Holding

An insurer may not appeal a Motor Accidents Claims Tribunal award on merits unless it is impleaded under Section 170 and the appeal is confined to the statutory defences enumerated in Section 149(2).

Summary

The Supreme Court examined whether a motor insurer can appeal a Motor Accidents Claims Tribunal award under Section 173 of the Motor Vehicles Act, 1988 when the insured has not filed an appeal. It held that an insurer’s right of appeal is limited to the statutory defences listed in Section 149(2) and cannot be used to challenge the quantum of compensation or findings of negligence unless the insurer is impleaded under Section 170 and granted permission to contest the claim on the same grounds as the insured. The Court clarified that the right of appeal is a statutory, not inherent, right and must be exercised within the scheme of Sections 149, 170 and 173. Consequently, the appeal in Civil Appeal No. 5911/2002 was set aside and allowed, while the other three appeals were dismissed. The decision reaffirmed the legislative intent to protect third‑party victims rather than to expand insurers’ appellate rights.

Issues considered

Can an insurer file an appeal under Section 173 of the Motor Vehicles Act, 1988 against a Tribunal award when the insured has not appealed?
Is an insurer permitted to challenge the quantum of compensation and findings of negligence or contributory negligence?
Do the grounds for an insurer’s appeal extend beyond those enumerated in Section 149(2) when Section 170 conditions (collusion or non‑contest) are satisfied?
May an insurer seek permission from the Tribunal to contest a claim on the insured’s grounds and, if granted, appeal on those grounds?

Legislation cited

Code of Civil Procedure, 1908s. 13
Insurance Act, 1938
Motor Vehicles Act, 1939s. 96(1), s. 96(2), s. 96(6)
Motor Vehicles Act, 1988s. 149(2), s. 170, s. 173

Subjects

Motor vehicle accidentThird‑party compensationInsurer appealStatutory defenceSection 149Section 170Section 173CollusionImpleadmentCompensation quantumNegligence

Judgment

A NATIONAL INSURANCE CO. LTD., CHANDIGARH
v.
NICOLLETTA ROHTAGI AND ORS.

SEPTEMBER 17, 2002

B {V.N. KHARE, SHIVARAJ V. PATIL AND ASHOK BHAN, JJ.]

Motor Vehicles Act, 1988- Sections 149(/),(2),(7), 170 and 173~ Motor
Accident-Third party compensation-Appeal uls 173 by insurer questioning
C quantum of compensation and finding regarding negligence of offending
vehicle, in absence of appeal by insured-Whether permissible-Held, no--
Appeal by insurer can be filed only on ground$ provided uls l 49(2)-
However, where there is collusion between claimant and the insured, or the
insured does not contest the claim, or the Tribunal does not implead the
insurer to contest in such cases, the insurer on seeking permission of the
D Tribunal can contest the claim on the grounds available to the insured-
Motor Vehicles Act, 1939-Section96(1),(2) and (6).

The question for consideration in these matters was whether it is open
to the insurer to prefer an appeal under Section 173 of the Motor Vehicles
Act, 1988 against an award by Motor Accidents Claims Tribunal questioning
E the quantum of compensation, as well as the finding as regards the negligence \
of the offending vehicle, where an insurer has not preferred an appeal.

Disposing of the appeals, the Court

HELD: I.I Even if no appeal is preferred under section 173 of Motor
F Vehicles Act, 1988 by an insured against the award ofa Tribunal, it is not
permissible for an insurer to file an appeal questioning the quantum of
compensation as well as findings as regards negligence or contributory
negligence of the offending vehicle. (473-G, H]

1.2. The right of appeal is not an inherent right or common law right,
G but it is a statutory right. If the law provides that an appeal can be filed on
limited grounds, t~e grounds of challenge cannot be enlarged on the premise
that the insured or the persons against whom a claim has been made has not
filed any appeal. Section 149 (2) of 1988 Act limits the insurer's appeal on
those enumerated grounds and the appeal being a product of the statute, it is
H not open to an insurer to take any other plea other than those provided in
456
NATIONAL INSURANCE CO.LTD., CHANDIGARH'" NICOLLETIA ROHTAG! 457
section 149(2) of 1988 Act. (471-F, G( A
1.3. Parliament, while enacting sub-section (2) of Section 149 only
specified some of the defences which are based on conditions of the policy
and, therefore, any other breach of conditions of the policy by the insurer
which does not find place in sub-section (2) of Section 149 cannot be taken as
a defence by the insurer. If the Parliament had intended to include the breach B
of other conditions of the policy as a defence, it could have easily provided any
breach of conditions of insurance policy in sub-section (2) of Section 149 of
1988 Act. (468-8, CJ

