Holding

The insurer is liable to pay compensation under the Motor Vehicles Act for third‑party risk, but may recover the amount from the vehicle owners without a separate execution petition.

Summary

A labourer travelling on the mud‑guard of a tractor owned by three brothers was killed when the driver, the son of one owner, lost control of the vehicle. The driver had no licence and the tractor was being used for hire, contrary to the terms of the compulsory insurance policy. The heirs of the deceased filed a claim before the Motor Accident Claims Tribunal, which awarded Rs.2,04,000 compensation and held the insurer liable for third‑party risk, while allowing the insurer to recover the amount from the owners. The insurer appealed, contending that the deceased was not a "third party" under Section 147 of the Motor Vehicles Act, 1988, and that the breach of licence and use conditions exempted it from liability under Section 149(2). The Supreme Court affirmed that the insurer's liability to indemnify for third‑party risk is statutory and cannot be avoided by the cited exceptions, but directed that the insurer may recover the sum from the owners without filing a separate execution petition. Consequently, the appeal was dismissed and the Tribunal's award stood.

Issues considered

The deceased passenger on the mud‑guard is a "third party" within the meaning of Section 147 of the Motor Vehicles Act, 1988.
Whether the insurer is exempt from liability under the exception in sub‑section (2) of Section 149 due to the driver’s lack of licence and the vehicle’s use contrary to the policy.
Whether the insurer must file a separate execution petition to recover the compensation from the vehicle owners.
Whether the Supreme Court should entertain the petition under Article 136 of the Constitution.

Legislation cited

Motor Vehicles Act, 1988s. 147, s. 149(2), s. 166

Subjects

Motor Vehicles Actinsurance liabilitythird partydriver licencecompensationclaims tribunalArticle 136execution petition

Judgment

[2008] 2 S.C.R. 810

A THE NEW INDIA INSURANCE COMPANY
II.
DARSHANA DEVI AND ORS.
(Civil Appeal No. 1232 of 2008)
FEBRUARY 12, 2008
B
[S.B. SINHA AND V. S. SIRPURKAR, JJ.]
~
·,
Motor Vehicles Act, 1988:
ss. 149 & 166 - Motor accident - Liability of insurer -
c Extent of - Tractor driven by son of one of the co-owners - ;
r
. Driver did not have a driving licence - Rash driving - Labourer
travelling on mudguard of the tractor in breach of the contract
of insurance, fell down and died - Claims Tribunal awarded
compensation of Rs. 2 lakhs to heirs of the deceased holding
D that the. insurance company was liable in regard to third party
risk but entitled to recover compensation amount from the
owners - Order upheld by High Court- On appeal, held: Case
not fit for interference under Art. 136 of the Constitution -
Insurance company permitted to recover dues from owners
E by filing application before the Claims Tribunal - No need for
it to file separate execution petition against the owners -
Constitution of India, 1950 - Art. 136.
I
A labourer travelling on mudguard of a tractor loaded ~
with 'Safeda wood' fell down due to rash and negligent
F driving by the driver and died. The driver, who was son of
-f

one of the co-owners of the tractor, did not have a driving
licence.
Heirs of the deceased filed claim petition. Appellant-
G insurance company, in its written statement, contended
that the deceased being a passenger in the said tractor
was not a third party within meaning of s.147 of the Motor
r.-
..
Vehicles Act, 1988; that since he was travelling on the '
mudguard of the tractor in breach of conditions of contract
H . 810
THE NEW INDIA INSURANCE COMPANY v. 811
DARSHANA DEVI AND ORS.

