J.B. Koshy, J.
1. Can insurance company be exonerated from liability to pay compensation merely because driver who was driving a commercial vehicle was not having a badge? Learned single Judge noticed two divergent views expressed by a Division Bench of this Court. Hence, the matter was referred to the Division Bench. In Govindakutty Nair v. Gopalakrishnan 2000 (1) KLT 224 : 2000 AIHC 575 a Division Bench of this Court held that requirement of driver's badge is necessary to drive a transport vehicle and if the driver is not having a badge at the time of accident, insurance company is exonerated from liability. The Division Bench referred to the decision of the Apex Court in United India Insurance Company Limited v. Gian Chand and Ors. : AIR1997SC3824 and Rukmani and Ors. v. New India Assurance Company and Ors. : (1998)9SCC160 . Another Division Bench of this Court in Ramachandran v. Unnikrishnan 2006 (2) KLTSN 15, Case No. 20, held that mere absence of a badge to drive a commercial vehicle is not sufficient, but, it must be proved that it was the reason for the accident and then only insurance company can get exonerated from the liability for violation of policy conditions. The latter Division Bench followed the decision in National Insurance Co. Ltd. v. Swaran Singh AIR 2004 SC 1531. Normally, if there are two different views expressed by two Division Benches, we are bound to refer the matter to Full Bench. But, we are of the opinion that there is no difference of opinion expressed by the Division Bench decision and on the facts of the case and on the basis of the subsequent decisions of the Apex Court, we are of the opinion that the question can be decided by us.
2. In United India Insurance Co. Ltd. v. Gian Chand and Ors. : AIR1997SC3824 referred to in Govindakutty Nair's case 2000 AIHC 575, the driver had no licence at all. Therefore, it has no application to the question in issue. Rukmani's case 1999 AIR SCW 4712 referred to in Govindankutty Nair's case was explained by the Supreme Court subsequently by a three-member Bench decision in Swaran Singh's case : AIR2004SC1531 as follows:
63. In Rukmani and Ors. v. New India Assurance Co. Ltd. and Ors. : (1998)9SCC160 , this Court while upholding the defences available to the insurer to the effect that vehicle in question was not being driven by a person holding a licence, held that the burden of the insurer would not be discharged when the evidence which was brought on record was that the Inspector of Police in his examination-in-chief merely stated : 'My enquiry revealed that the respondent No. 1 did not produce the licence to drive the above said scooter. The respondent No. 1 even after my demand did not submit the licence since he was not having it.
64. The proposition of law is no longer res integra that the person who alleges breach must prove the same. The insurance company is, thus, required to establish the said breach by cogent evidence. In the event, the insurance company fails to prove that there has been breach of conditions of policy on the part of the insured, the insurance company cannot be absolved by its liability. (See : Sohan Lal Passi v. P. Sesh Reddy and Ors. : AIR1996SC2627 ).
Therefore, it can be seen that in both decisions of the Apex Court referred to in the Govindankutty Nair's case 2000 AIHC 575, mere absence of badge was not the issue considered. Govindankutty Nair's case was decided interpreting Section 96(2) of the Motor Vehicles Act, 1939. In that decision itself, it is stated that the provisions in the Motor Vehicles Act, 1988 are different. It was observed as follows:.It has to be noted that a provision similar to the proviso to Sub-section (4) of Section 149 of the Motor Vehicles Act, 1988 was not available under Section 96 of the 1939 Act. Therefore, all the other decisions relied on by the learned Counsel for the appellant arising in 1988 Act have no application to the facts of this case. We, therefore, find no merit in the contention that the Tribunal has wrongly absolved the Insurance Company of its liability.In Ramachandran's case, the Division Bench was considering a case under 1988 Act. Therefore, it cannot be stated that there is any difference of view by the two Division Benches. We shall consider the scope of Section 149 subsequently (See : Paragraph 5 of this Judgment).
3. In National Insurance Co. Ltd. v. Swaran Singh : AIR2004SC1531 , after considering large number of previous decisions, a three-member bench of the Hon'ble Supreme Court summarised the legal position regarding liability of the insurance company when the driver of the insured vehicle has no licence or no effective licence at the time of accident. At paragraph 105 law has declared by the Hon'ble Apex Court as follows ;
105. The summary of four findings to the various issues as raised in these petitions are as follows:
(i) Chapter XI of the Motor Vehicles Act, 1988 providing compulsory insurance of vehicles against third party risks is a social welfare legislation to extend relief by compensation to victims of accidents caused by use of motor vehicles. The provisions of compulsory insurance coverage of all vehicles are with this paramount object and the provisions of the Act have to be so interpreted as to effectuate the said object.
(ii) Insurer is entitled to raise a defence in a claim petition filed under Section 163A or Section 166 of the Motor Vehicles Act, 1988 inter alia in terms of Section 149(2)(a)(ii) of the said Act.