1.4. Motor vehicle accident claim is a tortuous claim directed against C
tortfeasors 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 149of1988
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 cla·1se !!! the insurance policy except those D
specified in Section 149(2) of the Act or where the condition precedent
specified in Section 170 is satisfied. (470-G, H; 471-A]

1.5. Where conditions precedent embodied in Section 170 are 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 E
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 any different interpretation to Section 173
of the 1988 Act is given, the same would go contrary to the scheme and object
of the Act. (471-D, El
F
1.6. In a situation where there is a collusion between the claimants and
the insured or the insured does not contest the claim and, further, the Tribunal
does not implead the insurance company to contest the claim in such cases,
it is open to an insurer to seek permission of the tribunal to contest the claim
on the ground available to the insured or to a person against whom a claim G
has been made. If permission is granted and the insurer is Allowed to contest
the claim on merits in that case, it is open to the insurer to file an appeal
against an award on merits, if aggrieved. In any case where an application
for permission is erroneously rejected the insurer can challenge only that
part of the order while filing appeal on grounds specified in sub-section (2) of
Section 149of1988 Act. But such application for permission has to be bona H
458 SUPREME COURT REPORTS (2002] SUPP. 2 S.C.R.

A fide and tiled at the stage when the insured is required to lead. his evidence.
So far as obtaining compensation by fraud by the claimant is .concerned, it is
no longer res integra that fraud vitiates the entire proceeding and in such
case it is open to an insurer to apply to the Tribunal for rectification of award.

B 1.7. Liability of an insurer in the event of a motor accident in respect of
third party right was not for interpreting Sections 149, 170 and 173of1988
Act, but only for showing that while enacting Chapter VIII of Motor Vehicles
Act, 1939 or Chapter XI of 1988 Act, the intention' of legislature was to protect
third party rights and not the insurer. 1467-AI
c Shankarayya and Anr v. United India Insurance Co. ltd. and Anr. 119981
3 SCC 140; Narender Kumar and Anr. v. Yarenissa and Ors., (19981 9 SCC
202; Chinnama George and Ors v. N.K. Raju and Anr., 1200014 SCC 130 and
Rita Dev.i (Smt) and Ors. v. New India Assurance Co. Ltd and Anr., 120001 5
sec 113, affirmed.
D
United India Insurance Co. Ltd. v. Bhushan Sachdeva and Ors., 120021
2 sec 265, overruled.

Skandia Insurance Co. Ltd v. Kokilaben Chandravadan & Ors., (19871
2 sec 654, referred to.
E
2. The 1939 Act as well as 1988 Act both were enacted on pattern of
English statute with the object to relieve the distress and miseries of victims
of accidents and reduce the profitability of the insurer in regard to
occupational hazard undertaken by them by way of business activities and not
to promote business interest of insurance companies even though they may
F be nationalised companies. j472-G, H; 473-AI

CIVIL APPEL LA TE JURISDICTION : Civil Appeal No. 4292 of 2002.

From the Judgment and Order dated 3.1.2001 of the Punjab and Haryana
High Court in F.A.0. No. 2920 of2000.
G
Jitendra S~rma, Kishore Rawat, M.K. Dua, Romy Chacko, Rajiv Mehta,
P.N. Pillai, K. Veeranjaneyulu, Surya Kant, U.N. Goyal, Dr. Meera Aggarwal,
Ramesh Chandra Mishra, B.K. Pal and Ms. Minakshi Vij for the appearing
parties.

H The Judgment of the Court was delivered by
NATIONAL INSURANCE CO.LTD., CHANDIGARH 1•. NICOLLETIA ROHTAGI [V.N. KHARE, J.] 459
V. N. KHARE, J. Leave granted. A
The short question that arises for our consideration in this group of
appeals is 'where an insured has not preferred an appeal under Section 173
of The Motor Vehicles Act, 1988 (hereinafter referred to as' 1988 Act') against
an award given by the Motor.Accidents Claims Tribunal (hereinafter referred
to as 'Tribunal'). is it open to the insurer to prefer an appeal against the award B
by the Tribunal questioning the quantum of the compensation,as well as
finding as regards the negligence of the offending vehicle'.

Before we proceed further, it is necessary to set out brief facts of the
cases, which have given rise to the aforesaid question.
c
In Civil Appeal No. 5911/2002 @ S.L.P. (Civil) No. 9238/2000, the appellant
was grievously injured in a motor vehicle accident on 29.5. 1993. He preferred
a claim petition before the Tribunal and the Tribunal granted a compensation
to the tune of Rs. 1,50,415/ against the insurer and the insured jointly. The
insurer was directed to deposit the decretal amount. The insured did not file D
any appeal. On appeal being filed by the insurer, the High Court reduced the
compensation to Rs. 84,375/-. In this appeal, the appellant questioned the
maintainability of the appeal preferred by the insurer.

