Giriraj Prasad Agrawal and ors. Vs. Parwati Devi and ors. and - Court Judgment

M.Y. Eqbal, J.

1. These two appeals have been referred to Full Bench for testing the correctness of two decisions of this Court, one by Division Bench in the case of Bholla Nath Yadav v. Hemwati and Ors., 2003 (1) JCR 105 (Jhr) : 2002 (2) JLJR 411 and the other by a learned single Judge in Oriental Insurance Company Ltd. v. Jashmani Kongari, 2001 (1) JLJR 178.

2. Facts which have given rise to the present controversy may be stated :--

The deceased along with other persons were traveling by Bus on the relevant date of accident. The deceased was sitting on the roof of the Bus. When the Bus reached near Jaruadih More, several mango trees were spread towards road and the deceased who was on the roof of the Bus. Sustained grievous head injury. The deceased was taken to hospital and subsequently he died. In another case, the deceased was traveling on the roof of the Bus. Because of rash and negligent driving, the deceased fell down form the bus and succumbed to injuries.

3. The respondent-Insurance Company, on being noticed, appeared and filed written statement taking a defence that the vehicle was insured against third party risk under which insurer is not liable to pay compensation as there was a serious and fundamental breach of specified condition of policy. According to the respondents, the vehicle was insured for carrying specified number of passengers inside the Bus. It was contended that carrying passengers on the top roof of the Bus is violation of the conditions of permit as also the terms and conditions of the policy of insurance, which completely exonerate the insurer from any liability.

4. The Claim Tribunal has come to a finding that the insured has violated the condition of permit as well as the terms and conditions of policy of insurance and, therefore, the Insurance Company is not liable to pay compensation to the claimants. Hence, these appeals by the owner-appellant.

5. The Division Bench took notice of two conflicting decisions of this Court, one rendered by Single Bench in the case of Oriental Insurance Company Ltd., Ranchi v. Jashmani Kongari and Anr., (supra), wherein it was held that the Insurance Company cannot be held liable and other decision rendered by the Division Bench in the case of Bholla Nath Yadav v. Hemwati and Ors., (supra), wherein it was held that the Insurance Company shall be held liable for payment of compensation. In view of the aforesaid two conflicting decisions and also conflicting decisions of different High Courts, the matter has been referred to the Full Bench for answering the question whether the Insurance Company can take such defence for disowning the liability for payment of compensation.

6. Mr. S.N. Lal, learned counsel appearing for the appellant-owner of the Vehicle, drawn our attention to Section 149 of the Motor Vehicles Act, 1988 (shortly M.V. Act) and submitted that the Insurer can defend the action only on the grounds mentioned in the said section and no other defences are available to it. Learned counsel further submitted that violation of Chapter VIII of the Act of 1988 may be an offence under the M.V. Act, but it does not ipso facto constitute a breach for which the Insurance Company can be exonerated from its liability. Learned counsel put heavy reliance on the decisions of the Supreme Court in the case of United India Insurance Company Limited v. Doddapapaiah and Anr., (2000) 1 ACC 373; State of Maharashtra and Ors. v. Nanded Parbhani, Z.I.B.M.V. Operator Sangh, AIR 2000 SC 725, and National Insurance Company Ltd., Chandigarh v. Nicoletta Rohtagi and Ors., 2002 (3) JCR 201 (SC) : AIR 2002 SC 3350. Mr. Lal then submitted that traveling on the roof-top of the Bus or violation of Section 123 of the Act will not, in any way, deprive the defendants of payment of compensation. In this connection, learned counsel relied upon decisions of various High Courts, 1989 (2) TAC 482; 1998 ACJ 1177; 2002 JLJR 411.

7. On the other hand, Mr. Basav Chatterjee and Mr. Alok Lal, learned counsels appearing for the Insurance Company have put much reliance on Section 123 of the M.V. Act, 1988 and submitted that premium was paid for covering the risk of specified passengers and the permit was issued specifying the number of passengers. According to the learned counsel, Andhra Pradesh Insurance Company cannot be held liable in a case where there is a violation of permit by carrying more passengers. In this connection, learned counsel relied upon a decision in the case of National Insurance Company Ltd. v. Challa Bharathamma and Ors., 2005 (1) JCR 41 (SC).

