# 14 (ADDL.) S.C.R. 763 UNITED INDIA INSURANCE CO. LTD v. SHILA DATTA & ORS

- **Citation:** [2011] 14 S.C.R. 763
- **Court:** Supreme Court of India
- **Decided:** 2011-10-13
- **Case number:** Civil Appeal No. 6026-6027 OF 2007
- **Bench:** R.V. Raveendran, H.L. Dattu, K.S. Radhakrishnan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/14-addl-s-c-r-763-united-india-insurance-co-ltd-v-shila-datta-ors-27574
- **Pages:** 37

## Headnote

Motor Vehicles Act, 1988:
c
Claim petition under - For compensation in regard to a
motor accident - Nature of - Held: An award by the tribunal
cannot be seen as an adversarial adjudication between the
litigating parties to a dispute but a statutory determination of
compensation on the occurrence of an accident, after due
0
enquiry, in accordance with the statute.
ss. 149(2) and 170 - Claim petition - Position in cases
where the claimants implead the insurer as a respondent -
Held: Where the insurer is a party-respondent, either on
account of being impleaded as a party by the tribunal u/s. 170
E
or being impleaded as a party-respondent by the claimants
in the claim petition voluntarily, It would be entitled to contest
the matter by raising all grounds, without being restricted to
the grounds available uls. 149(2) of the Act.
ss. 173, 168 and 149 - Joint appeal by the owner of the
vehicle (insured) and insured - Maintainability of - Held: An
appeal which is maintainable when the owner of the vehicle
files it, does not become not maintainable merely on account
F
of the insurer being a co-appellant with the owner- When the
G
insurer becomes a co-appellant, the owner of the vehicle does
· not cease to be a person aggrieved - So long as the owner
is an appellant and he is a. 'person aggrieved' in law, the
question whether he is independently filing the appeal, or
763
H
764
SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A whether he is filing it at the instance of the insurer becomes
irrelevant - When a counsel holds vakalatnama for an insurer
and the owner of the vehicle in a joint appeal, the court cannot
say his arguments and submissions are only on behalf of the
insurer and not on behalf of the owner.
B
s. 149(2) - Claim petition - Position in cases where the
insurer is only a noticee uls. 149(2) and has not been
impleaded as a party to the claim proceedings - Held: ft is
accepted that where a notice is issued uls. 149(2), the insurer
as 'noticee' (as contrasted from a 'party') cannot 'deny' its
C liability as an insurer on grounds other than those mentioned
in Section 149(2)(a} and (b) of the Act, but nothing prevents
it as a person liable to pay the compensation, from assisting
the Tribunal in arriving at the Just' compensation - Therefore,
an insurer, without seeking to avoid or exclude its liability
D under the policy, on grounds other than those mentioned in
Section 149(2)(a) and (b), can contest the claim, in regard to
the quantum - All that Section 149(2) said that insurer cannot
raise all kinds of contentions based on the terms of policy to
avoid the contract of indemnity - .But it does not require the
E insurer to concede wrong claims or false claims or not
challenge erroneous determination of compensation - It is
only the insurer, who is required to pay the compensation
amount, is interested in fifing the appeal - It can file an
appeal by itself or it can file an appeal jointly with the owner
F - If it is denied that opportunity, there is a likelihood of huge
compensation being awarded without any correction - Act
nowhere says that the insurer is not a 'person aggrieved' with
reference to the amount of compensation awarded which he
is required to pay - Interests of justice would not be served
G by allowing obvious errors to remain uncorrected - If the owner
of the vehicle(insured) fails to file an appeal when an
erroneous award is made, he fails to contest the same and
consequently, the insurer should be able to fife an appeal, by
applying the principle underlying s. 170 - Interests of justice
H would not be served by allowing obvious errors to remain
UNITED INDIA INSURANCE CO. LTD. v. SHILA
765
DATIA & ORS.
uncorrected - Matter placed before the Chief Justice for A
constituting a larger bench to consider the said issues.
On reference by the two Judge Bench of this Court
the questions which arose for consideri:ttion before the
present three Judge Bench were wheth.er the insurer
8
could contest a motor accident claim on

## Text

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[2011) 14 (ADDL.) S.C.R. 763
UNITED INDIA INSURANCE CO. LTD.
