Holding

The insurance company is not liable to indemnify the owner because the deceased employee is excluded from coverage under Section 147, and the insurer therefore need not satisfy the Tribunal's award.

Summary

Suresh Chandra Variyal, a regional manager, died in a motor accident while using a company car insured under the Motor Vehicles Act, 1988. His widow and daughter filed a claim under Section 166 against the employer and Oriental Insurance Company. The Motor Accidents Claims Tribunal held the employer liable but exonerated the insurer, finding that Variyal himself was driving and was not a third‑party covered by the policy. The High Court reversed this, directing the insurer to pay the award. The Supreme Court allowed the appeal, holding that the insurer is not liable because the deceased was an employee and the policy’s proviso excludes coverage for employee death unless arising under the Workmen’s Compensation Act. The Court also emphasized that the driver should have been impleaded and that the Swaran Singh ratio does not apply to non‑third‑party claims.

Issues considered

The insurer's liability under Section 147/149 of the Motor Vehicles Act when the deceased is an employee of the insured.
Whether the driver (Mahmood Hasan) must be impleaded to establish negligence under Section 166.
Whether proof of driver negligence is required for a claim under Section 166.
The applicability of the Swaran Singh decision to the present case.
Interpretation of the proviso to Section 147 regarding exclusion of employee liability.
The correctness of the High Court's direction to the insurer to pay the award.

Legislation cited

Motor Vehicles Act, 1988s. 146, s. 147, s. 149, s. 163A, s. 166
Workmen's Compensation Act, 1923

Subjects

Motor Vehicles Actinsurance liabilitySection 147Section 166third partyemployee exclusionvicarious liabilitynegligenceclaim petitionWorkmen's Compensation ActSwaran Singh ratioindemnity

Judgment

ORIENTAL INSURANCE COMPANY LIMITED
v.
MEENA VARIYAL AND ORS.

APRIL 2, 2007

[C.K. THAKKERAND P. K. BALASUBRAMANYAN, JJ.] B

Motor Vehicles Act, 1988: Sections 147 and 166.

Accident-Claim petition-Liability of insurance company-One 'S'
was employed as a Regional Manager with a company who was the owner c
of a motor vehicle- 'S' was provided with a car by the employer-The
vehicle was insured with the insurance company in .terms of the Motor
Vehicles Act-There was no special contract-The vehicle met with an
accident and 'S' died-The widow and daughter of 'S' filed a claim petition
under Section 166 of the Act before the Motor Accidents Claims Tribunal- D
According to the claim, the deceased was driving along with his 'companion'
'MH' after completing his work for the employer-The car collided with a
tree due to the rash and negligent driving of the driver-The car was being
driven by 'MH' at the time ofthe accident- 'MH' had lodged a first information
report on the same day giving wrong facts to escape from any prosecution-
'MH', who was allegedly driving the car at the time of the accident, was not E
impleaded-The owner of the car did not appear and did not file any written
statement-The insurance company filed a written statement-it pleaded that
the driver and the owner of the vehicle had colluded and the alleged driver
of the car had not been impleaded and as a matter of fact the deceased
himself was driving the vehicle-The Tribunal held that 'S' was driving the F
vehicle and that 'S' was not holding a valid driving licence when he drove
the car-Purporting to accept the version of the wife of 'S' the Tribunal
awarded a certain sum as compensation-The Tribunal held that the claimants
were entitled to receive the amount from the owner of the vehicle, the
employer, but the insurance company was not liable, since the vehicle was
being driven by the deceased himself who was an employee of the owner of G
the car and the policy of insurance did not cover such an employee-On
appeal, the High Court simply directed the insurance company to pay the
amount as ordered by the Tribunal, leaving it to the insurance company to
take recourse to recover the amount from the insured in accordance with the
641 H
+-
642 SUPREME COURT REPORTS [2007] 4 S.C.R.
~
>-
A directions ofSupreme Court in Swaran Singh's case-Correctness of-Held:
Any Tribunal trained in law should ask the claimants to produce evidence
in support of the monthly salary or income earned by the deceased from his
employer Company-There is nothing in the Motor Vehicles Act which stands
in the way of the Tribunal to ask for the best and acceptable evidence-The
Tribunal ought to have, in the case on hand, directed the claimant to implead
B 'MH' who was allegedly driving the vehicle at the time of the accident-In
these circumstances, Insurance Company is not liable to indemnify the insured
and is also not obliged to satisfy the award of the Tribunal/Court and then ;;._ \-
have recourse to the insured, the owner of the vehicle-High Court judgment
set aside.
c One 'S' was employed as a Regional Manager with respondent No. 3,
the owner of a motor vehicle 'S' was provided with a car by the employer. The
· vehicle was insured with the appellant-company in terms of the Motor Vehicles
Act. 1988. There was no special contract. The vehicle met with an accident
and 'S' died. The widow and daughter of 'S' fded a claim petition under. Section
D 166 of the Act before the Motor Accidents Claims Tribunal. According to the
claim, the deceased was driving along with his 'companion' 'MH' after
completing his work for the employer. The car collided with a tree due to the
rash and negligent driving of the driver. The car was being driven by 'Mii' at
the time of the accident 'MH' had lodged a first information report on the
same day giving wrong facts to escape from any prosecution. 'MH', who was
E
allegedly driving the car at the time of the accident, was not impleaded. The
owner of the car did not appear and did not file any written statement. The
insurance company filed a written statement. It pleaded that the driver and
the o'Wner of the vehicle bad colluded and the alleged driver of the car had not
been impleaded and as a matter of fact the decreased himself was driving the
F vehicle.
The Tribunal held that 'S' was driving the vehicle and that 'S' was not
holding a valid driving licence when be drove the car. Purporting to accept
the version of the wife of 'S' the Tribunal awarded a certain sum as
compensation. The Tribunal held that the claimants were entitled to receive
G the amount from the owner of the vehicle, the employer, but the insurance ,..
company was not liable, since the vehicle was being driven by the deceased
himself who was an employee of the owner of the car and the policy of
..,.
insurance did not cover such an employee.

