Citation Codes

Equivalent Citations

citation codes

Case Number

M.A No. 372 of 1995

Advocates

R.P Agrawal
Nos. 1 to 5: Y.P Sharma
No. 6 U.K Sharma

Judges

S.K Dubey
Rajeev Gupta, JJ.

Acts

Section 146 corresponding to section 94 of the old Act (for short 'repealed Act')
Motor Vehicles Act, 1939, repealed by the Act (for short 'old Act')
section 173 of the Motor Vehicle Act, 1988 (for short 'the Act')
sub-section (6) of section 149 [sub-section (5) of section 96
SECTION 11 CONTRACT ACT
section 11 of the Indian Contract Act.
section 114(g) of the Evidence Act
Sub-section (1) of section 146

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Smart Summary

Structured Summary of the Opinion

Factual and Procedural Background

This is an appeal under section 173 of the Motor Vehicle Act, 1988 against the award dated 16-1-1995 passed in Claim Case No. 82/93 by the First Additional Motor Accidents Claims Tribunal, Satna.

Respondents Nos. 1 to 5 are the legal representatives of the deceased, Chokhelal, who died in a motor accident on 6-8-1992 at about 11:30 a.m. The accident involved truck No. RPJ-5588 driven by respondent No. 6, owned by respondent No. 7, and insured with the appellant insurer. The claimants sought compensation of Rs. 14,90,000/-. Respondents Nos. 6 and 7 filed a joint written statement denying liability. The appellant insurer filed a separate written statement contending that the insurance contract (Ex. D-1) was void because the insured (respondent No. 7) was a minor and therefore not competent to contract, and that the policy was obtained by the father of respondent No. 7 by concealing the insured's minority.

The Tribunal found, after appreciation of evidence, that the accident was caused due to the sole negligence of the truck driver and that the motorcyclist Chokhelal died as a result. The Tribunal awarded Rs. 4,53,600/- plus interest at 12% p.a. from the date of application (2-9-1992) against the owner, driver and insurer. The finding that the accident was caused due to the sole negligence of the truck driver (issue No. 1) was not challenged before the Court.

Legal Issues Presented

Whether the insurer (appellant) is liable to pay compensation under the policy when the registered owner/insured (respondent No. 7) was a minor at the time the insurance was obtained, and whether the policy is void for that reason or for alleged suppression of material fact.
Whether there was suppression of a material fact (minority of the insured) that would vitiate the policy and absolve the insurer of liability.
Whether the quantum of compensation awarded by the Tribunal is excessive, specifically the amounts awarded for loss of love and affection to minor children.

Arguments of the Parties

Appellant's Arguments

The policy is void from its inception because respondent No. 7 (the insured/owner) was a minor at the time of entering into the insurance contract, and thus not competent to contract under section 11 of the Indian Contract Act.
The policy was obtained by the father of respondent No. 7 by concealment and suppression of the material fact of minority; therefore the insurer should not be liable.
Counsel for the appellant also challenged the quantum of compensation, contending that Rs. 8,000/- for love and affection to minor children was not appropriate.
The appellant called Indrajeet Singh (Branch Manager) as a witness who stated the insured was a minor when insurance was obtained; the appellant relied on this to support its case of minority and suppression.
Counsel cited authorities (Ma Hnit & Ors.; Govind Ram v. Piran Ditta) in support of the position that contracts involving minors may be void or unenforceable.

Respondent No. 7's Arguments (Insured/Owner)

The Motor Vehicles Act does not prohibit a minor from being the owner of a motor vehicle. If a minor can be owner of a vehicle to be used in a public place, such vehicle must necessarily be insured.
Insurance of the vehicle was for the benefit of the minor; property of a minor can be insured and the insurer cannot refuse to insure simply because the owner is a minor.
Counsel relied on Great American Insurance Co. Ltd. v. Madanlal Sonulal (AIR 1938 Bom. 363) to support the view that a contract of insurance effected on behalf of a minor for the minor's benefit is enforceable.
The father (guardian) obtained the policy and the agent accepted the premium; the agent knew of the minor status (per the father’s evidence), and the policy was issued and not repudiated or cancelled by the insurer.

