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IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
SPECIAL LEAVE PETITION (CIVIL) No. 11801-11804 of 2005
Jai Prakash ....... Petitioner
Vs.
National Insurance Co. Ltd. & Ors. ....... Respondents
O R D E R
R.V. RAVEENDRAN, J.
We propose to address four problems frequently faced
in motor accident claim cases under the Motor Vehicles
Act, 1988 (`Act' for short).
Problem (i)
2. The first problem relates to a section of motor
accident victims who are doubly unfortunate - first in
getting involved in an accident, and second, in not
getting any compensation. Let us elaborate. There are two
categories of victims in motor accidents - those who will
be able to get compensation and those who will not be
able to get compensation. Victims of motor accidents
involving insured vehicles, who are assured of getting
compensation from the insurer, fall in the first
category. Victims of motor accidents involving the
following categories of vehicles, who do not receive any
compensation fall under the second category:-
(i) Hit and run vehicles which remain
unidentified.
(ii) Vehicles which do not have any insurance
cover.
(iii) Vehicles with third party insurance,
carrying persons who are not covered by the
insurance (gratuitous passengers in a goods
vehicle or a car, and pillion riders on two
wheelers etc.)
In hit and run cases, the victim has no one from whom he
can claim or get compensation. In regard to vehicles
which do not have any insurance or do not have an
insurance covering the risks relating to gratuitous
passengers/riders, even if the driver/owner may be made
liable under an award of the Tribunal, there is little or
no chance of recovery of compensation that may be
awarded. This is because normally driver and owners of
uninsured vehicles will not have the capacity to pay the
compensation or would have transferred their assets to
escape paying compensation. It is estimated that around
20% of the victims of motor accidents fall under the
unfortunate categories who do not get any compensation
(except some who may get a token amount under Section 161
or 140 of the Act). A person hit by an uninsured vehicle,
feels frustrated, cheated and discriminated, when he does
not get any compensation, but sees another person hit by
an insured vehicle getting compensation. The victim does
not choose the vehicle which hits him, nor any role in
causing the accident. But a victim is denied
compensation, if the vehicle which hits disappears
without trace, or if the vehicle is without insurance,
while a similar victim hit by an insured vehicle gets
compensation. Should the State, which by law provided for
compulsory third party insurance to protect motor
accident victims, ignore these 20% victims who do not get
compensation or provide them with some effective remedy?
Should the State go something to reduce the incidence of
non-insurance?
Problem (ii)
3. The second problem relates to the widespread
practice of using goods vehicles for passenger traffic.
Such use is primarily due to the following four reasons:
(a) Non-availability of regular mode of passenger
transport in several parts of the country, particularly
in rural areas, compelling people to use lorries and
other goods vehicles as modes of transport to reach their
destinations.
(b) Non-availability of contract carriages for group
travel during special occasions. Consequently, large
groups of people use, again mostly in rural areas, goods
vehicles (lorries and tractor-trailers) for group travel
on occasions like marriages, festivals, functions and
political rallies.
(c) Frequent break-down of buses/cars/other vehicles (on
roads with sparse traffic) due to bad maintenance of
roads or the vehicles, or other emergencies forcing the
stranded passengers to use goods vehicles to reach
nearest city or town from which they can get regular
recognized modes of transport.
(d) The temptation of lorry drivers to make a quick buck
by carrying passengers for a fare (with or without the
knowledge of the owner) coupled with the attraction of a
low fare for the poor and needy. (These passengers though
termed as `gratuitous' passengers, except in a few cases,
are fare paying illegal passengers).
Where persons travel in a goods vehicle either knowing or
not knowing that such travel is illegal (gratuitously or
by paying an illegal `fare' to the driver or owner) and
such the vehicle is involved in an accident resulting in
injuries to such passengers, various legal and moral
questions arise. Whether the victims are entitled to
compensation? Whether the insurer is liable? Whether the
owner, who may be unaware of such illegal carriage by the
driver, can be made liable? Whether the owner and driver
of goods vehicles should be made liable to pay
compensation, even where they were carrying passengers
stranded on the road, gratuitously only out of sympathy ?
