JUDGMENT
Y.P. Nargotra, J.
1. The short question that arises for consideration in these group of appeal is where an insured has not preferred an appeal under Section 173 of Motor Vehicles Act (hereinafter referred to as Act) against an award given by Motor Accident Claims Tribunal, is it open to the insurer to prefer an appeal against the award questioning the quantum of the compensation where in the policy of Insurance the right to contest such award on merits has been reserved.
2. Ld. MACT Kargil adjudicated upon nine claim petitions filed under Section 166 of the Act arising out of the same accident occuring on 29-1-2001 at Sher Ali Thang in Kaksar area of District Kargil. The vehicle involved in the accident was a State Road Transport Corporation passenger bus bearing No. JK01Y-0212 wherein some of the passengers had died. Ld. Tribunal passed the awards by its Single Judgment dated 16-12-2001 awarding various amounts of compensation against SRTC and directed its payment by the Insurance company in each claim petition. The owner of the vehicle, SRTC has not filed any appeal against the award but the insurance company has come up in appeal.
3. The appellant Insurance Company has filed Civil Appeal Nos. 18/02,19/02,20/02,21/02,22/02 and 23/2002 challenging the giving of the awards by the Ld. Motor Accidents Claims Tribunal Kargil in favour of the claimants against the owner SRTC by its judgment dated 16-12-2001 and whereby the compensation awarded has been directed to be paid by the appellant, on the grounds; that the quantum of compensation has not been properly assessed by applying suitable multiplier to the monthly income of the deceased not rightly assessed.
4. Ld. counsel for the appellant has submitted that Insurance company the appellant is entitled to challenge the award of the claims Tribunal even in the absence of the appeal of the insured, on merits because in the Insurance policy right to contest the liability of the Insurance company has been reserved. In support of his contention he seeks to rely upon a Full Bench judgment of this court reported in AIR 1982 J&K page 105, on the other hand, contention of LC for the respondents/ claimants is that Insurance company is not so entitled in view of the Judgment rendered by the Hon’ble Supreme Court in the case reported in AIR 2002 SC 3350. Before deciding the controversy it will be apt to notice the following provisions of Motor Vehicles Act:-
“149 Duty of insurers to satisfy judgments and awards against persons insured in respect of third party risks-
(1) If, after a certificate of insurance has been issued under Sub-section (3) of Section 147 in favour of the person by whom a policy has been effected, judgment or award in respect of any such liability as is required to be covered by a policy under Clause (b) of Sub-section (1) of Section 147 (being a liability covered by the terms of the policy) or under the provisions of Section 163A is obtained against any person insured by the policy, then notwithstanding that the insurer may be 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 pay/able thereunder, as if he were the judgment debtor, in respect 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 or award unless, before the commencement of the proceedings in which the judgment or award is given the insurer had notice through the court or, as the case may be, the claims Tribunal of the bringing of the proceedings, or in respect of such judgment or award 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) that there has been a breach of a specified condition of the policy, being one of the following conditions, namely:-
(i) a condition excluding the use of the vehicle.
(a) for hire or reward, where the vehicle is on the date of the contract of insurance a vehicle not covered by a permit to ply for hire or reward, or
(b) for organised racing and speed testing, or
(c) for a purpose not allowed by the permit under which the vehicle is used, where the vehicle is a transport vehicle, or
(d) without side-care being attached where the vehicle is a motor cycle; or
(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
(iii) a condition excluding liability for injury caused or contributed to by conditions of war, civil war, riot or civil commotion; or (b) that the policy is void on the ground that it was obtained by the non-disclosure of a material fact or by a representation of fact which was false in some material particular.