Claimants / Respondents Nos. 1–5

The claimants supported the Tribunal's award. (The opinion records that counsel for the respondents-claimants supported the award.)

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Ma Hnit and Ors. v. Hasim Ebrahim Meter, AIR 1919 PC 129	Cited by appellant's counsel in support of the argument that contracts involving minors may be void or unenforceable.	The Court treated the decisions relied upon by the appellant (including this) as inappropriate for the present context because they do not deal with motor insurance against third party risks under the Act.
Govind Ram v. Piran Ditta, AIR 1935 Lahore 561	Cited by appellant's counsel to support the contention that a contract with a minor is void under the Contract Act.	The Court found such decisions inapplicable to motor third-party insurance under the Act and therefore inappropriate to absolve the insurer here.
Great American Insurance Co. Ltd. v. Madanlal Sonulal, AIR 1938 Bom. 363	Cited by respondent No. 7 to show that an insurance contract made on behalf of a minor for the minor's benefit is enforceable and property of minors can be insured.	The Court relied on and described this authority at length to support the proposition that insurance of a minor's property (or vehicle) for the minor's benefit is enforceable and that acceptance of premium and knowledge by agent/company prevents repudiation.
A. Raghavamma v. A. Chenchamma, AIR 1964 SC 136	Cited for the principle that an adverse inference can be drawn under section 114(g) of the Evidence Act where a party withholds the best evidence.	The Court applied this principle to draw an adverse inference against the appellant for not producing the proposal form and not examining the agent whose evidence would illuminate the controversy.
Gopal Krishnaji Ketkar v. Mohamed Haji Latif & Others, AIR 1968 SC 1413	Cited for the same principle under section 114(g) of the Evidence Act concerning adverse inference for withholding material evidence.	The Court relied on this authority along with A. Raghavamma to justify drawing an adverse inference against the appellant insurer for non-production of documents/agent evidence.
New Asiatic Insurance Co. Ltd. v. Pessumal Dhanamal Aswani, AIR 1964 SC 1736	Cited for the purposive interpretation of the insurance chapter: that provisions ensure third parties can obtain damages independently of the driver's or owner's financial condition.	The Court cited this decision to explain the object of the insurance provisions (Chapter XI/old Chapter VIII) and to support construing the provisions so as to secure compensation to third parties.
M/s Automobiles Transport (Rajasthan) Pvt. Ltd. v. Dewalal, AIR 1977 Raj. 121	Cited for the proposition that 'material fact' or 'material particulars' must be such as to influence the judgment of a prudent insurer (i.e., materiality requires showing influence on the insurer's decision).	The Court relied on this authority to hold that nondisclosure of minority did not, on the facts, establish that the insurer's judgment as a prudent insurer would have been influenced; thus non-disclosure was not shown to be material.
Northern India General Insurance Co. Ltd. v. Kanwarjit Singh, 1973 ACJ 119 (All)	Cited for the same principle regarding materiality of non-disclosure to the prudent insurer's decision.	The Court cited this case to support its conclusion that the appellant failed to show how nondisclosure (the insured being a minor) would have influenced the insurer's judgment regarding risk, premium, or conditions.

Court's Reasoning and Analysis

The Court proceeded step-by-step as follows (based on the material in the opinion):

