T.D.Joseph, Thoppil House Vs. the United India Insurance Co. Ltd. - Court Judgment

Excerpt:
[a.n.venugopala gowda j.] this writ petition is filed under articles 226 and 227 of the constitution of india, praying to quash the impugned order dated 15.7.2010 passed in execution no.25095/2009 by the learned xiii addl. city civil judge, mayo hall unit, bangalore vide annexure -j. misc.w.no.9778/2010 is filed under section 151 of the code of civil procedure 1908, praying to vacate the interim order of stay granted in the above case.o r d e r harun-ul-rashid, j. ------------------------ m.a.c.a.no.3023 of 2008 ---------------------- dated this the 4th day of november, 2010. j u d g m e n t the appellants are the respondents 1 & 2 in o.p(m.v). no.476 of 1999 on the file of the mact, pala. petitioner in the o.p. sustained injuries in a motor accident on 28.2.1999 when he was hit by a scooter owned by the 1st respondent and driven by the second respondent in the o.p. alleging negligence on the part of the second respondent the petitioner in the o.p. preferred the claim for compensation. the respondents 1 & 2 disputed the negligence of the second respondent and contented that the first respondent was riding the scooter. the third respondent in the o.p is the insurer. third respondent disputed the quantum and alleged that the second respondent was not holding a valid driving licence. the court below after considering the respective contentions of the parties allowed the petitioner in the o.p to realise an amount of rs.26,750/- with 9% interest along with costs. the third respondent insurer is directed to deposit the amount. the insurer has deposited the amount. the court ordered that the insurer can realise the amount deposited with 9% interest per annum from the date of deposit till realisation from the respondents 1 & 2. aggrieved by the award respondents 1 & 2 in the o.p. have preferred the present appeal. 2. the original award was passed on 16.10.2004. in the appeal preferred by the appellants as m.a.c.a.no.1303 of 2005 this court confirmed the finding of negligence. the tribunal found that there is violation of policy condition on the part of the insured and the insurer was allowed to recover the amount awarded from respondents 1 & 2. 3. appellants contended that there is no fundamental breach of policy conditions on the side of the insured. originally, this court remanded the case to the tribunal for fresh consideration. after remand the question for consideration before the tribunal is confined to the question of recovery of the award amount by the insurer from the appellants. the contentions raised by the appellants before the tribunal and before this court in this appeal is on the basis of the decision reported in national insurance company ltd. v. swaran singh (2004 (1) klt 781). relying on the said decision the appellants contended that mere absence, fake or invalid driving licence or disqualification of the driver for driving at the relevant time, are not in themselves defence available to the insurer against either the insured or to the third parties. it is said that 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 from driving the vehicle. the learned counsel also pointed out clause 6 in the summary of findings in paragraph 102 in the above referred decision that unless 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. it is true that the dictum laid down in the apex court decision as referred above was not considered by the tribunal instead the tribunal considered only the findings of the apex court that when the driver of the vehicle who is authorised to drive one type of vehicle drives different type of vehicle, the insurer is entitled to avoid its liability. the learned judge further observed that the insurer is required to prove the fact that the driver was not having a licence of a different type of vehicle contributed to the accident. the tribunal, in fact considered the decision of the apex court in the context of a driver possessing of licence of one type of vehicle but, driving another type of vehicle contributed to the cause of accident. the said question was also considered by the apex court. the apex court held as follows: "if it is found that the accident was caused solely due to some other unforeseen on intervening causes like mechanical failures and similar other causes having no nexus with 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". in this case the question is not as to whether the driver possessing licence of one type of vehicle but, found driving another type of vehicle, was the main contributory cause of accident. principles to be applied in the said situation was also dealt within the decision. in this case the question to be considered is not a case where the driver possessing driving licence for one type of vehicle found driving another type of vehicle. it is true that the tribunal failed to consider the question raised by the appellants relying on the principles laid down in swaransingh's case (supra). this is a case where the driver of the vehicle admittedly did not hold any licence and he was allowed to be driven by the owner of the vehicle. the question is whether the insurer is entitled to succeed in its defence and avoid liability. the contention raised by the counsel for the appellants is that 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 the insured unless the said breach or breaches of the condition of the driving licence is/are so fundamental as are found to have contributed to the cause of the accident. according to him as laid down by the apex court, 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 motor vehicles act. since the tribunal did not consider the contentions of the appellants with reference to the principles laid down by the apex court applicable to this case, i have, without resorting to a second remand, heard the counsel on both sides very elaborately. 4. the finding that the second respondent in the o.p drove the vehicle and he did not possess any licence to drive the vehicle has become final. this court in m.a.c.a.no.1303 of 2005 held that the driver did not have a valid driving licence. this is a case where a person without a driving licence drove the vehicle and caused accident. the finding that the accident happened due to the rash and negligent act of the driver has also become final. this is not a case where the driver was holding one type of driving licence but drove a different type of vehicle for which he has no licence. according to the appellants, on the facts of this case, it is for the insurance company to prove that there is fundamental breach of the policy conditions on the side of the owner that on facts, there is no fundamental breach of policy conditions and therefore the insurance company is not entitled to reimburse the amount paid to the claimants. 5. the apex court in the decision referred supra held as follows: "a 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 of its liability". it was also held that, "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 licenced driver or one who was not disqualified to drive at the relevant time". from the above said dictum it is clear that not only fake or invalid driving licences or disqualification of the driver for driving at the relevant time are not themselves available to the insurer against the insured or third parties, the absence of licence is also, it is stated, is not by themselves a defence available to the insurer in a case where a person drove the vehicle without a licence. 