Holding

An insurer is not liable to pay compensation under Section 149(2) when the driver of the insured vehicle lacks a valid licence for that class of vehicle, but must initially satisfy the award and may recover the amount from the vehicle’s owner.

Summary

The Motor Accident Claims Tribunal awarded Rs. 3,01,500 as compensation to the family of Shukurullah, who died after being hit by a scooter driven by Ram Surat, who held only a Heavy Motor Vehicle licence and not a valid licence for a two‑wheeler. Oriental Insurance Co. Ltd., the insurer of the scooter, appealed, arguing that under Section 10(2) of the Motor Vehicles Act the driver’s lack of a valid licence discharged the insurer’s liability under Section 149(2). The High Court dismissed the appeal without addressing this contention. The Supreme Court examined the statutory provisions and held that a breach of the licence condition must be proved as a wilful or reckless violation by the insured before the insurer can escape liability. It concluded that the driver’s licence deficiency constituted a breach of Section 10(2) and therefore the insurer was not liable to pay the compensation directly. However, the Court directed the insurer to satisfy the award initially and to recover the amount, with interest, from the vehicle’s owner, respondent No. 8.

Issues considered

Whether an insurer under Section 149(2) of the Motor Vehicles Act is liable to pay compensation when the driver of the insured vehicle did not hold a valid licence for that class of vehicle.
Whether the breach of licence condition by the driver constitutes a defence that discharges the insurer’s statutory liability.

Legislation cited

Motor Vehicles Act, 1988s. 10, s. 10(2), s. 149(1), s. 149(2), s. 149(2)(a)(ii), s. 3, s. 5

Subjects

Motor Vehicles Actinsurance liabilitySection 149invalid driving licencethird‑party compensationmotor accidentinsurer defence

Judgment

[2008] 7 S.C.R. 58
-t
A ORIENTAL INSURANCE CO. LTD.
v
ZAHARULNISHA & ORS.
(Civil Appeal No. 3055 of 2008)

B
APRIL 29, 2008 ·- ~

(S.B. SINHA AND LOKESHWAR SINGH PANTA, JJ.]

Motor Vehicles Act, 1988 - s. 149 (2) and 10 (2) - Motor
accident causing death - By two wheeler scooter - Driver of
c the offending vehicle not holding valid licence - Claim for
compensation - Motor Accident Claims Tribunal as well as
High Court awarding compensation - Direction to insurance.
Company to satisfy the award - On appeal, held: The driving
of vehicle without a valid licence was in violation of s. 10 (2) -
Hence Insurance Company not liable to pay the compensation )..
D
- However, Insurance Company directed to satisfy the award
with liberty to recover the same from the owner of the vehicle.
Death was caused ,of a person due to accident from
a two wheeler scooter. Legal representatives of the
E deceased filed a petition claiming compensation. Motor
Accident Claims tribunal held that the accident was due
to rash and negligent driving of the scooter and awarded
compensation in favour of the respondent-claimants and
against the owner of the offending vehicle and the
y
F insurance company. Insurance Company filed an appeal
contending that it was not liable to pay the compensation
as the driver of the offending vehicle did not hold a valid
licence to drive a two wheeler scooter and thus there was
breach of provisions of Motor Vehicles Act, 1988. High
Court dismissed the appeal. Hence the present appeal.
G
Partly allowing the appeal, the Court
HELD: 1. The appellant-insurance company cannot
· be held liable to pay the amount of compensation to the
H 58
ORIENTAL INSURANCE CO. LTD. v. ZAHARULNISHA & 59
ORS. [LOKESHWAR SINGH PANlif., J.]
"
claimants for the death caused in road accident which A
had occurred due to rash and negligent driving of scooter
by driver thereof who admittedly had no valid and
effective licence to drive the vehicle on the day of accident.
'I The scooterist was possessing driving licence of driving
. .{
...; HMV and he was driving totally different class of vehicle B
' which act of his is in violation of Section 10(2) of Motor
Vehicles Act. [Para 18] [69-A, B, C]
National Insurance Company Limited v. Swaran Singh
2004 (3) sec 297 - relied on.
c
2. It is directed that the appellant-insurance company
though not liable to pay the amount of compensation, but
in the nature of this case it shall satisfy the award and
shall have the right to recover the amount deposited by it
. 1 along with interest from the owner of the vehicle, viz.
D
respondent No. 8, particularly in view of the fact that no
appeal was preferred by him nor has he chosen to
appear before this Court to contest this appeal. [Para 19]
[69-C, DJ
National Insurance Co. Ltd. v. Baljit Kaur and Ors. 2004 E
(2) SCC 1; Oeddappa and Ors. v. Branch Manager, National
Insurance Co. Ltd. 2008 (2) SCC 595 - relied on.
CIVILAPPELLATE JURISDICTIO,N: Civil Appeal No. 3055
')' of 2008.
F
From the Judgment and Order dated 12.7.2006 of the High
Court of Judicature at Allahabad in First Appeal from Order No.
1760 of 2006.
M.K. Dua and Kishore Rawat for the Appellant.
G
J Girjesh Kumar Mall, Amit Pawan, Manish R. Sinha and T.
Mahipal for the Respondents.
The Judgment of the Court was delivered by
LOKESHWAR SINGH PANTA, J. 1. Leave granted.
H
60 SUPREME COURT REPORTS [2008] 7 S.C.R.

