NATIONAL INSURANCE CO. LTD. v. SWARAN SINGH AND ORS.

Sub-section (5) of Section 149 which imposes a liability on the insurer E must also be given its full effect. The insurance company may not be liable to satisfy the decree and, therefore, its liability may be zero but it does mean that it did not have initial liability at all. Thus, if the insurance company is made liabie to pay any amount, it can recover the entire amount paid to the third party on behalf of the assured. If this interpretation is not given to the F .-. beneficent provisions of the Act having regard to its purport and object, we \ fail to see a situation where beneficent provisions can be given effect to. Sub- section (7) of Section 149 of the Act, to which pointed attention of the Court has been drawn by the learned counsel for the petitioner, which is in negative language may now be noticed. The said provision must be read with sub- section (I) thereof. The right to avoid liability in terms of sub-section (2) of G Section 149 is restricted as has been discussed hereinbefore. It is one thing to say that the insurance companies are entitled to raise a defence but it is another thing to say that despite the fact that its defence has been accepted having regard to the facts and circumscances of the case, the Tribunal has power to direct them to satisfy the decree at the first instance and then direct H

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A recovery of the same from the owner. These two matters stand apart and require contextual reading.

WHEN ADMITTEDLY NO LICENCE WAS OBTAINED BY A DRIVER:

We have analysed the relevant provisions of the said Act in terms whereof a motor vehicle must be driven by a person having a driving licence. The owner of a motor vehicle in terms of Section 5 of the Act has a responsibility to see that no vehicle is driven except by a person who does r not satisfy the provisions of Section 3 or 4 of the Act. In a case, therefore, where the driver of the vehicle admittedly did not hold any licence and the same was allowed consciously to be driven by the owner of the vehicle by such person, the insurer is entitled to succeed in its defence and avoid liability. The matter, however, may be different where a disputed question of fact arises as to whether the driver had a valid licence or where the owner of the vehicle committed a breach of the terms of the contract of insurance as also · the provisions of the Act by consciously allowing any person to drive a D vehicle who did not have a valid driving licence. In a given case, the driver of the vehicle may not have any hand at all, e.g. a case where an accident takes place owing to a mechanical fault or vis-major. [See Jitendra Kumar (supra)].

In V. Mepherson v. Shiv Charan Singh, (1998) ACJ 601 (Del.)] the E owner of the vehicle was held not to be guilty of violating the condition of policy by willfully permitting his son to drive the car who had no driving licence at the time of accident. In that case, it was held that the owner and insurer both were jointly and severally liable.

In New India Assurance Co. ltd v. Jagtar Singh and Ors., (1998) ACJ F 1074, Hon'ble M. Srinivasan, CJ, as His Lordship then was, dealing with the case where a duly Iicensed driver was driving a vehicle but there was a dispute as to who was driving the vehicle. In that case the court referred to the judgment in Kashiram Yadav v. Oriental Fire & General Insurance Cu. Ltd, ( 1989) ACJ I 078 SC and expressed its agreement with the views taken therein.

In Natiuna/ Insurance Co. ltd v. lshroo Devi and Ors., (1999) ACJ 615 where there was no evidence that the society which employed the driver was having knowledge that the driver was not holding a valid licence, it was held the insurance company is liable. The court relied upon the decisions of this Court in Kashiram Yadav 's case (supra), Skandia 's case (supra) and

NATIONAL INSURANCE CO.LTD. 1·.SWARAN SINGH [V.N KHARE, Cl] 223 -y Sohan Lal Passi 's case (supra). A WHEN THE PERSON HAS BEEN GRANTED LICENCE FOR ONE TYPE J OF VEHICLE BUT AT THE RELVANT TIME HE WAS DRIVING ANOTHER TYPE OF VECHILE :

Section 10 of the Act provides for forms and contents of licences to B drive. The licence has to be granted in the prescribed form. Thus, a licence to drive a light motor vehicle would entitle the holder thereto drive the vehicle falling within that class or description.