Whether `illegal' passengers should be denied
compensation as a deterrent to discourage unauthorized
travel? Should we ignore the harsh reality that as long
as the causes necessitating or forcing people to resort
to such illegal travel in goods vehicles continue to
exist, people will continue to travel in goods vehicles,
unmindful of the risk, whether legal or illegal?
Problem (iii)
4. The third problem relates to the procedural delays
in adjudication/settlement of claims by Motor Accidents
Claims Tribunals (for short `Tribunals') and
consequential hardship to the victims and their families.
In cases where the accident victim dies, the family -
usually the widow and children - loses its sole bread
winner and are virtually driven to the streets. Many a
time, the widow and children are forced to take up
unaccustomed manual labour for their survival, the
children foregoing their education. Payment of
compensation without delay will help them to sustain
themselves and pick up the threads to live with dignity.
4.1) Most of the accident victims (who are injured) are
not able to access quality medical treatment for want of
funds, as their earning capacity is either permanently
lost or is put on hold on account of the injuries. They
get the compensation only after the treatment and after a
contested trial. Many a time lack of treatment or
inadequate treatment for want of funds, itself converts
what could have been a temporary disability into
permanent disability for the victim, thereby increasing
the compensation payable. The Insurance Companies know
full well that timely payment of compensation or timely
better treatment of the victims can ultimately reduce the
quantum of compensation payable by them. The insurance
companies also know that they will have to ultimately
reimburse the cost of medical treatment of the accident
victim with interest. But still they fail to extend
timely aid to the injured victims, but wait for the
injured to file a claim petition, after completing the
treatment at his own cost.
4.2) The Legislature tried to reduce the period of
pendency of claim cases and quicken the process of
determination of compensation by making two significant
changes in the Act, by Amendment Act 54 of 1994, making
it mandatory for registration of a motor accident claim
within one month of receipt of first information of the
accident, without the claimants having to file a claim
petition. Sub-section (6) of section 158 of the Act
provides:
"As soon as any information regarding any
accident involving death or bodily injury
to any person is recorded or report under
this section is completed by a police
officer, the officer-in-charge of the
police station shall forward a copy of the
same within thirty days from the date of
recording of information or, as the case
may be, on completion of such report to
the Claims Tribunal having jurisdiction
and a copy thereof to the concerned
insurer, and where a copy is made
available to the owner, he shall also
within thirty days of receipt of such
report, forward the same to such Claims
Tribunal and insurer".
Sub-section (4) of Section 166 of the Act reads thus:-
"The Claims Tribunal shall treat any
report of accidents forwarded to it under
sub-section (6) of section 158 as an
application for compensation under this
Act".
Rule 150 of Central Motor Vehicle Rules, 1989 prescribes
the form (No.54) of the Police Report required to be
submitted under section 158(6) of the Act.
4.3) This Court in General Insurance Council v. State of
A.P. [2007 (12) SCC 354] emphasised the need for
implementing the aforesaid provisions. This Court
directed:
"It is, therefore, directed that all the
State Governments and the Union Territories
shall instruct all police officers
concerned about the need to comply with the
requirement of Section 158(6) keeping in
view the requirement indicated in Rule 150
and in Form 54, Central Motor Vehicles
Rules, 1989. Periodical checking shall be
done by the Inspector General of Police
concerned to ensure that the requirements
are being complied with. In case there is
non-compliance, appropriate action shall be
taken against the erring officials. The
Department of Road Transport and Highways
shall make periodical verification to
ensure that action is being taken and in
case of any deviation immediately bring the
same to the notice of the State
Governments/Union Territories concerned so
that necessary action can be taken against
the officials concerned."
4.4) But unfortunately neither the police nor the Motor
Accidents Claims Tribunals have made any effort to
implement these mandatory provisions of the Act. If these
provisions are faithfully and effectively implemented, it
will be possible for the victims of accident and/or their
families to get compensation, in a span of few months.
There is, therefore, an urgent need for the concerned
police authorities and Tribunals to follow the mandate of
these provisions.