8. Learned counsel further contended that Section 123 of the M.V. Act, 1988 is mandatory in nature and violation of this provision amounts to violation of policy condition and, therefore, the Insurance Company can take such a defence, learned counsel relied upon a decision in the case of United Indian Insurance Company Ltd. v. Lingamalli Mondi and Ors., 2004 ACJ 233.

9. The Motor Vehicles Act, 1939 which related to the law of Motor Vehicles was amended from time to time to keep it up-to-date. Various Committees and Law Commission of India examined different aspects of the road transport and recommended updating, simplification and rationalization of law relating to Motor Vehicles. A Bill was moved in the Parliament for seeking to achieve the objects and a new Act, namely, M.V. Act, 1988 came into force from 1st July, 1988.

10. Here we are concerned with the provisions relating to insurance against third party risk and liability for payment of compensation for death and bodily injury caused by Motor Vehicle accident. The Supreme Court in the case of M.K. Kunhimohammed v. P.A. Ahmedkutty and Ors., AIR 1987 SC 2158, made certain suggestions to raise the limit of compensation payable as a result of motor accident in respect of death and permanent disablement in the event of there being no proof of fault on the part of the person involved in the accident and also in 'hit and run' motor accidents and to remove certain disparities in the liability of the insurer to pay compensation depending upon the class and type of vehicles involved in the accident. This is how major amendments have been made in the provisions dealing with motor insurance and extent of liability of the Insurance Company.

11. Chapter XI of the new Act, 1988 deals with the insurance against third party risk. Section 145 of the Act corresponding to Section 93 of 1939, Act defines certain words and expressions appearing in this Chapter.

12. Section 146 of the Act (old Section 94) makes the insurance of vehicle mandatory against third party risk. The object of Section 146 is to ensure insurance of all vehicles which are to be sued in public peace so that if a third party suffers any damage due to use of the said vehicle in public place, he would be able to get damage for the same straightaway from the Insurance Company. The statutory compulsion is made with a view to give benefit to a large number of persons who lose their lives in automobile accidents or who are injured and disabled as a result of such accident. The owner of the vehicle would not be able to meet the claims of the victims of the accident. It is with the above object that the compulsory insurance is made under the M.V. Act. The Insurance Companies are nationalized with a view to see that they toe the line of the Directive Principles of State Policy under Article 39 of the Constitution of India and also fulfil the obligations under the M.V. Act.

13. The expression 'third party' as defined in this Chapter means and includes everyone, be it a person traveling in another vehicle, one walking on the road or a passenger in the vehicle. Every insured takes out an Insurance Policy against a third party risk only with the motive and purpose of covering the risk which may arise in relation to claim lodged against him by a third party. By agreeing to issue Insurance Policy, the insurer undertakes to insure the insured and indemnify him against all risks and in relation to all claims lodged against him by third parties.

14. Section 147 of the said Act deals with requirement of policies and limits of liability. This section is quite comprehensive in scope and meaning. It has to be given wider, effective and practical meaning so that the object of legislature which was faced with divergent views of various Courts of the country giving different interpretation to the provision of Section 95 (old) causing immense harm to may categories of persons by disentitling them from claiming compensation either from the insurer or the insured or both. The Legislature clearly intended that every policy of insurance is statutorily required to cover the risk of liability in respect of classes of persons relating to all types of vehicles without exception and with no defence to the Insurance Company disowning the liability with respect to particular class of persons or particular kind of vehicles.

15. The legal effect of omission of Clause (ii) of the provision to Section 95(1)(b) of the old Act from the corresponding Section 147 of the new Act brings about a sweeping change in the extent of insurer's liability to pay compensation to the injured victims or the defendant of the deceased victim of a motor accident. Under the new Act the insurer is required to cover the risk to 'any person,' who is a victim of motor accident, whether or not the victim was a gratuitous passenger in any insured vehicle.

16. Now I shall deal with the provision of Section 149 of 1988, Act corresponding to Section 96 of the old act, 1939 which is most relevant provision for answering the question referred to the Full Bench.