On appeal, the High Court simply directed the insurance company to
H
+
ORIENTALINSURANCECOMPANYLm.v.MEENAVARIYAL 643
~

pay the amount as ordered by the Tribunal, leaving it to the insurance company A
to take recourse to recover the amount from the insured in accordance with
the directions of this Court in Swaran Singh 's case. Hence the appeal.

Allowing the appeal, the Court

HELD: 1. The High Court has not reversed the finding of the Tribunal B
that the deceased was himself driving the vehicle. The position was that a
Regional Manager of the Company, which was the owner of the vehicle, was
himself driving the vehicle of the Company and during the course of it, he
died in an accident, whether the accident occurred due to his negligence or
otherwise. Merely going by some decision or the other, without appreciating
c
the facts in a given case, in the light of the law, if any, declared by this Court,
does not lead a court or Tribunal to a correct conclusion in the normal course.
[Para 7] (649-A-B]

2.1. It may be true that the Motor Vehicles Act, 1988, insofar as it relates
to claims for compensation arising out of accidents, is a beneficent piece of D
legislation. It may also be true that subject to the rules made in that behalf,
,.. the Tribunal may follow a summary procedure in dealing with a claim. That
does not mean that a Tribunal approached with a claim for compensation under
the Act should ignore all basic principles oflaw in determining the claim for
compensation. Ordinarily, a contract of insurance is a contract of indemnity.
(Para 9] (650-D-E] E

2.2. When a car belonging to an owner is insured with the insurance
company and it is being driven by a driver employed by the insured, when it
meets with an accident, the primary liability under law for payment of
compensation is that of the driver. Once the driver is liable, the owner of the
,, vehicle becomes vicariously liable for payment of compensation. It is this F
vicarious liability of the owner that is indemnified by the insurance company.
A third party for whose benefit the insurance is taken is, therefore, entitled
to show, when he moves under Section 166 of the Act, that the driver was
negligent in driving the vehicle resulting in the accident, that the owner was
.... vicariously liable and that the insurance company was bound to indemnify the G
owner and consequently satisfy the award made. (Para 9] [650-E-G]

-/ 2.3. Under general principles, one would expect the driver to be impleaded
before adjudication is claimed under Section 166 of the Act as to whether a
claimant before the Tribunal is entitled to compensation for an accident that
has occurred due to the alleged negligence of the driver. The Tribunal should H
I

+~

644 SUPREME COURT REPORTS [2007] 4 S.C.R. ,__ \..

A insist on the driver of the vehicle being impleaded 'When a claim is being filed.
The relevant provisions of the Act are not intended to jettison all principles
of law relating to a claim for compensation which is still based on a tortuous
liability. The Tribunal ought to have, in the case on hand, directed the claimant
to implead 'MH' who was allegedly driving the vehicle at the time of the
accident Here, there was also a controversy whether it was 'MH' who was
B driving.the vehicle or it was the deceased himself. Surely, such a question
could have been decided only in the presence of 'MH' who would have been
principally liable for any compensation that might be decreed in case he was
driving the vehicle. Secondly, the deceased was employed in a limited company.
It was necessary for the claimants to establish what the monthly inc~me was
c and what the dependency ~as on the basis of which the compensation could be
adjudged as payable. Any Tribunal trained in law should ask the claimants to
produce evidence in support of the monthly salary or income earned by the
deceased from hiS employer Company. There is nothing in the Motor Vehicles
Act which stands in the way of the Tribunal to ask for the best and acceptable
evidence. Here again, he position that the Motor Vehicles Act vis-a-vis claim
D for compensation arising out of an accident is a beneficent piece of legislation,
cannot lead a Tribunal trained in law to forget all basic principles of ,,
es~ablishing liability and establishing the quantum of compensation payable.
The Tribunal, in this case, has chosen to merely go by the oral evidence of
the widow when with~ut any difficulty the claimants could have got the
E employer-company to produce the relevant documents to show the income that
was being derived by the deceased from his employment. Of course in this
case, the above two aspects become relevant only if it is found that the
insurance company is liable. If it is found that only the owner of the vehicle,
the employer of the deceased was liable, there will be no occasion to further
consider these aspects since the owner has acquiesced in the award passed
F by the Tribunal against it [Para 9) [650-G; 651-A-EJ -l.,

, 3. The object of the insistence on insurance under Chapter XI of the
Act thus seems to be to compulsorily cover the liability relating to their
person or properties ~f third parties and in respect of employees of the insured
ef!lployer the liability that may arise under the. Workmen's Compensation Act,
G 1923 in respect of the driver, the conductor and the one carried in a goods
vehicle carrying goods. On this plain understanding of Section 147, it is
difficult to hold that the insurance company, in the case on hand, was liable to .,,.
indemnify the owner, the employer Company, the insured, in respect of the
death of one of its employees, who according to the claim, was not the driver.
H Be it noted that the liability is not one arising under the Workmen's
ORJENTALINSURANCECOMPANYLTD. v. MEENA VARJYAL 645
... Compensation Act, 1923 and it is doubtful, on the case put forward by the A
claimant, whether the deceased could be understood as a workman coming
within the Workmen's Compensation Act, 1923. Therefore, on a plain reading
of Section 147 of the Act, it appears to be clear that the insurance company
is not liable to indemnify the insured in the case on hand.
(Para 11) (653-B-D]
B
4. The argument that the proviso does not keep out employees from
coverage though the claims under the Workmen's Compensation Act are
specified cannot be accepted on the plain language of the proviso. The proviso
enacts an exemption and carves out an exception to that exemption. The
suggested interpretation would result ignoring the effect of the language
employed by the proviso, exempting the owner from covering his employees c
under insurance except in cases where the liability in respect of them is, one
arising under the Workmen's Compensation Act. Obviously, as determined
by that Tribunal. (Para 12) [653-E]

5. On the facts of this case, there is no finding that 'MH', another
employee of the owner was driving the vehicle. Even if he was, there is no D
finding of his negligence. The victim was the Regional Manager of the
Company that owned the car. He was using the car given to him by the Company
... for use. Whether he is treated as the owner of the vehicle or as an employee,
he is not covered by the insurance policy taken in terms of the Act-withou.t
any special contract-since there is no award under the Workmen's
Compensation Act is required to be satisfied by the insurer. In these E
circumstances, it is held that the appellant-Insurance Company is not liable
to indemnify the insured and is also not obliged to satisfy the award of the
Tribunal/Court and then have recourse to the insured, the owner of the vehicle.
The High C mrt was in error in modifying the award of the Tribunal in that
regard. [Para 26) (660-E-G]
F
,, National Insurance Co. Ltd. v. Laxmi Narain Dhut, (2007] 4 SCALE
36, relied on.