Problem (iv)
5. Courts have always been concerned that the full
compensation amount does not reach and benefit the
victims and their families, particularly those who are
uneducated, ignorant, or not worldly-wise. Unless there
are built-in safeguards they may be deprived of the
benefit of compensation which may be the sole source of
their future sustenance. This court has time and again
insisted upon measures to ensure that the compensation
amount is appropriately invested and protected and not
frittered away owing to ignorance, illiteracy and
susceptibility to exploitation. [See Union Carbide
Corporation v. Union of India - 1991 (4) SCC 584 and
General Manager, Kerala State Road Transport Corporation
v. Susamma Thomas - 1994 (2) SCC 176]. But in spite of
the directions in these cases, the position continues to
be far from unsatisfactory and in many cases unscrupulous
relatives, agents and touts are taking away a big chunk
of the compensation, by ingenious methods.
Reports of Amicus Curiae
6. In this background, to find some solutions, on
9.9.2008, this Court requested Shri Gopal Subramaniam, to
assist the Court as Amicus Curiae. The learned amicus
curiae with his usual thoroughness and commitment has
examined the issues and submitted a series of reports and
has also made several suggestions for consideration. He
has also referred to and relied on a series of zealous
directions issued by a learned Single Judge of the Delhi
High Court to expedite and streamline the adjudication of
motor vehicle claims and disbursement of compensation.
7. Having considered the nature of the problems and
taking note of the several suggestions made by the
learned Amicus Curiae and after hearing, we propose to
issue a set of directions to the police authorities and
Claims Tribunals. We also propose to make some
suggestions for implementation by Insurance Companies and
some suggestions for the consideration of the Parliament
and the Central Government.
Directions to Police Authorities
8. The Director General of Police of each State is
directed to instruct all Police Stations in his State to
comply with the provisions of Section 158(6) of the Act.
For this purpose, the following steps will have to be
taken by the Station House Officers of the jurisdictional
police stations:
(i) Accident Information Report in Form No. 54 of the
Central Motor Vehicle Rules,1989 (`AIR' for short) shall
be submitted by the police (Station House Officer) to the
jurisdictional Motor Vehicle Claims Tribunal, within 30
days of the registration of the FIR. In addition to the
particulars required to be furnished in Form No. 54, the
police should also collect and furnish the following
additional particulars in the AIR to the Tribunal: (i)
The age of the victims at the time of accident; (ii) The
income of the victim; (iii) The names and ages of the
dependent family members.
(ii) The AIR shall be accompanied by the attested
copies of the FIR, site sketch/mahazar/photographs of the
place of occurrence, driving licence of the driver,
insurance policy (and if necessary, fitness certificate)
of the vehicle and postmortem report (in case of death)
or the Injury/Wound certificate (in the case of
injuries). The names/addresses of injured or dependant
family members of the deceased should also be furnished
to the Tribunal.
(iii) Simultaneously, copy of the AIR with annexures
thereto shall be furnished to the concerned insurance
company to enable the Insurer to process the claim.
(iv) The police shall notify the first date of hearing
fixed by the Tribunal to the victim (injured) or the
family of the victim (in case of death) and the driver,
owner and insurer. If so directed by the Tribunal, the
police may secure their presence on the first date of
hearing.
9. To avoid any administrative difficulties in
immediate implementation of sections 158(6) of the Act,
we permit such implementation to be carried out in three
stages. In the first stage, all police stations/claims
Tribunals in the NCT Region and State Capital regions
shall implement the provisions by end of April 2010. In
the second stage, all the police stations/claims
Tribunals in district headquarters regions shall
implement the provisions by the end of August 2010. In
the third stage, all police stations/Claims Tribunals
shall implement the provisions by the end of December,
2010. The Director Generals shall ensure that necessary
forms and infrastructural support is made available to
give effect to Section 158 (6) of the Act.
10. Section 196 of the Act provides that whoever drives
a motor vehicle or causes or allows a motor vehicle to be
driven in contravention of the provisions of Section 146
shall be punishable with imprisonment which may be
extended to three months, or with fine which may extend
to Rs. 1000/-, or with both. Though the statute requires
prosecution of the driver and owner of uninsured
vehicles, this is seldom done. Thereby a valuable
deterrent is ignored. We therefore direct the Director
Generals to issue instructions to prosecute drivers and
owners of uninsured vehicles under Section 196 of the
Act.
11. The Transport Department, Health Department and
other concerned departments shall extend necessary co-
operation to the Director-Generals to give effect to
Section 158 (6).
