# ICICI Lombard General Insurance Co. Ltd v. Smt. Arti Devi & Ors. 176 INDIAN LAW REPORTS ALLAHABAD SERIES

- **Citation:** (2025) 1 ILRA 175
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2025-01-31
- **Case number:** First Appeal From Order No. 1780 of 2024
- **Bench:** Kshitij Shailendra
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/icici-lombard-general-insurance-co-ltd-v-smt-arti-devi-ors-176-indian-law-52964
- **Pages:** 22

## Headnote

A. Civil Law - Motor Vehicles Act,1988Sections 147, 149 & 150 (as amended by
the
Motor
Vehicles
(Amendment)
Act,2019)-Right of Insurer to Recover
Compensation-"Pay
and
Recover"
Principle-Omission of Proviso to Section
149(4)-Effect on Insurer's Liability-HeldThe insurer is liable to pay compensation
to accident victims first and can recover
the amount from the vehicle owner if
there is a breach of policy conditions-The
Motor Vehicles (Amendment) Act, 2019
does not abolish the principle of "pay and
recover".(Para 1 to 39)

B. Statutory obligation of insurer u/s
147(6)-the presence of section 147(6)
which mandates that insurers indemnify
the insured, reinforces the insurer's duty
to compensate victims before seeking
reimbursement from the vehicle owner.
the amendment does not relieve the
insurer from its initial liability. (Para 18)

C. Indemnification Obligation unaffectedthe replacement of section 149 with
section 150 does not alter the insurer's
obligation to indemnify third party risks.
the omission of the proviso does not
negate the well-established principle of
"pay and recover" which continues to
protect the rights of accident victims.
(Para 21)

The appeal dismissed. (E-6)

List of Cases cited:

## Text

_Characters 0–39,998 of 74,391. This is a partial read: ask again with offset=39998 for what follows._

1 All. ICICI Lombard General Insurance Co. Ltd. Vs. Smt. Arti Devi & Ors.
175
deed was executed by the defendant no.1 in
favour of the defendants no.2 to 6, could
have been a ground to hold that the suit is
not maintainable. The execution of the
alleged unregistered Power of Attorney has
been denied by the plaintiff-respondent and
it has been found forged by the courts
below, on the basis of which the registered
sale deed has been executed by the
defendant no.1 in favour of defendant no.2
to 6, whereas no title or power could have
been transferred and conferred on the basis
of said unregistered Power of Attorney.

18. The Hon'ble Supreme Court, in
the case of Rajni Tandon Versus Dulal
Ranjan Ghosh Dastidar and another
(Supra), has held that in cases where the
person signing the document cannot present
the document before the registration officer
and gives a power of attorney to another to
present the document, the provisions of
Section 33 get attracted and it is only in
such a case that the said Power of Attorney
has to be necessarily executed and
authenticated in the manner provided under
Section 33(1)(a) of the Act. However this
case is not of any assistance to the
appellants because the case of plaintiffrespondent is not attracted by Section
33(1)(a) of the Act. The sale deed was
challenged on the ground that the sale deed
has been executed on the basis of
fraudulent unregistered Power of Attorney,
which has not been executed by the
defendant-respondent and it has been
proved. In view of latest judgment of the
Hon'ble Supreme Court in the case of
Shakeel Ahmed Versus Syed Akhlaq
Hussain (Supra), in which the suit was
filed for possession and mesne profits on
the basis of Power of Attorney and decree
for possession alongwith mesne profits was
granted. On being challenged the findings
were confirmed by the High Court.
However the Hon'ble Supreme Court held
that no right, title or interest can be
transferred with respect to immovable
properties on the basis of an unregistered
agreement to sell or on the basis of an
unregistered Power of Attorney. Thus even
if he who signs the deed could have
presented the same, he could not have
transferred the title with respect to
immovable properties on the basis of
unregistered Power of Attorney, which has
been found fraudulent, so it cannot be said
that the suit was not maintainable and non
challenge to same would not vitiate the
impugned judgment and decrees as in view
of the grounds raised it has been
considered. There is no illegality or error in
it.

19. In view of above, the courts below
have passed the impugned judgment and
decrees in accordance with law, which does
not call for any interference by this court as
no substantial question of law arises in this
appeal. The appeal has been filed on
baseless and misconceived grounds.

20.
The
Second
Appeal
is,
accordingly, dismissed at the admission
stage. No order as to costs.
----------
(2025) 1 ILRA 175
APPELLATE JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 31.01.2025

BEFORE

THE HON'BLE KSHITIJ SHAILENDRA, J.

