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REPORTABLE  

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 2253 OF 2018 (Arising out of S.L.P. (CIVIL) NO. 7692 of 2017)

Amrit Paul Singh & Anr.          Appellant(s)

VERSUS

TATA AIG General Insurance                          Respondent(s) Co. Ltd. & Ors.

J U D G M E N T

Dipak Misra, CJI.

 The legal representatives of the deceased, Jagir Singh, the

husband  of the second respondent,  preferred  a claim petition

being MACT Case No. 70 of 2013 under Section 166 of the Motor

Vehicles Act, 1988 (for brevity, ‘the Act’) before the Motor

Accident  Claims  Tribunal,  Pathankot (for short, ‘the tribunal’)

claiming compensation to the tune of Rs. 36,00,000/­. The claim

petition was filed on the basis that on 19.02.2013, Jagir Singh

was travelling to Pathankot on his  motor cycle and at that

juncture, the offending truck bearing temporary registration No.

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PB­06­6894 belonging to the appellant No. 2 driven in a rash and

negligent manner hit the motor cycle of the deceased as a result

of which he sustained multiple injuries, and eventually,

succumbed to the same when being taken to the hospital. The

claim put forth was  sought to  be  sustained on many a  basis

which need not be adverted to.  

2. The insurer, the first respondent herein, opposed the claim

on the ground that the vehicle in question was driven in violation

of the terms of the insurance policy and further the driver was

not having a valid and effective driving license and, therefore, it

was not obliged to  indemnify the insured. That apart,  a stand

was taken that the vehicle did not have the permit on the date of

the accident. On behalf of the owner of the vehicle and driver,

assertions were made that the vehicle was insured with the first

respondent as  per the insurance policy, that the vehicle  was

registered and the driver had the requisite driving licence.

Additionally, copy of the route permit of the offending truck was

brought on record.  

3. The tribunal noted that the vehicle was purchased in

September 2012 and insured on 20.12.2012. It was registered on

26.02.2013. The accident, as stated earlier, occurred on

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19.02.2013. The tribunal, placing reliance on the decision

rendered by this Court in  National Insurance Co. Ltd. v.

Challa Bharathamma and others1, held that the insurer was

not liable and proceeded to quantify the amount of compensation

and determined the same at Rs. 15,63,120/­. The tribunal

directed the amount to be paid by the insurer along with interest

at the rate of 9% from the date of award till its realisation and

recover the same  from the  owner and driver  of the  vehicle.  A

further direction was given for attachment of the truck in

question till the award was satisfied.

4. The award dated 20.11.2014 passed by  the tribunal  was

challenged in FAO No. 1702 of 2016   before the High Court of

Punjab and Haryana at Chandigarh. It was contended in appeal

that the appellant No. 2, the owner of the offending vehicle, had

deposited the necessary fees along with application on

19.02.2013 for issue of route permit and the same was issued on

27.02.2013. It  was further  urged that  when  the  owner  of the

vehicle had already submitted the documents  in the transport

office for grant of permit along with the requisite fees, the

tribunal was in error in holding that the vehicle was being plied

1 (2004) 8 SCC 517

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without a valid permit. In support of the submissions, reliance

was placed upon  Ashok Kumar Khemaka v. Oriental

Insurance Company Ltd. and other2,  National Insurance

Company Limited v.  Kamlesh Kaur and others3  and  Moti

Ram v. ICICI Lombard and others4.  

5. The High Court scrutinized Annexure A­1 which was filed to

justify the stand that the application for issue of the route permit

was made to the competent authority and, on a scrutiny of the

same, came to hold that the owner had not been able to establish

that he had submitted the application for issue of permit before

the  accident.  Referring to  Section  66  of the  Act  and  placing

reliance on Challa Bharathamma case, the High Court opined

that even assuming that the owner had already applied for grant

of the permit before the accident, the same would not entitle the

owner to ply the vehicle. It is worthy to note that the learned

single Judge distinguished the decisions cited before him and,

resultantly, confirmed the award of the tribunal.

