Apsrtc, Mushirabad, Hyderabad v. Kanche Nagabhushanam Bhushanam And Others

1. Heard Sri C. Prakash Reddy, learned standing Counsel for the appellant - A.P. State Road Transport Corporation (for brevity "the Corporation"), learned Counsel for respondent No. 1 - petitioner/claimant and learned standing counsel for respondent No. 4 - New India Assurance Company Limited (insurer).

2. Aggrieved by the order and decree, dated 17-04-2001, in O.P. No. 370 of 1996, passed by the Chairman, Motor Accident Claims Tribunal (II Additional District Judge), West Godavari at Eluru (for brevity "the Tribunal") awarding a sum of Rs. 60,000/- towards compensation as against the claim of Rs. 1,00,000/-, for the injuries sustained by the petitioner therein in a motor accident that occurred on 21-05-1995 while proceeding on his cycle, opposite to Dharmajigudem Police Station, due to the rash and negligent driving on the part of driver of the bus, bearing registration No. AP 16 3092, belonging to the third respondent herein, which was hired by the Corporation and insured with fourth respondent herein, the present civil miscellaneous appeal has been preferred by the Corporation.

3. The appellant herein is the Corporation, respondent No. 1 is the claimant, respondent No. 2 and 3 herein are driver and owner of the bus, respectively, and respondent No. 4 is the New India Assurance Company Limited (insurer).

4. For the sake of convenience, in this judgment, the parties herein are referred to as "the Corporation", "the claimant", "the driver of the bus", "the owner of the bus" and 'the insurer", respectively.

5. The facts that led to filing of the present civil miscellaneous appeal, in brief and to the extent necessary, are that the bus involved in the accident was originally owned by respondent No. 3 herein and the same was insured with respondent No. 4 herein covering the risk of third parties, which is not in dispute. The said bus, after the insurance policy was drawn by the insured/owner, was leased out to the Corporation. To that effect an agreement was also entered into between the owner of the bus and the Corporation. Be that as it may, the bus met with an accident resulting in the injuries to the claimant. The claimant filed the claim petition O.P. No. 370 of 1996 making both the Corporation as well as the insurer along with the driver and owner of the offending bus as parties.

6. The Tribunal, having considered the facts on record, granted an amount of Rs. 60,000/- towards compensation fastening the liability on the Corporation to pay the compensation to the claimant. Hence the present civil miscellaneous appeal.

7. It is the contention of the learned standing counsel for the Corporation that the Corporation had simply hired the bus from the original owner and, therefore, it is the owner of the bus, who is responsible for any indemnification.

8. In support of his contention, the learned standing counsel relied on a decision of the apex Court in Rikhi Ram and Anr. v. Sukhrania and Ors. 2003 (2) ALD 71 (SC).

9. On the other hand, learned standing counsel for the insurer vehemently contended that the insurer has no obligation to indemnify, inasmuch as, the bus was taken on hire by the Corporation and the same was being driven with the absolute control by the Corporation only. Therefore, any accident resulting either in bodily injuries or death shall have to be indemnified by the Corporation only.

10. In support of his contention, the learned standing counsel placed reliance on a judgment of the apex Court in Rajasthan State Road Transport Corporation v. Kailash Nath kothari .

11. From the above rival contentions, there is no dispute as regards the quantum of compensation awarded by the Tribunal. The only question that falls for consideration in this civil miscellaneous appeal is whether the Corporation or the insurer is responsible for payment of compensation.

12. In Kailash Nath Kothari's case , the apex Court while interpreting the definition of 'Owner' enjoined under Section 19(2) of the Motor Vehicles Act, 1939 (for brevity "the old Act") held that only the Rajasthan State Road Transport Corporation was vicariously liable to pay the compensation.

13. In Rikhi Ram's case 2003 (2) ALD 71 (SC), the apex Court had taken into consideration sections 94 and 95 of the old act, which are akin to Sections 146 and 147 of the amended Act i.e., the Motor Vehicles Act, 1988 (for brevity

"the new Act"

14. For ready reference, section 95(5) of the old act, which is relevant, is extracted as under:

Notwithstanding anything elsewhere contained in any law, a person issuing a policy of insurance under this Section shall be liable to indemnify the person or classes of person specified in the policy in respect of any liability which the policy purports to cover in the case of that person or those classes of person.