A
V.
SHILA DATTA & ORS.
(Civil Appeal No. 6026-6027 OF 2007)
OCTOBER 13, 2011
B.
[R.V. RAVEENDRAN, H.L. DATTU AND K.S.
RADHAKRISHNAN, JJ.]
Motor Vehicles Act, 1988:
c
Claim petition under - For compensation in regard to a
motor accident - Nature of - Held: An award by the tribunal
cannot be seen as an adversarial adjudication between the
litigating parties to a dispute but a statutory determination of
compensation on the occurrence of an accident, after due
0
enquiry, in accordance with the statute.
ss. 149(2) and 170 - Claim petition - Position in cases
where the claimants implead the insurer as a respondent -
Held: Where the insurer is a party-respondent, either on
account of being impleaded as a party by the tribunal u/s. 170
E
or being impleaded as a party-respondent by the claimants
in the claim petition voluntarily, It would be entitled to contest
the matter by raising all grounds, without being restricted to
the grounds available uls. 149(2) of the Act.
ss. 173, 168 and 149 - Joint appeal by the owner of the
vehicle (insured) and insured - Maintainability of - Held: An
appeal which is maintainable when the owner of the vehicle
files it, does not become not maintainable merely on account
F
of the insurer being a co-appellant with the owner- When the
G
insurer becomes a co-appellant, the owner of the vehicle does
· not cease to be a person aggrieved - So long as the owner
is an appellant and he is a. 'person aggrieved' in law, the
question whether he is independently filing the appeal, or
763
H
764
SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A whether he is filing it at the instance of the insurer becomes
irrelevant - When a counsel holds vakalatnama for an insurer
and the owner of the vehicle in a joint appeal, the court cannot
say his arguments and submissions are only on behalf of the
insurer and not on behalf of the owner.
B
s. 149(2) - Claim petition - Position in cases where the
insurer is only a noticee uls. 149(2) and has not been
impleaded as a party to the claim proceedings - Held: ft is
accepted that where a notice is issued uls. 149(2), the insurer
as 'noticee' (as contrasted from a 'party') cannot 'deny' its
C liability as an insurer on grounds other than those mentioned
in Section 149(2)(a} and (b) of the Act, but nothing prevents
it as a person liable to pay the compensation, from assisting
the Tribunal in arriving at the Just' compensation - Therefore,
an insurer, without seeking to avoid or exclude its liability
D under the policy, on grounds other than those mentioned in
Section 149(2)(a) and (b), can contest the claim, in regard to
the quantum - All that Section 149(2) said that insurer cannot
raise all kinds of contentions based on the terms of policy to
avoid the contract of indemnity - .But it does not require the
E insurer to concede wrong claims or false claims or not
challenge erroneous determination of compensation - It is
only the insurer, who is required to pay the compensation
amount, is interested in fifing the appeal - It can file an
appeal by itself or it can file an appeal jointly with the owner
F - If it is denied that opportunity, there is a likelihood of huge
compensation being awarded without any correction - Act
nowhere says that the insurer is not a 'person aggrieved' with
reference to the amount of compensation awarded which he
is required to pay - Interests of justice would not be served
G by allowing obvious errors to remain uncorrected - If the owner
of the vehicle(insured) fails to file an appeal when an
erroneous award is made, he fails to contest the same and
consequently, the insurer should be able to fife an appeal, by
applying the principle underlying s. 170 - Interests of justice
H would not be served by allowing obvious errors to remain
UNITED INDIA INSURANCE CO. LTD. v. SHILA
765
DATIA & ORS.
uncorrected - Matter placed before the Chief Justice for A
constituting a larger bench to consider the said issues.
On reference by the two Judge Bench of this Court
the questions which arose for consideri:ttion before the
present three Judge Bench were wheth.er the insurer
8
could 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
whether an insurer could prefer an appeal under Section
C
173 of the Motor Vehicles Act, 1988, against an award of
the Motor Accident Claims Tribunal, questioning the
quantum of compensation awarded?
