The Oriental Insurance Company Limited Vs. Smt. K. Sundaramma Alias Sundara and ors. - Court Judgment

Ram Mohan Reddy, J.

1. The insurer of the motor vehicle involved in the accident being aggrieved by the judgment and award dated 24-7-2002 passed in MVC No. 2839 of 2000 on the file of the Motor Accidents Claims Tribunal, Bangalore (for short, the 'MACT), has preferred this appeal under Section 173(1) of the Motor Vehicles Act, 1988 (for short, the 'Act').

2. It is not in dispute that one Neelakantha succumbed to the fatal injuries on 30-7-2000 involving the motor vehicle being a motor-cycle bearing registration No. KA. 04.H.9346 belonging to the 8th respondent and insured by the appellant. In the claim petition filed by the dependents of the deceased, the appellant herein was arraigned as 1st respondent, who, entered appearance, resisted the claim by filing its statement of objections. The 2nd respondent, the owner of the offending vehicle, though served with the notice, remained absent. The MACT, framed issues, recorded the evidence of the 3rd petitioner as P.W. 1, marked 11 documents as Exs. P. 1 to P. 11. For the respondents, the Assistant Regional Transport Officer was examined as R.W. 1 and Assistant Divisional Manager as R.W. 2 and marked two documents viz., the Insurance policy as Ex. R. 1 and the leamed licence extract as Ex. R. 2.

3. The MACT, appreciating the evidence both oral and documentary, recorded a finding of actionable negligence on the rider of the offending motor vehicle and awarded compensation of Rs. 3,40,000/- with interest at 8% p.a. from the date of petition until payment. The MACT fastened the liability to pay the compensation on the appellant-insurer. The appellant, being aggrieved by the clamping of liability on it, to pay the compensation, has preferred this appeal.

4. In this appeal, the finding of actionable negligence is not in controversy between the parties. Hence, there is no necessity to review the said finding. Though the contention, in the alternative, is taken with regard to the quantum of compensation, the same is not pressed in this appeal.

5. The only contention advanced by Sri S. Srishaila, learned Standing Counsel for the appellant is that the MACT was not justified in fastening the liability to pay compensation on the insurer. Dilating on the said contention, he would point out the fact that the rider of the motor-cycle possessed the learning licence effective for the period from 29-12-1999 to 28-6-2000 which was renewed from 20-7-2000 to 19-1-2001 and that the rider did not possess driving licence as on 19-7-2000, the date of the accident. In the established facts, the rider of the offending motor-cycle not having a licence to ride, it is the contention of the learned Counsel that it would tantamount to fundamental breach of the terms of the Insurance Policy, which the MACT ought to have considered and having not done so, the finding recorded by it, is vitiated on account of perversity.

6. Per contra, Sri S.P. Shankar, learned Senior Counsel for Smt. Y.N. Leelavathi, Advocate for respondents 1 to 5, would contend that the renewal of the driving licence on the date subsequent to the date of accident, by the rider of the motor-cycle would establish that the rider was not disqualified from obtaining the driving licence and in any event, according to him, it is not the case of the Insurance Company that the rider had incurred any disqualification for holding a licence. He would further contend that it is not the case of the appellant that the rider of the motor-cycle had no driving licence at all.

7. Having heard the learned Counsels for the parties and perused the impugned judgment and award, the only question that arise for decision making in this appeal is: Whether in the established facts that on the date of the accident, the rider of the offending motor-cycle, who held a valid learning licence which had expired, had not renewed the said licence, but having renewed it on a day subsequent to the date of the accident, could be considered as having proved that the rider of the offending motor-cycle did not possess effective driving licence

8. The fact that the rider of the offending motor-cycle did not possess a licence on 19-7-2000, the date of accident though he did possess an effective learners' licence for the period 29-12-1999 to 28-6-2000 which was renewed from 20-7-2000 to 19-1-2001 is established by the evidence of R.W. 1, the Assistant Regional Transport Officer. The rider of the motor-cycle is not examined in this case nor did the owner of the motor-cycle, the 8th respondent herein, file his statement or adduce evidence. The case of the appellant is that there is breach of condition of policy on the part of the insured due to the riding of the motor- cycle by a person who did not hold a driving licence at the time of the accident.