2 2014 (3) RCR (Civil) 1018 3 2006 (3) RCR (Civil) 634  4 2015 ACJ 1793

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6. We have heard Mr. Sudhir Walia,  learned counsel  for the

appellants, and Mr. Amit Kumar Singh, learned counsel for the

respondent­insurer.

7. The conclusions recorded by the tribunal and further

confirmed by the  High Court clearly show that the accident

occurred on 19.02.2013 and the competent authority issued the

permit on 27.02.2013.  In this regard, Sections 2(28) and 2(31) of

the Act that define “motor vehicle” or “vehicle” and “permit” are

reproduced below:­

“(28) “motor vehicle” or “vehicle” means any mechanically  propelled  vehicle  adapted  for use upon roads whether the power of propulsion is transmitted thereto from an external or  internal source and  includes a chassis to which a body has not been attached and a trailer; but does not include a vehicle running upon fixed rails or a vehicle of a special type adapted for use only in a factory or in any other enclosed premises or a vehicle having less than four wheels fitted with engine capacity of not exceeding  twenty­five cubic centimetres;

(31) “permit”  means  a  permit issued  by  a State or Regional Transport Authority or an authority prescribed in this behalf under this Act authorising the use of a motor vehicle as a transport vehicle;”

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On a perusal of both the definitions, it is quite clear that a

permit has to be issued by the competent authority under the Act

for use of a motor vehicle as a transport vehicle. The emphasis is

on the words “use” as well as “transport vehicle”.   

8. Section 2(47) states that “transport vehicle” means a public

service vehicle, a goods carriage, an educational institution bus

or a private service vehicle.  Section 66 stipulates necessity  for

permits. Sub­section (1) thereof provides that no owner of a

motor  vehicle  shall  use  or  permit the  use  of the  vehicle  as  a

transport vehicle in any public place, whether or not such vehicle

is actually carrying any passengers or goods save in accordance

with the conditions of a permit granted or countersigned by a

Regional or State Transport Authority or any prescribed

authority.  Various  provisos  have  been appended  to the  main

provision stipulating conditions for use of the vehicle and

purpose of carriage of goods vehicle.  Sub­section (2) states that

the holder of a goods carriage permit may use the vehicle for the

drawing of any trailer or semi­trailer not owned by him, subject

to such conditions as  may be prescribed. It is necessary to

mention here that a proviso has been added by Act 54 of 1994

with effect from 14.11.1994 allowing the holder of a permit of any

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articulated vehicle to  use the  prime­mover of that articulated

vehicle for any other semi­trailer. Section 2(2) defines “articulated

vehicle” to  mean a  motor vehicle to which a semi­trailer is

attached.  

9. It is apt to  note  here that sub­section (3) of  Section  66

carves out certain exceptions to sub­section (1). The relevant part

of sub­section (3) is extracted below:­

“(3) The  provisions  of sub­section (1) shall not apply— (a) to any transport vehicle owned by the Central Government or a State Government and used for Government purposes unconnected with any commercial enterprise; (b) to any transport vehicle owned by a local authority or by a person acting under contract with a local authority and used solely  for  road cleansing, road watering or conservancy purposes; (c) to  any transport vehicle used solely  for police, fire brigade or ambulance purposes; (d) to any transport vehicle used solely  for the conveyance of corpses and the mourners accompanying the corpses; (e) to any transport vehicle used for towing a disabled vehicle or for removing goods from a disabled vehicle to a place of safety; (f) to any transport vehicle used for any other public purpose as may be prescribed by the State Government in this behalf; (g) to any transport vehicle used by a person who manufactures or deals in motor vehicles or builds bodies for attachment to

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10. In the case at hand, the findings  would show that the

appellant No. 2 did not have a permit for the vehicle. There is no

dispute that the vehicle initially had a temporary registration and

eventually the permanent registration. It is the stand of the

appellants that the tribunal and the High Court did not

appreciate that the chasis of  the vehicle was sent to the body

where the body of the truck was fabricated and when the vehicle

was driven out of the work shop at which point of time it met

with an accident. A contention has been made that the insurance

policy was in force at the relevant time and, hence, the insurer is

legally obliged to indemnify the insured.  A distinction has to be

made between “route permit” and “permit” in the context of

Section 149 of the Act. Section 149(2) provides the grounds that

can be taken as defence by the insurer. It enables the insurer to

defend on the ground that there has been breach of a specific

condition of the policy, namely, (i) a condition that excludes 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 organized racing and