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 licenced driver or one who was disqualified to drive at the relevant time. therefore, it is clear that the absence of driving licence by itself is not a defence available to the insurer. the insurance company 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. the apex court in paragraph 77 of the swaran singh's case considered the specific question as to the liability of the insurer, when admittedly no licence was obtained by a driver. the apex court held as follows: "where the driver of the vehicle admittedly did not hold any licence and the same was allowed consciously to be driven by the owner of the vehicle by such person, the insurer is entitled to succeed in its defence and avoid liability". the insurer in order to succeed in its defence and to avoid its liability in a case like this, mere absence of the driving licence by the person who drove the vehicle at the time of accident is not enough, the insurance company has to prove that the vehicle was allowed consciously to be driven by the owner of the vehicle by a person who is not holding a valid licence. so, there should be evidence to show that the owner after full knowledge about the fact that the person who drove the vehicle has not licence allowed consciously to drive the vehicle. the insurer also has to prove that the owner was guilty of negligence and failed to exercise reasonable care in the matter of fulfilling the condition of the policy. in this case, the insurance company did not adduce any evidence to show that the owner of the vehicle consciously allowed the second respondent to drive the vehicle. the insurance company also did not give any evidence to prove that the owner of the vehicle was guilty of negligence and the owner failed to exercise reasonable care in the matter of fulfilling the conditions of policy. what was proved in this case is the first limb in clause (iii) of summary of findings stated in paragraph 102 of the decision reported above, namely, the driver was not holding any licence. in the absence of proof of other factors namely, consciously allowing the driver to drive the vehicle who is not holding a driving licence, the fact that the owner was guilty of negligence and failed to exercise reasonable care in the matter of fulfilling the condition of policy, having failed to prove the same, the insurance company cannot avoid its liability towards the insured. 6. the apex court also held that the insurance company is required to establish breach of condition of policy by cogent evidence and that if the insurance company fails to prove that there has been breach of conditions of policy of the part of the insured the insurance company cannot be absolved of its liability. 7. in clause (vi) of the summary of findings in paragraph 102 the apex court held as follows: "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 of 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 tribunal 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 s.149(2) of the act". in the light of the said pronouncement it is also necessary for the insurance company to prove that the absence of driving licence is the fundamental cause contributed to the accident. there is no evidence in this case to prove that the absence of the driving licence is the fundamental reason which have contributed to the cause of the accident. 8. the learned counsel for the respondent insurance company relying on the decision reported in sardari and others v. sushil kumar and others (2008 acj 1307) contended that since the driver of the scooter was not holding a driving licence the insurance company was rightly exempted from liability. it was held in the decision that the owner of vehicle has a statutory obligation to see that the driver of vehicle who authorised to drive the vehicle holds a valid licence. in the said division bench decision the court quoted with approval the various decisions which are referred to and relied on in swaran singh's case. the court also referred to the situation that the vehicle was allowed consciously to be driven by the owner of the vehicle by a person holding no licence, the insurer is entitled to succeed in its defence and avoid liability. the learned counsel also relied on the decision reported in united india insurance co. ltd. v. rakesh kumar arora and others (2008 air scw 6872). that was a case where the vehicle in question admittedly was driven by a minor who was aged about 15 years, he does not have a driving licence on the date of the accident. it is a case where the father was the owner of the vehicle and it has been proved that there was a breach of condition of the policy on the part of the insured. learned counsel also relied on the decision of the apex court in national insurance co. ltd. v. kusum rai [2006 (2) klt 300 (sc)]. this is a case where admittedly the driver did not hold any licence and the same was consciously allowed to be driven by the owner of the vehicle by such a person, the insurer is entitled to succeed its defence and avoid liability. in the said case also the apex court referred to the decision reported in swaran singh's case. the apex court in swaran singh's case laid down the rule that with a view to avoid the liability of the insurance company, the company must not only establish the available defence but, must also establish 'breach' on the part of the owner of the vehicle. the burden of proof would be on them. the apex court in paragraph 63 held as follows: "the degree of proof which would satisfy the requirement inasmuch as the same would indisputably depend upon the facts and circumstances of each case. each case may pose different problem which must be resolved having to a large number of factors governing the case including conduct of parties as regard duty to inform, correct disclosure, suppression, fraud on the insurer, etc. it will also depend upon the fact as to who is the owner of the vehicle and the circumstances in which the vehicle was being driven by a person having no valid and effective licence". therefore, parties alleging breach must be held to have succeeded in establishing the breach of conditions of contract of insurance on the part of the insured by discharging its burden of proof. 9. on the basis of the facts, circumstances and the findings recorded as final and in the light of the relevant legal principles laid down in swaran singh's case discussed in the preceding paragraphs, i am of the view that the insurance company is liable to pay the amount and is not entitled to get reimbursement from the appellants. in the result, the appeal is allowed. the impugned award is set aside to the extent of allowing the insurance company to realise the award amount with 9% interest per annum from the date of deposit till realisation from the appellants. there will be no order as to costs.