j..
of insurance, the insurance company was not liable to A
reimburse the owner of the vehicle and further that since
driver of the vehicle did not have a driving licence, the
case came within purview of the exeption as regards
liability of the insurer as envisaged under sub-section (2)
of s.149 of the Act. B
The Tribunal held that, at the relevant time, the tractor
.. 'I was not being used for agricultural purposes, for which it
was insured, and that although owners of the tractor in
question had contravened the contract of insurance, the
appellant-insurance company was liable in regard to third c
party risk but was entitled to recover the amount of
compensation from the insurer, namely, the owner of the
offending vehicle. The Tribunal awarded compensation
of Rs.2,04,000/- to heirs of the deceased. Appeal filed by
insurance company was summarily dismissed by the High D
Court.
-;
In appeal to this Court, the contention of the
Appellant-insurance company is that it was not liable at
all in terms of the provisions of the Act.
E
Disposing of the appeal, the Court
HELD: 1.1. The liability of an insurance company to
recompense the owner and driver of a vehicle, who are
primarily responsible for payment of compensation to a
victim or dependent of a deceased arising out of use of a F
motor vehicle, is statutory in nature. [Para 8] [815-B]
1.2. Whereas an owner of a motor vehicle is under a
statutory obligation to get it compulsorily insured, the
defence of an insurance company is limited. [Para 8]
G
[815-C]
-'\ 1.3. The deceased was labourer. The Tribunal has
found that besides being a labourer, he also used to deal
;n Safeda wood. He was t~e owner of the 'Safeda' wood
which was being transported to the market for its sale. H
812 SUPREME COURT REPORTS (2008] 2 S.C.R.

~

A His income was assessed only at Rs.2,400 per month. In ~ ...
this view of the matter, it is not a fit case where this Court
should exerci~e its discretionary jurisdiction under Article
136 of the Constitution. [Paras 12, 13] [821-G, H; 822-A, B]
1.4. It is directed that for the purpose of realization of
B dues, the insurance company need not file a separate
execution petition against the owner. If an application is
filed for realization or recovery of dues before the Tribunal, · ~ ;..
......
the Tribunal shall take appropriate steps in this behalf.
[Para 14] [822-F, G]
·C
Dhanraj v. New India Assurance Co. Ltd. &Anr. (2004) 8
SCC 553; United India Insurance Co. Ltd., Shim/a v. Tilak
Singh & Ors. (2006) 4 SCC 404; National Insurance Company
v. Swaran Singh & Ors. (2007) 3 SCC 297; New Indian
Insurance Company Ltd. v. Vedwati & Ors. (2007) 3 SCALE
D
397; Oriental lnsuirance Co. Ltd. v. Smt. Jhuma Saha & Ors.
AIR (2007) SC 1054; New India Assurance Co. Ltd.. v. Asha
Rani & Ors. (2003) 2 SCC 428; Oriental Insurance Co. Ltd. v.
*
Meena Variyal & Ors. (2007) 5 SCC 428 and Oriental
Insurance Co. Ltd. v. Brij Mohan & Ors. (2007) 7 SCALE 753-
E referred to.

CIVILAPPELLATE JURISDICTION: Civil Appeal No. 1232
of 2008. ~

From the Judgment and final Order dated 13.2.2004. of
F the High Court of Punjab and Haryana at Chandigarh in FAO "(
No. 85312004.
Pankaj Bala Verma, Kiran Suri, Kishore Rawal and M.K.
Dua for the Appellant.
G Ravi Bakshi, Yash Pal Dhingra and R.C. Kohli for the
Respondents. 7-
The Judgment of the Court was delivered by
S.B. SINHA, J. 1. Leave granted.
H
THE NEW INDIA INSURANCE COMPANY v. 813
DARSHANA DEVI AND ORS. [S.S. SINHA, J.]