The Tribunal's factual finding that the accident was caused by the sole negligence of the truck driver and that the deceased died was not challenged and therefore stands.
The appellant insurer's primary contention was that the policy was void because the registered owner/insured was a minor and thus not competent to contract under section 11 of the Contract Act, and that the policy was obtained by suppression of this material fact.
The Court examined the statutory framework of the Motor Vehicles Act: definitions of 'owner' (section 2(30)), 'certificate of registration' (section 2(4)), 'public place' (section 2(34)), permit (section 2(31)), and the requirement of insurance for vehicles used in public places under section 146 (corresponding to section 94 of the old Act). Chapter XI (corresponding to old Chapter VIII) mandates insurance against third party risks to secure compensation to third parties irrespective of the owner's/driver's financial condition.
The Court observed there is no provision in the Act prohibiting the issue of a policy to a registered owner who is a minor; on the contrary, where a vehicle is to be used in a public place it must be insured. An authorised insurer who accepts the proposal and premium must issue a certificate of insurance and a policy covering third party risks in accordance with section 147.
On the evidentiary issue, the Court noted the appellant failed to produce the proposal form and did not call the agent (Mr. Nigam) who accepted the premium. The father of the insured (Premlal) gave evidence stating he disclosed the age and that his son was a student. Given the appellant's non-production of the proposal form and non-examination of its agent, the Court drew an adverse inference against the appellant under section 114(g) of the Evidence Act (supported by A. Raghavamma and Gopal Krishnaji Ketkar).
Materiality: The Court analyzed sub-section (6) of section 149 (sub-section (5) of section 96 of the old Act) and held that for non-disclosure to vitiate the policy it must be a 'material fact' likely to influence the judgment of a prudent insurer as to whether to take the risk, at what premium and on what conditions. The Court found the appellant did not demonstrate how nondisclosure of minority would have influenced a prudent insurer's judgment on these points.
The Court relied on authorities (M/s Automobiles Transport (Rajasthan) Pvt. Ltd. v. Dewalal; Northern India General Insurance Co. Ltd. v. Kanwarjit Singh) to support the view that mere nondisclosure of the fact that the registered owner was a minor, where the agent accepted premium and the policy was issued and not repudiated, is insufficient to void the policy unless materiality affecting the insurer's judgment is shown.
Drawing on Great American Insurance Co. v. Madanlal Sonulal, the Court accepted that insurance on behalf of a minor for the minor's benefit is enforceable and that an insurer who knowingly enters into such a contract and accepts premium cannot later avoid liability on a purely technical defence.
Accordingly, the Court concluded that (a) there was no proven suppression of a material fact by the owner or the father; (b) the insurer knew (or its agent knew) of the minor status and accepted premium; (c) the policy was issued and never repudiated; and (d) the insurer failed to show how nondisclosure influenced its judgment—therefore the insurer remained liable under the policy for third party risks.
On quantum, the Court re-assessed dependency based on the admission of A.W.1 that the deceased contributed Rs. 4,000 per month to family expenses. The Court deducted Rs. 1,000 per month as personal living expenses (adjusting the earlier Tribunal calculation), resulting in monthly dependency of Rs. 3,000 (Rs. 36,000 per year). Applying multiplier 11 produced Rs. 3,96,000; additions of Rs. 10,000 for consortium, Rs. 10,000 for loss of estate and Rs. 2,000 for funeral brought the total compensation to Rs. 4,18,000. Interest at 12% p.a. from the date of application until realization was awarded, with directions for deposit and disbursement.

Holding and Implications

Core Holding: The appeal was partly allowed; the Court held that the appellant insurer cannot avoid liability under the policy of insurance for third party risks even though the registered owner (insured) was a minor and that the policy was not vitiated for suppression of a material fact.

Direct Consequences / Orders:

The Tribunal's award was modified on quantum: the Court awarded Rs. 4,18,000/- to respondents Nos. 1 to 5 with interest at 12% per annum from the date of application until realization.
The appellant insurer was directed to deposit the amount with interest (less amounts already deposited) within two months from supply of certified copy; failing which interest at 15% per annum would apply.
On deposit, the amount shall be disbursed in accordance with well-settled guidelines (as referred to by the Court).
The appeal was partly allowed; the appellant was to bear its own costs and to pay costs to respondents Nos. 1 to 5. Counsel's fee of Rs. 1,500/- was allowed if pre-certified.

Broader Implications Noted by the Court:

The Court stated that no provision of the Motor Vehicles Act forbids issuing an insurance policy to a registered owner who is a minor, and that compulsory third-party insurance is meant to protect third parties' right to compensation irrespective of the owner's or driver's financial position.
The Court emphasized the principle that for an insurer to avoid liability on the ground of nondisclosure, it must show that the nondisclosed fact was material — i.e., that it would have influenced the judgment of a prudent insurer as to risk, premium, or conditions. The insurer failed to discharge that burden here.
The Court observed that the decisions relied upon by the appellant were inappropriate because they did not deal with motor insurance against third party risks under the Act.

This summary is based exclusively on the content of the provided opinion. No information has been added beyond what appears in the opinion.