First Appeal From Order No. 1780 of 2024
With other connected cases

ICICI Lombard General Insurance Co. Ltd.
 ...Appellant
Versus
Smt. Arti Devi & Ors. ...Respondents
176 INDIAN LAW REPORTS ALLAHABAD SERIES
Counsel for the Appellant:
Rahul Sahai

Counsel for the Respondents:
Abhinav Trivedi, Adarsh Kumar, Shreesh
Srivastava

A. Civil Law - Motor Vehicles Act,1988Sections 147, 149 & 150 (as amended by
the
Motor
Vehicles
(Amendment)
Act,2019)-Right of Insurer to Recover
Compensation-"Pay
and
Recover"
Principle-Omission of Proviso to Section
149(4)-Effect on Insurer's Liability-HeldThe insurer is liable to pay compensation
to accident victims first and can recover
the amount from the vehicle owner if
there is a breach of policy conditions-The
Motor Vehicles (Amendment) Act, 2019
does not abolish the principle of "pay and
recover".(Para 1 to 39)

B. Statutory obligation of insurer u/s
147(6)-the presence of section 147(6)
which mandates that insurers indemnify
the insured, reinforces the insurer's duty
to compensate victims before seeking
reimbursement from the vehicle owner.
the amendment does not relieve the
insurer from its initial liability. (Para 18)

C. Indemnification Obligation unaffectedthe replacement of section 149 with
section 150 does not alter the insurer's
obligation to indemnify third party risks.
the omission of the proviso does not
negate the well-established principle of
"pay and recover" which continues to
protect the rights of accident victims.
(Para 21)

The appeal dismissed. (E-6)

List of Cases cited:

1. NICL Vs Swaran Singh & ors.(2004) JT 1 SC
109

2. Satheedevi Vs Prasanna (2010) 5 SCC 622

3. UOI Vs Deoki Nandan Aggarwal (1991) AIR
SCW 2754
4. M/s Unique Butyle Tube Industries Pvt. Ltd.
Vs UP Financial Corp. & ors.(2003) AIR SC 2103

5. New India Assr. Co., Shimla Vs Kamla &
ors.(2001) 4 SCC 342

6. S. Iyyapan Vs UII Co. Ltd. & anr.(2013) 7
SCC 62

7. ICICI Lombard Gen. Ins. Co. Ltd. Vs Suresh &
ors. (2024) 2 ADJ 576

(Delivered by Hon'ble Kshitij Shailendra, J.)

EFFECT OF MOTOR VEHICLES
(AMENDMENT) ACT, 2019 (32 of 2019)
ON INSURER'S RIGHT TO RECOVER
COMPENSATION FROM OWNER

1. Heard Shri Aditya Singh Parihar,
learned
counsel
for
the
appellantInsurance Company, Shri S.D. Ojha, and
Shri Shreesh Srivastava, learned counsel
for the claimant-respondents and Shri
Abhinav Trivedi as well as Shri Adarsh
Kumar, learned counsel for vehicle
owner and driver in all the connected
appeals.

2. All these appeals involve common
questions of fact and law and, hence, are
being decided by a common judgment. For
the sake of convenience, First Appeal From
Order No. 1780 of 2024 shall be treated as
leading case.

3. The present appeal at the instance of
Insurance Company challenges the award
dated 01.06.2024, whereby the Presiding
Officer, Motor Accident Claims Tribunal,
Kanpur Dehat has allowed M.A.C. No. 186
of 2022 (Smt. Aarti Devi and others vs.
Manager
I.C.I.C.I.
Lombard
General
Insurance Company Limited and others) in
part awarding a sum of Rs.20,11,800/-
towards compensation against the owner
1 All. ICICI Lombard General Insurance Co. Ltd. Vs. Smt. Arti Devi & Ors.
177
and driver of the offending vehicle with an
observation that vehicle being insured with
the appellant-Company, the appellant shall
have right to recover the amount of
compensation from the owner and the
driver. Initial liability to pay compensation
has been fastened upon the appellantInsurance Company.

4. Brief facts giving rise to the instant
appeal are that a road accident took place
on 29.05.2022 in which one Pradeep
Kumar, who was sitting in Eco Car No.
U.P. 90 U-9831, suffered injuries and
succumbed to the same on the spot. The
accident was caused by Bus No. U.P. 77 T5052,
which
was
insured
with
the
appellant-Insurance Company. A claim
petition
was
filed
by
the
legal
representatives of the deceased claiming
compensation. The Tribunal, after framing
issues as regards rash and negligent driving
of the bus driver and the car driver and as
to whether the drivers were having valid
driving license on the date of accident,
factum of insurance and liability to pay
compensation by which party and to what
extent, decided the claim petition by the
impugned judgment and order.