,._ 2. This appeal is directed against a judgmenf and order A
dated 13.02.2004 passed by a Division Bench of the Punjab
and Haryana High Court whereby and whereunder the appeal
preferred by the appellant herein against the judgment and order
dated 3.12.2003 passed by the Motor Accident Claims Tribunal,
Hoshiarpur under Section 166 of the Motor Vehicles Act, 1988, B
was summarily dismissed.
..i.. ... 3. The facts necessary to be noticed for the present appeal
are that the tractor bearing Registration Number PB-070-1026
was owned by three brothers, namely, Mahinder Singh, Joginder
Singh and Jagdev Singh. c
Ajay Kumar son of Mahinder Singh was driving the said
vehicle on 18.10.2000. He did not have a driving licence. The
accident occurred at about 7.00 pm on the aforementioned date ..
The deceased, Baldev Singh, was said to have been travelling
D
on the mudguard of the said tractor which was going to
-. Hoshiarpur loaded with 'safega' wood. Owing to rash and
negligent driving by Ajay Kumar, the deceased fell down and
came underneath the said tractor.
A claim petition was filed before the Motor Vehicle Accident E
Claims Tribun·a1 on 19.07.2001 by the heirs and legal
representatives of the said deceased.
\
Appellant, in its written statement, inter alia, raised the
following contentions :
F
(1) The deceased being a passenger in the said tractor,
was not a third party within the meaning of the
provisions of Section 147 of the Motor Vehicles Act.
(2) As he was travelling on the mudguard of the tractor
in breach of conditions of contract of insurance, the G
insurance company was not liable to reimburse the
owner' of the vehicle; and
(3) Ajay Ku.mar, being the son of one of the owners of
the tractor and having no licence to drive the same,
H
814 SUPREME COURT REPORTS [2008] 2 $.C.R.

A the case comes with in the purview of the exeption as .....
regards the liability of the insurer as envisaged under
sub-section (2) of Section 149 of the Motor Vehicles
Act.
4. The Tribunal in the said proceedings, inter alia, framed
B the following issues :

"(2) Whether the respondent No.1 was not having any valid ~).
driving licence at the time of accident? OPR-2"
The findings of fact arrived at by the Tribunal are as under:
c
(i) Mohinder Singh, Baldev Singh and Jagdev Singh
son of Pannu were the owners of the tractor.
(ii) Ajay Kumar is son of Mahinder Singh, co-respondent.
(iii) The tractor used to be plied on hire.
D
(iv) At the relevant time, it was not being used for
agricultural purposes for which it was insured. *
(v) Although the owners haq contravened the contracts
of insurance, the insurance company cannot escape
E
its liability in regard to third party risk but was entitled
to recover the amount of compensation from the
insurer, namely, the owner of the offending vehicle. ~

The Tribunal awarded a sum of Rs.2,04,000/- by way of
F compensation in favour of the claimants.
""(
5. As indicated hereinbefore, a Division Bench of the High
Court dismissed the appeal preferred by the insurance company
summarily.

G 6. Ms.Kiran Suri, learned counsel appearing on behalf of
the appellant, submitted that the Tribunal committed a serious
error in passing the impugned judgment insofar as it failed to 7"'-
take into consideration that in a case of this nature, the insurance
company was not liable at all in terms of the provisions of the
Motor Vehicles Act, 1988.
H
THE NEW INDIA INSURANCE COMPANY v. 815
DARSHANA DEVI AND ORS. [S.S. SINHA, J.] .

7. Mr. Bakshi, learned counsel appearing on behalf of the A
respondent, on the other hand, urged that although no exception
to the legal proposition can be taken but it is not a fit case where
this Court should exercise its discretionary jurisdiction under
Article 136 of the Constitution of India.
8. The liability of an insurance company to recompense B
the owner and driver of a vehicle, who are primarily responsible
J..... for payment of ·compensation to a victim or dependent of a
deceased arising out of use of a motor vehicle, is statutory. in
nature.
Whereas an owner of a motor vehicle is under a statufory C
obligation to get it compulsorily insured, the defence of an
insurance company is limited. Sub-section (2) of Section 149
of the Motor Vehicles Act, 1988 reads thus :
"(2) No sum shall be payable by an insurer under sub- 0
section (1) 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 E
of such judgment or award so long as execution is stayed
thereon p~nding an appeal; and an insurer to whom notice
of the bringing of any such proceedings is so given shall
be entitled to be made a party thereto and to defend the
action on any of the following grounds, namely:-
F
(a) that there has been a breach of a specified condition
of the policy, being one of the following conditions,
namely:-
(i) a condition excluding the use of the vehicle-
(a) for hire or reward, where.the vehicle is on G
_~ the date of the contract of insurance a
vehicle not covered by a permit to ply for
hire or reward, or
(ii) a condition excluding driving by a named person H
816 SUPREME COURT REPORTS [2008) 2 S.C.R.

