Insurer Liable To Indemnify Compensation To Third Party In Case Of Breach Of Policy Conditions, May Recover From Insured Later: Rajasthan High Court

Justice Sudesh Bansal, observed, "Insurance Company has miserably failed to prove that the declaration of cancellation/ nullifying the driving licence of the Driver was ever brought to the knowledge of the owner of vehicle and it is not proved that the owner was guilty of negligence in not following the due care and caution to fulfil the conditions of the insurance policy, therefore, the Tribunal has not committed any error of law in following the principle of "pay and recover".

Facts

Essentially, the claim petition was filed in relation to an accident that occurred on 3-7-2015 when the vehicle in question overturned and one Mr.Vinit Moyal died. The vehicle in question, insured with the United India Insurance Company, was in the ownership of respondent Ashraf and was being driven by respondent Mustkim.

On filing claim petition under Section 166 of the Motor Vehicles Act, 1988 the Tribunal awarded a compensation of Rs.47,99,536/- with interest in favour of the claimants. The Tribunal recorded that there was a breach of conditions of insurance policy as the driver was not having a valid and effective licence and that the vehicle was not having a route permit and fitness certificate on the date of accident.

The Insurance Company was exonerated from liability and by applying the principle of "pay and recover" it was directed that the Insurance Company first will pay compensation to claimants and then may recover the same from owner and driver of the vehicle in question. The present appeals were filed against the aforementioned judgment and award passed by the MACT, Alwar.

Findings

Counsel for the Insurance Company raised three points, which were addressed by the court accordingly:

(i) The driver of vehicle was not having a valid and effective licence on the date of accident,

Relying on National Insurance Company Vs. Swaran Singh [(2004) 3 SCC 297], the court opined that the driving licence issued to Driver and renewed for a period from 10-8-2011 to 19-11-2015 was informed to be nullified vide public notice date 28-12-2017. The court further opined that the Tribunal should not have treated this as invalid and ineffective on the date of accident, which, however, has not been put to challenge by the claimants. In this regard, the court refused to interfere with such a finding of the Tribunal.

Notably. in Swaran Singh, Apex Court observed that under the principle of "pay and recover", the insurer is liable to indemnify the compensation to a third party and may recover the same from the insured.

(ii) Vehicle in question was not having a route permit and fitness certificate on the date of accident

On the issue of the vehicle in question not having a route permit and fitness certificate on the date of accident, the court observed that nothing has been brought on record by the insured (owner of vehicle) to prove that he had a valid permit of vehicle on 3-7-2015.

The court, while dismissing the second point, observed that recovery rights of Insurance Company against owner/ driver of vehicle are treated in context of principles laid down in National Insurance Co. Ltd. Vs. Challa Bharathamma [(2004)8 SCC 517]. In this, the Apex Court held that plying vehicle without a permit is an infraction and same is breach of conditions of insurance policy under Section 66 of the Motor Vehicles Act, 1988, defence for the same is available to the insurer under Section 149(2) of the Act of 1988.

Thus, the insurer is not required to file a separate suit to certify his right to recover the amount from the owner and driver of the vehicle, added the court. The court opined that the insurer may directly initiate proceedings before the Executing Court concerned, as the dispute between the insurer and owner/ driver of vehicle was subject matter of determination before the Tribunal and the issue has been decided against the owner/ driver in favour of the insurer.

(iii) The Tribunal has assessed the quantum of compensation on higher side and prayed that impugned judgment be modified suitably.

The court observed that the Tribunal has assessed the compensation after considering material on record and after due application of relevant rules and law. The compensation awarded by the Tribunal is just and proper. The court noted that the Insurance Company has failed to point out any illegality or perversity in this regard and thus, there is no force in this argument.

After the perusal of the record, the court observed that Insurance Company has deposited entire compensation amount before the Tribunal pursuant to interim order dated 12-4-2019, out of which 50% amount of compensation has been disbursed to claimants according to order dated 5-8-2021 and therefore, remaining amount so deposited be also disbursed to claimants in terms of the award.

Arguments

The Insurance Company argued that when the Tribunal itself has held that there is breach of insurance policy then the claim petition ought to have been dismissed against the Insurance Company as a whole and the Tribunal committed an error of law in directing the Insurance Company to pay the compensation amount to claimants and then to recover from the owner of the vehicle.

On the other hand, the counsel for claimants submitted that the Tribunal has not committed any illegality or jurisdictional error in applying the principle of "pay and recover", as the vehicle in question was insured with the Insurance Company. He further argued that even if any breach of conditions of insurance policy, then also considering the beneficial object of the Act of 1988, the Tribunal is justified and well within its jurisdiction in directing the insurer to satisfy the award, though in law it has no liability.

The counsel for claimants further contended that the right of the insurer to recover the amount of award from the owner and driver of the vehicle has been protected as well. He submitted that as far as the quantum of compensation is concerned, the same is rather lower side and deserves to be enhanced suitably. However, in any case, the Insurance Company cannot challenge the quantum of compensation as the same travels beyond defences available to Insurance Company under Section 149(2) of the Act, 1988, he argued.

Lastly, counsel for the claimants submitted that in case the appeal filed Insurance Company is dismissed, the claimants would not press their appeal.

Adv. Tripurari Sharma appeared on behalf of appellants, while Adv. Ram Sharan Sharma appeared for the respondents.

Case Title: United India Insurance Company Ltd v. Smt Soniya

Citation: 2022 LiveLaw (Raj) 35