Citation Codes

Equivalent Citations

citation codes

Case Number

F.A.F.O No. 408 of 1979*

Judges

N.N Mithal
B.N Misra, JJ.

Acts

Motor Vehicles Act in 1957. Section 96(2)
S. 110-D of the Motor Vehicles Act,
S. 95 of the Motor Vehicles Act.
Section 110-D

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Smart Summary

Structured Summary of the Opinion (N.N. Mithal, J.)

Factual and Procedural Background

This is an appeal under S. 110-D of the Motor Vehicles Act challenging an award of the Motor Accident Claims Tribunal. The Insurance Company and the owner of the vehicle filed a joint appeal against the Tribunal's award. The Tribunal's award ordered payment of compensation from the insurer; the amount awarded was less than Rs. 50,000/-, and the Tribunal had made the insurer liable to indemnify that amount. The owner of the vehicle had not contested the claim before the Tribunal and the proceedings had, at one stage, proceeded ex parte against him. The insurer later applied to set aside the ex parte order and was permitted to test the claim on merits.

Legal Issues Presented

Whether a joint appeal by an insurer and the insured (owner) against an award of the Motor Accident Claims Tribunal is legally maintainable.
Whether the owner of the vehicle, having had the award made only against the insurer and not against himself, is a person "aggrieved" within S. 110-D and therefore entitled to appeal.
Whether, on appeal under S. 110-D, the insurer is confined to raising only those grounds available under S. 96(2) of the Motor Vehicles Act (i.e., whether the insurer's grounds of challenge on appeal are limited).
Whether an award made directly against the insurer, without an award made against the insured, is invalid (i.e., whether insurer's liability under S. 96 arises only if a judgment is rendered against the insured).
On the merits, whether there was evidence on the record proving rashness or negligence by the driver of the offending vehicle.

Arguments of the Parties

Appellants (Insurer and Owner) — Primary Contentions

A preliminary objection was challenged: a joint appeal by the insurer and insured is not legally maintainable (the appellants contested this objection).
The appellants contended that the two preliminary points (joint appeal maintainability and owner's aggrieved status) were not sustainable and were contrary to the provisions of the Act.
The insurer argued that the award itself was defective and not sustainable because, under S. 96(1), the insurer's liability to reimburse an insured arises only when a judgment has been rendered against the insured — thus, a direct award against the insurer without an award against the insured was said to be a nullity (case cited: Abdul Ghafoor v. New India Assurance Company).
On merits, the appellant contended there was no evidence on record proving rashness or negligence by the driver.
When the Court indicated a joint appeal might not be maintainable, counsel for the appellants candidly stated that if so, the appeal could be treated as proceeding only on behalf of the Insurance Company.

