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Dharman And Another v. N.C Srinivasan And Others
Judgment Summary — Letters Patent Appeal (Padmini Jesudurai, J.)
Factual and Procedural Background
On 6-3-1980 at about 7:05 p.m. a motorcycle (Regn. No. TMC 6883), which had formerly belonged to the third respondent and on the day of the accident belonged to the first appellant, was driven by the second appellant and struck the first respondent (claimant), causing serious injuries. The claimant filed Original Petition No. 525 of 1980 under Section 110-A of the Motor Vehicles Act before the Motor Accidents Claims Tribunal, Madras, claiming Rs. 25,000 as compensation.
The appellants denied rash/negligent driving by the second appellant, alleging instead negligence by the claimant in suddenly crossing the road. The second respondent (the insurer) resisted liability on the ground that the vehicle belonged to the third respondent and that the vehicle had been transferred during the policy period to the first appellant, so the insurer could not be called upon to indemnify the first appellant. The third respondent was made a party and remained ex parte.
The Tribunal held that the accident resulted from rash and negligent driving by the second appellant, assessed compensation at Rs. 6,500, and held that because the vehicle had been transferred before the accident the erstwhile owner and his insurer could not be held liable; the award was passed against the appellants alone. The appellants' Civil Miscellaneous Appeal (C.M.A. 172 of 1982) in this Court was dismissed, and the present Letters Patent Appeal followed.
Legal Issues Presented
- Whether, in a third-party claim where an accident occurs during the period of cover, the insurer may avoid liability by contending that the policy had come to an end because the vehicle was transferred (sold) during the period of cover — i.e., whether such a plea is available to the insurer under Section 96(2) of the Motor Vehicles Act.
- Whether Ex. P.6 (a rough sketch of the scene prepared by PW3, the Investigating Officer) is inadmissible because it was prepared based on statements recorded under Section 161 Cr.P.C., and if so whether reliance on Ex. P.6 renders the Tribunal's finding of rash and negligent driving unsustainable.
Arguments of the Parties
Appellants' Arguments
- The insurer (second respondent) cannot, in a third-party claim where the accident occurred during the period of cover and the policy was not otherwise terminated under Section 96(2), avoid liability by taking a defence not available under Section 96(2) — specifically, it cannot contend that the policy ended on transfer of the vehicle from the third respondent to the first appellant.
- The Tribunal and the learned Judge impermissibly relied upon Ex. P.6 (the rough sketch) which was prepared by PW3 based on statements recorded under Section 161 Cr.P.C.; such statements are inadmissible in evidence and therefore the finding of rash and negligent driving is unsustainable.
Respondent (Second Respondent / Insurer) Arguments
- The insurer contested the appellants' contentions (briefly noted as "countered the above contentions"). The insurer's counsel relied on a single-judge decision (South India Insurance Co. Ltd. v. Lakshmi) suggesting that the defences available under Section 96 in a third-party claim are not exhaustive.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| British India General Insurance Co. Ltd. v. Itbar Singh (1959) | An insurer made a party in a third-party claim is entitled to defend only on the grounds enumerated in Section 96(2); it cannot raise defences not specified in that sub-section. Sub-sec. (6) reinforces this limitation. | The Court relied on this authority to hold that an insurer's defences in third-party claims are strictly limited to those in Section 96(2) and that the insurer cannot avoid liability by taking defences outside the sub-section (thereby rejecting the sale/transfer plea as an available defence under S.96(2)). |
| South India Insurance Co. Ltd. v. Lakshmi (Single Judge decision) | Observed (at single-judge level) that defences open to an insurer under Section 96 in a third-party claim cannot be said to be exhaustive. | The Court rejected these observations as inconsistent with the Supreme Court authority (British India case) and therefore not sustainable; it did not follow this single-judge view. |