In Civil Appeal No. 4292/2002, an accident took place on 8.8.1995 in E
which one Anil Kishore Roghtagi died. The dependants of the deceased filed
a claim petition before the Tribunal and the Tribunal awarded compensation
to the tune of Rs. 13,13,150/- with@20% p.a. The appeal preferred against
the said award before the High Court by.the insurer was dismissed on the
ground that no appeal at the instance of the insurer is maintainable as regards
quantum of compensation. It is against the said judgment of the High Court, F
the insurer has preferred this appeal. When this matter came up for hearing
before a Bench of this Court, Learned Judges were of the view that since two
Benches of this Court comprising of two learned Judges in Rita Devi & Ors.
· v. New India Assurance Co. Ud & Anr., (2000) 5 SCC 113 and United India
Assurance Co. ltd V. Bhushan Sachdeva & Ors., (2002) 2 sec 265 have taken G
a contrary view,. \he matter is required to be decided by a Bench of three
learned Judges.·.,

In Civil Appeal No. 5913/2002@S.L.P (Civil) No. 10616/2001, identical
question of law is involved and the same has been referred to a Bench of
three learned Judges. H
460 SUPREME COURT REPORTS [2002] SUPP. 2 S.C.R.

A In Civil Appeal No. 5914/2002@ S.L.P. (Civil) No. 17076/2001, one
Rabinder Singh Lehal died in a motor accident. The dependants of the deceased
preferred a claim petition before the Tribunal. The Tribunal awarded a
compensation to the tune of Rs. 2.70 lakhs in favour of the claimants. In an
appeal preferred by the insurer, the High Court held that the insurer cannot
B challenge the quantum of compensation granted by the Tribunal and in that
view of the matter the appeal was dismissed. It is against the said decision,
the appeal has been preferred by the insurer and a Bench of this Court has
also referred this appeal to be decided by a Bench of three learned Judges.

For deciding the controversy at hand, it is necessary to set out the
C relevant provisions of the Act.
"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

D (a) is issued by a person who is an authorised insurer; or

(b) insurer 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
E of the death of or bodily [injury to any person, including
owner of the goods or his authorised 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;
F (ii) against the death of or bodily injury to any passenger of a
~bl~~ire~icle~~~m~siqomcl~u~cl
the vehicle in a public place:

Provided that a policy shall not be required -
G (0 to cover liability in respect of the death arising out of and in the
course of his employment, of the employee of a person insured
by the policy or in respect of bodily injury sustained by such an
employee arising out of and in the course of his employment
other than a liability arising under the Workmen's Compensation
H Act, 1923 (8 of 1923) in respect of the death of, or bodily injury
NA Tl ONAL INSURANCE CO.LTD., CHANDIGARH,.. NICOLLEITA ROHT AG! [V.N. KHARE,J.) 46 J

to, any such employee- A
(a) engaged in driving the vehicle, or

(b) if it is a public service vehicle engaged as conductor of the
vehicle or in examining tickets on the vehicle, or

(c) if it is a goods carriage, being ,carried in the vehicle or B
(ii) to cover any contractual liability.
(2) Subject to the proviso to sub-section (I), a policy of insurance
referred to in sub-section (!), shall cover any liability incurred m
respect of any accident, up to the following limits, namely :- C
(a) save as provided in clause (b), the amount of liability incurred;
(b) in respect of damage to any property of a third par(y, a limit of
rupees six thousand.
Provided that any policy of insurance issued with any limited D
liability and in force, immediately before the commencement of this
Act, shall continue to be effective for a period of four months after
such commencement or till the date of expiry of such policy whichever
is earlier.

(3) A policy shall be of no effect for the purposes of this Chapter E
unless and until there is issued by the insurer in favour of the person
by whom the policy is effected a certificate of insurance in the prescribed
form and containing the prescribed particulars of any condition subject
to which the policy is issued and of any other prescribed matters; and
different forms, particulars and matters may be prescribed in different F
cases.

(4) Where a cover note issued by the insurer under the provisions of
this Chapter or the rules made thereunder is not followed by a policy
of insurance within the prescribed time, the insurer shall, within seven
days of the expiry of the period of the validity of the cover note, G
notify the fact to the registering authority in whose records the
vehicle to which the cover note relates has been registered or to such
other authority as the State Government may prescribe.