National Insurance Co. Ltd. v. Swaran Singh [2004] 3 SCC 297, Malla
Prakasarao v. Malla Janaki [2004] 3 SCC 343, New India Assurance Co.
Ltd. v. Asha Rani, [2003] 2 SCC 223. United India Insurance Co. Ltd. v. Tilak G
Singh, [2006] 4 SCC 404; New India Assurance Co. v. Satpal Singh, [2000]
1 SCC 237, Cooper v. Motor Insurers' Bureau, (1985) 1 QBD 575, New India

.. ,/
Assurance Co. Ltd. v. Ru/a, (2000) 3 SCC 195, New India Assurance Co. v.
Kam/a, [2001] 4 SCC, Minu B. Mehta v. Balkrishna Ramchandra Nayan,
[1977] 2 SCR 886, Gujarat State Road Transport Corporation v. Ramanbhai
H
+-'·
646 SUPREME COURT REPORTS [2007] 4 S.C.R.

A Prabhatbhai, (1987) 3 SCC 234 and Pushpabai Purshottam Udeshi v. Mis
Ranjit Ginning & Pressing Co. (P) Ltd. (1977) 3 SCR 372, referred to. " •
Halsbury's Laws ofEngland, Fourth Edition, Para 761, referred to

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5825 of2006.
B From the Final Judgment and Order dated 27.08.2004 of the High Court
of Judicature of Uttaranchal at Nainital in AO No. 239 of 2004.

P.K. Seth and Manjeet Chawla for the Appellant. >..,

K. Mehta, Manish Kumar, Amit Kumar, Nityanand Yadav, Faisal
c Amin,Jayant
Rakesh K. Sharma, Gauri Karuna Das, Anu Gupta, Sanjay Mani Tripathi
and Kamal Kant Tripathi for the Respondents.

The Judgment of the Court was delivered by

P.K. BALASUBRAMANYAN, J. l. One Suresh Chandra Variyal was
D employed as a Reg.ional Manager in Mis Apace Savings and Mutual Benefits
(India) Ltd., the owner of a motor vehicle, respondent No.3 herein. Variyal was
provided with a car by the employer. The vehicle was insured with the J..,

appellant company in terms of the Motor Vehicles Act, 1988. There was no
special contract. On 14.6.1999, the vehicle met with an accident. Suresh
E Chandra Variyal, died. The widow and daughter Of Suresh Chandra Variyal,
filed a claim petition under Section 166 of the Motor Vehicles Act, 1988, before
the Motor Accidents Claims Tribunal, Nainital. Therein, they claimed
compensation to the tune of Rs.15 lakhs. According to the claim, the deceased
was driving along with his 'companion' Mahmood Hasan after completing his
work for the employer. At about 11.30 pm the car collided with a tree due to
F the rash and negligent driving of the driver. The car was being driven by
Mahmood Hasan at the time of the accident. The deceased was an occupant -l..

of the car. The car was being used for the business and for the benefit of the
employer of the deceased at the time of the accident. The deceased was
earning Rs. 9,000/· per month. He had a bright career ahead. Mahmood Hasan
G had lodged a first information report the same day (reiterated in the counter
affidavit filed in this Court) giving wrong facts to escape from any prosecution.
It was not specified in the application as to what was the wrong fact or what
were the wrong facts mentioned in the complaint filed by Mahmood Hasan.
The claimants as dependants were entitled to compensation as claimed.
..
H 2. The claim was filed against the employer, the owner of the motor
'
-~
!
ORIENTALINSURANCECOMPANYLTD. v. MEENA VARIYAL[BALASUBRAMANYAN,J.] 647

vehicle and against the insurance company. Mahmood Hasan, who was A
allegedly driving the car and that too negligently, at the time of the accident,
was not impleaded. No reason was given in the claim for his not being
impleaded. The owner of the car, the company that employed the deceased,
did not appear and did not file any written statement. The insurance company
filed a written statement. It pleaded that the driver and the owner of the
vehicle have colluded and the alleged driver of the car had not been impleaded. B
As a matter of fact, the deceased himself was driving the vehicle. Hence he
was not entitled to claim any compensation since the accident occurred on
account of his own negligence. The insurance company had no liability. The
compensation claimed was exorbitant and the claim was liable to be dismissed.

3. In support of the claim, the wife of Variyal was examined as P.W. l and C
another person, who was allegedly travelling in the car when it met with the
accident, was examined as P.W. 2. P.W. 1 asserted that the vehicle was being
driven at the time of the accident by Mahmood Hasan and her husband was
travelling in the car. This was sought to be supported by P. W. 2 who claimed
that he was also travelling in the same car at the time of the accident. He gave D
evidence that Variyal was employed as a Regional Manager with the owner
of the car, Mis Apace Savings and Mutual Benefits (India) Ltd. P.W. 2 also
gave evidence that sometimes Variyal himself used to drive the vehicle but
Mahmood Hasan usually drove the car. Mahmood Hasan had lodged a First
Information Report at 4.40 p.m. on the day of the accident. Therein, Mahmood
Hasan had stated that Variyal was driving the car at the time of the accident. E

4. No independent evidence was adduced to show what exactly was the
salary that was being earned by Variyal from his employer. The employer was
a limited liability company and in the normal course, should have been
maintaining the relevant records showing the salary paid to a Regional Manager F
like Variyal. No attempt was made to get them produced. The widow contented
herself by asserting in her oral evidence that Variyal was earning a salary of
Rs. 9,000/- per month. The Motor Accident Claims Tribunal held that the
evidence disclosed that Variyal was driving the vehicle since what was more
acceptable was the first version regarding the accident and not the oral
assertions of P.Ws. land 2 in support of the claim. It also held that Variyal G
was not holding a valid driving licence when he drove the car. Purporting to
accept the interested, unsupported version of P.W. l that the income of her
husband was Rs. 9,000/- per month, the Tribunal calculated the dependency
at Rs. 6,000/- per month and applying the multiplier of 10, arrived at the
compensation payable as Rs. 7,20,000/-. The Tribunal held that the claimants H

