JUDGMENT
V. Sivaraman Nair, J.
1. On 30.12.1986 at about 4.30 P.M. a Motor Cycle registered as ADN 4756 hit Sri Sailada Appalanaidu, while he was proceeding along with Taddi Thatha by the side of Rajapulova-Vizianagaram road. He fell down on the road as a result of the impact and died shortly thereafter. His wife, two sons and 2 daughters filed O.P. 189/87 under Section 110-A of the Motor Vehicles Act, 1939 (hereinafter referred to as ‘the Act’) claiming compensation of Rs. 1,50,000/- from the person who was riding the vehicle (1st respondent), the owner of the vehicle (2nd respondent) and the insurer (3rd respondent). The 1st and 3rd respondents alone contested the matter. The 2nd respondent was called absent and set ex parte. The claimants examined three witnesses including the 1st claimant, widow, a companion of the deceased who was an eye-witness and the medical witnesses. They also marked the pay-slip of the deceased who was an employee in a jute mill, certified copies of the F.I.R., accident report, inquest report, post-mortem certificate, certificate of employment and kist receipts., as exhibits A-l to A-7. Respondents did not examine any witness nor produced any document. On a consideration of the entire evidence before him, the Motor Accidents Claims Tribunal, (Additional District Judge), Vizianagaram, awarded an amount of Rs. 1,23,300/- as compensation, which was split up into Rs. 97,200/- for loss of dependency, Rs. 6,000/- towards love and affection, Rs. 12,000/- towards loss of consortium, Rs. 5,000/- towards pain and suffering and Rs. 100/- towards damage to clothes worn by the deceased at the time of the accident and Rs. 3,000/- towards expenses for transport to hospital, funeral etc.
2. The insurer 3rd respondent filed C.M.A. No. 938/88. The learned single Judge allowed the appeal in part by reducing the total compensation to Rs. 90,000/-. He found that the loss of dependency had to be worked out as Rs .90,000/-. He effected a deduction of 10% towards cash payment and awarded Rs. 81,000/- on this count. He retained Rs. 3,000/- towards transport and funeral expenses, reduced compensation towards loss of consortium from Rs. 12,000/- to Rs. 5,000/- and disallowed the entire amount of Rs. 6,000/- towards loss of love and affection and rounded of the total amount of compensation to Rs. 90,000/-. No mention was made regarding compensation for damage to clothes Rs. 100/- and towards pain and suffering – Rs. 5,000/-. The claimants have filed the Letters Patent Appeal objecting to the above deductions.
3. We felt that it was important to consider the question whether the insurer could have assailed the quantum of compensation in an appeal under Section 110-D of the Act, in view of the restrictive provisions of Section 96 (2) of the Act. We therefore called upon counsel for the 3rd respondent-insurer to address us on this aspect. He argued the matter in great detail with reference to a number of decisions, eventhough he urged that no such preliminary objection was raised before the learned single Judge or in the letters patent appeal.
4. We are of the opinion that Section 96 (2) and Section 110-C (2-A) do raise points of jurisdiction and the same can be urged even in an appeal. Those provisions were so understood by Courts, including the Supreme Court to be restrictive of the defences which could be raised by an insurer before the Tribunal as also in an appeal from the decision of the Tribunal.
5. Section 96 (1) of the Act makes it obligatory on the part of the insurer to satisfy judgments and awards against persons insured in respect of third party risks. Sub-section (2) of Section 96 provides that the insurer will be liable only if before the commencement of the proceedings in which the judgment or award is given the insurer had notice through the Court or the claims Tribunal or in respect of such judgment or award so long as execution is stayed therein pending an appeal. It is also provided that the insurer so notified shall be entitled to be made a party thereto and to defend the action on any of the following grounds viz.,
“(b) 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 not 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-car 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 licenced, 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
(c) that the policy is void on the ground that it was obtained by the nondisclosure of a material fact or by a representation of fact which was false in some material particular.”
