NATIONAL INSURANCE CO. LTD.versusCHALLA UPENDRA RAO AND ORS.

                  NATIONAL INSURANCE CO. LTD.                                   A
                               v.
                 CHALLA UPENDRA RAO AND ORS.

                          SEPTEMBER 21, 2004

             [ARIJIT PASAYAT AND C.K. THAKKER, JJ.]                             B

     Motor Vehicles Act, 1988:

     Section 149(2)-Claim petition-Resisting of-Statutory defences
available to the Insurer-Held: Are confined only to those available under       C
s. 149(2).
     Section 149(2)(b)(i)(a)-Driving of vehicle-Without permit to ply-
For hire or reward-High Court was of the view that since there was no
permit, the question of violation of any condition thereof did not arise-
Correctness of-Held: High Court's view is clearly fallacious-Plying of a        D
vehicle without a permit is an infraction-A person without a permit to ply
a vehicle cannot be placed at a better pedestal vis-a-vis one who has a
permit, but has violated any condition thereof-Therefore, in terms of
S.149(2) insurer has a defence to resist the claim petition on account of the
absence of permit.                                                              E
       Sections 149(2), 168, 169 and 17~!aims petition-Insurer established
 its statutory defence under S. 149(2)-However, High Court held insurer
liable to indemnify. the award-Correctness of-Held: High Court not
justified in holding the insurer liable-Insurer has the option to recover the
 amount paid from the insured-Mode ofrecovery and execution-Explained.          F
      Three persons were traveling in an auto rickshaw, which met with
an accident. Two persons lost their lives while one was seriously injured.
The legal representatives of the two deceased persons filed claim petitions
while the injured filed a separate petition claiming compensation in
terms of Section 166 of the Motor Vehicles Act, 1988. The auto rickshaw         G
in question belonged to the insured. The insurer resisted the claim on
the ground that the insured had not obtained a permit to ply the vehicle
and, therefore, in terms of the policy of insurance the insurer had no
liability. The Motor Vehicles Accident Claims Tribunal accepted the
plea. It however, held that the insurer was liable to pay the compensation      H ·
                                    587
     588                 SUPREME COURT REPORTS [2004) SUPP. 4 S.C.R.

A   which was fixed at a certain amount in the case of death, while in the
    case of the injured's claim a certain sum was directed to be paid. The
    High Court by the impugned judgment held that the insurer was liab.le
    to indemnify the award. Hence the appeals.

           Disposing of the appeals, the Court
B
         HELD: 1. The statutory defences, which are available to the insurer
    to contest the claim, are-confined to those provided in Section 149(2) of
    the Motor Vehicles Act, 1988. [595-H)


c National
       New India Assurance ,Co. Ltd v. Asha Rani, (2003) 2 SCC 223 and
           Insurance Co. Ltd v. Nicolletta Rohtagi, (2002) 7 SCC 456, relied
     on.

          2. The High Court was of the view that since there was no permit, the
    question of violation of any condition therea-f does not arise. The view is
D   clearly fallacious. A person without a permit to ply a vehicle cannot be
    placed at a better pedestal vis-a-vis !-me who has a permit, but has violated
    any condition thereof. Plying of a vehicle without a permit is an infraction.
    Therefore, in terms of Section 149(2) of the Act a defence is available to
    the insurer on that aspect. The acceptability of the stand is a matter of
    adjudication. The question of policy being operative had no relevance for
E   the issue regarding liability of the insurer. The High Court was, therefore,
    not justified in holding the insurer lia.ble. (596-A, BJ

          3. Considering the beneficial object Of the Act, it would be proper
    for the insurer to satisfy the award, though in' law it has no liability. In
F   some cases the insurer has been given the option and liberty to recover
    the amount from the insured. For the purpose of recovering the amount
    paid from the owner, the insurer shall not be required to file a suit. lt
    may initiate a proceeding before the concerned Executing Court as if
    the dispute between the insurer and the owner was the subject matter
    of determination before the Tribunal and the issue is decided against the
G   owner and in favour of the insurer. Before release of tbe amount to the
    claimants, the owner of the offending vehicle shall furnish security for
    the entire amount, which the insurer is required to pay to the claimants.
    Th·e offending vehicle shall be attached, as part of the security: If necessify
    arises the Ex.ecuting Court shall take the assi~tance of the concerned
H   Regional ·Transport Authority. The Executing .Court shall pass
    NATIONAL INSURANCE CO. LTD. v. C. UPENDRA RAO [PASAYAT, J.] 589


appropriate orders in accordance with law as to the manner in which               A'
the owner of the vehicle shall make the payment to the insurer. In case
there is any default it shall be open to the Executing Court to direct
realization by disposal of the securities to be furnished or from any·
other property or properties of the owner of the vehicle i.e. the insured.
In the instant case considering the quantum involved it is left to the            B
discretion of the insurer to decide whether it would take steps for recovery
of the amount from the insured. (596-C-F]

     CIVIL APPELLATE JURlSDICTION: Civil Appeal No. 6178 of2004.