'·-
I

648 SUPREME COURT REPORTS [2007] 4 S.C.R.
-t
A were entitled to receive th.e amount from the owner of the vehicle, the employer,
but the insurance company was not liable, since the vehicle was being driven
-·
by the deceased himself who was an employee of the owner of the car and
the policy of insurance did not cover such an employ.;.ee. Thus, the claim was
ordered directing the owner of the car to pay ~he claimant a sum of Rs.
7,20,000/- with interest thereon.
B
5. The claimants filed an appeal before the High Court. The insurance
company, which. had been exonerated by the Tribu~al~ alone resisted the
appeal. The owner of the· vehicle kept away. The claimants, the appellants
before the High Court, contended that the Tribunal was in error in finding that "'
the insurance company was not liable and in not granting them a decree
c against the insurance company. The insurance company pointed out that the
deceased was not a third party covered by the insurance policy, was an
employee of the owner of the vehicle and was not covered by the policy. Even
otherw.ise, he was driving the car himself as found by the Tribunal and since
the accident was caused. by his own negligence, the insurance company was I-
D not liable.

6. The only argument attempt~d on behalt of the claimants, the appellants
in the High Court, was that in the light of the decision of this Court in
"
National Jnsuranc~ Co. Ltd. v. Swaran Singh & Ors., [2004] 3 S.C.C. 297,'the
insurance comp~y was liable to pay the amount awarded even if there was
E .breach of a policy condition and if there was a dispute between the insured
and the insurer, it had to be fought elsewhere and they cannot be denied the
. benefit of the insurance. The insurance company pointed out that the ratio f=
.in Swaran Singh (supra) had no application to the case and in the face of
the finding that the deceased was himself driving the vehicle belong!ng to his
employer, the insurance company had no liability. There was no special
F
contract and since it was only a policy in terms of the Motor Vehicles Act,
,,_
the insurance company cannot be asked to pay the amount awarded which ......
was even otherwise not supported by any admissible or acceptable evidence.
The High Court, stating that they had in so many cases held, in view of the
ratio in Swaran Singh (supra), that it is not open to the insurance company
G to avoid liability under the Act, simply directed the insurance company to pay
the amount as orde~ed by the Tribunal, leaving it to the insurance company ..:,.....
to take recourse to recover the amount from the insured in accordance with
the directions of this Court in Swaran Sir.gh (supn).
~
,_•
7. We must say that one would have expected the High Court to apply
H
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ORIENTALINSURANCECOMPANYLTD.v.MEENAVARIYAL[BALASUBRAMANYAN,J.J 649
~

its mind to the question arising, in a better manner and to specifically answer A
the question that arose for decision in the case. For instance, we may observe
that it has not reversed the finding of the Tribunal that the qeceased was
himself driving the vehicle. Then, what was the position? The position was
that a Regional Manager of the Company, which was owner of the vehicle,
was himself driving the vehicle of the Company and during the course of it,
he died in an accident, whether the accident occurred due to his negligence B
or otherwise. It appears to us that mere going by some decision or other,
without appreciating the facts in a given case, in the light of the law, if any,
declared by this court, does not lead a court or Tribunal to a correct conclusion
in the nonnal course.

8. On behalf of the insurance company, the appellant, it is contended c
that the policy was only one in terms of the Motor Vehicles Act, 1988 and
the policy did not cover the employee of the owner, the insured, who was
driving the vehicle while attending to the business of the employer company.
The deceased was not "a third party" in terms of the policy or in terms of
the Act. The Act did not provide for statutory coverage of such a person. D
This would be the position even if the deceased was only travelling in the
car in his capacity as a Regional Manager of the owner Company and the
vehicle was being driven by Mahmood Hasan as claimed. Since the High
Court has not interfered with the finding of the Tribunal that the deceased
was himself driving the car at the time of the accident and that he did not
have a valid licence to drive a vehicle, there was absolutely no question of E
the insurance company being made liable under any principle of law. It was
also submitted that without impleading Mahmood Hasan who was allegedly
driving the car, the claim ought not to have been entertained, especially since
there was controversy as to whether the car was being driven by Mahmood
Hasan or by the deceased as sought to be projected by the claimants. The F
claimants were obliged to prove the negligence of the driver and the principles
of general law in that regard, have not been jettisoned by the Motor Vehicles
Act. On the other hand, the law expounded by this Court earlier had been
accepted by the Legislature by enacting Section l 63A of the Act. Thus, this
was a case where High Court grossly erred in directing the insurance company
to pay the compensation decreed by the Tribunal, which in itself was a figure G
unsupported by any legal evidence and in purporting to apply the ratio of
Swaran Singh (supra) to compel the insurance company to pay the amount
_, awarded and then to have recourse to the insured. The learned counsel for
the claimant - respondent on the other hand submitted that the vehicle, at the
relevant time, was being driven by Mahmood Hasan and the Tribunal was
H
(

t
650 SUPREME COURT REPORTS (2007) 4 S.C.R.

A wrong in entering a finding that the deceased himself was driving the vehicle
in the light of the evidence of P.Ws. I and 2. The burden was on the insurance
company, on the scheme of the Act, to show that it had no liability and in
that context to show that the deceased himself was driving the vehicle and
not Mahmood Hasan. Learned counsel further submitted that this Court in
B Swaran Singh (supra) has laid down the law and that principle applies in all
cases involving an insurance company and a policy issued by the Company
in terms of the Act and whenever there is an award against the insured, the
insurer is obliged to satisfy the award and have recourse to the insured even
if the insurance company was really not liable under the policy. He therefore
submitted that the High Court was justified in directing the insurance company
C to pay the compensation. He urged that Chapter XI of the Act contained
beneficent provisions to protect the victims and the relevant sections should
not be construed restrictively.