Respondent (Claimant) — Primary Contentions

The respondent raised a preliminary objection that a joint appeal by insurer and insured is not maintainable and that the owner was not a person aggrieved because the award was made entirely against the insurer (reliance placed on United India Fire & Gen. Ins. Co. Ltd. v. Gulab Chandra Gupta and Kanti Lal v. Rama Rani Debi).
The respondent also contended that the insurer was not entitled to raise any point in appeal except those available under S. 96(2) (again relying on the Division Bench decision and Itbar Singh's case).
The respondent argued that because of the insurer's limited pleadings, the claimant may have been under a mistaken impression that he did not need to prove negligence; this aspect was invoked in response to the insurer's submission on merits.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
United India Fire & Gen. Ins. Co. Ltd. v. Gulab Chandra Gupta, 1985 Acc CJ 245 : AIR 1985 All 44	Support for the proposition that a joint appeal by insurer and insured was not maintainable and that insurer's grounds of challenge are confined to S. 96(2) (as interpreted by the Division Bench).	The Court reviewed this authority and concluded that the Division Bench had misconstrued the Supreme Court decision in Itbar Singh with respect to the availability of grounds to an insurer in an appeal. The Court therefore declined to follow the restrictive position as applied in that Division Bench decision for present purposes.
Kanti Lal v. Rama Rani Debi, 1980 Acc CJ 501 : AIR 1979 Cal 152	Authority relied upon for the proposition that a joint appeal is not maintainable (Calcutta High Court Division Bench decision).	The Court acknowledged this authority as one of the precedents the earlier Division Bench relied upon, but proceeded to articulate a more nuanced test (conflict of interest; common grounds) rather than an absolute bar. In the facts of the present case the Court found the joint appeal not maintainable for the reasons stated in the opinion.
British India General Insurance Company v. Capt. Itbar Singh, (1958) 65 ACJ 1 : AIR 1959 SC 1331	Interpreted by earlier benches to limit the defences available to insurers at trial to those in S. 96(2); relied upon by the respondent to argue that insurer cannot raise other grounds on appeal.	The Court analyzed Itbar Singh and held that the Supreme Court decision concerned trials (defences available at trial) and did not decide what grounds an insurer may take on appeal under S. 110-D. The Court therefore rejected the view that Itbar Singh confines insurer's grounds on appeal to S. 96(2).
Abdul Ghafoor v. New India Assurance Company, AIR 1980 All 410	Authority cited for the proposition that insurer's liability to satisfy judgment under S. 96 arises only when there is a judgment against the insured; relied upon to argue an award directly against the insurer is invalid.	The Court examined the facts of Abdul Ghafoor and distinguished it: in that case there was no claim alive against the insured. In the present case the insured was a party (proceedings taken ex parte at one stage) and, on analysis, the Court treated the Tribunal's award against the insurer as a defect in form that could be corrected on appeal (O. 41, R. 33 CPC). The Court did not accept that the award was a nullity in the present facts.

Court's Reasoning and Analysis

The Court conducted a step-wise analysis addressing the preliminary objections, the legal capacity of the parties to appeal, the scope of grounds available to the insurer on appeal, and the merits on liability:

Maintainability of Joint Appeal:
The Court observed there is no statutory provision expressly barring a joint appeal by insurer and insured. The proper test is whether there is a conflict of interest between the two appellants or whether they share a common ground of challenge. A joint appeal is permissible only where the grounds are common and there is no inherent conflict. If the interests may come into conflict in granting relief, the court's discretion should go against permitting a joint appeal.

Applying this to the facts, the Court noted that the owner had not contested the claim before the Tribunal and proceedings progressed ex parte against him; the award was only against the insurer (amount under Rs. 50,000) and the insurer alone was ordered to satisfy compensation. In these circumstances the Court found it difficult to hold that the owner was a person aggrieved entitled to appeal. Consequently, a joint appeal by both insurer and owner was not maintainable in these facts.
Deeming the Appeal to Proceed for Insurer:
After counsel for the appellants candidly stated that if the Court held the joint appeal not maintainable the appeal might be treated as proceeding only on behalf of the insurer, the Court accepted that stance and proceeded accordingly.
Scope of Grounds Available to the Insurer on Appeal:
The Court examined Itbar Singh and the Division Bench decision (United India). It concluded that Itbar Singh dealt with defences available to the insurer at the trial stage and did not decide what grounds the insurer may take on appeal under S. 110-D. Section 110-D does not limit the right of an aggrieved person to challenge an award on specified grounds; it simply permits "any aggrieved person" to appeal. Therefore, the Court held an aggrieved appellant (including an insurer properly before the Tribunal) may challenge an award on all legal and factual grounds available on the record in the appeal.

The Court also relied on S. 110-C(2A) which allows the Tribunal, when satisfied that the owner failed to contest or there was collusion, to implead the insurer and grant the insurer the right to contest the claim "on all or any of the grounds that are available to the person against whom the claim has been made." The Court found that, in the present case, although there was no formal recorded order under S. 110-C(2A), the insurer had in practice been allowed to contest on grounds available to the owner; the insurer should be deemed to have been permitted to contest on those grounds.
Validity of an Award Made Only Against the Insurer:
The Court distinguished Abdul Ghafoor: in that earlier case there was no live claim against the insured and thus the Tribunal's approach was justified. Here, however, the insured was a party (even though proceedings had been ex parte at one stage) and the award, although cast directly on the insurer, was in substance an award against the insured with reimbursement by the insurer. The Court treated the issue as a defect in form rather than a nullity and noted that the appellate court has power under Order 41, Rule 33 CPC to mould the decree into one in accordance with law.

