The Vanguard Insurance Co. Ltd. Petitioner v. Smt. Rohini Bhan & Others S

H.R Khanna, C.J:— This judgment will dispose of Civil Revisions Nos. 458-D and 459-D of 1961.

The revisions arise out of an application filed on July 15, 1959, before the Motor Accidents Claims Tribunal, by Shrimati Rohini Bhan widow of J.N Bhan against Ranjit Surendra Goods Carrier Pvt. Limited Respondent No. 1, Gaja Singh, truck driver, Respondent No. 2 and Vanguard Insurance Company, Limited, Respondent No. 3. According to the allegations of Shrimati Rohini Bhan, her husband J.N Bhan while driving a scooter on April 30, 1959, was knocked down by truck No. DLD-5628 belonging to Ranjit Surendra Goods Carrier Pvt. Ltd. Gaja Singh was the driver of the truck at that time. It is alleged that Gaja Singh was an employee of Ranjit Surendra Goods Carrier Pvt. Ltd., and the accident occurred during the course of his employment. It is further stated that the above accident was due to reckless, rash and negligent driving of the truck by Gaja Singh. J.N Bhan died as a result of the injuries received by him on May 8, 1959. Vanguard Insurance Company Ltd. was stated to be liable to pay compensation and damages to Shrimati Rohini Bhan because the truck was insured with that company. A claim of Rs. 50,000 was accordingly made by Shrimati Rohini Bhan.

Written statements were filed on behalf of all the three respondents and they contested the application. The following issues were framed in the case :

(1) Whether it is not a properly constituted Tribunal under section 110 of the M.V Act ?

(2) Whether the injuries to Shri J.N Bhan were caused by the negligence of the respondent No. 2, and whether the death of Shri J.N Bhan occurred due to these injuries ?

(3) To what amount of compensation, if any, is the petitioner entitled, and from whom ?

(4) Whether the respondent No. 2 was driving the vehicle at the time of accident in course of employment of respondent No. 1 ?

On September 8, 1960, an application was filed on behalf of Shrimati Rohini Bhan that the name of Respondent No. 3 be struck off as a party as the aforesaid respondent had taken grounds in the written statement which were not covered by Sub-section (2) of section 96 of the Motor Vehicles Act (hereinafter referred to as the Act). This application was resisted by Respondents 1 and 2 as well as by Respondent No. 3. Another application was filed by Shrimati Rohini Bhan petitioner, under Order 14 rule 5, Code of Civil Procedure praying that Issue No. 4 which arose out of the pleas raised by Respondent No. 3 might be deleted. This application too was resisted by all the respondents. The Claims Tribunal as per order dated September 24, 1960, held that the Insurance Company could become a party to the proceedings only if it was in a position to base its defence on one of the grounds mentioned in Sub-section (2) of section 96 of the Act. It was further observed that as the pleas raised by the Insurance Company were not covered by that sub-section, the Insurance Company could not remain on the record as a party. The application of Shrimati Rohini Bhan for striking out the name of the Insurance Company from the list of respondents was allowed. Order was also made for the removal of the written statement of the Insurance Company from the record. It was further held that as Issue No. 4 arose out of the pleas taken in the written statement of the Insurance Company only, the said issue should be treated as deleted. Civil Revision 458-D/1961 has been filed by the Vanguard Insurance Company Ltd. against the above order.

On February 14, 1961 Vanguard Insurance Company Limited filed an application under section 151 of the Code of Civil Procedure for leave to defend the claim of Shrimati Rohini Bhan in the name of Ranjit Surendra Goods Carrier Pvt. Ltd. This application was resisted by Shrimati Rohini Bhan. The Claims Tribunal as per order dated May 2, 1961 disallowed the above application. Civil Revision No. 459-D of 1961 is directed against that order.

When the two revision petitions came up for hearing before Dua, C.J, he directed that the matter be referred to a larger Bench.

In order to appreciate the points of controversy we may refer to the relevant provisions of the Act. Chapter VIII of the Act makes provision for the insurance of motor vehicles against third party risks. Section 94 makes insurance against third party risk compulsory, while section 95 provides for the requirements of policies and limits of liability with which a policy of insurance must comply. According to section 97 the insurer shall be under the same liability to the third party as the insured in case where the insured becomes insolvent. Section 96 deals with the duty of insurers to satisfy judgments against persons insured in respect of third party risks. sub-section (1) of that section provides that if, after a certificate of insurance has been issued in favour of the person by whom a policy has been effected, judgment in respect of such liability is obtained against any person insured by the policy, the insurer shall, subject to other provisions, pay to the person entitled to the benefit of the decree any sum not exceeding the sum assured payable thereunder, as if he were the judgment debtor, in respect of the liability, together with the amount of costs and interest. Sub-section (2) of section 96 has a bearing and reads as under :—

