# India Insurance Co. Ltd., Saharanpur v. Smt. Shashi Prabha Sharma & Ors

- **Citation:** (2015) 2 ILRA 940
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2015-08-11
- **Case number:** First Appeal From Order No. 2174 of 2014
- **Bench:** Dr. Dhananjaya Yeshwant Chandrachud, C.J. Dilip Gupta, Pradeep Kumar Singh Baghel
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/india-insurance-co-ltd-saharanpur-v-smt-shashi-prabha-sharma-ors-43245
- **Pages:** 17

## Headnote

Motor Vehicle Act-1988-Section 173whether the Tribunal right in shifting the
liability of compensation upon insurerwhere the vehicle owner has been held
responsible for payment?-if 'yes' how the
interest of insurer could be protected?-
held-vehicle owner to furnish security of
amount
paid
by
insurer-insurer
not
required
to
file
separate
suit
for
recovery-execution Court to exercise all
power available to balance in payment of
compensation to claimant but at same
time to protect the concern of insurer-in
case
of
default
by
vehicle
ownerexecution court empowered to realize
the said amount from any other property
of the vehicle owner.
Held: Para-39
In these circumstances, we hold that where
the insurer is directed to pay the amount in
the first instance despite having been held
not to be under a legal liability to pay the
awarded amount, while permitting the
insurer to recover the amount from the
owner, the procedure which has been laid
down in Challa Upendra Rao (supra) would
have to be followed. This would envisage
that before the amount is released to the
claimant, the owner of the offending vehicle
shall furnish security for the amount which
the insurer has to pay to the claimants. The
offending vehicle is to be attached as a part
of the security for the purpose of recovering
the amount from the insured. The insurer
shall not be required to file a suit and may
initiate a proceeding before the executing
Court. The executing Court may pass
appropriate orders in accordance with law
as to the manner in which the insured,
namely the owner of the vehicle, shall make
payment to the insurer. In the event that
there is any default, it is open to the
executing Court to direct realisation by the
disposal of the securities to be furnished or
from any other property or properties of the
owner of the vehicle. In the event that the
person on whose behalf payment has been
made by the insurer, does not furnish
security or is not in a position to furnish
security to the insurer, the insurer should
promptly move the executing Court. The
executing Court shall then duly ensure that
it exercises all its available powers in
execution in accordance with law so that
while on one hand payment is made to the
person to whom it is due, the concerns of
the insurer are duly balanced. We may only
add here that all necessary and proper
steps should be taken by the executing
Court to ensure that the intent and object
of the legislature in enacting the beneficial
provisions of the Act is duly preserved and
are expeditiously implemented.
Case Law discussed:
AIR 2002 SC 3350; (1998) 3 SCC 140; (2011)
10 SCC 509; 2013

## Text

_Characters 0–39,895 of 57,705. This is a partial read: ask again with offset=39895 for what follows._

940
 INDIAN LAW REPORTS ALLAHABAD SERIES
The inherent power under section 482
Cr.P.C. can be exercised to give effect to any
order under Cr.P.C. or to prevent the abuse
of the process of any court or otherwise to
secure the ends of justice. Certainly, if the
application has been dismissed for default,
that cannot be termed as 'judgement'.
28. Accordingly, the bar as provided
by section 362 Cr. P.C. shall not be
applicable. This court has power to
dismiss in default any application or writ
petition and at the same time has also
power to restore such proceedings on
sufficient grounds being shown for nonappearance provided it appears to the
court that default was not wilful and it
was accidental. There are instances,
where either legal advise is given or due
to shrewd character of
the litigant
malafide efforts are adopted with a view
to delay the proceedings of the case, such
tactics are also adopted to get the case
dismissed in default and then to move
application for restoration and thus,
lingering on the proceedings. Certainly,
such practice must be carved out and
should not be permitted to continue.
29. The views expressed by the various
High Courts in the aforesaid decisions are in
favour of the restoration of such petition,
which has been dismissed in default in
exercise of powers under section 482 of the
code of criminal procedure with a view to
secure the ends of justice and I am also in
respectful agreement with the views expressed
by the various High Courts in the aforesaid
decisions.
30. Therefore, I am of the view that
if any petition has been dismissed in
default and the application for recall is
made, then it will not come within the
meaning of words 'alter' or 'review' as
expressed in Section 362 of the Code.