The Court further observed S. 110-B prescribes the form in which the Claims Tribunal shall make awards and that the expression "by all or any of them" (owner, insurer, driver) is wide enough to include an award only against the insurer. Thus an award only against the insurer could not be said to be invalid on that ground alone.
On Merits — Proof of Rashness or Negligence:
The Court reiterated the fundamental rule that compensation arises only on proof of rashness or negligence. On perusal of the record and statements recorded by the Claims Tribunal, the Court found nothing to suggest proof of rash or negligent driving. The appellant pressed this point.

However, the claimant countered that because the owner had not defended and the claimant may have been under the impression that the insurer's defences were limited to S. 96(2), the claimant may have not led full evidence on negligence. The Court found some force in that submission and concluded that the Tribunal had failed to frame an issue on the question of negligence, which caused prejudice to the parties.

To cure this procedural prejudice and in the interest of fairness, the Court framed the issue itself — whether the accident was caused due to rash and negligent driving by the driver of the offending vehicle — and remitted that issue to the Claims Tribunal to be decided within three months after affording the parties an opportunity to lead fresh evidence on that issue alone.

Holding and Implications

Holding (core ruling): The Court held that, in the facts and circumstances of this case, a joint appeal by the insurer and the insured (owner) was not maintainable; the appeal was to be treated as proceeding only on behalf of the Insurance Company. The Court further held that the insurer is not confined on appeal to the limited grounds of S. 96(2) and, subject to the record, may challenge the award on all legal and factual grounds. Finally, the Court found no evidence on record of rash or negligent driving and remitted that single issue to the Claims Tribunal for fresh evidence and decision within three months.

Implications (direct consequences and scope):

The joint appeal was struck down as not maintainable in the present circumstances; however, the appeal was permitted to continue on behalf of the insurer following counsel's admission.
The Court rejected the narrow proposition that an insurer on appeal is limited to the grounds in S. 96(2), distinguishing the Supreme Court's decision in Itbar Singh as addressing trial-stage defences rather than appellate rights; the Court relied on S. 110-D and S. 110-C(2A) to support a broader appellate scope for insurers properly before the Tribunal.
Where an award is made only against the insurer but the insured was a party (even if proceedings had at one time proceeded ex parte), the appellate court may correct the defect in form and treat the award as substantively against the insured with indemnity by the insurer; such an award is not necessarily a nullity.
Because the Tribunal failed to frame an issue on negligence and the claimant may have been prejudiced by limited pleadings, the Court framed the issue itself and remitted it to the Tribunal for fresh evidence and determination within three months — this is the operative remedial direction in the judgment.
No broader novel legal rule beyond the application of the statutory provisions cited (S. 95, S. 96, S. 110-B, S. 110-C(2A), S. 110-D and procedural power under O. 41, R. 33 CPC) was established; the decision applies the statutes and corrects procedural defects in the record in the interests of justice.

Orders: The identified issue on negligence is remitted to the Claims Tribunal to be decided within 3 months after allowing the parties to lead fresh evidence on that issue alone. (Final operative directions appear in paras 14–16 of the opinion.)

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Oriental Fire & General Insurance Co. Ltd., New Delhi And Another v. Smt. Rajendra Kaur .

N.N Mithal, J.:— In this appeal under S. 110-D of the Motor Vehicles Act, an award of the Motor Accident Claims Tribunal has been challenged by the Insurance Company as well as the owner of the vehicle in a joint appeal.

