Posted On by &filed under High Court, Madhya Pradesh High Court.


Madhya Pradesh High Court
New India Assurance Co. Ltd. vs Savitri Parag And Ors. on 28 August, 2000
Equivalent citations: I (2003) ACC 658
Author: B Singh
Bench: B Singh, A Mishra

JUDGMENT

Bhawani Singh, C.J.

1. This judgment disposes of M.A. No. 1760 of 2000 (arising out of Claim Case No. 63 of 1998), M.A. No. 1759 of 2000 (arising out of Claim Case No. 64 of 1998) and M.A. No. 1758 of 2000 (arising out of Claim Case No. 65 of 1998) against the common awards of the Motor Accident Claims Tribunal, Jabalpur, dated 8.5.2000.

2. Shortly stated, the facts are that late Mangal Parag, Ex-M.L.AV aged 48 years, late Mubarak Shah, aged 50 years and late Syed Anwar Ali, aged 27 years, along with their companion Sunil Kumar Jaiswal, were travelling in Fiat car bearing registration No. MOK 9074 belonging to Harsh Sales and driven by Manoj Suhane. Allegation is that respondent No. 4 Manoj Suhane was driving the car rashly and negligently resulting in the accident near village Hardua, under Police Station Nohta, District Damoh, when this vehicle dashed against a mango tree on the roadside, resulting in the deaths of Mangal Parag, Mubarak Shah and Syed Anwar Ali on the spot, while Manoj Suhane and Sunil Jaiswal suffered non-fatal injuries. Case was registered at Police Station Nohta, vide Crime No. 20 of 1996 for prosecution of the driver. Legal heirs of Mangal Parag, Mubarak Shah and Syed Anwar Ali filed different claim petitions for compensation. For the death of Mangal Parag, compensation claimed is Rs. 30,00,000/-; for the death of Mubarak Shah, compensation of Rs. 7,80,000/- was claimed, and for the death of Anwar Ali, compensation claimed is Rs. 30,00,000/-.

3. The appellant Insurance Company appeared before the Tribunal and took the defence that the driver did not possess valid driving licence to drive the vehicle. Owner of the vehicle stated that the driver possessed valid driving licence which was obtained from Kanpur and renewed at Shahdol. The driver appeared, but he did not file written statement.

4. The Motor Accident Claims Tribunal found on evidence that the accident took place during the night intervening 25/26.2.1996, at about 1.30 a.m., at village Hardua due to rash and negligent driving of the car No. MOK 9074 which hit a mango tree as a result of which the deceased died. With respect to non-possession of a valid driving licence, the finding is that although the original driving licence was issued by the R.T.O., Kanpur, it was renewed by the R.T.O., Shahdol. Ultimately, compensation to the extent of Rs. 3,10,000/- is allowed in case of Mangal Parag; Rs. 1,50,000/- in case of Mubarak Shah, and Rs. 1,45,000/- in case of Syed Anwar Ali. Interest at the rate of 12 percent per annum has been awarded from two years prior to the date of award till the date of realisation. Appellant is not satisfied with the awards of the Motor Accident Claims Tribunal in these cases, so they have been challenged through these appeals.

5. Mr. Rajendra Menon, learned Counsel for appellant, contended that the awards of the Motor Accident Claims Tribunal are liable to be set aside since it has wrongly been held that the driver was in possession of valid driving licence at the time of accident. The learned Counsel contends that no licence was issued by R.T.O., Kanpur, therefore, it was fake. Consequently, renewal of the same by R.T.O., Shahdol would be of no effect. In support of the plea, reliance is placed on two decisions, namely, National Insurance Co. Ltd. v. Santro Devi I (1998) ACC 600 (SC) : 1998 ACJ 116 (SC), and United India Insurance Co. ltd. v. Gian Chand II (1997) ACC 437 : 1997 ACJ 1065 (SC). These decisions do not help the ppellant since they turn on their own facts and the observations made in them have different backgrounds.

