The Manager, Iffco Tokyo General Insurance Company Ltd. v. Selvam & Ors.

1BEFORE THE MADURAI BENCH OF MADRAS HIGH COURTDATED : 01.07.2011CORAM :THE HONOURABLE MS.JUSTICE K.B.K.VASUKIC.M.A.(MD)No.736 of 2011The Manager, Iffco Tokyo General Insurance Company Ltd., 82, Preetham Plaza,I Floor, ChandraganthiNagar, Ponmani, Bye Pass,Madurai - 625 010. ... Appellant/2nd respondentVs.1.Selvam2.Minor Arun Kumar3.Minor Ashok Kumar ... Respondents 1 to 3/Petitioners(rep. by the respondents 2 & 3 are represented by their father and guardian Selvam, 1st respondent)4.Suresh5.Natrayasamy6.The Manager, Sozhamandalam M.S.General Insurance Co. Ltd., I Floor, Anna Plaza No.5, Kovai Road, Opp. AKC Petrol Bunk, Karur -2. ... Respondents 4 to 6/4th respondentPRAYER: Civil Miscellaneous Appeal filed under Section 173 of theMotor Vehicles Act, 1988 against the award dated 04.02.2011 made inM.C.O.P.No.438 of 2009 on the file of the Motor Accident ClaimsTribunal/Additional District cum Fast Track Court, Dindigul.For appellant : Mr.S.Srinivasa RaghavanJUDGMENTThis appeal is, on consent, disposed of at the admissionstage.2. This appeal is filed by the second respondent/insureragainst the award of compensation of Rs.5,95,000/- made in favour ofthe claimants/respondents 1 to 3 for the death of one Dhanam in theaccident occurred at 10.15 p.m. on 31.05.2009 near GopalpattiKaruppu Kovil on Dindigul to Natham Main Road due to head oncollusion of two autos owned by the respondents 1 & 3 and insuredwith the respondents 2 & 4. 3.The tribunal after due analaysis of the materials placedbefore the same, found that the driver of the first respondent'sauto is responsible for the accident and that the auto driver washaving only licence to drive Light Motor Vehicle and the auto in https://hcservices.ecourts.gov.in/hcservices/ 2question was used for transport purpose and the auto driver drovethe vehicle without any badge or endorsement to drive particulartype of vehicle, as such, he is not duly licenced to drive thevehicle and on the basis of such finding, directed the award ofcompensation to be satisfied by the second respondent/insurer onbehalf of the first respondent/insured at the first instance withright given to the second respondent/insurer to recover the samefrom the insured by initiating execution proceedings in the sameclaim petition.4.The present appeal is filed by the insurer against thedirection for payment made against the insurer by applying thedoctrine of pay and recovery theory. It is argued by the learnedcounsel for the appellant that the act of the first respondent/ownerin permitting his driver to drive the vehicle at the time of theaccident without proper and effective driving licence amounts tobasic and fundamental breach of terms and conditions of the policyof insurance and on the strength of exclusion clause in the policyof insurance, the insurer ought to have been totally exonerated fromthe liability to answer the award and ought not to have beendirected to, answer the award. It is his contention that pay andrecovery principle is not applicable to the instant case.5.The main point arises for consideration herein is as towhether the direction issued to the insurer for payment of awardwith right given to the same to recover it from the insured on theground that the driver of the offending vehicle was on the date ofthe accident not duly licenced to drive the vehicle in question andthe licence possessed by him was only to drive light motor nontransport vehicle without any endorsement to drive transport vehicleis sustainable? The same is already dealt with by the larger benchof the Supreme court in the judgment reported in 2004 (2) LW 744(National Insurance Company Limited Vs. Swaran Singh and others) andthe same is referred to by the Supreme Court in the subsequentjudgments and also followed by our High Court.6.The Hon'ble Supreme court in the batch of cases referred toabove, had an occasion to deal with the question of law relating toSection 149(2)(a)(ii) vis-'-vis the proviso to Sub-Sections (4) and(5) of the Motor Vehicles Act. In all these cases, the InsuranceCompany raised the defence in terms of Section 149(2)(a)(ii) of theMotor Vehicles Act, 1988 relating to non-possession of drivinglicence by the driver or possession of fake licence, expiredlicence, licence to drive for one class and description of vehicleand drivers having learner's licence and not duly licenced etc. TheHon'ble Supreme Court having detailed analysis of factual and legalaspects in respect of each defence so raised under separate captionhas in para 110 summarised its findings on various issues. Forbetter appreciation, para 110 of the Hon'ble Apex Court judgment isextracted hereunder :"(i) Chapter XI of the Motor Vehicles Act, 1988 providingcompulsory insurance of vehicles against third-party risksis a social welfare legislation to extend relief bycompensation to victims of accidents caused by use of motor https://hcservices.ecourts.gov.in/hcservices/ 3vehicles. The provisions of compulsory insurance coverage ofall vehicles are with this paramount object and theprovisions of the Act have to be so interpreted as toeffectuate the said object.