(5) Notwithstanding anything contained in any law for the time being
in force, an insurer issuipg a policy of insurance under this section H
462 surREME COURT REPORTS (2002) SUPP. 2 S.C.R.

A shall be liable to indemnify the person or classes of persons specified
in the policy in respect of any liability which the policy purports to
cover in the case of that person or those classes of persons."

"149. Duty of insurers to satisfy judgments and awards against
persons insured in respect of third party risks. (I) If, after a certificate
B 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 (I) of section 147 (being
a liability covered by the terms of the policy) [or under the provisions
of section I63A] is obtained against any person insured by the policy,
c then, 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 of the decree any sum not exceeding the sum assured
payable thereunder, as if he were the judgment debfor, in respect of
D 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 (I) in
respect of any judgment or award unless, before the commencement
E of the proceedings in which the judgment of 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
F 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:-
G (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
pennit to ply for hire or reward, or

H (b) for organised racing and speed testing, or
NATIONAL INSURANCE CO. LTD.,CHANDIGARil '" NICOLLETTA ROilTAGI [V.N. KHARE,J.J 463

(c) for a purpose not allowed by the permit under which the A
vehicle is used, where the vehicle is a transport vehicle,
or

(d) without side-car being attached where the vehicle is a
motor cycle; or
B
(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 C
to by conditions of war, civil war, riot or civil commotion; or

(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.
D
(3) Where any such judgment as is referred to in sub-section (1) is
obtained from a Court in a reciprocating country and in the case of
a foreign judgment is, by virtue of the provisions of section 13 of the
Code of Civil Procedure, 1908 (5of1908) conclusive as to any matter
adjudicated upon by it, the insurer (being an insurer registered under
the Insurance Act, 1938 (4of1938) and whether or not he is registered E
under the corresponding law of the reciprocating country) shall be
liable to the person entitled to the benefit of the decree in the manner
and to the extent specified in sub-section (I), as if the judgment were
given by a Court in India.

Provided that no sum shall be payable by the insurer in respect F
of any such judgment unless, before the commencement of the
proceedings in which the judgment is given, the insurer had notice
through the Court concerned of the bringing of the proceedings and
the insurer to whom notice is so given is entitled under the
corresponding law of the reciprocating country, to be made a party to G
the proceedings and to defend the action on grounds similar to those
specified in sub-section (2).

(4) Where a certificate of insurance has been issued under sub-
section (3) of section 147 to the person by whom a policy ~as been
efrected, so much of the policy as purports to restrict. the insurance ·H
464 SUPREME COURT REPORTS (2002) SUPP. 2 S.C.R.

A of the persons insured thereby by reference to any condition other
than those ifl clause· (b) of sub-section (2) shall, as respect such
liabilities-as are required to be covered by a policy under clause (b)
.of sub-section (Tfof section 147, be of no effect.

Provided that any sum paid by the insurer in or towards the
B discharge of any liability of any person which is covered by the
policy by virtue only of this sub-section shall be recoverable by the
'insurer from that person.

(5) If the amount which an insurer becomes liable under this section
)o pay in respect of a liability incurred by a person insured by a policy
c exceeds the. amount for which the insurer would apart from the
provisions of this section be liable under the policy in respect of that
liability, the insurer shall be entitled to recover the excess from that
person.

(6) In this section the expression "material fact" and "material particular"
D
means, respectively a fact or particular of such a nature as to influence
the judgment of a prudent insurer in determining whether he will take
' the risk and, if so, at what premium and on what conditions, and the
expression "liability covered by the terms of the policy" means a
liability which is covered by the policy or which would be so covered
E but for the fact that the insurer is entitled to avoid or cancel or has
avoided or cancelled the policy.

(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
F referred to in sub-section (I) 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."

"170. lmpleading insurer in certain cases. Where in the course of
G
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
H
NATIONAL INSuRANCECO. LTD., CHANDIGARH 1·. NICOLLETTA ROHTAGI [V.N. KHARE,J.l 465

contest the claim, it may, for reason to be recorded in writing, A
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 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 B
to the person against whom the claim has been made."

"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 C
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:

Provided further that the High Court may entertain the appeal D
after the expiry of the said period of ninety days, if it is satisfied that
the appellant was prevented by sufficient cause from preferring the
appeal in time.