Accordingly, such orders may be recalled
or set aside provided the intention of the
parties is bonafide i.e. party who has
moved the application for recall or
restoration is not unnecessary lingering on
the proceedings malafidely or that interim
order or stay order, if any, is not being
misused.
31.
Accordingly, the application for
restoration or recall of the order is
maintainable and the prohibition of Section
362 Cr.P.C. do not apply in the petitions,
which have been dismissed in default
without discussing the merits of the case
because it do not come within the prohibition
of 'alter' or 'review' of judgment, which has
entirely a different meaning.
32. In the present case, the petition
was dismissed for want of prosecution
because the counsel for the petitioner
could not appear due to sudden illness for
which the learned counsel for the CBI
also has raised no objection.
33. Accordingly, the application for
recall is allowed.
34. The order dated 29.04.2015 is
recalled. The petition is restored to its
original number and status.
--------
APPELLATE JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 11.08.2015
BEFORE
THE HON'BLE DR. DHANANJAYA YESHWANT
CHANDRACHUD, C.J.
THE HON'BLE DILIP GUPTA, J.
THE HON'BLE PRADEEP KUMAR SINGH
BAGHEL, J.
First Appeal From Order No. 2174 of 2014
2 All] United India Insurance Co. Ltd., Saharanpur Vs. Smt. Shashi Prabha Sharma & Ors.
941
United
India
Insurance
Co.
Ltd.,
Saharanpur
 ...Appellant
Versus
Smt. Shashi Prabha Sharma & Ors.
...Respondents
Counsel for the Appellant:
Sri Vishesh Kumar Gupta
Counsel for the Respondents:
Sri S.D. Ojha
Motor Vehicle Act-1988-Section 173whether the Tribunal right in shifting the
liability of compensation upon insurerwhere the vehicle owner has been held
responsible for payment?-if 'yes' how the
interest of insurer could be protected?-
held-vehicle owner to furnish security of
amount
paid
by
insurer-insurer
not
required
to
file
separate
suit
for
recovery-execution Court to exercise all
power available to balance in payment of
compensation to claimant but at same
time to protect the concern of insurer-in
case
of
default
by
vehicle
ownerexecution court empowered to realize
the said amount from any other property
of the vehicle owner.
Held: Para-39
In these circumstances, we hold that where
the insurer is directed to pay the amount in
the first instance despite having been held
not to be under a legal liability to pay the
awarded amount, while permitting the
insurer to recover the amount from the
owner, the procedure which has been laid
down in Challa Upendra Rao (supra) would
have to be followed. This would envisage
that before the amount is released to the
claimant, the owner of the offending vehicle
shall furnish security for the amount which
the insurer has to pay to the claimants. The
offending vehicle is to be attached as a part
of the security for the purpose of recovering
the amount from the insured. The insurer
shall not be required to file a suit and may
initiate a proceeding before the executing
Court. The executing Court may pass
appropriate orders in accordance with law
as to the manner in which the insured,
namely the owner of the vehicle, shall make
payment to the insurer. In the event that
there is any default, it is open to the
executing Court to direct realisation by the
disposal of the securities to be furnished or
from any other property or properties of the
owner of the vehicle. In the event that the
person on whose behalf payment has been
made by the insurer, does not furnish
security or is not in a position to furnish
security to the insurer, the insurer should
promptly move the executing Court. The
executing Court shall then duly ensure that
it exercises all its available powers in
execution in accordance with law so that
while on one hand payment is made to the
person to whom it is due, the concerns of
the insurer are duly balanced. We may only
add here that all necessary and proper
steps should be taken by the executing
Court to ensure that the intent and object
of the legislature in enacting the beneficial
provisions of the Act is duly preserved and
are expeditiously implemented.
Case Law discussed:
AIR 2002 SC 3350; (1998) 3 SCC 140; (2011)
10 SCC 509; 2013 (4) TAC 22 (SC); (1996) 5
SCC 21; AIR 2004 SC 1531; (1960) 1 SCR 168;
AIR 2004 SC 1630; (2004) 2 SCC 1; (2013) 2
SCC 41; SLP © No. 5699 of 2006; (2009) 8
SCC 785.
(Delivered by Hon'ble Dr. D. Y. Chandrachud,
C.J.)