6. Relevant decisions on the question may now be considered. In Skandia Insurance Co. Ltd. v. Kokilaben Chandravadan I (1987) ACC 413 (SC) : 1987 ACJ 411 (SC), the Apex Court, in paras 13 and 14 said:

(13) In order to divine the intention of the Legislature in the course of interpretation of the relevant provisions, there can scarcely be a better test than that of probing into the motive and philosophy of the relevant provisions keeping in mind the goals to be achieved by enacting the same. Ordinarily, it is not the concern of the Legislature whether the owner of the vehicle insures his vehicle or not. If the vehicle is not insured, any legal liability arising on account of third party risk will have to be borne by the owner of the vehicle. Why then has the Legislature insisted on a person using a motor vehicle in a public place to insure against third party risk by enacting Section 94? Surely, the obligation has not been imposed in order to promote the business of the insurers engaged in the business of automobile insurance. The provision has been inserted in order to protect the members of the community travelling in vehicles or using the roads from the risk attendant upon the user of motor vehicles on the roads. The law may provide for compensation to victims of the accidents who sustain injuries in the course of an automobile accident or compensation to the dependants of the victims in the case of a fatal accident. However, such protection would remain a protection on paper unless there is a guarantee that the compensation awarded by the Courts would be recoverable from the persons held liable for the consequences of the accident. A Court can only pass an award or a decree. It cannot ensure that such an award or decree results in the amount awarded being actually recovered, from the person held liable who may not have the resources. The exercise undertaken by the law Courts would then be an exercise in futility. And the outcome of the legal proceedings which by the very nature of things, involve the time, cost and money cost invested from the scarce resources of the community would make a mockery of the injured victims, or the dependants of the deceased victim of the accident, who themselves are obliged to incur not inconsiderable expenditure of time, money and energy in litigation. To overcome this ugly situation, the Legislature has made it obligatory that no motor vehicle shall be used unless a third party insurance is in force. To use the vehicle without the requisite third party insurance being in force is a penal offence. The Legislature was also faced with another problem. The insurance policy might provide for liability walled in by conditions which may be specified in the contract of policy. In order to make the protection real, the Legislature has also provided that the judgment obtained shall not be defeated by the incorporation of exclusion clauses other than those authorised by Section 96 and by providing that except and save to the extent permitted by Section 96, it will be the obligation of the Insurance Company to satisfy the judgment obtained against the persons insured against third party risks (vide Section 96). In other words, the Legislature has insisted and made it incumbent on the user of a motor vehicle to be armed with an insurance policy covering third party risks which is in conformity with the provisions enacted by the Legislature. It is so provided in order to ensure that the injured victims of automobile accidents or the dependants of the victims of fatal accidents are really compensated in terms of money and not in terms of promise. Such a benign provision enacted by the Legislature having regard to the fact that in the modern age, the use of motor vehicles notwithstanding the attendant hazards, has become an inescapable fact of life, has to be interpreted in a meaningful manner which serves rather than defeats the purpose of the legislation. The provision has, therefore, to be interpreted in the light of the aforesaid perspective.

(14) Section 96(2)(b)(ii) extends immunity to the Insurance Company if a breach is committed of the condition excluding driving by a named person or persons or by any person who is not fully licensed, or by any person who has been disqualified by holding or obtaining a driving licence during the period of his disqualification. The expression ‘breach’ is of great significance. The dictionary meaning of ‘breach’ is ‘infringement or violation of a promise or obligation’. [See Collin’s English Dictionary]. It is, therefore, abundantly clear that the insurer will have to establish that the insured is guilty of an infringement or violation of a promise that a person who is not duly licensed will have to be in charge of the vehicle. The very concept of infringement or violation of the promise that the expression ‘breach’ carries within itself induces an inference that the violation or infringement on the part of the promisor must be a wilful infringement or violation. If the insured is not at all at fault and has not done anything, he should not have done or is not amiss in any respect how can it be conscientiously posited that he has committed a breach? 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 ‘guilty’ of the breach of the promise that the vehicle will be driven by a licensed driver. It must be established by the Insurance Company 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. Unless the insured is at fault and is guilty of a breach the insurer cannot escape from the obligation to indemnify the insured and successfully contend that he is exonerated having regard to the fact that the promisor (the insured) committed a breach of his promise. Not when some mishap occurs by some mischance. 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 a licensed driver, with the express or implied mandate to drive himself, it cannot be said that the insured is guilty of any breach. And it is only in case of a breach or a violation of the promise on the part of the insured that the insurer can hide under the umbrella of the exclusion clause. 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. The discussion made in para 239 of Breach of Contract by Carter, 1984 Edn., under the head ‘Proof of Breach’, gives an inkling of this dimension of the matter:

‘Exculpation of a promisor.–Given a presumption of absoluteness of obligation, a promisor who is alleged to have failed to perform must either prove performance or establish some positive excuse for any failure on his part. In other words, he must find exculpation from what is presumed to be a breach of contract, either in the contract itself or in some external rule of law. There are five grounds for exculpation: construction of the contract; the doctrine of frustration; the existence of an implied term; the presence of an exclusion clause; and the application of a statutory rule or provision. These will be considered later.

In the present case, even if the promise were to be treated as an absolute promise, the grounds for exculpation can be found from Section 84 of the Act which reads thus:

84. Stationary vehicles.–No person driving or in charge of a motor vehicle shall cause or allow the vehicle to remain stationary in any public place, unless there is in the driver’s seat a person duly licensed to drive the vehicle or unless the mechanism has been stopped and a brake or brakes applied or such other measure takes as to ensure that the vehicle cannot accidentally be put in motion in the absence of the driver.

In view of this provision, apart from the implied mandate to the licensed driver not to place a non-licensed person in charge of the vehicle. There is also a statutory obligation on the said person not to leave the vehicle unattended and not to place it in charge of an unlicensed driver. What is prohibited by law must be treated as a mandate to the employee and should be considered sufficient in the eyes of law for excusing non-compliance with the conditions. It cannot, therefore, in any case, be considered as a breach on the part of the insured. To construe the provision differently would be to rewrite the provision by engrafting a rider to the effect that in the event of the motor vehicle happening to be driven by an unlicensed person regardless of the circumstances in which such a contingency occurs, the insurer will not be liable under the contract of insurance. It needs to be emphasised that it is not the contract of insurance which is being interpreted. It is the statutory provision defining the conditions of exemption which is being interpreted. These must, therefore, be interpreted in the spirit in which the same have been enacted accompanied by an anxiety to ensure that the protection is not nullified by the backward looking interpretation which serves to defeat the provision rather than to fulfil its life-aim. To do otherwise would amount to nullifying the benevolent provision by reading it with a non-benevolent eye and with a mind not tuned to the purpose and philosophy of the legislation without being informed of the true goals sought to be achieved. What the Legislature has given, the Court cannot deprive of by way of an exercise in interpretation when the view which renders the provision potent is equally plausible as the one which renders the provision impotent. In fact it appears that the former view is more plausible apart from the fact that it is more desirable. When the option is between opting for a view which will relieve the distress and misery of the victims of accidents or their dependants on the one hand and the equally plausible view which will reduce the profitability of the insurer in regard to the occupational hazard undertaken by him by way of business activity, there is hardly any choice. The Court cannot but opt for the former view. Even if one were to make a strictly doctrinaire approach, the very same conclusion would emerge in obeisance to the doctrine of ‘reading down’ the exclusion clause in the light of the ‘main purpose’ of the provision so that the ‘exclusion clause’ does not cross swords with the ‘main purpose’ highlighted earlier. The effort must be to harmonise the two instead of allowing the exclusion clause to snipe successfully at the main purpose. This theory which needs no support is supported by Carter’s Breach of Contract vide para 25. To quote:

Notwithstanding the general liability of contracting parties to agree to exclusion clauses which operate to define obligations, there exists a rule, usually referred to as the ‘main purpose rule’, which may limit the application of wide exclusion clauses defining a promisor’s contractual obligations. For example, in Glynn v. Margetson & Co. (1893) AC 351, Lord Halsbury L.C. stated:

It seems to me that in constructing this document, which is a contract of carriage between the parties, one must in the first instance look at the whole instrument and not at one part of it only. Looking at the whole instrument, and seeing what one must regard as its main purpose, one must reject words, indeed whole provisions, if they are inconsistent with what one assumes to be the main purpose of the contract.

Although this rule played a role in the development of the doctrine of fundamental breach, the continued validity of the rule was acknowledged when the doctrine was rejected by the House of Lords in Suissee Atlantique Societe D’ Armament Maritime S.A. v. N.V. Rotterdamsche Kolen Centrale (1967) 1 AC 361. Accordingly, wide exclusion clauses will be read down to the extent to which they are inconsistent with the main purpose, or object of the contract.