17. At this stage, I would first like to refer Section 149 of the Act which reads as under :--

'149. Duty of insurers to satisfy judgments and awards against persons insured in respect of third party risks.--(1) If, after a certificate of insurance has been issued under Sub-section (3) of Section 147 in favour of the person by the 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, notwithstanding that the insurer may be entitled to avoid or cancel or may have avoided or cancelled the policy, 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 there under, 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.

(2) No sum shall be payable by an insurer under Sub-section (1) in respect of any judgment or award unless, before the commencement of the proceedings in which the judgment or award is given the insurer had notice through the Court or, as the case may be the Claims Tribunal of the bringing of the proceedings, or in respect of such judgment or award so long as execution is stayed thereon pending an appeal; and an insurer to whom notice of the bringing of any such proceedings is so given shall be entitled to be made a party thereto and to defend the action on any of the following grounds, namely :

(a) That there has been a breach of a specified condition of 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 not 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 disqualifications; 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.

(3) Where any such judgment as is referred to in Sub-section (1) is obtained from a Court in a reciprocating country and in the case of a foreign judgment is, by virtue of the provisions of Section 13 of the Code of Civil Procedure, 1908 conclusive as to any matter adjudicated upon by it, the insurer (being an insurer registered under the Insurance Act, 1938 and whether or not he is registered under the corresponding law of the reciprocating country) shall be liable to the person entitled to the benefit of the decree in the manner and to the extent specified in Sub-section (1), as if the judgment were given by a Court in India :

Provided that no sum shall be payable by the insurer in respect of any such judgment unless before the commencement of the proceedings in which the judgment is given, the insurer had notice through the Court concerned of the bringing of the proceedings and the insurer to whom notice is so given is entitled under the corresponding law of the reciprocating country, to be made a party to the proceedings and to defend the action on grounds similar to those specified in Sub-section (2). (4) Where a certificate of insurance has been issued under Sub-section (3) of Section 147 to the person by whom a policy has been effected, so much of the policy as purports to restrict the insurance of the persons insured thereby by reference to any conditions other than those in Clause (b) of Sub-section (1) of Section 147, be of no effect :

(5) If the amount which an insurer becomes liable under this section to pay in respect of a liability incurred by a person insured by a policy exceeds the amount for which the insurer would apart, from the provisions of this section be liable under the policy in respect of that liability, the insurer shall be entitled to recover the excess from that person.

(6) In this section the expressions 'material fact' and 'material particular' mean, respectively a fact or particular of such a nature as to influence the judgment of a prudent insurer in determining whether he will take the risk and, if so, at what premium and on what conditions, and the expression 'liability covered by the terms of the policy' means a liability which is covered by the policy or which would be so covered but for the fact that the insurer is entitled avoid or cancel or has avoided or cancelled the policy.

(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 referred to in 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 reciprocating country, as the case may be.'

18. From bare perusal of the aforesaid provision it is manifest that some changes have been brought in this section. A comparison of Section 149(2) with the provision of Section 96(2). Of the old Act makes it clear that the grounds contemplated in Section 96(2)(a) is absent in Section 149(2). It appears that Section 96(2)(a) has been deleted and Sections 96(2)(b), 96(2)(c), 96(2A) and 96(3) have been reenacted as Section 149(2)(a), 149(2)(b), 149(3) and 149(4) respectively.

19. The law is well settled that the right of third party to get compensation from the insurer being a statutory one is independent of the contracted rights and obligations between the insurer and the insured. Therefore even non-disclosure or concealment of material facts by the insured at the time of obtaining policy or any contravention of the condition of the policy by him could have no effect on the statutory rights of the third party to claim compensation from the Insurance Company. The insurer could not escape its statutory liability so far as third parties are concerned.

20. In the case of British India General Insurance Company Ltd. v. Captain Itbar Singh and Ors., AIR 1959 SC 1331, the Supreme Court elaborately dealt with the provision of Section 96 of the Act. Their Lordship observed :--

'Para 6. 'Now the language of Sub-section (2) to us to be perfectly plain and to admit of no doubt or confusion. It is that an insurer to whom the requisite notice of the action has been given 'shall be entitled to be made a party thereto and to defend the action on any of the following grounds, namely,' after which comes an enumeration of the grounds. It would follow that an insurer is entitled to defend on any of the grounds enumerated and no others. If it were not so, then of course no grounds need have been enumerated. When the grounds of defence have been specified, they cannot be added to. To do that would be adding words to the statute.