1. During the course of the hearing
of a First Appeal From Order1 arising out
of a decision of the Motor Accident
Claims Tribunal at Saharanpur dated 6
May 2014, a Division Bench of this Court
formulated the following questions for
consideration by a Full Bench2:
(i) Where on account of a breach of
an insurance policy, the owner of an
offending vehicle has been held liable to
pay compensation (the insurer having
been held not to be liable) but a direction
is issued to the insurer to pay the
942
 INDIAN LAW REPORTS ALLAHABAD SERIES
compensation awarded to the claimant
and to recover it from the owner of the
offending vehicle, does the insurer have a
right to appeal under Section 173 of the
Motor Vehicles Act, 19883?
(ii) If question (i) above is answered
in the affirmative, to what extent and on
what grounds will the insurer have the
right to challenge an order of the
Tribunal?
(iii) In a situation where the Motor
Accident Claims Tribunal4 has fastened
the liability to pay compensation only on
the owner of the offending vehicle but the
insurer has been directed to pay the
compensation to the claimant and recover
it from the owner subject to the owner
furnishing security to the extent of the
compensation awarded and if the owner
fails to furnish security, either due to
incapability or for any other reason,
should the award be allowed to be
frustrated for want of security, thereby
defeating the object of the legislature to
protect the right of third parties?
2. The incident which had led to the
proceedings before the Division Bench in
an FAFO took place at 6.30 pm on 24
December 2010 when Surya Prakash
Sharma boarded a tempo at Saharanpur.
During the course of the journey, the
tempo collided with a tractor and trolley
coming from the opposite direction. Surya
Prakash
Sharma
sustained
multiple
injuries and was declared dead at the
District Hospital at Saharanpur. The place
of the occurrence was before the Air
Station Sarsawa, near Sourana on the
Saharanpur Sarsawa road.
3. The claim petition was filed
before the Tribunal at Saharanpur by the
widow on her behalf and for three minor
children who were respectively of the
ages of one, fourteen and sixteen. United
India Insurance Company Limited5, the
appellant, was impleaded as a party to the
claim petition. The Tribunal held that the
insurance company was not liable to pay
compensation on the ground that (i) the
driver did not have a valid and effective
driving licence on the date of the accident
and there was a violation of the conditions
of the insurance policy; and (ii) the tempo
was being driven in violation of its route
permit. The Tribunal came to the
conclusion that the accident took place
because of the rash and negligent manner
in which the tempo was being driven. The
claim for compensation was allowed in
the amount of Rs 19,10,665/- together
with interest at the rate of seven percent
per annum. The insurance company was
directed to satisfy the award by paying the
compensation awarded to the claimants
subject to its right to recover the amount
from the insured.
4. We will now proceed to analyse
the three questions which have been
referred to the Full Bench for being
considered.
Re Questions (i) and (ii)
5. Section 173 of the Act provides as
follows:
"173. Appeals.-(1) Subject to the
provisions of sub-section (2), any person
aggrieved by an award of a Claims
Tribunal may, within ninety days from the
date of the award, prefer an appeal to the
High Court:
Provided that no appeal by the
person who is required to pay any amount
in terms of such award shall be
entertained by the High Court unless he
2 All] United India Insurance Co. Ltd., Saharanpur Vs. Smt. Shashi Prabha Sharma & Ors.
943
has deposited with it twenty-five thousand
rupees or fifty per cent of the amount so
awarded, whichever is less, in the manner
directed by the High Court:
Provided further that the High Court
may entertain the appeal after the expiry
of the said period of ninety days, if it is
satisfied that the appellant was prevented
by sufficient cause from preferring the
appeal in time.
(2) No appeal shall lie against any
award of a Claims Tribunal if the amount
in dispute in the appeal is less than ten
thousand rupees."
6. A right of appeal against an award
of the Tribunal has been made available
by sub-section (1) of Section 173 to 'any
person aggrieved' by the award subject to
the amount in dispute in the appeal being
above the threshold specified in subsection (2). The issue before the Court is
whether the insurance company is a
person aggrieved within the meaning of
sub-section (1). If it is, the further
question that needs to be addressed is in
regard to the scope of the appellate
remedy.
7. Chapter XII of the Act provides
for
Claims
Tribunals.