| New Asiatic Insurance Co. v. Pessumal Dhanmal Aswani | Guidelines for interpreting Chapter VIII: provisions aim to secure compensation for third parties injured by motor vehicle use and must be construed to achieve that object (i.e., protect victims regardless of vehicle user's financial status). | The Court cited this to support a purposive construction of Chapter VIII that prevents interpretations defeating protection of third-party victims, reinforcing that transfer of ownership during the period of cover should not defeat third-party claims. |
| Skandia Insurance Co. Ltd. v. Kokilaben Chandravadan (AIR 1987 SC 1184) | Exclusion clauses should be read down so they do not conflict with the purpose of statutory protections for accident victims; interpretation should probe legislative motive and the goals of the provisions. | Used to demonstrate the Supreme Court's trend of interpreting insurance-related provisions strictly in favour of protecting accident victims and to justify a purposive, protective reading of the Act's provisions. |
| Guru Govekar v. Filomena F. Lobo Miss (later Supreme Court pronouncement) | Reflects the same strict approach to interpretation favoring the protection of accident victims (as in Skandia). | Cited to show continuity in Supreme Court approach supporting restrictive interpretation of insurer defences and protective reading of Chapter VIII. |
| Madineni Kondiah v. Yaseen Fatima (Full Bench, Andhra Pradesh) (AIR 1986 Andh Pra 62) | In a third-party claim it is not open to the insurer under Section 96(2) to raise a plea that the policy had lapsed during the period of cover because the vehicle was sold to someone else. | The Court relied on this Full Bench decision to support the conclusion that sale/transfer during the policy period is not a defence available to the insurer against third-party claims. |
| Tori Singh v. State of U.P. | Deals with the effect of Section 161 Cr.P.C. statements; the bar under Section 161 applies only to criminal trials and such statements can be considered in other proceedings if properly proved. | The Court used this principle to hold that Ex. P.6 (sketch based on statements under S.161) could be looked into provided the statements or the sketch are properly proved. In the instant case PW3's testimony supplied the necessary proof, making Ex. P.6 admissible for consideration. |
Court's Reasoning and Analysis
The Court addressed the appellants' two contentions in sequence.
1. Whether transfer/sale during the period of cover defeats insurer's liability
The Court examined the language and scheme of Section 96(2) of the Motor Vehicles Act and observed that the statute expressly limits the defences an insurer may raise when made a party in a third-party claim. It relied on the Supreme Court authority in British India General Insurance Co. Ltd. v. Itbar Singh to conclude that the grounds enumerated in Section 96(2) are exhaustive; the insurer cannot add other grounds by implication.
The Court noted that Section 96(6) reinforces this limitation by stating an insurer shall not be entitled to avoid liability except in the manner provided in sub-section (2). The Court therefore read Section 96(2) as the exclusive repository of defences available to the insurer in third-party claims.
The Court analysed the specific sub-clauses of Section 96(2). It identified that the Act contemplates cancellation of the policy before the accident (Section 96(2)(a)) in certain specific ways (mutual consent, surrender of certificate, proceedings for cancellation after compliance with Section 105) and allows challenge that a policy is void for non-disclosure or misrepresentation (Section 96(2)(c)). Beyond these situations, the statute does not provide for a defence that the policy ceased to be in force merely because ownership transferred during the period of cover.
Relying on Chapter VIII's object — compulsory insurance to protect third-party victims — and authorities (New Asiatic Insurance; Skandia; Guru Govekar), the Court applied a purposive construction to avoid interpretations which would defeat the protective purpose of the Chapter. It rejected the single-judge observation in South India Insurance Co. Ltd. v. Lakshmi as inconsistent with Supreme Court authority.
The Court further relied on the Full Bench decision in Madineni Kondiah v. Yaseen Fatima to hold explicitly that a sale/transfer of the vehicle during the period of cover does not give the insurer a defence under Section 96(2) in a third-party claim. On this basis the insurer's plea that the policy had lapsed on transfer was held unavailable as a defence against the claimant.
