NEW INDIA ASSURANCE CO. LTD. v. NAGDANBHAI GANESHBHAI AHIR & Ors.

========================================================= NEW INDIA ASSURANCE CO. LTD. - Appellant(s) Versus NAGDANBHAI GANESHBHAI AHIR & 9 - Defendant(s) ========================================================= Appearance : MR PV NANAVATI for Appellant(s) : 1,MR VIBHUTI NANAVATI for Appellant(s) : 1, MR PRAVIN GONDALIYA for Defendant(s) : 1 - 3,6 - 7. MR JOLLY R SHAH for Defendant(s) : 4, RULE SERVED BY DS for Defendant(s) : 5, 8, RULE NOT RECD BACK for Defendant(s) : 9, MR DAKSHESH MEHTA for Defendant(s) : 10, ========================================================= CORAM : HONOURABLE MR.JUSTICE D.H.WAGHELA FA/3608/2007 JUDGMENT Date : 08/02/2008 ORAL JUDGMENT

1. The appellant-Insurance Company has, under the provisions of Section 173 of the Motor Vehicles Act, 1988 (for short, “the Act”), challenged the judgment and award dated

20.12.2006 of M.A.C.T., Patan in a group of claim petitions, even as the appellant-Insurance Company is directed to pay, jointly and severally with another insurance company and the owners of the vehicles, various amounts of compensation in 14 claim petitions.

2. It was submitted by learned counsel Mr.V.P. Nanavati, appearing for the appellant, that the original claimants were travelling by tempo bearing registration No.GJ-12-V-7943, which was insured by the appellant. The motor accident was caused by collision of that tempo with the tanker insured by respondent No.10 herein. It was submitted that the driver of the tanker was solely negligent in causing the accident whereas the appellant could not have been saddled with any liability in view of the fact that the tempo was a goods vehicle and the victims of the accident were travelling in the tempo which FA/3608/2007 JUDGMENT violated the Motor Vehicles Rules. Elaborating that argument, learned counsel submitted that, even though the claims were made or entertained under Section 163A of the Act, the appellant- Insurance Company was required and permitted to take all the defences under Section 170 and, even otherwise, breach of specified condition of policy was one of the defences available to the appellant. He further submitted that the provisions of Section 147 did not require the policy to cover liability arising out of injury to the passengers travelling in the goods vehicle. It was, however, fairly conceded that the liability under the impugned award being joint and several, the other insurance company i.e. respondent No.10 had already satisfied the awards to the extent of 50% and it did not even propose to challenge the liability as stated by its learned counsel Mr.Dakshes Mehta. It was also conceded that the arguments sought or proposed to be advanced for the appellant and recent judgments proposed to be relied upon were elaborately considered in the recent judgment dated 16.01.2008 of this Court in First Appeal No.2042 of 2007 and allied matters [New India Assurance Co. Ltd. V/s. P. Saguna wd/o. P.Balakrishna and others].

3. Learned counsel Mr.Gondaliya, appearing FA/3608/2007 JUDGMENT for the original claimants, relied upon the aforesaid recent judgment of this Court and the observations as under made therein:- Schedule, “9. The scheme of the provisions relevant for interpretation and application of section 163-A is fairly clear, although not very simple. Section 163-A is engrafted into Chapter XI entitled "Insurance Of Motor Vehicles Against Third Party Risks" and clearly provides for liability of the insurer to pay compensation, as indicated in the notwithstanding Second anything contained in the Act or in any other law or instrument having force of law. Simply put, it creates an absolute liability of the owner of the motor vehicle as well as the authorised insurer in case of death or permanent disablement due to accident arising out of the use of motor vehicle. And, self- contained code as it is held to be in Deepal Soni (supra), the liability should not depend upon or be subject to any other consideration under any other provision of law. That conclusion would be further buttressed by reading the relevant part of sub-section (1) of section 149 of the Act. That part, shorn of irrelevant or adjectival clauses, provides that if an award in respect of any liability required to be covered by the policy OR under the provisions of section 163-A is obtained against any person insured by the policy, the insurer shall, subject to the provisions of that section, pay to the other person entitled to the benefit of the decree, any sum not exceeding the sum assured payable thereunder, as if he were the judgment debtor. FA/3608/2007 JUDGMENT

9.1 Conjoint reading of sections 149 (1) and 163-A (1) would lead to the conclusion that liability to pay compensation under section 163-A arises directly against the authorised insurer as such and for obtaining an award in that regard so as to execute a decree as if the insurer were the judgment debtor, the provisions of section 149 have to be complied. The fact, however, would remain that the liability under section 163-A is an independent statutory liability directly arising against the insurer.

