1. The Court: This is an application made by the claimant, who is the respondent No. 1 in the insurer's appeal, for summary dismissal of the said appeal.

2. It is submitted that the fact of the accident and of the use of the vehicle there is no dispute. It is further submitted that the insurer has not raised any dispute in regard to the validity of the policy itself. As it appears from the Memorandum of Appeal, the insurer's only substantial grievance is against the quantum of damages assessed. Before the Claims Tribunal, the owner never put in an appearance. The contest was made by the insurer and the insurer only. The insurer was a party to the claim from the beginning. Notice was also duly served. The insurer no doubt disputed the quantum, before the Claims Tribunal but even then, according to the claimant, the appeal is not arguable by the insurer.

3. The facts of this case and the litigation so far are that sometime in or around July, 1989, which is the month when the Motor Vehicles Act, 1988 also came into operation, the unfortunate accident occurred killing the only issue of the claimant. The claimant now resides in an interior part of Midnapore and is ill able to afford litigation. Her son died at an age below 20. He used to work as a petty street vendor. The Tribunal has awarded compensation of Rs. 80,000/- directing payment to be made within one month of the passing of the award, which was passed on 19.2.1992 In default of such payment, it was ordered, that the principal sum of Rs. 80,000/- would carry interest at the simple rate of 10% per annum from the date of presentation of the claim till payment.

4. For our purposes, since the claim has to be filed within six months from the accident, we shall treat interest as running from the beginning of the year 1990.

5. The summary dismissal of the appeal was prayed for by invoking section 170 of the Motor Vehicles Act, 1988. The said section is set out hereinblow:

“170. Impleading insurer in certain cases.-

Where in the course of any inquiry, the Claims Tribunal is satisfied that-

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

b) the person against whom the claim is made has failed to contest the claim, it may, for reasons to be recorded 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, without prejudice to the provisions contained in sub-section (2) of section 149, 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.”

6. It was submitted that this section has already fallen to be considered by the Supreme Court. Such consideration has been made in the reported judgment of Shankarayya, which was decided by the Supreme Court on January 16, 1998. The case is reported at AIR 1998 SC 2968.

7. The short judgment of a page and a half was placed in full before us and it was emphasized that in that case the Supreme Court had refused to allow an appeal by the insurer to be argued for reduction of the quantum of damages. The original claim before the Tribunal had been made to the extent of Rs. 2.60 lac; the Tribunal had awarded Rs. 1.05 lac. On an appeal by the insurer, the High Court brought down the quantum to Rs. 60,000/-. The Supreme Court said that the interference by the High Court was improper and the insurer, not having appropriately invoked section 170 before the Claims Tribunal, was not entitled to raise a point as to the reduction of the quantum of damages in the appeal before the High Court.

8. The Supreme Court noted that the insurer had been a party throughout before the Tribunal; that the insurer had urged and argued the point of quantum before the Tribunal without any demur or protest being raised against such argument at that time before the Tribunal. Yet, according to the Supreme Court, section 170 not being appropriately invoked, the insurer had no right to urge a point upon the quantum of damages. Their Lordships opined that the Insurance Company can be permitted to contest the proceeding on merits only if the conditions precedent mentioned in the section are found to be satisfied. Their Lordships pointed out that this did not mean the loss of any right of the insurer to raise points of defence as mentioned in sub-section (2) of section 149 of the Motor Vehicles Act. However, that section is related not to the quantum of damages but to points of defence on the Insurance Policy itself, like, say, the policy itself being void or non-existant.

9. The argument of the claimant-respondent before us was that the case before us is on all forms with Shankarayya's case and upon the simple doctrine of precedent, we are bound to follow it and dismiss the appeal outright.

10. A reference was also made to a Division Bench judgement of our court given in the case of Gurdial Singh, reported at 2000 Vol. I, CIJ 624. The Division Bench allowed an application like the one, we are hearing now, and allowed it by dismissing the appeal in limine on the principles enunciated in Shankarayya's case.

