Holding

The insurer shall pay the compensation fixed by the tribunal to the claimants and may recover the amount from the insured by initiating proceedings before the executing court, without filing a separate suit.

Summary

An accident occurred on 15 September 1990 and the claimants filed a petition under the Motor Vehicles Act, 1988 seeking compensation. The Motor Accident Claims Tribunal held that only the vehicle owner (the insured) was liable, rejecting any liability on the insurer. The Madras High Court, relying on the earlier Satpal Singh decision, reversed this, directing the insurer to pay compensation by way of indemnification. The insurer appealed, arguing that Satpal Singh had been overruled by later Supreme Court judgments and that the insurer should instead recover the amount from the insured via execution proceedings, not a separate suit. The Supreme Court set aside the High Court order, held that under Section 168 the insurer must pay the compensation within three months and may recover it from the insured through a proceeding before the executing court, attaching the vehicle as security. The appeal was allowed and the insurer was directed to follow the specified procedure.

Issues considered

Whether, under Section 168 of the Motor Vehicles Act, 1988, the insurer is liable to pay compensation to the claimant or the liability rests solely with the insured owner of the vehicle.
Whether the insurer must file a separate suit to recover the compensation from the insured, or may initiate proceedings before the executing court for recovery.

Legislation cited

Motor Vehicles Act, 1988s. 168

Subjects

Motor Vehicles ActSection 168insurance liabilityindemnificationcompensationexecution courtmotor accident claimSupreme Court judgment

Judgment

..,..._
ORIENTAL INSURANCE CO. LTD. A
v.
SHRI NANJAPPAN AND ORS.

FEBRUARY 13, 2004

[DORAISWAMY RAJU AND ARIJIT PASAYAT, JJ.] B

MQtor Vehicles Act, 1988-Section 168-Claim for compensation-High
Court holding that claimant entitled to compensation from the owner of the
vehicle-insured and insurer liable to pay compensation by way of C
indemnification-Correctness of-Held: Insurer would pay compensation fixed
which it would recover from the insured, thus order of High Court set aside-
For recovery filing of suit not required-Proceedings may be initiated before
Executing Court which will pass appropriate orders regarding the manner of
payment to the insurer by the insured
D
An accident took place and the respondent-claimant filed claim
petition. Courts below held that the insured-owner of the vehicle was only
liable and not the insurer. High Court applying the decision of Satpal
Singh 's case held that the respondent-claimant were entitled to
compensation from the insured-owner of the vehicle which was insured
with the appellant-insurer and the insurer was to pay compensation by E
way of indemnification.

Hence the present appeal.

Respondent-claimant contended that though the view in Satpal
Singh 's case has been overruled, yet in a recent decision in Baljit Kaur 's p
case it is held that it would be equitable if the insurance company pays
the amount of compensation to the claimant and recovers it from the
insured.

Disposing of the appeal, the Court

HELD: The insurer shall pay the quantum of compensation fixed G
by the tribunal to the respondents-claimant within three months from
today which it will recover from the insured for which the insurer shall
not file a suit but initiate a proceeding before the concerned Executing
Court as if the dispute between the insurer and the owner was the subject
365 H
366 SUPREME COURT REPORTS [2004] 2 S.C.R.

A 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 vehicle shall be issued a notice and he shall be
required to furnish security for the entire amount which the insurer will
pay to the claimants. The offending vehicle shall be attached as a part of
B the security. If necessity arises the Executing Court shall take assistance
of the concerned Regional Transport Authority. It shall pass appropriate
orders in accordance with law as to the manner in which the insured-owner
of the vehicle shall make payment to the insurer. In case there is any
default the Executing Court shall direct realization by disposal of the
securities to be furnished or from any other property or properties of the
C owner of the vehich~. (368-D-G)

New India Assurance Company v. Satpal Singh and Ors., (2000) 1 SCC
237, overruled.

Mis. National Insurance Co. Ltd. v. Baljit Kaur and Ors., (2004) 1
D SCALE 124, relied on.

New India Assurance Co. Ltd. v. Asha Rani, [2003) 2 SCC 223 and
Oriental Insurance Co. Ltd. v. Devireddy Konda Reddy, (2003) 2 SCC 339, I
!
referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1012 of
E 2004.
From the Judgment and Order dated 28.10.2002 of the Madras High
Court in L.P.A. No. 27 of 2001.

Joy Basu for B.K. Satija for the Appellant.
F A.T.M. Sampath and Ms. Aarthi Radhakrishnan for the Respondents.

The Judgment of the Court was delivered by

ARIJIT PASAYA T, J. Leave granted.