6. The purport of the above provision is to make it obligatory that the insurer has notice prior to the proceedings and shall be enabled to be impleaded so as to defend the claim on the specified grounds. It is axiomatic that the insurer shall not ordinarily, raise any defence other than those which are specifically mentioned in Section 96 (2) (b). An exception to that rule is provided in Section 110-C (2-A) which reads:
“(2-A) where in the course of any inquiry, the Claims Tribunal is satisfied that-
(i) there is collusion between the person making the claim and the person against whom the claim is made, or
(ii) the person against whom the claim is made has failed to contest the claim.
it may, for reasons to be recorded by it 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 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.”
The two circumstances in which there may be departure from the restriction of the defence by the insurer are –
1. Collusion between the person making the claim and the person against whom the claim is made, or
2. The person against whom the claim is made has failed to contest the claim.
In the event of any of these two contingencies taking place, the Tribunal has an obligation to record its satisfaction with reasons therefor. It may thereafter direct the insurer who may be liable in respect of such claim to be impleaded as a party to the proceeding who may, thereupon, have the right to contest the claim on all or any of the grounds that are available to the person against whom the claims are made.
7. The question which arises for consideration before us is whether the above restrictive and enabling provisions will apply to an appeal under Section 110-D of the Act as well.
8. Almost the same question had to be considered by the Supreme Court in the celebrated decision in British India General Insurance Co. Ltd. v. Captain Itbar Sing, . The Court held that the insurer had no right, apart from the provisions of Section 96 (2) of the Act, to be made a party to the action by the claimant against the insured whose vehicle caused the injury. The Court held that the right created by statute and its content necessarily depend upon the provisions of the statute. The Court held Further –
“Sub-section (2) clearly provides that an insurer made a defendant to the action is not entitled to take any defence which is not specified in it. When the grounds of defence have been specified, they cannot be added to. The only manner of avoiding liability provided for in Sub-section (2) is through the defences therein mentioned. Therefore, when Sub-section (6) talks of avoiding liability in the manner provided in Sub-section (2), it necessarily refers to these defences. It cannot be said that in enacting Sub-section (2) the legislature was contemplating only those defences which were based on the conditions of the policy.”
9. It is interesting to note that the above decision arose from the judgment of the High Court of Punjab, holding that insurers impleaded as parties pursuant to Section 96 (2) of the Act could defend actions only on the grounds mentioned in the sub-section and on no others. Unfortunately, however, the clear guidelines provided in It bar Singh (1 supra) were not followed uniformly by all Courts as it ought to have been. A myriad of decisions followed, which took contrary positions, notwithstanding the clear enunciation by the Supreme Court.
10. In National Insurance Co. Ltd. v. Magikhia Das, 1976 ACJ 239 (Orissa) a full Bench of the Orissa High Court following Itbar Singh (1 supra) held that Section 96 (2) was clear that an insurer who is made a party in a proceeding for recovery of compensation can resist the claim only on those grounds and not on any other. The Court also held that specific conditions contained in the contract of Insurance enabling the insurer to contest the claim on other grounds may avail the insurer if the insurer had also appeared and contested in cases where the Court or Tribunal had permitted it under Section 110-C (2-A) of the Act.
11. A full bench of this Court in Madineni Kondaiah v. Yaseen Fatima, AIR 1986 A.P. 62 = 1985(2) ALT 88 also held that the insurer cannot raise defences other than what are set out in Sub-section (2) of Section 96 of the Act. Earlier decisions in Kanakalakshmi v. R.V. Subba Rao, 1972 (1) APLJ 47 and New India Assurance Co. v. M. Ramanamma, 1982 (1) APLJ 124 to the contrary effect were overruled by the bench. Therefore, as far as this Court is concerned, the position is clear the an insurer is not entitled to raise defences other than those which are mentioned in Section 96 (2) of the Act, unless there was specific order by the Tribunal containing reasons for being satisfied either that there has been collusion between the claimant and the persons against whom the claim was made or that the claim has not been resisted.