5. When the appeal came up for
consideration on the first date, this Court,
after noting down submissions advanced by
the appellant including a legal plea raised in
the light of omission of proviso to sub-section
(4) of Section 149 of the Motor Vehicles Act,
1988 (herein after referred to as Act, 1988)
by way of Motor Vehicles (Amendment)
Act, 2019 (32 of 2019), admitted the appeal
on 27.09.2024 and issued notices to the
unrepresented respondents. After the parties
were represented, the Court, by an order
dated 08.11.2024, summoned the record of
the Tribunal. The appeal was heard at length
on 09.01.2025 and judgment was reserved.

THE LEGAL ISSUE INVOLVED

6. The decision in these appeals raises
a very significant question of law in the
light of Motor Vehicles (Amendment)
Act, 2019 (32 of 2019) and not yet decided
in India, as informed to the Court. Vide
notification dated 25.02.2022 issued in
exercise of powers under Section 1(2) of
the Amending Act, 2019, various sections
including Section 51 of the Amending Act
came into force w.e.f. 01.04.2022. It is
Section 51 that replaces Chapter XI of the
Act of 1988 by a new Chapter XI that is
relevant for the instant case. When read
with Section 166 (3) of the Act where
limitation to present a claim petition within
6 months from the occurrence of accident
has been prescribed, it infers that the
provisions of newly substituted Chapter XI
would deal with cases arising from
accidents taking place after 01.04.2022.
The question is as to whether mere
omission of proviso attached to sub-section
(4) of Section 149 of Act, 1988 after its
replacement by Section 150 by Amendment
Act, 2019 would mean that the liability of
the insurer to pay and its right to recover
the amount from the owner has been taken
away and does not survive in relation to
accidents occurring after 01.04.2022.

ARGUMENTS ON BEHALF OF
INSURER

7. Learned counsel for the appellant
has vehemently argued that since the
accident took place after coming into force
of the Amendment Act, the Tribunal was
not justified in issuing a direction to the
appellant to pay compensation to the
claimants
with
a
right
to
recover.
Elaborating his submissions, it is urged that
Insurance Company's right to recover
compensation from the owner of the
178 INDIAN LAW REPORTS ALLAHABAD SERIES
offending vehicle flows from the proviso
attached to sub-section (4) of Section 149
of Motor Vehicles Act, 1988, however, the
said proviso has been omitted by Act of
2019 and, therefore, in case of a breach of
policy, it is only the owner against whom
award can be directly made and Insurer is
liable to be relieved from any liability to
indemnify the owner. It is further submitted
that language used in the statute being plain
and simple, nothing can be read which the
statute does not contain and, hence, earlier
judgments laying down proposition to first
pay compensation to the claimants and then
have right to recover the same from the
owner, would have no application as in
none of the authorities so far, the effect of
amendments made by the Act of 2019 has
been examined. Entire Chapter XI of the
Act of 1988 has been replaced by new
Chapter XI and in place of Section 149 of
the Act of 1988, Section 150 has been
substituted, which does not contain any
provision/proviso as was earlier attached to
sub-section (4) giving right to the Insurer to
recover the amount in case of breach of
policy. Placing reliance upon Statement of
Objects and Reasons behind enactment of
Act of 2019, it is urged that after
considering numerous representations and
recommendations in the form of grievances
and suggestions from various stake-holders,
legislature has, in its wisdom, brought into
existence the Amendment Act to minimize
road accidents and disregard traffic rules
and regulations and to improve road safety
and transport system. There is flood of
cases where either fake claims are raised or
the claimants collude with the owners of
the offending vehicle and proceed in such a
manner so that ultimately, though breach of
insurance policy is found, liability to pay
compensation at the first instance is
enforced against the Insurance Company,
knowing well that owner's role would
come into picture when the recovery is
issued against him by which time the
claimants would have been compensated
and a situation would arise where for years
together, owners would remain absolved of
liability.

8. Elaborating his submissions, it is
urged by Shri Parihar as under:-

(a) Section 149 (4) and amended
provision section 150 (4) reflect that the
unamended section 149 (2) provided two
defences to the Insurance Co.:

i. Case of breach of policy
mentioned section 149 (2)(a) of the Act and

ii. policy being void as per
section 149 (2) (b) of the Act.

(b) The unamended provision laid
down that except under the situation
provided by section 149 (2)(b), the insurer
would not be in a position to avoid the
liability because it has got right against the
owner under the above provision. So, in a
situation of breach of policy as provided u/s
149 (2)(a), the Insurance Co. would be held
liable and it can recover the same in light of
the proviso to Section 149(4).

(c) The amended Section 150 (2)
provides three defences to the Insurance
Co.:

i. Case of breach of policymentioned u/s 150 (2)(a) of the Act,

ii. Policy being void as per sec.
150 (2)(b) of the Act, and

iii. Non-receipt of premium.