(Emphasis added)

The above decision has been followed in Sohan Lai Passi v. P. Sesh Reddy I (1587) ACC 413 (SC) : 1996 ACJ 1044 (SC). In para 12, the Court said:

(12) Now it has to be examined as to whether the Insurance Company can be absolved of its liability to pay the, compensation in a case where the owner of the vehicle had got the vehicle insured, but the accident took place when it was being driven by a person not holding the driving licence. In the present case, the accident took place when the Motor Vehicles Act, 1939, was in force. Section 96 of the Act prescribed the duty of the insurers to satisfy the judgments against persons insured in respect of third party risks (the parallel provision being Section 149 in the Motor Vehicles Act, 1988). The relevant part of Section 96 provided:

96. Duty of insurers to satisfy judgments against persons insured in respect of third party risks.–(1) If, after a certificate of insurance has been issued under Sub-section (4) of Section 95 in favour of the person by whom a policy has been effected, judgment in respect of any such liability as is required to be covered by a policy under Clause (b) of Sub-section (1) of Section 95 (being a liability covered by the terms of the policy) is obtained against any person insured by the policy, then, notwithstanding that the insurer maybe entitled to avoid or cancel or may have avoided or cancelled the policy, the insurer shall, subject to the provisions of this section, pay to the person entitled to the benefit of the decree any sum not exceeding the sum assured payable thereunder, as if he were the judgment-debtor, in respect of the liability.

(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 proceedings 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) xxx xxx xxx

(b) that there has been a breach of a specified condition of the policy, being one of the following conditions, namely:

(i) xxx xxx xxx

(ii) a condition excluding driving by a named person or persons or by any person who is not duly licensed, or by any person who has been disqualified for holding or obtaining a driving licence during the period of disqualification; or

xxx xxx xxx

In view of Sub-section (1) of Section 96 if after the certificate of insurance has been issued in favour of the person by whom a policy has been effected, judgment in respect of any such liability as is required to be covered by a policy, the insurer shall subject to the provisions of the said section, pay to the person entitled to the benefit of the decree any sum not exceeding the sum assured payable thereunder, as if he was the judgment debtor, in respect of the liability.

(Emphasis supplied)

Sub-section (2) of Section 96 enjoins that notice of the proceedings in which the judgment is given has to be given to the insurer and such insurer shall be entitled to defend the action on any of the grounds mentioned in Sub-section (2) of Section 96. We are concerned in the present case only with Section 96(2)(b)(ii), a condition excluding driving by any person who is not duly licensed. The question is as to whether the Insurance Company can repudiate its liability to pay the compensation in respect of the accident by a vehicle only by showing that at the relevant time, it was being driven by a person having no licence. In the case of Skandia Insurance Co. Ltd. v. Kokilaben Chandmvadan 1987 ACJ 411 (SC), in respect of this very defence by, the Insurance Company, it was said:

The defence built on the exclusion clause cannot succeed for three reasons, viz.:

(1) On a true interpretation of the relevant clause which interpretation is at peace with the conscience of Section 96,the condition excluding driving by a person not duly licensed is not absolute and the promisor is absolved once it is shown that he has done everything in his power to keep, honour and fulfil the promise and he himself is not guilty of a deliberate breach.

(2) Even if it be treated as an absolute promise, there is substantial compliance therewith upon an express or implied mandate being given to the licensed driver not to allow the vehicle to be left unattended so that it happens to be driven by an unlicensed driver.

(3) The exclusion clause has to be read down in order that it is not at war with the main purpose of the provisions enacted for the protection of victims of accidents so that the promisor is exculpated when he does everything in his power to keep the promise.