speed testing,  or (c) for  a  purpose  not  allowed by the  permit

under which the vehicle is used, where the vehicle is a transport

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vehicle, or (d) without side­car being attached where the vehicle

is a motor cycle.  That apart, it also entitles the insurer to raise

the issue pertaining  to  a condition  that  excludes 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 that excludes liability for injury caused or contributed to by

conditions of war, civil war, riot or civil commotion.   A further

defence that can be availed of by the insurer is that the policy is

void on the ground that it has been obtained by non­disclosure of

the material fact or by representation of act which is false in the

material particular.  

11. On a perusal of the written statement filed by the owner and

the driver, it is evident that the factum of accident having been

caused by the vehicle in question had been denied.  That apart,

there is also a denial of liability that relates to the manner in

which the accident had occurred as alleged in the claim petition.

It  was the specific  assertion of  the  insurer before the tribunal

that the vehicle was running in contravention of the provisions of

the Act, for it did not possess a route permit. The tribunal, on the

basis of  the materials brought on record to the effect that the

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route permit was issued on 27.02.2013 and the accident

occurred on 19.02.2013, returned a finding that the vehicle in

question  did  not  have the  permit.  As stated  earlier, the  High

Court has affirmed the same.

12. Learned counsel for the appellants would submit that in the

obtaining factual  matrix, the  breach  would  not exonerate the

insurer from satisfying the judgment and an award in terms of

Section 149 of the Act. He has drawn inspiration from the

decision of a three­Judge Bench in National Insurance Co. Ltd

v. Swaran Singh and others5. In the said case, the Court was

dealing  with the interpretation  of  Section  149(2)(a)(ii) vis­à­vis

the proviso appended to sub­sections (4) and (5) of Section 149 of

the Act.  The issue centrally pertained to the necessity of having

a driving licence. After adverting to various provisions, the Court

also  delved  into the fundamental  concept of third party right.

Regard being had to the nature of the beneficial legislation, the

Court observed:­

“39. The question as to whether an insurer can avoid its liability in the event it raises a defence  as  envisaged in  sub­section  (2)  of Section 149 of the Act corresponding to sub­ section (2) of Section 96 of the Motor

5 (2004) 3 SCC 297

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Vehicles  Act, 1939  had  been the subject­ matter of decisions in a large number of cases.”

13. The Court posed the question as to whether an insurer can

avoid its liability in the event it raised the defence as envisaged in

sub­section (2) of Section 149 of the Act corresponding to sub­

section (2)   of   Section 96 of the Motor Vehicles Act, 1939. The

Court analysed the language employed in sub­section (2) of

Section 149,  specifically  clause (a),  and,  after  scrutinizing the

same and referring to various authorities, opined:­

“69. The proposition of law is no longer res integra that the person who alleges breach must prove the same. The insurance company is, thus, required to establish the said breach by cogent evidence. In the event the  insurance company  fails to prove  that there has been breach of conditions of policy on the part of the insured, the insurance  company  cannot  be  absolved of its liability. (See Sohan Lal Passi6)

70. Apart from the above, we do not intend to lay down anything further i.e. degree of proof which would satisfy the aforementioned requirement inasmuch as the same would indisputably depend upon the facts and circumstances of each case. It will also depend upon the terms of contract of insurance. Each case may pose a different problem  which  must be resolved having regard to a large number of factors

6 Sohan Lal Passi v. P. Sesh Reddy and others, (1996) 5 SCC 21

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governing the case including conduct of parties  as regards  duty to inform, correct disclosure, suppression, fraud on the insurer etc. It will also depend upon the fact as to who is the owner of the vehicle and the circumstances in which the vehicle was being  driven  by  a  person  having  no  valid and effective licence. No hard­and­fast rule can, therefor, be laid  down. If in a given case there exists sufficient material to draw an adverse inference against either the insurer or the insured, the Tribunal may do so. The parties alleging breach must be held to have succeeded in establishing the breach of conditions of the contract of insurance, on the part of the insurer by discharging its burden of proof. The Tribunal, there cannot be any doubt, must arrive at a finding on the basis of the materials available on records.

