The Motor and General Insurance Co. Ltd., Calcutta Vs. Hota Ram and ors. - Court Judgment

Gurdev Singh, J.

1. There has been no dispute before us about the quantum of damages awarded to the plaintiff, Though he claimed Rs. 15,000/- the learned Senior Subordinate Judge has awarded him Rs. 5,000/- only as damages. Considering the fact that the plaintiffhad sustained fracture of three ribs and pelvisbone and injuries on various other parts, which, necessitated his confinement in the hospital for 53 days, there is no denying the fact that his efficiency and prospects of promotion in the police-force in which he was employed must have been affected and for these injuries a sum of Rs. 5,000/-that has been awarded by the trial Court, cannot be considered excessive. In addition he has been rightly held to be entitled to Rs. 250/- which he has proved to have spent on medical treatment.

2. The learned counsel for the appellant has urged that no decree should have been passed against the Insurance Company as there was no privity of contract between the plaintiff and the Company and his suit against it was not competent. Reliance in this connection has been placed on Des Raj Pahwa v. Concord of India Insurance Co., Ltd., AIR 1951 Punj 114, R. Ramaswamy V. R. Satyanarayana, AIR 1958 Andh Pra 309 and British India General Insurance Co., Ltd. v. Janardan Vishwanath Naik, AIR 1938 Rom 217. No such plea was raised at the trial, nor any issue framed thereon, and we hardly find any justification for permitting the appellant to take up this new plea at this stage.

3. Apart from this, I do not find much force in this contention. It is true that the plaintiff was not a party to the insurance polity Ex. D-13, which was taken out by the Amritsar National Transport Co-operative Society under the provisions of Section 94 of the Motor Vehicles Act, and he would not be entitled to sue the Insurance Company straightway without impleading the insured Transport Society, but I see nothing in law that could prevent the plaintiff from impleading the appellant Insurance Company as a defendant in the suit.

It is not disputed that under the terms of the policy Ex. D-13 the appellant Company had undertaken to indemnify the passengers travelling in this bus of the Amritsar National Transport Society for injuries suffered in the course of the motor accident. It is also beyond dispute that once a decree for damages was passed against the Transport Society the insurer would be liable to pay the amount to the decree-holder though up to the limit of its liability as laid down in the insurance policy. The relevant provision as contained in Sub-sections (1), (2) and (6) of the Motor Vehicles Act 4 of 1939 runs as under:

'96(1). If, after a certificate of insurance has been issued under Sub-section (4) of Section 95 in favour of the person by whom a policy has been effected, judgment in respect of any such liability as is required to be covered by a policy under Clause (b) of Sub-section (1) of Section 95 (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 thereunder, as if he were the judgment-debtor, in respect of the liability, together with any amount payable in respect of costs. and any sum payable in respect of interest on that sum by virtue of any enactment relating to interest on judgment.

(2) No sum shall be payable by an insurer under Sub-section (1) in respect of any judgment unless before or after the commencement of the proceedings in which the judgment is given the insurer had notice through the Court of the bringing of the proceedings, or in respect of any judgment 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:

X X X x x X X X X X (6) No insurer to whom the notice referred to in Sub-section (2) (or Sub-section (2A)) has been givenshall be entitled to avoid his liability to any person entitled to the benefit of any such judgmentas is referred to in Sub-section (1) (or Sub-section (2A))otherwise than in the manner provided for in Sub-section (2) .. ...'

From the above it would be evident that when a person institutes a suit against a transport company, or the owner of a motor vehicle which is insured under Section 94 of the Motor Vehicles Act, he has to serve a notice of the proceedings on the Company with whom the vehicle in question is insured and this notice may be served either before the suit or the proceedings are lodged or after they are commenced.

On receiving such notice it is open to the Insurance Company to apply to the Court to be made a party and to defend the action On the grounds specified in Clauses (a), (b) and (c) to Sub-section (2) of Section 96. The object of providing for a notice is twofold; firstly, it is to enable the Insurance Company to defend the action in its own right on the grounds which are open to it under Sub-section (2) of Section 96; and secondly to ensure that a decree behind the back of the Insurance Company is not passed as a result of collusion between the plaintiff and the insured.