A 2. This appeal is against the judgment dated 1st July, 2006
passed by the High Court of Judicature at Allahabad whereby
and whereunder, appeal filed by the Oriental Insurance Company
Limited challenging the award dated 26.04.2006 of the Motor
Accident Claims Tribunal/Additional District Judge Khushi
B Nagar in MAC No. 98/2002, has been dismissed.

3. Briefly stated the facts leading to the filing of the appeal
are as under:-

On 23.07.2001 at about 6:00 p.m. one Shukurullah was
c going from Kasya Courts to his village Shivpur on a bicycle. A
two wheeler scooter, be~aring registration No. UP 57 - 5901,
being driven by one Ram Surat in a rash and negligent manner
hit Shukurullah near Sapha P.S. Kasya and as a result thereof,
Shurkurullah sustained ~1rievous injuries and died. The ill-fated
scooter was owned by Vakilrao - respondent No. 8 herein. The ). I
0
legal representatives of deceased Shukurullah lodged a Claim
Petition No. 98/2002 before the Motor Accident Claims Tribunal,
Khushi Nagar/Additional District Judge and they claimed
compensation for the death of their sole bread earner.

E 4. By its award dated 26.04.2006, Motor Accident Claims
Tribunal held that the accident was due to rash and negligent
driving of the scooter by Ram Surat. It awarded a sum of Rs.
3,01,500/- as compensation with interest at 9% per annum in
favour of the claimants and against the second respondent, y
F owner of the scooter and appellant - insurance company. The
appellant- insurance company was directed to pay the amount
of compensation. The appellant - insurance company filed an
appeal before the High Court. Before the High Court it was
contended that as the driver Ram Surat was holding licence for
G driving Heavy Motor Vehicle (HMV) only, therefore, he had no
valid licence to drive a two wheeler scooter which is totally a
different class of vehicle in terms of Section 10 of the Motor
Vehicles Act, 1988 [hereinafter referred to as 'the MV Act']. It
was contended that in view of the breach of the provisions of
H the MV Act, the appellant - insurance company cannot be held
ORIENTAL INSURANCE CO. LTD. v. ZAHARULNISHA & 61
t ORS. [LOKESHWAR SINGH PANTA, J.]

liable to satisfy the award in terms of Section 149(2) of the MV A
Act.
5. The High Court without noticing the contention of the
appellant - insurance company passed short and unreasoned
' _;"
--' order, which reads as under:-
B
"Heard Sri S.C. Srivastava, learned counsel for the
appellant and perused the record.
Having considered the submission of the learned counsel
for the appellant, we are of the view that this appeal has
got no force and is dismissed summarily. However, the c
statutory deposits so made before this Court be remitted
to the Claims Tribunal within three weeks."
6. Hence, the insurance company has filed this appeal.
-( 7. Despite service of notice, respondent No. 2 - owner of D
the vehicle has chosen not to put in appearance and contest
~
the appeal.
8. Shri M.K. Dua, learned counsel for the appellant -
insurance company contended that the High Court grossly erred
E
in dismissing the statutory appeal of the insurance company
without considering the legal question involved in the present
case. He contended that the insurance company cannot be held
liable to pay the amount of compensation for the default of the
driver of the scooter who was not holding a valid licence and
the liability to indemnify claimants is the responsibility of the F
owner of the vehicle involved in the accident.
9. Shri Girijesh Kumar Mall, learned counsel appearing
on behalf of the claimants, contended that the claimants should
not be made to suffer for the inter se dispute between the
G
appellant - insurance company and respondent No. 8 - owner
of the vehicle in regard to their liability to pay the amount of
compensation to the claimants. According to the learned
counsel, the amount of compensation as directed by the Tribunal
has to be feleased to the claimants and the appellant - insurance
H
62 SUPREME COURT REPORTS· [2008] 7 S.C.R.
i
A company can realise the .said amount from the owner of the
vehicle in accordance with law.
10. In order to appreciate the rival contentions of the learned
counsel for the parties, the legal question that needs to be
considered by us is: Whether the appellant- insurance company ,.
B could be held liable to pay the amount of compensation for the '.>

