Judgment:
H.R. Panwar, J.
1. This appeal is directed against the judgment and award dated 25.5.1992 passed by the Motor Accidents Claims Tribunal, Balotra (hereinafter to be referred as 'the Tribunal'), whereby the Claims Tribunal awarded compensation of Rs. 2,83,900 in favour of the respondents-claimants (hereinafter referred to as 'the claimants') and against respondent Nos. 10 and 11 and the insurance company.
2. Aggrieved by the award impugned, appellant insurance company, the insurer has filed this appeal on two grounds; first the accident in question took place on 16.8.1988 and cover note was obtained by the respondent No. 11, the owner of the vehicle by concealing material fact that the bus No. 4665 met with an accident prior to the obtaining of the cover note. The second ground on which the present appeal is filed by the appellant is regarding limits of liability. According to Section 95(2)(b)(i) of Motor Vehicles Act, 1939 as then it was applicable statutory liability of insurance company was Rs. 50,000. Learned counsel for the appellant submits that the vehicle in which the passengers were carried for hire and reward met with an accident.
3. I have heard learned Counsel for the parties. Perused the judgment and award impugned.
4. Learned counsel for the appellant contended that though the cover note is dated 12.8.1988 but in fact it was obtained on 16.8.1988 after the happening of the accident. Cover note is said to be valid from 12.8.1988 to 11.8.1989 covering third party risk. It is further contended that on behalf of the appellant, DW 3 Ramswaroop Pareek, Investigator was examined by the Claims Tribunal. He stated that the cover note Exh. 44 was issued on 12.8.1988 and the accident took place on 16.8.1988 and in between 12.8.1988 and 16.8.1988, no other cover note was issued. He proved the report as Exh. 1 prepared by him. He stated that agent of insurance company deposited the premium amount of the insurance which he collected on 16.8.1988 and on the basis of the cover note, policy Exh. A-2 was issued showing the covering of risk for the period from 12.8.1988 to 11.8.1989. It was alleged that the agent of the insurance company was also the employee of the insured.
5. Learned counsel for the respondents contended that the insurance cover note Exh. 44 and policy Exh. A-2 clearly go to show that the insurance company undertook the risk of third party for the period commencing from 12.8.1988 to 11.8.1989 and the accident in question took place on 16.8.1988 as such, on the relevant date of accident, bus was validly insured with the appellant insurance company and, therefore, the appellant is liable to pay compensation to the claimants.
6. Learned counsel for the appellant relied on a judgment of this Court in United India Insurance Co. Ltd. v. Pema Ram 1997(2) WLC (Raj) 647. In this case, the insurance policy was taken on 28.3.1988 to be effective at 2.15 p.m. and as such it was effective from 2.15 p.m. On 28.3.1988 the accident took place at 9 a.m. on the very day, i.e., 28.3.1988 and the policy clearly specified its commencement from 2.15 p.m. on 28.3.1988 and the accident had taken place much earlier than the time of issuance of the policy and, therefore, this Court held that the insurer is not liable to pay the compensation for the accident occurring before the commencement of the policy. In the instant case, the cover note Exh. 19 as also the policy of insurance issued by the appellant Exh. A-2 clearly go to show that the policy covers the risk of third party for the period commencing from 12.8.1988 to 11.8.1989 and the accident had taken place after four days of issuance of the policy, i.e., on 16.8.1988 and thus, it cannot be said that the policy came in force after the accident has taken place. Thus, the authority cited by the learned Counsel for the appellant is of no help and distinguishable on facts.
7. In Oriental Insurance Co. Ltd. v. Inderjit Kaur 1998 ACJ 123 (SC), the Hon'ble Supreme Court held as under:
Despite the bar created by Section 64-VB of Insurance Act, the appellant, an authorised insurer, issued a policy of insurance to cover the bus without receiving the premium therefor. By reason of the provisions of Sections 147(5) and 149(1) of Motor Vehicles Act, the appellant became liable to indemnify third parties in respect of the liability which that policy covered and to satisfy the awards of compensation in respect thereof notwithstanding its entitlement (upon which we do not express any opinion) to avoid or cancel the policy for the reason that the cheque issued in payment of the premium thereon had not been honoured.
8. It was further held that the policy of insurance issued by the appellant was a representation upon which the authorities and third parties were entitled to act. The appellant insurer was not absolved of its obligations to third parties under the policy because it did not receive the premium.