    From the Judgment and Order dated 26.8.2002 of the Andhra Pradesh             C
High Court in A.A.O. No. 1646 of 1997.

                                   WITH

     C.A. No. 6179 of 2004.
                                                                                  D
     Joy Basu, Madhurendra Kumar and B.K. Satija for the Appellant.

      The Judgment of the Court was delivered by

      ARIJIT PASAYAT, J.: Leave granted.
                                                                                  E
      National Insurance Company limited (hereinafter referred to as the
'insurer') calls in question legality of the judgment rendered by a learned
Single Judge of the Andhra Pradesh High Court holding the insurer to be
liable for indemnifying the award of compensation.
                                                                                  F
      Background facts in nutshell are as follows :

      Three person~~ ~ere traveling in an auto rickshaw which met with an
accident on 9.5.1992. Two persons lost their lives while one was seriously
injured. Claim petitions were filed by the legal representatives of the two
deceased persons while the injured filed separate petition claiming               G
compensation in terms of Section 166 of the Motor Vehicles Act, 1988 (in
short the 'Act') The au!o rickshaw in question beionged to Challa Atchayya
(hereinafter referred to as the 'insured'). The insurer resisted the claim on
the ground that the insured had not obtained permit to ply the vehicle and
therefore in terms of the policy of.the insurance the insurer had no liability.   H
    590                   SUPREME COURT REPORTS (2004] SUPP. 4 S.C.R.

A   The Motor Vehicle Accident Claims Tribunal, Krishna at Vijayawada (in
    short the 'Tribunal') accepted the plea. It however, held that the insured was
    liable to pay compensation which was fixed at Rs. 1,24,000 in the case of
    the death while in case injured's claim a sum of Rs. 2,000 was directed
    to be paid. The judgment was challenged in appeal before the Division Bench
B   of the High Court of Andhra Pradesh at Hyderabad questioning the correctness
    of the view regarding non-liability of .the insurer. The High court by the
    impugned judgment held that the insurer was liable to indemnify the award.

         In support of the appeal learned counsel for the appellant - insurer
    submitted that the High Court has lost sight of the fact that plying the vehicle
c   without requisite permit is a breach of a specific condition of the policy and,
    therefore, the insurer had no liability. It was pointed .out that Section 149
    of the Act deals with the defences available to the insurer.

          Reference was also made to Section 66 of the Act relating to the
    necessity for permits. The High Court's view that since the yehicle was
D
    subject-matter of insurance and the policy was in operation; insurer's liability
    is really of no .consequence. The defence available to the insurer is when
    the policy subsists and stress of the High Court on that is really beside the
    point.

E         Per contra, learned counsel for the respondent-claimants submitted that
    in one case at hand two young children of the deceased were the beneficiary
    of the award. The widow of the deceased, during the pendency of the appeal
    before this Court, has also expired. In one of the cases, old parents of the
    deceased arc the claimants. In this view of the matter, considering the small
F   amounts awarded, this is not a fit oase for interference.

          Section l49(2)(a) (i) relates to a vehicle not covered by a permit to ply
    for hire or reward. Section 149(2) reads as follows : ·

                   "No sum shall be payable by an insurer under sub-section (1)
G            in respect of any judgment or award unless, before the commencement
             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 awar~ so long as execution is stayed thereon
             pending an appeal; and an insurer to whom notice of th~ bringing
H
NATIONAL INSURANCE CO. LTD. v. C. UPENDRA RAO [PASAYAT, J.] 591

   of any such proceedings is so given shall be entitled to be made a          A
   party 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
   poliey, being one of the following conditions, namely:-
                                                                               B
         (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 permit to ply for hire or reward, or          C

                     (b) for organized racing and speed testing, or

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

                     (d) without side-car being attached where the vehicle
                     is a motor cycle; or

