JUDGMENT S.P. Srivastava and M.P. Singh, JJ.
1. Heard the learned counsel for the insurer-appellant.
2. The only submission urged and pressed in support of this appeal by the insurer-appellant is that the deceased who was travelling in the offending motor vehicle (a Truck) was the owner of the goods being carried in the truck and, therefore, there being a breach of the terms and conditions, subject to which the insurance policy had been issued, the insurer could not be saddled with any liability to pay the amount of compensation determined by the Motor Accident Claims Tribunal.
3. Learned counsel for the respondents has strenuously urged that in the facts and circumstances of the case taking into account the statutory liability of the insurer, it has rightly not been exonerated as claimed.
4. We have given our anxious consideration to the above submissions made by the learned counsel for the parties.
5. It is not disputed that the terms and conditions subject to which the policy has been issued, permitted the carrying of 5 persons as labourers. It has come in the evidence that although the goods in question which was sand, had been purchased by the deceased and he was taking the said goods as a labourer. He was acting in a dual capacity.
6. The status of the insurer in law so far as the statutory liability sought to be fastened upon him under the Act cannot be more than that of a guarantor and he acts as a security for the third party with respect to its realising damages for the injuries suffered or death, as the case may be, but a right to get any amount paid in excess is refunded to it by the insured, stands secured. The ultimate burden always remains cast or fastened on the insured/owner of the motor vehicle.
7. In any view of the matter, since the insurer was bound under law to discharge the statutory liability cast upon it under the provisions of the Motor Vehicles Act, the mere fact that there was an alleged breach of the terms and conditions subject to which the policy had been issued, cannot exonerate the insurer from its liability as against the third party or the victim.
8. In its decision, the Apex Court, in the case of Oriental Insurance Co. Ltd. v. Cheruvakkara Najeessu and Ors., Civil Appeal No. 7359 of 2000, decided on 14.12.2000, had elaborately dealt with the extent of liability of an insurance company towards the third party as per Section 95 (1) (b) of the Motor Vehicles Act, 1939, and on the question as to what are its rights in case of payment of an amount in excess of the limits of the liability under the insurance policy vis-a-vis the insured.
9. In the aforesaid case, the claimants had raised a claim for an amount of Rs. 2,00,000 as compensation on account of the death of their predecessor-in-interest in a road accident on 6.7.1988 involving the offending motor vehicle an auto-rickshaw bearing registration No. KRN 1859. The insurer had contested the claim specifically stating therein that its liability was limited to Rs. 50,000 under the policy of insurance. The Claims Tribunal, however, had granted an award for an amount of Rs. 1,94,150 and had fastened the entire liability on the appellant/ Insurance company. The insurance policy in that case was of a date prior to the coming into force of the new Motor Vehicles Act, 1988, on 1.7.1989.
10. Under the aforesaid insurance policy, the limit of the Insurance Company's liability in respect of any one claim or series of claims arising out of one event was fixed at Rs. 50,000 only. However, the avoidance clause of the policy provided that "nothing in the said policy or the endorsement hereon shall affect the right of any person indemnified by this policy or any other person to recover an amount under or by virtue of the provisions of the Motor Vehicles Act, 1939, Section 96. But the insured shall pay to the company all sums paid by the company which the company would not have been liable to pay but for the said provisions". Section II of the policy dealt with "liability of third party" and provided that the company will indemnify the insured against all sums including claimants posts and expenses which insured become legally liable to pay in respect of the death of or bodily injury to any person caused by or arising out of the use of the motor vehicle or damage to the property caused by such use.
11. Taking into consideration the earlier decisions of the Apex Court in the case of New Asiatic Insurance Co. Ltd. v. Pessuamal Dhanamal Aswani and Ors., AIR 1964 SC 1736 and Amrit Lal Sood and Anr. v. Smt. Kaushalaya Devi Thapar and Ors., 1998 (2) AWC 1197 (SC) : AIR 1998 SC 1433, the Hon'ble Supreme Court came to the conclusion that despite holding the liability under the policy limited to the extent of Rs. 50,000 the Claims Tribunal and the High Court were not unjustified in directing the appellant/Insurance Company to pay the whole of the awarded amount to the claimants on the basis of the contractual obligations contained in clauses relating to the liability of the third parties and avoidance clause. However, it was further indicated that the Claims Tribunal and the High Court were not justified in rejecting the right of the appellant/Insurance Company to recover from the insured the excess amount paid in execution and discharge of the award of the Tribunal.
12. In the aforesaid view of the matter, the Apex Court allowed the appeal holding that the appellant/ Insurance Company was liable to pay the entire awarded amount to the claimants. Upon making such payment, the appellant can recover the excess amount from the insured by executing the award against the insured to the extent of such excess as per Section 174 of the Motor Vehicles Act, 1988.
13. In its another decision in the case of New India Assurance Company, Shimla v. Kamla and Ors. 2001 (2) AWC 1405 (SC) :
2001 AIR SCW 1340, the Apex Court had indicated, taking into consideration the implications arising under Sub-section (4) and its proviso together with Sub-section (5) of Section 149 of the Motor Vehicles Act, 1988, that they are intended to safeguard the interest of an insurer who otherwise has no liability to pay any amount to the insured but for the provisions contained in Chapter XI of the Act. This, it was clarified, means that the insurer has to pay to the third parties only on account of the fact that a policy of insurance has been issued in respect of the vehicle, but the insurer is entitled to recover any such sum from the insured if the insurer were not otherwise liable to pay such sum to the insured by virtue of the conditions of the contract of insurance indicated by the policy.
14. In paragraph 22 of the aforesaid decision, the Apex Court summarized the position in law indicating that when a valid insurance policy has been issued in respect of a vehicle as evidenced by a certificate of insurance, the burden is on the insurer to pay to third parties, whether or not there has been any breach or violation of the policy conditions. But the amount so paid by the insurer to third parties can be allowed to be recovered from the insured if as per the policy conditions, the insurer had no liability to pay such sum to the insured.
15. In paragraph 25 of the aforesaid decision, it was indicated that the insurer and the insured are bound by the conditions enumerated in the policy and the insurer was not liable to the insured if there was violation of any policy condition. But the insurer who was made statutorily liable to pay compensation to third parties on account of the certificate of insurance issued shall be entitled to recover from the insured the amount paid to the third parties, if there was any breach of policy condition.
16. In view of the aforesaid position in law and what has been indicated herein before, no justifiable ground has been made out for any interference in the impugned award in favour of the claimants. The appeal is dismissed as against the claimants providing, however, that the appellant-company can recover the excess amount from the insured by executing the award against the insured to the extent of such excess as per Section 174 of the Motor Vehicles Act, 1988, on the adjudication of this dispute after affording an opportunity to the insured of being heard in the matter.
17. As prayed, the amount of Rs. 25,000 deposited in this Court by the insurer-appellant under Section 173 of the Motor Vehicles Act be remitted to the Motor Accident Claims Tribunal concerned so that it may be disbursed to the claimant.