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Case Number

C.M.A(MD) No. 1624 of 2008 and Connected Miscellaneous Petitions

Attorney(S)

S. Ramachandran, Advocate for Appellant.
N. Balakrishnan for R. Muruganandam, Advocate for Respondents.

Judges

D. Hariparanthaman, J.

Acts

Motor Vehicles Act and the Insurance Policy Ex.A16 (Exs.B3 and B5)
Sections 140, 147 and 166 of the Motor Vehicles Act, 1988
COMPANIES ACT 1956

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Smart Summary

Structured Summary of the Opinion — Civil Miscellaneous Appeal (Motor Accident Claim)

Factual and Procedural Background

The First Respondent (a doctor and the Managing Director of M/s. Kanakesa Thevar Memorial Hospital (P) Ltd., the Second Respondent) was injured in a motor accident on 23.3.2001 while travelling in a Lancer car (Regn. No. TN-49-K-2750) owned by the Second Respondent and insured with the Appellant (Insurance Company). The First Respondent sustained serious facial and other injuries and later filed M.A.C.O.P No. 357/2004 under Sections 140, 147 and 166 of the Motor Vehicles Act, 1988, claiming Rs. 20,00,000/- against the Second Respondent (Company) and the Appellant (Insurance Company).

Before the Motor Accident Claims Tribunal (Sub-Court), Pattukkottai, the Insurance Company resisted liability arguing that the First Respondent was the legal owner of the vehicle and therefore not covered under the insurance policy. The Tribunal found that the First Respondent was not the owner of the vehicle but that the Second Respondent Company was, and awarded Rs. 8,63,200/- with interest at 7.5% from the date of filing of the petition. The Insurance Company filed the present Civil Miscellaneous Appeal challenging that finding on the sole ground that the First Respondent was the owner and therefore not entitled to compensation under the policy.

Legal Issues Presented

Whether the First Respondent (the Managing Director) was the owner of the car involved in the accident such that he would be excluded from claiming compensation under the terms of the insurance policy;
Whether, if the First Respondent is not the owner, the Insurance Company (Appellant) is liable to pay compensation to him as an occupant under the insurance policy issued in the name of the Second Respondent (Company).

Arguments of the Parties

Appellant's Arguments (Insurance Company)

The First Respondent, being the Managing Director who signed on behalf of the Second Respondent in the R.C. Book, is the real/legal owner of the vehicle.
The insurance policy (Ex.A16 / Exs.B3 and B5) does not cover the risk of the owner of the vehicle; therefore the First Respondent is not entitled to compensation if he is the owner.
The learned counsel relied on a number of judicial decisions (not named in the opinion) establishing the proposition that the owner is not covered under the policy unless specifically included.

First Respondent's Arguments (Claimant) and Second Respondent's Position (Company)

The car was owned by the Second Respondent Company (a distinct legal entity registered under the Companies Act, 1956); the First Respondent, though Managing Director, is a different legal person from the Company.
Ex.B1 (Certificate of Incorporation) and the company's Memorandum and Articles demonstrate the separate corporate identity; the Managing Director receives salary and cannot be equated with the Company or claim company assets as his own.
The insurance policy (Ex.A16 / Exs.B3 and B5) was taken in the name of the Company and is a package policy covering occupants; in fact, the insurer had already paid compensation to the legal heirs of a deceased occupant and had paid the Company for damage to the car.
The First Respondent relied on various judgments (not all named in the opinion) supporting that occupants under a package policy are entitled to compensation, and specifically relied on Chamundeeswari v. The Commercial Tax Officer, 2007 (2) CTC 149 to support the distinctness of the Company from its Managing Director.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Chamundeeswari v. The Commercial Tax Officer, 2007 (2) CTC 149	Supports the proposition that distraint proceedings (and, more broadly, liabilities) against a Company cannot be equated with actions against its Directors; the corporate entity is distinct from its Managing Director.	The Court applied this authority to reinforce that the First Respondent (Managing Director) is distinct from the Second Respondent (Company) and therefore not the owner of the vehicle for purposes of the insurance exclusion.
Unspecified judgments relied on by the Appellant (not named in the opinion)	Proposition that unless the owner of the vehicle is covered under the policy, the owner is not entitled to claim compensation.	The Court noted that this proposition was not disputed by the Respondents but held those judgments inapplicable on the facts because the question of ownership (whether the First Respondent was owner) was determinative and, on the record, the registered owner and policy holder was the Company.
Unspecified/various judgments relied on by the First Respondent regarding package policies (not named in the opinion)	Package insurance policies bind the insurer to pay compensation to occupants of an insured vehicle.	The Court observed that this proposition was not disputed by the Appellant and that the Appellant had in fact paid compensation to a deceased occupant's heirs and to the Company for vehicle damage; therefore those authorities were not further dealt with.

