reply, do not
defend the claim by effectively cross-examining the
claimant’s witnesses and by leading defence evidence.
Owners are complacent as they have an insurance cover and
know that the insurer will bear the liability. In practice
therefore the insurer has to keep on goading the owner to
contest the matter and place necessary evidence. Section
170 provides that if the driver/owner fail to contest the
claim, the Tribunal may permit the insurer to contest the
claim. But what, if the driver/owner file a reply but fail
to effectively participate in the proceedings? What if the
counsel for driver/owner are present but resort to only
cursory cross-examination? What if the driver/owner do not
at all lead defence evidence? What if there is a well-
planned collusion that does not meet the eye? Where the
insurer does not get permission under section 170, there is
a reasonable chance of the defence to the claim being far
from satisfactory. Judicial notice can also be taken of the
fact that there have been several false claims by claimants
in collusion with the owners/drivers of vehicle and/or
Police and/or doctors. The question raised is whether it is
proper to prohibit the insurer, which is to bear the
liability statutorily and contractually, from participating
in the process of adjudication of liability and assessment
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of compensation? Or the statute having made the insurer
directly liable to the claimants, should the insurer be
given a direct right to contest the claim on merits without
the technical requirement of permission? Should the insurer
always be at the mercy of the owner to contest the claim ?
These are matters that invite serious consideration,
particularly by the Parliament and Law Commission and other
stake-holders. Be that as it may.
8. Coming to these cases, we are satisfied that the grant
of permission by the Tribunal to the insurer to contest the
proceedings does not call for interference. In the first
case, both the driver and owner, though served, remained
absent and did not contest the claim. In the second case,
the driver was deleted from the array of parties as he
could not be served and the owner entered appearance, but
did not file statement of objections or contest the claim.
The insurer specifically alleged in the applications under
section 170 that the driver/owner failed to contest the
claim and therefore it was seeking permission.
9. Even assuming that order granting permission required
recording of reasons, if the order failed to record reasons
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on being challenged, the High Court could either set aside
the permission granted, with a direction to the Tribunal to
reconsider the applications and pass a reasoned order, or
in special circumstances, itself consider whether the case
warranted the grant of permission and decide the question.
But under no circumstances, the Tribunal’s permission to
contest the claim, can be equated to or treated as denial
of permission to contest the claim, merely on the ground
that reasons were not recorded. Further, where the order
granting the permission to contest is not challenged at
all, the High Court can not dismiss the appeal filed by the
insurer on merits, on the ground that Tribunal did not
assign reasons while granting permission under Section 170
of the Act. Consequently, the orders of the High Court
dismissing the appeals only on the ground that the Tribunal
did not record reasons for granting permission, are liable
to be set aside.
10. Having regard to the fact that the two appeals relate
to accidents which took place in the years 1991 and 1996
and the appeals have been pending in this Court for nearly
seven years, we propose to consider and dispose of the
appeals on merits, instead of relegating the parties to one
more round of litigation before the High Court.
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Civil Appeal No. 1171/2002
11. The claim related to the death of a mason aged 58
years in a motor accident which occurred in the year 1991.
His son and daughter-in-law were the claimants and claimed
a compensation of Rs. 3 lakhs. The Tribunal after
considering the evidence, held that the deceased was aged
55 to 58 years, that his income was Rs. 2,250/- per month
and that he was contributing Rs.1500/- per month to the
family. It however restricted the annual loss of
dependency to Rs.15,000/- instead of Rs.18000/- and by
applying a multiplier of 10, arrived at the loss of
dependency as Rs. 1,50,000/-. It awarded Rs. 15,000/-
towards loss of estate, Rs. 5,000/- for funeral expenses,
Rs.5,000/- towards medicines/treatment (as the deceased
underwent treatment for a short period in a hospital before
death). Thus it determined the compensation payable as Rs.
1,75,000/- and awarded the same with interest @ 15% per
annum from the date of petition.
12. The learned counsel for the appellant submitted that
when there was no clear and conclusive evidence that the
married son and daughter-in-law were dependent on the
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deceased, the Tribunal erred in restricting the deduction
towards the living/personal expenses of the deceased to
only one-third. He also submitted that award of Rs.
