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1
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS.6026-6027 OF 2007
United India Insurance Co. Ltd. ... Appellant
Vs.
Shila Datta & Ors. ... Respondents
With
Civil Appeal No. 6717 of 2004
Civil Appeal Nos. 798-800 of 2006
Civil Appeal Nos. 1891 of 2008
Civil Appeal No. 1889 of 2008
Civil Appeal No. 4917 of 2008
SLP(C) Nos. 9302-9305/2005
SLP(C) No. 5364/2006
SLP(C) No. 8789/2006
SLP(C) No. 10128/2006
SLP(C) No. 10130/2006
SLP(C) No. 10131/2006
SLP(C) No. 10132/2006
SLP(C) No. 10133/2006
SLP(C) No. 10164/2006
SLP(C) No. 10211/2006
SLP(C) No. 10217/2006
SLP(C) No. 10269/2006
SLP(C) No. 10315/2006
SLP(C) No. 10390/2006
SLP(C) No. 10511/2006
SLP(C) No. 10797/2006
SLP(C) No. 12121/2006
SLP(C) No. 12747/2006
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SLP(C) No. 13966/2006
SLP(C) No. 16460/2006
SLP(C) No. 17258/2006
SLP(C) No. 18540/2006
SLP(C) No. 20966/2006
SLP(C) No. 6359/2007
SLP(C) No. 6380/2007
SLP(C) No. 7905/2007
SLP(C) No. 14962/2007
SLP(C) No. 2022/2008
SLP(C) No. 3556/2008
SLP(C) No. 5073/2008
SLP(C) No. 5383/2008
SLP(C) No. 7108/2008
SLP(C) No. 13916/2008
SLP(C) No. 14121/2008
SLP(C) No. 14125/2008
SLP(C) No. 14129/2008
SLP(C) No. 14131/2008
SLP(C) No. 14134/2008
SLP(C) No. 14144/2008
SLP(C) No. 14148/2008
SLP(C) No. 14152/2008
SLP(C) No. 16018/2008
SLP(C) No. 16066/2008
SLP(C) No. 19472/2008
SLP(C) No. 19275-85/2008
SLP(C) No. 21888-889/2008
SLP(C) No. 25491/2008
SLP(C) No. 26470/2008
SLP(C) No. 121/2009
SLP(C) No. 5531-5532/2009
SLP(C) No. 9983/2009
SLP(C) No. 17965/2009
SLP(C) No. 19701/2009
SLP(C) No. 22535/2009
SLP(C) No. 29055/2009
SLP(C) ... CC NO. 2854-55/2009
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J U D G M E N T
R.V.RAVEENDRAN, J.
A Two Judge Bench of this Court made the following order of
reference in this case on 3.12.2007:
"One of the contentions raised in these appeals is the correctness of a
three-Judge Bench decision of this Court in National Insurance Co. Ltd.,
Chandigarh vs. Nicolletta Rohtagi and Ors., - 2002 (7) SCC 456, which is
said to be pending consideration in a large number of cases before this
Court. Assailing the correctness of the aforesaid decision Mr. Atul Nanda
submits that therein the liability of the insurer to reimburse the insured on
two premises, namely, (1) just compensation; and (2) whose liability
would be to pay, as envisaged under sub-section (1) of section 149 vis-`-
vis the right of the aggrieved persons (Which would include the insured)
to prefer an appeal in terms of section 173 of the Motor Vehicles Act, had
not been considered in the backdrop of the history in which sub-section (1)
of section 149 was enacted.
Apart from the question raised by Mr. Nanda, we are of the opinion that
the matter may be considered from other angles, namely, whether the
insurer shall be wholly without any remedy even if the amount of
compensation is determined in violation of the standard formula envisaged
under the second schedule of the Act or in clear violation of the ratio (s)
laid down by this Court.
We, therefore, are of the opinion that it is a fit case where the matter
should be referred to larger Bench. We direct accordingly. Let the records
of the case be placed before Hon'ble the Chief Justice of India for
appropriate orders."
2. On the said reference made, the following questions arise for our
consideration, in regard to the position of an Insurer, under the Motor
Vehicles Act, 1988 (`Act' for short) :
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(i) Whether the insurer can contest a motor accident claim on merits, in
particular, in regard to the quantum, in addition to the grounds
mentioned in section 149(2) of the Act for avoiding liability under the
policy of insurance?
(ii) Whether an insurer can prefer an appeal under section 173 of the
Motor Vehicles Act, 1988, against an award of the Motor Accident
Claims Tribunal, questioning the quantum of compensation awarded?