To examine the correctness of the aforesaid view, this appeal was referred to a three-Judges’ Bench, because on behalf of the Insurance Company, a stand was taken that when Section 96(2)(b)(ii) has provided that the insurer shall be entitled to defend the action on the ground that there has been a breach of a specified condition to the policy, i.e., the vehicle should not be driven by a person who is not duly licensed, then the Insurance Company cannot be held to be liable to indemnify the owner of the vehicle. In other words, once there has been a contravention of the condition prescribed in Sub-section (2)(b)(ii) of Section 96, the person insured shall not be entitled to the benefit of Sub-section (1) of Section 96. According to us, Section 96(2)(b)(ii) should not be interpreted in a technical manner. Sub-section (2) of Section 96 only enables the Insurance Company to defend itself in respect of the liability to pay compensation on any of the grounds mentioned in Sub-section (2) including that there has been a contravention of the condition excluding the vehicle being driven by any person who is not duly licensed. This bar on face of it operates on the person insured. If the person who has got the vehicle insured has allowed the vehicle to be driven by a person who is not duly licensed, then only that clause shall be attracted. In a case where the person who has got insured the vehicle with the Insurance Company, has appointed a duly licensed driver and if the accident takes place when the vehicle is being driven by a person not duly licensed on the basis of the authority of the driver duly authorised to drive the vehicle whether the Insurance Company in that event shall be absolved from its liability? The expression ‘breach’ occurring in Section 96(2)(b) means the infringement or violation of a promise or obligation. As such, the insurance Company will have to establish that the insured was guilty of an infringement or violation of a promise. The insurer has also to satisfy the Tribunal or the Court that such violation or infringement on the part of the insured was wilful. If the insured has taken all precautions by appointing a duly licensed driver to drive the vehicle in question and it has not been established that it was the insured who allowed the vehicle to be driven by a person not duly licensed, then the Insurance Company cannot repudiate its statutory liability under Sub-section (1) of Section 96. In the present case, far from establishing that it was the appellant who had allowed Rajinder Pal Singh to drive the vehicle when the accident took place, there is not even any allegation that it was the appellant who was guilty of violating the condition that the vehicle shall not be driven by a person not duly licensed. From the facts of the case, it appears that the appellant had done everything within his power inasmuch as he has engaged a licensed driver Gurubachan Singh and had placed the vehicle in his charge. While interpreting the contract of insurance, the Tribunals and Courts have to be conscious of the fact that right to claim compensation by heirs and legal representatives of the victims of the accident is not defeated on technical grounds. Unless it is established on the materials on record that it was the insured who had wilfully violated the condition of the policy by allowing a person not duly licensed to drive the vehicle when the accident took place, the insurer shall be deemed to be a judgment-debtor in respect of the liability in view of Sub-section (1) of Section 96 of the Act. It need not be pointed out that the whole concept of getting the vehicle insured by an Insurance Company is to provide an easy mode of getting compensation by the claimants, otherwise in normal course, they had to pursue their claim against the owner from one Forum to the other and ultimately to execute the order of the Accident Claims Tribunal for realisation of such amount by sale of properties of the owner of the vehicle. The procedure and result of the execution of the decree is well-known.

7. Division Bench of Himachal Pradesh High Court in Sukh Dev v. Bhagwati Devi II (1996) ACC 174 (DB) : 1996 ACJ 1292 (HP), has followed the decision of the Apex Court in Skandia Insurance Co. ltd. (supra), and in para 10 said:

(10) Above all, applying the ratio of judgment in Skandia Insurance Co. Ltd. v. Kokilaben Chandravadan 1987 ACJ 411 (SC), we are of the opinion that in the facts and circumstances of this case, the appellant owner had done whatever was within his power, inasmuch as he has engaged a licensed driver and given him mandate to drive it himself, as such, it cannot be said that he is guilty of any breach disentitling him to get the compensation amount from the Insurance Company. The appellant owner cannot be penalised, as has been done by the Tribunal, as it was not expected of him to make detailed verification from the Licensing Authorities from where the licence was issued and renewed before engaging his driver. Therefore, we have no hesitation to hold that the Insurance Company is liable to indemnify the appellant owner for the compensation awarded to the claimants. Mr. Ashwani Kumar Sharma has tried to urge another point that the accident had not occurred due to negligence of the driver of the tractor, but that of the driver of the bus. We are not permitting this argument as by now it is well-settled that this defence is not available to the Insurance Company. See: United India Insurance Co. Ltd. v. Shaik Saibaqtualla 1992 ACJ 858 (AP); British India Genl. Insurance Co. Ltd. v. Captain Itbar Singh 1958-65 ACJ 1 (SC), and Raddipalli Chinnarao v. Reddi Lorurdu 1980 ACJ 470 (AP).