15. The apex Court while interpreting section 95(5) of the old act, eventually held as under:

For the aforesaid reasons, we hold that whenever a vehicle which is covered by the insurance policy is transferred to a transferee, the liability of insurer does not cease so far as the third party/victim is concerned, even if the owner or purchaser does not give any intimation as required under the provisions of the Act.

16. From the above, it is abundantly clear that merely because the vehicle was transferred from the original owner to another person, so long as the vehicle is covered by the insurance policy, it is only the insured and in turn the insurer, which is responsible to pay the compensation, however, subject to the terms and conditions of the insurance policy.

17. It is to be further noticed that "transfer of the vehicle" is not defined anywhere under the Act. The vehicle may be transferred by the owner in different ways. It may be transferred to another person either by way of hire or with just permission to use the vehicle. In case of transfer by way of hire, there will be consideration to be paid by the hirer to the owner. In any case, the ownership of the vehicle does not get transferred and the liability of the owner of the vehicle does not cease. Consequently, so long as the said vehicle is covered by the insurance policy, the liability would cast upon the insurer insofar as the indemnification is concerned.

18. In both the cases referred above, there appears to be a divergent view. However, a careful perusal of the facts in Kailash Nath Kothari's case , it was specifically noted by the apex Court that there was a privity of contract between "the owner" and "the Corporation" in so far indemnification is concerned and that the vehicle was kept under the absolute control of the Corporation. Further more, Clause 15 of the agreement, which was pressed into service, specifically deals with the liability of the Corporation, notwithstanding the fact that the vehicle was covered by the insurance policy.

Therefore, in such circumstances, it was observed that the owner, for the purpose of indemnification, would be the Corporation only, because it has the absolute control over the vehicle and in the light of the specific condition under Clause 15 of the agreement taking the burden of indemnification upon itself by the Corporation. Therefore, it was held that it is the Corporation, which was vicariously liable to pay the compensation. In a way, the Insurance Company was exonerated from its liability of indemnification.

19. But in Rikhi Ram's case 2003 (2) ALD 71 (SC), there was no such reference of any privity of contract between the owner and the Corporation i.e., the owner and the hirer.

20. It is not in dispute that the offending vehicle, though was in absolute control of the Corporation, the original owner did not part with the ownership of the vehicle. In other words, there is no cessation of relationship between the vehicle and its original owner.

21. It is needless to say that subject to the terms and conditions of the agreement, the owner is always at liberty to withdraw the vehicle from the control of the Corporation, in case of any violation or breach of the contract. So also the Corporation. Therefore, much depends upon the terms and conditions between the owner and the hirer.

22. But, as already noticed, notwithstanding the change in the usage of the vehicle, it cannot be said that the usage of the vehicle has been absolutely transferred. The question of such absolute transfer would arise only in case of sale, but not otherwise. The only other exception is by way of incorporating a specific condition in the agreement between the owner and the hirer. In the absence of any such specific condition, expressly imposing the liability on the hirer, the obligation of the original owner will not cease by mere transfer.

23. Now, coming to the issue of "the owner", it has been defined under the old Act as well as "the new Act".

24. As per Section 2(30) of "the new Act" i.e., Motor Vehicles Act, 1988, the "owner" is defined as under:

"Owner" means a person in whose name a motor vehicle stands registered, and where such person is a minor, the guardian of such minor, and in relation to a motor vehicle which is the subject of a hire-purchase agreement, or an agreement of lease or an agreement of hypothecation, the person in possession of the vehicle under that agreement.

As per Section 2(19) of the old Act i.e., Motor Vehicles Act, 1939, the "owner" is defined as under:

"Owner" means, where the person in possession of a motor vehicle is a minor, the guardian of such minor, and in relation to motor vehicle which is the subject-matter of hire purchase agreement, the person in possession of the vehicle under that agreement.

25. From the above, even though there is an explicit variation in the language employed, I am unable to find any variation insofar as the expression "the person in possession of the vehicle under that agreement" both under the old Act as well as "the new Act". In other words, the above expression is common both under the old Act and "the new Act".