(2) No appeal shall lie against any award of a Claims Tribunal if
the amount in dispute in the appeal is less than ten thousand rupees." E
Since one of the appeals arises out of the Motor Vehicles Act, !9'.39
(hereinafter referred to as the '1939 Act'), we may also briefly note the
provisions of 1939 Act. Section 96(1) of the 1939 Act corresponds to Section
149(1) of 1988 Act which provides that after the issuance of the certificate of
insurance, the insurance company shall satisfy the award or decree passed F
by the Tribunal against the insured not exceeding the sum assured as if he
were the judgment debtor. Section 96(2) of 1939 Act which corresponds to
Section 149(2) of 1988 Act lays down that an insurance company can defend
the action only on the ground of breach of conditions of the policy referred
to in sub-section or on the ground that the policy is void for the reason G
referred to in the said sub-section. Section 96(6) of the 1939 Act corresponds
to Section 149(7) of the 1988 Act and the same provides that the insurance
company cannot avoid the liability to any person entitled to benefit of any
judgment or award referred to in sub-section (I) except. in the manner provided
in sub-section (2) of the Act.
H
466 SUPREME COURT REPORTS (2002] SUPP. 2 S.C.R.

A Chapter VIII of 1939 Act and Chapter XI of 1988 Act have been enacted
on pattern of several English statutes which is evident from the report 'Motor
Vehicles Insurance Committee 1936-37'. In order to find out the real intention
for enacting Section 96 of 1939 Act which corresponds to Section 149 of 1988
Act, it is relevant to trace the historical development of the law for compulsory
third party insurance in England. Prior to 1930, there was no law of compulsory
B insurance in respect of third party rights in England. As and when an accident
took place the injured (claimant) used to bring action against the motorist for
recovery of damages. But in many cases it was found the owner of the
offending vehicle had no means to pay to the injured or dependant of the
deceased and in such a situatiori the claimants were unable to recover damages.
C It is under such circumstances various legislations were enacted. To meet the
situation, it is for the first time 'The Third Parties' Rights Against Insurance
Act 1930' was enacted in England. The provision of the said Act finds place
in Section 97 of 1939 Act which gave to third party a right to sue directly
against the insurer. Subsequently, 'The Road Traffic Act 1930' was enacted
D · w_hich provided for the compulsory insurance of motor vehicles. The provision
--·. 'of the said Act is engrafted in Section 95of1939 Act and Section 146of1988
Act. It is relevant to notice that under Section 38 of the English Act of 1930,
certain conditions of insurance policy were made ineffective so far as third
parties were concerned. The object behind the said provision was that third
party should not suffer on account of failure of the insured to comply with
E those terms of the insurance policy.
Subsequently in the 1934, second Road Traffic Act was el)acted. The
object of the said legislation was to satisfy the liability of the insl\fed. Under
the said enactment three actions were provided. The first was to satisfy the
award passed against the insured. The second was that, in case the insurer
F did not discharge its liability the claimant had right to execute decree against
the insurer. However, in certain events namely, what was provided in Section
96(2)(a) which corresponds to Section 149(2)(a) of 1988 Act, the insurer could
defend his liability. The third action provided for was contained in Section
10(3) of the Road Traffic Act. Under the said provision, the insurer could
G defend his liability to satisfy decree on the ground that insurance policy was
obtained due to misrepresentation or fraud. The said provision also finds
place in Section 149(2)(b) of 1988 Act. While enacting the 1939 Act and 1988
Act, all the three actions have been engrafted in Section 96 of 193 9 Act and
Section 149of1988 Act. It may be remembered that neither the 1939 Act nor
the 1988 Act conferred greater rights to the insurer than what had been
H conferred in English law. Thus, in common law, an insurer was not permitted
NATIONAL INSURANCE CO.LTD., CHANDIGARH 1• NICOLLETIA ROHTAGI IV.N. KHARE,J.] 467
to contest a claim of a claimant on merits i.e. offending vehicle was not A
negligent or there was contributory negligence. The insurer could contest the
claim only on statutory defences specified for in the statute.

We have traced the legislative history of English law as regards liability
of an insurer in the event of a motor accident in respect of third party right
was not for interpreting Sections 149, 170 and 173of1988 Act, but only for B
showing that while enacting Chapter Vlll of 1939 Act or Chapter XI of 1988
Act, the intention of legislature was to protect third party rights and not the
insurer.