(d) The amended provision, i.e.
Section 150(4) provides that except under
the situations provided by S.150(2), the
insurer would not be in a position to avoid
the liability. Meaning thereby that if the
case falls under any of the defences
reflected in Section 150(2) of the Act, the
Insurer can avoid the liability.
1 All. ICICI Lombard General Insurance Co. Ltd. Vs. Smt. Arti Devi & Ors.
179

(e) All the earlier precedents lose
their precedential value as they relate to
earlier unamended provision and, hence, do
not
contemplate
the
new
amended
provision and its implication. If the
arguments of claimants are accepted that
even after deletion of proviso by way of
amendment
Act,
Insurance
Company
would be liable to pay compensation,
permitting it to raise grounds of challenge
would be a redundant provision and in no
case, defence of Insurance Company would
be entertainable.

(f) The power under Article 142
of the Constitution of India is in the
exclusive domain of the Apex Court and
can be exercised by the Apex Court alone
to serve the ends of justice in the peculiar
facts and circumstances of a case. Hence all
the judgements of the Hon'ble Supreme
Court invoking its power under Article 142
of the Constitution of India cannot be relied
upon.

(g) The leading judgment in
relation to Insurance Company's right to
recover from the owner, i.e., National
Insurance Company Limited vs. Swaran
Singh and others, JT 2004 (1) SC 109,
was pronounced when the proviso to subsection (4) of Section 149 existed in the
Statute Book and the matter before the
Supreme
Court
had
arisen
out
of
interpretation of Section 149 vis-a-vis the
proviso and once the proviso does not find
place after amendment, any law laid down
by the Supreme Court or this Court would
not be read in relation to those cases where
accident took place after the Amendment
Act has come into operation.

(h)
The
doctrine
of
"Stare
decisis" directs courts to follow prior
decisions of higher courts when resolving
cases involving similar facts and law. The
argument of the respondents and the
judgments relied upon by them presented
as examples of stare decisis suggesting that
insurers cannot avoid liability and that 'Pay
and Recover' still remains where liability is
disputed, hold no ground as they are based
on the now-deleted provisions of the Act,
1988.

(i) The amendments in Act are
prospective in nature and, hence, the
mandate of Swaran Singh's case would
hold ground for all cases wherein the
occurrence of accident predates the coming
into force of the amendment, i.e. 1.4.2022,
but not otherwise.

(j) It is a trite law that primary
rule of interpretation/ construction is that
the intention of the legislature must be
found in the words used by the legislature
itself. The Hon'ble Apex Court, in the case
of Satheedevi vs Prasanna, (2010) 5 SCC
622, has held that if the words used are
capable of one construction only then it
would not be open to the courts to adopt
any other hypothetical construction on the
ground that such hypothetical construction
is more consistent with the alleged object
and policy of the Act. The words used in
the material provisions of the statute must
be interpreted in their plain grammatical
meaning and it is only when such words are
capable of two constructions that the
question of giving effect to the policy or
object of the Act can legitimately arise.

(k) In the case of Union of India
vs. Deoki Nandan Aggarwal,1991 AIR
SCW 2754, the Hon'ble Apex Court has
held that court cannot rewrite recast or
reframe the legislation. A court cannot add
words to a statute or read words which are
not there in it. Even if there is a defect or
an omission in the statute, the court cannot
correct the defect or supply the omission.

(l) The Supreme Court has upheld
the Causus Omissus maxim in several
judgments, explicitly stating that such
omissions cannot be addressed by judicial
180 INDIAN LAW REPORTS ALLAHABAD SERIES
interpretation. In M/s Unique Butyle Tube
Industries Pvt. Ltd. vs. UP Financial
Corporation and Others, AIR 2003 SC
2103, it was held that the legislature's
omissions (if any) cannot be filled by
judicial interpretation. If a statute leaves
out a particular situation, the courts cannot
insert words to address that omission. In
such a circumstance, reading something
into a provision when the legislature in its
wisdom has specifically omitted, deleted or
repealed a provision or its part, would
amount to doing violence to the statute and
the same should not be done to the clear
and plain language of the statute.

(m) Even laws that are beneficial
must follow the constraints of statutory
language ensuring a balance between
legislative intent and literal interpretation
The principle that "the law is what the text
says" underlines court judgments. While
beneficial legislation plays an important
role, it cannot override the clear and
specific language of statutes as drafted by
the legislature. The court cannot go beyond
the
framework
established
by
the
legislature.

