R.A. Sharma, J.
1. In view of the difference of opinion between the Hon'ble Judges, the Division Bench passed the following order referring three questions mentioned therein for being decided by a third Judge:
Since we are divided in opinion, we refer the following points of diffrence for being decided by a third Judge in accordance with Chapter VII, Rule 3 of the Rules of the Court:
1. If a vehicle which is registered as a taxi meets an accident, whether the Insurance Company can disown its liability to compensate for the loss, if the driver driving the vehicle did not possess a driving livence which entitled him to drive a transport vehicle (taxi)?
2. Whether there is any embargo under the provisions of the Motor Vehicles Act, 1988, prohibiting driving of a transport vehicle (taxi) for private use by a vehicle?
3. Whether on the facts and circumstances of the present case, the action of the Insurance Company in repudiating the claim of the petitioner was justified in law?
Let the papers of this case be placed before Hon'ble the Chief justice for appropriate orders, forthwith.
Hon,ble the Chief Justice has nominated me for deciding those questions. I have heard the learned Counsel for the parties.
Petitioner purchased a Maruti Car 1000 under the State Sponsored Scheme and it was registered as a Taxi. Petitioner submitted aproposal on 4.9.1992 before M/s. Oriental Insurance Company (hereinafter referred to as the Company) for getting the said car insured as a taxi. The Company, however, insured the car as a private car instead of a taxi. On 6.10.1992 petitioner's younger brother, Parag Gupta, aged about 26 years was driving the said car when it was involved in a serious accident, resulting in the death of Parag Gupta and two of his friends. After the accident the car was declared as a total loss. Petitioner lodged a claim for Rs. 4,00,000/- against the Company. The Company repudiated the claim of the petitioner on the ground that Parag Gupta, who was driving the car, did not have a licence to drive a taxi. Hence this petition.
2. Chapter XI consisting of Sections 145 to 164 of the Motor Vehicles Act, 1988 (hereinafter referred to as the Act) deals with the insurance of the motor vehicles. Section 146 prohibits the use of a motor vehicle in a public place by any person except as a passenger, unless there is in force in relation to the use of the vehicle by that perspn, a policy of insurance complying with the requirements of the aforesaid Chapter. Section 147 has laid down the requirements of the insurance policy and limit of the liability of the Insurance Company. Relevant part of Sub section (1) of Section 147 of the Act is extracted below:
147. Requirements of policies and limits of liability--(1) In order to comply with the requirements of this Chapter, a policy of insurance must be a policy which.
(a) is issued by a person who is an authorised insurer; and
(b) insures the person or classes of persons specified in the policy to the extent specified in Sub-section (2):
(i) against any liability which may be incurred by him in respect of the death of or bodily injury to any person or damage to any property of a third party caused by or arising out of the use of the vehicle in a public place;
(ii) against the death of or bodily injury to any passenger of a public service vehicle caused by or arising out of the use of the vehicle in a public place.
3. Section 149 places an obligation on the insurer to satisfy judgment and award against the person insured in respect of third party risks. Sub-section (1) of Section 149 is as under:
149. Duty of insurers to satisfy judgments and awards against persons insured in respect of thirdparty 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 is obtained against any person insured by the policy then, no twithstanding that 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 payable 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.
Under Sub-section (2) of Section 149 the insurer is entitled to defend the action initiated for recovery of the compensation on any of the following grounds:
(a) that there has been a breach of a specified condition or 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 and 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 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 nondisclosure of a material fact or by a representation of fact which was false in some material particular.