(3) Where any such judgment as is referred to in Sub-section (1) is obtained from a court in a reciprocating country and in the case of a foreign judgment is, by virtue of the provisions of Section 13 of the Code of Civil Procedure, 1908 (5 of 1908) conclusive as to any matter adjudicated upon by it, the insurer being an insurer registered under the Insurance Act, 1938 (4 of 1938) and whether or not he is registered under the corresponding law of the reciprocating country) shall be liable to the person entitled to the benefit of the decree in the manner and to the extent specified in Sub-section (1) as if the judgment were given by a court in India:
Provided that no sum shall be payable by the insurer in respect of any such judgment unless, before the commencement of the proceedings in which the judgment is given, the insurer had notice through the court concerned of the bringing of the proceedings and the insurer to whom notice is so given is entitled under the corresponding law of the reciprocating country, to be made a party to the proceedings and to defend the action on ground similar to those specified in Sub-section (2).
(4) Where a certificate of insurance has been issued under Sub-section (3) of Section 147 to the person by whom a policy has been effected, so much of the policy as purports to restrict the insurance of the persons insured thereby by reference to any conditions other than those in Clause (b) of Sub-section (2) shall, as respects such liabilities as are required to be covered by a policy under Clause (b) of Sub-section (1) of Section 147, be of no effect: provided that any sum paid by the insurer in or towards the discharge of any liability of any person which is covered by the policy by virtue only of this sub-section shall be recoverable by the insurer from that person.
(5) If the amount which an insurer becomes liable under this section to pay in respect of a liability incurred by a person insured by a policy exceeds the amount for which the insurer would apart from the provisions of this section be liable under the policy in respect of that liability the insurer shall be entitled to recover the excess from that person.
(6) In this section the expressions “material fact” and “material particular” mean respectively a fact or particular of such a nature as to influence the judgment of a prudent insurer in determining whether he will take the risk and, if so, at what premium and on what conditions and the expression “liability covered by the terms of the policy” means a liability which is covered by the policy or which would be so covered but for the fact that the insurer is entitled to avoid or cancel or has avoided or cancelled the policy.
(7) No insurer to whom the notice referred to in Sub-section (2) or Sub-section (3) has been given shall be entitled to avoid his liability to any person entitled to the benefit of any such judgment or award as is referred to in Sub-section (1) or in such judgment as is referred to in Sub-section (3) otherwise than in the manner provided for in Sub-section (2) or in the corresponding law of the reciprocating country as the case may be.
Explanation–For the purpose of this section, “Claims Tribunal” means a Claims Tribunal constituted under Section 165 and “award” means an award made by that Tribunal under Section 168.”
170. Impleading insurer in certain cases
Where in the course of any inquiry, the Claims Tribunal is satisfied that-
(a) there is collusion between the person making the claim and the person against whom the claim is made, or
(b) the person against whom the claim is made has failed to contest the claim, it may for reasons to be recorded in writing, direct that the insurer who may be liable in respect of such claim, shall be impleaded as a party to the proceeding and the insurer so impleaded shall thereupon have, without prejudice to the provisions contained in Sub-section (2) of Section 149, 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.” 173. Appeals–(1) Subject to the provisions of Sub-section (2), any person aggrieved by any award of a Claims Tribunal may, within ninety days from the date of the award, prefer an appeal to the High Court:
Provided that no appeal by the person who is required to pay any amount in terms of such award shall be entertained by the High Court unless he has deposited with it twenty five thousand rupees or fifty percent, of the amount so awarded, whichever is less, in the manner directed by the High Court:
Provided further that the High Court may entertain the appeal after the expiry of the said period of ninety days, if it is satisfied that the appellant was prevented by sufficient cause from preferring the appeal in time.
(2) No appeal shall lie against any award of a Claims Tribunal if the amount in dispute in the appeal is less than ten thousand rupees.”
5. In the case reported in AIR 2002 SC 3350, their lordships after noticing the afore-quoted provisions observed as follows:
“12. We have traced the legislative history of English law as regards liability of an insurer in the event of a motor accident in respect of third party right was not for interpreting Section 149, 170 and 173 of 1988 Act, but only for showing that while enacting Chapter VIII of 1939 Act or Chapter XI of 1988 Act, the intention of legislature was to protect third party rights and not the insurer.