9. In an almost identical defence as taken by the appellant, the Supreme Court in the case of United India Insurance Company Limited v. Gian Chand and Ors., : AIR1997SC3824 , referring to two lines of cases observed thus:

'In order to resolve this controversy between the parties, it must be observed at the outset that the aforesaid decisions clearly indicate two distinct lines of cases'. The first line of cases consists of fact situations wherein the insured are alleged to have committed breach of the condition of insurance policy, which required them not to permit the vehicle to be driven by an unlicensed driver. Such a breach is held to be a valid defence for the insurance company to get exonerated from meeting the claims of third parties who suffer on account of vehicular accidents which may injure them of their breadwinner on account of such accidents caused by the insured vehicles. The other line of cases deals with the insured owners of offending motor vehicles that cause such accidents wherein the insured owners of the vehicles do not themselves commit breach of any such condition and hand over the vehicles for driving to licensed drivers who on their own and without permission, express or implied, of the insured, hand over vehicles or act in such a way that the vehicles get available to unlicensed drivers for being driven by the later and which get involved in vehicular accidents by the driving of such unlicensed drivers. In such cases the insurance company cannot get benefit of the exclusionary clause and will remain liable to meet the claims of third parties for accidental injuries. Whether fatal or otherwise the decisions of this Court in Skandia Insurance Company Limited v. Kokilaben Chandravadan, : [1987]2SCR752 ) and in Sohan Lal Passi v. P. Sesh Reddy, : AIR1996SC2627 represent this second line of cases while the decisions of this Court in New India Assurance Company Limited v. Mandar Madhav Tambe, : AIR1996SC1150 and in Kashiram Yadav v. Oriental Fire and General Insurance Company Limited, : [1989]3SCR811 represent the first line of cases.

The Supreme Court has further observed as follows: In view of the aforesaid two sets of decisions of this Court, which deal with different fact situations, it cannot be said that the decisions rendered by this Court in case of Kokilaben Chandravadan and the decision of the Bench of three Judges in Sohan Lal Passi, in any way conflict with the decisions rendered by this Court in the cases of Mandar Madhav Tambe and Kashiram Yadav'.

10. The interpretation of Section 149(2)(a)(ii) of the Act for consideration before the Hon'ble Supreme Court in the case of Beer Singh and Ors. v. Satbir Singh and Anr., 2000 ACJ 681 (P and H) Section 149(2)(a)(ii) reads thus:

'A condition excluding driving by a named person or persons or by any person who is not duly licensed or any person who has been disqualified for holding or obtaining a driving licence during the period of disqualification'.

In the said case, the contention advanced was that the word 'or' should be read as 'and' and therefore, the driver having not held a driving licence without proving that he was disqualified from holding or obtaining driving licence would not absolve the Insurance Company of its liability and the Court held that since the word used 'or' and not 'and', the said contention cannot be accepted.

11. The contention of the appellant, Insurance Company, requires to be considered in the light of the principles laid down by the Supreme Court in the above cases. The facts of the case fall within the second line of cases as observed by the Apex Court in its judgment, in Gian Chand's case. What is required to be seen is, whether the Insurance Company proved breach of condition of policy by reason of which it stood absolved of its liability to indemnify the insured in terms of the policy. The appellant having taken a specific contention of disqualification, it is for the appellant to adduce evidence that the driver was not duly licensed and was disqualified. In the present case, all that the appellant has done is to have the evidence of R.W. 1, the Assistant Regional Transport Officer to speak to the learners' licence extract at Ex. R. 2 so as to establish the fact that on the date of the accident, the rider of the offending motor vehicle did not possess a driving licence. However, with regard to disqualification of the rider of the motor-cycle to hold a driving licence, there is no titer of evidence. In the present case, the rider of the offending motor-cycle had not renewed his learning licence on the date of the accident and therefore, it cannot be said that the rider of the motorcycle did not have a licence at all. Having not secured a renewal, the rider of the motor-cycle cannot be said to be disqualified from obtaining or holding a driving licence, since on the very next day after the accident, he secured a renewal of learner's licence. The very renewal would establish that the rider was not disqualified from obtaining a driving licence. In any event, it is not the case of the Insurance Company that the rider was disqualified from holding a licence. Unless the Insurance Company can place any of the materials covered by Sections 19, 20, 132, 134 and 185 of the Act, it can never be said that there was any disqualification to hold the licence. In any event, it is not the case of the appellant that the rider of the motor- cycle did not know how to ride. We are unable to accept the contention advanced by the learned Counsel for the appellant that there is violation of the condition of the exclusion clause in the policy, on the mere fact that the rider of the offending vehicle had not got his driving licence renewed on the date of the accident and secured the renewal on the date subsequent to the date of accident. In any view of the matter, this cannot tantamount to breach of condition of the policy.