Section 3 of the Act casts an obligation on a driver to hold an effective driving licence for the type of vehicle which he intends to drive. Section I0 c of the Act enables Central Government to prescribe forms of driving licences for various categories of vehicles mentioned in sub-section (2) of said section. The various types of vehicles described for which a driver may obtain a licence for one or more of them are (a) Motorcycle without gear, (b) motorcycle with gear, (c) invalid carriage, (d) light motor vehicle, (e) transport vehicle, D (f) road roller and (g) motor vehicle of other specified description. The definition clause in Section 2 of the Act defines various categories of vehicles ';tt which are covered in broad types mentioned in sub-section (2) of Section 10. They are 'goods carriage', 'heavy-goods vehicle', 'heavy passenger motor- vehicle', 'invalid carriage', 'light motor-vehicle', 'maxi-cab', 'medium goods vehicle', 'medium passenger motor-vehicle', 'motor-cab', 'motorcycle', E 'omnibus', 'private service vehicle', 'semi-trailer', 'tourist vehicle', 'tractor', 'trailer', and 'transport vehicle'. In claims for compensation for accidents, various kinds of breaches with regard to the conditions of driving licences arise for consideration before the Tribunal. A person possessing a driving licence for 'motorcycle without gear', for which he has no licence. Cases F may also arise where a holder of driving licence for 'light motor vehicle' is .4. found to be driving a 'maxi-cab', 'motor-cab' or 'omnibus' for which he has t no licence. In each case on evidence led before the tribunal, a decision has to be taken whether the fact of the driver possessing licence for one type of vehicle but found driving another type of vehicle, was the main or contributory cause of accident. If on facts, it is found that accident was caused solely G because of some other unforeseen or intervening causes like mechanical failures and similar other causes having no nexus with driver not possessing requisite type of licence, the insurer will not be allowed to avoid its liability merely for technical breach of conditions concerning driving licence.

We have construed and determined the scope of sub-clause (ii) of sub- H

224 SUPREME COURT REPORTS (2004] I S.CR.

A section (2) of section 149 of the Act. Minor breaches of licence conditions, such as want of medical fitness certificate, requirement about age of the driver and the like not found to have been the direct cause of the accident, would be treated as minor breaches of inconsequential deviation in the matter of use of vehicles. Such minor and inconsequential deviations with regard to licensing conditions would not constitute sufficient ground to deny the benefit of coveragt~ of insurance to the third parties.

On all pleas of breach of licensing conditior.s taken by the insurer, it would be open to the tribunal to adjudicate the claim and decide inter se liability of insurer and insured; although where such adjudication is likely to entail undue delay in decision of the claim of the victim, the tribunal in its discretion may relegate the insurer to seek its remedy of reimbursement from the insured in the civil court.

WHERE THE DRIVER'S LICENCE IS FOUND TO BE FAKE:

D It may be true as has been contended on behalf of the petitioner that a fake or forged licence is as good as no licence but the question herein, as noticed hereinbefore, is whether the insurer must prove that the owner was guilty of the wilful breach of the conditions of the insurance policy or the contract of insurance. In lehru 's case (supra), the matter has been considered at some details. We are in general agreement with the approach of the Bench E but we intend to point out that the observations made therein must be understood to have been made in the light of the requirements of law in terms whereof the insurer is to establish wilful breach on the part of the insured and not for the purpose of its disentitlement from raising any defence or the owners be absolved from any liability whatsoever. We would be dealing in some details with this aspect of the matter a little later.

LEARNER'S -LICENCE :

Motor Vehicles Act, 1988 provides for grant of learner's licence. [See Section 4(3), Section 7(2), Section 10(3) and Section 14]. A learner's licence is, thus, also a licence within the meaning of the provisions of the said Act. It cannot, therefore. be said that a vehicle when being driven by a learner subject to the conditions mentioned in the licence, he would not be a person who is not duly licensed resulting in conferring a right on the insurer to avoid the claim of the third party. It cannot be said that a person holding a learner's licence is not entitled to drive the vehicle. Even if there exists a condition in the contract of insurance that the vehicle cannot be driven by a person holding

NATIONAL INSURANCE CO.LTD. 1·.SWARAN SINGH [V.N. KHARE, CJ.] 225 a learner's licence, the same would run counter to the provisions of Section A 149(2) of the said Act.

The provisions contained in the said Act provide also for grant of driving licence which is otherwise a learner's licence. Section 3(2) and 6 of the Act provides for the restriction in the matter of grant of driving licence, Section 7 deals with such restrictions on granting of learner's licence. Section B 8 and 9 provide for the manner and conditions for grant of driving licence. Section 15 provides for renewal of driving licence. Learner's licences are l granted under the rules framed by the Central Government or the State Governments in exercise of their rule making power. Conditions are attached to the learner's licences granted in terms of the statute. A person holding learner's licence would, thus, also come within the purview of"duly licensed" c as such a licence is also granted in terms of the provisions of the Act and the r4les framed thereunder. It is now a well-settled principle of law that rules ~al idly framed become part of the statute. Such rules are, therefore, required to be read as a pa1t of main enactment. It is also well-settled principle of law that for the interpretation of statute an attempt must be made to give effect D to all provisions under the rule. No provision should be considered as surplusage. v Mandar Madhav Tambe 's case (supra), whereupon the learned counsel placed reliance, has no application to the fact of the matter. There existed an exclusion clause in the insurance policy wherein it was made clear that the E Insurance Company, in the event of an accident, would be liable only if the

- vehicle was being driven by a person holding a valid driving licence or a permanent driving licence "other than a learner's licence". The question as to whether such a clause would be valid or not did not arise for consideration before the Bench in the said case. The said decision was rendered in the peculiar fact situation obtaining therein. Therein it was stated that "a driving ..[ licence" as defined in the Act is different from a learner's licence issued under Rule 16 of the Motor Vehicles Rules, 1939 having regard to the factual matrix involved therein.