default of the scooterist who was not holding licence for driving
two wheeler scooter but had driving licence of different class of
vehicle in terms of Section 10 of the MV Act?

c 11. For the purpose of determination of the above said
issue, we may notice relevant provisions of the MV Act. Section
2 of the MV Act deals with definitions. Sub-section 9 of Section
2 defines 'driver' to include -
'in relation to a motor vehicle which is drawn by another
D motor vehicle, the person who acts as a steersman of the
1
)- I
drawn vehicle.'
Sub-section (10) of Section 2 defines 'driving licence.' to
mean -'the licence issued by a competent authority under
Chapter II authorizing the person specified therein to drive,
E otherwise than as a learner, a motor vehicle or a motor
vehicle of any specified class or description.'
Section 3 in Chapteir II of the MV Act prescribes necessity
for driving licence which reads as under:-
F "(1) No person shall drive a motor vehicle in any public
place unless holds an effective driving licence issued to
him authorising him to drive the vehicle; and no person
shall so drive a transport vehicle [other than 1 [a motor cab
or motor cycle] hired for his own use or rented under any
G scheme made under sub-section (2) of section 75] unless
his driving licence specifically entitled him to do so.
(2) The conditions subject to which sub-section (1) shall
not apply to a person receiving instructions in driving a
H Subs. By Act 54 of 1994, sec. 3 for "a motor cab" (w~e.f. 14. 11.1994)
1
ORIENTAL INSURANCE CO. LTD. v. ZAHARULNISHA & 63
ORS. [LOKESHWAR SINGH PANTA, J.]

motor vetiicle shall be such as may be prescribed by the A
Central Government.
12. Section 5 prescribes that no owner or person in charge
of a motor vehicle shall caus.e or permit any person who does
not satisfy the provisions of Section 3 or Section 4 to drive the
.,,
H
B
vehicle. Driving licence has to be granted by the licencing
l authority having jurisdiction in the area to any person who is
not, for the time being, disqualified of holding or obtaining a
driving licence in terms of Section 9 of the MV A.ct. Section 10
prescribes forms and contents of the licences to drive which
reads as under:- c
(1) Every learner's license and driving licence, except a
driving licence issued under Section 18, shall be in such
form and shall contain such information as may be
prescribed by the Central Government.
D
(2) A learner's licence or, as the case may be, driving
licence shall also be expressed as entitling the holder to
drive a motor vehicle of one or more of the following
classes, namely:-
(a) motor cycle without gear; E

(b) motor cycle with gear;
(c) invalid carriage;
(d) light motor vehicle;
'Y F
2
[e) transport vehicle;
(i) road-roller;
0) motor vehicle of a specified description."
13. Driving licence has to be issued by the licencing G
J.- authority on presentation of the application in Form IV as
prescribed by Rule 14 of the Motor Vehicle Rules, 1989. The
application form shall be accompanied by documents specified

2
Subs. By Act 54 of 1994, sec. 8, for clause (e) to (h) (w.e.f 14.11.1994) H
64 SUPREME COURT REPORTS [2008] 7 S.C.R.
•i