To answer the question, it is necessary to find out on what grounds the C
insurer is entitled to defend/contest against a claim by an injured or dependants
of the victims of motor vehicle accident. Under Section 96(2) of 1939 Act
which corresponds to Section 149(2) of 1988 Act, an insurance company has
no right to be a party to an action by the injured person or dependants of
deceased against the insured. However, the said provision gives the insurer
the right to be made a party to the case and to defend it. It is, therefore, D
obvious that the said right is a creature of the statute and its content depends
on the provisions of the statute. After the insurer has been made a party to
a case or claim, the question arises what are the defences available to it under
the statute. The language employed in enacting sub-section (2) of Section 149
appears to be plain and simple and there is no ambiguity in it. It shows that E
when an insurer is impleaded and has been given notice of the case, he is
entitled to defend the action on grounds enumerated in the sub-section,
namely, sub-section (2) of Section 149 of 1988 Act, and no other ground is
available to him. The insurer is not allowed to contest the claim of the injured
or heirs of the deceased on other ground which is available to an insured or
breach of any other conditions of the policy which do not find place in sub- F
section (2) of Section 149 of'l 988 Act. If an insurer is permitted to contest
the claim on other grounds it would mean adding more grounds of contest
to the insurer than what the statute has specifically provided for.

Sub-section (7) of Section 149 of 1988 Act clearly indicates in what
manner sub-section (2) of Section 149 has to be interpreted. Sub-section (7) G
of Section 149 provides that 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 (I) or in such judgment as is referred to in sub-
section (3) otherwise than in the manner provided for in sub-section (2) or H
468 SUPREME COURT REPORTS (2002) SUPP. 2 S.C.R.

A in the corresponding law of the reciprocating country, as the case may be.
The expression 'manner' employed in sub-section (7) of Section 149 is very
relevant which means an insurer can avoid its liability only in accordance with
what has been provided for in sub-section (2) of Section 149. It, therefore,
shows. that the insurer can avoid its liability only on the statutory defences
expressly provided in sub-section (2) of Section 149 of 1988 Act. We are,
B therefore, of the view that an insurer cannot avoid. its liability on any other
grounds except those mentioned in sub-section (2) of Section 149 of 1988 Act.

It is relevant to note that the Parliament, while enacting sub-section (2)
of Section 149 only specified some of the defences which are based on
C conditions of the policy and, therefore, any other breach of conditions of the
policy by the insured which does not find place in sub-section (2) of Section
149 cannot be taken as a defence by the insurer. If the Parliament had
intended to include the breach of other conditions of the policy as a defence,
it could have easily provided any breach of conditions of insurance policy
in sub-section (2) of Section 149. If we permit the insurer to take any other
D defence other than those specified in sub-section (2) of Section 149, it would
mean we are adding more defences to insurer in the statute which is neither
found in the Act nor was intended to be included.

For the aforesaid reasons, we are of the view that the statutory defences
E which are available to the insurer to contest a claim are confined to what are
provided in sub-section (2) of Section 149 of 1988 Act and not more and for
that reason if an insurer is to file an appeal, the challenge in the appeal would
confine to only those grounds.

Before proceeding further, it may be noticed that while 'The Motor
F Vehicles Act, 1939' was in force, Section 110-C (2A) was inserted therein in
the year 1970 which corresponds to Section 170 of the 1988 Act. The said
provision provides that in course of an inquiry of a claim if the Tribunal is
satisfied that there is a collusion between the claimant and the insured or the
insured fails to contest the claim, the Tribunal for reasons to be recorded in
writing, direct that the insurer who may be liable in respect of such claim, shall
G be impleaded as a party to th:: proceeding and the insurer so impleaded shall
thereupon have, without 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.

The aforesaid provisions show two aspects. Firstly, that the insurer has
H
NATIONAL INSURANCE CO.LID., CHANDIGARH 1·. NI COLLETTA RO HT AG I [V.N. KHARE, J.] 469

only stat.utory defences avai_lable as provided in sub-section (2) of Section A
149 of 1988 Act and, secondly, where the Tribunal is of the view that there
is a collusion between the claimant and the insured, or the insured does not
contest the claim, the insurer can be made a party and on such impleadment
the insurer shall have all defenses available to it. Then comes the provisions
of Section 173 which provides for an appeal against the award given by the B
Tribunal. Under Section 173, any person aggrieved by an award is entitled to
prefer an appeal to the High Court. Very often the question has arisen as to
whether an insurer is entitled to file an appeal on the grounds available to
the insured when either there is a collusion between the claimants and the
insured or when the insured has not filed an appeal before the High Court
questioning the quantum of compensation. The consistent view of this Court C
had been that the insurer has no right to file an appeal to challenge the
quantum of compensation or finding of the Tribunal as regards the negligence
or contributory negligence of offending vehicle.