11. An unreported decision of the same Hon'ble Division Bench given on April 7, 2000 was also relied upon before us. There the Division Bench observed that it was not making any observation on the submission made by the learned Advocate for the Insurance Company that Special Leave Petition had been preferred in regard to other matters (presumably involving the same point). The unreported case reference is as follows: (F.M.A 401 of 1992, The Oriental Insurance Co. Ltd. v. Smt. Bijoli Maji).

12. Several other authorities were also relied upon by the claimant but in our opinion, those are not material to the real issue.

13. Resisting the application for summary dismissal, Mr. Das learned Advocate appearing for the Insurance Company submitted that so far as that part of the principal sum, namely, the sum of Rs. 50,000/-, is concerned, along with the interest thereon, the Insureance Company might not be able to raise points as to the quantum even in the final hearing of the appeal. This is because such sum is payable on the basis of the principles and provisions mentioned and enacted in section 140 of the Motor Vehicles Act, by reason of which in cases of accident involving death, a sum of Rs. 50,000/- is payable without proof of damage, but upon proof of the accident and the use of the vehicle only.

He, therefore, restricted his submissions to the balance principal sum of Rs. 30,000/- and interest thereupon and his submission was that to this extent the appeal should not be summarily rejected.

14. The main case upon which he relied, is the case of Captain Itbar Singh, a decision given on 11.5.1958 by a Bench of the Supreme Court consisting of three Hon'ble Judges. Mr. Das submitted that Shankarayya's case is decided by a Bench of strength two.

The said case of Captain Itbar Singh is reported at (1958-65) Accidents Claims Journal, page - 1.

That matter arose before the Supreme Court as the High Court had held that the insurers in regard to the then operative Motor Vehicles Act, 1939, could defend the actions only on the grounds mentioned in sub-section (2) of section 96 of the said Act. That sub-section is practically in pari materia with the present sub-section (2) of section 149.

The Supreme Court opined that the decision of the High Court was correct and the appeals to the Supreme Court were dismissed. Their Lordships affirmed the view that the insurer would be entitled to insist the liability created by the Statute against it, only by raising statutory defences as permitted in the Statute and those were as mentioned in the above referred sub-section.

However, in answering the contention of the learned Solicitor-General Mr. C.K Daphtary, that it is only fair, that a person sought to be made bound by a judgement, should be entitled to resist his liability under it by all defences which he can in law advance against the passing of it, the Supreme Court opined as follows:

“We are furthermore not convinced that the statute causes any hardship. First, the 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 then be urged by him, and there is no other defence that he claims to be entitled to urge.”

Paragraphs 15 and 16 of the judgment should be referred to in this regard as the arguments and the answers thereof as mentioned by us are contained there.

The arguments made by the then learned Additional Solicitor-General, Mr. C.K Daphtary are to be found in paragraph No. 15 of the said judgment, and it is, in its essence, an argument of natural justice. The argument was that the insurer, if he is to be made liable to pay a certain quantum of damages, should be heard as to the said quantum before liability is made to fix upon him. Such a principle of creating liability after hearing the party intended to be affected is at the root of the system of dispensation of justice. Justice A.K Sarkar (as His Lordship then was) with the greatest respect, naturally could not and did not brush aside this argument; that the principle of natural justice is to be observed with regard to the insurers, is statutorily specified in the Motor Vehicles Act, 1988, also, and this is to be found in section 168 of that Act. The giving of an opportunity of being heard including to the insurer is mentioned in that section specifically. According to the decision of Captain Itbar Singh's case, this principle of natural justice as to the quantum is satisfied in regard to the insurer because he can always contest the claim in the name of the owner or the insurer and by doing that he can raise arguments against the assessment of the quantum of damages as much as the insured himself can.

The Supreme Court said exactly this, in the manner we venture to read and understand that paragraph, in paragraph No. 16 of the above judgement.