12. To the same effect is the decision of a full bench of the Kerala High Court in New India Assurance Co. Ltd. v. Celine and Ors., . The Court proceeded to consider whether there was a reservation clause in a policy on payment of additional premium to enable the insurer to resist the claim on grounds other than those mentioned in Section 96 (2) and held that on the principles of subrogation which applied to all contracts including contracts of indemnity such as motor insurance, the insurer can place himself in the position of the insured against third parties. That later aspect does not arise for consideration in this appeal.
13. Counsel for the insurer laid considerable stress on two decisions of the Madhya Pradesh High Court and one decision of the Delhi High Court. The first is Darmanand and Ors. v. Manohardas, 1990 ACJ 888 (M.P.) by a division bench of the Madhya Pradesh High Court which held that in cases where the Tribunal and the owner did not contest the claim and the Tribunal allowed the insurer to take all defences available to the insured by reason of Section 110-C (2-A) the insurer would be entitled to file an appeal under Section 110-D on all grounds which could have been raised by the insure.
14. A single Judge of the same Court in United India Insurance Co. Ltd, v. Vesta and Ors., 1992 ACJ 996 (M.P.) held where the owner and Driver remained ex parte and the Tribunal allowed the application under Section 110-C (2-A) to contest the claim on all grounds available to them, it was competent for the Insurer to file an appeal.
15. A single Judge of the Delhi High Court in Joginder Nath Maini v. Manawar Khan, held that in a case where the Driver, Owner and insurer of the vehicle had contested the claim on all grounds without any objection by the claimant before the Tribunal, it was not competent for the claimant to raise an objection based on Section 96 (2) of the Act at the appellate stage.
Reliance was placed on a decision of the Kerala High Court in New India Assurance Co. Ltd. v. Raju Markose, 1989 ACJ 643 (Kerala).
16. The only circumstance in which an insurer can take defences other than those which are mentioned in Section 96 (2) are- (1) where the insurance contract specifically reserves the right of the insurer to raise all grounds available to the insurer (sic. insured), or (2) where the Tribunal, for reasons to be stated, records such satisfaction that in view of collusion between the claimant and the insured or the absence of the insured in those proceedings, it was necessary to permit the insurer to take all such defences. In either case, it is for the insurer to plead the above facts positively as also by production of the Insurance policy in the former case and by invocation of the satisfaction of the Tribunal by specific application in the latter case. It cannot be a matter of assumption in either case. If the Insurer had not specifically pleaded the existence of a specific condition in the policy of Insurance that it was entitled to plead all defences available to the insured, the Tribunal may not permit him to do so. Likewise, unless the Insurer pleads and satisfies the Tribunal that there has been collusion between the claimant and the insured or the insured had defaulted in its defence, the Tribunal may exceed its jurisdiction in permitting the insured to take other defences.
17. In an appeal by the insurer, it is obligatory duty of the appellate Court to consider whether the insurer is overstepping the limits of Section 96 (2). It is equally obligatory on the part of the appellate Court to ascertain whether the Tribunal had, in exercise of its power under Section 110-C (2-A) of the Act, permitted the insurer to avail of other defences as well. We are of the opinion that a ground of this nature can be raised at any time even in Letters Patent, because that point goes to the root of the jurisdiction of the appellate Court. We therefore permitted the appellant to raise the ground before us and has invited arguments by both sides.