3. The insurance companies have urged the following five points for our
consideration, which are independent grounds in support of their contention
that insurance companies are not barred from questioning the quantum of
compensation either before the Motor Accidents Claims Tribunal or in
appeals arising from the awards of the Tribunal :
(i) There is a significant difference between insurer as a `noticee' (a
person to whom a notice is served as required by section 149(2) of the Act)
in a claim proceedings and an insurer as a party-respondent in a claim
proceedings. Where an insurer is impleaded by the claimants as a party, it
can contest the claim on all grounds, as there are no restrictions or
limitations in regard to contest. But where an insurer is not impleaded by the
claimant as a party, but is only issued a statutory notice under section 149
(2) of the Act by the Tribunal requiring it to meet the liability, it is entitled
to be made a party to deny the liability on the grounds mentioned in section
149(2).
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(ii) When the owner of the vehicle (insured) and the insurer are aggrieved
by the award of the Tribunal, and jointly file an appeal challenging the
quantum, the mere presence of the insurer as a co-appellant will not render
the appeal, as not maintainable. When insurer is the person to pay the
compensation, any interpretation to say that it is not a `person aggrieved' by
the quantum of compensation determined, would be absurd and anomalous.
(iii) When an insurer is aggrieved by the quantum of compensation, it is
not seeking to avoid or exclude its liability, but merely wants determination
of the extent of its liability. The restrictions imposed upon the insurers to
defend the action by the claimant or file an appeal against the judgment and
award of the Tribunal will apply, only if it wants to file an appeal to avoid
liability and not when it admits its liability to pay the amount awarded, but
only seeks proper determination of the quantum of compensation to be paid.
(iv) Appeal is a continuation of the original claim proceedings. Section
170 provides that if the person against whom the claim is made, fails to
contest the claim, the insurer may be permitted to resist the claim on merits.
If and when an award is made by the Tribunal which is excessive, arbitrary
or erroneous, the owner of the vehicle has to challenge the same by filing an
appeal before the High Court. If the insured (owner of the vehicle) fails to
challenge an award even when it is erroneous or arbitrary or fanciful, it can
be considered that the insured has failed to contest the same and
consequently under section 170, the High Court or the tribunal may permit
the insurer to file an appeal and contest the award on merits.
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(v) The Motor Vehicles Act, 1988 (`Act' for short) creates a liability upon
the insurer to satisfy the judgments and awards against the insured. The Act
expressly restricts the right of the insurer to avoid the liability as insurer,
only to the grounds specified in section 149(2) of the Act. Though it is
impermissible to add to the grounds mentioned in the statute, the insurer has
a right, if it has reserved such a right in the policy, to defend the action in the
name of the insured. If it opts to step into the shoes of the insured, it can
defend the action in the name of the insured and all defences open to the
insured will be available to it and can be urged by it. Its position contesting a
claim under section 149(2) of the Act is distinct and different, when it is
contesting the claim in the name of or on behalf of the insured owner of the
vehicle. In cases, where it is authorized by the policy to defend any claim in
the name of the insured, and the insurer does so, it can not be restricted to
the grounds mentioned in section 149(2) of the Act, as the defence is on
behalf of the owner of the vehicle.
Relevant Legal Provisions
4. We may refer to the position of an insurer and insured in the scheme
contained in Chapters XI and XII of the Act.
4.1) Section 149 deals with the duty of insurers to satisfy judgments and
awards against persons insured in respect of third party risks. Sub-sections
(1), (2) and (7) are extracted below :
"149. Duty of insurers to satisfy judgments and awards against
persons insured in respect of third party risks :
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(1) If, after a certificate of insurance has been issued under sub-section
(3) of section 147 in favour of the person by 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) [or under the
provisions of section 163A] is obtained against any person insured by the
policy, then, notwithstanding that the insurer may be entitled to avoid o
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 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 organized 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
(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
disqualification; or
(iii) a condition excluding liability for injury caused or contributed to by
conditions of war, civil war, riot or civil commotion; or
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(b) that the policy is void on the ground that it was obtained by the non-
disclosure of a material fact or by a representation of fact which was false
in some material particular.
x x x x
(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 is 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."
4.2) Section 147 prescribes the requirements of policies and limits of
liability. The relevant portion of the said section is extracted below:
"147. Requirements of policies and limits of liability.--(1) In order to
comply with the requirements of this Chapter, a policy of insurance must
be a policy which -
(a) is issued by a person who is an authorized insurer; and
(b) insures the person or classes of persons specified in the policy to the
extent specified in sub-section (2)--
(i) against any liability which may be incurred by him in respect of the
death of or bodily [injury to any person, including owner of the
goods or his authorized representative carried in the vehicle] or
damage to any property of a third party caused by or arising out of
the use of the vehicle in a public place;
(ii) against the death of or bodily injury to any passenger of a public
service vehicle caused by or arising out of the use of the vehicle in
a public place:
Provided that a policy shall not be required--"
xxx xxx xxx
4.3) Section 163A makes special provisions as to payment of
compensation on structured formula basis and is extracted below :
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"163A. Special provisions as to payment of compensation on
structured formula basis.--(1) Notwithstanding anything contained in
this Act or in any other law for the time being in force or instrument
having the force of law, the owner of the motor vehicle or the authorized
insurer shall be liable to pay in the case of death or permanent
disablement due to accident arising out of the use of motor vehicle,
compensation, as indicated in the Second Schedule, to the legal heirs or
the victim, as the case may be."