4. In the present case what has been done is that the plaintiff while instituting the suit against the insured Transport Society impleaded the insurer Company as a defendant. The summons in the name of the Insurance Company were thereupon issued and in response to the same the Insurance Company not only appeared without any objection but also availed of the opportunity and contested the plaintiff's claim tooth and nail, even on grounds which were not available to it under Sub-section (2) of Section 96.

The summonses issued to it can be considered as a substitute for the notice of the proceedings under Section 96 of the Motor Vehicles Act and when the appellant Insurance Company put in a written statement and contested the plaintiffs claim its conduct was tantamount to a prayer that it be made a party to the suit.

In these circumstances when Sub-section (1) of Section 96 of the same Act lays down that a decreeobtained against the insured would be executable against the insurer, even though the latter wasnot a party to the suit, I fail to see how the appellant Company can now object that it should not have been impleaded as a party in the suit.

5. Coming to the authorities relied upon by the appellant's learned counsel we find that the decision in AIR 1938 Bom 217, was given prior to the enactment of the Motor Vehicles Act (Act IV of 1939) when there was no provision similar to the one contained in Section 96 of the Motor Vehicles Act. It is based upon the English rule about the contracts of insurance as stated in Halsbury, Vol 18. para 879, which has been stated thus:

'The person who has suffered the injury or damage for which the assured is liable is not a party or privy to the contract of insurance, and had not, either at Common Law Or in equity, any right to the money payable under the policy which he could enforce directly against either the insurers or the assured.'

In AIR 1958 Andh Pra 309, a Division Bench ot that Court rejected the contention that in a contract of insurance for third party risks, the third party could be regarded as cestui quo trust on whose behalf the policy was effected, and was thus competent to sue the Insurance Company for damages sustained by him in a motor accident. The learned Judges relied upon the Bombay decision quoted above and on AIR 1951 Punj 114.

This Punjab decision was given by my learned brother Falshaw, J. The question that came up for consideration before his Lordship in that case was whether the third party, who had sustained injuries in a motor accident could avail of an arbitration clause contained in the insurance policy. In answering this question in the negative my learned brother was mainly influenced by the fact that under ordinary law only a party to a contract could enforce it. In this connection it was observed:

'Under the ordinary law the only persons who can take legal steps to enforce the terms of contract are the parties to the contract, but there are undoubtedly some Indian cases relied on by the claimants in which it has been held that in certain circumstances a contract can be enforced by someone other than a party to it ........

On behalf of the claimants it was contended that in a contract of insurance for third party risks there was a kind of trust created for the benefit of any third party who might suffer injury or loss, but I cannot believe that this is the kind of trust contemplated in the decisions relied on by them.'

Noticing the provisions of Section 96, Motor Vehicles Act, 1939, his Lordship proceeded to say:

'It seems to me, however, that the provisions of this section would only come into operation if the claimants had brought a suit against Mr. Tawakley, or the owner of the car at the time of the accident, and I cannot interpret the section as extending the ordinary principle of law that legal proceedings based on a contract can only be instituted by a party to the contract.'

6. From what has been said above it would be evident that the question which faces us in the present case, namely whether the Insurance Company could be impleaded as a defendant along with the insured did not arise in the Punjab case and that decision is no authority in support of the proposition urged on behalf of the appellants.

7. Under Section 96 of the Motor Vehicles Act, 1939 the Insurance Company is under a statutory liability to indemnify the insurer. It has further been given a right to receive notice of the proceedings against the insured and to be impleaded as a party at its own request with liberty to take up such defences as are specified in Sub-section (2) of Section 96 because of its vital interest in the outcome of the suit brought by a third party for injury sustained in the motor accident.

Though under this section it is not necessary for the plaintiff in such a suit to implead the Insurance Company as a defendant, yet he is under a duty to serve a notice of the proceedings on the Insurance Company so that it could join as a defendant and watch its interests. If the plaintiff in those circumstances impleads the Insurance Company as a defendant it would certainly be open to Insurance Company to object to its being joined as a party, but if it does not do so, and actually defends the action, it cannot later complain that no order regarding its liability should be passed after it has unsuccessfully contested the plaintiffs claim.