9. In New India Assurance Co. Ltd. v. Rula 2000 ACJ 630 (SC), the Hon'ble Supreme Court reiterated the same view and held as under:
The contract of insurance in respect of motor vehicles has, therefore, to be construed in the light of the above provisions. Section 146(1) contains a prohibition on the use of the motor vehicles without an insurance policy having been taken in accordance with Chapter XI of the Motor Vehicles Act. The manifest object of this provision is to ensure that the third party, who suffers injuries due to the use of motor vehicle, may be able to get damages from the owner of the vehicle and recoverability of the damages may not depend on the financial condition or solvency of the driver of the vehicle who had caused the injuries.
10. It was further held that any contract of insurance under Chapter XI of the Motor Vehicles Act, 1988 (corresponding to Chapter VIII of the Motor Vehicles Act, 1939) contemplates a third party who is not a signatory or a party to the contract of insurance but is, nevertheless, protected by such contract. In New Asiatic Insurance Co. Ltd. v. Pessumal Dhanamal Aswani 1958-65 ACJ 559 (SC), the Hon'ble Supreme Court held that the rights of the third party to get indemnified can be exercised only against the insurer of the vehicle. The Hon'ble Apex Court further held in New India Assurance Co. Ltd. v. Rula (supra), that the third party is not concerned and does not come into the picture at all in the matter of payment of premium. Whether the premium has been paid or not is not the concern of the third party who is concerned with the fact that there was a policy issued in respect of the vehicle involved in the accident and it is on the basis of this policy that the claim can be maintained by the third party against the insurer. The Hon'ble Supreme Court further held that even if the insurance policy is cancelled on the ground that the cheque through which premium was paid was dishonoured, would not affect the rights of the third party which had accrued on the issuance of the policy on the date on which the accident took place. If, on the date of accident, there was a policy of insurance in respect of the vehicle in question, the third party would have a claim against the insurance company and the owner of the vehicle would have to be indemnified in respect of the claim of that party. Subsequent cancellation of the insurance policy on the ground of nonpayment of premium would not affect the rights already accrued in favour of the third party. In the cases of Oriental Insurance Co. Ltd. v. Inderjit Kaur (supra) and New India Assurance Co. Ltd. v. Rula (supra), the amount of premium was paid by the insured by cheque, which was ultimately dishonoured and as such, against the insurance policy, no premium was received by the insurance company even then the Hon'ble Supreme Court held that so far as the third party is concerned, right of realising the compensation accrues in favour of the third party on issuance of the policy and it is a concern between the insured and the insurance company and the right of third party to recover compensation from insurer would not be affected in the way so far as compensation to third party is concerned.
11. The facts of the instant case are that the appellant insurer issued the cover note Exh. 44 on 12.8.1988 at 4.45 p.m. and insurance policy Exh. A-2 covering risk to third party commencing from 12.8.1988 to 11.8.1989. It is the case of appellant that the person who issued the cover note Exh. 44 has received the amount of premium from the insured and deposited with the office of appellant insurer on 16.8.1988.
12. DW 1 stated that 13.8.88, 14.8.1988 and 15.8.1988 were holidays, therefore, authorised agent of insurance company deposited the amount of premium with the appellant on 16.8.1988. It is also not disputed that the insurer's agent Sugana Ram was the authorised agent of the appellant insurer and was competent to insure the vehicle involved in accident. PW 3 Sugana Ram was examined on behalf of the appellant insurance company. He is authorised insurance agent of the appellant insurer. He stated that he issued cover note Exh. 19 (same cover note was exhibited as Exh. 44), cover note No. 355605 and he had received a premium of Rs. 872 on 12.6.1988 at 4.45 p.m. and after having received the premium of insurance, he issued the said cover note. He further stated that between 12.6.1988 and 16.8.1988, there were holidays and, therefore, the amount could not be deposited with the insurance company but it remained with him. It is not disputed that this witness is the agent of insurance company and, therefore, so far as insured is concerned, he had paid the premium on 12.8.1988 at 4.45 p.m. Whether it has been subsequently deposited by the agent in the office of insurance company or not, is the matter between the agent of the insurance company and the insurance company and the insured and third parties have nothing to do with this.
13. In New India Assurance Co. Ltd. v. Bhanwari Devi RLW 2001(3) Raj 1430, a Division Bench of this Court has held that so far as the third party risk is concerned, the liability being statutory cannot be overridden by the terms of the contract of insurance between the parties. In Ragunath Eknath Hivale v. Shardabai Karbhari Kale 1986 ACJ 460 (Bombay), the court held as under:
The terms of the contract between the insurer and the insured determining their rights and liability towards each other are not and should not be confused with the statutory liability of the insurer for the third party risks. If there is a breach of the contract on the part of the insured, the insurer may proceed against the insured. As far as the third party risks are concerned, the liability being statutory, it cannot be overridden by the terms of the contract of insurance, between the parties.