xxx xxx xxx
4.4) Section 168 relates to award of the Claims Tribunal and the relevant
portion thereof is extracted below :-
"168. Award of the Claims Tribunal.--On receipt of an application for
compensation made under section 166, the Claims Tribunal shall, after
giving notice of the application to the insurer and after giving the parties
(including the insurer) an opportunity of being heard, hold an inquiry into
the claim or, as the case may be, each of the claims and, subject to the
provisions of section 162 may make an award determining the amount of
compensation which appears to it to be just and specifying the person or
persons to whom compensation shall be paid and in making the award the
Claims Tribunal shall specify the amount which shall be paid by the
insurer or owner or driver of the vehicle involved in the accident or by all
or any of them, as the case may be:"
4.5) Section 170 deals with impleading insurer in certain cases and is
extracted below :-
"170. Impleading insurer in certain cases.--Where in the course of any
inquiry, the Claims Tribunal is satisfied that -
(a) there is collusion between the person making the claim and the person
against whom the claim is made, or
(b) the person against whom the claim is made has failed to contest the
claim,
it may, for reasons to be recorded in writing, direct that the insurer who
may be liable in respect of such claim, shall be impleaded as a party to the
proceeding and the insurer so impleaded shall thereupon have, without
10
prejudice to the provisions contained in sub-section (2) of section 149, the
right to contest the claim on all or any of the grounds that are available to
the person against whom the claim has been made."
Section 173 deals with appeals and relevant part thereof is extracted below :-
"173. Appeals.--(1) Subject to the provisions of sub-section (2) any
person aggrieved by an award of a Claims Tribunal may, within ninety
days from the date of the award, prefer an appeal to the High Court:
Provided that no appeal by the person who is required to pay any amount
in terms of such award shall be entertained by the High Court unless he
has deposited with it twenty-five thousand rupees or fifty per cent of the
amount so awarded, whichever is less, in the manner directed by the High
Court:"
Nature of a claim petition under the Motor Vehicles Act, 1988
5. A claim petition for compensation in regard to a motor accident (filed
by the injured or in case of death, by the dependant family members) before
the Motor Accident Claims Tribunal constituted under section 165 of the
Act is neither a suit nor an adversarial lis in the traditional sense. It is a
proceedings in terms of and regulated by the provisions of Chapter XII of
the Act which is a complete Code in itself. We may in this context refer to
the following significant aspects in regard to the Tribunals and
determination of compensation by Tribunals:
(i) A proceedings for award of compensation in regard to a motor
accident before the Tribunal can be initiated either on an application for
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compensation made by the persons aggrieved (claimants) under section
166(1) or section 163A of the Act or suo moto by the Tribunal, by treating
any report of accident (forwarded to the tribunal under section 158(6) of the
Act as an application for compensation under section 166 (4) of the Act.
(ii) The rules of pleadings do not strictly apply as the claimant is required
to make an application in a form prescribed under the Act. In fact, there is no
pleading where the proceedings are suo moto initiated by the Tribunal.
(iii) In a proceedings initiated suo moto by the tribunal, the owner and
driver are the respondents. The insurer is not a respondent, but a noticee
under section 149(2) of the Act. Where a claim petition is filed by the
injured or by the legal representatives of a person dying in a motor accident,
the driver and owner have to be impleaded as respondents. The claimants
need not inplead the insurer as a party. But they have the choice of
impleading the insurer also as a party respondent. When it is not impleaded
as a party, the Tribunal is required to issue a notice under section 149(2) of
the Act. If the insurer is impleaded as a party, it is issued as a regular notice
of the proceedings.
(iv) The words `receipt of an application for compensation' in section 168
refer not only to an application filed by the claimants claiming compensation
but also to a suo motu registration of an application for compensation under
section 166(4) of the Act on the basis of a report of an accident under section
158(6) of the Act.
(v) Though the tribunal adjudicates on a claim and determines the
compensation, it does not do so as in an adversarial litigation. On receipt of
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an application (either from the applicant or suo motu registration), the
Tribunal gives notice to the insurer under section 149(2) of the Act, gives an
opportunity of being heard to the parties to the claim petition as also the
insurer, holds an inquiry into the claim and makes an award determining the
amount of compensation which appears to it to be just. (Vide Section 168 of
the Act).
(vi) The Tribunal is required to follow such summary procedure as it
thinks fit. It may choose one or more persons possessing special knowledge
of and matters relevant to inquiry, to the assist it in holding the enquiry (vide
section 169 of the Act).
(vii) The award of the Tribunal should specify the person/s to whom
compensation should be paid. It should also specify the amount which shall
be paid by the insurer or owner or driver of the vehicle involved in the
accident or by all or any of them. (Vide section 168 of the Act).
