Holding

The insurer is not liable to indemnify where the insured breached the policy condition by permitting an unlicensed driver to operate the vehicle.

Summary

A constable was killed when a tractor owned by Kashiram Yadav was driven by Raghuraj, who had no driving licence. The victim's widow and children claimed compensation, and the Motor Accident Claims Tribunal awarded Rs.96,000, holding the owner liable. On appeal, the owner and the insurer argued that the insurer should pay the award under Section 96 of the Motor Vehicles Act, 1939. The Supreme Court examined Section 96(2)(b), which excludes insurer liability if the insured breaches a policy condition, specifically the condition that the vehicle not be driven by an unlicensed driver. The Court found that the owner had not proved he had sold the vehicle or that a licensed driver was in charge, establishing a breach of the condition. Consequently, the insurer was not obliged to indemnify the owner, and the appeal was dismissed.

Issues considered

Whether the insurer is liable to indemnify the owner under Section 96 of the Motor Vehicles Act, 1939 when the insured vehicle was driven by an unlicensed driver, thereby breaching the policy condition.

Legislation cited

Motor Vehicles Act, 1939s. 96, s. 96(2)(b)

Subjects

Motor Vehicles ActSection 96insurance indemnityunlicensed driverpolicy condition breachthird party liabilitycompensationfatal accident

Judgment

KASHIRAM YADAV & ANR. A
v.
ORIENTAL FIRE & GEN. INSURANCE CO. & ORS.

AUGUST 10, 1989
B
[K. JAGANNATHA SHETTY AND A.M. AHMADI, JJ.)

Motor Vehicles Act, 1939: Sec. 96-Fatal accident caused by
unlicensed driver-Compensation awarded-Insurance company-
Whether liable to indemnify owner of vehicle.
~-. .
c
.

·- A Constable while returning home after performing his duties was
knocked down by a tractor owned by appellant No. I, and driven by
appellant No. 2 who had no driving licence. As a result or"the accident,
the Constable died and his widow and children claimed compensation,
before the Tribunal.
D
Awarding a compensation of Rs.96,000 the Tribunal held that at
the time of the accident the vehicle belonged to appellant No. I and was
driven by appellant No. 2, who had no driving licence, thatthe accident
took place due to his rash and negligent driving, and appellant No. I
-\ alone was liable to pay the compensation.
E
The appellant bas come in appeal, by special leave, contending
1
that the insurer alone would be liable to pay the compensation amount,
even though the tractor was not driven by a licensed driver.

Dismissing the appeal,

~ HELD: I. Section 96 of the Motor Vehicles Act, 1939 imposes a F
duty on the insurer to satisfy judgments against persons insured in
respect of third party ris~. Sub-section 2 thereof provides exception to
the liability of the insurer. Sub-sec. 2(b) of sec. 96 provides that the
insurer is not liable to satisfy the judgments against the persons insured
·if there has been a breach of a specified condition of the policy. One of
.the conditions orthe policy specified under clause (ii) is that the vehicle G
should not be driven by any person who is not duly licensed or by any
i person, who has been disqualified from holding or obtaining driving
/
licence, during the period of disqualification. It is not in dispute that the
. certificate of insurance c«ncerned in this case contains this condition .
. If, therefore, there is a breach of this condition, the insurer will not be
·liable to indemnify the owner. f8I3C-E)
H
,, 811
812 SUPREME COURT REPORTS [1989} 3 S.C.R.

A 2. In the present case, the onus of the insurer has been discharged
from the evidence of the insured himself. The insured took a po>itive
defence slating that he was not the owner of the vehicle since he had
already sold the same lo a third party. This had not been proved.
Secondly, he took a defence stating that the vehicle at the relevant time
was driven· by a licensed driver. This was proved to be false. There is no
B other material even to indicate that the vehicle was entrusted to the
licensed driver on the date of the fatal accident. [8140-F}

Skandia Insurance Co. Ltd. v. Kokilaben Chandravadan and
Ors., [1987) 2 SCC 654, distinguished.
)
C CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2183
of 1988.

From the Judgment and Order dated 25.3.1988 of the Allahabad
High Court in F.A.F.O. No. 951of1987.

D N.D.B. Raju and N. Ganapathy for the Appellants.

M.S. Ganesh and Murlidhar for the Respondents.

The Judgment of the Court was delivered by

E K. JAGANNATHA SHETTY, J. The question raised in this
appeal relates to the liability of the owner of an insured vehicle to pay
compensation for the accident caused by negligence of an unlicensed
driver.