Judgment:
O R D E R

HARUN-UL-RASHID, J.

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M.A.C.A.No.3023 Of 2008

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Dated this the 4th day of November, 2010.

J U D G M E N T

The appellants are the respondents 1 & 2 in O.P(M.V). No.476 of 1999 on the file of the MACT, Pala. Petitioner in the O.P. sustained injuries in a motor accident on 28.2.1999 when he was hit by a scooter owned by the 1st respondent and driven by the second respondent in the O.P. Alleging negligence on the part of the second respondent the petitioner in the O.P. preferred the claim for compensation. The respondents 1 & 2 disputed the negligence of the second respondent and contented that the first respondent was riding the scooter. The third respondent in the O.P is the insurer. Third respondent disputed the quantum and alleged that the second respondent was not holding a valid driving licence. The court below after considering the respective contentions of the parties allowed the petitioner in the O.P to realise an amount of Rs.26,750/- with 9% interest along with costs. The third respondent insurer is directed to deposit the amount. The insurer has deposited the amount. The court ordered that the insurer can realise the amount deposited with 9% interest per annum from the date of deposit till realisation from the respondents 1 & 2. Aggrieved by the award respondents 1 & 2 in the O.P. have preferred the present appeal.

2. The original award was passed on 16.10.2004. In the appeal preferred by the appellants as M.A.C.A.No.1303 of 2005 this Court confirmed the finding of negligence. The Tribunal found that there is violation of policy condition on the part of the insured and the insurer was allowed to recover the amount awarded from respondents 1 & 2.