A or persons or by any person who is not duly ~
licensed, or by any person who has been
disqualified for holding or obtaining a driving
licence during the period of disqualification; or
(iii) a condition excluding liability for injury caused
B or contributed to by conditions of war, civil war,
riot or civil commotion; or
(b) that the policy is void on the ground that it was
obtained by the nondisclosure of a material fact or
by a representation of fact which was false in some
c material particular."
9. Extent of liability of an insurance company in terms of
the said provision came up for consideration before this Court
in a large number of decisions. We may notice some of these.
D In Dhanraj v. New India Assurance Co. Ltd. & Anr. [(2004)
8 SCC 553), this Court held :
"In the case of Oriental Insurance Co. Ltd. v. Sunita Rathi
[(1998) 1 sec 365) it has been held that the liability of an
insurance company is only for the purpose of indemnifying
E the insured against liabilities incurred towards a third
person or in respect of damages to property. Thus, where
the insured i.e. an owner of the vehicle has no liability to
a third party the insurance company has no liability also."
F In United India Insurance Co. Ltd., Shim/a v. Tilak Singh
& Ors. [(2006)4 SCC 404), it was opined :
"In our view, although the observations made in Asha Rani
case were in connection with carrying passengers in a
goods vehicle, the same would apply with equal force to
G gratuitous passengers in any other vehicle also. Thus, we
must uphold the contention of the appellant Insurance
Company that it owed no liability towards the injuries
suffered by the deceased Rajinder Singh who was a pillion
rider, as the insurance policy was a statutory policy, and
hence it did not cover the ri.sk of death of.or bodily injury
H
~
THE NEW INDIA INSURANCE COMPANY v. 817
DARSHANA DEVI AND ORS. [S.B. SINHA, J.]

~·
to a gratuitous passenger." A
10. This Court, inter alia, opined that in a case where the
driver has no licence to drive a particular category of motor
venicle, the insurance company would not be liable. [See
National Insurance Company v. Swaran Singh & Ors. [(2007)
3 sec 297, para 84]. B

11. We may also ·take notice of a few recent

- )., .,
pronouncements of this Court.
12. In New Indian Insurance Company Ltd. v. Vedwati &
Ors. [2007 (3) SCALE 397), this Court held that passenger of a .c
motor vehicle is not a third party, stating :
"The difference in the language of "goods vehicle" as
appear in the old Act and "goods carriage" in the Act is of
significance. A bare reading of the provisions makes it
clear that the legislative intent was to prohibit goods vehicle . D
...,. from carrying any pas~enger. This is clear from the
expression "in addition to passengers" as contained in
definition of "good vehicle" in the old Act. The position
becomes further clear because the expression used is
"good carriage" is solely for the carriage of goods. Carrying E
of passengers in a goods carriage is not contemplated in
the Act. There is no provision similar to Clause (ii) of the
proviso appended to Section 95 of the old Act prescribing
requirement of insurance policy. Even Section 147 of the
Act mandates compulsory coverage against death of or F
y
bodily injury to any passenger of "public service vehicle".
The proviso makes it further clear that compulsory
coverage in respect of drivers and conductors of public
service vehicle and employees carried in goods vehicle
would be limited to liability under the Workmen's G
Compensation Act, 1923 (in short 'WC Act"). There is no
-~ reference to any passenger in "goods carriage".
11. The inevitable conclusion, therefore, is that provisions
of the Act do not enjoin any statutory liability on the owner of a
vehicle fo get his vehicle insured for any passenger travelling in H
818 SUPREME COURT REPORTS [2008] 2 S.C.R.