Court's Reasoning and Analysis

The court undertook a focused analysis on the sole issue of ownership. The steps in the court's reasoning were:

The court examined Ex.B1 (Certificate of Incorporation) and the Memorandum and Articles of Association of the Second Respondent and noted Clauses relevant to corporate existence and powers (clause 22 of the Memorandum was quoted; Articles clauses 28(i), 30 and 57 were referenced) to establish that the Second Respondent is a company incorporated under the Companies Act, 1956 and therefore a distinct legal entity.
The court inspected the R.C. Book (Ex.A5) and observed that the registered owner is recorded as the Company (M/s. Kanakesa Thevar Memorial Hospital (P) Ltd.). Although the First Respondent signed the R.C. book as the Managing Director, the court held that this signature did not convert the Managing Director into the owner of the vehicle.
The court noted that the insurance policy (Ex.A16 / Exs.B3 and B5) was issued in the name of the Company, not the First Respondent, and that the Appellant had, on the record, accepted and acted on that position by paying compensation to the deceased occupant's legal heirs and for damage to the car in favour of the Company.
While the Appellant relied on earlier judgments for the general proposition that an owner is not covered under a policy unless specifically included, the court found that proposition undisputed but inapplicable given the factual finding that the Company — not the Managing Director — was the registered owner and policyholder.
The court applied Chamundeeswari v. The Commercial Tax Officer to support the legal distinction between the Company and its Managing Director and concluded that the First Respondent could not be treated as the vehicle's owner for the purpose of excluding him from the policy cover.
On these bases, the court concluded that the First Respondent was entitled to compensation as an occupant and that the Insurance Company was liable to pay the award made by the Tribunal.

Holding and Implications

APPEAL DISMISSED.

Direct effects and orders:

The Civil Miscellaneous Appeal filed by the Insurance Company is dismissed.
The Appellant (Insurance Company) is directed to deposit the Tribunal's award amount of Rs. 8,63,200/- with interest at 7.5% per annum from the date of filing of the Claim Petition, within four weeks from receipt of a copy of this order.
No costs were awarded. Connected Miscellaneous Petitions were closed.

Implications beyond the parties: The opinion confines itself to application of established principles (corporate distinctness; scope of policy cover) to the facts and does not purport to lay down any novel legal proposition. Accordingly, the decision's practical consequence is the affirmation of the Tribunal's award and the insurer's liability to pay it; the opinion does not announce a new precedent beyond applying the cited authorities to the facts of this case.

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National Insurance Company Limited v. Dr. Balakrishnan

1. The Appellant - Insurance Company has questioned the order and decree dated 19.04.2007 passed in M.A.C.O.P No. 357/2004 by the Motor Accident Claims Tribunal, Sub-Court, Pattukkottai on the sole ground that the First Respondent, being the owner of the vehicle that was insured with the Appellant, is not entitled to compensation for the injuries suffered, while he travelled in the vehicle.

2. That was the only issue raised by the Appellant - Insurance Company before the Tribunal. The Tribunal recorded a finding that the First Respondent herein was not the owner of the vehicle and that the Second Respondent - Company is the owner of the vehicle. In view of such finding, the Tribunal awarded compensation of Rs. 8,63,200/- with interest at 7.5% from the date of filing of the Petition.

3. The brief facts leading to the filing of this Appeal are as follows:

(a) The First Respondent is a Doctor by profession. M/s. Kanakesa Thevar Memorial Hospital (P) Ltd., the Second Respondent herein, is a Company registered under the Companies Act, 1956. The First Respondent is the Managing Director of the Second Respondent Company. The Second Respondent owned a Lancer Car, bearing registration No. TN-49-K-2750 which involved in the accident and the same was insured with the Appellant.

(b) On 23.3.2001, at 08.30 p.m, the First Respondent travelled in the Car from Trichy to Tanjore. While so, the Car involved in an accident with a bullock cart at Muthandipatti in Trichy - Tanjore Road. Due to the accident, the First Respondent sustained multiple injuries with fascio maxillary injury and his nasal bones also got fractured. He lost his 10 teeth. His upper jaw also got broken. He was treated as in-patient at Vinodhagan Memorial Hospital, Tanjore for a long time. His face got disfigured. His speech power also got reduced. He could not freely open his mouth. He could not hear well. It affected his medical practice seriously. According to him, he suffered 60% permanent partial disability.