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National Insurance Co. Ltd. v. Kusum Devi Mishra And Others

1. This is an appeal under section 173 of the Motor Vehicle Act, 1988 (for short 'the Act') against the award dated 16-1-1995 passed in Claim Case No. 82/93 by the First Additional Motor Accidents Claims Tribunal, Satna.

2. Facts giving rise to this appeal are thus. Respondents Nos. 1 to 5 are the legal representatives of the deceased Chokhelal, who claimed compensation of Rs. 14,90,000/- for the death of Chokhelal, caused in motor accident on 6-8-1992 at about 11.30 a.m. by truck No. RPJ-5588, driven by respondent No. 6, owned by respondent No. 7 and insured with appellant. Respondents Nos. 6 and 7 filed their joint written statement denying their liability to pay compensation. Appellant in its separate written statement contended that the contract of insurance entered into between the appellant and the owner of the vehicle is void as he was minor and was not competent to contract. The policy was obtained by the father of respondent No. 7 by concealment and suppression of the material fact of minority of the respondent No. 7.

3. The Tribunal after appreciation of evidence adduced by the parties, held that the accident was caused due to sole negligence" of the truck driver as a result of which motor cyclist Chokhelal died. At the time of the accident the deceased was aged 38 years and was earning Rs. 5,000/- per month by contractorship and by agriculture. After deducting 1/3rd amount towards the personal living expenses of the deceased, the dependency was estimated at Rs. 39,600/- applying the multiplier of 11, the amount was worked out to Rs. 4,35,600/-; in that Rs. 10,000/- was added towards consortium and Rs. 2,000/- to each children for loss of company and love and affection. Thus an award of Rs. 4,53,600/- with interest at the rate of 12 percent per annum from the date of application, that is, 2-9-1992, till realisation, was passed against the owner, driver and insurer.

4. The finding on issue No. 1 holding that the accident was caused due to sole negligence of truck driver resulting in the death of Chokhelal, has not been challenged before us.

5. Shri R. P. Agrawal, learned counsel for the appellant submitted that the appellant cannot be made liable to pay as the policy was void from its inception, so at the time of entering into contract of insurance (Ex. D-1) the respondent No. 7 who is the insured was a minor. This material fact was suppressed by the father of the respondents No. 7 at the time of giving proposal form. The contract was void as respondent No. 7 was not competent to enter into contract in view of section 11 of the Indian Contract Act. Counsel cited Ma Hnit and Ors. v. Hasim Ebrahim Meter, AIR 1919 PC 129 and Govind Ram v. Piran Ditta, AIR 1935 Lahore 561. Learned counsel for the appellant also challenged the quantum of compensation. It was submitted that Rs. 8,000/- for love and affection to minor children could not have been awarded.

6. Shri U. K. Sharma, learned counsel for respondent No. 7 submitted that the Act does not prohibit a minor to be the owner of a motor vehicle. If the minor can be the owner of the vehicle which is to be used at a public place, such vehicle has necessarily to be insured. The conduct of insurance was for the benefit of minor. If the contention of the appellant is accepted, in that case property of minor cannot be insured which is not the law. He cited Great American Insurance Co. Ltd. v. Madanlal Sonulal, AIR 1938 Bom. 363.

7. Shri Y. P. Sharma, counsel for the respondents-claimants, supported the award.

8. To establish the plea that the policy was obtained by suppressing material fact, the appellant examined Indrajeet Singh, Branch Manager (N.A.W. 1), who stated that when the insurance was obtained in the name of the insured, he was a minor. He admitted that in the proposal form, there is no column wherein the age of the insured is to be declared and stated. On behalf of the owner, N.A.W. 2 Premlal, father of the insured appeared as a witness and stated that he got the vehicle insured for third party risk on behalf of his son. The premium was accepted by the Agent, Nigam. After accepting the premium, the appellant Company issued the policy valid from 31st January, 1992 to 30th January, 1993. He further stated that he disclosed the age and the fact that his son is a student of Class VI.