2. A preliminary objection has been taken as to the maintainability of the appeal on the ground that a joint appeal by the insurer and the insured is not legally maintainable. It is also urged that no award having been made against the owner of the vehicle, he was not a person aggrieved and as such was not entitled to file the appeal. The claimant's learned, counsel seeks support to his submission from a Division Bench decision of this Court in United India fire and General Insurance Co. Ltd. v. Gulab Chandra Gupta, 1985 Acc CJ 245 : (AIR 1985 All 44). In that case, two appeals had been filed against the award of the Motor Accident Claims Tribunal under which the entire amount was made payable by the insurer. One appeal was filed jointly by the owner of the vehicle and the Insurance Company while the other appeal had been filed by the owner of the vehicle alone. The appeal filed by the owner was dismissed on the ground that he was not an aggrieved person since the entire amount payable under the award was to be paid by the Insurance Company only. The joint appeal was also dismissed relying upon Kanti Lal v. Rama Rani Debi, 1980 Acc CJ 501 : (AIR 1979 Cal 152) where a Division Bench of the Calcutta High Court had held that a joint appeal was not maintainable. The Bench of this Court also observed that in view of British India General Insurance Company v. Capt. Itbar Singh, (1958) 65 ACJ 1 : (AIR 1959 SC 1331), the Insurance Company was not entitled to challenge the award on any ground other than those contained in S. 96(2) of the Act. The learned counsel for the appellant, however, submits that both the points raised by way of preliminary objection are not sustainable and the contentions are against the provisions of the Act.

3. As far as the question of filing a joint appeal is concerned, there is no provision which bars the filing of such an appeal jointly by the insurer and the insured. Objection to them can be taken only on the general principle that there should not be any conflict of interest between the two appealing parties. It is only in those cases in which the ground on the basis of which the judgment of the court below is challenged is common to both the appellants and there is no inherent conflict in their interest that a joint appeal may be permissible. However, if it appears that the interest of the insurer and the insured may come in conflict while granting relief, then certainly the court's discretion must go against the filing of a joint appeal. When the owner of a vehicle and the insurer join hands in filing an appeal, their interest may be common only to a particular extent i.e the immediate liability which the insurer is liable to undertake under S. 95 of the Motor Vehicles Act. If, however, the claim of the insured is being challenged on the ground of any defect in the contract of insurance or where the insurer takes refuge in avoiding its liability on any of the terms of the contract, then in such an event their interest can not be co-extensive and are likely to come in conflict with each other. In such a situation, therefore, the two can not be allowed to file a joint appeal.

4. In the instant case, there is another aspect which can not be lost sight of. The owner of the vehicle did not choose to contest the claim before the Motor Accident Claims Tribunal and the matter proceeded ex parte against him. The award which has been given is only against the insurer as it is less than Rs. 50,000/- and the entire liability for paying the compensation has to be indemnified by the Insurance Company. In these circumstances it is difficult to accept the appellant's contention that the owner of the vehicle was a person aggrieved so as to entitle him to file an appeal.

5. Under S. 110-D, an appeal against the award of the Claims Tribunal can be preferred only by a person aggrieved.

6. It is, however, contended by the appellant that in this case the award itself was defective and was not sustainable. It is urged that under S. 96(1) of the Act, the Insurance Company is liable to reimburse the insured to the extent of liability as per S. 95(1)(b) of the Act only when a judgment in respect of such liability has been rendered against the insurer. In other words, the insurer's liability to pay the amount under the award arises only when the insured also is made liable for the amount in the first instance. Since in this case no award has been made against the insured and the insurer has been directly made liable for the payment of compensation such an award was itself bad in law and a mere nullity. In support the case of Abdul Ghafoor v. New India Assurance Company, AIR 1980 All 410 has been cited. The facts of that case are however slightly different. The Claim Petition had been dismissed against the owner since the claimant had failed to take steps for service on him and ultimately the claim petition itself was dismissed on that account. When the matter was taken in appeal before the High Court. Hon'ble K.N Singh, J. (as he then was) speaking for the Bench held that S. 96 compels the insurer to satisfy judgment against the person insured in respect of third parties subject to the conditions stated in S. 95, vis. (1) that there should be a judgment or decree against a person insured (2) that the judgment is in respect of liability covered by the policy under S. 95(1)(b) and (3) that the liability in fact is covered by the terms of the policy.