Directions to the Claims Tribunals
12. The Registrar General of each High Court is directed
to instruct all Claims Tribunals in his State to register
the reports of accidents receive under Section 158 (6) of
the Act as applications for compensation under Section
166 (4) of the Act and deal with them without waiting for
the filing of claim applications by the injured or by the
family of the deceased. The Registrar General shall
ensure that necessary Registers, forms and other support
is extended to the Tribunal to give effect to Section 166
(4) of the Act.
13. For complying with section 166(4) of the Act, the
jurisdictional Motor Accident Claims Tribunals shall
initiate the following steps:
(a) The Tribunal shall maintain an Institution Register
for recording the AIRs which are received from the
Station House Officers of the Police Stations and
register them as miscellaneous petitions. If any
private claim petitions are directly filed with
reference to an AIR, they should also be recorded in
the Register.
(b) The Tribunal shall list the AIRs as miscellaneous
petitions. It shall fix a date for preliminary
hearing so as to enable the police to notify such
date to the victim (family of victim in the event of
death) and the owner, driver and insurer of the
vehicle involved in the accident. Once the
claimant/s appear, the miscellaneous application
shall be converted to claim petition. Where a
claimant/s file the claim petition even before the
receipt of the AIR by the Tribunal, the AIR may be
tagged to the claim petition.
(c) The Tribunal shall enquire and satisfy itself that
the AIR relates to a real accident and is not the
result of any collusion and fabrication of an
accident (by any `Police Officer - Advocate -
Doctor' nexus, which has come to light in several
cases).
(d) The Tribunal shall by a summary enquiry ascertain
the dependent family members/legal heirs. The
jurisdictional police shall also enquire and submit
the names of the dependent legal heirs.
(e) The Tribunal shall categories the claim cases
registered, into those where the insurer disputes
liability and those where the insurer does not
dispute the liability.
(f) Wherever the insurer does not dispute the liability
under the policy, the Tribunal shall make an
endeavour to determine the compensation amount by a
summary enquiry or refer the matter to the Lok
Adalat for settlement, so as to dispose of the claim
petition itself, within a time frame not exceeding
six months from the date of registration of the
claim petition.
(g) The insurance companies shall be directed to deposit
the admitted amount or the amount determined, with
the claims tribunals within 30 days of
determination. The Tribunals should ensure that the
compensation amount is kept in Fixed deposit and
disbursed as per the directions contained in General
Manager, KSRTC v. Susamma Thomas [1994 (2) SCC 176].
(h) As the proceedings initiated in pursuance of Section
158(6) and 166(4) of the Act, are different in
nature from an application by the victim/s under
Section 166(1) of the Act, Section 170 will not
apply. The insurers will therefore be entitled to
assist the Tribunal (either independently or with
the owners of the vehicles) to verify the
correctness in regard to the accident, injuries,
age, income and dependents of the deceased victim
and in determining the quantum of compensation.
14. The aforesaid directions to the Tribunals are
without prejudice to the discretion of each Tribunal to
follow such summary procedure as it deems fit as provided
under Section 169 of the Act. Many Tribunals instead of
holding an inquiry into the claim by following suitable
summary procedure, as mandated by Section 168 and 169 of
the Act, tend to conduct motor accident cases like
regular civil suits. This should be avoided. The Tribunal
shall take an active role in deciding and expeditious
disposal of the applications for compensation and make
effective use of Section 165 of the Evidence Act, 1872,
to determine the just compensation.
SUGGESTIONS FOR INSURANCE COMPANIES
15. In cases of death, where the liability of the
insurer is not disputed, the insurance companies should,
without waiting for the decision of the Motor Accidents
Claims Tribunal or a settlement before the Lok Adalat,
endeavour to pay to the family (Legal representatives) of
the deceased, compensation as per the standard formula
determined by the decisions of this Court.
16. In cases of injuries to any accident victim, where
the liability is not disputed, the insurer should offer
treatment at its cost to the injured, without waiting for
an award of the Tribunal. If insurance companies can meet
the bills for treatment of those who have taken a medical
insurance policy, we see no reason why they should not
extend a similar treatment to the accident victims of
vehicles insured with them.