A a goods carriage and the insurer would have no liability therefor."
JI\
In Oriental lnsuirance Co. Ltd. v. Smt. Jhuma Saha & Ors.
[AIR 2007 SC 1054], it' was held:
"11. Liability of the insurer-company is to the extent of
B indemnification of the insured against the respondent or
an injured person, a third person or in respect of damages
of property. Thus, if the insured cannot be fastened with
i-'.).
any liability under the provisions of Motor Vehicles Act, the
question of the insurer being liable to indemnify insured,
c therefore, does not arise."
{See also New India Assurance Co. Ltd. v. Asha Rani &
Ors. [(2003) 2 sec 428}.
In Oriental Insurance Co. Ltd. v. Meena Variyal & Ors.
[(2007) 5 SCC 428], this Court held :
D
"It is Section 147 that sets out the requirement of policies
-¥"
and limits of liability. 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
E authorised insurer; or which insures the person or classes
of persons specified in the policy to the extent specified
in Sub-section (2) against any liability which may be
incurred by the owner in respect of the death of or bodily
injury or damage to any property.of a third party caused by
F or arising out of the use of the vehicle in a public place.
With effect from 14.11.1994, injury to the owner of goods ....,.
or his authorised representative carried in the vehicle was
also added. The policy had to cover death of or bodily
injury to any passenger of a public service vehicle caused
by or arising out of the use of the vehicle in a public place.
G
Then, as per the proviso, the policy shall not be required
to cover liability in respect of the death, arising out of and /"'-
in the course of his employment, of the employee of a
person insured by the policy or in respect of bodily injury
sustained by such an employee arising out of and in the
H
THE NEW INDIA INSURANCE COMPANY v. 819
DARSHANA DEVI AND ORS. [S.B. SINHA, J.]
~
course of his employment, other than a liability arising A
/
under the Workmen's Compensation Act, 1923 in respect
of the death of, or bodily injury to, an employee 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) B
only sets down the limits of the policy. As we understand
J.,~
Section 147(1) of the Act, an insurance policy thereunder
llJ-
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 c
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 representative, if it is
a goods vehicle. It is provided that the policy also shall not
D
be required to cover any contractual liability."
.....
Swaran Singh (supra) was also distinguished stating that
therein the vehicle involved having a third party risk stating :
"17. It is difficult to apply the ratio of this decision to a
case not involving a third party. The whole protection E
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 made automatically liable merely by resorting
..,-
to the Swaran Singh (supra) ratio. This appears to be the F
position. This position was expounded recently by this
Court in National Insurance Co. Ltd. v. Laxmi Narain
Dhut [2007 (4) SCALE 36]. This Court after referring to
Swaran Singh (supra) and discussing the law summed up
the position thus: G
--'°\
In view of the above analysis the following situations
emerge:

1. The decision in Swaran Singh's case (supra) has no
application to cases other than third party risks. H
820 SUPREME COURT REPORTS [2008] 2 S.C.R .