(c) Hence, the First Respondent herein filed a Petition in M.A.C.O.P No. 357/2004 under Sections 140, 147 and 166 of the Motor Vehicles Act, 1988 against the Second Respondent and Appellant herein, claiming a sum of Rs. 20,00,000/- as compensation, before the Motor Accident Claims Tribunal (Sub-Court), Pattukkottai. The Appellant - Insurance Company was shown as Second Respondent and the Second Respondent - Company was shown as the First Respondent in the Claim Petition.

(d) The Appellant - Insurance Company resisted the claim contending that they are not liable to indemnify the First Respondent herein, who happens to be the legal owner of the vehicle in question, and that the First Respondent herein, is not covered under the insurance policy, in specific, under the terms and conditions of the Insurance Policy.

(e) Before the Tribunal, the First Respondent - Claimant got examined himself as P.W.1 and the Doctor by name Mr. Sivaraj, who gave the Disability Certificate, was examined as P.W.2 On the side of the First Respondent - Claimant, 16 documents were marked as Exs.A1 to A16.

(f) Likewise, the Second Respondent - Company examined its Manager as R.W.1 and the Divisional Manager of the Insurance Company was examined as R.W.2 On the side of the Second Respondent - Company, 6 documents were marked as Exs.B1 to B6, out of which Exs.B1 to B4 were marked through R.W.1 and Exs.B5 and B6 were marked through R.W.2

(g) The Tribunal passed the order and decree dated 19.04.2007 in M.A.C.O.P No. 357/2004 holding that the First Respondent was not the owner of the Car and hence, he is entitled to compensation and directed the Appellant - Insurance Company to pay a sum of Rs. 8,63,200/- with interest at 7.5% from the date of filing of the Petition.

Challenging the same, the Insurance Company has come up with the present Civil Miscellaneous Appeal.

4. Heard the submissions made by the learned Counsel for the Appellant and learned Counsel for the Respondents.

5. As stated above, the only issue that arises for consideration in this Appeal is whether the First Respondent - Claimant is the owner of the Car and in that event, he could not claim compensation as the Insurance Policy Ex.A16 (Exs.B3 and B5) does not cover the risk of the owner of the vehicle.

6. The learned Counsel for the Appellant strenuously contended that the First Respondent, being the Managing Director who represented the Second Respondent - Company and signed on behalf of the Second Respondent - Company in the R.C Book of the Car, is the real owner of the Car. The learned Counsel relied on number of judgments that risk of the owner of the vehicle is not covered statutorily under the Motor Vehicles Act and the Insurance Policy Ex.A16 (Exs.B3 and B5) does not cover the risk of the owner in an accident.

7. On the other hand, the learned Counsel for the First Respondent-Claimant submitted that the Car which involved in the accident was owned by the Second Respondent - Company, which is registered under the Companies Act, 1956 and it was a distinct entity. He heavily relied on Ex.B1, the Certificate of Incorporation of the Second Respondent - Company under the Companies Act, 1956. The Managing Director is in receipt of salary from the Company and he is a different person from the Company. The Managing Director could occupy a high position in the Company, but he could not be equated with the Company. Any liability of the Company could not be recovered from the Managing Director or from the Directors and the same should be recovered only from the Company. Likewise, if there is any assets of the Company, the Managing Director or the Directors of the Company, could not claim right over those assets. The learned Counsel submitted that the Insurance Policy-Ex.A16 (Exs.B3 and B5) is a package policy and that covers the occupants of the Car. The other person, who travelled in the Car died due to the accident and he was paid compensation by the Appellant - Insurance Company. Further, the Appellant - Insurance Company paid compensation to the Second Respondent - Company for the damages to the Car suffered due to the accident. He relied on various judgments to show that in the case of package policies, the Insurance Company is bound to pay compensation to the occupant of the Car. He also relied on a judgment of this Court in Chamundeeswari v. The Commercial Tax Officer, 2007 (2) CTC 149 to show that the distraint proceedings initiated by the Commercial Tax Department against the Directors of the Company in respect of sales tax dues from the Company was quashed. The said judgment supports the case of the First Respondent that the Managing Director is a different person from that of the Company.

8. I have considered the submissions made on either side and perused the materials available on record.

9. Ex.B1 is the Certificate of Incorporation incorporating the Second Respondent - Company under the Companies Act. As per incorporation, the name of the Second Respondent - Company is Kanakesha Thevar Memorial Hospital Private Limited. The Memorandum of Association and Articles of Association of the Second Respondent - Company do form part of Ex.B1 Clause 22 of the Memorandum of the Association is relevant for the purpose of this case and the same reads as follows:

“To initiate, conduct, defend or compound any legal proceedings by or against the Company or its officers or otherwise concerning the affairs of the Company and to pay, satisfy or compromise any claim made against the company or any of its officers notwithstanding that the claim may not be valid in law.”