2. Admissibility of Ex. P.6 (sketch) prepared by the Investigating Officer
The Court considered the contention that markings in Ex. P.6 were based on statements recorded under Section 161 Cr.P.C. and therefore inadmissible. The Court explained that the bar on use of Section 161 statements applies only in criminal trials. In civil or quasi-civil proceedings such as the present third-party claim, statements recorded under Section 161 may be looked into if they are properly proved — either by examining the Investigating Officer who recorded them or by examining the witnesses themselves. If not proved, they remain hearsay and are inadmissible.
In the instant case PW3, the Investigating Officer, testified that he visited the scene and that the motorcycle driver and one Kupparaj pointed out the scene to him, on the basis of which he drew Ex. P.6. The Court found that Ex. P.6 was therefore adequately proved by PW3's testimony and could be relied upon.
Factual application and conclusion on liability
On the facts, both the Tribunal and the learned Judge had concluded that the accident occurred at the eastern extremity of the road while the vehicle was travelling north to south and the claimant was proceeding west to east. Given the width of the road (7.55 metres) and the claimant's position having crossed about three-quarters of the road and being close to the eastern pavement, the Court found that negligence on the part of the claimant was ruled out and that the circumstances pointed to rash and negligent driving by the second appellant. The Court concurred with these findings.
Holding and Implications
Core Ruling: Appeal allowed in part.
Direct consequences and orders:
- The appeal was partly allowed with costs.
- The Court awarded compensation in the sum of Rs. 4,500 (reduced from the Tribunal's Rs. 6,500). The award is against respondents 2 and 3 and appellants 1 and 2, with the amount initially payable by the insurer (second respondent).
- The awarded amount shall carry interest at 12% per annum from the date of filing of the claim petition before the Motor Accidents Claims Tribunal until payment.
- It was recorded that the appellant had deposited one half of a previous amount (which the claimant had withdrawn). Once the Insurance Company deposits the directed amount, the appellants will be entitled to withdraw the amount previously deposited by them.
- The Court specifically noted that it would be open to the insurer (second respondent) to pursue remedies against other parties under Section 96(3) proviso or Section 96(4) of the Act.
Broader legal implication:
The Court held — consistent with Supreme Court and Full Bench authorities cited — that in third-party claims where an accident occurred during the period of cover, an insurer cannot avoid liability by asserting that the policy ceased because the vehicle was transferred/sold during the period of cover; such a plea is not available as a defence under Section 96(2) of the Motor Vehicles Act. The Court applied a purposive construction of Chapter VIII to preserve statutory protections for accident victims.
Appeal allowed in part.
ORDER Padmini Jesudurai, J.
1. The owner and driver respectively of a motor cycle against whom the Motor Accidents Claims Tribunal, had passed an award, confirmed by this Court in appeal, have preferred this Letters Patent Appeal.
2. Facts briefly are : On 6-3-1980 at 7.05 p. m. motor cycle bearing registration No. TMC 6883 which had formerly belonged to the third respondent herein and on the day of the accident had belonged to the first appellant, was driven in a rash and negligent manner by the second appellant and dashed against the first respondent-claimant and caused him serious injuries. The first respondent filed O. P. 525 of 1980 under Sec. 110-A of the Motor Vehicles Act (hereinafter referred to as the Act) before the Motor Accidents Claims Tribunal, Madras, claiming a compensation of Rs. 25,000/-.
3. The appellants resisted the claim contending that the accident was not due to the rash and negligent driving of the second appellant, but was due to the negligence of the first respondent in suddenly crossing the road. The second respondent, the Insurance Co., resisted its liability contending that the vehicle belonged to the third respondent herein, with whom alone there was a valid policy of insurance and the vehicle having been transferred during the period of cover to the first appellant, the second respondent could not be called upon to indemnify the first appellant. On this counter, the third respondent was also made a party and he chose to remain ex parte.