15. The principle which allows the insurer to take up before the Claims Tribunal, the defence which justly and appropriately belongs peculiarly to the insurer only, i.e, say, the defence as to the quantum of damages, is the principle of subrogation. Stated in brief, in a rough and ready manner without refinements and trappings of perfection, the principle is that if A satisfies the liability of B, which B owes to C then and in that event. A becomes also entitled to the rights of B which B would have had against C, before the intervention of A, had B satisfied C on his own.

16. This principle finds its application and statement again and again. Under the Contract Act (section 41) if A satisfies the liability of B to C, C cannot thereafter again sue B. Mere typically, if a mortgage is redeemed by a third party, then the person redeeming becomes entitled, upon the principle of subrogation to the rights of the mortgagee as against the mortgagor including the rights of foreclosure. (See section 92 of the Transfer of Property Act, 1882). The principle of subrogation has always applied to the situation of insurers contracts. If an insurer satisfies an insured the insurer is subrogated to the rights of the insurer, who has claimed total loss, to obtain whatever is left, say, of property damaged by fire which was under fire insurance. It is upon this principle of subrogation, that an insurer, who is before the Claims Tribunal, and who is bound directly to satisfy the claim, if the award goes against him, becomes entitled to take up the defences of the insured. The situation then looks upon the contract of insurance as already having been appropriately discharged, and allows the insurer to take up the insurer's defence even before the pronouncement of the award. We might call this, the principle of advance subrogation, where subrogation occurs even before actual discharge of the subrogatee's liabilities.

17. But in this two conditions must bis satisfied.

Those are as follows:

i) The contract of insurance must provide for subrogation, in the sense that it must permit, upon satisfaction of the insurance liability or upon the making of due provisions of such satisfaction, the insurer to be subrogated to the insured's position as regards the taking of defences in suits and actions including Motor Vehicles Compensation Actions,

ii) The insurer must, absolutely correct and technical theory, make it plain to the Tribunal hearing the action, that the defence is being raised by the insurer in the name of the insured and for lessening the liability of the insured, so that in the insurer's turn, he is thereby benefitted.

18. Mr. Das argued that in the present day, every contract of third party Motor Insurance contains a Clause which satisfies the first of these above conditions. In other words, a Clause permitting subrogation of the insurer to take up the defence of the insured is inserted as a matter of course by all the four nationalized Insurance Companies.

19. To substantiate this position Mr. Das most helpfully drew our attention to the case of New India Assurance v. Leela (decided on 24.2.98) reported in 1999 Accidents Claims Journal, page 542. It is a Division Bench judgement of the Kerala High Court sitting at Ernakulam. The Condition No. 2 is most helpfully quoted in that judgement. We need not re-quote it herein, as it could not be disputed or compended by the claimant that such a condition was absent in the policy of Insurance under review by us.

20. Because, perhaps, of the proximity on fine of this above judgement of the Hon'ble Division Bench of the Kerala High Court to the judgement in Shankarayya's case, that case was not considered there but the value of the Kerala decision remains nonetheless for the reasons given above.

21. Mr. Das, thus, contended that the Insurance Company never having disputed its appropriately determined liability vis-a-vis the insured, the insurer all along hand, by the operation of the principle of subrogation as noticed in Captain Itbar Singh's case, the right to challenge the quantum even if the insured himself did not make the challenge or even did not appear.

22. The argument by Mr. Das is no doubt of great force but before we can accept it finally, we have to see how the case of Shankarayya affects the disputes before us.

23. It is not that section 170 of the 1988 Act is a new inclusion. A similar provision was there under the 1939 Act under section 110C-2(A). That section is set out below:

“HOC. (2A) 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.”

24. It will be seen that there is not much difference between this provision and section 170 as it now stands. It is equally important to note that this sub-section was not enacted along with the 1939 Act. It was inserted therein much later by an Act of 1969 and it became effective from 2.3.1970 Captain Itbar Singh's case was decided some 12 years before this inclusion.

25. The point to note is that notwithstanding the absence of a section similar to section 170, the decision reached in Captain Itbar Singh's case, is not very much at variance with the decision given in Shankarayya's case. The great similarity between these two cases lies in this, that both recognised the peculiar and typical defence of the insured to be defences related to the Insurance Policy, which defences were mentioned in section 96 sub-section (2) of the 1939 Act and which defences are again mentioned in section 149(2) of Act 1988.