9. In support of his submissions,
learned counsel for the appellant has placed
reliance upon the following authorities:-

(1) New India Assurance Co.,
Shimla vs. Kamla and others, 2001(4)
SCC 342

(2) National Insurance Co. Ltd.
vs. Swaran Singh and others, JT 2004 (1)
SC 109

(3) S. Iyyapan vs. United India
Insurance Co. Ltd. And another, 2013 (7)
SCC 62

(4) M/s Unique Butyle Tube
Industries Pvt. Ltd. vs. U.P. Financial
Corporation and others, AIR 2003 SC
2103

(5) Satheedevi vs. Prasanna and
another, 2010 (5) SCC 622

(6) Union of India vs. Deoki
Nandan Aggarwal, 1991 AIR SCW 2754

(7) ICICI Lombard General
Insurance Co. Ltd. vs. Suresh and 2
others, 2024 (2) ADJ 576.

ARGUMENTS ON BEHALF OF
CLAIMANTS AND
OWNER

10. Per contra, learned counsel for the
claimants-respondents as well as owner and
driver of offending vehicle submit as
under:-

(a) Amendments incorporated by
the Act of 2019 would not absolve the
liability of the Insurer to first pay
compensation and irrespective of deletion
of proviso to sub-section (4) of Section 149
by virtue of newly substituted Section 150,
the Insurer shall have to pay compensation
and right to recover compensation so paid
from the owner would still remain intact.

(b) Requirements of issuance of
insurance policy and limiting liability as
per section 147 of Act of 1988 has to be
read in the light of various sub-sections
especially sub-section (1) (a), (b) and (5)
thereof and a conjoint reading of the said
provision with the previous sub-section (4)
in Section 149 and newly substituted subsection (4) of Section 150 would reveal that
there is no change as far as indemnifying
the owner of the vehicle by the Insurance
Company is concerned.

(c) Even as on today, the
Supreme
Court
has
passed
certain
judgments whereby right to recover has
been given to the Insurance Company and
considering the fact that the Act is a
beneficial legislation having benevolent
object, the argument of Insurance Company
1 All. ICICI Lombard General Insurance Co. Ltd. Vs. Smt. Arti Devi & Ors.
181
that the award has to be made against the
owner and the Insurance Company has to
be completely freed from indemnifying the
owner cannot be accepted.

(d) Claimants being dependents
of the deceased or themselves injured
would not be in a position to recover the
amount from the owner of the vehicle and,
therefore, keeping in view the object of the
Act, immediate compensation has to be
paid to the claimants by the Insurance
Company.

(e) If the Insurance Company
keeps on issuing insurance policy and
renew
it
without
examining
the
requirements such as existence of a valid
driving license or permit or other such
components, in case breach of policy
comes into light during the course of
proceedings before Tribunal, the Company
being at fault, it cannot absolve itself from
liability to pay compensation and then
recover from the owner.

(f)
Despite
replacement
of
Section 149 by substituted Section 150,
liability
of
Insurance
Company
to
indemnify the risk as provided under
Section 147(5) of the Act of 1988 prior to
amendment has not been taken away, rather
the
said
sub-section
has
now
been
reintroduced as sub-section (6) of the Act
after amendment and, therefore, liability of
Insurance Company to first pay the amount
to the claimants does not vanish.

(g) Insurance policy is a contract
between insurer and the owner and third
party being alien to the contract, in case of
breach of policy, claimants cannot suffer
and beneficial legislation and object behind
it containing provision of indemnifying the
risk would stand frustrated if mere noninclusion of proviso in sub-section (4) of
Section 150 is interpreted to absolve the
Insurance Company to first pay the amount
to the claimants.

11. In support of their submissions,
reliance
has
been
placed
upon
the
following authorities:-

(1)
Praveenbhai
S.
Khambhayata vs. United India Insurance
Company Ltd. & others 2015 (11) SCC
417

(2) National Insurance Co. Ltd.
vs. Santro Devi and others, 1997 (9)
Supreme 458

(3)
Amrit
Paul Singh
and
another vs. Tata AIG General Insurance
Company Limited and others, 2018 (7)
SCC 558

(4) National Insurance Co. Ltd.
vs. Swaran Singh and others, 2004 (3)
SCC 297

(5) S. Iyyapan vs M/s United
India Insurance Company Ltd. and
another, 2013 (7) SCC 62

(6) Shivawwa and another vs.
The Branch Manager, National India
Insurance Co. Ltd. And another, 2018 (5)
SCC 762

(7) Balu Krishna Chavan vs. The
Reliance General Insurance Company
Ltd. And others, 2023 ACJ 1546.

(8) Pappu and others vs. Vinod
Kumar Lamba and another, 2018 (3) SCC
208

(9) Dhondubai vs. Hanmantappa
Bandappa Gandigude (since deceased)
through his LRs and others, 2023 ACJ
1979.