4. The Tribunal, on the material placed before it, held that the accident was due to the rash and negligent driving of the vehicle by the second appellant and assessed the compensation at Rs. 6,500. Holding that because the vehicle had been transferred by the third respondent to the first appellant even before the date of the accident, neither the third respondent, the erstwhile owner, nor his insurer, the second respondent, could be held liable. An award was passed against the appellants alone. C.M.A. 172 of 1982 filed by the appellants in this Court was dismissed. Hence this Letters Patent Appeal.
5. Thiru S. Subbiah, learned counsel for the appellants, urged the following two contentions in support of his prayer--
(1) The vehicle having been insured with the second respondent and the accident having taken place during the period of cover and the policy of insurance not having been terminated during the period of cover in any one of the modes contemplated in Sec. 96(2) of the Act, it is not open to the second respondent, the Insurer, to avoid the liability against third parties by taking a plea not available to it under Sec. 96(2) of the Act, contending that the policy had come to an end on the transfer of the vehicle from the third respondent to the first appellant.
(2) Both the tribunal as well as the learned Judge, erred in placing reliance on Ex. P. 6, the rough sketch of the scene prepared by P. W. 3, the Investigating Officer, based purely on the statements recorded by him under Sec. 161 Cr. P.C. which were not admissible in evidence. The finding that the accident was due to the rash and negligent driving of the second appellant was, therefore, unsustainable.
6. Thiru Madangopal Rao, learned counsel for the second respondent, countered the above contentions.
6A. Contention No. 1 -- The first contention of the learned counsel for the appellants is that this being a claim by a third party, it is not open to the insurer, the second respondent, to escape the liability accrued during the period of cover of the policy of insurance by putting forward any defence not contemplated in Sec. 96(2). According to the learned counsel, a policy of insurance against third party claims, could come to an end only in the manner provided under Sec. 96(2)(a) and (c) of the Act. The short question, therefore, is whether a plea that the policy of insurance has lapsed on the transfer of a vehicle, is a plea that could be put forward under Sec. 96(2) as against a third party claim.
7. According to Sec. 96(2) of the Act, an insurer, if he is to he called upon to indemnify his insured, should be made a party to the proceedings to the limited extent of enabling him to put forward certain defence made available to him in that sub-section itself. It is therefore, clear that the defence of an insurer is directly limited only to what the Statute has chosen to provide in S. 96(2). That the insurer cannot take any defence, not specifically provided for under S. 96(2) of the Act, has been laid down by the Supreme Court as early as in 1959 in British India General Insurance Co. Ltd. v. Itbar Singh, , in the following words (at Pp. 1333-34 of AIR).
"Now the language of sub-see. (2) seems to us to be perfectly plain and to admit of no doubt or confusion. It is that an insurer to whom the requisite of notice of the section has been given shall be entitled to be made a party thereto and to defend the action on any of the following grounds, namely, after which comes an enumeration of the grounds. It would follow that an insurer is entitled io defend on any of the grounds enumerated and no others. If it were not so, then of course no grounds need have been enumerated. When the grounds of defence have been specified, they cannot be added to. To do that would be adding words to the statute.
Sub-section (6) also indicates clearly how sub-sec. (2) should be read. It says that no insurer to whom the notice of the action has been given shall be entitled to avoid his liability under sub-sec. (1) otherwise than in the manner provided for in sub-sec. (2). Now the only manner of avoiding liability provided for in sub-sec. (2) is by successfully raising any of the defences therein mentioned. It comes then to this that the insurer cannot avoid his liability except by establishing such defences. Therefore, sub-sec. (6) clearly contemplates that he cannot take any defence not mentioned in sub-sec. (2), If he could, than he would have been in a position to avoid his liability in a manner other than provided for in sub-sec. (2). That is prohibited by sub-sec. (6). We, therefore, think that sub-sec. (2) clearly provides that an insurer made a defendant to the action is not entitled to take any defence which is not specified in it."
