# The National Insurance Co. Ltd v. Ratibhan Kewat & Ors

- **Citation:** (2014) 3 ILRA 1463
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2014-11-20
- **Case number:** First Appeal From Order No. 3162 of 2014
- **Bench:** Pankaj Mithal
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/the-national-insurance-co-ltd-v-ratibhan-kewat-ors-43044
- **Pages:** 3

## Headnote

INDIAN LAW REPORTS ALLAHABAD SERIES
Constitution of India Art.-141, 142direction
of
Apex
Court
to
pay
compensation to third party-whether
mere
direction
to
complete
justice
between the party-mere direction under
Article 142 or having binding precedent
under Art. 141-held-in view of latest
direction of Apex Court-such direction
has binding effect-mere reference to
larger Bench-have no disturbing effect to
the settled law.
Held: Para-10 & 11

## Text

3 All]. The National Insurance Co.Ltd. Vs. Ratibhan Kewat & Ors.
1463
taken until the property of the principal
debtors is first sold of. In the said cases, the
Apex Court was dealing with recovery
under the provisions of the U.P. Public
Moneys (Recovery of Dues) Act, 1972. The
said Act provides for recovery to be first
made from the pledged goods and hence it
was held that action against the guarantor
cannot be taken until the property of the
principal debtor is first sold of. The present
is not a case under the aforesaid U.P. Act.
The learned Single Judge, relying on the
judgment of the Apex Court in the case of
Industrial Investment Bank of India Limited
vs. Biswanath Jhunjhunwala (2009) 9 SCC
478 has dismissed the writ petition on the
ground that liability of the borrower as well
as the guarantor is always co-extensive and
it is for the Bank to proceed either against
the borrower or the guarantor. In the said
judgment the Supreme Court has relied on
various judgments, including that of the
Supreme Court in the case of Bank of Bihar
Ltd. vs. Dr. Damodar Prasad AIR 1969 SC
297 wherein it has been held that "the very
object of the guarantee is defeated if the
creditor is asked to postpone his remedies
against the surety. In the present case the
creditor is a banking company. A guarantee
is a collateral security usually taken by a
banker. The security will become useless if
his rights against the surety can be so easily
cut down."
6. It is not disputed that in the
present case the order of the Tribunal was
passed in the year 2001, which had
become final and in pursuance thereof,
recovery proceedings had been initiated
against the principal debtors as well as the
appellant, who was a guarantor.
7. The liability of the guarantor is
co-extensive with that of the principal
debtor as has been clearly held by the
Supreme Court in the case of Industrial
Investment Bank of India Limited (supra).
In the present case either on the ground of
entering into a compromise or on the
ground that the recovery should first be
made from the principal debtor and not
from
the
guarantor,
the
recovery
proceedings have been delayed and
postponed for over a decade. The law on
this point is absolutely clear that the liability
of the guarantor is co-extensive. As such in
equity also if the principal debtor as well as
the guarantor have been postponing the
recovery for the last more than a decade
firstly by offering to enter into a
compromise and thereafter resiling and then
challenging the recovery on technical
grounds, we are of the firm view that by
doing so, the very purpose of The Recovery
of Debts Due to Banks and Financial
Institutions Acts, 1993 is being defeated. As
such, on merits as well as on equity, we do
not find any good ground to interfere with
the order passed by the writ court.
8. This appeal is accordingly
dismissed.
--------
APPELLATE JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 20.11.2014
BEFORE
THE HON'BLE PANKAJ MITHAL, J.
First Appeal From Order No. 3162 of 2014
The National Insurance Co. Ltd.
 ...Appellant
Versus
Ratibhan Kewat & Ors.
...Respondents
Counsel for the Appellant:
Sri P.K. Sinha
Counsel for the Respondents:
Sri S.D. Ojha
1464
 INDIAN LAW REPORTS ALLAHABAD SERIES
Constitution of India Art.-141, 142direction
of
Apex
Court
to
pay
compensation to third party-whether
mere
direction
to
complete
justice
between the party-mere direction under
Article 142 or having binding precedent
under Art. 141-held-in view of latest
direction of Apex Court-such direction
has binding effect-mere reference to
larger Bench-have no disturbing effect to
the settled law.
Held: Para-10 & 11
10. It is settled law that mere reference
of any question of law to a larger bench
would not have the effect of disturbing
the law which has been settled by the
court until and unless the reference is
answered to the contrary.
11. The principle where the vehicle is
covered by insurance policy, the insurer
is liable to compensate the loss in the
first instance and then may recover the
amount from the owner of the vehicle in
case of breach of any conditions of the
policy, as such is binding precedent laid
down
under
Article
141
of
the
Constitution of India and is not by way
of special circumstances to do the
complete justice under Article 142 of the
Constitution of India.
Case Law discussed:
2014 (142) FLR 638; 2001 (2) TAC 243 (SC);
2004 (1) TAC 321; 2013 (1) TAC 414 (SC)