(viii) The Tribunal should deliver copies of the award to the parties
concerned within 15 days from the date of the award. (Vide section 168 (2)
of the Act).
We have referred to the aforesaid provisions to show that an award by the
tribunal cannot be seen as an adversarial adjudication between the litigating
parties to a dispute, but a statutory determination of compensation on the
occurrence of an accident, after due enquiry, in accordance with the statute.
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T he decision in N ICOLLETTA ROHTAGI
6. In National Insurance Co. Ltd. vs. Nicolletta Rohtagi - 2002 (7) SCC
456, a three Judge Bench of this Court considered the following two
questions :
(i) Non-filing of an appeal by the insured amounted to failure to contest
the claim and that the right to contest included the right to file an appeal
against the award of the Tribunal.
(ii) Where despite the existence of the facts postulated in section 170 of
the MV Act, 1988, the Tribunal does not implead the insurance company to
contest the claim on grounds available to the insured or the persons against
whom claim has been made, or in such a situation rejects the insurer's
application for permission to contest the claim on merit or where the
claimant has obtained an award by playing fraud, in such cases the insurer
has a right of appeal to contest the award on merits.
The three Judge Bench, after referring to the decisions in Shankarrayya vs.
United Insurance Co. Ltd. - 1998 (3) SCC 140, Narendra Kumar vs.
Yarenissa - 1998 (9) SCC 202, Chinnamma George vs. N. K. Raju - 2000
(4) SCC 130, ad Ritu Devi vs. New Delhi Insurance Co. Ltd. - 2000 (5) SCC
113, held as under :
"It was urged by learned counsel appearing for the insurance company that
if an insured has not filed any appeal, it means he has failed to contest the
claim and that the right to contest include the right to contest by filing an
14
appeal against the award of the Tribunal as well, and in such a situation an
appeal by the insurer questioning the quantum of compensation would be
maintainable.
We have earlier noticed that motor vehicle accident claim is a tortious
claim directed against tort-feasors who are the insured and the driver of
the vehicle and the insurer comes to the scene as a result of statutory
liability created under the Motor Vehicles Act. The legislature has ensured
by enacting Section 149 of the Act that the victims of motor vehicle are
fully compensated and protected. It is for that reason the insurer cannot
escape from its liability to pay compensation on any exclusionary clause
in the insurance policy except those specified in Section 149(2) of the Act
or where the condition precedent specified in Section 170 is satisfied.
For the aforesaid reasons, an insurer if aggrieved against an award, may
file an appeal only on those grounds and no other. However, by virtue of
Section 170 of the 1988 Act, where in course of an enquiry the Claims
Tribunal is satisfied that (a) there is a collusion between the person
making a claim and the person against whom the claim has been made or
(b) the person against whom the claim has been made has failed to contest
the claim, the tribunal may, for reasons to be recorded in writing, implead
the insurer and in that case it is permissible for the insurer to contest the
claim also on the grounds which are available to the insured or to the
person against whom the claim has been made. Thus, unless an order is
passed by the tribunal permitting the insurer to avail the grounds available
to an insured or any other person against whom a claim has been made on
being satisfied of the two conditions specified in Section 170 of the Act, it
is not permissible to the insurer to contest the claim on the grounds which
are available to the insured or to a person against whom a claim has been
made. Thus where conditions precedent embodied in Section 170 is
satisfied and award is adverse to the interest of the insurer, the insurer has
a right to file an appeal challenging the quantum of compensation or
negligence or contributory negligence of the offending vehicle even if the
insured has not filed any appeal against the quantum of compensation.
Sections 149, 170 and 173 are part of one Scheme and if we give any
different interpretation to Section 172 of the 1988 Act, the same would go
contrary to the scheme and object of the Act."
A careful reading of the said decision shows that issues (i) and (ii) raised
before us did not arise for consideration in Nicolletta Rohtagi, nor were they
considered therein.
Re: Point No.(i) : The position in cases where the claimants implead the
insurer as a respondent in the claim petition.
15
7. The scheme of the Motor Vehicles Act, 1988 as contained in Chapters
XI (Insurance of Motor Vehicles against Third Party risks) and XII (Claim
Tribunals) proceeds on the basis that an insurer need not be impleaded as a
party to the claim proceedings and it should only be issued a statutory notice
under section 149(2) of the Act so that it can be made liable to pay the
compensation awarded by the tribunal and also resist the claim on any one of
the grounds mentioned in clauses (a) and (b) of sub-section (2) of section
149. Sub-sections (1), (2) and (7) of section 149 clearly refer to the insurer
being merely a noticee and not a party. Similarly, sections 158(6), 166(4),
168(1) and 170 clearly provide for and contemplate insurer being merely a
noticee for the purposes mentioned in the Act and not being a party-
respondent. Section 170 specifically refers to impleading of insurer as a
party to the claim proceedings.