8. Learned counsel for the second respondent however, brought to our notice a judgment of a single Judge of this Court in the South India Insurance Co. Ltd. v. Lakshmi, wherein the learned Judge had observed that the defences that are open to an insurer under S. 96 of the Act, in a claim by third parlies, cannot be said to he exhaustive. These observations however, cannot be sustained in view of the decision of the Supreme Court, referred to above. It is, therefore, clear that in a claim by a third party, the defences of an insurer are strictly limited to what the Statute has chosen to provide under S. 96(2).
9. A reading of S. 96(2) would show that even during the period of cover, it is open to the insurer to avoid third party claims, by pulling forward the defence made available to it under S. 96(2)(a), whereby the policy could be brought to an end even before its expiration by efflux of time. Once a certificate of insurance has been issued under S. 95(4) of the Act, and an accident occurs during the period of cover, the only two situations that the Act contemplates, which would be available to defence by the insurer to contend that the policy is not in force, are found in S. 96(2)(a) and (e) which arc as follows --
"(a) that the policy was cancelled by mutual consent or by virtue of any provision contained therein before the accident giving rise to the liability, and that either the certificate of insurance was surrendered lo the insurer or that the person to whom the certificate was issued has made an affidavit stating that the certificate has been lost or destroyed, or that either before or not later than fourteen days after the happening of the accident the insurer has commenced proceedings for cancellation of the certificate after compliance with the provisions of S. 105;
...................
(c) that the policy is void on the ground that it was obtained by the non-disclosure of a material fact or by a representation of fact which was false in some material particular."
10. An analysis of S. 96(2)(a) shows that the policy could be cancelled (1) by mutual consent, (2) by virtue of any provision contained therein before the accident giving rise to the liability and the certificate of insurance is surrendered; (3) either before or not later than fourteen clays after the accident, the insurer has commenced proceedings for cancellation of the certificate, after compliance with the provisions of S. 105 of the Act, which requires that when the insurer cancels or suspends a policy, he shall within seven days notify to the registering authority the effect of such cancellation or suspension. Section 96(2)(c) enables the insurer to contend that the policy itself is void on the ground that it was obtained by non-disclosure of material fact or misrepresentation.
11. Section 96(2) of the Act does not contemplate any other situation, which would enable the insurer to contend, as against third party, regarding an accident that had occurred during the period of cover, that the policy has come to an end. One cannot miss the fact that Chap. VIII has been introduced into the Motor Vehicles Act making insurance of motor vehicles compulsory against third party risks. The Motor Vehicles Act, being a special act and the provisions of chap. viii having been introduced to serve a particular purpose, should be so construed as not to defeat the object for which the provisions have been enacted, by importing into it, principles related with the general law of insurance or general law of contracts. Section 103-A merely indicates the procedure by which, on the transfer of a vehicle contractual rights inter se insurer, transferor, and transferee could be regulated for working out remedies available under S. 96(3) proviso and S. 96(4) and has no reference to the liability of the insurer against third parly claims during the period of cover. It could never have been the intention of the Legislature that in the event of transfer of ownership of the vehicle during the period of cover, the rights of third party victims of accidents occurring during the period of cover, would depend on whether or not, parties choose to act under S. 103-A. The wordings in S.96(1) that the insurer shall pay notwithstanding that he might have avoided or cancelled the policy make this interpretation imperative.
12. The Supreme Court in New Asiatic Insurance Co. v. Pessumal Dhanmal Aswani, has given guidelines regarding the interpretation of the various provisions of Chap. VIII of the Act.
"Chapter VIII of the Ad, it appears from the headings, makes provision for insurance of the vehicle against third party risks, that is to say, its provisions ensure that third parlies who suffer on account of the user of the motor vehicle would be able to get damages for injuries suffered and that their ability to get the damages will not be dependent on the financial condition of the driver of the vehicle whose user led to the causing of the injuries. The provisions have to be construed in such a manner as to ensure this object of the enactment."