Section
165
provides for the establishment of a
Tribunal to adjudicate upon claims for
compensation in respect of accidents
involving the death of, or bodily injury to,
persons arising out of the use of motor
vehicles, or damages to any property of a
third party so arising, or both. Section 166
provides
for
an
application
for
compensation. The Tribunal can be
moved either upon an application for
compensation under sub-section (1) of
Section 166 or even upon proceedings
initiated suo motu by treating a report of
an accident forwarded to the Tribunal
under Section 158 (6) as an application
for compensation under Section 166 (4).
Under sub-section (1) of Section 168, on
receipt of an application for compensation
under Section 166, the Tribunal, after
furnishing a notice of the application to
the insurer and after allowing the parties
including the insurer, an opportunity of
being heard, is required to enquire into the
claim. The Tribunal has to make an award
(i)
determining
the
amount
of
compensation which appears to it to be
just; (ii) specifying the person or persons
to whom the compensation shall be paid;
and (iii) specifying the amount to be paid
by the insurer or owner or driver of the
vehicle involved in the accident or by all
the three of them, as the case may be.
Under sub-section (3) of Section 168, the
person who is required to pay any amount
in terms of the award, has to deposit the
entire amount awarded in the manner in
which the Tribunal may direct, within
thirty days from the date of the award. In
making its enquiry, the Tribunal under
sub-section (1) of Section 169 has to
follow a summary procedure as it thinks
fit.
8. Where a claim is brought before
the Tribunal under Section 166, the driver
and owner have to be impleaded as
respondents. The claimant may or may
not implead the insurer as a party to the
proceedings. However, sub-section (2) of
Section 149 provides that no sum shall be
payable by the insurer under sub-section
(1) in respect of a judgment or award
unless, before the commencement of the
proceedings, the insurer had notice of the
proceedings. The insurer to whom a
notice of the proceedings is given, shall
be entitled to be made a party thereto.
Section 149 forms a component of
Chapter XI which provides for insurance
944
 INDIAN LAW REPORTS ALLAHABAD SERIES
of motor vehicles against third party risks.
Section 146 makes it obligatory to obtain
an insurance policy covering third party
risks. No person can allow or cause to
allow a motor vehicle to be used in a
public place without an insurance policy
being in force in accordance with the
requirements of the Chapter. Section 147
defines the requirements of such a policy
and the limits of liability. If a judgment or
award in respect of the liability which has
to be covered under Section 147 (3) (b) is
obtained against the insured, after a
certificate of insurance is obtained, the
insurer
is
obligated
to
pay
the
compensation payable to the person to
whom the benefit of the decree enures,
even though the insurer is entitled to or
has actually cancelled or avoided the
policy.
9. Sub-section (2) of Section 149
provides the grounds on which an insurer
to whom notice of the bringing of the
proceedings is given, can defend the
action. Sub-sections (1) and (2) of Section
149 provide as follows:
"(1) If, after a certificate of insurance
has been issued under sub-section (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) 6[or under the
provisions of Section 163-A] 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
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 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
2 All] United India Insurance Co. Ltd., Saharanpur Vs. Smt. Shashi Prabha Sharma & Ors.
945
(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."
10. Section 170 of the Act provides
for the impleadment of the insurer in
certain cases and is as follows:
"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."
11.

Two
eventualities
are
contemplated in Section 170 in which the
Tribunal may, in the course of its enquiry,
direct that the insurer who may be liable
in respect of the claim, shall be impleaded
as a party to the proceedings. The first is,
where the Tribunal is satisfied that there
is a collusion between the claimant and
the person against whom the claim is
made. The second is, where the person
against whom the claim has been made,
has failed to contest the claim. Upon
being impleaded, the insurer shall have,
without prejudice to the provisions of subsection (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.