“(2) No sum shall be payable by an insurer under sub-section (1) in respect of any judgment unless before or after the commencement of the proceedings in which the judgment is given the insurer had notice through the Court of the bringing of the proceedings, or in respect of any judgment so long as execution is stayed thereon pending an appeal; and an insurer to whom notice of the bringing of any such proceedings is so given shall be entitled to be made a party thereto and to defend the action on any of the following grounds, namely :—

(2) That the policy was cancelled by mutual consent or by virtue of any provisions contained therein before the accident giving rise to the liability, and that either the certificate of insurance was surrendered to 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 section 105; or

(b) that there has been a breach of a specified condition of the policy, being one of the following conditions, namely :—

(i) a condition excluding the use of the vehicle.

(a) for hire or reward, where the vehicle is on the date of the contract of insurance a vehicle not covered by a permit to ply for hire or reward, or

(b) for organised racing and speed testing, or

(c) for a purpose not allowed by the permit under which the vehicle is used, where the vehicle is a transport vehicle, or

(ii) a condition excluding driving by a named person or persons or by any person who is not duly licensed, or by any person who has been dis-qualified for holding or obtaining a driving licence during the period of dis-qualification; or

(iii) a condition excluding liability for injury caused or contributed to by conditions of war, civil war, riot or civil commotion; or

(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.”

It is not disputed before us that none of the grounds mentioned in clauses (a), (b) and (c) of Sub-section (2) of section 96 exists in the present case.

Bare perusal of the relevant part of sub-section (2), which has been reproduced above, makes it plain that an insurer, upon whom liability is sought to be fastened in respect of any amount regarding which legal proceedings are taken against the insured, has to be served with a notice of the proceedings through the Court. The insurer on receipt of that notice has a right to be impleaded as a party to the proceedings. The grounds, which the insurer can however take to defend the action in case the insurer is impleaded as a party, have to be those confined to clauses (a), (b) and (c) of Sub-section (2) of section 96. It may also be mentioned that apart from the statute the insurer has no right to be made a party to the action by the injured person or the heirs of the deceased against the insured causing the injury. Sub-section (2) of section 96, however, gives the right to the insurer to be made a party. The right is thus created by statute and its scope and extent would necessarily be governed by the provisions of the statute. Dealing with Sub-section (2) of section 96 of the Act, Sarkar, J., (as he then was) speaking for the Court, observed in the case of British India General Insurance Co. Ltd., v. Captain Itbar Singh and others, (1) :—

“To start with it is necessary to remember that apart from the statute an insurer has no right to be made a party to the action by the injured person against the insured causing the injury. Sub-section (2) of section 96 however gives him the right to be made a party to the suit and to defend it. The right therefore is created by statute and its content necessarily depends on the provisions of the statute. The question then really is, what are the defences that sub-section (2) makes available to an insurer ? That clearly is a question of interpretation of the sub-section.

(6) Now the language of sub-section (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 notice of the action 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 to 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.”

Mr. Chawla on behalf of Shrimati Rohini Bhan has argued that the insurer has a right to be impleaded as a party only if the insurer takes up any of the defences mentioned in clauses (a), (b) and (c) of Sub-section (2) of section 96 of the Act. If the insurer does not take those defences the name of the insurer, according to the submission of Mr. Chawla, would be liable to be struck out from the list of respondents. This contention, in our opinion, is not well-founded. An insurer to whom notice under Sub-section (2) of section 96 of the Act is given has a right to be impleaded as party to the proceedings. The Court at that stage is only concerned with the question of impleading the insurer as a party. It cannot at that stage compel the insurer to disclose his defence. It is only after the insurer is impleaded as a party that he can be called upon to file his written statement. If the written statement discloses defence, which is not covered by clauses (a), (b) and (c) of Sub-section (2) of section 96, the defence to that extent would be liable to be struck off. The insurer would, however, continue to remain a party to the proceedings.

In the present case the insurance company was initially impleaded as a respondent to the proceedings. Although the Tribunal was justified in striking off the defence of the insurance company to so far as it was not covered by clauses (a), (b) and (c) of Sub-section (2) of section 96, the Tribunal, in our view, was in error in striking off the name of the insurance company from the list of respondents in the case. Mr. Chawla has referred to the case of Sarupsing Managatsing v. Nilkant Bhaskar, (2). In that case a Division Bench of Bombay High Court (Chagla, C.J and Bhagwati J.) held :—

“if the ex-parte decree was passed against the defendant and if the Insurance Co. through the defendant satisfied the Court that the Insurance Co. did not have reasonable opportunity to defend the action, then the Court acting under its inherent jurisdiction would set aside the ex-parte decree, because although the defendant might have had sufficient cause to defend the action, if the defence was being conducted by the Insurance Co. and the defendant was only a nominal defendant, then it is not sufficient that the defendant should have had ample opportunity to defend the action, but the Insurance Co. should also be given ample opportunity to defend the action.