3. Appellants contended that there is no fundamental breach of policy conditions on the side of the insured. Originally, this Court remanded the case to the Tribunal for fresh consideration. After remand the question for consideration before the Tribunal is confined to the question of recovery of the award amount by the insurer from the appellants. The contentions raised by the appellants before the Tribunal and before this Court in this appeal is on the basis of the decision reported in National Insurance Company Ltd. v. Swaran Singh (2004 (1) KLT 781). Relying on the said decision the appellants contended that mere absence, fake or invalid driving licence or disqualification of the driver for driving at the relevant time, are not in themselves defence available to the insurer against either the insured or to the third parties. It is said that 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 from driving the vehicle. The learned counsel also pointed out Clause 6 in the summary of findings in paragraph 102 in the above referred decision that unless 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. It is true that the dictum laid down in the Apex Court decision as referred above was not considered by the Tribunal instead the Tribunal considered only the findings of the Apex Court that when the driver of the vehicle who is authorised to drive one type of vehicle drives different type of vehicle, the insurer is entitled to avoid its liability. The learned Judge further observed that the insurer is required to prove the fact that the driver was not having a licence of a different type of vehicle contributed to the accident. The tribunal, in fact considered the decision of the Apex Court in the context of a driver possessing of licence of one type of vehicle but, driving another type of vehicle contributed to the cause of accident. The said question was also considered by the Apex Court. The Apex Court held as follows:

"If it is found that the accident was caused solely due to some other unforeseen on intervening causes like mechanical failures and similar other causes having no nexus with 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".

In this case the question is not as to whether the driver possessing licence of one type of vehicle but, found driving another type of vehicle, was the main contributory cause of accident. Principles to be applied in the said situation was also dealt within the decision. In this case the question to be considered is not a case where the driver possessing driving licence for one type of vehicle found driving another type of vehicle. It is true that the Tribunal failed to consider the question raised by the appellants relying on the principles laid down in SwaranSingh's case (supra). This is a case where the driver of the vehicle admittedly did not hold any licence and he was allowed to be driven by the owner of the vehicle. The question is whether the insurer is entitled to succeed in its defence and avoid liability. The contention raised by the counsel for the appellants is that 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 the insured unless the said breach or breaches of the condition of the driving licence is/are so fundamental as are found to have contributed to the cause of the accident. According to him as laid down by the Apex Court, 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 Motor Vehicles Act. Since the Tribunal did not consider the contentions of the appellants with reference to the principles laid down by the Apex Court applicable to this case, I have, without resorting to a second remand, heard the counsel on both sides very elaborately.

4. The finding that the second respondent in the O.P drove the vehicle and he did not possess any licence to drive the vehicle has become final. This Court in M.A.C.A.No.1303 of 2005 held that the driver did not have a valid driving licence. This is a case where a person without a driving licence drove the vehicle and caused accident. The finding that the accident happened due to the rash and negligent act of the driver has also become final. This is not a case where the driver was holding one type of driving licence but drove a different type of vehicle for which he has no licence. According to the appellants, on the facts of this case, it is for the insurance company to prove that there is fundamental breach of the policy conditions on the side of the owner that on facts, there is no fundamental breach of policy conditions and therefore the insurance company is not entitled to reimburse the amount paid to the claimants.

5. The Apex Court in the decision referred supra held as follows:

"A 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 of its liability".

It was also held that,

"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 licenced driver or one who was not disqualified to drive at the relevant time".

From the above said dictum it is clear that not only fake or invalid driving licences or disqualification of the driver for driving at the relevant time are not themselves available to the insurer against the insured or third parties, the absence of licence is also, it is stated, is not by themselves a defence available to the insurer in a case where a person drove the vehicle without a licence. 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 licenced driver or one who was disqualified to drive at the relevant time. Therefore, it is clear that the absence of driving licence by itself is not a defence available to the insurer. The insurance company 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. The Apex Court in paragraph 77 of the Swaran Singh's case considered the specific question as to the liability of the insurer, when admittedly no licence was obtained by a driver.

The Apex Court held as follows:

"Where the driver of the vehicle admittedly did not hold any licence and the same was allowed consciously to be driven by the owner of the vehicle by such person, the insurer is entitled to succeed in its defence and avoid liability".