14. Thus, the respondents-claimants who are third parties acquired a right to be paid compensation and appellant is liable to indemnify the insured.
15. It was next contended by learned Counsel for the appellant that the liability of the insurance company on the relevant date of accident as per the provisions of Section 95(2)(b)(i) of the Motor Vehicles Act, 1939 (old Act) for the vehicle in which passengers are carried for hire or reward is limited to Rs. 50,000. It has not been disputed by the learned Counsel for the respondents. However, the learned Counsel for the respondents submits that even if the liability of appellant insurance company is limited to the extent provided under the provisions of Section 95(2)(b)(i) of the Motor Vehicles Act (old Act), the claimants are entitled for entire amount of compensation from the appellant insurance company. It was contended that there is a clear condition in the policy that nothing in the policy or any endorsement hereon shall affect the right of any person to be indemnified by the policy or any other person to recover an amount under or by virtue of the provisions of Section 96 of the Motor Vehicles Act, 1939. But the insured shall repay to the company all sums paid by the company which the company would not have been liable to pay but for the said provisions.
16. In New Asiatic Insurance Co. Ltd. v. Pessumal Dhanamal Aswani (supra), the Hon'ble Supreme Court has held as under:
The Act contemplates the possibility of the policy of insurance undertaking liability to third parties, providing such a contract between the insurer and the insured, that is, the person who effected the policy, as would make the company entitled to recover the whole or part of the amount it has paid to the third party from the insured. The insurer thus acts as security for the third party with respect to its realising damages for the injuries suffered, but vis-a-vis the insured, the company does not undertake that liability or undertake it to a limited extent. It is in view of such a possibility that various conditions are laid down in the policy. Such conditions, however, are effective only between the insured and the company and have to be ignored when considering the liability of the company to the third parties. This is mentioned prominently in the policy itself and is mentioned under the heading 'avoidance of certain terms and rights of recovery', as well as in the form of 'An Important Notice', in the Schedule to the policy. The avoidance clause says that nothing in the policy or any endorsement thereon shall affect the right of any person indemnified by the policy or any other person to recover an amount under or by virtue of the provisions of the Act. It also provides that the insured will repay to the company all sums paid by it which the company would not have been liable to pay but for the said provisions of the Act. The 'Important Notice' mentions that any payment made by the company by reason of wider terms appearing in the certificate in order to comply with the Act is recoverable from the insured, and refers to the avoidance clause.
17. In Oriental Insurance Co. Ltd. v. Cheruvakkara Nafeessu 2001 ACJ 1 (SC), a similar question came up for consideration before the Hon'ble Supreme Court. In that case, the limit of liability of the insurance company in respect of any one accident or series of claims arising out of one event was Rs. 50,000 only but the clause of the policy provides: 'Nothing in this 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 Motor Vehicles Act, 1939, Section 96'.
18. In that case, the Hon'ble Supreme Court held that liability under the policy was limited to the extent of Rs. 50,000. However, it was further held that the Claims Tribunal and the High Court were not unjustified in directing the appellant company to pay whole of the awarded amount to the claimants on the basis of contractual obligation contained in clauses related to the liability of third party and avoidance clause. It was also held that the appellant company is liable to pay entire amount awarded and upon making such payment insurance company can recover the excess amount from the insured.
19. The instant case is almost on identical facts and there is a clause in the general condition of the insurance policy, whereby the insurance company has undertaken to pay the amount to the persons entitled, i.e., claimants and for any amount paid by the appellant beyond its limits of liability, the appellant insurer would be entitled to recover from the insured in the terms of the policy. Thus, insurance company is liable to pay the entire amount along with interest to the claimants and thereafter, insurance company is entitled to recover the amount beyond its liability, i.e., Rs. 50,000 and interest thereon from the owner of the vehicle, respondent No. 11.
20. In view of the aforesaid discussion, the appeal filed by the insurer is allowed to the extent that liability of the insurance company is limited to Rs. 50,000 and the interest thereon. However, respondents-claimants are entitled for the entire amount of compensation along with interest from the appellant insurance company as awarded by the Tribunal and thereafter the appellant insurance company will be entitled to recover the amount paid by it beyond Rs. 50,000 and interest thereon from the insured, the owner of vehicle respondent No. 11 Dhan Raj. No order as to costs.