9. Before we proceed to consider the main aspect arising for decision
in this Appeal, we would like to make certain general observations. It may be
D true that the Motor Vehicles Act, insofar as it relates to claims for compensation
arising out of accidents, is a beneficent piece of legislation. It may also be
true that subject to the rules made in that behalf, the Tribunal may follow a
summary procedure in dealing with a claim. That does not mean that a
Tribunal approached with a claim for compensation under the Act should
E ignore all basic principles of law in determining the claim for compensation.
Ordinarily, a contract of insurance is a contract of indemnity. When a car
belonging to an owner is insured with the insurance company and it is being
driven by a driver employed by the insured, when it meets with an accident,
the primary liability under law for payment of compensation is that of the
driver. Once the driver is liable, the owner of the vehicle becomes vicariously
F liable for payment of compensation. It is this vicarious liability of the owner
that is indemnified by the insurance company. A third party for whose benefit
the insurance is taken, is therefore entitled to show, when he moves under
Section 166 of the Motor Vehicles Act, that the driver was negligent in driving
the vehicle resulting in' the accident; that the owner was vicariously liable and
that the insurance company was bound to indemnify the owner and
G consequently, satisfy the award made. Therefore, under general principles,
one would expect the driver to be impleaded before an adjudication is claimed
under Section 166 of the Act as to whether a claimant before the Tribunal is
entitled to compensation for an accident that has occurred due to alleged
negligence of the driver. Why should not a Tribunal insist on the driver of
H the vehicle being impleaded when a claim is being filed? As we have noticed,
ORIENTALINSURANCECOMPANYLTD. v. MEENA VARIYAL[BALASUBRAMANYAN,J.] 651

the relevant provisions of the Act are not intended to jettison all principles A
of law relating to a claim for compensation which i~ still based on a tortious
liability. The Tribunal ought to have, in the case on hand, directed the
claimant to implead Mahmood Hasan who was allegedly driving the vehicle
at the time of the accident. Here, there was also controversy whether it was
Mahmood Hasan who was driving the vehicle or.it was the deceased himself.
Surely, such a question could have been decided only in the presence of B
Mahmood Hasan who would have been principally liable for any compensation
that might be decreed in case he was driving the vehicle. Secondly, the
deceased was employed in a limited company. It was necessary for the
claimants to establish what was the monthly income and what was the
dependency on the basis of which the compensation could be adjudged as C
payable. Should not any Tribunal trained in law ask the claimants to produce
evidence in support of the monthly salary or income earned by the deceased
from his employer Company? Is there anything in the Motor Vehicles Act
which stands in the way of the Tribunal asking for the best evidence, acceptable
evidence? We think not. Here again, the position that the Motor Vehicles Act
vis-a-vis claim for compensation arising out of an accident is a beneficent D
piece of legislation, cannot lead a Tribunal trained in law to forget all basic
principles of establishing liability and establishing. the quantum of
compensation payable. The Tribunal, in this case, has chosen to merely go
by the oral evidence of the widow when without any difficulty the claimants
could have got the employer company to produce the relevant documents to E
show the income that was being derived by the deceased from his employment.
Of course, in this case, the above two aspects become relevant only if we find
the insurance company liable. If we find that only the owner of the vehicle,
the employer of th·e deceased was liable, there will be no ·occasion to further
consider these aspects since the owner has acquiesced in the award passed
by the Tribunal against it. F
IO. Chapter XI of the Act bears a heading, "Insurance of Motor Vehicles
against third party risks". The definition of "third party" is an inclusive one
since Section l45(g) only indicates that "third party" includes the Government.
It is Section 146 that makes it obligatory for an insurance to be taken out
before a motor vehicle could be used on the road. The heading of that Section G
itself is "Necessity for insurance against third party risk". No doubt, the
marginal heading may not be conclusive. It is Section 147 that sets out the
requirement of policies and limits ofliability. It is provided therein that in order
to comply with the requirements of Chapter XI of the Act, a policy of
insurance must be a policy which is issued by an authorised insurer; or which H
652 SUPREME COURT REPORTS [2007] 4 S.C:R.

A insures the person or classes of persons specified i,n the policy to the extent
+
specified in sub-section (2) against any liability whfoh may be incurred by the
owner in respect of the death of or bod~ly injury or d~Age to any property
of a third party caused _by or arising otit'of the use o[the vehicle in,a:,ptiblic
place. With effect from· 14.11.1994, injury to the owner of''guods Cir his
authorised representative carried in the vehicle was also added;::TKe policy
B had to cover death of or bodily injury to any passenger 'of'ai~u@Jii.c.service
vehicle caused by or arising out of the use of the vehi~le jn a publi.c-place.
Then, as per the proviso, the policy shall not be required to. c6ver 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 res'j:iect of bodily
injury sustained by such an employee' arising out of'and :in the. course of his
C employment, other than a liability arisfog under the Workmen's-c<inipensation
Act, 1923 in respect of the death of, or bodily injury to, an enipl~yee engaged
in driving the vehicle, or who is a conductor, if it is a public service vehicle
or an employee being carried in a goods vehicle or to cover any contractual
liability. Sub-section (2) only sets down the limits of the policy. As we
D understand Section 147 (1) of the Act, an insurance policy thereunder need
not cover the liability in respect of death or injury arising out of and in the
course of the employment of an employee of the person insured by the policy,
unless it be a liability arising under the Workmen's Compensation Act, 1923
in respect of a driver, also the conductor, in the case of a public service
vehicle, and the one carried in the vehicle as owner of the goods or his
E representative, if it is a goods
;,f.J.'.;.
vehicle.;
.
It is provided that the policy also shall
not be required to cover any corttiactual liability. Uninfluenced by authorities,
we find no difficulty in und~rstanding this provision as one providing that
the policy must insure an owner agaiitst·any ..liability to a third party caused
by or arising out of the use of the vehicle in'-a:'.pti6nJ~lace, and against death
F or bodily injury to any passenger of a public servic61 ~ehiCfo''caused by or
arising out of the use of vehicle in a public plac;e. The proviso cl~rifies that
the policy shall not be required to i:over an enip~oye~ of the instrelf -;esp~ct .
m .....
of bodily injury or death arising out of and in. !he course of his employment:
Then, an exception is provided to the last forgoing to the effect that the
policy must cover a liability arising under the \Yor,kmen's Compensation Act,
G 1923 in respect of the death or bodily injllty-~o·a~~emJ.lloyee who is engaged
in driving the vehicle or who serves as a c'onciuctor in '.i public service vehicle ·
or an employee who travels in the vehi~le ~of iii~ employer carrying good~. if
it is a goods carriage. Section 149(1), whicl(~ast~ an obligation on an ins~er
to satisfy an award, also speaks only of:award i~ respect of such liability as ...
H is required to be covered by a policy under clause (h) of sub-section (1) of
'
-t

ORIENTALINSURANCECOMPANYLTD. v. MEENAVARIYAL[BALASUBRAMANYAN,J.) 653

Section 147, (being a liability covered by the terms of the policy). This A
provision cannot therefore be used to enlarge the liability if it does not exist
in tenns of Section 147 of the Act.