8. The High Court of Andhra Pradesh has also taken the same view in Divisional Manager, Neiv India Assurance Co. Ltd. v. Tumu Gurava Reddy, 1999 ACJ 1077 (AP). In para 23, the Court held:

The learned Counsel for the claimants relied on the judgment of the Supreme Court reported in Sohan Lal Passi v. P. Sesh Reddy 1996 ACJ 1044 (SC). In that case, the Tribunal held that the accident had occurred on account of rash and negligent driving of the driver who did not have the driving licence and accordingly absolved the Insurance Company of the liability. Appeals were filed by the claimants for enhancement and the owner also filed appeal. The High Court, while enhancing the claim amount, dismissed the appeal filed by the owner. The matter was carried in civil appeal to the Supreme Court by the owner. It was observed by the Tribunal and the High Court that one Gurubachan Singh was the regular driver having a valid licence, but it appears that the said driver had allowed the cleaner Rajinder Pal Singh to drive the vehicle and while so the accident took place due to rash and negligent driving of the bus. The contention raised before the Supreme Court was that Gurubachan Singh was duly authorised to drive the vehicle and he in turn allowed the vehicle to be driven by the cleaner and, therefore, the owner cannot be made liable for payment of compensation. The Apex Court, after referring to Indian and English decisions, held as follows:

The appellant had authorised Gurubachan Singh to drive the vehicle, but Gurubachan Singh allowed Rajinder Pal Singh, the cleaner/conductor, who was also the employee of the appellant to drive the vehicle because of which the accident took place. It is not the stand of the appellant that Rajinder Pal Singh was driving the vehicle without the knowledge or consent of Gurubachan Singh, for his personal pursuit. He was driving the bus for the business of the appellant, that is to carry the passengers. In this background, the appellant cannot escape the liability so far the third parties are concerned on the ground that he had not actually authorised the particular manner in which the act was done. As it has been established that the negligent act of Gurubachan Singh and the respondent Rajinder Pal Singh was “in the course, of employment’ the appellant” shall be liable for the same. In the present case, the accident took place when the act authorised was being performed in a mode which may not be proper but nonetheless it was directly connected and within the course of employment. It was not an independent act for a purpose which had no nexus or connection with the business of the appellant so as to absolve the appellant from the liability.

However, the question of liability of the Insurance Company arose, the insurer took the defence that there was a breach of specified condition in the policy, i.e., the vehicle should not be driven by a person who was not duly licensed and that Section 96(2)(b)(ii) permitted the insurer to defend on the ground of breach of conditions. This issue was earlier decided by the two-Judges Bench of the Apex Court in Skandia Insurance Co. Ltd. v. Kokilaben Chandravadan 1987 ACJ 411 (SC), wherein the defence of the insurer was rejected on the following grounds:

(1) On a true interpretation of the relevant clause which interpretation is at peace with the conscience of Section 96, the condition excluding driving by a person not duly licensed is not absolute and the promisor is absolved once it is shown that he has done everything in his power to keep, honour and fulfil the promise and he himself is not guilty of a deliberate breach.

(2) Even if it is treated as an absolute promise, there is substantial compliance therewith upon an express or implied mandate being given to the licensed driver not to allow the vehicle to be left unattended so that it happens to be driven by an unlicensed driver.

(3) The exclusion clause has to be ‘read down’ in order that it is not at war with the ‘main purpose’ of the provisions enacted for the protection of victims of accidents so that the promisor is exculpated when he does everything in his power to keep the promise.

The correctness of the decision was doubted and when similar issue arose in that Court, the same was referred to three-Judges Bench. The Apex Court referring to Sohan Lal Passi’s case 1996 ACJ 1044 (SC), observed thus:

According to us, Section 96(2)(b)(ii) should not be interpreted in a technical manner. Sub-section (2) of Section 96 only enables the Insurance Company to defend itself in respect of the liability to pay the compensation on any of the grounds mentioned in Sub-section (2) including that there has been a contravention of the condition excluding the vehicle being driven by any person who is not duly licensed. This bar on face of it operates on the person insured. If the person who has got the vehicle insured has allowed the vehicle to be driven by a person who is not duly licensed then only that clause shall be attracted. In a case where the person who has got insured the vehicle with the Insurance Company, has appointed a duly licensed driver and if the accident takes place when the vehicle is being driven by a person not duly licensed on the basis of the authority of the driver duly authorised to drive the vehicle whether the Insurance Company in that event shall be absolved from its liability? The expression ‘breach’ occurring in Section 96(2)(b) means infringement or violation of a promise or obligation. As such, the Insurance Company will have to establish that the insured was guilty of an infringement or violation of a promise.