Oriental Insurance Company Limited (hereinafter referred to as an
G 'insurer') calls in question legality of the judgment rendered by a Division
Bench of the Madras High Court holding that the respondents (hereinafter
referred to as the 'claimants') were entitled to compensation from the owner
of the vehicle (described hereinafter as 'insured') which was the subject
matter of insurance with the appellant and that the insurer had the liability to
H pay the compensation by way of indemnification ..
ORIENTAL INSURANCE CO. LTD. v. NANJAPPAN [PASA YAT . .I.] 367

The Motor Accident Claims Tribunal and Subordinate Court, Tirupur A
(hereinafter referred to as the 'Tribunal') had held that the liability was of the
insured alone, and the insurer had no liability. In appeal, for accepting the
case of the respondents-claimants the High Court held that the decision of
this Court in New India Assurance Company v. Satpal Singh and Ors., [2000]
l SCC 237 was applicable. It has to be noted that the accident took place on
15.9.1990 and the Claim Petition was filed under the Motor Vehicles Act, B
1988 (in short the 'Act').

In support of the appeal, learned counsel for the insurer submitted that
the judgment in Satpal Singh 's case (supra) has been reversed in New India
Assurance Co. Ltd. v. Asha Rani, [2003] 2 SCC 223 and the said decision C
was followed in Oriental Insurance Co. ltd. v. Devireddy Kanda Reddy,
[2003] 2 sec 339.
Learned counsel for the respondents-claimants on the other hand
submitted that though the view in Satpal Singh's case (supra) has been
reversed, yet in a recent decision in Mis National Insurance Co. ltd. v. Baljit D
Kaur and Ors~. (2004) I SCALE 124 it has been held that it would be
equitable if the insurance company pays the amount of compensation to the
claimant and recovers it from the insured.

It has to be noted that the insured did not appear before the High Court

- and also has not appeared in this Court in spite of service of notice.

The view of the High Court cannot be maintained in view of what has
E

been stated in Asha Rani's case (supra) and Devireddy 's case (supra). To that
extent the judgment of the High Court is unsustainable. At the same time, the
observations of this Court in Baljit Kaur's case (supra) also need to be noted.
In para 21 of the judgment, it was observed as follows: F
"The upshot of the aforementioned discussions is that instead and
in place of the insurer the owner of the vehicle shall be liable to
satisfy the decree. The question, however, would be as to whether
keeping in view the fact that the law was not clear so long such a G
direction would be fair and equitable. We do not think so. We,
therefore, clarify the legal position which shall have prospective effect.
The Tribunal as also the High Court had proceeded in terms of the
decision of this Court in Satpal Singh (supra). The said decision has
been overruled only in Asha Rani (supra). We, therefore, are of the
opinion that the interest of justice will be sub-served if the appellant H
368 SUPREME COURT REPORTS [2004] 2 S.C.R.

A herein is directed to satisfy the awarded amount in favour of the
claimant if not already satisfied and recover the same from the owner
of the vehicle. for the purpose of such recovery, it would not be
necessary for insurer to file a separate suit but it may initiate a
proceeding before the executing court as if the dispute between the
insurer and the owner was the subject matter of determination before
B the tribunal and the issue is decided against the owner and in favour
of the insurer. We have issued the aforementioned directions having
regard to the scope and purport of Section 168 of the Motor Vehicles
Act, 1988 in terms whereof it is not only entitled to detennine the
amount pf claim as put forth by the claimant for recovery thereof ..•
.;

C from the insurer, owner or driver of the vehicle jointly or severally
but also the dispute between the insurer on the one hand and the
owner or driver of the vehicle involved in the accident inasmuch as
can be resolved by the tribunal in such a proceeding."

Therefore, while setting aside the judgment of the High Court we direct
D in terms of what has been stated in Baljit Kaur's case (supra) that th~ insurer
shall pay the quantum of compensation fixed by the Tribunal, about which
there was no dispute raised, to the respondents-claimants within three months ·
from today. For the purpose of recovering the same from the insured, the
insurer shall not be required to file a suit. It may initiate a proceeding before
E 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 qecided against the owner and in favour of the insurer. Before release
of the amount to the insured, owner of the vehicle shall be issued a notice
and he shall be required to furnish security for the entire amount which the
insurer will pay to the claimants. The offending vehicle shall be attached, as
F a part of the security. If necessity arises the Executing Court shall take
assistance oftbe concerned Regional Transport authority. The Executing Court
shall pass appropriate orders in accordance with law as to the manner in
which the insured, owner of the vehicle shall make 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
G property or properties of the owner of the vehicle. the insured. The appeal is
disposed of in the aforesaid terms, with no order as to costs.

N.J. Appeal disposed of.