11. The object of the insistence on insurance under Chapter XI of the
Act thus seems to be to compulsorily cover the liability relating to their
person or properties of third parties and in respect of employees of the B.
insured employer, the liability that may arise under the Workmen's
Compensation Act, 1923 in respect of the driver, the conductor and the one
carried in a goods vehicle carrying goods. On this plain understanding of
Section 147, we find it difficulty to hold that the insurance company, in the
case on hand, was liable to indemnify the owner, the employer Company, the C
insured, in respect of the death of one of its employees, who according to
the claim, was not the driver. Be it noted that the liability is not one arising
under the Workmen's Compensation Act, 1923 and it is_ doubtful, on the case
put forward by the claimant, whether the deceased could be understood as
a workman coming within the Workmen's Compensation Act, 1923. Therefore,
on a plain reading of Section 147 of the Act, it appears to be clear that the D
insurance company is not liable to indemnify the insured in the case on hand.

12. The argument that the proviso does not keep out employees from
> coverage though the claims under the Workmen's Compensation Act are
specified, cannot be accepted on the plain language of the proviso. The
proviso enacts an exemption and carves out an exception to that exemption. E
The suggested interpretation would result in ignoring the effect of the language
employed by the proviso, exempting the owner from covering his employees
under insurance except in cases where the liability in respect of them is, one
arising under the Workmen's Compensation Act. Obviously, as determined by
that Tribunal: · ·
F
13. We shall now examine the decision in Swaran Singh (supra) on
which practically the whole of the arguments on behalf of the claimants was
rested. On examining the facts, it is found that, that was a case which related
to a claim by a third party. In claims by a third party, there cannot be much
doubt that once the liability of the owner is found, the insurance company G
is liable to indemnify the owner, subject of course, to any defence that may
7 be available to it under Section 149(2) of the Act. In a case where the liability
• is satisfied by the insurance company in the first instance, it may have
recourse to the owner in respect of a claim available in that behalf. Swaran
Singh (supra) was a case where the insurance company raised a defence that
H
I

t
654 SUPREME COURT REPORTS (2007] 4 S.C.R.

A the owner had pennitted the vehicle to be driven by a driver who really had
no licence and the driving licence produced by him was a fake one. Their
Lordships discussed the position and held ultimately that a defence under
Section 149(2)(a)(ii) of the Act was available to an insurer when a claim is filed
either under Section 163A or under Section 166 of the Act. The breach of a
policy condition has to be proved to have been committed by the insured for
B avoiding liability by the insurer. Mere absence of or production of fake or
invalid driving licence 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 party. The insurance company to avoid liability,
must not only establish the available defence raised in the concerned
C proceeding but must also establish breach on the part of the owner of the
vehicle for wi1ich the burden of proof would rest with the insurance company.
Whether such a burden had been discharged, would depend upon the facts
and circumstances of each case. Even wh~n the insurer, is able to prove
breach on the part of the insured concerning a policy condition, the insurer
would not be allowed to avoid its liability towards the insured unless the said
D breach of condition is so fundamental as to be found to have contributed to
the ·cause of the accident. The question whether the owner has taken '
reasonable care to find out whether the driving licence produced by the driver
was fake or not, will have to be detennined in each case. If the vehicle at the
time of the accident was driven by a person having a learner's licence, the
E insurance company would be liable to satisfy the award. The amount that may
be awarded to the insurance company against the insurer in an appropriate
case could be recovered even by way of the enforcement of the very award.
The insurance company had to satisfy the claim of the insured in cases where
a defence under Section 149(2) has been established by the Company in tenns
of a fake licence or the learner's licence. Their Lordships distinguished Malla
F Prakasarao v. Malla Janaki & Ors., [2004] 3 S.C.C. 343 wherein it was held
that the insurance company had no liability to pay any compensation where
an accident resulted by a vehicle being driven by a driver without a driving
licence. In other words, a distinction between a case of no licence and a case
of licence which turned out to be fake or deficient was drawn and the liability
G was held to stand on different footings.
14. It is difficult to apply the ratio of this decision to a case. not
involving a third party. The whole protection provided by Chapter XI of the
Act is against third party risk. Therefore, in a case where a person is not a
third party within the meaning of the Act, the insurance company cannot be
H m.ade automatically liable merely by resorting to the Swaran Singh (supra)
+
ORIENTAL INSURANCE COMPANY LTD. l'. MEENA VARIYAL (BALASUBRAMANYAN, J.] 655

ratio. This appears to be the position. This position was expounded recently A
by this Court in National Insurance Co. Ltd. v. Laxmi Narain Dhut, (2007)
4 SCALE 36. This Court after referring to Swaran Sin[Jh (supra) and discussing
the law summed up the position thus:

"In view of the above analysis the following situations emerge:

l. The decision in Swaran Singh 's case (supra) has no application
IB
to cases other than third party risks.

2. Where originally the licence was a fake one, renewal cannot cure
the inherent fatality.

3. In case of third party risks the insurer has to indemnify the C
amount and if so advised, to recover the same from the insured.

4. The concept of purposive interpretation has no application to
cases relatable to Section 149 of the Act.

The High Courts/Commissions shall now consider the mater afresh in D
the light of the position in law as delineated above."

We are in respectful agreement with the above view.