Para 7. 'Subs-section (6) also indicates clearly how Sub-section (2) should be read. It says that no insurer to whom the notice of the action has been given shall be entitled to avoid his liability under Sub-section (1) 'otherwise than in the manner provided for in Sub-section (2).' Now the only manner of avoiding liability provided for in Sub-section (2) is by successfully raising any of the defences therein mentioned. It comes then to this that the insurer cannot avoid his liability except by establishing such defences. Therefore Sub-section (6) clearly contemplates that he cannot take any defence not mentioned in Sub-section (2). If he could, then he would have been in a position to avoid his liability in manner other than that provided for in Sub-section (2). That is prohibited by Sub-section (6).

Para 16. 'Again, we find the contention wholly unacceptable. The statute has no doubt created a liability in the insurer to the injured person but the stature has also expressly confined the right to avoid that liability to certain grounds specified in it. It is not for us to add to those grounds and therefore to the statute for reasons of hardship. We are furthermore not convinced that the statute causes any hardship. First, the insurer has the right, provided he has reserved it by the policy, to defend the action in the name of the assured and if he does so, all defences open to the assured can then be urged by him and there is no other defence that he claims to be entitled to urge. He can thus avoid all hardship if any, by providing for a right to defend the action in the name of the assured and this he has full liberty to do. Secondly, if he has been made to pay something which on the contract of the policy he was not bound to pay, he can under the proviso to Sub-section (3) and under Sub-section (4) recover it from the assured. It was a aid that the assured might not be able to recover anything from him. But the answer to that is that is the insurer's bad luck. In such circumstances the injured person also would not have been able to recover the damages suffered by him from the assured, the person causing in injuries. The loss had to fall on some one and the statute has thought fit that it shall be borne by the insurer. That also seems to us to be equitable for the loss falls on the insurer in the course of his carrying on his business, a business out of which he makes profit, and he could so arrange his business that in the net result he would never suffer a loss. On the other hand, if the loss fell on the injured person, it would be due to no fault of his; it would have been a loss suffered by him arising out of an incident in the happening of which he had no hand at all.'

21. In the case of Skandia Insurance Company Ltd. v. Kokilaben Chandravadan and Ors., AIR 1987 SC 1184 the Supreme Court elaborately discussed the legislative intent and the object of these provisions. Their Lordships observed :--

'Para 13. In order to divine the intention of the legislature in the course of interpretation of the relevant provisions there can scarcely be a better test than that of probing into the motive and philosophy of the relevant provisions keeping in mind the goals to be achieved by enacting the same. Ordinarily it is not the concern of the legislature whether the owner of the vehicle insures his vehicle or not. If the vehicle is not insures any legal liability arising on account of third party risk will have to be borne by the owner of the vehicle. Why then has the legislature insisted on a person using a motor vehicle in a public place to insure against third party risk by enacting Section 94. Surely the obligation has not been imposed in order to promote the business of the insurers engaged in the business of automobile insurance. The provision has been inserted in order to protect the members of the community traveling in vehicles or using the roads from the risk attendant upon the user of motor vehicles on the roads. The law may provide for compensation to victims of the accidents who sustain injuries in the course of an automobile accident or compensation to the defendants of the victims in the case of a fatal accident. However, such protection would remain a protection on paper unless there is a guarantee that the compensation awarded by the Courts would be recoverable from the persons held liable for the consequences of the accident. A Court can only pass an award or a decree. It cannot ensure that such an award or decree results in the amount awarded being actually recovered, from the person held liable who may not have the resources. The exercise undertaken by the law Courts would then be an exercise in futility. And the outcome of the legal proceedings which by the very nature of things involve the time cost and money cost invested from the scarce resources of the Community would make a mockery of the injured victims, or the dependents of the deceased victim of the accident, who themselves are obliged to incur not inconsiderable expenditure of time, money and energy in litigation. 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 or conditions which may be specified in the contract of 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 clauses other than those authorized by Section 96 and by providing that 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 covering third party risks, 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 accident 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 legislature. The provision has therefore to be interpreted in the twilight of the aforesaid perspective.'