13. To answer the question, it is necessary to find out on what grounds the insurer is entitled to defend/contest against a claim by an injured or dependants of the victims of motor vehicle accident. Under Section 96 (2) of 1939 Act which corresponds to Section 149(2) of 1988 Act, an insurance company has no right to be a party to an action by the injured person or dependants of deceased against the insured. However, the said provision givens the insurer the right to be made a party to the case and to defend it. It is, therefore, obvious that the said right is a creature of the statute and its content depends on the provisions of the statute. After the insurer has been made a party to a case or claim, the question arises what are the defences available to it under the statute. The language employed in enacting Sub-section (2) of Section 149 appears to be plain and simple and there is no ambiguity in it. It shows that when an insurer is impleaded and has been given notice of the case, he is entitled to defend the action on grounds enumerated in the sub-section namely, Sub-section (2) of sec. 149 of 1988 Act, and no other ground is available to him. The insurer is not allowed to contest the claim of the injured or heirs of the deceased on other ground which is available to an insured or breach of any other conditions of the policy which do not find place in Sub-section (2) of Section 149 of 1988 Act. If an insurer is permitted to contest the claim on other grounds it would mean adding more grounds of contest to the insurer than what the statute has specifically provided for.
14. Sub-section (7) of Section 149 of 1988 Act clearly indicated in what manner Sub-section (2) of Section 149 has to be interpreted. Sub-section (7) of Section 149 provides that no insurer to whom the notice referred to in Sub-section (2) or Sub-section (3) has been given shall be entitled to avoid his liability to any person entitled to the benefit of any such judgement or award as is referred to in Sub-section (1) or in such judgement as is referred to in Sub-section (3) otherwise than in the manner provided for in Sub-section (2) or in the corresponding law of the reciprocating country, as the case may be. The expression ‘manner’ employ in Sub-section (7) of Section 149 is very relevant which means an insurer can avoid its liability only in accordance with what has been provided for in Sub-section (2) of Section 149. It, therefore, shows that the insurer can avoid its liability only on the statutory defences expressly provided in Sub-section (2) of Section 149 of 1988 Act. We are, therefore, of the view that an insurer cannot avoid its liability on any other grounds except those mentioned in Sub-section (2) of Section 149 of 1988 Act.
15. It is relevant to note that the Parliament, while enacting Sub-section (2) of Section 149 only specified some of the defences which are based on conditions of the policy and therefore, any other breach of conditions of the policy by the insured which does not find place in Sub-section (2) of Section 149 cannot be taken as a defence by the insurer. If the Parliament had intended to include the breach of other conditions of the policy as a defence, it could have easily provided any breach of conditions of insurance policy in Sub-section (2) of Section 149. If we permit the insurer to take any other defence other than those specified in Sub-section (2) of Section 149, it would mean we are adding more defences to insurer in the statute which is neither found in the Act nor was intended to be included.
17. Before proceeding further, it may be noticed that while the Motor Vehicles Act, 1939 was in force, Section 110-C (2A) was inserted there in the year 1970 which corresponds to Section 170 of the 1988 Act. The said provision provides that in course of an inquiry of a claim if the Tribunal is satisfied that there is a collusion between the claimant and the insured or the insured fails to contest the claim, the Tribunal for reasons to be recorded in writing, direct that the insurer who may be liable in respect of such claim, shall be impleaded as a party to the proceeding and the insurer so impleaded shall thereupon have, without prejudice to the provisions contained in Sub-section (2) of Section 149, 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.
18. The aforesaid provisions show two aspects–Firstly, that the insurer has only statutory defences available as provided in Sub-section (2) of Section 149 of 1988 Act and, secondly where the Tribunal is of the view that there is a collusion between the claimant and the insured or the insured does not contest the claim, the insurer can be made a party and on such impleadment the insurer shall have all defences available to it. Then comes the provisions of Section 173 which provides for an appeal against the award given by the Tribunal. Under Section 173, any person aggrieved by an award is entitled to prefer an appeal to the High Court. Very often the question has arisen as to whether an insurer is entitled to file an appeal on the grounds available to the insured when either there is a collusion between the claimants and the insured or where the insured has not filed an appeal before the High Court questioning the quantum of compensation. The consistent view of this court had been that the insurer has no right to file an appeal to challenge the quantum of compensation or finding of the Tribunal as regards the negligence or contributory negligence of offending vehicle.