7. From the above, it would be clear that in that case there was no claim alive against the insured (owner of the vehicle). In those circumstances, the Tribunal was justified in dismissing the claim. In the present case, however, the insured was a party before the Tribunal though proceedings were being takeri ex parte against him. It is true that proper order to be passed in such a situation was to make an award against the owner of the vehicle and then to say that the same will be payable by the Insurance Company. This, however, is merely a defect in form but in substance the award has been made against the insured to be reimbursed by the insurer. Such defect in form can always be corrected by the appellate court whose duty was to pass a decree in such form as would be inaccordance with law. This power has to be exercised by the appellate court under O. 41, R. 33, C.P.C

8. Apart from this, S. 110-B provides the form in which the Claims Tribunal has to make the award. It lays down that the Tribunal may make an award determining the amount of compensation which appears to it to be just and specifying the person or persons to whom compensation shall be paid and in making the award the Claims Tribunal shall specify the amount which shall be paid by the insurer or owner or driver of the vehicle involved in the accident or by all or any of them, as the case may be. The expression by all or any of them is wide enough to include an award being made only against the insurer. The Tribunal has the power to make an award against any of the three persons, namely the insurer, insured or the driver and this can be done either collectively or separately or against any one of them. Therefore, when the award has been made only against the Insurance Company, the same can not be said to be invalid or a nullity.

9. After giving our careful consideration to this aspect of the matter, we are of the opinion that a joint appeal by the insurer and the insured both, in the facts and circumstances of this case, was not maintainable. When asked to make a choice, Sri A.B Saran, learned counsel for the appellant very candidly stated that should the Court come to the conclusion that a joint appeal was not maintainable, then the appeal may be deemed only on behalf of the Insurance Company.

10. After this statement had been made, the learned counsel for the respondent raised other preliminary objection and it was contended that the insurer was not entitled to raise any other point in appeal except that which could have been taken by it by way of defence as provided under S. 96(2) of the Act. For this objection also, reliance is placed on 1985 Acc CJ 245 : (AIR 1985 All 44) (supra). In the above Division Bench decision, reliance has been placed on Itbar Singh's case, (AIR 1959 SC 1331) (supra) and in para 13 of the report, while quoting Itbar Singh's case, the Division Bench of this Court mentioned that their Lordships (of the Supreme Court) held that an insurer can not challenge in appeal the award of compensation by the Claims Tribunal on any other ground than what is contained in S. 96(2) of the Act. This, however, does not appear to be the correct position. In Itbar Singh, the Supreme Court was not dealing with the matter at the appellate stage as the facts quoted in the Supreme Court decision would show. In that case what had happened was that the defendant in his written statement took pleas in defence other than those that are mentioned in S. 96(2) of the Act and this was objected to by the plaintiff who prayed that the written statement of the insurer be taken off the record. It was in this situation that a question arose as to what were the defences available to the insurer. Against the order passed by the trial court, appeals were taken to the High Court where it was held that the insurer must only take such defences as are mentioned in sub-sec. (2) of S. 96 and no others. It was against this decision of the High Court that the matter came before the Supreme Court and the decision of the High Court was upheld. At any rate, the question of raising a plea other than those permitted by S. 96(2) to the insurer at the appellate stage did not arise at all in that case. It may also be mentioned that the matter which came before the Supreme Court did not arise not arise out of a claim petition under S. 110-A of the Act but it was raised in a regular suit for damages against the owner and insurer of the vehicle. The Supreme Court, therefore, did not lay down as to what grounds would be available to the insurer in an appeal under S. 110-D. All that was considered in that case was the grounds or defences which were available to an insurer in the suit at the stage of trial. Section 110-D dealing with the appeal does not also limit or in any way circumscribe the right of the appellant as to the grounds on which the award can be assailed by insurer. All that it says is that ‘any aggrieved person’ may prefer appeal against the award of the Claims Tribunal. On what grounds can such an award be challenged by the aggrieved party has not been specified. When the right of appeal has been given to an aggrieved party, it must have the right to challenge the award on all legal and factual grounds, of course not outside the scope of the record. Whatever evidence is there on the record can be taken advantage of by the appellant in order to satisfy the appellate court that the award had been wrongly made. We, therefore find it difficult to accept the second preliminary objection as it seems to us that in 1985 Acc CJ 245 : (AIR 1985 All 44), the Division Bench of this Court had totally misconstrued the Supreme Court decision in coming to the conclusion that in appeal also, the grounds available to an insurer are limited to those mentioned in S. 96(2) of the Act.