22. In the case of National Insurance Company Ltd. Chandigarh v. Nicolletta Rohtagi and Ors., 2002 (3) JCR 201 (SC) : AIR 2002 SC 3350 the Supreme Court interpreted the provision of Section 149(2) of 1988, Act and observed :

'9. Since one of the appeals arises out of the Motor Vehicles Act, 1939 (hereinafter referred to as the '1939 Act'), we may also briefly note the provisions of 1939 Act, Section 96(1) of the 1939, Act corresponds to Section 149(1) of 1988, Act which provides that after the issuance of the certificate of insurance, the Insurance Company shall satisfy the award or decree passed by the Tribunal against the insured not exceeding the sum assured as if he were the judgment debtor. Section 96(2) of the 1939, Act which corresponds to Section 149(2) of 1988, Act lays down that an Insurance Company can defend the action only on the ground of breach of conditions of the policy referred to in sub-section or on the ground that the policy is void for the reason referred to in the said sub-section. Section 96(6) of the 1939, Act corresponds to Section 149(7) of the 1988, Act and the same provides that the Insurance Company cannot avoid the liability to any person entitled to benefit of any judgment or award referred to in Sub-section (1) except in the manner provided in Sub-section (2) of the Act.

13. To answer the question, it is necessary to find out on what grounds the insurer is entitled to defend/contest against a claim by an injured or dependents of the victims of motor vehicle accident. Under Section 96(2) of 1939 Act which corresponds to Section 149(2) of 1988, Act, an Insurance Company has no right to be a party to an action by the injured, person or dependents of deceased against the insured. However, the said provision gives the insurer the right to be made a party to the case and to defend it. It is, therefore, obvious that the said right is a creature of the statute and its content depends on the provisions of the statute. After the insurer has been made a party to a case or claim, the question arises what are the defences available to it under the statute. The language employed in enacting Sub-section (2) of Section 149 appears to be plain and simple and there is no ambiguity in it. It shows that when an insurer is impleaded and has been given notice of the case, he is entitled to defend the action on grounds enumerated in the sub-section, namely, Sub-section (2) of Section 149 of 1988 Act, and no other ground is available to him. The insurer is not allowed to contest the claim of the injured or heirs of the deceased on other ground which is available to an insured or breach of any other conditions of the policy which do not find place in Sub-section (2) of Section 149 of 1988, Act. If an insurer is permitted to contest the claim on other grounds it would mean adding more grounds of contest to the insurer than what the statute has specifically provided for.

14. Sub-section (7) of Section 149 of 1988 Act, clearly indicates in what manner Sub-section (2) of Section 149 has to be interpreted. Sub-section (7) of Section 149 provides that 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 to 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 reciprocating country, as the case may be. The expression 'manner' employed in Sub-section (7) of Section 149 is very relevant which means an insurer can avoid its liability only in accordance with what has been provided for in Sub-section (2) of Section 149. It, therefore, shows that the insurer can avoid its liability only on the statutory defences expressly provided in Sub-section (2) of Section 149 of 1988, Act. We are, therefore, of the view that an insurer cannot avoid its liability on any other grounds except those mentioned in Sub-section (2) of Section 149 of 1988, Act.

15. It is relevant to note that the Parliament, while enacting Sub-section (2) of Section 149 only specified some of the defences which are based on conditions of the policy and, therefore, any other breach of conditions of the policy by the insured which does not find place in Sub-section (2) of Section 149 cannot be taken as a defence by the insurer. If the Parliament had intended to included the breach of other conditions of the policy as a defence, it could have easily provided any breach of conditions of Insurance Policy in Sub-section (2) of Section 149. If we permit the insurer to take any other defence other than those specified in Sub-section (2) of Section 149, it would mean we are adding more defences to insurer in the statute which is neither found in the Act nor was intended to be included.'

23. In a case reported 2000 (1) ACC 373, a Bench of Karnataka High Court decided a similar question as to whether the Insurance Company can take defence and disown its liability on the ground that the deceased was sitting on the top roof of the bus. It was held that it is not open to the Insurance Company to avoid us liability as it falls outside the scope of Section 149(2) of the Act. Further, the Insurance Company also cannot maintain appeal since its right of appeal is restricted to the grounds as contained in Section 149(2) of the said Act.