6. From the aforesaid authority it stands authoritatively settled that an Insurer cannot escape from its liability to pay compensation on any exclusionary clause in the Insurance policy except those specified in Section 149(2) of the Act or it can contest the claim of the claimants on merits only when conditions precedent specified in Section 170 are satisfied. Therefore the Insurance company cannot independently maintain an appeal on the question of quantum of compensation awarded to the claimants by an award of a Motor Accident Claims Tribunal. From this it follows that even if right of Insurer to contest an award on merits is reserved in the Insurance Policy itself even then the Insurer cannot contest the claim on merits except on the grounds specified in Section 149(2) of the Act, subject however to the condition that it may so contest if Insurer has satisfied the Tribunal that two conditions enumerated in Section 170 that their is collusion between the person making a claim and the person to whom the claim is made or the person against whom the claim is made has failed to contest the claim and the tribunal has for the reasons recorded in writing allowed the insurer to contest the claim on any of the grounds that are available to the person against whom the claim has been made. Therefore the ratio of the judgment rendered in the case AIR 2000 SC 3350 appears to be that insurer’s grounds of contesting the award cannot be enlarged by any condition/clause of the insurance policy executed between insurer and insured and insurer is entitled to take only those defences which have been provided in Section 149(2).
7. In United Fired General Insurance Company v. Lakshmi Short AIR 1982 J&K 105 Full Bench of this Court considered the question whether insurer has any right to challenge quantum of compensation in appeal against an award of a Claims Tribunal. Ld. Full Bench of this court has held as follows:-
“33. Before the Tribunal an insurer can resist the claim against him in two ways (1) by urging that the insurer, is not liable even though the insured may be liable and (2) by pleading that the insurer is not liable because the insured is not liable.
34. Under the first head, an insurer is entitled to escape his liability by showing that the policy of insurance is void as it had been obtained on false representation or concealment of material facts or that the policy had been cancelled before the accident or that there had been a breach of any condition of the policy and the like grounds. The insurer is not entitled to raise any other ground of defence to avoid his liability. Where the insured is found to have incurred the liability because of the simple reason that a policy of insurance being in the nature of a contract of indemnity, the insurer taken upon himself to discharge the liability of the insured arising out of a motor vehicle accident, subject of course to the terms and conditions of the policy and the maximum statutory liability. He cannot under the first head avoid his liability except on the grounds mentioned above, when a party takes out a policy of insurance, does so after paying the premium for the sum assured and unless the contract between him and the insurer can be avoided, the insurance company which has been benefited by the premium cannot backout of its commitment to indemnify the insured. This is manifest from the plain phraseology of Section 95 (5) of the Act, which reads thus:-
“Notwithstanding anything elsewhere contained in any law, a person issuing a policy of insurance under this section shall be liable to indemnify the person or classes of persons specified in the policy in respect of any liability which the policy purports to cover in the case of that person or those classes of persons.
35. However, no sum shall be payable by an insurer under Section 96(1) in respect of any Award unless before or after the commencement of the proceeding in which the Award is given, the insurer had notice through the Tribunal of the bringing of those proceedings. It is only an insurer to whom notice of the bringing of any such proceedings is given who shall be entitled to be made a party to the proceedings and to defend the action on the grounds contained in Section 96(2) of the Act, unless the insurer had reserved in the policy of insurance a right to defend the action in the name of the insured, in which event he can defend on all the grounds on which the insured could defend.
36. Under the second head, an insurer can plead that there was no negligence on the part of the insured and raise all such pleas in defence to the claim as are available to an insured to show that the insured had not incurred any liability. This however, can be done by the insurer only if the insurer had reserved, in the policy of insurance a right to defend the claim in the name of the insured. If there is no such reservation made in the policy of Insurance, then Section 96 (2) strictly debars an insurer from taking any defence other than those enumerated therein, to show that the insurer was not liable although the insured had incurred liability.