(10)
Oriental
Insurance
Company
Ltd.
Allahabad
vs.
Smt.
Chandra Devi and another, 2010 (5)
AWC 4607

(11) Oriental Insurance Co. Ltd.
vs. Sunita Rathi and others, AIR 1998 SC
257

(12) V. Ravi vs. M/s New
India Assurance Company Ltd. 1998
ACJ 598
182 INDIAN LAW REPORTS ALLAHABAD SERIES

(13) Uttar Pradesh State Road
Transport Corporation vs. Kulsum and
others, 2011 (8) SCC 142.

(14)
Manuara
Khatun
and
others vs. Rajesh Kumar Singh and
others, 2017 (4) SCC 796.

(15) Shamanna and another vs.
The Divisional Manager, The Oriental
Insurance Co. Ltd. and others, 2018 (9)
SCC 650.

(16) Rishi Pal Singh vs. New
India Assurance Co. Ltd. And others,
2022 (3) ACC 556.

ANALYSIS OF RIVAL CONTENTIONS

12. Having heard learned counsel for
the parties, this Court proceeds to deal with
some relevant provisions of Act of 1988,
both before and after amendments made in
the year 2019.

Motor Vehicles Act, 1988

"147. Requirements of policies
and limits of liability.-

(1) In order to comply with the
requirements of this Chapter, a policy of
insurance must be a policy which-

(a) is issued by a person who is
an authorised insurer; and

(b) insures the person or classes
of persons specified in the policy to the
extent specified in sub-section (2)-

(i) against any liability which
may be incurred by him in respect of the
death of or bodily injury to any person,
including owner of the goods or his
authorized representative carried in the
vehicle or damage to any property of a
third party caused by or arising out of the
use of the vehicle in a public place;

(ii) against the death of or bodily
injury to any passenger of a public service
vehicle caused by or arising out of the use
of the vehicle in a public place:

Provided that a policy shall not be
required-

(i) to cover liability in respect of
the death, arising out of and in the course
of his employment, of the employee of a
person insured by the policy or in respect
of bodily injury sustained by such an
employee arising out of and in the course
of his employment other than a liability
arising
under
the
Workmen's
Compensation Act, 1923 (8 of 1923), in
respect of the death of, or bodily injury to,
any such employee-

(a)
engaged
in
driving
the
vehicle, or

(b) if it is a public service vehicle
engaged as a conductor of the vehicle or in
examining tickets on the vehicle, or

(c) if it is a goods carriage, being
carried in the vehicle, or

(ii) to cover any contractual
liability.

Explanation.-For the removal
of doubts, it is hereby declared that the
death of or bodily injury to any person
or damage to any property of a third
party shall be deemed to have been
caused by or to have arisen out of, the
use of a vehicle in a public place
notwithstanding that the person who is
dead or injured or the property which is
damaged was not in a public place at the
time of the accident, if the act or
omission which led to the accident
occurred in a public place.

(2) Subject to the proviso to subsection (1), a policy of insurance referred to
in sub-section (1), shall cover any liability
incurred in respect of any accident, up to
the following limits, namely:-

(a) save as provided in clause (b),
the amount of liability incurred;

(b) in respect of damage to any
property of a third party, a limit of rupees
six thousand:
1 All. ICICI Lombard General Insurance Co. Ltd. Vs. Smt. Arti Devi & Ors.
183

Provided that any policy of
insurance issued with any limited liability
and in force, immediately before the
commencement of this Act, shall continue
to be effective for a period of four months
after such commencement or till the date of
expiry of such policy whichever is earlier.

(3) A policy shall be of no effect
for the purposes of this Chapter unless and
until there is issued by the insurer in favour
of the person by whom the policy is
effected a certificate of insurance in the
prescribed
form
and
containing
the
prescribed particulars of any condition
subject to which the policy is issued and of
any other prescribed matters; and different
forms, particulars and matters may be
prescribed in different cases.

(4) Where a cover note issued by
the insurer under the provisions of this
Chapter or the rules made thereunder is not
followed by a policy of insurance within
the prescribed time, the insurer shall,
within seven days of the expiry of the
period of the validity of the cover note,
notify the fact to the registering authority in
whose records the vehicle to which the
cover note relates has been registered or to
such
other
authority
as
the
State
Government may prescribe.

(5) Notwithstanding anything
contained in any law for the time being
in force, an insurer issuing a policy of
insurance under this section shall be
liable to indemnify the person or classes
of persons specified in the policy in
respect of any liability which the policy
purports to cover in the case of that
person or those classes of persons.

.....................................