71. In the aforementioned backdrop, the provisions of sub­sections (4) and (5) of Section 149 of the Motor Vehicles Act, 1988 may be considered as to the liability of the insurer to satisfy the decree at the first instance.

x  x  x

83. Sub­section (5) of Section 149  which imposes a liability on the insurer must also be given its full effect. The insurance company  may  not  be liable to satisfy the decree and, therefore, its liability  may be zero but it  does  not  mean  that it  did not have initial liability at all. Thus, if the insurance company is  made liable to  pay any amount, it can recover the entire amount paid to the third party on behalf of the assured. If this interpretation is not

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given to the beneficent provisions of the Act having regard to its purport and object, we fail to see a situation where beneficent provisions can be given effect to. Sub­ section (7) of Section 149 of the Act, to which  pointed attention of the  Court has been drawn by the learned counsel for the petitioner, which is in negative language may now be noticed. The said provision must be read with sub­section (1) thereof. The right to avoid liability in terms of sub­ section (2) of  Section  149 is restricted  as has been discussed hereinbefore.  It is  one thing to say that the insurance companies are entitled to raise a defence but it is another thing to  say that  despite the fact that its  defence has been accepted having regard to the facts and circumstances of the case, the Tribunal has power to direct them to satisfy the decree at the first instance and then direct  recovery of the same  from the owner. These two matters stand apart and require contextual reading.”

[Emphasis supplied]

14. We may fruitfully note that the three­Judge Bench adverted

to situations where the driver does not have a licence and the

same has been allowed to be driven by the owner of the vehicle

by such  person, the insurer  would be entitled to succeed in

defence and avoid liability,  but the position would be different

where the  disputed  question  of fact  arises  as to  whether the

driver had a valid licence and where  the owner of the vehicle

committed a breach of the terms of the contract of insurance as

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also the provisions of the Act by consciously allowing any person

to drive a vehicle who did not have a valid driving licence.

15. The Court held that if, on facts, it is found that the accident

was caused solely because of some other unforeseen or

intervening causes like  mechanical failures and similar other

causes having no nexus with the driver not possessing the

requisite type of licence, the insurer will not be allowed to avoid

its liability merely for technical breach of conditions concerning

driving licence. That apart, minor and inconsequential deviations

with regard to licensing conditions would not constitute sufficient

ground to deny the benefit of coverage of insurance to third

parties.  The other category of cases that the Court addressed to

included cases where the licence of the driver is found to be fake.

In that context, the Court expressed its general agreement with

United India Insurance Co. Limited v. Lehru7  and stated

thus:­

“92. … In  Lehru case  the matter has been considered in some detail. We are in general agreement with the approach of the Bench but we intend to point out that the observations made therein must be understood to have been made in the light of the requirements of the law in terms whereof the insurer is to establish wilful

7 (2003) 3 SCC 338

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breach on the part of the insured and not for the  purpose  of its  disentitlement from raising any defence or for the owners to be absolved from any liability whatsoever ..”  

16. The three­Judge Bench summed up its conclusions and we

think it appropriate to reproduce the relevant part of the same:­

“110. (iii) The breach of policy condition e.g. disqualification of the driver or invalid driving licence of the driver, as contained in sub­section (2)(a)(ii)  of  Section 149, has to be proved to  have  been committed by  the insured for avoiding liability by the insurer. Mere absence, fake or invalid driving licence or disqualification of the driver for driving at the relevant time, are not in themselves defences available to the insurer against either  the  insured or the  third parties.  To avoid its liability towards  the  insured, the insurer has to prove that the insured was guilty of negligence and failed to exercise reasonable care in the matter of fulfilling the condition of the policy regarding use of vehicles by a duly licensed driver or one who was not disqualified to drive at the relevant time.

x x x x

(vi) Even where the insurer is able to prove breach on the part of the insured concerning the policy condition regarding holding of a valid licence by the driver or his qualification to drive during the relevant period, the insurer would not be allowed to avoid its liability towards the insured unless the said breach or breaches on the

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condition of driving licence is/are so fundamental as are found to have contributed to the cause of the accident. The Tribunals in interpreting the policy conditions  would apply “the rule of  main purpose” and the concept of “fundamental breach” to  allow  defences  available to the insurer under Section 149(2) of the Act.