8. When an insurer is impleaded as a party - respondent to the claim
petition, as contrasted from merely being a noticee under section 149(2) of
the Act, its rights are significantly different. If the insurer is only a noticee, it
can only raise such of those grounds as are permissible in law under section
149(2). But if he is a party-respondent, it can raise, not only those grounds
16
which are available under section 149(2), but also all other grounds that are
available to a person against whom a claim is made. It therefore follows that
if a claimant impleads the insurer as a party-respondent, for whatever reason,
then as such respondent, the insurer will be entitled to urge all contentions
and grounds which may be available to it.
9. The Act does not require the claimants to implead the insurer as a
party respondent. But if the claimants choose to implead the insurer as a
party, not being a noticee under section 149(2), the insurer can urge all
grounds and not necessarily the limited grounds mentioned in section 149(2)
of the Act. If the insurer is already a respondent (having been impleaded as a
party respondent), it need not seek the permission of the Tribunal under
section 170 of the Act to raise grounds other than those mentioned in section
149(2) of the Act. The entire scheme and structure of Chapters XI and XII is
that the claimant files a claim petition only against the owner and driver and
the tribunal issues notice to the insurer under section 149(2) so that it can be
made liable to pay the amount awarded against the insurer and if necessary,
deny liability under the policy of insurance, on any of the grounds
mentioned in section 149(2). If an insurer is only a noticee and not a party-
respondent, having regard to the decision in Nicolletta Rohtagi, it can defend
the claim only on the grounds mentioned in section 149(2) and not any of
17
the other grounds relating to merits available to the insured-respondent. This
is the position even where the claim proceedings are initiated suo moto
under sections 149(7) and 158(6) of the Act, without any formal application
by the claimants, as the insurer is only a noticee under section 149(2) of the
Act.
10. Section 170 of the Act does not contemplate an insurer making an
application for impleadment. Nor does it contemplate the insurer, if he is
already impleaded as a party respondent by the claimants, making any
application seeking permission to contest the matter on merits. Section 170
proceeds on the assumption that a claim petition is filed by the claimants, or
is registered suo moto by the tribunal, with only the owner and driver of the
vehicle as the respondents. It also proceeds on the basis that in such a
proceeding, a statutory notice would have been issued by the tribunal to the
insurer so that the insurer may know about its future liability in the claim
petition and also resist the claim, on any of the grounds mentioned in section
149(2). Section 170 of the Act also assumes that the tribunal will hold an
inquiry into the claim, where only the claimants and the owner and driver
will be the parties. Section 170 provides that if during the course of such
inquiry, the tribunal finds and satisfies itself that there is any collusion
between the claimant and the owner/driver or where the owner/driver has
18
failed to contest the claim, the tribunal may suo moto, for reasons to be
recorded in writing, direct that the insurer who may be liable in respect of
the claim, who was till then only a notice, shall be treated as a party to the
proceedings. The insurer so impleaded, without prejudice to the provisions
of section 149(2), will have the right to contest the claim on all or any of the
grounds that are available to the driver/owner.
11. Therefore, where the insurer is a party- respondent, either on account
of being impleaded as a party by the tribunal under section 170 or being
impleaded as a party-respondent by the claimants in the claim petition
voluntarily, it will be entitled to contest the matter by raising all grounds,
without being restricted to the grounds available under section 149(2) of the
Act. The claim petition is maintainable against the owner and driver without
impleading the insurer as a party. When a statutory notice is issued under
section 149(2) by the tribunal, it is clear that such notice is issued not to
implead the insurer as a party-respondent but merely to put it on notice that a
claim has been made in regard to a policy issued by it and that it will have to
bear the liability as and when an award is made in regard to such claim.
Therefore, it cannot, as of right, require that it should be impleaded as a
party-respondent. But it can however be made a party-respondent either by
19
the claimants voluntarily in the claim petition or by the direction of the
Tribunal under section 170 of the Act. Whatever be the reason or ground for
the insurer being impleaded as a party, once it is a party-respondent, it can
raise all contentions that are available to resist the claim.
Re : Point (ii) : Maintainability of a joint appeal by the owner of the
vehicle (Insured) and Insurer
12. There is no dispute that when an award is made by the Tribunal, the
owner of the vehicle (insured), being a person aggrieved, can file an appeal
challenging his liability on any ground, or challenge the quantum of
compensation. An appeal which is "maintainable" when the owner of the
vehicle files it, does not become "not maintainable" merely on account of
the insurer being a co-appellant with the owner. When the insurer becomes a
co-appellant, the owner of the vehicle does not cease to be a person
aggrieved.
13. This question came up for consideration of a Two Judge Bench of this
Court with reference to the provisions of the Motor Vehicles Act, 1939 (`Old
Act' for short) in Narendra Kumar vs. Yarenissa - 1998 (9) SCC 202. This
Court held :
20
"The question, however, is if such a joint appeal is preferred must it be
dismissed in toto or can the tortfeasor, the owner of the offending vehicle,
be permitted to pursue the appeal while rejecting or dismissing the appeal
of the insurer. If the award has gone against the tortfeasors it is difficult to
accept the contention that the tortfeasor is not "an aggrieved person" as
has been held by some of the High Courts vide Kantilal & Bros. v.