4. Supreme Court in Skandia Insurance Co. Ltd. v. Kokilaben Chandravadan AIR 1987 SC 1184: I (1987) ACC 413, while dealing with a case under the old Motor Vehicles Act, 1939, provisions of which, in this connection, are similar to those contained in the Act, has laid down that the provisions regarding insurance of the motor vehicles have been incorporated in the said Act so as to protectthe members of the public travelling in vehicles or using the roads from the risk attendant upon the user of motor vehicles on the roads. In order to achieve the said object the Legislature has on the one hand prohibited the use of motor vehicle in public place without a third party insurance and on the other hand has made it obligatory for the Insurance Company to satisfy the judgment against the person insured against third party risk except and save to the extent provided for in Section 96 of the old Act (Section 149 of the Act). The relevant extract from the aforesaid decision of the Supreme Court is reproduced below:
To overcome this ugly situation the Legislature has made it obligatory that no motor vehicle shall be used unless a third party insurance is in force. To use the vehicle without the requisite third party insurance being in force is a penal offence. The Legislature was also faced with another problem. The insurance policy might provide for liability walled in by conditions which may be specified in the contract policy. In order to make the protection real, the Legislature has also provided that the judgment obtained shall not be defeated by the incorporation of exclusion except and save to the extent permitted by Section 96 it will be the obligation of the Insurance Company to satisfy the judgment obtained against the persons insured against third party risks (vide Section 96). In other words, the Legislature has insisted and made it incumbent on the user of a motor vehicle to be armed with an insurance policy coverting third party risk which is in conformity with the provisions enacted by the Legislature. It is so provided in order to ensure that the injured victims of automobile accidents or the dependents of the victims of fatal accidents are really compensated in terms of money and not in terms of promise. Such a benign provision enacted by the Legislature having regard to the fact that in the modern age the use of motor vehicles notwithstanding the attendant hazards, has become an inescapable fact of life, has to be interpreted in a meaningful manner which serves rather than defeats the purpose of the legislation. The provision has, therefore, to be interpreted in the twilight of the aforesaid perspective.
5. Insurance Company, therefore, can avoid its liability only on the ground mentioned in Section 149 of the Act and it cannot defeat the claim on the basis of the exclusion clause other than those authorised by Section 149. Sub-section (7) of Section 149, which is reproduced below also makes this position clear:
(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 toin 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 receiprocating country, as the case may be.
Explanation.--For the purposes 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.
As regards the breach of condition referred to in Section 96(2)(b)(ii) of the old Act (Section 149(2)(a)(ii) of Act excluding driving by named person or a person, who is not duly licensed or by a person, who has been disqualified for holding or obtaining a driving licence, on account of which Insurance Company can avoid its liability, Supreme Court in Skandia Insurance Co. Ltd. v. Kokilaben Chandravadan (supra), extract from which is reproduced below, has laid down that unless the insured is at fault, Insurance Company cannot avoid its liability:
Section 96(2)(b)(ii) extends immunity to the Insurance Company if a breach is committed of the aondition excluding driving by a named person or persons or by any person who is not fully licensed, or by any person who has been disqualified for holding or obtaining a driving licence during the period of disqualification. The expression 'breach' is of great significance. The dictionary meaning of breach' is infringement or violation of a promise or obligation' (see Collins English Dictionary). It is therefore abundantly clear that the insurer will have to establish that the insured is guilty of an infringement or violation of a promise that a person who is not (sic) duly licensed will have to be in charge of the vehicle. The very concept of infringement or violation of the promise that the expression breach carries within itself inducesan inference that the violation or violation. If the insured is not at all at fault and has not done anything he should not have done or is not amiss in any respect how can it be conscientiously posited that he has committed a beach? It is only when the insured himself places the vehicle in charge of a person who does not hold a driving licence, that it can be said mat he is guilty' of the breach of the promise that the vehicle will be driven by a licensed driver. It must be established by the Insurance Company that the breach was on the part of the insured and that it was the insured who was guilty of violating the promise or infringement of the contract. Unless the insured is at fault and is guilty of a breach the insurer cannot escape from the obligation to indemnify the insured and successfully contend that he is exonerated having regard to the fact that the promisor (the injured) committed a breach of his promise. Not when some mishap occurs by some mischance. When the insured has done everything within his power inasmuch as he has engaged a licensed driver and has placed the vehicle in charge of a licensed driver, with the express or implied mandate to drive himself it cannot be said that the insurer is guilty of any breach. And it is only in case of a breach or a violation of the promise on the part of the insured that the insured can hide under the umbrella of the exclusion clauses.
Regarding the defence of me Insurance Company on the exclusion clause the Supreme Court summed up the position as under:
(1) On a true interpretation of the relevant clause which interpretation is at peace with the conscience of Section 96, the condition excluding driving by a person not duly licensed is not absolute and the promisor is absolved once it is shown that he has done everything in his power to keep, honour, and fulfil the promise and he himself is not guilty of a deliberate breach.
(2) Even if it is treated as an absolute promise, there is substantial compliance therewith upon an express or implied mandate being given to the licensed driver not to allow the vehicle to be left unattached so that it happens to be driven by an unlicensed driver.
(3) The exclusion clause has to be read down' in order that it is not at war with the 'main purpose' of the provisions enacted for the protection of victims of accidents so that the promisor is exculpated when he does everything in his power to keep the promise.