As has been observed earlier, under Section 96 of the Motor Vehicles Act, 1939, once the claim is decreed against the insured, the Insurance Company is under a statutory obligation to satisfy the liability of the insured under that judgment. In view of this situation it would be idle to contend that no decree could be passed against the Insurance Company, who had been joined as a defendant and had fought out the case.

Even if there was any technical difficulty in passing a decree against the Insurance Company in such a suit, the Court would be perfectly within its powers to grant the decree against the insured and declare at the same time that, in view of the provisions of Section 96 of the Motor Vehicles Act, 1939,the decree would be executable against the Insurance Company and this would hardly make any difference to the result of the suit.

8. In some cases it has been ruled that though under Section 96(2), Motor Vehicles Act, 1939, an Insurance Company cannot be impleaded as a defendant, except on its own request, it may be permitted to defend the suit in the name of theinsured and to take up even those pleas in defence of the action which would not be open tothe Insurance Company itself under Sub-section (2) of Section 96, Motor Vehicles Act. Reference in this connection may be made to Royal Insurance Co., Ltd. v. Abdul Mahomed Meheralli, (S) AIR 1955 Bom 39 and Vimlabai Vashishtha v. General Assurance Society, Ltd., (S) AIR 1955 Bom 278. This view was followed by a Division Bench of this Court in Itbar Singh v. P.S. Gill, (S) AIR 1955 Punj 187, where Harnam Singh, J., who wrote thejudgment, ruled:

'Insurers in the several matters on showingsufficient cause may be permitted to defend the action affecting them on merits in the name of the original defendant or defendants as the casemay be.'

9. This power to permit an Insurance Company to defend a suit even on pleas which are not open to it under Sub-section (2) of Section 96 of the Motor Vehicles Act, is based on the inherent powers of the Court. If that is so, I fail to see why when the Insurance Company has been joined as a defendant and has fought out the case even on pleas which are not open to it under Section 96 of the Motor Vehicles Act, no decree can be passed against it as the party who is under a statutory liability to satisfy the judgment passed against the insured.

Here the suit was primarily against the driver of the bus, whose rash and negligent act resulted in injury to the plaintiff, and his employer the Amritsar National Transport Society. The appellant Company as insurer was impleaded because ultimately the damages awarded to the plaintiff could be recovered from it in accordance with the terms of the policy Ex. D-13.

By impleading the Insurance Company as a defendant in the case, the plaintiff has afforded an opportunity to the Company to defend itself. Though the appellant Company was not a necessary party to the suit, the fact that it was interested in the result of litigation between the plaintiff and the other two defendants would make it a proper party and it has in no way been prejudiced by its being made a party.

10. There is, however, considerable force in the appellant's contention that its liability was confined to Rs. 2,000/- and a decree in excess of that amount could not be passed against it. Clause (1) of the Insurance policy D-13 runs as follows:

'1. Subject to the limit of liability the Company will indemnify the insured in the event of accident caused by or arising out of the use of the motor vehicle in a public place against all sums including claimant's costs and expenses which the insured shall become legally liable to pay in respect of death of or bodily injury to any person.' Endorsement No. 3 which forms part of the policy reads as under: 'In consideration of the payment of an additional premium it is hereby understood and agreed that this policy shall cover liability to passengers carried in the vehicle described in the Schedule for hire or reward to the extent of Rs. 2,000/-in respect of any one person and subject to the limit of Rs. 20,000/- in respect of any number of claims arising out of one case.'

From the above it is clear that in respect of loss suffered by a passenger in a bus, the Insurance Company is liable to pay only Rs. 2,000/-. Accordingly no decree in excess of that amount could be passed against the appellant. If damages in excess of Rs. 2,000/- are awarded, the plaintiff may recover the same from the other defendants but not from the insurer.

11. As a result of the above discussion I would accept the appeal and modifying the judgment and decree of the trial Court direct that the appellant Company shall be liable only to the extent of Rs. 2,000/-. The learned Senior Subordinate Judge was clearly in error in not passing any decree against the other defendants who on his own findings were primarily responsible foe the damages suffered by the plaintiff.

Acting under the provisions of Order 41, Rule 33 of the Code of Civil Procedure, I would grant the plaintiff a decree for Rs. 5,250/- against defendants Nos. 1 and 2 as welt In view of the partial success of the appellant, the parties are let to bear their own costs in this Court.

Falshaw, J.

12. I agree.