The insurer has also to satisfy the Tribunal or the Court that such violation or infringement on the part of the insured was wilful. If the insured has taken all the precautions by appointing a duly licensed driver to drive the vehicle in question and it has not been established that it was the insured who allowed the vehicle to be driven by a person not duly licensed, then the Insurance Company cannot repudiate its statutory liability under Sub-section (1) of Section 96. In the present case, far from establishing that it was the appellant who had allowed Rajinder Pal Singh to drive the vehicle when the accident took place, there is not even any allegation that it was the appellant who was guilty of violating the condition that the vehicle shall not be driven by a person not duly licensed. From the facts of the case, it appears that the appellant had done everything within his power inasmuch as he has engaged a licensed driver Gurubachan Singh and had placed the vehicle in his charge. While interpreting the contract of insurance, the Tribunals and Courts have to be conscious of the fact that right to claim compensation by heirs and legal representatives of the victims of the accident is not defeated on technical grounds. Unless it is established on the materials on record that it was the insured who had wilfully violated the condition of the policy by allowing a person not duly licensed to drive the vehicle when the accident took place, the insurer shall be deemed to be a judgment-debtor in respect of the liability in view of Sub-section (1) of Section 96 of the Act. It need not be pointed out that the whole concept of getting the vehicle insured by an Insurance Company is to provide an easy mode of getting compensation by the claimants, otherwise in normal course, they had to pursue their claim against the owner from one Forum to the other and ultimately to execute the order of the Accident Claims Tribunal for realisation of such amount by sale of properties of the owner of the vehicle. The procedure and result of the execution of decree is well-known.

The Hon’ble Supreme Court, in the case of Kashiram Yadav v. Oriental Fire & General Insurance Co. Ltd. 1989 ACJ 1078 (SC), reiterated the view expressed in Skandia Insurance Co. Ltd. v. Kokilaben Chandravadan 1987 ACJ 411 (SC). While referring to that case, it was said:

…There the facts found were quite different. The vehicle concerned in that case was undisputedly entrusted to the driver who had a valid licence. In transit the driver stopped the vehicle and went to fetch some snacks from the opposite shop leaving the engine on. The ignition key was at the ignition lock and not in the cabin of the truck. The driver had asked the cleaner to take care of the truck. In fact the driver had left the truck in care of the cleaner. The cleaner meddled with the vehicle and caused the accident. The question arose whether the insured (owner) had committed a breach of the condition incorporated in the certificate of insurance since the cleaner operated the vehicle on the fatal occasion without driving licence. This Court expressed the view that it is only when the insured himself entrusted the vehicle to a person who does not hold a driving licence, he could be said to have committed breach of the condition of the policy. It must be established by the Insurance Company that the breach is on the part of the insured. Unless the insured is at fault and is guilty of a breach of the condition, the insurer cannot escape from the obligation to indemnify the insured. It was also observed that when the insured had done everything within his power inasmuch as he has engaged the licensed driver and has placed the vehicle in his charge with the express or implied mandate to drive himself, it cannot be said that the insured is guilty of any breach.

We affirm and reiterate the statement of law laid down in the above case. We may also state that without the knowledge of the insured, if by driver’s acts or omission, others meddle with the vehicle and cause an accident, the insurer would be liable to indemnify the insured. The insurer in such a case cannot take the defence of a breach of the condition in the certificate of insurance.

We are in respectful agreement with the view expressed in the case of Shandia Insurance Co. ltd. v. Kokilaben Chandmvadan 1987 ACJ 411 (SC).