6. In the above case the driver of the truck with its running engine had handed over its control to the cleaner who was not having a driving licence to drive such a vehicle. During the period when the truck was in the control of the cleaner, it was involved in an accident giving rise to the claim against the Insurance Company. Supreme Court upheld the claim holding that the owner of the truck was not at fault, and, therefore/the Insurance Company is liable to satisfy the judgment. The law laid down in the case of Skandia Insurance Co. Ltd. v. Kokilaben Chandravadan (supra) has been reaffirmed by the Supreme Court in Kashi Ram Yadav v. Oriental Fire and General Insurance Co. : [1989]3SCR811 wherein, in this connection, it was laid down as follows:
We affirm and reiterate the statement of lawlaid down in the above case. We may also state thatwithouttheknowledge of the insured, if by driver's acts or omission others meddle with the vehicle and cause an accident, the insurer would be liable to indemnify the insured. The insurer in such a case cannot take the defence of a breach of the condition in the certificate nf insurance. In Gum Govekar v. Miss Filomena F. Lobo and Ors. : AIR1988SC1332 , the vehicle was in the custody of a mechanic of repairer when it was involved in an accident. Supreme Court held that Insurance Company is liable to pay compensation not only when the insured has used the vehicle but also when he has allowed any other person to use the vehicle in a public place. In this connection, Supreme Court has laid down as follows:
Thus if a policy is taken in respect of a motor vehicle from an insurer in compliance with the requirements of Chapter VIII of the Act, the insurer is under an obligation to pay the compensation payable to a third party on account of any injury to his/her person or property or payable to the legal representatives of the third party in caseof death of the third party caused by or arising out of the use of the vehicle at a public place. The liability to pay compensation in respect of death of or injury caused to the person or property of a third party undoubtedly arises when such injury is caused when the insured is using the vehicle in a public place; It also arises when the insurer has caused or allowed any other person (including an independent contractor) to use his vehicle in a public place and the death of or injury to the person or property of a third party is caused on account of the use of the said vehicle during such period unless such other person has himself taken out a policy of insurance to cover the liability arising out of such an accident.
7. When a taxi is involved in an accident, Insurance Company cannot disown its liability to pay compensation for the loss unless it is proved that the insured was at fault in placing the vehicle in charge of a person, who was not holding a driving licence to drive the vehicle. So far as driving the motor vehicle in public place is concerned, the Act has approved for and defined different types of vehicles and has also made provisions for grant of driving licence to drive those vehicles. Section 2(25) of the Act defines 'motor cab' as follows:
Any motor vehicle constructed or adapted to carry not more than six passengers excluding the driver for hire or reward.
Section 2(26) defines 'motor car' as under:
Motor car' means any motor vehicle other than a transport vehicle, omnibus, road-roller, tractor, motor cycle or invalid carriage.'
'Public Service Vehicle' has been defined by Section 2(35) of the Act as follows:
Public Service' means any motor vehicle used or adapted to be used for the carriage of passengers for hire or reward, and incoudes a taxi-cab, a motor cab, contract carriage, and stage;
According to Section 2(47) 'Transport Vehicle' means:
a public service vehicle, a goods carriage, an educational institution bus or a private service vehicle.
8. The difference between a motor cab and motor car is mat the former is used for carrying not more than six passengers for hire or reward, whereas the later is not used for such a purpose.
Section 3, which is reproduced below, prohibits every person to drive a motor vehicle in any public place unless he holds an effective driving licence to drive the vehicle:
3(1). Necessity for driving licence.--No person shall drive a motor vehicle in any public place unless he holds an effective driving licence issued to him authorising him to drive the vehicle and no person shall so drive a transport vehicle (other than a motor cab hired for his own use or rented under any scheme made under Sub-section (2) of Section 75) unless his driving licence specifically entitles him so to do.
Section 5 casts a duty on owner or person incharge of a motor vehicle not to permit any person, who does not satisfy the provisions of Sections 3 & 4, to drive the vehicle. Sections 180 and 181 have made driving of a vehicle in public place in contravention of Sections 3 & 4 of the Act a penal offence punishable for a term or with fine or with both specified therein.