(iii) The breach of policy condition e.g. disqualification of driver or invalid driving licence of the driver, as contained in Sub-section (2)(a)(ii) of Section 149, have to be proved to have been committed by the insured for avoiding liability by the insurer. Mere absence, fake or invalid driving licence or disqualification of the driver for driving at the relevant time, are not in themselves defences available to the insurer against either the insured or the third parties. To avoid its liability towards insured, the insurer has to prove that the insured was guilty of negligence and failed to exercise reasonable care in the matter of fulfilling the condition of the policy regarding use of vehicles by duly licensed driver of one who was not disqualified to drive at the relevant time.
(iv) The insurance companies are, however, with a view to avoid their liability must not only establish the available defence(s) raised in the said proceedings but must also establish 'breach' on the part of the owner of the vehicle; the burden of proof wherefore would be on them.
(v) The Court cannot lay down any criteria as to how said burden would be discharged, inasmuch as the same would depend upon the facts and circumstances of each case.
(vi) Even where the insurer is able to prove breach on the part of the insured concerning the policy condition regarding holding of a valid licence by the driver or his qualification to drive during the relevant period. the insurer would not be allowed to avoid its liability towards insured unless the said breach or breaches on the condition of driving licence is are so fundamental as are found to have contributed to the cause of the accident. The tribunals in interpreting the policy conditions would apply 'the rule of main purpose' and the concept of 'fundamental breach' to allow defences available to the insured under Section 149(2) of the Act.
(vii) The question as to whether the owner has taken reasonable care to find out as to whether the driving licence produced by the driver, (a fake one or otherwise), does not fulfill the requirements of law or not will have to be determined in each case.
(viii) If a vehicle at the time of accident was driven by a person having a learner's licence, the insurance companies would be liable to satisfy the decree.
(ix) The Claims Tribunals constituted under Section 165 read with Section 168 is empowered to adjudicate all claims in respect of the accidents involving death or of bodily injury or damage to property of third party arising in use of motor vehicle. The said power of the tribunal is not restricted to decide the claims inter se between claimant or claimants on one side and insured, insurer and driver on the other. In the course of adjudicating the claim for compensation and to decide the availability of defence or defences to the insurer, the Tribunal has necessarily the power and jurisdiction to decide disputes inter se between insurer and the insured. The decision rendered on the claims and disputes inter se between the insurer and insured in the course of adjudication of claim for compensation by the claimants and the award made thereon is enforceable and executable in the same manner as provided in Section 174 of the Act for enforcement and execution of the award in favour of the claimants.
(x) Where on adjudication of the claim under the Act the tribunal arrives at a conclusion that the insurer has satisfactorily proved its defence in accordance with the provisions of Sections 149(2) read with Sub-section (7), as interpreted by this Court above, the Tribunal can direct that the insurer is liable to be reimbursed by the insured for the compensation and other amounts which it has been compelled to pay to the third party under the award of the tribunal. Such determination of claim by the tribunal will be enforceable and the money found due to the insurer from the insured will be recoverable on a certificate issued by the tribunal to the Collector in the same manner under Section 174 of the Act as arrears as land revenue. The certificate will be issued for the recovery as arrears of land revenue only if, as required by Sub-section (3) of Section 168 of the Act the insured fails to deposit the amount awarded in favour of the insurer within thirty days from the date of announcement of the award by the tribunal.
(xi) The provisions contained in Sub-section (4) with proviso thereunder and Sub-section (5) which are intended to cover specified contingencies mentioned therein to enable the insurer to recover amount paid under the contract of insurance on behalf of the insured can be taken recourse of by the Tribunal and be extended to claims and defences of insurer against insured by relegating them to the remedy before regular Court in cases where on given facts and circumstances adjudication of their claims inter se might delay the adjudication of the claims of the victims.
(Underlining by us to give emphasis).
4. The Apex Court considered its earlier decision in Gian Chand's case : AIR1997SC3824 (supra) at paragraph 58 and noticed that the above decision was due to the peculiar facts of that case. In New India Assurance Co. v. Kamla and Ors. : [2001]2SCR797 , it was held that driver was holding only a fake licence and insurance company has to pay the amount and recover the amount from the owner. It is now settled law that even if there is no driving licence and breach of police condition is proved, insurance company should pay the amount and satisfy the statutory liability to third parties and then recover the amount from the insured. (See : New India Assurance Co. v. Kamla and Ors. : [2001]2SCR797 , United India Insurance Co. Ltd. v. Lehru and Ors. : [2003]2SCR495 ; BIG Insurance Co. Ltd. v. Captain Itbar Singh and Ors. : [1960]1SCR168 and Oriental Insurance Co. Ltd. v. Nanjappan : AIR2004SC1630 .