        (ii)   a condition excluding driving by a named person or
   persons or by any person who is not duly licensed, or by any person
                                                                               E
   who has been disqualified for holding or obtaining a driving licence
   during the period of dis-qualification; or

         (iii) a condition excluding liability for injury caused or
    contributed to by conditions of war, civil war, riot or civil commotion;   F
    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."
                                                                               G
Section 66 of the Act is also relevant. Same reads as follows:

   "66. Necessity for permits - (1) No owner of a motor vehicle shall
   use or permit the use of the vehicle as a transport vehicle in any
   public-place whether or not such vehicle is actually carrying any           H
    592               SUPREME COURT REPORTS (2004] SUPP. 4 S.C.R.

A         passengers or goods save in accordance with the conditions of a
          permit granted or countersigned by a Regional or State Transport
          Authority or any prescribed authority authorizing him the use of the
          vehicle in that place in the manner in which the vehicle is being
          used:

B              Provided that a stage carriage permit shall, subject to any
          conditions that may be specified in the permit, authorize the use of
          the vehicle as a contract carriage:

                Provided further that a stage carriage permit may, subject to
c         any conditions that may be sp~cified in the permit, authorize the use
          of the. vehicle as a goods carriage either when carrying passengers
          or not:

               Provided also that a goods carriage permit shall, subject to any
          conditions that may be specified in the permit, authorize the holder
D         to use the vehicle for the carriage of goods for or in connection with
          a trade or business carried on by him.

          (2) The holder of a goods carriage permit may use the vehicle, for
          drawing of any trailer or semi-trailer not owned by him, subject to
          such conditions as may be prescribed:
E
               Provided that the holder of a permit of any articulated vehicle
          may us~e the prime-mover of that articulated vehicle for any other
          semi-trailer.

F         (3) The provisions of sub-section (1) shall not apply -

          (a) to any transport vehicle owned by the Central Government or
          a State Government and used for Government purposes unconnected
          with any commercial enterprise;

G         (b) to any transport vehicle owned by a local authority or by a
          person acting under contract with a local authority and used solely
          for road cleansing, ·road watering or conservancy purposes;

          (c) to any transport vehicle used solely for police, fire brigade or
          ambulance purposes;
H
NATIONAL INSURANCE CO. LTD. v. C. UPENDRARAO [PASAYAT,J.] 593

   (d) to any transport vehicle usedyolely for the conveyance of              A
   corpses and the mourners accompanying the corpses;

   (e) to any transport vehicle used for towing a disable vehicle or
   for removing goods from a disabled vehicle to a place of safety;

   (f) to any transport vehicle used for any other public purpose as may      B
   be prescribed by the State Government in this behalf;

   (g) to any transport vehicle used by a person who manufactures or
   deals in motor vehicles or builds bodies for attachment to chassis,
   solely for such purposes and in accordance with such conditions as         C
   the Central Government may, by notification in the Official Gazette,
   specify in this behalf;

   (h) omitted

    (i) to any goods vehicle, the gross vehicle weight of which does          D
    not exceed 3,000 kilograms;

    (j)   subject to such conditions as the Central Government may, by
    notification in the Official Gazette, specify, to any transport vehicle
    purchased in one State and proceeding to a place, situated in that
    State or in any other State, without carrying any passenger or goods;     E
    (k) to any transport vehicle w.hich has been temporarily registered
    under section 43 while proceeding empty to any place for the
    purpose of registration of the vehicle;

    (I)   omitted.                                                            F

    (m) to any transport vehicle which, owing to flood, earthquake or
    any other natural calamity, obstruction on road, or unforeseen
    circumstances, is required to be diverted through any other route,
    whether within or outside the State, with a view to enabling it to        G
    reach its destination;

    (n) to any transport vehicle used for such purposes as the Central
    or State Government may, by order, specify;

    (o) to any transport vehicle which is subject to a hire-purchase,         H
    594                 SUPREME COURT REPORTS [2004] SUPP. 4 S.C.R.

A           lease or hypothecation agreement and which owing to the default
            of the owner has been taken possession of by or on behalf of, the
            person with whom the owner has entered into such agreement, to.
            enable such motor vehicle to reach its destination; or

            (p) to any transport vehicle while proceeding empty to any place
B           for purpose of repair.

            (4) Subject to the provisions of sub-section (3), sub-section (1)
            shall, if the State Government by rule made under section 96 so
            prescribes, apply to any motor vehicle adapted to carry more than
c           nine persons excluding the driver."