As in the facts of the present case, the appellant shall be deemed to be liable to pay compensation applying the principle of vicarious liability because the accident took place when the act authorised was being performed in a mode which may not be proper, but was directly connected with in the course of employment, Sub-section (1) of Section 96 of the Act shall come into play and the Insurance Company shall be deemed to be the judgment-debtor, so far as the claim made by the heirs and legal representatives of the deceased is concerned.

Applying the said principles in the instant case, it has to be held that there was no breach of condition of policy. Admittedly, the driver was having a licence and that was held to be a fake one during the inquiry before the Tribunal. As an owner of the vehicle, he is expected to entrust the vehicle to a person having driving licence. He should take all reasonable care and caution as are expected of a person of ordinary prudence. It is not the case that the owner of the vehicle had deliberately allowed the vehicle to be driven by the person not having any licence at all. It is beyond anybody’s comprehension that the owner should first verify the genuineness of the licence with the Licence Issuing Authority and only thereafter, the vehicle should be entrusted for driving. If the owner had taken the reasonable steps available within his powers, it must be held that he had acted bona fide and discharged his statutory obligation under the Act. To the same effect is the judgment of Division Bench of Himachal Pradesh High Court in Sukh Dev v. Bhagiwati Devi 1996 ACJ 1292 (HP), which held thus:

Above all, applying the ratio of the judgment in Skandia Insurance Co. Ltd. v. Kokilaben Chandravadan 1987 ACJ 411 (SC), we are of the opinion that in the facts and circumstances of this case, the appellant owner had done whatever was within his power, inasmuch as he has engaged a licensed driver and given him mandate to drive it himself, as such, it cannot be said that he is guilty of any breach disentitling him to get the compensation amount from the Insurance Company. The appellant owner cannot be penalised, as has been done by the Tribunal, as it was not expected of him to make detailed verification from the Licensing Authorities from where the licence was issued and renewed before engaging his driver.

Therefore, we have no hesitation to hold that the Insurance Company is liable to indemnify the appellant owner for the compensation awarded to the claimants. Mr. Ashwani Kumar Sharma has tried to urge another point that the accident had not occurred due to negligence of the driver of the tractor, but that of the driver of the bus. We are not permitting this argument as by now, it is well-settled that this defence is not available to the Insurance Company.

9. Therefore, it is clear from the aforesaid discussion that where insured had done whatever was within his power, inasmuch as he has engaged a licensed driver to drive the vehicle, he cannot be penalised on discovery that the licence possessed by the driver was fake, since it was not expected of him to make detailed verification from the Licensing Authorities from where the licence was issued and renewed before engaging him as a driver. It may be a different case where facts disclose that the owner of the vehicle had deliberately allowed the vehicle to be driven by a person not having any licence at all, but where the person possessed driving licence, it would be beyond one’s comprehension that the owner should first verify the genuineness of the licence before entrusting the vehicle to him. If the owner acted bona fide and found the driver in possession of licence, we think, he has discharged his statutory obligation under the Act and he cannot be said to have committed breach of the condition of the policy.

10. Turning to the facts of these cases, it may be that during the course of proceedings before the Tribunal, it came out that the licence issued by the R.T.O., Kanpur was issued in the name of Mohammad Asgar, son of Mohammad Ibrahim and not the driver, therefore, the licence possessed by the driver in this case was fake, but fact remains that it was renewed by the R.T.O., Shahdol obviously after putting the driver to test as per requirement of the Motor Vehicles Act, 1988, and the Rules framed thereunder. Fact that the licence in possession of the driver engaged by the insured was not issued by R.T.O., Kanpur, therefore, fake was not in the knowledge of the insured when he engaged this driver, nor could he know this fact. He was not expected to verify the validity of licence from R.T.O., Kanpur before engaging the driver. Further, the driver knew driving and the licence was renewed by R.T.O., Shahdol after putting the driver to test. There is no lack of bona fides on the part of insured in engaging the driver, therefore, Insurance Company cannot escape from shouldering the responsibility to pay the compensation. Fake licence stands validated on renewal and demonstrates that the driver knew driving prior to taking place of the accident.

11. In the aforesaid background, the Tribunal rightly fixed the liability on the Insurance Company to pay the compensation. We find no justification to interfere with the finding so recorded, therefore, the same is confirmed.

12. Consequently, there is no merit in these appeals and the same are dismissed.


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