Ramarani Debi, 1980 ACJ 501, New India Assurance Co. Ltd. v.
Shakuntla Bai, 1987 ACJ 224, Nahar Singh v. Manohar Kumar, (1993) 1
ACJ 269, Radha Kishan Sachdeva v. Fit, Lt. L.D. Sharma, (1993) 27 DRJ
18 (Del) merely because under the scheme of Section 96 if a decree or
award has been made against the tortfeasors the insurer is liable to answer
judgment "as if a judgment-debtor". That does not snatch away the right of
the tortfeasors who are jointly and severally liable to answer judgment
from preferring an appeal under Section 110-D of the Act. If for some
reason or the other the claimants desire to execute the award against the
tortfeasors because they are not in a position to recover the money from
the insurer the law does not preclude them from doing so and, therefore,
so long as the award or decree makes them liable to pay the amount of
compensation they are aggrieved persons within the meaning of Section
110-D and would be entitled to prefer an appeal. But merely because a
joint appeal is preferred and it is found that one of the appellants, namely,
the insurer was not competent to prefer an appeal, we fail to see why the
appeal by the tortfeasor, the owner of the vehicle, cannot be proceeded
with after dismissing or rejecting the appeal of the insurer. To take a view
that the owner is not an aggrieved party because the Insurance Company is
liable in law to answer judgment would lead to an anomalous situation in
that no appeal would lie by the tortfeasors against any award because the
same logic applies in the case of a driver of the vehicle. The question can
be decided a little differently. Can a claim application be filed against the
Insurance Company alone if the tortfeasors are not the aggrieved parties
under Section 110-D of the Act? The answer would obviously be in the
negative. If that is so, they are persons against whom the claim application
must be preferred and an award sought for otherwise the insurer would not
be put to notice and would not be liable to answer judgment as if a
judgment-debtor. Therefore, on first principle it would appear that the
contention that the owner of a vehicle is not an aggrieved party is
unsustainable.
For the reasons stated above, we are of the opinion that even in the case of
a joint appeal by insurer and owner of offending vehicle if an award has
been made against the tortfeasors as well as the insurer even though an
appeal filed by the insurer is not competent, it may not be dismissed as
such. The tortfeasor can proceed with the appeal after the cause-title is
suitably amended by deleting the name of the insurer."
21
14. When the issue again came up for consideration before another Two
Judge bench of this Court in Chinnama George & Ors. vs. N. K. Raju &
Anr. - 2000 (4) SCC 130, with reference to the provisions of the Motor
Vehicles Act, 1988, this Court agreed with Narendra Kumar that the owner
of the vehicle is an aggrieved person, but held that a joint appeal would not
be maintainable. This Court held :
"Admittedly, none of the grounds as given in Sub-section (2) of Section
149 exist for the insurer to defend the claims petition. That being so, no
right existed in the insurer to file appeal against the award of the Claims
Tribunal. However, by adding N.K. Raju, the owner as co-appellant, an
appeal was filed in the High Court which led to the impugned judgment.
None of the grounds on which insurer could defend the claims petition
was the subject matter of the appeal as far as the insurer is concerned. We
have already noticed above that we have not been able to figure out from
the impugned judgment as to how the owner felt aggrieved by the award
of the Claims Tribunal. The impugned judgment does not reflect any
grievance of the owner or even that of the driver of the offending bus
against the award of the Claims Tribunal. The insurer by associating the
owner or the driver in the appeal when the owner or the driver is not an
aggrieved person cannot be allowed to mock at the law which prohibit the
insurer from filing any appeal except on the limited grounds on which it
could defend the claims petition. We cannot put our stamp of approval as
to the validity of the appeal by the insurer merely by associating the
insured. Provision of law cannot be undermined in this way. We have to
give effect to the real purpose to the provision of law relating to the award
of compensation in respect of the accident arising out of the use of the
motor vehicles and cannot permit the insurer to give him right to defend or
appeal on grounds not permitted by law by a backdoor method. Any other
interpretation will produce unjust results and open gates for the insurer to
challenge any award. We have to adopt purposive approach which would
not defeat the broad purpose of the Act. Court has to give effect to true
object of the Act by adopting purposive approach.