The insurance companies contended that they were
not barred from questioning the quantum o'f
D
compensation either before the Motor Accidents Claims
Tribunal or in appeals arising from the awards of the
Tribunal on the following grounds:
(i) Where an insurer is impleaded by the claimants as
a party, it can contest the claim on all grounds, as
there were no restrictions or limitations in regard to
contest but where an insurer 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).
E
F
(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,
G
the mere presence of the insurer as a co-appellant
will not render the appeal, as not maintainable.
(iii) When an insurer is aggrieved by the quantum of
compensation, it is not seeking to avoid or exclude
H
A
B
c
D
E
F
G
H
766
SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R
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 would 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) If and when an award is made by the Tribunal
which is 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 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.
HELD: 1. The issues as regards the position in cases
UNITED INDIA INSURANCE CO. LTD. v. SHILA
767
DATTA & ORS.
where the claimants implead the insurer as a respondent
A
in the claim petition; and maintainability of a joint appeal
by the owner of the vehicle (Insured) ,and Insurer, are
held in favour of the Insurers. The matters covered by the
said issues are placed before the respective benches for
consideration. Further, in view of the decision in
B
*Nico/Jetta Rohtagi' s case, the issue where the insurer is
only a notice under Section 149(2) and has not been
impleaded as a party to the claim proceedings, cannot be
decided in favour of Insurers. For the aforesaid reasons,
in so far as the said issues are concerned, *Nico/Jetta c
Rohtagi requires reconsideration by a larger bench. It is
directed that these matters where the insurer alone was
the appellant before the High Court and where the insurer
was only a noticee under Section 149(2) and not an
impleaded respondent in the claim petition, to be placed
0
before the Hon'ble Chief Justice for constituting a larger
bench to consider the issues raised by the insurers. [Para
21, 22] [799-C-H]
Nature of a claim petition under the Motor Vehicles Act,
1988
E
2. A claim petition for compensation in regard to a
motor accident .(filed by the injured or in case of death,
by the dependant family members) before the Motor
Accident Claims Tribunal constituted under Section 165
F
of the Act is neither a suit nor an adversarial lis in the
traditional sense. It is a proceedings in terms of and
regulated by the provisions of Chapter XII of the Act
which is a complete Code in itself. There are significant
aspects in regard to the Tribunals and determination of
compensation by Tribunals. An award by the tribunal G
cannot be seen as an adversarial adjudication between
the litigating parties to a dispute, but a statutory
determination of compensation on the occurrence of an
accident, after due enquiry, in accordance with the
statute. [Para 5] [783-C-E; 785-C]
H
768
SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A The position in cases where the claimants implead the
insurer as a respondent in the claim petition:
3.1. An insurer need not be impleaded as a party to
the claim proceedings and it should only be issued a
8 statutory notice under Section 149(2) of the Act so that it
can be made liable to pay the compensation awarded by
the tribunal and also resist the claim on any one of the
grounds mentioned in clauses (a) and (b) of sub-section
(2) of Section 149. Sub-sections (1 ), (2) and (7) of Section
149 clearly refer to the insurer being merely a noticee and
C not a party. Similarly, Sections 158(6), 166(4), 168(1) and
170 clearly provide for and contemplate insurer being
merely a noticee for the purposes mentioned in the Act
and not being a party-respondent. Section 170
specifically refers to impleading of insurer as a party to
D the claim proceedings. [Para 7] [787 -F-H; 788-A]
3.2. When an insurer is impleaded as a party.
respondent to the claim petition, as contrasted from
merely being a noticee under Section 149(2) of the Act,
E its rights are significantly different. If the insurer is only
a noticee, it can only raise such of those grounds as are
permissible in law under section 149(2). But if he is a
party-respondent, it can raise, not only those grounds
which are available under section 149(2), but also all other
F grounds that are available to a person against whom a
claim is made. It therefore, follows that if a claimant
impleads the insurer as a party-respondent, for whatever
reason, then as such respondent, the insurer will be
entitled to urge all contentions and grounds which may
G be available to it. [Para 8] [788-B-C]
H
3.3. If the insurer is already a respondent (having
been impleaded as a party respondent), it need not seek
the permission of the Tribunal under Section 170 of the
Act to raise grounds other than those mentioned in
UNITED INDIA INSURANCE CO. LTD. v. SHILA,
769
DATTA & ORS.