- 15. In New India Assurance Co. Ltd. v. Asha Rani and Ors., [2003] 2
S.C.C 223 this Court had occasion to consider the scope of the expression
"any person" occurring in Section 147 of the Act. This Court held: E
"that the meaning of the words "any person" must also be attributed
having regard to the context in which they have been used i.e. " a
third party". Keeping in view the provisions of the 1988 Act we are
of the opinion that as the provisions thereof did not enjoin any
statutory liability on the owner of a vehicle to get his vehicle insured
F
for any passenger travelling in a goods vehicle, the insurers would
not be liable therefor."

In other words, this Court clearly held that the apparently wide words "any
person" are qualified by the setting in which they occur and that "any G
person" is to be understood as a third party.

16. In United India Insurance Co. Ltd., Shim/av. Tilak Singh & Ors.,
7
f1006l 4 S.C.C. 404, this Court made a survey of the prior decisions and
discountenanced an attempt to confine the ratio of Asha Rani (supra). This
Court stated that although the observations in Asha Rani were in connection 1H
656 SUPREME COURT REPORTS [2007] 4 S.C.R.

A with carrying passengers in a goods vehicle, the same would apply with equal
force also to gratuitous passengers in any other vehicle. This Court also
noticed that the decision to the contrary in New India Assurance Co. v.
Satpal Singh, [2000] l S.C.C. 237 was specifically overruled in Asha Rani's
case (supra). In other words, it was re-emphasised that a policy in terms of
B Section 147 of the Act is not intended to cover persons other than third
parties.

17. The Court of Appeal in Cooper v. Motor Insurers' Bureau, (1985)
1 Queen's Bench Division 575) considered the interpretation of Section 143
and 145 of the Road Traffic Act, 1972 corresponding to Section 146 and
C Section 147 of the Act. The Court of Appeal held:

"that Section 143(1) of the Act of the 1972 imposed an obligation on
the owner to insure against the risk of injury or death to third parties
resulting from the use by him or any other person of his vehicle on
the road; that "third party risks" in section 143(1) did not include risks
D to the driver of the vehicle at the relevant time so that "any person"
in section l 45(3)(a) was therefore restricted to persons other than the
driver of the vehicle and its owner; and that, accordingly, since the.
liability of the owner to the plaintiff was not one that was required to
be covered by a policy of insurance by the Act of 1972, the Motor
Insurers' Bureau were not liable under the terms of the agreement to
E compensate the plaintiff in the sum of the unsatisfied judgment."

18. In Halsbury's Laws of England, Fourth Edition, in paragraph 761, the
position as regards 'employees' is stated as follows:

"A policy is not required to cover liability in respect of the death of
F or bodily injury sustained by a person in the employment of a person
insured by the policy where the death or injury arises out of and in
the course of that employment. This exclusion is framed in the language
of the Workmen's Compensation Acts and is presumably intended to
reflect the well-established distinction in the insurance world between
G public liability risks and employers' liability risks. The distinctions
w~ich are involved are very finely drawn."

19. In New India Assurance Co. Ltd. v. Ru/a & Ors., [2000] 3 S.C.C. 195,
this Court postulated that the contract of insurance in respect of motor
vehicles has to be construed in the light of Sections 146(1),147(5) and 149(1)
H of the Motor Vehicles Act, 1988. The manifest object of Section 146(1), which
ORIENTALINSURANCECOMPANYLTD. '" MEENA VARIYAL[BALASUBRAMANYAN,J.] 657

contains a prohibition on the use of motor vehicles without an insurance A
policy having been taken in accordance with Chapter XI of the Act is to
ensure that the third party, who suffers injuries due to the use of the motor
vehicle, may be able to get damages from the owner of the vehicle and
recoverability of the damages may not depend on the financial condition or
solvency of the driver of the vehicle who had caused the injuries. Thus, any
contract of insurance under Chapter XI of the Motor Vehicles Act, 1988 B
contemplates a third party who is not a signatory or a party to the contract
of insurance but is, nevertheless, protected by such contract. That this was
the object was reiterated in New India Assurance Co. Shim/a v. Kam/a &
Ors., [2001] 4 S.C.C. 342, wherein it was stated that the raison d'etre for the
legislature making it prohibitory for motor vehicles being used in public C
places without covering third-party risks by a policy of insurance is to protect
the members of the community who become sufferers on account of accidents
arising from the use of motor vehicles. The object of Chapter XI has thus
always been recognised as one intended to protect third parties as understood
in the context of the Act unless of course there is a special contract in respect
of protection to others. L>
20. We are thus satisfied that based on the ratio in Swaran Singh
(supra), the insurance company cannot be made liable in the case on hand
to pay the compensation first and to recover it from the insured, the owner
of the vehicle. The deceased being an employee not covered by the Workmen's
Compensation Act, of the insured, the owner of the vehicle, has not to be E
covered compulsorily under the Act and only by entering into of a special
contract by the insured with the insurer could such a person be brought
under coverage. There is no case that there is any special contract in that
behalf in this case.

21. It was argued by learned counsel for the appellant that since on the F
finding that the deceased was himself driving the vehicle at the time of the
accident, the accident arose due to the negligence of the deceased himself
and hence the insurer is not liable for the compensation. Even if the case of
the claimant that the car was driven by Mahmood Hasan was true, then also,
the claimant had to establish the negligence of the driver before the insured G
could be asked to indemnify the insured. The decision in Minu B. Mehta &
Anr. v. Balkrishna Ramchandra Nayan & Anr., [1977] 2 S.C.R 886, of a three
Judge. Bench of this Court was relied on in support.
22. In that decision, this Court considered the question whether in a
claim for compensation under the Motor Vehicles Act, 1939, proof of negligence lf
+\
658 SUPREME COURT REPORTS [2007) 4 S.C.R.

A was essential to support a claim for compensation. On the facts in that case,
their Lordships found that the appeal was liable to be dismissed subject to
certain directions issued therein. But their Lordships, in the light of the fact
that the High Court had discussed the law on the question and it was of some
importance, felt that it was necessary to state the position in law. Noticing
B that the liability of the owner of the car to compensate the victim in a car
accident due to negligent driving of his servant is based on the law of tort,
the court discussed the scheme of the Act of 1939 and the law on the
question. Regarding the view of the High Court that it was not necessary to
prove negligence, the court held:

c "The reasoning of the two learned judges is unacceptable as it is
opposed to basic principles of the owner's liability for negligence of
his servant and is based on a complete misreading of the provisions
of Chapter VIII of the Act. The High Court's zeal for what it considered
to be protection of public good has misled it into adopting a course
which is nothing short of legislation."
D
Their Lordships also noticed that proof of negligence remained the lynch pin
to recover compensation. Their Lordships concluded by saying,

"We conclude by stating that the view of the learned Judges of the
High Court has no support in law and hold. that proof of negligence
E is necessary before the owner or the insurance company could be
held to be liable for the payment of compensation in a motor accident
claim case."