24. A Bench of the Punjab and Haryana High Court, in a case reported in 1989 (2) TAC 485 has taken a similar view and held that in case of a person traveling on the roof of the bus and dying in an accident, the insured committed no breach of any specified condition of policy. Insurance Company cannot take a defence which does not fall within the purview of Section 149(2) of the said Act.

25. In the light of the provisions of the M.V. Act referred to hereinabove and law decided by the Supreme Court and different High Courts quoted hereinabove, I have no doubt in my mind in holding that the insurer can avoid its liability only if the conditions specified in Section 149(2) are satisfied, and not otherwise. The statute recognizes no other condition for an insurer to escape its liability except those given in Section 149(2). Whatever may be the terms and conditions between the insurer and the insured the terms of contract between the insured and the insurer determining their rights and liabilities towards each other are not and should not be confused with the statutory liability of the insurer for the third party risk. If there is a breach of contract on the part of the insured, the insurer may proceed against the insured. As far as third party risk is concerned, the liabilities being statutory, it cannot be overridden by terms of the contract of insurance between the parties.

26. Learned counsels appearing for the Insurance Company put heavy reliance on the provisions of Section 123 of the M.V. Act, 1988 and submitted that when premium was paid for covering the risk of specified number of passengers and the permit was issued specifying the number of passengers then Insurance Company cannot be held liable in a case where there is a violation of permit by carrying more passengers. In this connection, learned counsel relied upon the decision of the Supreme Court in the case of National Insurance Company Ltd. v. Challa Bharathamma and Ors., 2005 (1) JCR 41 (SC). In my opinion, the ratio decided by the Supreme Court will be of no help to the respondents. In that case the deceased were traveling in an auto rickshaw which met with an accident. The Insurance Company resisted the claim on the ground that insured had not obtained permit to ply the vehicle and, therefore, in terms of the policy of the insurance the insurer had no liability. On these facts, Supreme Court held that such a defence is available to insurer in terms of Section 149(2) of the Act. However, it was directed that insurer may satisfy the award with liberty to recover the amount from the insured by initiating a proceeding before the Executing Court.

27. In the instant case, it is not the defence of the Insurance Company that the vehicle was being plied on the road without any valid permit rather the stand of the Insurance Company is that carrying passengers more than the number specified in the permit is violation of condition of permit and the Insurance Policy and, therefore, this defence is available to the Insurance Company under Section 149(2) of the Act. I do not find any substance in the stand taken by the Insurance Company.

28. In the case of State of Maharashtra and Ors. v. Nanded-Parbhani Z.L.B.MV. Operator Sangh, AIR 2002 SC 725, a similar question with regard to liability of the Insurance Company in case where vehicle was found carrying more passengers than the number of passengers prescribed in the permit came for consideration before the Supreme Court and their Lordships observed:

'According to the learned counsel, appearing for the State of Maharashtra, the expression 'purpose for which the vehicle may be used' could be construed to mean that when the vehicle is found to be carrying passengers more than the number prescribed in the permit, the purpose of user is otherwise. We are unable to accede to this contention as in our opinion, the purpose would only refer to a contingency when a vehicle having a permit of stage carriage is used as a contract carriage or vice versa or where a vehicle having a permit for stage carriage or contract carriage is used as a goods vehicle and vice versa. But carrying passengers more than the number specified in the permit will not be a violation of the purpose for which the permit is granted. If the legislature really wanted to confer power of detention on the police officer for violation of any condition of the permit, then there would not have been the necessity of adding the expression 'relating to the route on which or the area in which or the purpose for which the vehicle may be used.' The user of the aforesaid expression cannot be ignored nor can it be said to be a tautology. We have also seen the form of permit (From P.Co.T.), meant in respect of a tourist vehicle, which is issued under Rule 72(1)(IX) and Rule 74(6) of the Maharashtra Motor Vehicles Rules, 1989. On seeing the different columns, we are unable to accede to the contention of the learned counsel appearing for the State of Maharashtra, that carrying passengers beyond the number mentioned in Column 5, indicating the seating capacity, would be a violation of the conditions of permit relating either the route or the area or the purpose for which the permit is granted. In this view of the matter, we see no infirmity with the conclusion arrived at by the High Court in the impugned judgment and the detention of the vehicles has rightly been held to be unauthorized and consequently, the compensation awarded cannot be said to be without jurisdiction. This appeal, therefore, fails and is dismissed but in the circumstances, there will be no order as to costs.'