26. The point of subrogation and the point of the existence of a permissive subrogating contractual Clause like Clause 2 above was never argued in Shankarayya's case. The Supreme Court did not consider this aspect of the case at all. If this aspect of the case is not considered, then the ruling of Itbar Singh and the ruling of Shankarayya are at one. The joint ruling is that the insurer shall not take up the peculiar defences of the insured relating to the merits of the case like the quantum of damages, unless upon a principle of advance subrogation, which we have explained above.

27. In our opinion, although section 170 is wide in scope, yet the typical situation which section 170 or its precursor, was intended to correct was a situation where the insurer is not made a party at all before the Accident Claims Tribunal. The claimant is not entitled or obliged to make the insured a party although a notice to the insurer the Claims Tribunal might necessarily have to send under section 168 of the M.V Act of 1988. If the Insurance Company is to be made liable on the judgment of the Claims Tribunal, it would have to be given notice, even under the 1939 Act, under sub-section (2) of section 96. A similar provision is there in the present sub-section (2) of section 149. Upon receipt of such notice, the insurer can raise the defences of the type specifically mentioned in the statute in the above sub-section.

28. Unless a notice under section 149(2) is given, no sum shall be payable by it as that very sub-section provides. Sub-section 7 of section 149 provides that if a notice has been given to the insured as per sub-section (2), the insurer must either raise a successful defence as per that sub-section, or in default thereof, be bound by the judgment and a award.

29. The Act, therefore, contemplates notice, other than in section 170, in two other places at least, in 149(2) and in 168. Section 168 notice is compulsorily to be given as the section uses the word “shall”. However, the notice under section 149(2) has to be given if and only if the insurer is sought to be made bound.

30. It is not outside the bounds of imagination, that a claim might be completely silent about any existence of any insurance contract. Although a duty to give disclosure about the existence of the particulars of such contract is fixed upon the insured by section 151 of the M.V Act of 1988, yet, the claimant and the insured might collusively beep totally silent about it. The insured might, on the other hand, be absconding, or untraceable, or too incurably lazy to attend any Tribunal or court. In this event, the claimant, in the absence of a section 149(2) notice to the insurer might well score a large ex parte victory before the Claims Tribunal and obtain an award of damages for an exhorbitant heavy sum.

31. If there is collusion between the claimant and the insured, or the owner insured ….absent from the Tribunal, such heavy sum might be made the subject matter of an insurance claim in a suit filed in a civil court where the plaintiff is the insured and the defendant is the insurer. Such a suit is not barred on a joint reading of sections 165 and 175 of the Motor Vehicles Act, 1988. At least it is arguable that such suit as between the insurer and the insured being a pure insurance suit is not so bared. The existence of an ex parte heavy award in a situation like this, is very likely to embarrass the Insurance Company, especially it is a nationalised one. It will be difficult for the Insurance Company to challenge the quantum of the award because it has been obtained in accordance with law by giving notice under section 168 but without giving notice under section 149(2) because the scheming or collusive applicant has not sought to get the Insurance Company bound by the award of the Accident Claims Tribunal. It is made a design to implicate the Insurance Company later on.

32. This evil, amongst others section 170 is designed to correct. If the Tribunal finds that the merits of the case including the quantum are not being appropriately contested on a due adversary procedure it might cause an Insurance Company which is not yet a party to be impleaded as such by the reasoned order. The Tribunal can thereupon get the case contested by the insurer itself, although the insured is showing a half-hearted attitude in the matter of wigging the insured's own defences on merits.

33. Shankarayya's case lays down that in a situation like this, it little matters whether the Insurance Company is a party before the Tribunal or has never been made a party before it. If the principle of subrogation is not involved, then the Insurance Company must satisfy the Tribunal that it needs to contest the case on merits so that the quantum and other matters are not settled by the Tribunal without a proper scrutiny of the matter. Unless the Tribunal is satisfied in this regard, the Insurance Company shall not, only by reason of the existence of an Insurance Contract, be entitled to contest the case on merits. Such contest can be made by the insured, if the insurer is absent, or is acting improperly only with events the insured can argue on merits at the instance of the Tribunal and also raise all defence on such merits.