12. A Bench three learned Judges of
the Supreme Court in National Insurance
Co
Ltd
Vs
Nicolletta
Rohtagi7,
considered the question whether, in a
situation where the insured had not
preferred an appeal under Section 173, it
would be open to the insurer to prefer an
appeal against an award of the Tribunal
questioning the quantum of compensation
as well as the finding in regard to the
negligence of the offending vehicle. The
Supreme Court observed that under the
provisions of Section 149 (2), the insurer
was conferred the right to be made a party
to the case and to defend it. The right
being a creature of the statute, its content
would
depend
upon
the
statutory
provision. In that context, the Supreme
Court observed as follows:
"...After the insurer has been made a
party to a case or claim, the question
arises what are the defences available to it
under the statute. The language employed
in enacting sub-section (2) of Section 149
appears to be plain and simple and there is
no ambiguity in it. It shows that when an
insurer is impleaded and has been given
notice of the case, he is entitled to defend
the action on grounds enumerated in the
sub-section, namely, sub-section (2) of
Section 149 of 1988 Act, and no other
ground is available to him. The insurer is
not allowed to contest the claim of the
injured or heirs of the deceased on other
ground which is available to an insured or
946
 INDIAN LAW REPORTS ALLAHABAD SERIES
breach of any other conditions of the
policy which do not find place in subsection (2) of Section 149 of 1988 Act. If
an insurer is permitted to contest the
claim on other grounds it would mean
adding more grounds of contest to the
insurer
than
what
the
statute
has
specifically provided for."8 (emphasis
supplied)
13. The Supreme Court held that the
insurer could not avoid its liability on any
ground except those mentioned in subsection (2) of Section 149:
"...the statutory defences which are
available to the insurer to contest a claim
are confined to what are provided in subsection (2) of Section 149 of 1988 Act
and not more and for that reason if an
insurer is to file an appeal, the challenge
in the appeal would confine to only those
grounds."9
14. The Supreme Court adverted to its
decision in Shankarayya Vs United India
Insurance Co Ltd10, where it was laid down
that an
insurance company which is
impleaded as a party by the Court could be
permitted to contest the proceedings on
merits only if the conditions precedent
mentioned in Section 170 were satisfied and
for that, the insurer would have to obtain an
order in writing from the Tribunal. Unless
this procedure was followed, the insurer
would not have a wider defence on merits
than what was available by way of statutory
defences under Section 149 (2). In the
absence
of
the
conditions
precedent
mentioned in Section 170 existing, the
insurer was not entitled to file an appeal on
merits
questioning
the
quantum
of
compensation.
The
Supreme
Court,
adverting to the earlier decisions, held as
follows:
"...Thus, unless an order is passed by
the tribunal permitting the insurer to avail
the grounds available to an insured or any
other person against whom a claim has
been made on being satisfied of the two
conditions specified in Section 170 of the
Act, it is not permissible to the insurer to
contest the claim on the grounds which
are available to the insured or to a person
against whom a claim has been made.
Thus
where
conditions
precedent
embodied in Section 170 is satisfied and
award is adverse to the interest of the
insurer, the insurer has a right to file an
appeal challenging the quantum of
compensation
or
negligence
or
contributory negligence of the offending
vehicle even if the insured has not filed
any appeal against the quantum of
compensation. Sections 149, 170 and 173
are part of one Scheme and if we give any
different interpretation to Section 172 of
the 1988 Act, the same would go contrary
to the scheme and object of the Act."11
15. The Supreme Court observed
that the main object of enacting Chapter
XI was to protect the interest of victims of
motor vehicle accidents and it was for that
reason the insurance of all motor vehicles
has been made statutorily compulsory.
The Act was enacted to protect the
interest of persons travelling on or using
roads from the risks attendant upon the
use of motor vehicles. The judgment in
Nicolletta Rohtagi (supra), therefore, laid
down that unless the conditions which are
prescribed in Section 170 are satisfied, an
insurer had no right of appeal to challenge
the award on merits. In a situation where
the Tribunal does not implead the insurer
though the conditions specified in Section
170 are fulfilled, it is open to an insurer to
seek the permission of the Tribunal to
contest the claim on grounds available to
2 All] United India Insurance Co. Ltd., Saharanpur Vs. Smt. Shashi Prabha Sharma & Ors.
947
the insured or those available to the
person against whom the claim is made. If
permission is granted and the insurer is
allowed to contest the claim on merits, it
would be open to it to file an appeal
against the award on merits. However, if
the Tribunal has rejected the application
for permission erroneously, it would be
open to the insurer to challenge that part
of the order while filing an appeal on the
grounds specified in Section 149 (2).
16. In 2011, a Bench of three
learned Judges of the Supreme Court in
United India Insurance Co Ltd Vs Shila
Datta12 considered the ambit of the
provisions of Section 149 (2) and Section
173 in a reference made on the
correctness of the three Judge Bench
decision in Nicolletta Rohtagi (supra).