In Shankarayya and Anr. v. United India Insurance Co. ltd. and Anr.
[ 1998] 3 sec 140, it was held that an insurance company when imp leaded as D
a party by the Court can be permitted to contest the proceedings on merits
only if the conditions precedent mentioned in Section 170 are found to be
satisfied and for that purpose the insurance company has to obtain an order
in writing from the Tribunal and which should be a reasoned order by the
Tribunal. Unless this procedure is followed, the insurance company cannot E
have a wider defence on merits than what is available to it by way of statutory
defences. In absence of the existence of the conditions precedent mentioned
in Section 170, the insurance company was not entitled to file an appeal on
merits questioning the quantum of compensation.

In Narender Kumar and Anr. v. Yarenissa and Ors. [1998] 9 SCC 202, F
question arose whether there can be a joint appeal by an insurer and owner
of the offending vehicle. It was held that even in the case of a joint appeal
by the insurer and the owner of an 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 G
tortfeasor can proceed with the appeal after the cause title is suitably amended
by deleting the name of the insurer. In the said case, it also held thus:

"The ground on which the insurer can defend the action commenced
against the torlfeasors are limited and unless one or more of those
grounds is/are available, the Insurance Company is not and cannot H
,
.

470 SUPREME COURT REPORTS [2002] SUPP. 2 S.C.R.

A be treated as a party to the proceedings. That is the reason why the
courts have consiste111/y taken the view that the Insurance Company
has no right to prefer an appeal under Section 110-D of the Act
unless it has been imp/eaded and allowed to defend on one or more
of the grounds set out in sub-section (2) of Section 96 or in the
situation envisaged by sub-section 2(A} of Section 110-C of the Act."
B
In Chinnama George and Ors. v. N.K. Raju and Anr., [2000] 4 SCC 130,
it was held that if none of the conditions as contained in sub-section (2) of
Section 149 exists for the insurer to avoid the liability, the insurer is legally
bound to satisfy the award and the insurer cannot be a person aggrieved by
C the award. In such a case, the insurer will be barred from filing an appeal
against the award of the Tribunal. It was also held that the insurer cannot
maintain a joint appeal along with the owner or driver if defence of any
ground under Section 149(2) is not available to it.

In Rita Devi (Smt) and Ors. v. New India Assurance Co. Ltd and Anr.
D [2000] s sec 113, it was held that the insurer having not obtained permission
under Section 170 of 1988 Act, is not entitled to prefer any appeal to the High
Court against the award given by the Tribunal on merits.

However, in United India Insurance Co. Ltd v. Bhushan Sachdeva and
Ors. [2002] 2 SCC 265, it was held that where the insured fails to file an appeal
E to the High Court against the quantum of compensation awarded by the
Tribunal, the insurer is entitled to file an appeal as the insured has failed to
contest the claim and in that view of the matter, the insurer could be a person
aggrieved. This is the only decision which has taken a contrary view to the
consistent view of this Court in regard to maintainability of appeal at the
F instance of an insurer. In our view, the decision in United India Insurance
(supra) does not lay down correct view of law for the reasons stated hereinafter.

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 ti ling
G an 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 tortfeasors who are the insured and the driver of the
H vehicle and the insurer comes to the scene as a result of statutory liability
NATIONAL INSURANCE CO. LTD., CHANDIGARH t'. NICOLLETIA ROHTAGI[V.N. KHARE,J.] 471
created under the Motor Vehicles Act. The legislature has ensured by enacting A
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 ..
B
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 C
against whom the claim has been made has failed to contest the c.laim, 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 D
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 E
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 173 of the 1988 Act, the same
would go contrary to the scheme and object of the Act. F
This matter may be examined from another angle. The right of appeal
is not an inherent right or common law right, but it is a statutory right. If the
law provides that an appeal can be filed on limited grounds, the grounds of
challenge cannot be enlarged on the premise that the insured or the persons
against whom a claim has been made has not filed any appeal. Section 149 G
(2) of 1988 Act limits the insurer's appeal on those enumerated grounds and
the appeal being a product of the statute, it is not open to an insurer to take
any other plea other than those provided in Section 149(2) of 1988 Act. The
view taken in United India Insurance Co. ltd. v. Bhushan Sachdeva & Ors.,
(supra) that a right to contest would also include the right to file an appeal H
~... :·.
472 SUPREME COURT REPORTS [2002] SUPP. 2 S.C.R.