A 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 amount and if so advised, to recover
B the same from the insured.
4. The concept of purposive interpretation has no ,....-l
application to cases relatable to Section 149 of the Act. '-
The High Courts/Commissions shall now consider the
c mater afresh in the light of the position in law as delineated
above.
We are in respectful agreement with the above view."
Asha Rani (supra) was followed.
D Yet again, in Oriental Insurance Co. Ltd. v. Brij Mohan &
Ors. [2007 (7) SCALE 753), wherein one of us (S.B. Sinha, J.)
was a member, this Court noticed Asha Rani and other
decisions. Following the same, it was stated :
"10. Furthermore, respondent was not the owner of the
E
tractor. He was also not the driver thereof. He was merely
a passenger travelling on the trolley attached to the tractor.
His claim petition, therefore, could not have been allowed
in view of the decision of this Court in New India Assurance
Co. Ltd. v. Asha Rani and Ors. [(2003) 2 SCC 223) wherein
F the earlier decision of this Court in New India Assurance
Co. v. Satpal Singh [(2000) 1 sec 237) was overruled.
In Asha Rani (supra) it was, inter a/ia, held:
'25. Section 147 of the 1988Act, inter alia, prescribes
compulsory coverage against the death of or bodily
G
injury to any passenger of "public service vehicle".
Proviso appended thereto categorically states that
compulsory coverage in respect of drivers and
conductors of public service vehicle and employees
carried in a goods vehicle would be limited to the
H
THE NEW INDIA INSURANCE COMPANY v. 821
DARSHANA DEVI AND ORS. [S.B. SINHA, J.]
~
liability under the Workmen Compensation Act. It A
A
does not speak of any passenger in a "goods
carriage".
26. In view of the changes in the relevant provisions
in the 1988 Act vis-'a-vis the 1939 Act, we are of the
opinion that the meaning of the words "any person" B
A.., 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 do
not enjoin any statutory liability on the owner Qf a c
vehicle to get his vehicle insured for any passenger
travelling in a goods vehicle, the insurers would not
be liable therefor.
27. Furthermore, Sub-clause (i) of Clause (b) of Sub-
D
section ( 1) of Section 147 speaks of liability which
~
may be incurred by the owner of a vehicle in respect
of death of or bodily injury to any person or damage
to any property of a third party caused by or arising
out of the use of the vehicle in a public place, whereas
Sub-clause (ii) thereof deals with liability which may E
,, b~ incurred by the owner of a vehicle against the
death of or bodily injury to any passenger of a public
service vehicle caused by or arising out of the use of
the vehicle in a public place.'
)' F
[See also National Insurance Co. Ltd. v. Bommithi
Subbhayamma and Ors. [(2005) 12 SCC 243]; United
India Insurance Co. Ltd., Shim/a v. Tilak Singh and Ors.
[(2006) 4 SCC 404]; Prem Kumar & Ors. v. Prah/ad Dev
& Ors. [2008 (1) SCALE 531] and Oriental Insurance Co.
G
- .
~·
Ltd. v. Prithvi Raj [2008 (1) SCALE 727]"
Having said so, we must take notice of th~ fact that the
deceased Baldev Singh was labourer. The Tribunal has found
that besides being a labourer, he also used to deal in Safeda
wood. He was the owner of the 'Safeda' wood which was being H
.,
\

i >-
822 SUPREME COURT REPORTS [2008) 2 S.C.R f

,.
l

A transported to the market for its sale. The first respondent, ~
Darshana Devi, in her deposition, stated that the deceased used --,.
to purchase wood from the State of Himachal Pradesh on
contract basis. Only Gurdial Singh and Ravinder Singh were
accompanying him as labourer. His income was assessed only
B at Rs.2,400 per month.
13. In this view of the matter, we are of the opinion that it is ~_}.,
not a fit case where this Court should exercise its discretionary
jurisdiction under Article 136 of the Constitution of India. Even I-
in Brij Mohan (supra), this Court held :
c
"13. However, respondent No. 1 is a poor labourer. He
had suffered grievous injuries. He had become disabled
to a great extent. The amount of compensation awarded
in his favour appears to be on a lower side. In the I'
'

•
aforementioned situation, although we reject the other
D
contentions of Ms. lndu Malhotra, we are inclined to
~
exercise our extraordinary jurisdiction under Article 142 of
the Constitution of India so as to direct that the award may ~-
be satisfied by the appellant but it would be entitled to
realize the same from the owner of the tractor and the
E trolley wherefor it would not be necessary for it to initiate
any separate proceedings for recovery of the amount as
provided for under the Motor Vehicles Act. ""'

14. It is well settled that in a situation of this nature this +--
F Court in exercise of its jurisdiction under Article 142 of the -'(
Constitution of India read with Article 136 thereof can issue
suit directions for doing complete justice to the parties."
14. We, therefore, while dismissing the appeal would direct
that for the purpose of realization of dues, the insurance company
b
r
I"-
G need not file a separate execution petition against the owner. If ~
an application is filed for realization or recovery of dues before '14-· -
the Tribunal, the Tribunal shall take appropriate steps in this '
behalf. The appeal is disposed of accordingly. No costs. '

B.B.B. Appeal disposed of.
H