"149. Duty of insurers to satisfy
judgments and awards against persons
insured in respect of third party risks.-

(1) If, after a certificate of
insurance has been issued under subsection (3) of section 147 in favour of the
person by whom a policy has been effected,
judgment or award in respect of any such
liability as is required to be covered by a
policy under clause (b) of sub-section (1) of
section 147 (being a liability covered by the
terms of the policy) or under the provisions
of section 163A is obtained against any
person insured by the policy, then,
notwithstanding that the insurer may be
entitled to avoid or cancel or may have
avoided or cancelled the policy, the insurer
shall, subject to the provisions of this
section, 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 any amount payable in respect of costs
and any sum payable in respect of interest
on that sum by virtue of any enactment
relating to interest on judgments.

(2) No sum shall be payable by
an insurer under sub-section (1) in respect
of any judgment or award unless, before
the commencement of the proceedings in
which the judgment or award is given the
insurer had notice through the Court or, as
the case may be, the Claims Tribunal of the
bringing of the proceedings, or in respect of
such judgment or award 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:-

(a) 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
184 INDIAN LAW REPORTS ALLAHABAD SERIES
insurance a vehicle not covered by a permit
to ply for hire or reward, or

(b) for organized 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

(d)
without
side-car
being
attached where the vehicle is a motor cycle;
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 disqualified for
holding or obtaining a driving licence
during the period of disqualification; or

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

(b) that the policy is void on the
ground that it was obtained by the nondisclosure of a material fact or by a
representation of fact which was false in
some material particular.

(3) .................

(4) Where a certificate of
insurance has been issued under subsection (3) of section 147 to the person by
whom a policy has been effected, so
much of the policy as purports to restrict
the insurance of the persons insured
thereby by reference to any conditions
other than those in clause (b) of subsection (2) shall, as respects such
liabilities as are required to be covered
by a policy under clause (b) of subsection (1) of section 147, be of no effect:

Provided that any sum paid by
the insurer in or towards the discharge
of any liability of any person which is
covered by the policy by virtue only of
this sub-section shall be recoverable by
the insurer from that person.
Motor Vehicles Act, 1988 [As amended
by Motor
 Vehicles (Amendment) Act, 2019]

"150. Duty of insurers to satisfy
judgments and awards against persons
insured in respect of third party risks.-

(1) If, after a certificate of
insurance has been issued under subsection (3) of section 147 in favour of the
person by whom a policy has been effected,
judgment or award in respect of any such
liability as is required to be covered by a
policy under clause (b) of sub-section (1) of
section 147 (being a liability covered by the
terms of the policy) or under the provisions
of section 164 is obtained against any
person insured by the policy, then,
notwithstanding that the insurer may be
entitled to avoid or cancel or may have
avoided or cancelled the policy, the insurer
shall, subject to the provisions of this
section, pay to the person entitled to the
benefit of the award any sum not exceeding
the sum assured payable thereunder, as if
that person were the decree holder, in
respect of the liability, together with any
amount payable in respect of costs and any
sum payable in respect of interest on that
sum by virtue of any enactment relating to
interest on judgments.

(2) No sum shall be payable by
an insurer under sub-section (1) in respect
of any judgment or award unless, before
the commencement of the proceedings in
which the judgment or award is given the
insurer had notice through the court or, as
the case may be, the Claims Tribunal of the
bringing of the proceedings, or in respect of
such judgment or award so long as its
execution is stayed 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:-
1 All. ICICI Lombard General Insurance Co. Ltd. Vs. Smt. Arti Devi & Ors.
185

(a) 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

(D)
without
side-car
being
attached where the vehicle is a twowheeled vehicle; or

(ii) a condition excluding driving
by a named person or by any person who is
not duly licenced or by any person who has
been disqualified for holding or obtaining a
driving licence during the period of
disqualification or driving under the
influence of alcohol or drugs as laid down
in section 185; or

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

(b) that the policy is void on the
ground
that
it
was
obtained
by
nondisclosure of any material fact or by
representation of any fact which was false
in some material particular; or

(c) that there is non-receipt of
premium as required under section 64VB
of the Insurance Act, 1938.

(3) ............

(4) Where a certificate of
insurance has been issued under subsection (3) of section 147 to the person by
whom a policy has been effected, so
much of the policy as purports to restrict
the insurance of the persons insured
thereby, by reference to any condition
other than those in sub- section (2) shall,
as respects such liabilities as are
required to be covered by a policy under
clause (b) of sub-section (1) of section
147, be of no effect.