xxxxxxxx
There is no dispute with the proposition so laid by this Court. But the
insurer cannot maintain a joint appeal along with the owner or the driver if
defence on any ground under Section 149(2) is not available to it. In that
situation joint appeal will be incompetent. It is not enough if the insurer is
struck out from the array of the appellants. The appellate court must also
22
be satisfied that a defence which is permitted to be taken by the insurer
under the Act was taken in the pleadings and was pressed before the
Tribunal. On the appellate court being so satisfied the appeal may be
entertained for examination of the correctness or otherwise of the
judgment of the Tribunal on the question arising from/relating to such
defence taken by the insurer If the appellate court is not satisfied that any
such question was raised by the insurer in the pleadings and/or was
pressed before the Tribunal, the appeal filed by the insurer has to be
dismissed as not maintainable. The court should take care to ascertain this
position on proper consideration so that the statutory bar against the
insurer in a proceeding of claim of compensation is not rendered irrelevant
by the subterfuge of the insurance company joining the insured as a co-
appellant in the appeal filed by it. This position is clear on a harmonious
reading of the statutory provisions in Sections 147, 149 and 173 of the
Act. Any other interpretation will defeat the provision of Sub-section (2)
of Section 149 of the Act and throw the legal representatives of the
deceased or the injured in the accident to unnecessary prolonged litigation
at the instance of the insurer."
This issue did not arise for consideration of the Three Judge Bench decision
in Nicolletta Rohtagi, as the question therein was whether an insurer could
file an appeal.
15. On a careful consideration, we are of the view that the decision in
Chinnamma George to the extent it holds that a joint appeal is not
maintainable, does not lay down the correct law. As observed in Narendra
Kumar, the owner of the vehicle does not cease to be an aggrieved person,
merely because the insurer is ultimately liable under the terms of the policy
or under section 149 of the Act. If the owner by himself, can file an appeal
as an aggrieved person and such appeal is maintainable, we fail to
understand how the presence of the insurer as a co-appellant would make the
23
appeal not maintainable. Whether the owner joins the insurer or the insurer
joins the owner, makes no difference to the fact that owner continues to be a
person aggrieved.
16. When a joint appeal is filed, to say that the insurer is not an aggrieved
person and the owner of the vehicle is also not an aggrieved person, would
lead to an anomalous situation and would border on an absurdity. Without
entering upon the question whether an insurer is an aggrieved person (which
requires to be considered separately), we make it clear that on account of the
insurer being a co-appellant, will not affect the maintainability of the appeal.
So long as the owner is an appellant and he is a `person aggrieved' in law,
the question whether he is independently filing the appeal, or whether he is
filing it at the instance of the insurer becomes irrelevant. When a counsel
holds vakalatnama for an insurer and the owner of the vehicle in a joint
appeal, the court cannot say his arguments and submissions are only on
behalf of the insurer and not on behalf of the owner. There is also no need to
examine at the threshold in a joint appeal, whether the insurer should be
deleted from the array of appellants.
Re : Points (iii) to (v)
24
17. We may next consider the cases where the insurer is only a noticee
under section 149(2) and has not been impleaded as a party to the claim
proceedings. The basic premises in Nicolletta Rohtagi is that the insurer can
contest a motor-accident claim for compensation only on the grounds
mentioned in section 149(2) of the Act. The contention of Insurance
Companies is that an Insurer can deny liability under the policy only on the
grounds mentioned in section 149(2) of the Act (even though several other
grounds may be available under the terms of the policy); and where it does
not deny liability or avoid liability under policy of insurance, it can certainly
assist the Tribunal in arriving at the just compensation, by contesting any
unjust or illegal or erroneous claim by the claimants. We find considerable
force in the contention that where a notice is issued under section 149(2) of
the Act, the insurer as `noticee' (as contrasted from a `party') can not `deny'
its liability as an insurer on grounds other than those mentioned in section
149(2)(a) and (b) of the Act, but nothing prevents it as a person liable to pay
the compensation, from assisting the Tribunal in arriving at the `just'
compensation. In this context, we may rely upon the observation of this
Court in National Insurance Co. Ltd. v. Jugal Kishore - 1988 (1) SCC 626,
referring to section 96(6) of the old Act (Motor Vehicles Act, 1939):
25
"....Secondly, from the words "to avoid his liability" used in Sub-section
(6) of Section 96 it is apparent that the restrictions placed with regard to
defences available to the insurer specified in Sub-section (2) of Section 96
are applicable to a case where the insurer wants to avoid his liability. In
the instant case the appellant is not seeking to avoid its liability but wants
a determination of the extent of its liability which is to be determined, in
the absence of any contract to the contrary, in accordance with the
statutory provision contained in this behalf in Clause (b) of Sub-section
(2) of Section 95 of the Act..."
The assumption that as a noticee under section 149(2), the insurer cannot
raise any contention other than those mentioned in clauses (a) and (b) of
section 149(2) is correct in so far as denial of liability under the policy is
concerned. This is because sub-section (1) of section 149 of the Act clearly
provides that `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.........". Therefore, an insurer, without seeking to avoid or exclude
its liability under the policy, on grounds other than those mentioned in
section 149(2)(a) and (b), can contest the claim, in regard to the quantum.
All that section 149(2) says is that insurer cannot raise all kinds of
contentions based on the terms of policy to avoid the contract of indemnity.