Section 149(2) of the Act. The entire scheme and
A
structure of Chapters XI and XII is that the claimant files
a claim petition only against the owner and driver and the
tribunal issues notice to the insurer under Section 149(2)
so that it can be made liable to pay the amount awarded
against the insurer and if necessary, deny liability under
B
the policy of insurance, on any of the grounds mentioned
in Section 149(2). If an insurer is only a noticee and not a
party-respondent, having regard to the decision in
*Nicolletta Rohtagi, it can defend the claim only on the
· grounds mentioned in Section 149(2) and not any of the c
other grounds relating to merits available to the insuredrespondent. This is the position even where the claim
proceedings are initiated suo moto under Sections 149(7)
and 158(6) of the Act, without any formal application by
the claimants, as the insurer is only a noticee under D
Section 149(2) of the Act. [Para 9] [788-D-H; 789-A]
3.4. Section 170 of the Act does not contemplate an
insurer making an application for impleadment. Nor does
it contemplate the insurer, if he is already impleaded as
a party respondent by the· claimants, making any
E
application seeking permission to contest the matter on
merits. Section 170 proceeds on the assumption that a
claim petition is filed by the claimants, or is registered suo
moto by the tribunal, with only the owner and driver of
the vehicle as the respondents. It also proceeds on the
F
basis that in such a proceeding, a statutory notice would
have been issued by the tribunal to the insurer so that
the insurer may know about its future liability in the claim
petition and also resist the claim, on any qf the grounds
mentioned in section 149(2). Section 170 of the Act also G
assumes that the tribunal will hold an inquiry into the
claim, where only the claimants and the owner and driver
will be the parties. Section 170 provides that if during the
course of such inquiry, the tribunal finds and satisfies
itself that there is any collusion between the claimant and
H
770
SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A the owner/driver or where the owner/driver has failed to
contest the claim, the tribunal may suo moto, for reasons
to be recorded in writing, direct that the insurer who may
be liable in respect <:>f the claim, who was till then only a
notice, shall be treated as a party to the proceedings. The
B insurer so impleaded, without prejudice to the provisions
of Section 149(2), would have the right to contest the
claim on all or any of the grounds that are available to the
driver/owner. [Para 10) [789-8-F]
3.5. Where the insurer is a party-respondent, either
C on account of being impleaded as a party by the tribunal
under Section 170 or being impleaded as a partyrespondent by the claimants in the claim petition
voluntarily, it would be entitled to contest the matter by
raising all grounds, without being restricted to the
D 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
E 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
F impleaded as a party-respondent. 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
G party, once it is a party-respondent, it can raise all
contentions that are available to resist the claim. [Para 11]
[789-G-H; 790-A-C]
Maintainability of a joint appeal by the owner of the vehicle
H (insured) and insured:
UNITED INDIA INSURANCE CO. LTD. v. SHILA
771
DATTA & ORS.
4.1. When an award is made by the Tribunal, the
A
owner of the vehicle (insured), being a person aggrieved,
can file an appeal challenging his liability on any ground,
or challenge the quantum of compensation. An appeal
which is "maintainable" when the owner of the vehicle
files it, does not become "not maintainable" merely on
B
account of the insurer being a co-appellant with the
owner. When the insurer becomes a co-appellant, the
owner of the vehicle does not cease to be a person
aggrieved. [Para 12] [ 790-E-F]
.·
4.2. When a joint appeal is filed, to say that insurer is
not an aggrieved person and the owner of the vehicle is
also not an aggrieved person, would lead to anomalous
situation and would border on an absurdity. On account
c
of the insurer being a co-appellant, will not affect the
maintainability of the appeal. So long as the owner is an
D
appellant and he is a 'person aggrieved' in law, the
question whether he is independently filing the appeal,
or whether he is filing it at the instance of the insurer
becomes irrelevant. When a counsel holds vakalatnama
for an insurer and the owner of the vehicle in a joint E
appeal, the court cannot say his arguments and
submissions are only on behalf of the insurer and not on
behalf of the owner. There is also no need to examine at
the threshold in a joint appeal, whether the insurer should
be deleted from the array of appellants. [Para 16] [794-GF
H; 795-A-C]
Chinnama George & Ors. vs. N. K. Raju & Anr. 2000 (4)
SCC 130 - Partly overruled.