26. Further, the above expression essentially refers to the 'agreement' and the said agreement is again referable to an agreement between the owner and the hirer.

27. In Kailash Nath Kothari's case , there was a specific agreement and by virtue of that agreement, particularly as per Clause 15 regarding the liability of the Corporation, the Corporation was in possession of the vehicle.

28. In the case on hand also, there appears to be an agreement, but the same was not pressed into service by either of the parties and no attempt has been made even by the insurer to file such document before the Tribunal. Even before this Court also, no such document has been filed. Even if any such document is filed, it should be demonstrated beyond reasonable doubt that there was a specific condition to the effect that it is only the Corporation which is liable to indemnify any damages. In the absence of any such document on record, it is not possible for this Court to arrive at a conclusion that there was a privity of contract shifting the burden of indemnification by the owner to the Corporation.

29. Even in such case also, it is to be remembered that there is no cessation of privity of contract between the original owner and the insurer by way of a policy. In other words, even in case of transfer of ownership, in any manner, so long as the policy is in force covering certain risks, notwithstanding the possession of the vehicle or the nature of possession, the liability of the insurer cannot be held to be ceased to the extent of its liability against third parties only as postulated under section 157 of "the new act". This position has been made clear by the apex Court in United India Insurance Co. Ltd. Shimla v. Tilak Singh 2006 (1) Decisions Today (SC) 479.

30. Therefore, in my considered view, there is no apparent conflicting view in the judgments rendered by the apex Court in Kailash Nath Kothari's case as well as Rikhi Ram's case 2003 (2) ALD 71 (SC).

31. Though learned standing counsel for the insurer had relied on a judgment rendered by a Division Bench of this Court in New India Assurance Co. Ltd. v. B.G. Suma , wherein following the judgment of the apex Court in Kailash Nath Kothari's case , this Court held that the Corporation was liable to pay the compensation, I am unable to follow the said judgment of Kailash Nath Kothari's case in view of the judgment rendered by three learned Judges of the apex Court in Rikhi Ram's case 2003 (2) ALD 71 (SC).

32. As already pointed out, there was no apparent divergent views expressed by the apex Court in both the cases i.e., Kailash Nath Kothari's case and Rikhi Ram's case 2003 (2) ALD 71 (SC). In other words, the judgment rendered by the apex Court in Kailash Nath Kothari's case is based altogether on different set of facts, particularly while dealing with the privity of contract between the owner and the hirer with special reference to Clause 15 of the agreement. Since the facts in both the cases differ from each other, the judgments rendered by the apex Court in both the cases have to be read and understood harmoniously. The look like divergence is only basing on the facts and circumstances in each case.

33. Unless and until the obligation of indemnification on the part of the Insurance Company is divested by way of an express agreement between the owner and the hirer, the said obligation on the part of the insurer would not get ceased. Furthermore, the conditions of the insurance policy would always remain unless they are specifically excluded by way of a separate agreement between the owner, hirer and the insurance company. In other words, the insurance company must be a party to a tripartite agreement but not a bipartite settlement between the owner and the hirer, and any such agreement does not absolve the insurer from its liability of indemnification. The same thing may happen by virtue of an independent agreement between the owner and the hirer excluding the liability of the insurer as happened in Kailash Nath Kothari's case .

34. A Division Bench of this Court in Depot Manager, Apsrtc, Miryalaguda v. Poreddy Sujatha 2003 (5) ALD 586 also deals with this aspect on the same lines.

35. Same is the view taken by two learned Single Judges of this Court in K. Matura Bai and Ors. v. A. Shiva Nageswar Rao 2004 (3) ALD 658 and New India Assurance Co. Ltd. Chittoor v. V. Ramachandra Naidu 2004 (5) ALD 378.

36. In view of the above said settled legal position, the impugned order passed by the Tribunal is liable to be set aside fixing the liability to pay the compensation on the insurer-New India Assurance Company Limited.

37. In the result, the civil miscellaneous appeal is allowed setting aside the impugned order passed by the Tribunal and the insurer-New India Assurance Company Limited is held liable to pay the entire amount of compensation to the claimant. In all other aspects and respects, the impugned order passed by the Tribunal shall remain unaltered. There shall be no order as to costs.