17. In countries like United Kingdom, the percentage of
motor accident claims, with reference to the accidents is
very low. This is because immediately after being
notified of the accident, the insurer makes its own
enquiries and satisfies itself about its liability and
voluntarily assesses and pays the compensation to the
victim. Only where the insurer denies the claim or where
the victim is not satisfied with the quantum of
compensation paid, the matter goes to court. There is no
reason why insurance companies in India should not adopt
such a procedure. In death cases, the calculation of
compensation is now standardized by several decisions of
this court [See for example: Sarla Verma v. Delhi
Transport Corporation - 2009 (6) SCC 121]. The insurers
can either by relying upon the police report (AIR) or by
enquiring with the family or the employer of the
deceased, ascertain the three inputs required for
calculation of the compensation, that is, age of the
deceased, income of the deceased and number of dependent
family members. With these particulars, the insurers can
easily calculate the compensation and offer a
compensation, either a lump sum or an annuity. Similarly
in cases of injuries, the insurers can offer treatment in
hospitals approved by it and meet the expenses or pay the
bills, or if the victim has already undergone the
treatment, reimburse the cost of treatment. It can also
reimburse other items of special damages, the damages for
pain suffering, which is also standardized in several
decisions of this Court. By such voluntary payment there
will be all round benefits. The insurers save interest
and litigation cost and discharge their obligation to the
society. The victims will be relieved from financial
hardship and benefit from timely effective treatment.
Burden on courts will be reduced and judicial man power
can be diverted to more complex cases.
18. To protect and preserve the compensation amount
awarded to the families of the deceased victim special
schemes may be considered by the insurance companies in
consultation with the Life Insurance Corporation of
India, State Bank of India or any other Nationalized
Banks. One proposal is for formulation of a scheme in
consultation with Nationalized Banks under which the
compensation is kept in fixed deposit for an appropriate
period and interest is paid by the Bank monthly to the
claimants without any need for claimants having to
approach either the court or their counsel or the Bank
for that purpose. The scheme should ensure that the
amount of compensation is utilized only for the benefit
of the injured claimants or in case of death, for the
benefit of the dependent family. We extract below the
particulars of a special Scheme offered by a nationalized
Bank at the instance of the Delhi High Court :
(i)The fixed deposit shall be automatically renewed till the
period prescribed by the Court.
(ii)The interest on the fixed deposit shall be paid monthly.
(iii)The monthly interest shall be credited automatically in
the saving account of the claimant.
(iv)Original fixed deposit receipt shall be retained by the
Bank in safe custody. However, the original passbook shall
be given to the claimant along with the photocopy of the
FDR.
(v)The original fixed deposit receipt shall be handed over to
the claimant at the end of the fixed deposit period.
(vi)Photo identity card shall be issued to the claimant and
the withdrawal shall be permitted only after due
verification by the Bank of the identity card of the
claimant.
(vii)No cheque book shall be issued to the claimant without
permission of the court.
(viii)No loan, advance or withdrawal shall be allowed on the
fixed deposit without permission of the court.
(ix)The claimant can operate the saving bank account from the
nearest branch of UCO Bank and on the request of the
claimant, the bank shall provide the said facility.
19. The Insurance companies may also consider offering
an annuity instead of lump sum compensation. They may
prepare an annuity scheme with the involvement of Life
Insurance Corporation of India or its own actuaries,
under which they can pay a monthly annuity to the widow
(for life) and to minor children (till they attain
majority) and in addition a lump sum at the end of 20 or
25 years to the widow. The benefit of such annuity scheme
may also be extended to victims who are permanently
disabled in accidents. Once such schemes are in place,
the victims and the Tribunal will have some choice in the
manner of payment of compensation.
20. Whenever the insurance companies find that the
driver of the insured vehicle possessed fake/forged
driving license, they should lodge a complaint with the
concerned police for prosecution. This will reduce the
incidence of fake licences and increase the road travel
safety.
SUGGESTIONS FOR LEGISLATIVE/EXECUTIVE INTERVENTION
21. We may next refer to some vital areas where
intervention by the legislature and/or executive is
called for. The suggestions are intended to draw the
attention of the executive and legislature to the several
vexed issues, which when properly and expeditiously
addressed, will improve the system of compensating the
motor accident victims.