A in the said Rule. The app'licant has to apply for a licence in terms
of Form IV enabling him to drive a particular vehicle of the .
\
description as specified in Section 10 of the MV Act, 1988. The ~

licencing authority shall !~rant driving licence to the applicant in
terms of Form VI and Rule 16(1) of the Central Motor Vehicle
i'
B Rules, 1989. ~
"'
~~
14. Sub-section (1) of Section 149 casts a liability upon ~

the insurer to pay to the person entitled to the benefit of the
decree "as if he was thei judgment debtor", that is, the Statute
raises a legal fiction to the effect that for the said purpose the
c insurer would be deemed to be a judgment-debtor in respect of
the liability of the insurer in respect of third party risks.
...
15. It is beyond aniy doubt or dispute that under Section
149 (1) of the MV Act, insurer, to whom notice of bringing of any
proceeding for compensation has been given, can defend the ..
D fa
action on any of the grounds mentioned therein. A three-Judge
Bench of this Court in National Insurance Company Limited
v. Swaran Singh [(2004) 3 SCC 297] has extensively dealt
with the meaning, application and interpretation of various
provisions, including Ss. 3(2), 4(3), 10(2) and 149 of the MV
E Act In paragraph 47 of the judgment, the learned Judges have
held that if a person has been given a licence for a particular
type of vehicle as specified therein, he cannot be said to have
no licence for driving another type of vehicle which is of the same
category but of different type. As for example, when a person is y·
F granted a licence for driving a light motor vehicle he can drive
either a car or a jeep and it is not necessary that he must have
driving licence both for car and jeep separately. In paragraph
48, it is held as under:
"Furthermore, the insurance company with a view to avoid
G
its liabilities is not only required to show that the conditions
laid down under Section 149(2)(a) or (b) are satisfied but """
is further required to establish that there has been a breach
on the part of the insured. By reason of the provisions
contained in the 1988 Act, a more extensive remedy has
H
ORIENTAL INSURANCE CO. LTD. v. ZAHARULNISHA & 65

. ORS. [LOKESHWAR SINGH PANTA, J.]

been conferred upon those who have obtained judgment A
against the user of a vehicle and after a certificate of
insurance is delivered in terms of Section 147(3). After a
third party has obtained a judgment against any person
insured by the policy in respect of a liability required to be
'..("
;
covered by Section 145, the same must be satisfied by B
the insurer, notwithstanding that the insurer may be entitled
to avoid or to cancel the policy or may in fact have done
so. The same obligation applies in respect of such a
liability but who would have been covered if the policy had
covered the liability of all persons, except that in respect c
of liability for death or bodily injury."
16. The judgment proceeds to hold that under the MV Act,
holding of a valid driving licence is one of the conditions of
contract of insurance. Driving of a vehicle without a valid licence
is an offence. However, the question herein is whether a third D
..( party involved in an accident is entitled to the amount of
compensation granted by the Motor Accidents Claims Tribunal
although the driver of the vehicle at the relevant time might not
have a valid driving licence but would be entitled to recover the
same from the owner or driver thereof. It is trite that where the E
insurers, relying upon the provisions of violation of law by the
assured, take an exception to pay the assured or a third party,
they must prove a wilful violation of the law by the assured. In
some cases, violation of criminal law, particularly violation of
the provisions of the MV Act, may result in absolving the insurers F
...,.,
but, the same may not necessarily hold good in the case of a
third party. In any event, the exception applies only to acts done
intentionally or "so recklessly as to denote that the assured did
not care what the consequences of his act might be". The
provisions of sub-sections (4) and (5) of Section 149 of the MV
G
Act may be considered as to the liability of the insurer to satisfy
the decree at the first instance. The liability of the insurer is a
statutory one. The liability of the insurer to satisfy the decree
passed in favour of a third party is also statutory.
17. The learned judges having considered the entire H
66 SUPREME COURT REPORTS [2008] 7 S.C.R.

~
A material and relevant provisions of the MV Act and conflict of
decisions of various High Courts and this Court on the question
of defences available to the insurance companies in defending
the claims of the victims of the accident arising due to the harsh
and negligent driving of the vehicle which is insured with the
B insurance companies, proceeded to record the following I'
).
summary of findings.
(i) Chapter XI of the Motor Vehicles Act, 1988 providing
compulsory insurance of vehicles against third party risks
is a social welfare legislation to extend relief by
c compensation to victims of accidents caused by use of
motor vehicles. The provisions of compulsory insurance
coverage of all vehicles are with this paramount object
and the provisions of the Act,. have to be so interpreted as
to effectuate the sa1id object.
D
(ii) Insurer is entitled to raise a defence in a claim petition )._
filed under Section 163A or Section 166 of the Motor
Vehicles Act, 1988 inter alia in terms of Section 149(2)(a)(ii)
of the said Act.