The following questions were formulated
for consideration:
"(i) Whether the insurer can contest a
motor accident claim on merits, in
particular, in regard to the quantum, in
addition to the grounds mentioned in
Section 149 (2) of the Act for avoiding
liability under the policy of insurance; and
(ii) Whether an insurer can prefer an
appeal under Section 173 of the Motor
Vehicles Act, 1988, against an award of
the Motor Accident Claims Tribunal,
questioning the quantum of compensation
awarded."13
17. Five submissions were urged
before the Supreme Court on behalf of the
Insurance Companies, these being:
"(i) There is a significant difference
between insurer as a `noticee' (a person to
whom a notice is served as required by
Section 149 (2) of the Act) in a claim
proceeding and an insurer as a partyrespondent in a claim proceeding. Where
an insurer is impleaded by the claimants
as a party, it can contest the claim on all
grounds, as there are no restrictions or
limitations in regard to contest. But where
an insurer is not impleaded by the
claimant as a party, but is only issued a
statutory notice under Section 149 (2) of
the Act by the Tribunal requiring it to
meet the liability, it is entitled to be made
a party to deny the liability on the grounds
mentioned in Section 149 (2).
(ii) When the owner of the vehicle
(insured) and the insurer are aggrieved by
the award of the Tribunal, and jointly file
an appeal challenging the quantum, the
mere presence of the insurer as a coappellant will not render the appeal, as not
maintainable. When insurer is the person
to
pay
the
compensation,
any
interpretation to say that it is not a `person
aggrieved'
by
the
quantum
of
compensation
determined,
would
be
absurd and anomalous.
(iii) When an insurer is aggrieved by
the quantum of compensation, it is not
seeking to avoid or exclude its liability,
but merely wants determination of the
extent of its liability. The restrictions
imposed upon the insurers to defend the
action by the claimant or file an appeal
against the judgment and award of the
Tribunal will apply, only if it wants to file
an appeal to avoid liability and not when
it admits its liability to pay the amount
awarded,
but
only
seeks
proper
determination
of
the
quantum
of
compensation to be paid.
(iv) Appeal is a continuation of the
original claim proceedings. Section 170
provides that if the person against whom
the claim is made, fails to contest the
claim, the insurer may be permitted to
resist the claim on merits. If and when an
award is made by the Tribunal which is
948
 INDIAN LAW REPORTS ALLAHABAD SERIES
excessive, arbitrary or erroneous, the
owner of the vehicle has to challenge the
same by filing an appeal before the High
Court. If the insured (owner of the
vehicle) fails to challenge an award even
when it is erroneous or arbitrary or
fanciful, it can be considered that the
insured has failed to contest the same and
consequently under Section 170, the High
Court or the Tribunal may permit the
insurer to file an appeal and contest the
award on merits.
(v) The Act creates a liability upon
the insurer to satisfy the judgments and
awards against the insured. The Act
expressly restricts the right of the insurer
to avoid the liability as insurer, only to the
grounds specified in Section 149 (2) of
the Act. Though it is impermissible to add
to the grounds mentioned in the statute,
the insurer has a right, if it has reserved
such a right in the policy, to defend the
action in the name of the insured. If it opts
to step into the shoes of the insured, it can
defend the action in the name of the
insured and all defences open to the
insured will be available to it and can be
urged by it. Its position contesting a claim
under Section 149 (2) of the Act is
distinct
and
different,
when
it
is
contesting the claim in the name of or on
behalf of the insured owner of the vehicle.
In cases, where it is authorized by the
policy to defend any claim in the name of
the insured, and the insurer does so, it can
not be restricted to the grounds mentioned
in Section 149 (2) of the Act, as the
defence is on behalf of the owner of the
vehicle."14
18. The Supreme Court observed
that issues (i) and (ii) did not arise for
consideration
in
Nicolletta
Rohtagi
(supra) nor were they considered. Since
the Bench hearing Shila Datta's case was
also a Bench of three Hon'ble Judges,
issues (i) and (ii) were resolved since they
had not been considered in the earlier
decision of three learned Judges in
Nicolletta Rohtagi (supra). Issues (iii),
(iv) and (v) would require reconsideration
of the decision in Nicolletta Rohtagi and
were referred to a larger Bench. For the
purpose of the present reference, the law
laid down in issue (i) in Shila Datta
assumes significance. Though issues (iii),
(iv) and (v) have been referred to a larger
Bench, Nicolletta Rohtagi will in the
meantime continue to be a precedent
laying down binding principles. Presently
we turn to the decision in Shila Datta on
issue (i) which has a bearing on this
reference.