(Delivered by Hon'ble Pankaj Mithal, J.)
1.
Heard Sri P.K. Sinha, learned
counsel for the appellant insurance company
and Sri S.D. Ojha, learned counsel appearing
for the claimant respondents.
2. This appeal under Section 173 of
the Motor Vehicles Act, 1988 has been
preferred against the judgment and order
dated 29.8.2014 passed in Motor Accident
Claims Petition No. 82/70/2013 (Rati
Bhan Singh and another Vs. Rajiv Lochan
Shukla and others) whereby a sum of Rs.
1,72,500/- with 7% interest from the date
of presentation of the claim petition has
been awarded.
3. The tribunal by the impugned award
has directed that the compensation awarded
shall be paid and deposited by the appellant
insurance company which may be recovered
by it from the owner of the vehicle as the
vehicle was covered by a valid insurance
policy but was driven in breach of the terms
and conditions of the policy.
4. In view of the fact that the liability
to pay compensation ultimately rests upon
the owner of the vehicle and the appellant
insurance company has been given right to
recover it on payment, no loss is likely to be
suffered by it. The compensation payable
under the award is actually payable by the
owner and not by the appellant insurance
company. In this sense of the matter,
appellant insurance company is not a party
aggrieved by the impugned award so as to
entitle it to maintain the appeal.
5.
Sri Sinha submits that once the
tribunal holds that there was violation of the
terms and conditions of the insurance policy,
no liability not even to pay the compensation
at the initial stage could have been fastened
upon the appellant insurance company. Any
direction of the apex court in this regard
directing the insurer to pay and recover are
directions
under
Article
142
of
the
Constitution of India and have no binding
precedent as has been recently held by the
three Judges Bench of the Supreme Court in
the Sate of Punjab and others Vs. Rafiq
Masih (White washer) 2014 (142) FLR 638.
6. The aforesaid decision of the
Supreme Court no doubt lays down that
any direction issued by the Apex Court in
3 All]. Chhote Lal alias Chhattoo Ram & Anr. Vs. D.D.C. Varanasi & Ors.
1465
exercise of its power under Article 142 of
the Constitution of India does not
constitute a binding precedent as they are
directions for the proper administration of
justice so as to do the complete justice
between the parties but the question is
whether the directions of the Supreme
Court to pay and recover given to the
insurer are under Article 141 or 142 of the
Constitution of India.
7.
The Supreme Court in New India
Assurance company, Shimla Vs. Kamla 2001
(2) TAC 243 (SC) probably for the first time
while considering the liability of the insurer
vis-a-vis the owner of the vehicle considering
the various provisions of the Act held that
when there is a valid insurance policy in
connection with a particular vehicle, the
burden is upon the insurer to compensate the
third party irrespective of any breach or
violation of the conditions of the policy but
may recover the said amount from the insured
policy holder. The court therefore directed the
insurer to first pay and then to recover the
amount from the owner of the vehicle. The
aforesaid direction of the Supreme Court was
under Article 141 of the Constitution of India
and not by way of doing complete justice
between the parties under Article 142 of the
Constitution of India.
8. The aforesaid decision has the
approval of the three Judges Bench of the
Supreme Court in National Insurance
Company Limited Vs. Swarn Singh and
others 2004 (1) TAC 321.
9. Recently, the Supreme Court in
Manager National Insurance Company
Limited Vs. Saju P. Paul and another
2013 (1) TAC 414 (SC) irrespective of the
fact that the Division Bench of the Supreme
Court in some matter has referred the
question regarding liability of the insurance
company to first pay the compensation and
then to recover it from the owner held that
the principal which has been followed for
long regarding first pay and then recover, can
not be held to be unjustified.
10. It is settled law that mere
reference of any question of law to a
larger bench would not have the effect of
disturbing the law which has been settled
by the court until and unless the reference
is answered to the contrary.
11. The principle where the vehicle is
covered by insurance policy, the insurer is
liable to compensate the loss in the first
instance and then may recover the amount
from the owner of the vehicle in case of
breach of any conditions of the policy, as
such is binding precedent laid down under
Article 141 of the Constitution of India and is
not by way of special circumstances to do the
complete justice under Article 142 of the
Constitution of India.
12. Accordingly, the above principle is
a binding principle. I am therefore of the
view that the appellant insurance company is
not a party aggrieved by the impugned award
so as to maintain the appeal.
13. Accordingly, the appeal is
dismissed as not maintainable.
--------
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 23.12.2014
BEFORE
THE HON'BLE BALA KRISHNA NARAYAN, J.
Civil Misc. Writ Petition No. 6429 of 1983
Chhote Lal alias Chhattoo Ram & Anr.
 ...Petitioners
Versus