9. Although Section 3 has laid down that no person shall drive a transport vehicle in public place unless his driving licence specifically entitles him so to do but it has made an exception in the case of a motor cab hired for his own use or rented under any scheme under Sub-section (2) of Section 75 of the Act. It is true that motor cab is transport vehicle and ho person can drive it in public place unless he holds a licence to drive a transport vehicle; but when it is hired for one's own use or rented under any scheme under Section 75, such a driving licence is not required. Had the Legislature intended that even when a motor cab is hired for one's own use or rented under a scheme under Section 75, it must be driven by a person holding a driving licence entitling him to drive a transport vehicle, it would not have made any exception in its favour and the prohibition contained in Section 3 would have governed the situation. But when the Legislature while laying down the prohibition against driving of a transport vehicle in a public place by a person, who does not hold a driving licence, which specifically entitles him to drive such a vehicle, makes an exception regarding motor cab hired for one's own use or rented under a scheme under Section 75, it is clear that in such case, a motor cab can be driven by a person who holds a driving licence to drive a 'motor car; which is a motor vehicle other man transport vehicle.
10. In this connection it may be mentioned that Section 3 of the old Motor Vehicles Act, 1939 prior to its amendment in 1959 was as under:
3. Necessity for driving licence.--No person shall drive a motor vehicle in any public place unless he holds an effective driving licence issued to himself authorising him to drive the vehicle; and no person shall sodrive a motor vehicle as a paid employee or shall so drive a transport vehicle unless his driving licence specifically entitles him so to do.
(2) A State Government may prescribe the conditions subject to which Sub-section (1) shall not apply to a person receiving instruction in driving a motor vehicle.
Sub-section (3), which was added to the said section in 1969,provided for driving motor cab by a person holding a driving licence to drive a motor car if he has hired it for his own use. Sub-section (3) as inserted in 1969 is as under:
3. (3). Notwithstanding anything contained in Sub-section (1), a person who holds an effective driving licence authorising him to drive a motor car may drive any motor cab hired by him for his own use.
The reason for inserting Sub-section (3) in Section 3 of the old Act are as under:
Clause 3--Under the existing law, a person possessing a driving licence for a private car cannot drive a. taxi cab even for his own use. In foreign countries, however, it is possible to hire and drive a taxi cab on payment of moderate charges. This clause seeks to introduce a similar facility in India, particularly for the purposes of promotion of tourism.
Section 3 of the Act has retained what was contained in Sub-section (3) of Section 3 of the old Act. Instead of making a separate provision like Sub-section (3) of Section 3 of the old Act, Parliament has made latter part of Sub-section (1) of Section 3 of the Act, which prohibits driving of a transport vehicle by a person unless his driving licence specifically entitles him so to do, in applicable to 'motor cab' hired for his own use or rented under the scheme framed under Section 75. The result of the above provision is that the motor cab hired or rented can be driven by a person who holds driving licence to drive a motor vehicle, which includes the car, other than the transport vehicle. Therefore, a taxi (motor cab) can also be driven by a person holding a driving licence to drive motor car, if it has been hired by him for his own use or rented under any scheme under Section 75.
11. In the instant case the vehicle was insured by the Company as a private car. The insurance Policy contained the following 'Driver's clause' and the clause relating to 'Limitation as to use.'
'Drive'rs clause': 'Persons or classes of persons entitled to drive--Any person including insured provided that a person driving holds an effective driving licence at the time of accident and is not disqualified from holding or obtaining such a licence. Provided also that the person holding an effective learner's licence may also drive the vehicle and such a person satisfied the requirement of Rule 3 of the Central Motor Vehicles Rules, 1989.
Limitation as to use: Use only for social, domestic and pleasure purposes and insured's own business. The policy does not cover use for hire or reward or for organised racing pacemaking reliability trials, speed testing, carriage of goods (other than samples) in connection with any trade or business or use for any purpose in connection with Motor Trade.
12. In view of the clause laying down 'limitation as to use ' the vehicle in question could not havebeen used for hire or reward. It is admitted that at the time of the accident the vehicle was being driven as private car and was not used for hire or reward or for any other prohibited purpose. As the vehicle in question was insured as a private car and was being used as a private car at the time of the accident, the Company cannot avoid its liability to pay the compensation if the person holding a driving licence todrive a private carwasdrivingit.It is admitted that the deceased Parag Gupta, who was driving the car at the time of the accident, was holding an effective driving licence to drive a car.Deceased was thus entitled to drive the vehicle. The Insurance Company, is therefore, bound to pay the compensation to the victims of the accident or their heirs and legal representatives, as the case may be. The Company's liability to pay the compensation is absolute unless it establishes that the case is covered by any of the grounds specified in Section 149. It is not disputed that none of the grounds referred to in the said section exists so as to enable the insurer to avoid its liability. It is also not a case where the policy can be said to be void on the ground that it was obtained by nondisclosure of a material fact or by a representation of fact, which was false in some material particulars. Petitioner has submitted a proposal for insurance of his vehicle as a taxi before the Company. He is neither guilty of non-disclosure of a material fact nor is he guilty of a representation of fact, which was false in some material particulars. If the Company has insured a taxi as a private car on account of some mistake, it may be open to it to correct or cancel the insurance certificate, but till it is done it cannot avoid its liability to pay the compensation to the victims or their heirs and legal representatives. It can neither avoid its liability on-the ground that the policy was issued under some mistake nor can it defeat the claim on the ground that the vehicle was registered as a taxi and at the time of the accident it was being driven by a person, who did not hold a driving licence to drive a taxi. The Company is bound by the insurance policy under which the vehicle was insured as a private car.