5. Section 149 of the Motor Vehicles Act mandates the insurance company to satisfy the awards against third party rights. Exemptions are also specified in the section. Under Section 149(2)(ii), if the driver is 'not duly licensed' or disqualified for holding or obtaining a driving licence, there is violation of policy conditions. A Full Bench of this Court in Oriental Insurance Co. Ltd. v. Paulose : 2004(1)KLT8 held that if the driver was having a proper licence, but, period of licence expired at the time of accident, insurance company cannot escape from the liability. At paragraph 9, it was observed as follows:
9. The Act embodies beneficent provisions. Such provisions have to be liberally construed. Literal construction can defeat the object and the purpose.
At paragraphs 14 and 15, it was observed as follows:
14. The statute specifies the defences, which are open to an insurer. One of these is that the driver was not 'duly licensed' to drive. If it is literally construed, the insurer may be able to evade its liability. This would defeat the purpose of the provision. Thus, a liberal construction deserves to be given. Thus, even if the licence had expired on the date of the accident but was subsequently renewed, it would fulfill the mandate of the statute.
15. When he is a person duly licensed, the insurer cannot so long as the policy is admitted, avoid the liability to compensate the injured or to indemnify the insured, because none of the conditions in the policy coming within Section 149(2) has been violated in this case.
6. Even though insurance company can raise the contention regarding violation of policy conditions by the insured, it is settled law that the burden to prove the above defence is on the insurer. With a view to avoid its liabilities, it is not sufficient for the insurer to show that the person driving at the time of accident was not duly licensed but it must further be established that there was a breach on the part of the insured and the alleged breach has contributed to the accident. (See : Narcinva V. Kamath and Anr. v. Alfredo Antonio Doe Martins and Ors. : [1985]3SCR951 ; Skandia Insurance Co. Ltd. v. Kokilaben Chandevadan and Ors. : [1987]2SCR752 ; Sohan Lal Passi v. P. Sesh Reddy and Ors. : AIR1996SC2627 and United India Insurance Co. Ltd. v. Lehru and Ors. : [2003]2SCR495 . In Swaran Singh's case : AIR2004SC1531 (supra), after considering the three-member Bench decision in Sohan Lal Passi's case (supra), it was observed as follows:
61. A bare perusal of the provisions of Section 149 of the Act leads to only one conclusion that usual rule is that once the assured proved that the accident is covered by the compulsory insurance clause, it is for the insurer to prove that it comes within an exception.
70. As has been held in Sohan Lal Passi : AIR1996SC2627 (supra), the insurance company cannot shake off its liability to pay the compensation only by saying that at the relevant point of time the vehicle was driven by a person having no licence.
Swaran Singh's case : AIR2004SC1531 (supra) was followed in Lal Chand v. Oriental Insurance Co. Ltd. 2006 AIR SCW 4832.
7. Learned Counsel for the insurance company relied on the recent decision of the Supreme Court in National Insurance Co. Ltd. v. Kusum Rai and Ors. : AIR2006SC3440 . In that case, appeal was filed by the insurance company against the finding of the High Court holding that even though driver was not holding a valid driving licence to drive the type of vehicle involved in the accident at the time of accident, insurance company is liable to pay the amount and recover the same from the owner of the vehicle, the insured. The Hon'ble Supreme Court dismissed the appeal filed by the insurance company. Registered owner did not file any appeal from the decision of the High Court. Claimants are also not aggrieved by the decision of the High Court. Owner did not enter appearance before the Apex Court as can be seen from paragraph 14 of the judgment. Kusum Rai's case AIR 2006 SC 3440 decided by a two member Bench of the Apex Court, relied on the dicta of Swaran Singh's case decided by a three-member Bench had observed as follows:
14. This Court in Swaran Singh : AIR2004SC1531 clearly laid down that the liability of the insurance company vis-a-vis the owner would depend upon several factors. The owner would be liable for payment of compensation in a case where the driver was not having a licence at all. It was the obligation on the part of the owner to take adequate care to see that the driver had an appropriate licence to drive the vehicle. The question as regards the liability of the owner vis-a-vis the driver being not possessed of a valid licence was considered in Swaran Singh : AIR2004SC1531 :89. Section 3 of the Act casts an obligation on a driver to hold an effective driving licence for the type of vehicle which he intends to drive. Section 10 of the Act enables the Central Government to prescribe forms of driving licences for various categories of vehicles mentioned in Sub-section (2) of the said section. The various types of vehicles described for which a driver may obtain a licence for one or more of them are : (a) motorcycle without gear, (b) motorcycle with gear, (c) invalid carriage, (d) light motor vehicle, (e) transport vehicle, (f) road roller, and (g) motor vehicle or other specified description. The definition clause in Section 2 of the Act defines various categories of vehicles which are covered in broad types mentioned in Sub-section (2) of Section 10. They are 'goods carriage', 'heavy goods vehicle', 'heavy passenger motor 'vehicle', 'invalid carriage', 'light motor vehicle', 'maxicab', 'medium goods vehicle', 'medium passenger motor vehicle', motor-cab', 'motorcycle', 'omnibus', 'private service vehicle', 'semi-trailer', 'tourist vehicle', 'tractor', 'trailer' and 'transport vehicle'. In claims for compensation for accidents, various kinds of breaches with regard to the conditions of driving licences arise for consideration before the Tribunal as a person possessing a driving licence for 'motorcycle without gear', (sic may be driving a vehicle) for which he has no licence. Cases may also arise where a holder of driving licence for 'light motor vehicle' is found to be driving a 'maxicab', 'motor-cab' or 'omnibus' for which he has no licence. In each case, on evidence led before the Tribunal, a decision has to be taken whether the fact of the driver possessing licence for one type of vehicle but found driving another type of vehicle, was the main or contributory cause of accident. If on facts, it is found that the accident was caused solely because of some other unforeseen or intervening causes like mechanical failures and similar other causes having no nexus with the driver not possessing requisite type of licence, the insurer will not be allowed to avoid its liability merely for technical breach of conditions concerning driving licence.