12. As noticed by us supra, the rider of the offending motor-cycle had a learners' licence for the period from 29-12-1999 to 28-6-2000 which was renewed from 20-7-2000 to 19-1-2001 and in the interregnum of 20 days during which the rider of the motor-cycle did not secure a renewal of his licence, cannot be said, that the rider did not know how to ride the motor-cycle. The non-renewal of the learner's licence as on the date of the accident, cannot be said to have contributed to the cause of the accident. The breach alleged in the present case is not a factor which has contributed to the causing of accident and therefore, is not a fundamental breach so as to entitle the insurer to avoid its liability altogether. We are supported by a decision of the Apex Court in the case of B.V. Nagaraju v. Oriental Insurance Company Limited, : AIR1996SC2054 wherein it was observed thus:

'In this appeal by special leave, the question of importance arising therein in whether the alleged breach of carrying humans in a goods vehicle more than the number permitted in terms of the insurance policy, is so fundamental a breach so as to afford ground to the insurer to eschew liability altogether; Ancillary to the question is the poser; whether the terms of the policy of insurance need be construed strictly or be read down to advance the main purpose of the contract as viewed by this Court in Skandia Insurance Company Limited's case, ......

It is plain from the terms of the Insurance policy that the insured vehicle was entitled to carry 6 workmen, excluding the driver. If those six workmen when travelling in the vehicle are assumed not to have increased any risk from the point of view of the Insurance Company on occurring of an accident, how could those added persons be said to have contributed to the causing of it is the poset, keeping apart the load it was carrying. Here, it is nobody's case that the driver of the insured vehicle was responsible for the accident. In fact, it was not disputed that the oncoming vehicle had collided head-on against the insured vehicle, which resulted in the damage, merely by lifting a person or two, or even three, by the driver or the cleaner of the vehicle, without the knowledge of the owner, cannot be said to be such a fundamental breach that the owner should, in all events be denied indemnification. The misuse of the vehicle was somewhat irregular through, but not so fundamental in nature so as to put an end to the contract, unless some factors existed which, by themselves, had gone to contribute to the causing of the accident'.

(emphasis supplied)

13. In the light of the observation of the Apex Court, the exclusion term of the Insurance Policy must be read down so as to 'serve the main purpose of the policy i.e., to indemnify the insured and accordingly, the Insurance Company must be made liable to pay compensation.

14. In the most recent decision, in the case of National Insurance Company Limited v. Swaran Singh and Ors., : AIR2004SC1531 the Apex Court set out the summary of its findings. The relevant portion of which is extracted as under:

'102. The summary of our 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 163 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 conditions, 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 or 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 wherefor 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 of 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 insurer under Section 149(2) of the Act'.

15. In view of the statement of law enunciated by the Apex Court, and the facts of the present case, we are of the considered view that the appellant has failed to prove that there was a breach of condition of policy and that the appellant is absolved of its liability to pay compensation as per terms of the policy and hold that the appellant is liable with the owner jointly and severally to pay the compensation awarded. It is not the case of the appellant that the insured knowing fully well that the rider did not possess a valid and effective driving licence to ride the motor-cycle involved in the accident permitted him to ride and thereby committed breach of conditions of the policy. Having held that the Insurance Company has failed to prove the breach of condition of the policy, the question of ordering recovery of the amount by the Insurance Company from the insured does not arise.

16. The appeal is without merit and is dismissed, with no order as to costs.

17. The appellant-Insurance Company is directed to deposit the compensation amount with interest at 8% p.a. minus (-) the amount already deposited/paid within six weeks from the date of receipt of a copy of this order and on such deposit being made, the MACT is directed to deposit/disburse the compensation, in the same proportion as stipulated by it in the impugned award.

The Registry is directed to transmit the sum of Rs. 25,000/- in deposit, in this appeal forthwith, to the MACT.