13. Before parting with the case, the plea raised on behalf of the Insurance Company regarding the exercise of power by this Court may also be dealt with. Their contention is that this Court should not interfere with this matter under Article 226 of the Constitution, because the petitioner himself was the agent of the Insurance Company and was instrumental in getting the vehicle insured as a private car. Such a plea cannot be sustained for three reasons, namely, (i) once the vehicle has been insured the claim of the victims of the accident or their heirs or legal representatives cannot be defeated on the ground that the Insurance Policy was issued under some bonafide mistake or otherwise. Unless the case falls within some 'exclusion clause' specified in Section 149. That is not the position here. Apart from the brother of the petitioner, two other persons have also died in the same accident. If such a plea, as is raised by the Company, is accepted the claim of the heirs and legal representatives of those deceased will be defeated without any justification, (ii) if the petitioner was instumental in getting the vehicle insured as a private car, it was open to the Company to correct or cancel it and till it is corrected or cancelled the Company cannot avoid its liability to pay the compensation. This is clear from Sub-section (1) of Section 149 of the Act, according to which the insurer has to satisfy the judgment against the person insured notwithstanding that the insurer may be entitled to avoid or cancel or may have avoided on cancelled the policy', and (iii) the questions raised in mis case are to be decided on the basis of the statutory provisions and not on the basis of the contract between the parties or their conduct. Supreme Court in Skandia Insurance Co. v. Kolilaber Chandravadan, (supra), the relevant extract from which is reproduced below, has laid down that when deciding the question of liability of the insurer it is not the contract of insurance, which is to be interpreted but it is the statutory provision relating to the exclusion clause under which the insurer can avoid his liability, which is to be interpreted:
It needs to be emphasised that it is not the contract of insurance which is being interpreted.
It is the statutory provision defining the conditions of exemption which is being interpreted. These must, therefore, be interpreted in the spirit in which the same have been enacted accompanied by an anxiety to ensure that the protection is not nullified by the backward looking interpretation which serves to defeat the provision rather than to fulfil its life aim. To do otherwise would amount to nullifying the benevolent provision by reading it with a non benevolent eye and with a mind not tuned to the purpose and philosophy of the legislation without being informed of the true goals sought to be achieved. What the Legislature has given, the Court cannot deeprive of by way of an exercise in interpretation when the view which renders the provision potent is equally plausible as the one which renders the provision important. In fact it appears that the former view is more plausible apart from the fact that it is more desirable. When the option is between opting for a view which will relieve the distress and misery of the victims of accidents or their dependents on the one hand and the equally plausible view which will reduce the profitability of the insurer in regard to the occupational hazard undertaken by him by way of business activity, there is hardly any choice. The Court cannot but opt for the former view.
14. The Question referred to by the Division Bench are answered as under:
1. (a) If a vehicle, which was registered as a taxi, meets an accident Insurance Company cannot disown its liability to compensate for the loss merely on the ground that the driver driving the vehicle was not holding a driving licence, which entitled him to drive a transport vehicle (taxi) unless the insured was at fault in placing the vehicle in charge of a person, who was not holding a driving licence to drive the vehicle;
(b) If a taxi (motor cab) has been hired for one's own use or rented under a scheme under Section 75 of the Act, Insurance Company cannot refuse to pay the compensation even if the said vehicle at the time of the accident was being driven by a person, who was holding a driving licence to drive a private car and was not holding a driving licence to drive a taxi;
2. There is no embargo under the Act prohibiting driving of a transport vehicle (motor cab-taxi) for private use by a person holding a valid driving licence to drive a motor vehicle other than the transport vehicle, if the motor cab has been hired for his own use or rented under a scheme framed under Section 75 of the Act.
3. Insurance Company was not justified to repudiate the claim of the petitioner.
Let the papers ofthis case be placed before the appropriate Division Bench for deciding the Writ Petition.