The question which arises for consideration in these petitions did not arise there. Neither the same were argued at the Bar nor the binding precedents were considered. Mandar Madhav Tambe 's case (supra), therefore, has no application to the facts of these cases nor create any binding precedent. The view we. have taken is in tune with the judgments rendered by different High Courts consistently. [See for example New India Assurance Co. ltd. v. la1hfl H

226 SUPREME COURT REPORTS [2004] I S.C.R.

A Jayaraj and Ors., (1991) ACJ 298.

CONFLICT OF DECISIONS :

Contention of Mr. Salve that there exists a conflict in the decisions of this Court in Nicollet/a Rohtagi (supra) on the one hand and Ka11ila (supra) B and lehru (supra) on the other cannot be accepted. We do not find in the said decisions any such conflict.

Nicollet/a Rohtagi (supra) was a case where a question arose as to whether an appeal by the insurer on the ground de 'hors those contained in Section 149(2) would be maintainable. It was held not to be. There cannot C be any doubt or dispute that defences enumerated in Section 149(2) would be available to the insurance companies, but that does not and cannot mean that despite such defences having not been established, they wou Id not be liable to fulfil their statutory obligation under sub-section (I) of Section 149 of the Act. D So far as the purported conflict in the judgments of Kam/a (supra) and lehru (supra) is concerned, we may wish to point out that the defence to the effect that the: licence held by the person driving the vehicle was a fake one, would be available to the insurance companies, but whether despite the same, the plea of default on the part of the owner has been established or not would E be a question which will have to be determined in each case.

The court, however, in lehru (supra) must not read that an owner of a vehicle can under no circumstances has any duty to make any enquiry in this respect. The same, however, would again be a question which would arise for consideration in each individual case. - F The submission of Mr. Salve that in lehn1 's case (supra), this Court has, for all intent and purport, taken away the right of insurer to raise a defence that the licence is fake does not appear to be correct. Such defence can certainly be raised but it will be for the insurer to prove that the insured did not take adequate care and caution to verify the genuineness or otherwise G of the licence held by the driver. Our attention has also been drawn on an unreported order of this Court in Malla Prakasarao v. Malla Janaki and Ors., (Civil Appeal No. 163 of 1996 disposed of on 6th August, 2002) which reads as under : H "It is not disputed that the driving licence of the driver of the vehicle

NATIONAL INSURANCE CO. LTD. v.SWARAN SINGH [V.N. KHARE. CJ] 227 had expired on 20th November, 1982 and the driver did not apply for A. renewal within 30 days of the expiry of the said licence, as required under Section l l of the Motor Vehicles Act, 1939. It is also not disputed that the driver of the vehicle did not have driving licence when the accident took ·place. According to the terms of contract, the Insurance Company has no liability to pay any compensation where B an accident takes place by a vehicle driven by a driver without driving licence. In that view of the matter, we do not find any merit in the appeal.

The appeal fails and is, accordingly dismissed. There shall be no order as to costs". c In that case, the Court presumably as in the case of Mandar Madhav Tambe 's case (supra), was concerned with the terms and conditions of the contract of insurance. Before the Court, no occasion arose to consider the general terms and condition of the contract of insurance vis-a-vis liability of insurance under the Motor Vehicles Act. D CONCLUSION:

It is, therefore, evident from the discussions made hereinbefore that the liability of the insurance company to satisfy the decree at the first instance and to recover the awarded amount from the owner or driver thereof has been E holding the field for a long time.

Apart from the reasons stated hereinbefore the doctrine of stare decisis persuades us not to deviate from the said principle.

It is well-settled rule of law and should not ordinarily be deviated from. F (See The Bengal Immunity Company limited v. The State of Bihar and Ors., [1955] 2 SCR 603 at 630-632, Keshav Mills Co. Ltd v. Commissioner of Income-Tax, Bombay North., [ 1965] 2 SCR 908 at 921-922, Union of India and Anr. v. Raghubir Singh (Dead) By lRs. etc., [ 1989] 3 SCR 316 at 323, 327, 334, Mis. Gannon Dunke1;/ey and Co. and Ors. v. State of Rajasthan and Ors., [1993] I SCC 364, Belgaum Gardeners Cooperative Production G Supply and Sale Society ltd v. State of Karanataka, [1993] Supp 1 SCC 96 and Hanuma/1/appa Krishnappa Mantur and Ors. v. State of Karna/aka, [1992] supp. 2 sec 213.