(ii) An insurer is entitled to raise a defence in a claimpetition filed under Section 163-A or Section 166 of theMotor Vehicles Act, 1988, inter alia, in terms of Section149(2)(a)(ii) of the said Act.(iii) The breach of policy condition e.g. disqualificationof the driver or invalid driving licence of the driver, ascontained in sub-section (2)(a)(ii) of Section 149, has tobe proved to have been committed by the insured for avoidingliability by the insurer. Mere absence, fake or invaliddriving licence or disqualification of the driver fordriving at the relevant time, are not in themselves defencesavailable to the insurer against either the insured or thethird parties. To avoid its liability towards the insured,the insurer has to prove that the insured was guilty ofnegligence and failed to exercise reasonable care in thematter of fulfilling the condition of the policy regardinguse of vehicles by a duly licensed driver or one who was notdisqualified to drive at the relevant time.(iv) Insurance companies, however, with a view to avoidtheir liability must not only establish the availabledefence(s) raised in the said proceedings but must alsoestablish “breach” on the part of the owner of the vehicle;the burden of proof wherefor would be on them.(v) The court cannot lay down any criteria as to how thesaid burden would be discharged, inasmuch as the same woulddepend upon the facts and circumstances of each case.(vi) Even where the insurer is able to prove breach on thepart of the insured concerning the policy conditionregarding holding of a valid licence by the driver or hisqualification to drive during the relevant period, theinsurer would not be allowed to avoid its liability towardsthe insured unless the said breach or breaches on thecondition of driving licence is/are so fundamental as arefound to have contributed to the cause of the accident. TheTribunals in interpreting the policy conditions would apply“the rule of main purpose” and the concept of “fundamentalbreach” to allow defences available to the insurer underSection 149(2) of the Act.(vii) The question, as to whether the owner has takenreasonable care to find out as to whether the drivinglicence produced by the driver (a fake one or otherwise),does not fulfil the requirements of law or not will have tobe determined in each case.(viii) If a vehicle at the time of accident was driven bya person having a learner's licence, the insurance companieswould be liable to satisfy the decree.(ix) The Claims Tribunal constituted under Section 165read with Section 168 is empowered to adjudicate all claims https://hcservices.ecourts.gov.in/hcservices/ 4in respect of the accidents involving death or of bodilyinjury or damage to property of third party arising in useof motor vehicle. The said power of the Tribunal is notrestricted to decide the claims inter se between claimant orclaimants on one side and insured, insurer and driver on theother. In the course of adjudicating the claim forcompensation and to decide the availability of defence ordefences to the insurer, the Tribunal has necessarily thepower and jurisdiction to decide disputes inter se betweenthe insurer and the insured. The decision rendered on theclaims and disputes inter se between the insurer and insuredin the course of adjudication of claim for compensation bythe claimants and the award made thereon is enforceable andexecutable in the same manner as provided in Section 174 ofthe Act for enforcement and execution of the award in favourof the claimants.