34. But this is not so, if by prior contract between the insurer and the insured, and by reason thereof and relying thereon, the insurer takes up, upon subrogation, the rights of defence of the compensation case on merits which originally belongs to the insured. If this be the case, neither the absence of the insured nor any examination of collusion between the claimant and the insured is of any material value. There is nothing in Shankarayya's case which is contrary to this, and there are clear propositions in paragraph No. 16 of Captain Itbar Singh's case which unmistakably support this oposition.

35. We are not much troubled with this technical aspect of the case, that although the insurer argued the case on merits before the Tribunal, it did not clarify the legal position so much, that it is doing it on subrogation, in the name of the insured and that it is thereby possessed of the rights, otherwise justly belonging to the insured only. This sort of clear legal line is not to be found in the proceedings before the Tribunal but what the Tribunal has done, is in no manner wrong. In a situation where a policy contains a subrogation clause, it is allowed to the insurer to take up the defence on merits whether in the absence or in the presence of the insured. It can do so without invoking section 170 of the Motor Vehicles Act, 1988. In our opinion, the Tribunal was perfectly entitled to allow the insurer to do so, without even the invocation of section 170, because of the existence of Clause 2 in the policy and the situation of subrogation which the presence of that clause automatically brings about.

36. The result of this discussion clearly is that the application for summarily rejection of the appeal because of non-invocation of section 170 of the Motor Vehicles Act, 1988 before the Claims Tribunal must fail.

37. The appeal, therefore, be heard on merits. Let the lower court records be called for. The requisite number of informal paper books containing legible copies of all documents before the Tribunal be filed within twelve weeks after receipt of notice on despatch.

38. However, the appeal shall survive only in regard to the principle sum of Rs. 30,000/-, as we have indicated in the beginning and the interest thereon, from 1.1.1990 until payment. As to the balance, i.e the principal sum Rs. 50,000/- and interest thereon from the said date, i.e 1.1.1990, the appeal does not survive as it can never succeed in that regard, for the reasons also already indicated.

39. The learned Registrar General, High Court, Calcutta or the Tribunal or any other concerned authority shall immediately make over payment of the sum of Rs. 40,000/- or Rs. 25,000/- or whatever sum has been deposited to the account of this claim or appeal, along with the accrued interest, if any, to the claimant-respondent or her duly authorised legal representative.

40. The total sum of Rs. 50,000/- and accrued interest thereon from 1.1.2000 @ 10% per annum till date we assess at Rs. 1 lakh taking principal and interest together. The balance sum of Rs. 1 lakh, after giving due credit for the receipt from the registry or other authorities shall be paid by the Insurance Company to the claimant-respondent on her duly authorised legal representative within eight weeks from date hereof.

41. In default of such payment of the balance sum, within the said time by the Insurance Company, this appeal shall itself stand dismissed with costs and in that event, the costs of the appeal shall be assessed at Rs. 10,000/-. In case of punctual payment, the appeal will remain on record and there will be no order for costs for the present, it remaining for the appeal court ultimately hearing the matter of assess costs, if any.

42. So far as the present application is concerned, in one manner of speaking it half succeeds and half fails. Thus there will be no order as to costs in regard to this application.

43. The learned Registrar General, High Court, Calcutta and the Tribunal and other authorities shall act accordingly on the basis of this order.

44. Urgent xerox certified copy of this order, if applied for, be given as expeditiously as possible.

Later on

3.7.2000

45. If there is a shortfall deposit and there has been any error in submission in that regard, the Insurance Company will make up for such error of submissions by appropriate deposit and payment, in default of which the appeal shall stand rejected with costs, as already ordered.

Ajoy Nath Ray, J.

Ranjan Kumar Mazumder, J.

Application rejected.

JNH