As per Clause 28(i) of the Articles of Association, the Company shall not have less than two and not more than ten Directors. Clause 30 of Articles of Association furnish the first Directors of the Company. There were three First Directors and the First Respondent - Claimant was one among them. The Company has a common seal as per Clause 57 of the Articles of Association.

10. From the above, it is very clear that the Second Respondent-Company is registered under the Companies Act and it is a distinct one. The Managing Director of the Company is a different person from that of the Company. Just because the First Respondent - Claimant signed on behalf of the Company in the R.C Book of the Car that involved in the accident, that could not make him the owner of the Car. In fact, Ex.A5 - R.C Book itself makes it very clear that the registered owner of the Car is the Second Respondent - Company and not the First Respondent - Claimant. In this regard, the first page of the R.C Book of the Car, which involved in the accident is extracted hereunder:

“Name of registered owner: M/s. Kanakesa Thevar son/wife/daughter of Memorial Hospital (P) Ltd., Full address (Permanent) 66, Chinnaiah Street, Pattukkottai, Thanjavur Full address (temporary) Act India Chennai - 20. Age: Date: 8.3.2000”

When the Registering Authority signed the R.C Book, the First Respondent - Claimant singed as Managing Director for Kanakesha Thevar Memorial Hospital Private Limited. That could not make him the owner of the vehicle. Furthermore, Ex.A16 (Exs.B3 and B5) Insurance Policy was issued in the name of Kanakesha Thevar Memorial Hospital Private Limited, and not in the name of the First Respondent - Claimant. That is, the Appellant - Insurance Company also recognize that the Second Respondent - Company as the owner of the vehicle and not the First Respondent - Managing Director. In order to avoid liability, the Appellant - Insurance Company could not simply say that the Managing Director is the legal owner of the vehicle.

11. In the ground No. 3 of the Appeal, the Appellant states that the First Respondent himself has taken the Policy of Insurance with the Appellant. As stated above, it is not factually correct and the policy was taken by the Company as per Ex.A16 (Exs.B3 and B5). Likewise, in ground Nos. 4 and 5 also, the same was repeated that the First Respondent is the owner of the vehicle, without any basis.

12. The judgments relied on by the learned Counsel for the Appellant are not relevant as the proposition therein is not disputed even by the learned Counsel for the Respondents. In those judgments, it was held that unless the owner of the vehicle is covered under the policy, the owner is not entitled to claim compensation. Hence, those judgments are not applicable to the facts of this case. If the First Respondent - Claimant is construed as the owner of the vehicle, he is not entitled to compensation and on the other hand, if he is not a owner, then he is entitled to compensation. Admittedly, when the other person, who travelled along with the First Respondent - Claimant, died in the accident, his legal heirs were paid compensation by the Appellant - Insurance Company based on the policy. Likewise, It is not disputed that the Second Respondent - Company was paid for the damages caused to the Car due to the accident based on the policy.

13. Hence, I am of the considered view that the First Respondent - Claimant is not the owner of the Car and that the Appellant - Insurance Company is liable to pay compensation to the injuries suffered to the First Respondent, while he travelled as an occupant of the Car. The judgment relied on by the learned Counsel for the First Respondent in Chamundeeswari v. The Commercial Tax Officer, 2007 (2) CTC 149 squarely applies to the case on hand. That is, the First Respondent is different from the Second Respondent - Company. Hence, the First Respondent is entitled to compensation. The Appellant resisted the case only on the ground that the First Respondent is the owner of the Car. If he is not the owner of the Car, the right of the First Respondent to receive compensation is not in dispute. The other judgments relied on by the learned Counsel for the First Respondent are for the proposition that the occupants of the Car insured with a package policy, are entitled to compensation as per the Policy conditions and the same is not disputed by the Appellant. Hence, those judgments are not dealt with.

14. For all the aforesaid reasons, the Civil Miscellaneous Appeal is dismissed and the Appellant - Insurance Company is directed to deposit the award amount with interest at the rate of 7.5% per annum from the date of filing of Claim Petition, within a period of four weeks from the date of receipt of a copy of this order. No costs. Consequently, connected Miscellaneous Petitions are closed.

National Insurance Company Limited v. Dr. Balakrishnan

Structured Summary of the Opinion — Civil Miscellaneous Appeal (Motor Accident Claim)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant's Arguments (Insurance Company)

First Respondent's Arguments (Claimant) and Second Respondent's Position (Company)

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

National Insurance Company Limited v. Dr. Balakrishnan

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