9. On the scrutiny of evidence and in the absence of non-examination of Mr. Nigam, the Agent of the appellant and non-production of the proposal form by the appellant before the Tribunal and even before this Court, it cannot be inferred that the fact of minority of the owner of the vehicle was suppressed. On the other hand, the adverse inference under section 114(g) of the Evidence Act has to be raised against the appellant as it is well settled that a party in possession of the best evidence which would throw light in controversy withholding it, Court ought to draw an adverse inference against him notwithstanding that onus of proof does not lie on him. See A. Raghavamma v. A. Chenchamma, AIR 1964 SC 136 and Gopal Krishnaji Ketkar v. Mohamed Haji Latif & Others ., AIR 1968 SC 1413.

10. However, the fact remains that the insured/owner of the vehicle was a minor at the time when the appellant accepted the proposal of insurance. It is not in dispute that the respondent No. 7 was the registered owner of the vehicle and was entered as such in the certificate of registration, as defined in section 2(4) of the Act, which means the certificate issued by a competent authority to the effect that a motor vehicle has been duly registered in accordance with the provisions of Chapter IV. Section 2(30) of the Act defines 'owner' means a person in whose name a motor vehicle stands registered and where such person is a minor, the guardian of such minor, and in relation to a motor vehicle which is the subject of a hire-purchase agreement or an agreement of lease or an agreement of hypothecation, the person in possession of the vehicle under that agreement. Motor vehicle involved in the accident is a goods carriage registered as such in certificate of registration issued by the Registering Authority as defined in section 2(37) of the Act. The vehicle is to be used at a 'public place' as defined in section 2(34) of the Act, in accordance with the conditions of permit as defined in section 2(31) of the Act. Chapter IV deals with the registration of motor vehicle. When a motor vehicle is to be used in a public place, it has to be necessarily insured against third party risks. Chapter XI of the Act corresponding to Chapter VIII of the Motor Vehicles Act, 1939, repealed by the Act (for short 'old Act') deals with the insurance of motor vehicle against third party risks. Section 145 is a definition provision. Section 146 corresponding to section 94 of the old Act (for short 'repealed Act') deals with necessity for insurance against third party risk. Sub-section (1) of section 146 provides that no person shall use, except as a passenger or cause or allow any other person to use a motor vehicle in a public place, unless there is in force relation to the vehicle by that person or that other person, as the case may be, a policy of insurance complying with the requirement of Chapter XI of the Act, corresponding to Chapter VIII of the repealed Act. The Supreme Court in New Asiatic Insurance Co. Ltd. v. Pessumal Dhanamal Aswani, AIR 1964 SC 1736 after considering the object of Chapter VIII of the old At observed thus:

"Chapter VIII of the Act, it appears from the heading, makes provision for insurance of the vehicle against third-party risks, that is to say, its provisions ensure that third parties 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."

11. No provision of Chapter XI or any provision under the Act, prohibits that the policy of insurance cannot be issued to a registered owner of the vehicle who is a minor. On the other hand a registered owner, who is minor or not, of a motor vehicle, which is to be used at a public place, such vehicle necessarily has to be insured against the third party risks under section 146 of the Act. The authorised insurer as defined in clause (a) of section 145 of the Act, cannot refuse to insure the vehicle, certainly on acceptance of proposal form and payment of due premium, and has to issue a 'certificate of insurance' as defined in clause (b) and policy of insurance as defined in clause (d) of section 145 of the Act, so as to cover the liability in accordance with the provisions of section 147 of the Act.

12. In view of the above, the contention that the insurer is not liable to pay compensation and the policy is void due to suppression of material fact, has no merit. Even otherwise, there was no suppression of material fact. The agent of the Insurance Company knew full well that the owner is a minor. He accepted the premium and the policy of insurance covering third party risks was issued in the name of the minor by the appellant. The said policy was never repudiated or cancelled. Besides to avoid the liability under section 149(2) of the Act corresponding to section 96(2) of the old Act, the expression 'material fact' and 'material particulars' in sub-section (6) of section 149 [sub-section (5) of section 96 of the old Act] should be of such a nature as to influence the judgment of a prudent insurer in determining whether he will take the risk, if so, at what premium and on what condition. The insurer while insuring the vehicle of a minor through the guardian cannot be said to have been influenced in his judgment as to the premium and other conditions merely because it is not disclosed that the minor was the real owner of the vehicle. Therefore, the contract of insurance cannot be said to be void on this ground which was obtained by the father of the owner. The appellant has failed to satisfy how this so-called non-disclosure would have influenced the judgment as a prudent insurer in determining whether the appellant will take the risk and, if so, at what premium and on what conditions. Therefore, also the contention is meritless. To say so, we take support from M/s Automobiles Transport (Rajasthan) Pvt. Ltd. v. Dewalal, AIR 1977 Raj. 121 and Northern India General Insurance Co. Ltd. v. Kanwarjit Singh, 1973 ACJ 119 (All).