9.2 Under the provisions of section 146 of the Act, insurance is compulsorily required "in relation to the use of the vehicle" and the policy has to compulsorily comply with the requirements of Chapter XI which includes provisions of section 163-A. However, the provisions in section 149 (1) creating a direct duty of the insurer to satisfy awards made under section 163-A is subject to the provisions of sub-section (2) of section 149 which provide for notice to and defences available for the insurer. That opportunity and availability of defences, however, are again subject to sub-sections (4) and (5) and restricted by the provisions of sub-section (7) of section 149. According to sub-section (4), once a certificate of insurance has been issued, so much of the policy as purports to restrict the insurance by reference to any condition other than those in clause (b) of sub-section (2) shall be of no effect; provided that any liability discharged by the insurer by virtue only of sub-section (4) shall be recoverable by the insurer from any person whose liability was discharged. FA/3608/2007 JUDGMENT material That would mean, even in case of breach of specified condition as enumerated in section 149 (2), liability has to be discharged by the insurer except where the policy was void on the ground of having been obtained by non-disclosure misrepresentation. Even if the liability incurred by the insurer exceeds the amount for which the insurer would be liable under the policy, the insurer will have to pay, but would be entitled to recover the excess from the insured. The insurer is, by sub-section (7), expressly prohibited from avoiding his liability towards any person entitled to the benefit of an award made under section 163-A, otherwise than in the manner provided for in sub-section (2) of section 149. Thus, as clearly held in 9.3 National Insurance Co. Ltd. v. Swaran Singh (supra), insurer is entitled to raise defences in terms of section 149 (2) subject to such qualifications as are laid down in that judgment. Otherwise, the scheme of compulsory insurance "in relation to the use of the vehicle" to insure against death, bodily injury or damage to any property of a third-party caused by or arising out of the use of the vehicle in a public place is wide enough to encompass "any liability" in respect of "any person". Since the requirement of even pleading any wrongful act, neglect or default of the owner or any other person is expressly excluded by sub-section (2) of section 163-A, the question of attributing negligence to any person, in proceeding under section 163-A, cannot be allowed to arise. As held by this Court in Bajaj Allianz General Insurance FA/3608/2007 JUDGMENT Co. Ltd. v. Belaben (supra), insurer's liability under section 163-A encompasses the liability to pay compensation on the basis of "no fault principle" even in case of a driver who is alleged to be responsible for causing the accident in question. As held by another Division Bench of this Court in New India Assurance Co. Ltd. v. Muna Maya Basant (supra), by introduction of section 163-A, liability arising thereunder must now be deemed to have been covered under the statutory liability regardless of the pecuniary limit in that regard specified in the policy or premium charged. Thus, the limits of statutory liability has to be deemed to have been extended or enlarged appropriately so as to cover the liability that arises under section 163- A and, for that, extra premium is not to be charged or specific contract is not required to be entered into. These propositions of law supported by aforesaid statutory provisions and precedents binding on this court cover all the contentions of the appellants. The victim of the accident being the tortfeaser, pillion rider, employee of the insured or gratuitous passenger appears to be wholly irrelevant for the purposes of adjudication of a claim for compensation under section 163-A of the Act.