15,000/- towards loss of estate was excessive. There is
some merit in the said contentions. We will therefore
reassess the compensation. The Tribunal found that the
income of the deceased was Rs. 2,250/- per month or
Rs.27,000/- per annum. There is no serious challenge to
this finding. On the facts and circumstances of the case,
50% should have been deducted towards the personal and
living expenses of the deceased and not one-third. Thus,
the contribution to the family (or the saving by the
deceased even assuming that the claimants were fully
dependant) would have been Rs. 13,500/- per annum. There is
nothing wrong in the multiplier applied (that is 10) as it
is in consonance with the principles laid down in General
Manager, Kerala State Road Transport Corpn. v. Susamma
Thomas [1994 (2) SCC 176] and U.P. State Road Transport
Corpn. v. Trilok Chandra [1996 (4) SCC 362]. Therefore,
the total loss of dependency would be Rs. 1,35,000/-. By
adding Rs.5,000/- each under the heads of loss of estate,
funeral expenses and cost of treatment, the total
compensation is determined as Rs. 1,50,000/-.
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13. We find that the award of interest at 15% per annum
was excessive. We are of the view that award of interest
at 9% per annum would be appropriate, just and reasonable.
14. We therefore, allow the appeal, set aside the order of
the High Court and reduce the award to Rs. 1,50,000/- with
interest at 9% per annum from the date of petition to date
of deposit.
Re : CA No. 1172/2002
15. The claim related to the death of a bus conductor aged
23 years in a motor accident in 1996. The claimants were
his widow aged 22 years, two minor children aged three
years and one year and parents. The claimants stated that
the deceased was earning Rs. 3,000/- per month plus
Rs.600/- as bhatta charges; that the deceased was pursuing
his studies for Master’s degree, and that he would have
earned Rs. 5,000/- to 6,000/- by securing other employment,
after completing his studies. The Tribunal held that the
deceased would have earned at least Rs. 5,000/- per month
on completing his studies. After deducting one-third
towards personal and living expenditure of the deceased, it
arrived at the contribution to the family as Rs. 3334/- per
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month or Rs.48,008/- per annum. It applied a multiplier of
16 and arrived at the total loss of dependency as Rs.
6,40,128/-. By adding Rs. 20,000/- towards loss of estate,
Rs. 10,000/- towards loss of consortium and Rs. 2,000/-
towards funeral expenses, the Tribunal determined the total
compensation as Rs. 6,72,128/- and awarded the same with
interest at Rs. 15% from the date of petition till the date
of deposit.
16. The learned counsel for the insurer submitted that in
view of the admissions and evidence that deceased was
getting a salary of Rs. 3,000/- , the Tribunal ought not to
take the income at a figure more than Rs. 3,000/- per
month. But having regard to the fact that the claimants
had produced evidence to show that the deceased had passed
B.A. and was studying for securing a M.A. degree, we are of
the view that the Tribunal was justified in assuming a
higher income at the time of death instead of the actual
earning at the time of his death. But the amount assessed
as income cannot be a fancy figure. It should be realistic
and should be close to the actual earning (vide Susamma
Thomas (supra) and Sarala Dixit v. Balwant Yadav — AIR
1996 SC 1274). On the facts and circumstances, we are of
the view that the income should be taken as Rs. 4,000/- per
15
month (Rs. 48,000/- per annum). Only one-fourth of the
income (instead of the standard one-third) has to be
deducted towards personal and living expenses of the
deceased, having regard to his larger family. Thus the
contribution to the family would have been Rs. 36,000/- per
annum. By applying a multiplier of 17, the loss of
dependency would be Rs. 6,12,000/-. By adding Rs, 5,000/-
each under the heads of loss of estate, loss of consortium
and funeral expenses, the total compensation would be Rs.
6,27,000/-. As the rate of interest awarded (15% per
annum) is excessive, we reduce it to 9% per annum.
17. We accordingly allowed this appeal, set aside the
order of the High Court and modify the award by reducing it
to Rs. 6,27,000/- with interest at 9% per annum from the
date of petition till date of relief. We direct that the
compensation be apportioned in the ratio of 40% to the
widow, 20% each to the two minor children and the mother.
The Tribunal shall make appropriate consequential
directions relating to bank deposits.
_________________J
[R. V. Raveendran]
_________________J
[H.L. Dattu]
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New Delhi;
February 26, 2009.