37. Where an insurer finds that it has not reserved such a right but that the insured and the claimant have colluded with each other as it is a possibility that cannot be ignored. It is open to an insurer to bring that fact to the notice of the Tribunal and seek the permission under Section 110-C (2A) to contest the claim on all the grounds available to an insured. On being satisfied that there is such a collusion, the Tribunal would grant permission and on such permission being granted, the insurer steps into the shoes of the insured and defends the claim on all available grounds, if the Award goes against the insurer, it can challenge it in appeal also on all such grounds on which it had contended the claim before the Tribunal. Right of appeal against an Award of the Tribunal is the creation of the statute. The Act had confined the right to avoid the liability in the insurer to the injured on certain grounds specified in it. It is not open to this court to add to those grounds on the plea that hardship would be caused to the insurer. An insurer can avoid any hardship by remaining vigilant during the trial of the claim petition and also by providing in the policy of insurance, for a right to defend the action in the name of the assured and that he had full liberty to do. Where the insurer has failed to do it, he cannot avoid the liability if the insured is found liable.
38. The aforesaid discussion leads to the conclusion (1) that an insurer is not entitled to resist the claim or the award, where the insured has been found liable, on grounds not enumerated under Section 96(2) of the Act, (2) where the term of the policy of insurance provides that the insurer has the right to defend the action in the name of the insured the insurer shall have the right to be defended and if he does so, all the defences as are open to the insured can be urged by the insurer both to resist the claim as well as the Award: (3) if it appears that the claimant and the insured have colluded, then after receiving permission of the Tribunal under Section 110-C (2A) the insured can defend the claim as well as the Award on all grounds which are available to the insured and (4) except, for the aforesaid contingencies, an insurer cannot question an Award in appeal and unless the case of the insurer is covered by (2) or (3) conclusions as noticed above, an insurer cannot, in an appeal against the Award, question the quantum of compensation only.”
8. Therefore according to the Ld. Full Bench where the term of the policy of Insurance provides that the insurer has a right to defend the action in the name of the insured the insurer shall have the right to be defended and if he does so, all defences as are open to the insured can be urged by the insurer both to resist the claim as well as the award. Their lordships of the Full Bench seem to have relied upon the following observations of Supreme Court made in the case AIR 1959 SC 1331:
“The Statute has no doubt created a liability in the insurer to the injured person but the statute has also expressly confined the right to avoid that liability to certain grounds specified in it. It is not for us to add to those grounds and therefore to the statute for reasons of hardship. We are furthermore not convinced that the statute causes any hardship. First, the insurer has the right, provided he has reserved it by the policy, to defend the action in the name of the assured and if he does so, all defences open to the assured can then be urged by him and there is no other defence that he claims to be entitled to urge. He can thus avoid all hardship if any, by providing for a right to defend the action in the name of the assured and this he has full liberty to do.”
9. On the strength of the Full Bench authority of this court Ld. counsel for the appellant has urged that the insurer if has reserved his right to defend itself from its liability to pay in a policy of insurance it can defend itself by challenging the award, on the question of quantum of compensation in appeal. According to Ld. counsel an additional ground of defence is thus available to an insurer which is other than the grounds enumerated in Section 149 of the Act.
10. In AIR 2002 SC 3350 case (supra) before the Hon’ble Supreme Court it was urged by appellant that if an insured has not filed any appeal, it means he has failed to contest the claim and that the right to contest includes the right to contest by filing an appeal against the award of the Tribunal as well and in such a situation an appeal by the insurer questioning the quantum of compensation would be maintainable. Though it was not urged in that case that where the right to contest has been reserved in the policy and where the insured has not filed the appeal the insurer is entitled to contest the award on the question of quantum of compensation in appeal, the following observations of their lordship provide the complete answer; to the plea raised here by the Ld. counsel of the appellant:
“25. We have earlier noticed that motor vehicle accident claim is a tortious claim directed against tortreasors who are the insured and the driver of the vehicle and the insurer comes to the scene as a result of statutory liability created under the Motor Vehicles Act. The legislature has ensured by enacting Section 149 of the Act that the victims of motor vehicles are fully compensated and protected. It is for that reason the insurer cannot escape from its liability to pay compensation on any exclusionary clause in the insurance policy except those specified in Section 149(2) of the Act or where the condition precedent specified in Section 170 is satisfied.