23. Learned counsel for the respondent contended that there was no
obligation on the claimant to prove negligence on the part of the driver.
F Learned counsel relied on Gujarat State Road Transport Corporation,
Ahmedabadv. Ramanbhai Prabhatbhai and Anr., [1987] 3 SCC 234 in support.
In that decision, this Court clarified that the observations in Minu B. Mehta 's
case (supra) are in the nature of obiter dicta. But, this Court only proceeded
to notice that departures had been made from the law of strict liability and
G the Fatal Accidents Act by introduct~on of Chapter VIIA of the 1939 A~t and
the introduction of Section 92A providing for compensation and the expansion
of the provision as to who could make a claim, noticing that the application
under Section I I OA of the Act had to be made on behalf of or for the benefit
of all the legal representatives of the deceased. This Court has not stated that
on a claim based on negligence there is no obligation to establish negligence.
H
ORIENT ALINSURANCECOMPANYLTD. v. MEENA VARIYAL (BALASUBRAMANYAN,J.] 659
-"'
This Court was dealing with no-fault liability and the departure made from the .,-\
Fatal Accidents Act and the theory of strict liability in the scheme of the Act
of 1939 as amended. This Court did not have the occasion to construe a
provision like Section 163A of the Act of 1988 providing for compensation
without proof of negligence in contradistinction to Section 166 of the Act. We
may notice that Minu B. Mehta 's case was decided by three learned Judges
and the Gujarat State Road Transport Corporation case was decided only by B
two learned Judges. An obiter dictum of this Court may be binding only on
the High Courts in the absence of a direct pronouncement on that question
elsewhere by this Court. But as far as this Court is concerned, though not
binding, it does have clear persuasive authority. On a careful understanding
of the decision in Gujarat State Road Transport Corporation (supra) we c
cannot understand it as having held that in all claims under the Act proof of
negligence as the basis of a claim is jettisoned by the scheme of the .Act. In
the context of Sections 166 and l 63A of the Act of 1988, we are persuaded
to think that the so called obiter observations in Minu B. Mehta 's case (supra)
govern a claim under Section 166 of the Act and they are inapplicable only
when a claim is made under Section 163A of the Act. Obviously, it is for the b
claimant to choose under which provision he should approach the Tribunal
and if he chooses to approach the Tribunal under Section 166 of the Act, we
cannot see why the principle stated in Minu B. Mehta's case should not apply
to him. We are, therefore, not in a position to accept the argument of learned
counsel for the respondents that the observations in Minu B. Mehta's case E
deserve to be ignored.

24. We think that the law laid down in Minu B. Mehta & Anr. v.
Balkrishna Ramchandra Nayan & Anr. (supra) was accepted by the legislature
while enacting the Motor Vehicles Act, 1988 by introducing Section 163A of
,l
the Act providing for payment of compensation notwithstanding anything f
contained in the Act or in any other law for the time being in force that the
owner of a motor vehicle or the authorised insurer shall be liable to pay in
the case of death or permanent disablement due to accident arising out of the
use of the motor vehicle, compensation, as indicated in the Second Schedule,
to the legal heirs or the victim, as the case may be, and in a claim made under
sub-section (I) of Section l 63A of the Act, the claimant shall not be required G
to plead or establish that the death or permanent disablement in respect of
. which the claim has been made was due to any wrongful act or neglect or
default of the owner of the vehicle concerned. Therefore, the victim of an
accident or his dependants have an option either to proceed under Section
166 of the Act or under Section l 63A of the Act. Once they approach the H
660 SUPREME COURT REPORTS [2007] 4 S.C.R.

A Tribunal under Section 166 of the Act, they have necessarily to take upon
themselves the burden of establishing the negligence of the driver or owner
of the vehicle concerned. But if they proceed under Section 163A of the Act,
the compensation will be awarded in terms of the Schedule without calling
upon the victim or his dependants to establish any negligence or, default on
the part of the owner of the vehicle or the driver of the vehicle.
B
25. In Pushpabai Purshottam Udeshi & Ors. }, .. Mis Rar.jit Ginning &
Pressing Co. (P) Ltd. & Anr., [1977] 3 S.C.R. 372~ ·~of the learned judges
who constituted the Bench in Minu B. Mehta (supra) held that when a car
is driven by the owner's employee on owner's business, the normal rule was
C that it was for the claimant for compensation to prove negligence. When the
Manager of the owner while driving the car on the business of the owner took
in a passenger, it would be taken that he had the authority to do so, considering
his position unless otherwise shown. If due to his negligent driving an
accident occurred and the passenger died, the owner would be liable for
compensation. The court noticed that the modem trend was to make the
D master liable for acts of his servant which may not fall within the expression
"in the course of his employment" as formerly understood. With respect, we
think that the extensions to the principle of liability has been rightly indicated
in this decision.

26. On the facts of this case, there is no finding that Mahmood Hasan,
E another employee of the owner was driving the vehicle. Even if he was, there
is no finding of his negligence. The victim was the Regional Manager of the
Company that owned the car. He was using the car given to him by the
Company for .use. Whether he is treated as the owner of the vehicle or as an
employee, he is not covered by the insurance policy taken in terms of the Act
F -without any special contract- since there is no award under the Workmen's
Compensation Act that is required to be satisfied by the insurer. In these
circumstances, we hold that the appellant Insurance Company is not Hable to
indemnify the insured and is also not obliged to satisfy the award of the
Tribunal/Court and then have recourse to the insured, the owner of the
vehicle. The High Court was in error in modifying the award of the tribunal
G in that regard.
27. We therefore allow the appeal and reversing the decision of the High
Court, restore the award of the Tribunal exonerating the appellant from liability.
We make no order as to costs.

H v.s.s. Appeal allowed.