         In New India Assurance Co. Ltd. v. Asha Rani and Ors., [2003] 2 SCC
    223 it was observed as follows:

            "We may consider the matter from another angle. Section 149(2) of
D           the 1988 Act enables the insurers to raise defences against.the claim
            of the claimants. In terms of clause (c) of sub-section (2) of section
            149 of the Act one of the defences which is available to the insurer ·
            is that the vehicle in question has been used for a purpose not
            allowed by the permit under which the vehicle was used. Such a
            statutory defence available to the insurer would be obliterated in
E
            view of the decision of this court in Satpal Singh's case [2000] 1
            sec 237."
         Similarly, in National Insurance Co. Ltd., Chandigarh v. Nicolletta
    Rohtagi and Ors., [2002] 7 SCC 456, the scope of Section 149 (2) of the
F   Act was elaborated. It was, inter alia, observed as follows:

            "To answer the question, it is necessary to find out 01,1 what grounds
            the insurer is entitled to defend/contest against a claim by an'injured
            or dependants of the victims of a motor vehicle accident. Under
            Section 96(2) ofthe 1939 Act which corresponds to Section 149(2)
G           of the 1988 Act, an insurance company has no right to be a party
            to an action by the injured person or dependants of the 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, obvious that the said right is a creature of the statute and
H           its content depends on the provisions of the statute. After the insurer
    NATIONAL INSURANCE CO. LTD. v. C. UPENDRA RAO [PASAYAT, J.] 595


        has been made a party to a case or claim, the question arises, what       A
        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 when
        an insurer is lmpleaded and has been given notice of the case, he
        is entitled to defend the action on grounds enumerated in the sub-        B
        section, namely, sub-section (2) of Section 149 of the 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 Jeceased 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-section.(2)
        of Section 149 of the 1988 Act. If an insurer is permitted to contest
                                                                                  c
        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 the 1988 Act clearly indicates in       D
        what manner sub-section (2) of Section 149 has to be interpreted.
        Sub-section (7) 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    E
        (1) 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 la_w of the reciprocating country, as tlie 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         F
        (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 the 1988 Act. We are, 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 the 1988      G
        Act."·

     As was observed in the said case the statutory defences which are
available to the insurer to contest the claim are confined to those provided
in sub-section (2) of Section 149.
                                                                                  H
    596                   SUPREME COURT REPORTS [2004] SUPP. 4 S.C.R.

A         High Court was of the view that since there was no permit, the question
    of violation of any condition thereof does not arise. The view is clearly
    fallacious. A person without permit to ply a vehicle cannot be placed at a
    better pedestal vis-a-vis one who has a permit, but has violated any condition
    thereof. Plying of a vehicle without a permit is an infraction. Therefore, in
B   terms of Section 149(2) defence is available to the insurer on that aspect. The
    acceptability of the stand is a matter of adjudication. The question of policy
    being operative had no relevance for the issue regarding liability of insurer.
    High Court was, therefore, not justified in holding the insurer liable.

           the residual question is what would be the appropriate direction.
c   Considering the beneficial object of the Act, it would be proper for the insurer
    to satisfy the award, though in law it has no liability. In some cases the insurer
    has been given the option and liberty to recover the amount from the insured.
    For the purpose <>f recovering the amount paid from the owner, the insurer
    shall not be required to file a suit. It may initiate a proceeding before the
    concerned Executing Court as if the dispute between the insurer and the
D
    owner was the subject matter of determination before the Tribunal and the
    issue is decided against the owner and in favour of the insurer. Before release
    of the amount to the claimants, owner of the offending vehicle shall furnish
    security for the entire amount which the insurer will pay to the claimants.
    The offending vehicle shall be attached, as a part of the security. If necessity
E   arises the Executing Court shall take assistance of the _concerned Regional
    Transport Authority. The Executing Court shall pass appropriate orders in
    accordance with law as to the manner in which the owner of the· vehicle shall
    make pa:Yment to the insurer. In case there is any default it shall be open to
    the Executing Court to direct realization by disposal of the securities to be
F   furnished or from any other property or properties of the owner of the vehicle
    i.e. the insured. In the instant case considering the quantum involved we
    leave it to the discretion of the insurer to decide whether it would take steps
    for recovery of the amount from the insured.

         The appeals are disposed of with ~he above observation. There will be
G   no order as to costs.

    v.s.s.                                                     Appeals disposed of.