8. Now, we will consider the facts of this case. First respondent in this appeal filed a case for compensation of Rs. 1,00,000/- contending that serious injuries were caused to him in an accident caused due to the negligence of the driver of the jeep owned by the appellant and insured by the first respondent in this appeal (third respondent in the O. P. (MV)). Tribunal allowed a compensation of Rs. 24,180/- with 6% interest and directed the insurance company to pay the same and recover the same from the appellant as the driver of the vehicle has no badge and there is violation of policy condition. Driver and owner of the vehicle did not file any written statement. Insurance Company filed written statement inter alia contending that the driver was not having any valid driving licence or badge and, therefore, there is no liability for the insurer due to violation of policy conditions. Tribunal summoned driving licence register and it was proved through Ext. XI driving licence register that he has valid driving licence, but, there was no valid badge on the date of accident. Merely for the absence of badge, insurance company was given the right of recovery from the insured. Tribunal held as follows:
The perusal of Ext. XI will reveal that the 2nd respondent was not having any valid badge at the time of accident, even though he was having a driving licence at the time of accident. Since the vehicle is already insured with the 3rd respondent the primary liability to pay the compensation is on the 3rd respondent. But, the 3rd respondent is entitled to recover the amount paid by him to the petitioner from the 1st respondent who is the owner of the vehicle because in order to get the owner indemnified from the liability there must be a valid badge for the 2nd respondent at the time of driving the vehicle. In this case, the 2nd respondent is not having any valid badge. So, the 1st respondent is liable to compensate the 3rd respondent loss sustained due to payment of amount by them to the petitioner.
There is no evidence to show that the insured was negligent in entrusting the vehicle to the driver knowing that he was not having badge or absence of badge was the cause of accident. It is proved by Ext. XI that he was having valid licence to drive the type of vehicle (jeep) involved in the accident. According to the appellant, even though the jeep had tax permit, at the time of the accident, it was used by the owner for travel of his family (private need). Driving licence is issued in 1996 and it was valid till 2000. There is no averment in the written statement that absence of badge is the cause of accident. In this connection, we refer to the dictum laid down in paragraph 105(iii), (iv) and (vi) in Swaran Singh's case AIR 2004 SC 1531 (supra). Here, there is no pleading or proof that the insured committed a breach by knowingly entrusting the vehicle to a person without badge or absence of badge is the cause of the accident. He was a duly licensed driver. Section 149(2) also speaks only about driving licence, but, not badge. Absence of badge in driving a commercial vehicle will attract penal consequences, but, it cannot be a ground to deny statutory liability to third party compensation based on Section 149(2)(ii).
9. In this case, driver was having a valid driving licence to drive the type of vehicle which he was driving (jeep). He was not driving a four wheeler with licence to drive a two wheeler or driving a heavy vehicle with licence to drive a light motor vehicle. There is no contention for the insurance company, even in the appeal, that absence of the badge is a fundamental breach of policy condition and it is a cause for the accident. Hence, on the facts of this case, following the dicta laid down in Swaran Singh's case (supra), we are of the opinion that the insurance company cannot be exonerated in indemnifying the owner. Merely because driver of the vehicle who was duly licensed was not having a badge will not enable the insurance company to shirk its liability as per Section 149 of the Motor Vehicles Act and insurance company also failed to prove that insured has committed a fundamental breach of the policy conditions resulting in the accident. Hence, we set aside the direction of the tribunal enabling the insurance company to recover the amount after depositing the amount of compensation from the appellant/insured. Appeal is allowed. Parties to bear their respective costs.