(x) Where on adjudication of the claim under the Act theTribunal arrives at a conclusion that the insurer hassatisfactorily proved its defence in accordance with theprovisions of Section 149(2) read with sub-section (7), asinterpreted by this Court above, the Tribunal can directthat the insurer is liable to be reimbursed by the insuredfor the compensation and other amounts which it has beencompelled to pay to the third party under the award of theTribunal. Such determination of claim by the Tribunal willbe enforceable and the money found due to the insurer fromthe insured will be recoverable on a certificate issued bythe Tribunal to the Collector in the same manner underSection 174 of the Act as arrears of land revenue. Thecertificate will be issued for the recovery as arrears ofland revenue only if, as required by sub-section (3) ofSection 168 of the Act the insured fails to deposit theamount awarded in favour of the insurer within thirty daysfrom the date of announcement of the award by the Tribunal.(xi) The provisions contained in sub-section (4) with theproviso thereunder and sub-section (5) which are intended tocover specified contingencies mentioned therein to enablethe insurer to recover the amount paid under the contract ofinsurance on behalf of the insured can be taken recourse toby the Tribunal and be extended to claims and defences ofthe insurer against the insured by relegating them to theremedy before regular court in cases where on given factsand circumstances adjudication of their claims inter semight delay the adjudication of the claims of the victims.7.The Hon'ble Supreme Court has laid down general principlesin Clauses (iii) to (viii) as referred to above in respect of breachof policy condition and the circumstances under which the insurancecompany can avoid its liability and the factors to be proved fordoing so and the mode of proving the same. In terms of which, theinsurer, in order to avoid their liability, is bound to prove thefirst act of breach of policy condition by the insured, such asdisqualification of the driver to drive the particular type of https://hcservices.ecourts.gov.in/hcservices/ 5vehicle or invalid driving licence etc. as contained in sub section2(a)(ii) of Section 149. But the same by itself will not amount todefence to avoid its liability and the insurer has to further provethat the insured was in any manner guilty of negligence orresponsible for breach of policy condition by having failed to takereasonable care in the matter of fulfilling the condition of thepolicy regarding the use of vehicle by duly licensed driver or byone who was not disqualified to drive the vehicle at the relevantpoint of time and to further prove that the breach is so fundamentalso as to contribute to the cause of the accident. In this case nosuch proof is available. The Hon'ble Supreme Court has under givensituation by duly interpreting sub sections 2, 4 and 5 of Section149, observed that whenever the insurer seeks to raise the defenceavailable under Section 149(2)(a)(ii) of the Act against the insuredin respect of the claim made by the third party, the insurer shallbe so long as the policy is in force, liable to indemnify theinsured and can have recourse under proviso to sub section 4 ofSection 149, which enables the insurer to recover from the insuredany sum paid by the insurer in or towards the discharge of liabilityor such person covered by the policy by virtue of Section 149(2) byinvoking the principle of 'pay and recovery' and the Tribunal cantake recourse to the same and can direct the insurer to at the firstinstance satisfy the award and then to get reimbursed by the insuredfor the compensation and other amounts, which it is compelled to payto the third party under the award of the Tribunal. 8.That being the factual and legal position, the same issquarely applicable to the facts of the present case, wherein, thedriver has valid license, but no effective endorsement to driveparticular type of vehicle, as such, the insurer cannot escape fromits liability to satisfy the award. Hence, the Tribunal's directionfor payment issued against the insurer with right given to theinsurer to proceed against the insured for recovery of the same,deserves no interference by this Court.9.In the result, the appeal stands dismissed and the awarddated 04.02.2011 made in M.C.O.P.No.438 of 2009 on the file of theMotor Accident Claims Tribunal/Additional District cum Fast TrackCourt, Dindigul is confirmed. Consequently, connected miscellaneouspetition is also dismissed. No costs.Sd/- Assistant Registrar(Crl.side) /True Copy/ Sub Assistant Registrar To1.The Motor Accident Claims Tribunal/Additional District cum FastTrack Court, Dindigul.+1cc to Mr.S.Srinivasa Raghavan, Advocate in SR.21217C.M.A.(MD)No.736 of 201101.07.2011gcgPBK :05.06.2012 ::5P-3C::