FEW AUTHORITIES ON
COMPULSORY INSURANCE

13. The Supreme Court, in United
India Insurance Company Limited v.
Santro Devi and Ors., (2009) 1 SCC 558
observed that the provisions of compulsory
insurance have been framed to advance a
social object. It is in a way part of the
social justice doctrine. When a certificate
of insurance is issued, in law, the insurance
company is bound to reimburse the owner.
There cannot be any doubt whatsoever that
a contract of insurance must fulfill the
statutory requirements of formation of a
valid contract but in case of a third- party
risk, the question has to be considered from
a different angle. It was further held that
section 146 of the Act gives complete
protection to Third Party in respect of death
or bodily injury or damage to the property
while using the vehicle in public place. For
that purpose, insurance of the vehicle has
been made compulsory to the vehicles or to
the owners. This would further reflect that
compulsory insurance is obviously for the
benefit of Third Parties. The judgment in
Santro Devi (supra) was followed by
Supreme Court in Uttar Pradesh State
Road Transport Corporation vs. Kulsum
and other, 2011 (8) SCC 142.

14. In G. Govindan vs. New India
Assurance Co. Ltd. and others, 1999 (3)
SCC 754, the Supreme Court, dealing with
mandatory
requirement
of
statute
governing insurance qua third party risks,
observed in paragraph Nos. 12, 13 and 15
as under:-
186 INDIAN LAW REPORTS ALLAHABAD SERIES

"12. The heading of Chapter VIII
of the old Act reads as "Insurance of Motor
Vehicles against Third Party Risks". A
perusal of the provisions under Chapter
VIII makes it clear that the Legislature
made
insurance
of
motor
vehicles
compulsory against third-party (victims)
risks. This Court in New Asiatic Insurance
Co. Ltd. v. Pessumal Dhanamal Aswani &
Ors., AIR (1964) SC 1736 after noticing
the compulsory nature of insurance
against third- party observed that once
the company had undertaken liability to
third parties incurred by the persons
specified in the policy, the third parties'
right to recover any amount under or by
virtue of the provisions of the Act is not
affected by any condition in the policy.

13. In our opinion that both under
the old act and under the new Act the
Legislature was anxious to protect the third
party (victim) interest. It appears that what
was implicit in the provisions of the old
Act is now made explicit, presumably in
view of the conflicting decisions on this
aspect among the various High Courts.

15.
As
between
the
two
conflicting views of the full bench
judgments noticed above, we prefer to
approve the ratio laid down by the
Andhra
Pradesh
High
Court
in
Kondaiah's case (Madineni Kondaiah v.
Yaseen Fatima: AIR 1986 AP 62) as it
advances the object of the Legislature to
protect the third party interest. We
hasten to add that the third party here will
not include a transferee whose transferor
has not followed procedure for transfer of
policy. In other words in accord with the
well- settled rule of interpretation of
statutes we are inclined to hold that the
view taken by the Andhra Pradesh High
Court in Kondaiah's case is preferable to
the
contrary
views
taken
by
the
Karnataka (National Insurance Co. Ltd.
v. Mallikarjun: AIR 1990 Kant 166) and
Delhi (Anand Sarup Sharma v. P.P.
Khurana: 1989 ACJ 577 (Del) (FB) High
Courts (supra) even assuming that two
views are possible on the interpretation
of relevant sections as it promotes the
object of the Legislature in protecting
the third party (victim) interest. The ratio
laid down in the judgment of Karnataka &
Delhi High Courts (supra) differing from
Andhra Pradesh High Court is not the
correct one."

LEADING AUTHORITIES ON 'PAY
AND
RECOVER'

15. In Kamla (supra), the Supreme
Court dealt with the then existing Chapter
XI of the Act of 1988 and held as under:-

"21. A reading of the proviso to
sub-section (4) as well as the language
employed in sub-section (5) would indicate
that they are intended to safeguard the
interest of an insurer who otherwise has no
liability to pay any amount to the insured
but for the provisions contained in Chapter
XI of the Act. This means, the insurer has
to pay to the third parties only on
account of the fact that a policy of
insurance has been issued in respect of
the vehicle, but the insurer is entitled to
recover any such sum from the insured if
the insurer were not otherwise liable to
pay such sum to the insured by virtue of
the
conditions
of
the
contract
of
insurance indicated by the policy.

22. To repeat, the effect of the
above provisions is this: When a valid
insurance policy has been issued in respect
of a vehicle as evidenced by a certificate of
insurance the burden is on the insurer to
pay to third parties, whether or not there
has been any breach or violation of the
1 All. ICICI Lombard General Insurance Co. Ltd. Vs. Smt. Arti Devi & Ors.
187
policy conditions. But the amount so paid
by the insurer to third parties can be
allowed to be recovered from the insured if
as per the policy conditions the insurer had
no liability to pay such sum to the insured."