'Took Eight Years To Deny Issuance Of Policy For Vehicle, Claimant Suffered Serious Consequences': Kerala High Court Raps Insurance Department

Setting aside the award directing the Kerala State Insurance Department to pay compensation in a road accident claim case, the Kerala High Court Friday said since the policy was not issued by it, the department cannot be charged with liability to pay compensation. However, the court added, since the department took more than eight years to deny the policy, the claimant deserves to be compensated.

The department had challenged the award of the Additional Motor Accidents Claims Tribunal-II, Kozhikode dated 19.10.2005 in a case dating back to 1995. The sole ground was that since the vehicle in question was not even insured by it, the liability of compensation is illegal. The vehicle was instead insured with the Oriental Insurance Company, which was not even made a party before the tribunal.

Justice C. Jayachandran in the order observed that it was "an extremely sad state of affair" that even in the year 2022, the claimant could not reap the benefit of the award passed in 2005 with respect to an accident that occurred in 1995 solely due to the inaction, laches and negligence on the part of the appellant insurance company.

"This Court perfectly agree with the proposition that in the absence of a valid policy, the appellant/R3 cannot be mulcted with liability to pay compensation to the first respondent/claimant. However, the fact that it took more than eight years for the appellant/R3 to deny the policy, as also, the liability, is something which cannot be brushed aside lightly, for, the same had resulted in serious consequences and prejudice to the first respondent/ claimant. This Court is therefore of the opinion that even when the appeal is to be allowed, the first respondent/claimant should be compensated in order to balance the equities", it observed.

The court allowed the appeal subject to the payment of cost of Rs 20,000 to the claimant, within a period of 45 days. It also remanded the case to tribunal for fresh consideration, in accordance with law, within a period of six months.

On 19.10.2005, the Tribunal had ordered the department to deposit the award with respect to an accident which took place on 08.04.1995. With a delay of more than three years, the appellant filed an application for review before the Tribunal, which was dismissed as per order dated 13.10.2010. It was only in 2014 that instant appeal was filed by the appellant challenging the award.

The Government Pleader Sreejith V.S. and Advocate E.C. Bineesh contended that the Tribunal had passed the award without taking due note that there had been no insurance policy for the vehicle at the relevant time. It was submitted that although there had been a delay in filing the instant appeal, the same was condoned as per High Court order dated 13.01.2017, upon payment of Rs.2000.

On behalf of the claimant, it was contended by Advocate K.M. Firoz, that he had met with an accident in the year 1995 and was granted a favourable award in 2005 amounting to Rs. 28,000 with interest but could not realise it even in 2022. The counsel argued that even if the appeal was allowed, the hardship and prejudice caused to the claimant ought to be compensated. The counsel further averred that although the appellant entered appearance through a counsel before the Tribunal, little was done  and no written statement had been filed denying the policy.

On behalf of the owner of the vehicle in question, it was contended by Advocate R. Sudhish, that although he had committed an error in admitting the policy claimed by the petitioner, it would still not exonerate the claimant from establishing before the Tribunal that the policy claimed in the petition covers the vehicle in question. It was further averred that the claimant never produced the final report before the Tribunal; which if done, would have prevented the precarious situation.

Findings of the Court

The Court in this case found that there were repeated instances of callous negligence and inaction on the part of the appellant insurance company.

Firstly, the court said, the department did not choose to file a written statement denying the insurance policy claimed by the claimant, in spite of entering appearance before the Tribunal through a lawyer.

Secondly, the court added, the review petition was filed before the Tribunal only after a lapse of more than three years after from the date of award.

Lastly, the court observed, no immediate action was taken by the appellant after the dismissal of the review petition. The Court also noted that it even took the department another three years and almost eight months to prefer the instant appeal in the year 2014.

"It is one thing to take note, as canvassed by the learned counsel for the appellant/R3, that as per order dated 13.1.2017, the huge delay stood condoned upon payment of a cost of Rs.2,000/-. However, it is different altogether and all the more significant to note that such condonation of delay would not efface off the prejudice, hardship and jeopardy caused to the first respondent/claimant," it said.

As regards the claim of the claimant that the benefit of the proviso to Section 21 of the Limitation Act would have to apply, the Court found that as per the proviso to the provision, it is provided that "where the court is satisfied that the omission to include a party was due to a mistake made in good faith, the court can direct that the suit as regards such new party shall be deemed to have been instituted on an earlier date".

The court thus accepted the argument and said since the department was made a party on the belief that the vehicle in question was covered by a policy issued by it, the claimant was entitled to the benefit of the provision.

"However, this Court is of the view that the insurance company which is going to be impleaded should not be mulcted with the responsibility of payment of interest for the award amount from the date of petition up to the date of impleadment," it added.

The court said interest component pertaining to the period has to be borne by the owner of the vehicle also as he was equally negligent and callous in admitting that the policy was issued by the department.

"The second respondent/owner had also contributed to the hardship and prejudice caused to the first respondent/claimant. Had the second respondent/ owner been diligent to ascertain its policy and to state correct and true facts in her written statement, the first respondent/claimant would not have been put to the present predicament," said the bench.

Advocates M. Manju, Jacob Abraham, Jeswin P. Varghese, S. Kannan, Raji T. Bhaskar, and M. Shajna also entered appearance for the various respondents. 

Case Title: The Kerala State Insurance Department v. P. Rajan & Ors. 

Citation: 2022 LiveLaw (Ker) 519

Click Here To Read/Download The Judgment