But it does not require the insurer to concede wrong claims or false claims or
not challenge erroneous determination of compensation.
26
18. Let us take by way of example, a case where the deceased was aged
20 years and the annual loss of dependency was Rs.1,00,000/- to the
dependants. The multiplier applicable would be 18 and the compensation
would be Rs.18 lakhs. But if the tribunal holds that as the life expectancy of
the deceased was 70 as per evidence and therefore, it would apply a
multiplier of 50 (that is 70-20), instead of 18 and as a consequence, awards
Rs.50 lakhs as compensation, should the insurer be without remedy if the
owner and driver do not care to file an appeal, as the liability under the Act
is that of the insurer. It is only the insurer, who is required to pay the
compensation amount, is interested in filing the appeal. It can file an appeal
by itself or it can file an appeal jointly with the owner. If it is denied that
opportunity, there is a likelihood of huge compensation being awarded
without any correction. The fact that the compensation is not likely to be
interfered, may also encourage the Motor Accident Claims Tribunal to make
awards which may not be fanciful reasonable. We fail to see why the
insurance company cannot challenge the judgment of the tribunal, if it is
erroneous. The Act nowhere says that the insurer is not a `person aggrieved'
with reference to the amount of compensation awarded which he is required
to pay. It is difficult to countenance the submission that a person who is
required to a sum of money, from his pocket, has no right even to say :
27
"Look here, the calculation of the amount claimed is wrong". Interests of
justice will not be served by allowing obvious errors to remain uncorrected.
19. The Insurers submit that if the owner of the vehicle (Insured) fails to
file an appeal when an erroneous award is made, he fails to contest the same
and consequently, the insurer should be able to file an appeal, by applying
the principle underlying section 170 of the Code. In this behalf, they relied
upon the decision in United India Insurance Co. Ltd. vs. Bhushan Sachdeva
- 2002 (2) SCC 265, (held to be not good law in Nicolletta Rohtagi) wherein
a two Judge Bench of this Court held thus :
"The person against whom the claim is made is normally the insured of
the vehicle involved in the accident. When he failed to contest that claim
made against him the insurer gets the opportunity to contest such claim on
all or any of the grounds available to the insured. Such a provision was
absent in the Motor Vehicles Act, 1939 initially and the Parliament
inserted it therein only in March 1970. The right of the insured to contest a
claim does not stop with the end of the proceedings before the Tribunal.
What is meant by the words "failed to contest"? Those words must be
interpreted in a realistic manner. Right to contest would include the right
to contest by filing an appeal against the award of the Tribunal as well.
Hence the insured can continue to context the claim by filing an appeal as
provided under Section 173 of the Act. If the insured fails to prefer an
appeal that also would amount to failure to contest that claim effectively.
Quite often the insured would lose the desire to contest the claim once he
is told that he would not be mulcted with the liability as the same is
siphoned off to the insurer. It means that insured had dropped out from
contesting a claim midway. In such an eventuality the Act enables the
insured to contest it on all grounds available to the insured."
28
20. In British India General Insurance Co.Ltd. v. Captain Itbar Singh &
Ors. -- AIR 1959 SC 1331, a three Judge Bench of this Court held as under:
"....The Statute has no doubt created a liability in the insurer to the injured
person but the statute 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...."
(emphasis supplied)
Nicolletta Rohtagi did not consider the issue with reference to the situation
where the insurer is enabled by a specific term in the insurance policy to
take over and conduct the defence of the case in the name of the insured,
presumably as the insurance policy did not have such an enabling provision.
In fact if such a contention had been raised, the court would have noticed
that the issue was covered by a binding three-Judge Bench judgment in
British India General Insurance. Be that as it may.
21. However, in view of the decision in Nicolletta Rohtagi, we cannot
decide points (iii) to (v) in favour of the Insurers. For the aforesaid reasons,
29
in so far as issues (iii) to (v) are concerned, we are of the view that
Nicolletta Rohtagi requires reconsideration by a larger bench.
Conclusion
22. We accordingly answer the points arising from the reference as under:
(i) Points (i) and (ii) are held in favour of the Insurers. The matters
covered by points (i) and (ii) are to be placed before the respective benches
for consideration accordingly.
(ii) Points (iii) to (v) which may come in conflict with Nicolletta Rohtagi,
are referred to a larger Bench. We accordingly direct these matters (that is,
cases where the insurer alone was the appellant before the High Court and
where the insurer was only a noticee under section 149(2) and not an
impleaded respondent in the claim petition), to be placed before the Hon'ble
Chief Justice for constituting a larger bench to consider points (iii), (iv) and
(v) raised by the insurers.
30
20. The parties to file memos indicating whether their cases are covered
by points (i) and (ii) or under points (iii) to (iv) to enable the Registry to
place the matters appropriately.
.................................J
[R. V. Raveendran]
.................................J
[H. L. Dattu]
.................................J
[K. S. Radhakrishnan]New Delhi; October 13, 2011.
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