11. The matter may be looked from another angle also. Sub-sec. (2A) of S. 110C provides as under:—

“(2-A) Where in the course of any inquiry, the Claims Tribunal is satisfied that—

(i) there is collusion between the person making the claim and the person against whom the claim is made, or

(ii) the person against whom the claim is made has failed to contest the claim.

it may, for reasons to be recorded by it in writing direct that the insurer who may be liable in respect of such claim, shall be impleaded as a party to the proceeding and the insurer so impleaded shall thereupon have the right to contest the claim on all or any of the grounds that are available to the person against whom the claim has been made.”

12. It may be recalled that Claims Tribunals were established after ah amendment had been made in the Motor Vehicles Act in 1957. Section 96(2) earlier provided that the insurer will not be liable for satisfying the judgment unless the insurer had a notice of the commencement of the proceedings and the insurer had the right to seek its impleadment and to defend the action but the grounds available to it were only those as are stated therein. When an application for compensation is made before the Claims Tribunal it is not incumbent upon the claimant to implead the Insurance Company and thus for this reason S. 110C(2A) made a provision that in certain contingencies mentioned therein, the Insurance Company will have a right to defend the claim even on grounds other than those mentioned in S. 96(2). In the present case, it is undisputed that the owner had kept away and, therefore, the Insurance Company was in the normal course, entitled to contest the Claim Petition on all such grounds as were available to the owner of the vehicle. It is true that in the present case no formal application in this respect has been made but it is obvious from the written statement that for all practical purposes the Insurance Company was entitled to defend the claim as an owner of the vehicle. At one stage, the claim had been decreed ex parte but on an application made by the Insurer, the order was set aside and it was allowed to test the claim on merits. When no objection at any stage was taken by the claimant that the grounds taken in the written statement of the Insurer were not confined to the grounds available to it u/s. 96(2)(c), any objection raised when the claimant's witnesses were cross-examined by the insurer on the lines much beyond the scope of S. 96. It would, therefore, be quite fair to assume that although no orders had been recorded in writing by the Tribunal, it did allow the Insurance Company to contest the claim on the grounds which were available to the owner of the vehicle. It is now too late for the claimant to contend that rights of the insurer are confined to the grounds mentioned in S. 96(2) of the Act. We are, therefore, of the opinion that in the facts and circumstances of this case, the Insurance Company must be deemed to have been permitted to contest the claim on those grounds also which were available to the owner of the vehicle. We hold accordingly.

13. Coming now to the merits of the case. The sole contention of the learned counsel for the appellant was that there was no evidence on the record to prove that the driver of the aforesaid vehicle was guilty of any laches or negligence. It is a fundamental rule that right to compensation can arise only on proof of rashness and negligence in causing the accident and in absence of the same no such claim can be sustained. We have been taken through the record and the statements recorded by the Claims Tribunal and we find nothing therein as would even suggest that there was any proof of rashness or negligence in driving the offending vehicle which may have caused the accident. This argument is, however, countered by the claimant on the plea that since the owner was not defending the claim and the defences available to the insurer were only confined to those as are mentioned in S. 96(2) the claimant was under a mistaken impression that he was not required to prove negligence on the part of the driver. After hearing the learned counsel for the appellant, we certainly find some force in this submission. On the face of evidence before us, we would have been inclined to dismiss the claim petition but in view of the fact that the claimant may have been under wrong impression in view of the limited pleadings by the Insurance Company that he was not required to prove negligence in this case and that may cause prejudice to the claimant, we are of the opinion that it would be fair to the parties if they are given an opportunity to prove this fact. The Tribunal had failed to frame an issue on the question which has caused this prejudice to the parties. We, therefore, frame the following issue:

“whether the accident was caused due to rash and negligent driving by the driver of the offending vehicle.”

14. The above issue is remitted to the Claims Tribunal to decide the same within 3 months of the receipt of record by it after affording an opportunity to the parties to lead fresh evidence on this issue alone.

15. Orders accordingly.

16. Orders accordingly.

Oriental Fire & General Insurance Co. Ltd., New Delhi And Another v. Smt. Rajendra Kaur .

Structured Summary of the Opinion (N.N. Mithal, J.)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellants (Insurer and Owner) — Primary Contentions

Respondent (Claimant) — Primary Contentions

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Oriental Fire & General Insurance Co. Ltd., New Delhi And Another v. Smt. Rajendra Kaur .

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