A is contrary to well established law that creation of a right to appeal is an act
which requires legislative authority and no court or tribunal can confer such
right, it being one of limitation or extension of jurisdiction. Further, the view
taken in United India Insurance (supra) that since the insurance companies
are nationalised and are dealing with public money/fund and to deny them
the right of appeal when there is a collusion between the claimants and the
B insured would mean draining out or abuse of public fund is contrary to the
object and intention of the Parliament behind enacting Chapter XI of 1988
Act. The main object of enacting Chapter XI of 1988 Act was to protect the
interest of the victims of motor vehicle accidents and it is for that reason the
insurance of all motor vehicles has been made statutorily compulsory.
C Compulsory insurance of motor vehicle was not to promote the business
interest of insurer engaged in the business of insurance. Provisions embodied
either in 1939 or 1988 Act have been purposely enacted to protect the interest
of travelling public or those using road from the risk attendant upon the user
of motor vehicles on the roads. If law would have provided for compensation
to dependants of victims of motor vehicle accident, that would not have been
D sufficient unless there is a guarantee that compensation awarded to an injured
or dependant of the victims of motor accident shall be recoverable from
person held liable for the consequences of the accident. In Skandia Insurance
Co. Ltd V. Kokilaben Chandravadan & Ors. (1987] 2 sec 654, it was observed
thus:
E
"In other words, the legislature has insisted and make it incumbent
on the user of a motor vehicle to be armed with an insurance policy
covering thirdparty risks which is in conformity with the provisions
enacted by the legislature. It is so provided in order to ensure that
the injured victims of automobile accidents or the dependants of the
F victims offatal accidents are really compensated in terms of money
and not in terms of promise. Such a benign provision enacted by the
legislature having regard to the fact that in the modern age the use
of motor vehicles notwithstanding the allendant hazards, has become
an· inescapable fact of life, has lo be interpreted in a meaningful
manner which serves rather than defeats the purpose of the
G
legislation. The provision has therefore to be imerpreted in the light
of ihe aforesaid perspective."

We have noticed the legislative development in regard to third party
rights in England and found that the object of those legislations was to
H protect the interest of third party rights. The 1939 Act as well as 1988 Act
NATIONAL INSURANCE CO. LID. CHANDIGARH 1·. NICOLLETTA ROJHAGI [V.N. KHARE,J.J 473
both were enacted on pattern of English statute with the object to relieve the A
distress and miseries of victims of accidents and reduce the profitability of
the insurer in regard to occupational hazard undertaken by them by way of
business activities and not to promote business interests of insurance
companies even though they may be nationalised companies.

For the aforesaid reasons, as well as that the learned Judges in United B
India Insurance Co. Ltd. (supra) have failed to notice the limited grounds
available to an insurer under Section 149(2) of the Act, we are of the view
that the decision in Uni1ed India Insurance (supra) does not lay down the
correct view of law.

It was then urged that if there is a collusion between the claimants and C
the insured or the insured does not contest the claim and 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 when the insurer files an application for permission to contest the
claim on merit and the same is rejected or where claimant has obtained an D
award by playing fraud, in such cases the insurer has a right of appeal to
contest the award on merits and the appeal would be maintainable.

We have already held that unless the conditions precedent specified in
Section 170 of 1988 Act is satisfied, an insurance company has no right of
appeal to challenge the award on merits. However, in a situation where there E
is a collusion between the claimants and the insured or the insured does not
contest the claim and, further, the tribunal does not implead the insurance
company to contest the claim in such cases it is open to an insurer to seek
permission of the tribunal to contest the claim on the ground available to the
insured or to a person against whom a claim has been made. If permission F
is granted and the insurer is allowed to contest the claim on merits in that
case it is open to the insurer to file an appeal against an award on merits, if
aggrieved. In any case where an application for permission is erroneously
rejected the insurer can challenge only that part of the order while filing
appeal on grounds specified in sub-sections (2) of Section I 49 of 1988 Act.
But such application for permission has to be bona fide and filed at the stage G
when the insured is required to lead his evidence. So far as obtaining
compensation by fraud by the claimant is concerned, it is no longer res
integra that fraud vitiates the entire proceeding and in such cases it is open
to an insurer to apply to the Tribunal for rectification of award.

For the aforesaid reasons, our answer to the question is that even if no H
474 SUPREME COURT REPORTS [2002] SUPP. 2 S.C.R.

A appeal is preferred under Section 173 of 1988 Act by an insured against the
award of a Tribunal, it is not permissible for an insurer to file an appeal
questioning the quantum of compensation as well as findings as regards
negligence ()r contributory negligence of the offending vehicle.

For the aforesaid reasons, the order and judginerit under challenge in ·
B Civil Appeal No. 5911/2002@ S.L.P. (Civil) No. 9238/2000 is set aside and
appeal is allowed. Civil Appeal No. 4292/2002, Civil Appeal No.5913/2002@
S.L.P. (Civil) No.10616/2001 and Civil Appeal No. 591412002 @ S.L.P. (Civil)
No. 17076/2001 are dismissed. There shall be no order as to costs.

K.K.T. Appeals disposed of.