liability of insurance companies =”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.”

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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

 2

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

 3

 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) : 

 4

(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).

 5

(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.

 6

(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 : 

 7

(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

 8

 (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 :

 9

 "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 

 11

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 

 12

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.

 13

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.