The facts which are now found are these.
F ;
A constable while returning home after performing his duties·
was knocked down by a tractor owned by appellant no. 1-Kashiram
Yadav. Appellant No. 2-Raghuraj was then driving the tractor. He
had no driving licence. The widow of the constable and her children
claimed compensation from the appellants and the insurer. The owner
G resisted the claim contending inter alia that he had already sold the
vehicle to a third party and that vehicle was driven by the licensed
driver Gaya Prasad at the time of the accident. Both these facts were l.,
not established. The Tribunal held that Raghuraj Singh was driving
the tractor and the accident took place due to his rash and negligent
driving and not due to any fault on the part of the constable. Since
H Raghuraj Singh had no driving licence, the Tribunal held that the
'
. K.R. YADAV v. INSURANCE CO. ISHETIY, J.) 813

~ owner of the vehicle alone is liable to pay the compensation. Having A
reached that conclusion, the Tribunal determined the amount of com-
pensation payable to the claimants. A sum of Rs.96,000 was awarded
with interest at the rate of 12 per cent per annum till realisation. This
award of the Tribunal has been affirmed by the High Court.

~ We are not concerned with the quantum of compensation B
determined by the Tribunal. That question has not been agitated
before us. The only contention that was canvassed before us is as to the
liability of the insurer to indemnify the owner to satisfy the judgment
~gains! him.

Section 96 of the Motor Vehicles Act, 1939 imposes duty on the C
~. insurer to satisfy judgments against persons insured in respect of third
party risks. Sub-section 2 thereof provides exception to the liability of
the insurer. Sub-sec. 2(b) of sec. 96 provides that the insurer is not
liable to satisfy the judgments against the persons insured if there has
been a breach· of a specified condition of the policy. One of the condi-
tions of the policy specified under clause (ii) is that the vehicle should D
not be driven by any person who is not duly licensed, or by any person
who has been disqualified from holding or obtaining driving licence
I during the period of disqualification. It is not in dispute that the certifi-
'"'I, cate of insurance concerned in this case contains this condition. If,
' therefore, there is a breach of this condition, the insurer will not be
liable t.o indemnify the owner. E

Counsel for the appellants however, submitted that insurer alone
would be liable to pay the award amount even though the tractor was
not driven by a licensed driver. In support of the contention, he placed
l.reliance on the decision of this Court in Skandia l~urance Co. Ltd. v.
I\ Kokilaben Chandravadan and Ors., [1987] 2 SCC654. We do not think F
that that decision has any relevance to the present case. There the facts
found were quite different. The. vehicle concerned in that case was
undisputedly entrusted to the driver who had a valid.licence. In transit
the driver.stopped the vehicle and.went to fetch some snacks from the
opposite shop leaving the engine on. '!he ignition key was at the igni,
tion lock and not in the cabin of the truck. The driver has asked the c;
1 cleaner to take care of the truck. In fact the driver had left the truck in

). the care of the cleaner. The clearner meddled with the vehicle and
caused the accident. The question arose whether the insured (owner)
had committed a breach of tbC condition incorporated in the ~rtificate
of insurance since the cleaner operated the vehicle on the fatal occa-
sion without driving licence. This Court expressed the view that it is H
,I;
·o. , . ·~

814 SUPREME COURT REPORTS [1989) 3 S.C.R.

A only when the insured himself .entrusted the vehicle to a person who
does not hold a driving licence, he could be said to have committed
breach of the condition of the policy. It must be established by the
Insurance Company that the breach is on the part of the insured.
Unless the insured is at fault and is guilty of a breach of the condition,
B the insurer cannot escape from the obligation to indemnify the
insured. It was also observed that when the insured has done every-
thing within his power in as much as he has engaged the licensed driver
and has placed the vehicle in his charge with the express or implied
mandate to drive himself, it cannot be said that the insured is guilty of
any breach.

C We affirm and reiterate the statement of law laid down in the
above case. We may also state that without the knowledge of the ..4
insured, if by driver's acts or omission othe.rs meddle with the vehicle
and cause an accident, the insurer would be liable to indemnify the
insured. The insurer in such a case cannot take the defence of a breach.
of the condition in the certificate of insurance.
D
But in the present case, the onus of the insurer has been .dis-
charged from the evidence of the insured himself. The insured took a
positive defence stating that he was not the owner of the vehicle since
he had already sold the same to a third party. This has not been
proved. Secondly, he took a· defence stating that the vehicle at the
E relevant time was driven by a licensed driver, Gaya Prasad, (PW-2).
This was proved to be false, There is no other material even to indicate
that the vehicle was entrusted·to the licensed driver on the date of the
fatal accident. With these distinguishing features in the present case,
we do not think that the ratio of the decision in Skandia Insurance Co.
Ltd. 's case·could be called to aid the appellants.
F
In the result, the appeal fails and is dismissed. In the facts and
circumstances of the case, we make.no order as to costs.

G.N. Appeal dismissed.

..
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