Ensuring that all accident victims get compensation
22. To ensure that all accident victims get
compensation, it is necessary to formulate a more
comprehensive scheme for payment of compensation to
victims of road accidents, in place of the present system
of third party insurance. For example, in South Africa
and some other African countries, Road Accident Funds
have been created, managed by Road Accident Fund
Commissions, thereby eliminating the need for third party
insurance. A fuel levy/surcharge is collected on the sale
of petrol and diesel and credited to such fund. All
accident victims, without exception, are paid
compensation from out of the said fund by the Commission.
But the feedback from operational statistics relating to
such funds is that the scheme, while successful in
smaller countries, may encounter difficulties and
financial deficits in larger countries like South Africa
or developing countries with infrastructural
deficiencies.
23. An alternative scheme involves the collection of a
one time (life time) third party insurance premium by a
Central Insurance Agency in respect of every vehicle sold
(in a manner similar to the collection of life time road
tax). The fund created by collection of such third party
insurance can be augmented/supplemented by an appropriate
road accident cess/surcharge on the price of
petrol/diesel sold across the country. Such a hybrid
model which involves collection of a fixed life time
premium in regard to each vehicle plus imposition of a
road accident cess may provide a more satisfactory
solution in a vast country like India. This will also
address a major grievance of insurance companies that
their outgoings by way of compensation in motor accident
claims is four times the amount received as motor
insurance premia. The general insurance companies may
however continue with optional insurance to provide cover
against damage to the vehicle and injury to the owner.
24. A more realistic and easier alternative is to
continue with the present system of third party insurance
with two changes:
(i) Define `third party' - to cover any accident victim
(that is any third party, other than the owner) and
increasing the premia, if necessary.
(ii) Increase the quantum of compensation payable under
Section 161 of the Act in case of hit and run motor
accidents.
25. India has the dubious distinction of being one of
the countries with the highest number of road accidents
and the longest response time in securing first aid and
medical treatment. There is therefore an urgent need for
laying down and enforcing Road safety measures and
establishment of large number of Trauma Centres and first
aid centres. It is also necessary to consider the
establishment of a Road Safety Bureau to lay down Road
Safety Standards and norms, enforce Road safety measures,
establish and run Trauma Centres, establish First Aid
Centres in Petrol Stations, and carry out research/data
collection for accident prevention.
26. Several countries have comprehensive enactments
dealing exclusively with accidents. In place of the
provisions relating to Accident tribunals and award of
compensation in the Motor Vehicles Act, 1988, and other
statutes dealing with accidents and compensation,
enacting a comprehensive and unified statute dealing with
accidents may be considered.
Rationalisation of II schedule to Motor Vehicles Act, 1988
27. The Central Government may consider amendment of the
Second Schedule to the Act to rectify the several
mistakes therein and rationalize the compensation payable
thereunder, repeatedly pointed out by this Court [See
U.P. State Road Transport Corporation v. Trilok Chandra -
1996 (4) SCC 362, and Sarla Verma (supra)].
Securing the compensation to the victims of accidents
involving uninsured vehicles
28. Where there is no insurance cover for a vehicle, the
owner should be directed to offer security or deposit an
amount, adequate to satisfy the award that may be
ultimately passed, as a condition precedent for release
of the seized vehicle involved in the accident. If such
security or cash deposit is not made, within a period of
three months, appropriate steps may be taken for disposal
of the vehicle and hold the sale proceeds in deposit
until the claim case is disposed of. The appropriate
Governments may consider incorporation of a rule on the
lines of Rule 6 of the Delhi Motor Accident Claims
Tribunal Rules, 2008 in this behalf.
CONSEQUENTIAL DIRECTIONS
29. The Supreme Court Registry is directed to send
copies of this order to (i) Chief Secretaries and
Director Generals of Police of all States, and (ii)
Registrar-Generals of all High Courts, for compliance
with the directions. The suggestions made may be placed
before the Central Government by the learned Solicitor
General. Registry may receive and put up any other
suggestions. List for further directions on 7.1.2010.
____________________J.
(R V Raveendran) ____________________J.
(Mukundakam Sharma)New Delhi; ____________________J.
December 17, 2009. (K.S. Radhakrishnan)
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