“26. For the aforesaid reasons an insurer if aggrieved against an award, may file an appeal only on those grounds and no other. However, by virtue of Section 170 of 1988 Act where in course of an enquiry the Claims Tribunal is satisfied that (a) there is a collusion between the person making a claim and the person against whom the claim has been made or (b) the person against whom the claim, the tribunal may, for reasons to be recorded in writing, implied the insurer and in that case it is permissible for the insurer to contest the claim also on the grounds which are available to the insured or to the person against whom the claim has been made. Thus, unless an order is passed by the Tribunal permitting the insurer to avail the grounds available to an insured or any other person against whom a claim has been made on being satisfied of the two conditions specified in Section 170 of the Act, it is not permissible to the insurer to contest the claim on the grounds which are available to the insured or to a person against whom a claim has been made. Thus where condition precedent embodied in Section 170 is satisfied and award is adverse to the interest of the insurer, the insurer has a right to file an appeal challenging the quantum of compensation or negligence or contributory negligence of the offending vehicle even if the insured has not filed any appeal against the quantum of compensation. Sections 149, 170 and 173 are part of one scheme and if we give any different interpretation to Section 172 of the 1988 Act, the same would go contrary to the scheme and object of the Act.
“28. We have noticed the legislative development in regard to third party rights in England and found that the object of those legislations was to protect the interest of third party rights. The 1939 Act as well as 1988 Act both were enacted on pattern of English statute with the object to relieve the distress and miseries of victims of accidents and reduce the profitability of the insurer in regard to occupational hazard undertaken by them by way of business activities and not to promote business interests of insurance companies even though they may be nationalised companies.
“29. For the aforesaid reasons, as well as that the Ld. Judges in United India Insurance Co. Ltd (supra) have failed to notice the limited grounds available to an insurer under Section 149(2) of the Act, we are of the view that the decision in United India Insurance (supra) does not lay down the correct view of law”
11. Therefore it becomes manifestly clear from the ratio of the above quoted authority, that insurer can contest the award on the question of quantum of compensation only if he has been permitted under Section 170 of the Act by the Tribunal and not otherwise. The reservation of right to contest in the policy of Insurance on the any other grounds not specified in Section 149(2) cannot clothe the insurer with a right to contest an award on merits in appeal. The right of appeal being a statutory right can be exercised only in the manner permitted by the statute. When law limits the grounds of challenge the grounds of challenge cannot be enlarged by any contract also. Section 149(2) of the Act limits the insurers appeal on those enumerated grounds and the appeal being creation of the statute it is not open to the insurer to take any other plea not provided in Section 149(2) of the Act and this bar includes the plea based upon any exclusionary clause embedded in policy of insurance. The view expressed by the Ld. Full of this court in the case AIR 1982 J&K 105 in my considered opinion runs contrary to the view taken by their lordships of the apex court in Nicolletta Rogtagi’s case (AIR 2002 SC 3350) and therefore is not a binding precedent.
12. In the premises I, therefore hold that even where an insured has not preferred an appeal under Section 173 of the Act against an award given by MACT, it is not open to the insured to prefer an appeal against such award on the question of quantum of compensation merely on the strength of a clause reserving such right in favour of the insurer in the insurance policy. An insurer can maintain the appeal only on the grounds enumerated in Section 149(2) of the Act subject however to the conditions that insurer may contest the award on merits including on the question of quantum of compensation only when he has satisfied the two conditions specified in Section 170 of the Act.
13. In the present appeals admittedly the conditions set out in Section 170 of the Act have not been satisfied therefore the appeals are not maintainable and as such are dismissed as not admitted.