19. The Supreme Court held in Shila
Datta (supra) that there is a distinction
between (i) a case where merely a notice
has been issued to the insurer under
Section 149 (2); and (ii) a case where the
insurer is a respondent to the proceedings.
If the insurer is merely furnished with a
notice under Section 149 (2), the only
ground which would be available to the
insurer would be the statutory grounds
provided in that sub-section. However, if
the insurer has been impleaded as a
respondent to the proceedings, it can raise
not only the statutory defences available
under Section 149 (2) but all other
grounds available to a person against
whom the claim is made. The insurer may
be impleaded as a party upon the
conditions specified in Section 170 being
fulfilled. Upon this happening the insurer
has open a full range of defences which
were available to a person against whom a
claim is brought, apart from the defences
under Section 149 (2). Moreover, if a
claimant impleads the insurer as a party to
the proceedings for whatever reason, the
2 All] United India Insurance Co. Ltd., Saharanpur Vs. Smt. Shashi Prabha Sharma & Ors.
949
insurer would be entitled to urge all
contentions and grounds as may be
available to it. If the insurer is already a
party to the proceedings, having been
impleaded, it is not necessary for it to
seek the permission of the Tribunal under
Section 170 to raise grounds other than
those mentioned in Section 149 (2).
20. Chapters XI and XII envisage
that a claim petition may be brought only
against an owner and driver, and the
Tribunal issues a notice under Section 149
(2) to the insurer so that it can be made
liable to pay the amount awarded and, if
necessary, to deny the liability by availing
of a statutory defence under Section 149
(2). If only a notice has been issued to the
insurer under Section 149 (2), it can
defend the claim on one of the statutory
defences available under sub-section (2)
and no more. Where, however, the insurer
is a respondent to the proceedings either
because it has been impleaded under
Section 170 by the Tribunal upon the
conditions precedent set out therein being
satisfied or has been impleaded by the
claimant as a respondent to the claim
petition voluntarily, it would be open to
the insurer to contest the matter on all
counts without being restricted to the
statutory defences under Section 149 (2).
21. This position is enunciated in the
following observations of the Supreme
Court in Shila Datta:
"Therefore, where the insurer is a
party-respondent, either on account of
being impleaded as a party by the
Tribunal under Section 170 or being
impleaded as a party-respondent by the
claimants in the claim petition voluntarily,
it will be entitled to contest the matter by
raising
all
grounds,
without
being
restricted to the grounds available under
Section 149 (2) of the Act. The claim
petition is maintainable against the owner
and driver without impleading the insurer
as a party.
When a statutory notice is issued under
Section 149 (2) by the Tribunal, it is clear
that such notice is issued not to implead the
insurer as a party-respondent but merely to
put it on notice that a claim has been made
in regard to a policy issued by it and that it
will have to bear the liability as and when
an award is made in regard to such claim.
Therefore, it cannot, as of right, require that
it should be impleaded as a partyrespondent. But it can however be made a
party-respondent either by the claimants
voluntarily in the claim petition or by the
direction of the Tribunal under Section 170
of the Act. Whatever be the reason or
ground for the insurer being impleaded as a
party, once it is a party-respondent, it can
raise all contentions that are available to
resist the claim."15
22. In a recent judgment of a Bench
of two learned Judges of the Supreme
Court in Josphine James Vs United India
Insurance Co Ltd16, the Supreme Court
held that the insurance company was not
entitled to file an appeal questioning the
quantum of compensation awarded but
had only a limited defence as provided in
Section 149 (2). The case was, therefore,
covered by the principle laid down in
Nicolletta Rohtagi where, evidently, no
permission had been obtained under
Section 170. The Supreme Court also held
that in the absence of permission obtained
under Section 170 (b) by the insurance
company from the Tribunal to avail of the
defence of the insured, the insurer was not
permitted to contest the case on merits as
held in Nicolletta Rohtagi (supra).