13. One cannot also miss the trend of the decisions of the Supreme Court in interpreting the provisions of this Act. More recently, in Skandia Insurance Co. Ltd. v. Kokilaben Chandravadan, 1987 Aec CJ 411 : (AIR 1987 SC 1184). the Supreme Court, while interpreting the exclusion clause contained in the policy of insurance, held that the exclusion clause has to be read down, in order that it is not at war with the main purpose of the provisions enacted for the protection of victims of accidents and that in order to define the intention of the Legislature in the course of interpretation of the relevant provisions, there can scarcely be a better test, than that of probing into the motive and philosophy of the relevant provisions, keeping in mind the goals to be achieved by enacting the same. The same strict interpretation is seen in a later pronouncement of the Supreme Court in Guru Govekar v. Filomena F. Lobo Miss, .
14. We would also refer to a Full Bench decision of the High Court of Andhra Pradesh in Madineni Kondiah v. Yaseen Fatima, 1986 Acc CJ 1 : (AIR 1986 Andh Pra 62), wherein the court held that in a claim by a third party it is not open to the insurer under S. 96(2) of the Act, to raise a plea that the policy had lapsed even during the period of cover by the vehicle being sold to someone else. We, therefore, hold that the defence that on sale of the vehicle during the period of cover the policy had elapsed, is not one that is available to the insurer under S. 96(2) as against third party claims.
15. Contention No. 2:-- According to the learned counsel for the appellants, the markings in Ex.A.6, the rough sketch of the scene made by PW3, the Investigating Officer, are based on statements recorded by him under S. 161, Cr.P.C. which are inadmissible in evidence and as such those markings in Ex.P.6 are to be eschewed from consideration. The findings of the Tribunal, as well as of, the learned Judge, based on those markings are therefore, unsustainable. Reliance was placed upon a decision of the Supreme Court in Tori Singh v. State of U. P. . The bar under S. 161, Cr.P.C. is applicable only to criminal trials. The statements recorded by the Investigating Officer under S. 161, Cr.P.C. could be looked into in other proceedings, provided of course, they are properly proved, either by examining the Investigating Officer, who recorded the statements or by examining the witnesses themselves. Once proved, those statements could be relied on, in proceedings like the present one. If, however, those statements arc not proved, they would come within the category of hearsay evidence and would not be admissible. In the instant case, PW 3 has stated that he visited the scene of accident and that the driver of the motor cycle and one Kupparaj were available there and that they pointed out the scene and on the basis of that he had drawn Ex.P.6, Ex.P.6, therefore could be relied on.
16. Both the Tribunal as well as the learned Judge have held, that the accident was due to the rash and negligent driving of the second appellant, mainly because the accident had occurred in the eastern extremity of the road, while the vehicle was coming from north to south and the first respondent was proceeding from west to cast. The width of the road was 7.55 metres. The first respondent, therefore, had crossed about 3/4ths of the road, and was about to reach the eastern pavement when the accident occurred. This rules out any negligence on the part of the first respondent and clearly spells out rashness and negligence on the part of the second appellant. We concur with the findings of the Tribunal as well as the learned Judge to that effect.
17. In the result, the appeal is partly allowed with costs, and there will be an Award for a sum of Rs. 4500, as against respondents 2 and 3 and appellants 1 and 2, the amount being initially payable by the insurer, the second respondent herein. This amount shall carry interest at 12 percent per annum from the date of the filing of the claim petition before the Motor Accident Claims Tribunal till the date of payment. It is needless to say that it would be open to the second respondent to work out its remedies against the parties concerned either under S. 96(3) proviso or under S. 96(4) of the Act. It is stated that the appellant had deposited one half of the amount which has since been withdrawn by the claimant. On the Insurance Company depositing the amount as directed above the appellants would be entitled to withdraw the amount which was deposited by them.
18. Appeal allowed in part.
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