18. We feel constrained, in view of the decision of the full bench of this Court reported in Madineni Kondaiah (3 supra) to hold that the insurer is not entitled to file an appeal challenging the quantum of compensation awarded by the Tribunal when such award is based entirely on defences other than those permitted under Section 96 (2) of the Act. We say so, since there has been no pleading that the insurer had reserved its right to contest the liability on all grounds which would have been available to the insurer (sic. insured). Nor has it been made out that the Tribunal, on being satisfied and for reasons recorded in writing, had permitted the insurer to take such defences in view of the provisions contained in Section 110-C (2-A). We are supported in this view in a sufficient measure by the decisions of various High Courts viz., Reddipilli Chinna Rao. v. Smt. Reddi Lorudu (A.P.), : Kantilal & Bros, v. Ramarani Debi (Calcutta), 1980 ACJ 501 (Cal.) United India Fire & General Insurance Co. v. Kalyani (Kerala), 1983 ACJ 29 (Ker.) New India Assurance Co. Ltd, v. O. V. Radhakrishnan (Kerala), 1983 ACJ 475 (Ker.) New India Assurance Co. v. V.S. Thankamani (Kerala), 1984 ACI791 (Ker.) Nachhan v. New India Assurance Co. Ltd. (Allahabad), 1985 ACJ 37 (All.) National Insurance Co. Ltd. v. Shanim Ahmad (Patna), 1985 ACJ 749 (Pat.) P.K. Krishna Nair v. K. Karunakaran Nair (Kerala), 1986 ACJ 41 (Ker.) Oriental Fire & General Insurance Co. Ltd. v. Baldeo Prasad (Allahabad), 1986 ACJ 191 (All.) New India Assurance Co. v. Devidas (Madhya Pradesh), 1986 ACJ 312 (M.P.) Ranghunath Eknath Hivale v. Shardabai Karbhari Kale (Bombay), 1986 ACJ 460 (Bom.) New India Assurance Co. Ltd. v. Vinayak Atmaram Date (A.P.), 1988 ACJ 278 (A.P.) Oriental Fire & General Ins. Co. Ltd. v. Panapati Devi(Patna), 1989 ACJ 678 (Pat.) National Insurance Co. v. V.S.R. Kumaresan (Madras), .
19. One decision which has to be noticed is Oriental Fire & General Insurance Co. Ltd. v. Rajendra Kaur, 1989 ACJ 961 (All.). A division bench of the Allahabad High Court held that even in the absence of a specific application under Section 110-C (2-A) of the act and a specific order enabling the insurer to take all defences in view of the absence of the insured who was declared ex parte, it shall be deemed that the Tribunal had granted permission under Section 110-C (2-A) of the Act and therefore it was open to the insurer to raise all defences which were available to the claimant. We are not inclined to accept this decision as correct. According to us, a specific sttutory inhibition contained in Section 96 (2) can be avoided only by the two means which we have indicated earlier, viz., (a) by a specific reservation clause in the policy of insurance which results in subrogation enabling the insurer to take all defences which the insured could have, or (b) by a specific order by the Tribunal on an application made by the insurer under Section 110-C (2-A) for the reasons mentioned therein. If we understand Section 96 (2) as imposing a statutory prohibition, it can be avoided only by a specific order of the Tribunal. There is no question of an inference enabling an insurer who has been lethargic in availing of the provisions of the enactment to avoid the restrictive provisions which disable it to defend the claim on any other than the specified grounds and enlarge the scope of the defence, notwithstanding the specific prohibition contained in Section 96(2) of the Act by filing an appeal. That is the reason why in the facts and circumstances the case, we thought that we shall permit the appellant to urge this ground which goes to the root of the jurisdiction of the appellate Court under Section 110-D of the Motor Vehicles Act. We are also of the opinion that even as a respondent in an appeal filed by the claimant-driver or the insured, the insurer cannot travel beyond the provisions of Section 96(2) of the Act, for after all, the appeal under Section 110-D is only an extension or continuation of the claim proceedings under Section 110-A of the Act, and whatever the Tribunal is prohibited from doing in the trial shall equally be out of bounds for the appellate Court as well.
20. In this view, we hold that the 3rd respondent-insurer was not entitled to file an appeal challenging the quantum of compensation awarded by the Tribunal
21. This seems to us to be sufficient to dispose of this appeal eventhough counsel had gone into the merits of the points in controversy.
22. We therefore allow the Letters Patent Appeal and set aside the Judgment of the learned single Judge. In the circumstances of the case, parties shall suffer their respective costs.
23. Soon after the judgment is pronounced, counsel for the appellants made an oral request for leave under Article 133 (a) of the Constitution of India. Since the point decided is covered by the decisions of all High Courts in the country and in sufficient measure by decision of the Supreme Court of India, we do not feel that this case involves any point of law of such importance as requires to be decided by the Supreme Court of India. Leave refused.