E (iii) The breach of policy condition, e.g. disqualification of
driver or invalid driving licence of the driver, as contained
in Sub-section (2)(a)(ii) of Section 149, have to be proved
to have been committed by the insured for avoiding liability
by the insurer. Mere absence, fake or invalid driving licence
F or disqualification of the driver for driving at the relevant
time, are not in themselves defences available to the
insurer against either the insured or the third parties. To
avoid its liability towards insured, the insurer has to prove
that the insured was guilty of negligence and failed to
exercise reasonable care in the matter of fulfilling the
G
condition of the policy regarding use of vehicles by duly
licensed driver or one who was not disqualified to drive at .....
the relevant time, (iv) The insurance companies are,
'
' however, with a view to avoid their liability must not only
I
' establish the available defence(s) raised in the said
H
68 SUPREME COURT REPORTS [2008] 7 S.C.R.

--(
A and to decide the availability of defence or defences to
the insurer, the Tribunal has necessarily the power and
jurisdiction to decide disputes inter se between insurer
and the insured. The decision rendered on the claims and
disputes inter se between the insurer and insured in the
B course of adjudication of claim for compensation by the
\'
claimants and Se award made thereon is enforceable )-
and executable in the same manner as provided in Section
174 of the Act for enforcement and execution of the award
in favour of the claimants.
c (x) Where on adjudication of the claim under the Act the
.tribunal arrives at a conclusion that the insurer has
satisfactorily proved its defence in accordance with the
provisions of Section 149(2) read with Sub-section (7),
as interpreted by this Court above, the Tribunal can direct
D that the insurer is liable to be reimbursed by the insured
for the compensation aind other amounts which it has been j_
compelled to pay to the third party under the award of the
tribunal Such determination of claim by the Tribunal will be
enforceable and the money found due to the insurer from
E the insured will be recoverable on a certificate issued by
the tribunal to the Collector in the same manner under
Section 174 of the Act as arrears of land revenue. The
certificate will be issued for the recovery as arrears of
land revenue only if, as required by Sub-section (3) of
F Section 168 of the Act the insured fails to deposit the
amount awarded in favour of the insurer within thirty days
from the date of announcement of the award by the tribunal.
(xi) The provisions contained in Sub-section (4) with proviso
thereunder and Sub-section (5) which are intended to cover
G specified contingencies mentioned therein to enable the
insurer to recover amount paid under the contract of
insurance on behalf of the insured can be taken recourse ·-'-
of by the Tribunal and be extended to claims and defences
of insurer against insured by, relegating them to the remedy
H before, regular court in cases where on given facts and
ORIENTAL INSURANCE CO. LTD. v. ZAHARULNISHA & 69
ORS. [LOKESHWAR SINGH PANTA, J.]

circumstances adjudication of their claims inter se might A
delay the adjudication of the claims of the victims.
18. In the light of the above-settled proposition of law, the
appellant - insurance company cannot be held liable to pay the
amount of compensation to the claimants for the cause of death
'. of Shukurullah in road accident which had occurred due to rash B
...(
and negligent driving of scooter by Ram Surat who admittedly
had no valid and effective licence to drive the vehicle on the day
of accident. The scooterist was possessing driving licence of
driving HMV and he was driving totally different class of vehicle
which act of his is in violation of Section 10(2) of the MV Act. c
19. In the result, the appeal is allowed to the limited extent
and it is directed that the appellant - insurance company though
not liable to pay the amount of compensation, but in the nature
of this case it shall satisfy the award and shall have the right to
D
recover the amount deposited by it along with interest from the
_{
owner of the vehicle, viz. respondent No. 8, particularly in view
of the fact that no appeal was preferred by him nor has he chosen
to appear before this Court to contest this appeal. This direction
is given in the light of the judgments of this Court in National
Insurance Co. Ltd. v. Baljit Kaur and Others [(2004) 2 SCC 1) E
and Deddappa and Others v. Branch Manager, National
Insurance Co. Ltd. [(2008) 2 SCC 595].
20. The appeal is, accordingly, allowed in the aforesaid
terms with no order as to costs. F
1
K.K.T. Appeal partly allowed.