Narendra Kumar vs. Yarenissa 1998 (9) SCC 202 -
G
referred to.
The position in cases where the insurer is only a noticee
under Section 149(2) and has not been impleaded as a
party to the claim proceedings:
H
772
SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A
5.1. There is considerable force in the contention that
where a notice is issued under Section 149(2) of the
Motor Vehicles Act, the insurer as 'noticee' (as contrasted
from a 'party') cannot 'deny' its liability as an insurer on
grounds other than those mentioned in Section 149(2)(a)
s and (b) of the Act, but nothing prevents it as a person
liable to pay the compensation, from assisting the
Tribunal in arriving at the 'just' compensation. The
assumption that as a noticee under Section 149(2), the
insurer cannot raise any contention other than those
c mentioned in clauses (a) and (b) of section 149(2) is
correct in so far as denial of liability under the policy is
concerned. This is because sub-section (1) of section 149
of the Act clearly provides that 'notwithstanding that the
insurer may be entitled to avoid or cancel or may have
0 avoided or cancelled the policy, the insurer shall subject
to the provisions of this section, pay to the person entitled
to the benefit.. ....... ". Therefore, an insurer, without
seeking to avoid or exclude its liability under the policy,
on grounds other than those mentioned in Section
149(2)(a) and (b), can contest the claim, in regard to the
E quantum. All that Section 149(2) said that insurer cannot
raise all kinds of contentions based on the terms of policy
to avoid the contract of indemnity. But it does not require
the insurer to concede wrong claims or false claims or
not challenge erroneous determination of compensation.
F [Para 17] [795-E-H; 796-C-F]
National Insurance Co. Ltd. v. Jugal Kishore 1988 (1)
sec 626 - referred to
G
5.2. It is only the insurer, who is required to pay the
compensation amount, is interested in filing the appeal.
It can file an appeal by itself or it can file an appeal jointly
with the owner. If it is denied that opportunity, there is a
likelihood of huge compensation being awarded without
H any correction. The fact that the compensation is not
likely to be interfered, may also encourage the Motor
UNITED INDIA INSURANCE CO. LTD. v. SHILA
773
DATIA & ORS.
Accident Claims Tribunal to make awards which may not A
be fanciful reasonable. This Court fails to see as to why
the insurance company cannot chall.enge the judgment
of the tribunal, if it is erroneous. The Act nowhere says
thatthe insurer is not a 'person aggrieved' with reference
to the amount of compensation awarded which he is
B
required to pay. Interests of justice would not be served
by allowing obvious errors to remain uncorrected. [Para
18] [797-A-D]
United India Insurance Co. Ltd. vs. Bhushan Sachdeva
C
2002 (2) SCC 265: 2002 (1) SCR 352; British India General
Insurance Co.Ltd. v. Captain ltbar Singh & Ors. AIR 1959 SC
1331: 1960 SCR 426 - referred to
5.3 *Nicolletta Rohtagi did not consider the issue with
reference to the situation where the insurer is enabled by
D
a specific term in the ins1:1rance policy to take over and
conduct the defence of the case in the name of the
insured, presumably as the insurance policy did not have
such an enabling provision. In fact if such a contention
had been raised, the court would have noticed that the
E
issue was covered by a binding three-Judge Bench
judgment in British India General Insurance. [Para 20]
[799-A-B]
*National Insurance Co. Ltd. vs i\Jicolletta Rohtagi 2002
(7) SCC 456: 2002 (2) Suppl. SGR 456; Shanka1rayya vs.
United Insurance Co. Ltd. 1398 (3) SCC 140; Ritu Devi vs.
New Delhi Insurance Co. Ltd. 2000 (5) SCC 113: 2000 (3)
SCR 741 - referred to
Case Law Reference:
2002 (2) Suppl. SCR 456 Referred to
1998 (3) sec 140
1998 (9) sec 202
Referred to
Referred to
Para 1
Para 6
Para 6
F
G
H
774
SUPREME COURT REPORTS [2011] 14 (ADDL.) S C.R.