We may, however, hasten to add that the Tribunal and the court must, H

228 SUPREME COURT REPORTS [2004] I S.C.R.

A however, exercise their jurisdiction to issue such a direction upon consideration of the facts and circumstances of each case and in the event such a direction has been issued despite arriving at a finding of fact to the effect that the insurer has been able to establish that the insured has committed a breach of contract of insurance as envisaged under sub-clause (ii) of clause (a) of sub- B section (2) of Section 149 of the Act, the insurance company shall be entitled to realise the awarded amount from the owner or driver of the vehicle, as the case may be, in execution of the same award having regard to the provisions of Sections 165 and 168 of the Act . However, in the event, having regard to the limited scope of inquiry in the proceedings before the Tribunal it had not been able to do so, the insurance company may initiate a separate action therefor against the owner or the driver of the vehicle or both, as the case may be. Those exceptional cases may arise when the evidence becomes available to or comes to the notice of the insurer at a subsequent stage or for one reason or the other, the insurer was not given opportunity to defend at ·all. Such a course of action may also be resorted when a fraud or collusion bttween the victim and the owner of the vehicle is detected or comes to the knowledge of the insurer at a later stage.

Although, as noticed hereinbefore, there are certain special leave petitions wherein the persons having the vehicles at the frne when the accidents took place did not hold any licence at all, in the facts and circumstances of the case, we do not intend to set aside the said awards. Such awards may also be satisfied by the petitioners herein subject to their right to recover the same from the ownas of the vehicles in the manner laid down therein. But this order may not be considered as a precedent.

Although in most of the case, we have not issued notices in view of the .. f fact that the question of law has to be determined; we have heard coun.sel for the paiiies at length at this stage.

SUMMARY OF FINDINGS :

The summary of our findings to the various issues as raised in these petitions are as follows:

(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 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

NATIONAL INSURANCE CO. LTD. 1·.SWARAN SINGH (V.N. KHARE, Cl] 229 and the provisions of the Act have to be so interpreted as to effectuate the said object. (ii) Insurer is entitled to raise a defence in a claim petition filed under Section 163 A or Section 166 of the Motor Vehicles Act, 1988 inter alia in terms of Section 149(2)(a)(ii) of the said Act. (iii) The breach of policy condition e.g., disqualification of drive~ 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 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 condition of the policy regarding use of vehicles by duly licensed driver or one who was not disqualified to drive at the relevant time. D

- (iv) The insurance companies are, however, with a view to avoid their liability must not only establish the available defence(s) raised in the said proceedings but must also establish 'breach' on the part of the owner of the vehicle; the burden ofproofwherefor would be on them. E (v) The coun cannot lay down any criteria as to how said burden would be discharged, inasmuch as the same would depend upon the facts and circumstance of each case. (vi) Even where the insurer is able to prove breach on the part of the insured concerning the policy condition regarding holding of a F valid licence by the driver or his qualification to drive during the relevant period, the insurer would not be allowed to avoid its liability towards insured unless the said breach or breaches on the condition of driving licence is/ are so fundamental as are found to have contributed to the cause of the accident. The G Tribunals in interpreting the policy conditions would apply ''the rule of main purpose" and the concept of "fundamental breach" to allow defences available to the insured under section 149(2) of the Act. (vii) The question as to whether the owner has taken reasonable care ·H

230 SUPREME COURT REPORTS [2004] I S.C.R.

A to find out as to whether the driving licence produced by the driver, (a fake one or otherwise), does not fulfil the requirements of law or not wi II have to be determined in each case. (viii) If a vehicle at the time of accident was driven by a person having a learner's licence, the insurance companies would be liable to B satisfy the decree. (ix) The claims tribunal constituted under Section 165 read with Section 168 is empowered to adjudicate all claims in respect of r the accidents involving death or of bodily injury or damage to property of third party arising in use of motor vehicle. The said c power of the tribunal is not restricted to decide the claims inter se between claimant or claimants on one side and insured, insurer and driver on the other. In the course of adjudicating the claim for compensation 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 course of ; adjudication of claim for compensation by the claimants and the award made thereon is enforceable and executable in the same 'i manner as provided in Section 174 of the Act for enforcement and execution of the award in favour of the claimants. (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 p l' Tribunal can direct that the insurer is liable to be reimbursed by the insured for the compensation and other amounts which it has been 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 the insured will be recoverable on a certificate issued by the tribunal G 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 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. H

NATIONAL INSURANCE CO. LTD. 1·.SWARAN SlNGH [V.N. KHARE, CJ.] 23 J (xi) The provisions contained in sub-section (4) with proviso thereunder and sub-section (5) which are intended to cover 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 before regular court in cases where on given facts and circumstances adjudication of their claims inter se might delay the adjudication of the claims of the victims.

For the reasons aforementioned, these petitions are dismissed but without any order as to costs. c S.K.S. Petitions dismissed.