The insurer in order to succeed in its defence and to avoid its liability in a case like this, mere absence of the driving licence by the person who drove the vehicle at the time of accident is not enough, the insurance company has to prove that the vehicle was allowed consciously to be driven by the owner of the vehicle by a person who is not holding a valid licence. So, there should be evidence to show that the owner after full knowledge about the fact that the person who drove the vehicle has not licence allowed consciously to drive the vehicle. The insurer also has to prove that the owner was guilty of negligence and failed to exercise reasonable care in the matter of fulfilling the condition of the policy. In this case, the insurance company did not adduce any evidence to show that the owner of the vehicle consciously allowed the second respondent to drive the vehicle. The insurance company also did not give any evidence to prove that the owner of the vehicle was guilty of negligence and the owner failed to exercise reasonable care in the matter of fulfilling the conditions of policy. What was proved in this case is the first limb in clause (iii) of summary of findings stated in paragraph 102 of the decision reported above, namely, the driver was not holding any licence. In the absence of proof of other factors namely, consciously allowing the driver to drive the vehicle who is not holding a driving licence, the fact that the owner was guilty of negligence and failed to exercise reasonable care in the matter of fulfilling the condition of policy, having failed to prove the same, the insurance company cannot avoid its liability towards the insured.

6. The Apex Court also held that the insurance company is required to establish breach of condition of policy by cogent evidence and that if the insurance company fails to prove that there has been breach of conditions of policy of the part of the insured the insurance company cannot be absolved of its liability.

7. In Clause (vi) of the summary of findings in paragraph 102 the Apex Court held as follows:

"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 of 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 Tribunal 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 S.149(2) of the Act".

In the light of the said pronouncement it is also necessary for the insurance company to prove that the absence of driving licence is the fundamental cause contributed to the accident. There is no evidence in this case to prove that the absence of the driving licence is the fundamental reason which have contributed to the cause of the accident.

8. The learned counsel for the respondent insurance company relying on the decision reported in Sardari and others v. Sushil Kumar and others (2008 ACJ 1307) contended that since the driver of the scooter was not holding a driving licence the insurance company was rightly exempted from liability. It was held in the decision that the owner of vehicle has a statutory obligation to see that the driver of vehicle who authorised to drive the vehicle holds a valid licence. In the said Division Bench decision the Court quoted with approval the various decisions which are referred to and relied on in Swaran Singh's case. The court also referred to the situation that the vehicle was allowed consciously to be driven by the owner of the vehicle by a person holding no licence, the insurer is entitled to succeed in its defence and avoid liability. The learned counsel also relied on the decision reported in United India Insurance Co. Ltd. v. Rakesh Kumar Arora and others (2008 AIR SCW 6872). That was a case where the vehicle in question admittedly was driven by a minor who was aged about 15 years, he does not have a driving licence on the date of the accident. It is a case where the father was the owner of the vehicle and it has been proved that there was a breach of condition of the policy on the part of the insured. Learned counsel also relied on the decision of the Apex Court in National Insurance Co. Ltd. v. Kusum Rai [2006 (2) KLT 300 (SC)]. This is a case where admittedly the driver did not hold any licence and the same was consciously allowed to be driven by the owner of the vehicle by such a person, the insurer is entitled to succeed its defence and avoid liability. In the said case also the Apex Court referred to the decision reported in Swaran Singh's case. The Apex Court in Swaran Singh's case laid down the rule that with a view to avoid the liability of the insurance company, the company must not only establish the available defence but, must also establish 'breach' on the part of the owner of the vehicle. The burden of proof would be on them. The Apex Court in paragraph 63 held as follows:

"The degree of proof which would satisfy the requirement inasmuch as the same would indisputably depend upon the facts and circumstances of each case. Each case may pose different problem which must be resolved having to a large number of factors governing the case including conduct of parties as regard duty to inform, correct disclosure, suppression, fraud on the insurer, etc. It will also depend upon the fact as to who is the owner of the vehicle and the circumstances in which the vehicle was being driven by a person having no valid and effective licence".

Therefore, parties alleging breach must be held to have succeeded in establishing the breach of conditions of contract of insurance on the part of the insured by discharging its burden of proof.

9. On the basis of the facts, circumstances and the findings recorded as final and in the light of the relevant legal principles laid down in Swaran Singh's case discussed in the preceding paragraphs, I am of the view that the insurance company is liable to pay the amount and is not entitled to get reimbursement from the appellants.

In the result, the appeal is allowed. The impugned award is set aside to the extent of allowing the insurance company to realise the award amount with 9% interest per annum from the date of deposit till realisation from the appellants. There will be no order as to costs.