There is no question of setting aside an ex-parte decree at the instance of an insurer in the present case. In the circumstances, the observations made by the learned Judges, which were in the context of the facts of that case, cannot be of any material assistance in the present case.

Reference has also been made by Mr. Chawla to the case of Vanguard Fire & General Insurance Co. Ltd. v. Sarla Devi and others (3). There is, however, nothing in that case which militates against the view we have taken in the matter.

Mr. Chadha on behalf of the Insurance Company has argued that the provisions of section 96 of the Act apply only to proceedings in a regualar suit before a civil court and not to proceedings before a Motor Accidents Claims Tribunal (herein referred to as the Claims Tribunal). Reference in this context has been made to the case of K. Gopalakrishnan Minor v. Sankara narayanan and others, (4), wherein a Division Bench of Madras High Court observed :—

“A reading of Section 96 clearly show that it was not intended to govern enquiry before a Claims Tribunal. Section 96 contemplates proceedings in a Court and not a proceeding before a Tribunal.”

We have given the matter our consideration and are of the view that the provisions of section 96 of the Act are intended to govern all proceedings in which question arises about the liability of the insurer to satisfy judgment against persons insured in respect of third party risks. There is nothing in that section which restricts the applicability of its provision to proceedings in a regular suit in a civil court and which excludes from their ambit the proceedings before the Claims Tribunal. It may be mentioned that prior to the enactment of section 96 of the Act the remedy of the victim of the accident was only to proceed against the assured for damages and the insurer could not intervene nor could the plaintiff implead the insurer as a defendant. The policy of insurance could be enforced only by the parties to the insurance and the third person being not a party associated with the insurance could not sue on its basis. Section 96 and the other provisions of Chapter VIII of the Act were enacted with a view to remove that difficulty and mitigate the harshness of the general law. It is, in our opinion, difficult to believe that the legislature intended to relieve the parties of that hardship only in proceedings in a regular suit and not those before the Claims Tribunal. It is no doubt true that section 96 makes reference to Courts and to judgment and decree. In that respect we are of the view that the word “court” ‘used in that section is comprehensive enough to include Claims Tribunal and the words “judgment” and “decree” would include the award of that Tribunal. Claims Tribunal have been established in pursuance of the provisions of Section 110 of the Act, and if it had been the intention of the legislature to exclude the proceedings before such Tribunal from the operation of section 96 a clear indication to that effect would have been given. It is significant that according to sub-section (2) of section 110 of the Act the Claims Tribunal shall have all the powers of a Civil Court for the purpose of taking evidence on oath and of enforcing the attendance of witnesses and of compelling the discovery and production of documents and material objects and for such other purposes as may be prescribed. It has further been provided that the Claims Tribunal shall be deemed to be a Civil Court for all the purposes of section 195 and Chapter XXXV of the Code of Criminal Procedure.

In Civil Revision No. 459-D Mr. Chadha has argued that the Claims Tribunal was in error in disallowing the application of the insurance company for leave to defend the claim of Shrimati Rohini Bhan in the name of the transport company. In this respect we find that the legal position, as laid down by their Lordships in the case of British India General Insurance Co. Ltd. v. Captain Itbar Singh and others, (1) is that an insurer has the right, provided he has reserved it by the policy, to defend the action in the name of the assured and if he does so, all defences open to the assured can be urged by him. He can thus avoid all hardship, if any, by providing for a right to defend the action in the name of the assured. In the present case the insurance company mentioned in Para 6 of the application that there was a condition of policy between the insurance company and the transport company to allow the insurance company to defend the action in the name of the transport company. This allegation of the insurance company was denied by Shrimati Rohini Bhan. No effort was made by the insurance company to substantiate that allegation with the result that there is nothing on the record which might prove the existence of such a condition in the policy of insurance. There is also no ground of revision that the insurance company was denied the right to prove the existence of such a condition and that it should have been granted an opportunity for the purpose. In the circumstances, we find no sufficient ground to interfere with the order of the Tribunal by which the Tribunal disallowed the application of the insurance company to defend the claim in the name of the transport company.

As a result of the above, we accept Civil Revision No. 458-D of 1961 and set aside the order of the Tribunal to the extent that the name of the insurance company was struck out from the list of the respondents. In other respects the aforesaid revision is dismissed. Revision No. 459-D of 1961 is dismissed to. Looking to all the facts, we leave the parties to bear their own costs of the two revisions.

The parties are directed, through their counsel to appear before the Claims Tribunal on 22-9-69.

ANK Order accordingly.