A
2000 (4) sec 130
2000 (3) SCR 741
1988 (1) sec 626
Referred to
Referred to
Referred to
Referred to
Referred to
Para 5
Para 5
Para 17
Para 18
Para 18
B
c
2002 (1) SCR 352
1960 SCR 426
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
6026-6027 of 2007.
From the Judgment & Order dated 19.9.2006 of the High
Court at Calcutta in F.M.A. 363 of 2002.
WITH
SLP (C) Nos. 10164 of 2006, 14962 of 2007, 10128, 10130.
D 10131, 10132, 10133, 10211, 10217, 10269, 10315, 10390
10511, 10797, 12121, 13966, 12747, 18540 of 2006, 9302
9305 of 2005, 7905 of 2007, 8789, 16460 of 2006, C.A. Nos.
798-800 of 2006, SLP (C) No. 3556, 5073, 1891, 1889, 7108,
16066, 4917, 13916 of 2008, 6359 of 2007, 5531-5532 of
E 2009, 19472 of 2008, 29055 of 2009, 26470 of 2008, 9983
of2009, 14134of2008, 14152, 14131, 14148, 14129, 14144,
14121, 14125 of 2008, 20966 of 2006, 121 of 2009, 16018
of 2008, 6380 of 2007, 17258 of 2006, 6717 of 2004, 1927519285 of 2008, 25491, 2022, 5383 of 2008, 22535 of 2009,
F 21888-21889 of 2008, 19701 of 2009, 2854-2855 of 2009,
17965 of 2009, 5364 of 2006.
Atul Nanda, Rameeza, Sugandha, (for Law Associates &
Co.), Subhro Sanyal, Kiran Suri, S.J. Amith, Aparna Mattoo,
A.K. De, Udit Kumar, Rajesh Kumar, Debasis Misra, Shivam
G Sharma, Akanksha Sharma, Rishi Kesh, Dinesh Verma, Rajat
Sharma, Vishnu Mehra, Sakshi Gupta, S.N. Bhat, Abhijit P.
Medh, Shakeel Ahmed, Parmanand Gaur, Nikhilesh
Ramachandra, Manish Mani, Alok Pandey, Shantanu Singh, R.
Bhaskar, Kishore Rawat, M.K. Dua, Azim H. Laskar, Sachin
H Das, Abhijit Sengupta, Ramesh Chandra Mishra, Di. Meera
UNITED INDIA INSURANCE CO. LTD. v. SHILA
775
DATIA & ORS.
Agarwal, Naveen R. Nath, Lalit Mohini Bhat, Gaurav Talukdar,
A
Amrita Sharma, S.L. Gupta, Goodwill lndeevar, Ram Ashray,
Biswanath Agrawalla, Arvind Kumar Sharma, Saurabh Mishra,
Hiren Dasan, Dhirendra Kr. Sharma, Shreejata, Sarla Chandra,
F.I. Choudhury, R.P. Goyal, Anilendra Pandey, Priya Kashyap,
Laxmi Arvind, Pramod Dayal, Avijit Bhattacharjee, P.V.
B
Yogeswaran, K. Rajeev, A.K. Raina, Anil Kumar Jha, Dr.
Kailash Chand, P.K. Jain, Anil Kumar Jain, Ajay Aggarwal,
R.P.S. Bhaduria, Rajiv Mehta, N. Ganp~thy, Shiv Mangal
Sharma, M.K. Dua, S. Janani, Jai Prakash Pandey, H.K. Puri,
Jatin laveri, Abhijit Sengupta, Dr. Meera Agarwal, S. Chandra c
Shekhar, P.N. Puri, Sharmila Upadhyay, 1.8. Gaur, Yash Pal
Dhingra, B.K. Satija, Manjusha Wadhwa, Sureshta Bagga,
Himanshu Shekhar, D. Mahesh Babu, Santosh Singh, Naresh
Kumar for the appearing parties.