29. In the case of United India Insurance Company Limited v. Doddapapaiah and Anr., (2000) 1 ACC 373, a Bench of Karnataka High Court considered a similar defence taken by the Insurance Company under Section 123 of the M.V. Act and held that Insurance Company cannot avoid its liability as the violation of Section 123 of the Act does not fall within the scope of Section 149(2) of the said Act.

30. In the case of Oriental Insurance Company Ltd. v. Jashmani Kongari, (supra), learned Single Judge of this Court considering the provision of Section 123 of the Act held as under :

'3. The Insurance Policy between the insurer and the insured represents in contract between the parties. Since the insurer undertakes to compensate the loss suffered by the insured on account of risks covered by the Insurance Policy, the terms of the agreement have to be strictly construed to determine the extent of liability of the insurer. The insured cannot claim any thing more than what is covered by the Insurance Policy. That being so, the insured has also to Act strictly in accordance with the statutory limitations or terms of the policy expressly set out therein. In the present case, the deceased passenger was not prevented, rather was allowed to travel on roof of the bus and as such it amounted to breach of a condition of the Insurance Policy and for the tortious act on behalf of owner of the vehicle, the insurer was not liable.'

31. On the contrary, a Division Bench of this Court in the case of Bholla Nath Yadav v. Hemwati and Ors., (supra), considering the similar question held as under :

'9. It is well settled that Insurer can avail only such defence as are permissible under Sub-section (2) of Section 149 of the Act, unless the policy itself permits the insurer to urge the defence to escape its liability to indemnify the owner. Under Section 149 the grounds specified under Section 149(2) of the Act does not include a breach of any specified condition of the policy on account of either traveling by a passenger on the roof top of the vehicle or traveling by persons more in number than the number of passengers for which extra premium was paid. Further even if the deceased, who was traveling on the roof top of the bus was not a bona fide passenger, the insurer under the provisions of Section 147 of the Act cannot claim exclusion of such gratuituous passengers, the Insurance Policy covering 3rd party risk.'

32. After giving my anxious consideration on the provisions of law and ratio decided by the Supreme Court in the decisions referred to hereinabove, I come to the following conclusion :

(i) Carrying passengers more than covered by the Insurance Policy though amounts to committing breach of terms of policy, the Insurance Company cannot be absolved from its liability to pay compensation with respect to the persons exceeding the number covered by the policy. In case Insurance Company is permitted to raise defence of limited liability on the basis of terms of policy, object of Section 147 would stand frustrated. Even otherwise, alleged breach of terms of policy by the insured may be an offence under the provisions of the Act, but surly that does not fall under Section 149(2)(a) of the Act.

(ii) The insurer can avoid its liability only if the conditions specified in Section 149(2) are satisfied, and not otherwise. The statute recognizes no other condition for an insurer to escape its liability except those given in Section 149(2) whatever the terms and conditions between the insurer and the insured may be. The terms of contract between the insured and the insurer determining their rights and liabilities towards each other are not and should not be confused with the statutory liability of the insurer for the third party risk. If there is a breach of contract on the part of the insured, the insurer may proceed against the insured. As far as third party risk is concerned, the liabilities being statutory, it cannot be overridden by terms of the contract of insurance between the parties.

33. I, therefore, hold that the decision of the learned single Judge in Oriental Insurance Company Ltd. v. Jashmani Kongari, 2001 (1) JLJR 178, is not correct and is hereby overruled. The decision given by the Division Bench in Bholla Nath Yadav v. Hemwati and Ors., 2002 (2) JLJR 411 is affirmed.

34. In view of the conclusions to which I have arrived, I hold that respondent-Insurance Company is liable to pay compensation assessed by Motor Accident Claims Tribunal. These two appeals are, therefore, allowed and the judgment and award passed by the Tribunal are set aside. The parties will, however, bear their own costs.

S.J. Mukhopadhyaya, J.

35. I agree.

Narendra Nath Tiwari, J.

36. I agree.