950
 INDIAN LAW REPORTS ALLAHABAD SERIES
23. The position as it emerges from
the decisions of the two three Judge
Bench judgments of the Supreme Court in
Nicolletta Rohtagi and Shila Datta (supra)
is as follows:
(I) Where the insurer has not been
impleaded as a respondent to the claim
proceedings and a notice is issued by the
Tribunal as required by Section 149 (2),
the position of the insurer is that of a mere
noticee who can contest the proceeding
only on one of the grounds available
under sub-section (2);
(II) Under Section 170, the Tribunal
can implead the insurer where, in the
course of its enquiry, it is satisfied that (i)
there is a 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;
(III) Once the insurer is impleaded
by the Tribunal on the satisfaction of the
conditions specified in Section 170, the
insurer has a right to contest the claim on
grounds which are available to the insured
or to a person against whom the claim has
been made. In such a situation, where the
award is adverse to the interest of the
insurer, the insurer has a right to file an
appeal challenging the award on all
available grounds including the issue of
negligence or contributory negligence of
the offending vehicle as well as on the
quantum of compensation even if the
insured has not filed an appeal. In such a
situation, the insurer is not confined to
contesting the appeal only on the statutory
defences available under Section 149 (2);
and
(IV) Where the insurance company
has
already
been
impleaded
as
a
respondent, either by virtue of its being
impleaded as a party by the Tribunal
under Section 170 [covered by (II) and
(III) above] or as a party respondent by
the claimants in the claim petition, it
would be entitled to contest the claim
petition by raising all grounds without
being restricted to the statutory defences
under Section 149 (2). Whatever be the
reason or ground for the insurer being
impleaded as a party, it is entitled to raise
all contentions that are available to resist
the claim, once it is a party respondent to
the proceedings. Consequently, in the
appeal, the insurer would not be restricted
to contesting the award only on the basis
of the statutory defences available under
Section 149 (2) but can challenge the
award on all grounds available to the
insured or the person against whom the
claim has been made.
Questions (i) and (ii) are answered
accordingly.
Re Question (iii)
24. Chapter XI of the Act was
legislated by Parliament to provide for
insurance of motor vehicles against third
party risks. Section 146 (1) 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 in relation to the use of
the vehicle by that person or that other
person, a policy of insurance which
complies with the requirements of the
Chapter. Section 147 lays down the
requirements which a policy of insurance
has to fulfill in order to comply with the
provisions of the Chapter and the limits of
liability. Clause (b) of sub-section (1) of
Section 147 requires the policy to ensure
against the following risks:
"(b) ...
2 All] United India Insurance Co. Ltd., Saharanpur Vs. Smt. Shashi Prabha Sharma & Ors.
951
(i) against any liability which may be
incurred by him in respect of the death of
or bodily injury to any person 17[,
including owner of the goods or his
authorised 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:"
25. Sub-section (1) of Section 149
stipulates that after a certificate of
insurance has been issued under Section
147 (3) and a judgment or award in
respect of a liability required to be
covered by Section 147 (1) (b) is obtained
against a person insured by the policy
then, even if the insurer is entitled to
avoid or cancel the policy or has avoided
or cancelled the policy, it shall pay to the
person entitled to the benefit of the
decree, a sum not exceeding the sum
assured as if he was the judgment debtor.
Section 149 (1) obligates the insurer to
satisfy the award against a person insured
by
the
policy.
This
obligation
is
predicated upon three conditions: first,
that a certificate of insurance has been
issued under Section 147 (3); second, that
the judgment or award is in respect of a
liability required to be covered by Section
147 (1) (b) and third, that the judgment or
award is against the person insured by the
policy. The insurer is made liable on the
basis of a legal fiction which is that the
insurer must pay "as if" he is the
judgment debtor. The insurer must pay
even if it is entitled to cancel or avoid the
policy or has cancelled or avoided it. Subsection (4) of Section 149 provides as
follows:
"(4) Where a certificate of insurance has
been issued under sub-section (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 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:
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 subsection shall be recoverable by the insurer
from that person." (emphasis supplied).
26. The proviso to sub-section (4)
enables the insurer to recover any sum
paid by it towards the discharge of a
liability of any person covered by the
policy, from that person.