The Judgment of the Court was delivered by
R.V. RAVEENDRAN, J. 1. A Two Judge Bench of this
Court made the following order of reference in this case on
3.12.2007:
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"One of the contentions raised in these appeals is the
correctness of a three-Judge Bench decision of this Court
in National Insurance Co. Ltd., Chandigarh vs. Nico/Jetta
Rohtagi and Ors., - 2002 (7) SCC 456, which is said to
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be pending consideration in a large number of cases
before this Court. Assailing the correctness of the
aforesaid decision Mr. Atul Nanda submits that therein the
liability of the insurer to reimburse the insured on two
premises, namely, (1) just compensation; and (2) whose
liability would be to pay, as envisaged under sub-section
(1) of section 149 vis-a-vis the right of the aggrieved
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persons (Which would include the insured) to prefer an
appeal in terms of section 173 of the Motor Vehicles Act,
had not been considered in the backdrop of the history in
which sub-section (1) of section 149 was enacted.
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Apart from the question raised by Mr. Nanda, we are of
the opinion that the matter may be considered from other
angles, namely, whether the insurer shall be wholly without
any remedy even if the amount of compensation is
determined in violation of the standard formula envisaged
under the second schedule of the Act or in clear violation
of the ratio (s) laid down by this Court.
We, therefore, are of the opinion that it is a fit case where
the matter should be referred to larger Bench. We direct
accordingly. Let the records of the case be placed before
Hon'ble the Chief Justice of India for appropriate orders." ·
2. On the said reference made, the following questions
arise for our consideration, in regard to the position of an
Insurer, under the Motor Vehicles Act, 1988 ('Act' for short) :
(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?
(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?
3. The insurance companies have urged the following five
points for our consideration, which are independent grounds in
G support of their contention that insurance companies are not
barred from questioning the quantum of compensation either
before the Motor Accidents Claims Tribunal or in appeals
arising from the awards of the Tribunal :
(i) There is a significant difference between Insurer as a
H 'noticee' (a person to whom a notice is served as required by
UNITED INDIA INSURANCE CO. LTD. v. SHILA
777
DATIA & ORS. [R.V. RAVEENDRAN, J.]
"-section 149(2) of the Act) in a claim proceedings and an
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insurer as a party-respondent in a claim proceedings·. 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
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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
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. are aggrieved by the award of the Tribunal, and jointly file an
appeal challenging the quantum, the mere presence of the
insurer as a co-appellant will not render the appeal, as not
maintainable. When insurer is the person to pay the
compensation, any interpretation to say th;:it it is not a 'person
aggrieved' by the quantum of compensation determined, would
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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
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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
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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
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award is made by the Tribunal which is 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.
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A insured has failed to contest the same and consequently unde•
section 170, the High Court or the tribunal may permit the
insurer to file an appeal and contest the award on merits.
(v) The Motor Vehicles Act, 1988 ('Act' for short) creates
8 a liab: •ty upon 'he insurer to satisfy the judgments and awards
against ~he insured. The Act expressly restricts the right of the
insurer :o avoid the liability as insurer, only to the grounds
spec1fi :·d in section 149(2) of the Act. Though it b
impermi,..sib!e to add to the grounds mentioned in the statute,
C 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,
D when it is ccntesting 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 defond 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 en
E behalf of the owner of the vehicle.
Relevant Legal Provisions
4. We may refer to the position of an insurer and insured
F in the scheme contained in Chapters XI and XII of the Act
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(4.1) Section 149 deals with the duty of insurers to satisfy
judgments and awards against persons insured in respect of
third party risks. Sub-sections (1), (2) and (7) are extracted
below:
"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
sub-section (3) of section 147 in favour of the person by
whom a policy has been effected, judgment or award in
UNITED !NOIA INSURANCE CO. LTD. v. SHILA
779
DATTA & ORS. [R.V. RAVEENDRAN, J.]
respect of any such liability as is required to be covered
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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 o
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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, c
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 subsection (1) in respect of any judgment or award unless,
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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
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. 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
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(b)
for organized racing and speed te~ting, or
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(c)
for a purpose not allowed by the permit under which
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the vehicle is used, where the vehicle is a transport
vehicle, 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 per;od 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 non-disclosure of a material fact or by a
representation of fact which was false in some material
particular.
xx xx
(7) No insurer to whom the notice referred to in sub-section
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(2) or sub-section (3) has been given shall be entitled to
avoid his liability to any person entitled to the benefit of any
such judgment or award as is referred to in sub-section
(1) or in such judgment as is referred to in sub-section (3)
otherwise than in the manner provided for in sub-~ection
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(2) or in the corresponding law of the reciprocating country,
as the case may be."