13. True Section 11 of the Contract Act lays down that a minor is not competent to contract. Section 11 of the Contract Act provides that every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject. The contract of insurance in the present case is in the nature of indemnity whereby the insurer has undertaken to indemnify the insured on the happening of an uncertain event by use of motor vehicle, which makes the insured liable to pay. The contract of insurance does not created any liability on the minor. Therefore, it would not be void. On the other hand the contract of insurance is for the benefit of the minor; hence it would not a void contract but it would be binding on the appellant Company to indemnify the insured/owner of the vehicle and to pay compensation under the award.

14. A Division Bench of the Bombay High Court in the case of Great American Insurance Co. v. Madanlal Sonulal (supra), considered a case where the guardian of minor effected an insurance against fire in respect of the minor's property. The Company also knew that the minor was the owner of the property. The property was burnt. A suit was filed by the minor through guardian to claim loss. The Company contended that the contract was void and could not be enforced. The Court observed that the contract sued upon was not a contract which was made by a minor, although it was made on behalf of the minor and for his benefit and that it was entitled to sue on that. The Court further observed that if the contention of the defendant is right, it means that property of minors cannot be insured. A great many joint family business descend upon minors, and such business are in practice managed by some adult member of the family in the name of the minor and if that member of the family cannot effect an insurance on behalf of the minor, the position is an extremely serious one particularly if insurance companies are going to do what they generally do not do; but what is done by the defendant company in this case, namely, set up a purely technical defence to the policy. As the agent and the Company knew full well and deliberately entered into the contract which was for the benefit of the minor and having insured the property, the premium having been accepted, the liability cannot be avoided.

15. As a result of the above discussion, we hold that the appellant cannot avoid its liability to pay compensation under the contract of insurance against third party risks. The decisions relied upon by the learned counsel for the appellant are inappropriate which do not deal with the cases of motor insurance against third party risks under the Act.

16. Coming to the compensation A. W. 1 has admitted in her statement that the deceased used to give Rs. 4,000/- per month for the family expenses which included expenses for education of children. The deceased was a contractor and was maintaining a motor cycle. In the circumstances, Rs. 1,000/- is deducted towards personal living expenses of the deceased, the dependency would come to Rs. 3,000/- per month, yearly Rs. 36,000/-, applying the multiplier of 11, the amount would work out to Rs. 3,96,000/- in that Rs. 10,000/- is added towards consortium and Rs. 10,000/- towards loss of estate and a further sum of Rs. 2,000/- for funeral expenses, the amount of compensation would come to Rs. 4,18,000/- which the respondents Nos. 1 to 5 would be entitled with interest thereon at the rate of 12 percent per annum from the date of application till realisation. Therefore, we direct the appellant Company to deposit the amount with interest thereon at the rate of 12 percent per annum from the date of application less the amount already deposited by it within a period of two months from the date of supply of certified copy failing which the interest shall be payable at the rate of 15 percent per annum. On deposit the amount shall be disbursed keeping in mind the well settled guidelines.

17. In the result, the appeal is partly allowed. The award of the Tribunal shall stand modified as indicated hereinabove. However, the appellant shall bear its own costs and shall pay the costs to respondents Nos. 1 to 5. Counsel's fee Rs. 1,500/- if pre-certified.

National Insurance Co. Ltd. v. Kusum Devi Mishra And Others

Structured Summary of the Opinion

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant's Arguments

Respondent No. 7's Arguments (Insured/Owner)

Claimants / Respondents Nos. 1–5

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

National Insurance Co. Ltd. v. Kusum Devi Mishra And Others

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