10. However, it was vehemently argued that very title of Chapter XI indicated that a scheme of compulsory insurance was provided against third- party risks and the title of the Second Schedule prescribed under section 163-A also provides for compensation for third-party claims which would not include the claims arising from death or FA/3608/2007 JUDGMENT injury to an employee, a driver, a pillion rider or a gratuitous passenger. The submissions in that regard were sought to be supported by the observations quoted hereinabove in Oriental Insurance Co. Ltd. v. Meena Variyal (supra), United India Insurance Co. Ltd. v. Tilak Singh (supra) and New India Assurance Co. Ltd. v. Asha Rani (supra). It was submitted that the cover of compulsory insurance provided by Chapter XI of the Act was only against third-party risks and "any person" is to be understood as "a third party", as held in the aforesaid judgments. And, as the provisions for compulsory insurance do not enjoin any statutory liability on the owner of the vehicle to get his vehicle insured for any passenger travelling in a goods vehicle, or gratuitous passenger in any other vehicle, their claim under section 163-A also need not be satisfied by the insurer. It must, however, be noted that the observations in Oriental Insurance Co. Ltd. v. Meena Variyal (supra), Dhanraj v. New India Assurance Co. Ltd. (supra), National Insurance Co. Ltd. v. Laxmi Narain Dhut (supra), and in United India Insurance Co. Ltd. v. Tilak Singh (supra), were not made with reference to the above aspect of the provisions of section 163-A of the Act; whereas the claims of compensation under section 163-A of the Act were under direct consideration of three Judge Bench of the Apex Court in National Insurance Co. Ltd. v. Swaran Singh (supra) and Deepal Soni (supra). In Meena Variyal (supra) itself it is observed that an obitur dictum of the Supreme Court is binding only in absence of a direct pronouncement on a particular question. The judgment in Laxmi Narain Dhut (supra) emphasises "rule of legislative FA/3608/2007 JUDGMENT intent". Interpretation must depend on the text and the context and the Court has to choose that interpretation which represents the true intention of the legislature. The enactment of section 163-A and amendment of section 149 (1) clearly marks a departure from the concept of insurer indemnifying the owner for the benefit and purpose of satisfying decrees obtained by third parties and breaks new ground by making the insurer directly liable to pay regardless of its liability under the policy of insurance. After the Amendment Act 54 of 1994, broadly two kinds of awards are required to be satisfied by the insurer under section 149 (1); viz. (i) "awards 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 (ii)"under the provisions of section 163-A". That addition of the alternative category of liability "under the provisions of section 163-A" unequivocally makes such liability different from the liability covered by the express terms of the policy.

10.1 Even as late as in the year 2007, in Smt. Yallwwa and Others (supra), while considering the provision for "no fault liability" under section 140, it was observed that it made the owner of the vehicle liable, but not the insurer per se. As against that, by express language of section 163-A, insurer is made directly liable per se as discussed earlier. Therefore, keeping in mind the objectives and purpose for which the provisions of section 163-A are made, and made to supersede all other provisions of law, it has to be FA/3608/2007 JUDGMENT held that the claim for compensation by a third-party cannot be defeated by an insurer of the motor vehicle out of the use of which the accident had arisen and death or permanent disablement caused, except as indicated hereinabove. It may be pertinent to reproduce as under, the observations of Justice Frankfurter of the United States Supreme Court, as quoted in para 35 of National Insurance Co. Ltd. v. Laxmi Narain Dhut(supra): "35. Legislation has an aim, it seeks to obviate some mischief, to supply an adequacy, to effect a change of policy, to formulate a plan of Government. That aim, that policy is not drawn, like nitrogen, out of the air; it is evidenced in the language of the statutes, as read in the light of other external manifestations of purpose." The observations of the Supreme Court in Mehboob Dawood Shaikh v. State of Maharashtra [(2004) 2 SCC 362] on application of precedent may be quoted as under: "12. ....A decision is available as a precedent only if it decides a question of law. A judgment should be understood in the light of facts of that case and no more should be read into it than what it actually says. It is neither desirable nor permissible to pick out a word or a sentence from the judgment of this Court divorced from the context of the question under consideration and treat it to be complete law decided by this Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before this Court." FA/3608/2007 JUDGMENT following Therefore,

11. judgments directly applicable in the cases under section 163-A and in view of the benevolent scheme of creating a statutory liability of the insurer, independent of the terms of policy and any other provision of law, it is held that the pleas and defences of the victim of the accident being tortfeaser, pillion rider, gratuitous passenger or employee of the insured were not available to the insurer for avoiding or defeating its liability to pay compensation in accordance with the prescribed formula.”

4. In view of the issue sought to be raised in the group of appeals having been admittedly squarely covered by the aforesaid recent judgment of this Court, the appeals are dismissed and Civil Applications are rejected and Rule issued in each of the applications is discharged with no order as to costs. Learned counsel Mr.Nanavati requested that in view of the conditional injunction having operated during the pendency of the civil applications, it may be continued for six weeks for the appellant to avail the opportunity of approaching the higher forum. The request was, however, not required to be considered in view of the statement made by learned counsel Mr.Gondaliya, appearing for the original claimants, that none of the claimants will withdraw any of the amounts deposited by the appellant towards its part of liability for six FA/3608/2007 JUDGMENT weeks from today. Hitesh (D.H.WAGHELA, J.)