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(4.2.) Section 147 prescribes the requirements of policies
and limits of liability. The relevant portion of the said section is
extracted below:
"147. Requirements of policies arid 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 issuec;t by a person who is an authorized insurer; and
UNITED INDIA INSURANCE CO. LTD. v. SHILA
781
DATTA & ORS. [R.V. RAVEENDRAN, J.]
(b) insures the person or classes of persons specified in
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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
8
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 cau.sed by or arising out of the
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use of the vehicle in a public place:
Provided that a policy shall not be required-"
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(4.3) Section 163A makes special provisions as to
payment of compensation on structured formula basis and is
.. extracted below :
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"163A.
Special provisions as to payment of E
compensation on structured formula basis.-(1)
Notwithstanding anything contained in this Act or in any
other law for the time being in force or instrument having
the force of law, the owner of the motor vehicle or the
authorized insurer shall be liable to pay in the case of F
death or permanent disablement due to accident arising
out of the use of motor vehicle, compensation, as indicated
in the Second Schedule, to the legal heirs or the victim,
as the case may be."
xxx
xxx
xxx
(4.4) Section 168 relates to award of the Claims Tribunal
and the relevant portion thereof is extracted below:-
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"168. Award of the Claims Tribunal.-On receipt of an
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SUPREME COURT REPORTS (2011) 14 (ADDL.) S.C.R.
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application for compensation made under section 166, the
Claims Tribunal shall, after giving notice of the application
to the insurer and after giving the parties (including the
insurer) an opportunity of being heard, hold an inquiry into
the claim or, as the case may be, each of the claims and,
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subject to the provisions of section 162 may make an
award determining the amount of compensation which
appears to it to be just and specifying the person or
persons to whom compensation shall be paid and in
making the award the Claims Tribunal shall specify the
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amount which shall be paid by the· insurer or owner or
driver of the vehicle involved in the accident or by all or any
of them, as the case may be:"
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(4.5) Section 170 deals with impleading insurer in certain
cases and is extracted below :-
"170. lmpleading 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,
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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,
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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."
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Section 173 deals with appeals and relevant part thereof is
extracted below :-
UNITED !NOIA INSURANCE CO. LTD. v. SHILA
783
DATTA & ORS. [R.V. RAVEENDRAN, J.]
"173. Appea!s.-(1) Subject to the provisions of subA
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
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pay any amount in terms of such award shall be entertained
by the High Court unless he has deposited with it twentyfive thousand rupees or fifty per cent of the amount so
awarded, whichever is less, in the manner directed by the
High Court:"
Nature of a claim petition under the Motor Vehicles Act,
1988
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5. A claim petition for compensation in regard to a motor
accident (filed by the injured or in case of death, by the
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dependant family members) before the Motor Accident Claims
Tribunal constituted under section 165 of the Act is neither a
suit nor an adversarial lis in the traditional sense. It is a
proceedings in terms of and regulated by the provisions of
Chapter XII of the Act which is a complete Code in itself. We
may in this context r~fer to the following significant aspects in
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regard to the Tribunals and determination of compensation by .
Tribunals:
(i) A proceedings for award of compensation in regard to
a motor accident before the Tribunal can be initiated either on
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an application for compensation made by the persons
aggrieved (claimants) under section 166(1) or section 163A of
the Act or suo moto by the Tribunal, by treating any report of
accident (forwarded to the tribunal under section 158(6) of the
Act as an application for compensation under section 166 (4)
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of the Act.
(ii) The rules of pleadings do not strictly apply as the
claimant is required to make an application in a form prescribed
under the Act. In fact, there is no pleading where the
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~ proceedings are suo moto initiated by the Tribunal.
(iii) In a proceedings initiated suo moto by thb tribunal, the
owner and driver are the respondents. The insurer is not a
respondent, but a noticee under section 149(2) of the Act.
8 Where a claim petition is filed by the injured or by the legal
representatives of a person dying in a motor accident, the driver
and owner have to be impleaded as respondents. The
claimants need not inplead the insurer as a party. But they have
the choice of impleading the insurer also as a party respondent.
When it is not impleaded as a party, the Tribunal is required to
C issue a notice under section 149(2) of the Act.