(vii) The question, as to whether the owner has taken reasonable care to find out as to whether the driving licence produced by the driver (a fake  one  or  otherwise),  does  not fulfil the requirements of law or not will have to be determined in each case.”

17. Learned counsel for the appellants would submit that there

has been no fundamental breach of the policy conditions. In this

context, we may profitably refer to the decision in  Challa

Bharathamma  (supra) wherein a two­Judge Bench squarely

dealt with the absence of a permit and ruled that plying a vehicle

without a permit is an infraction and insurer is not liable.

18. In  Lakhmi Chand v.  Reliance General  Insurance8, the

Court was concerned with an order passed by the National

Consumer  Disputes  Redressal  Commission (NCDRC) that  had

declined the relief  to the petitioner therein. The insurer  in the

said case had taken the plea that the complainant had violated

the terms and conditions of the policy, for five passengers were

8 (2016) 3 SCC 100

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travelling in the goods carrying vehicle at the time of the

accident,  whereas the  permitted seating  capacity  of the  motor

vehicle of  the appellant was only 1 + 1. The two­Judge Bench

referred to Oriental Insurance Co. Ltd. v. Meena Variyal and

others9 and expressed the view that in order to avoid liability, the

insurer must establish that there was breach on the part of the

insured.  

19. The obtaining fact situation is sought to be equated with the

factual score in the said case.  In this regard, it is useful to refer

to the Bench decision in  HDFC Bank Limited v. Reshma and

others10. The issue that arose before the Court was whether the

financier was liable to pay the compensation or it was the liability

of the borrower. The tribunal had returned the finding that the

duty of the financier was to see that the borrower did not neglect

to get the vehicle insured and, therefore, it was jointly and

severally liable along with the owner. The High Court had

concurred with the said conclusion.   The Court referred to

Purnya Kala Devi v. State of Assam and other11 that has dealt

with the definition of the term “owner” as contained in

9 (2007) 5 SCC 428 10 (2015) 3 SCC 679 11 (2014) 14 SCC 142

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Section 2(30) of the Act. In the said case, the vehicle in question

was under the requisition of the State of Assam under the

provisions of law. In that context, the Court has expressed that:­

“16. … The High Court failed to appreciate that at the relevant time the offending vehicle was under the requisition of Respondent 1 State of Assam under the provisions of the Assam Act. Therefore, Respondent 1 was squarely covered under the definition of ‘owner’ as contained in Section 2(30) of the 1988 Act. The High Court failed to appreciate the underlying legislative intention in including in the definition of ‘owner’ a person in possession of  a  vehicle  either  under  an agreement  of lease or agreement of hypothecation or under a hire­purchase agreement to the effect that a person in control and possession of the vehicle should be construed as the ‘owner’ and not alone the registered owner. The  High Court further failed to appreciate the legislative intention that the registered owner of the vehicle should not be held liable if the vehicle was not in his possession and control. The High Court also failed to appreciate that Section 146 of the 1988 Act requires that no person shall use or cause or allow any other person to use a  motor vehicle in a public place without an insurance policy meeting the requirements of Chapter XI of the 1988 Act and the State Government has violated the statutory provisions of the 1988 Act.”

20. Be it noted, in the said case, the liability was fixed on the

State keeping in view the legislative intention behind Section 146

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of the Act, no person shall use or cause or allow any other person

to use a motor vehicle in a public place without an insurance

policy as that is the mandatory statutory requirement under the

Act. Emphasis was laid on possession and control of the vehicle

and accordingly liability was fixed on the State of Assam.  

21. In  HDFC  Bank  Limited  (supra), the three­Judge  Bench

opined that the hypothecation agreement did not convey that the

appellant financier had become the owner and was in control and

possession of the vehicle. It was the absolute fault of the

respondent No. 2 to take the vehicle from the dealer without full

payment of the insurance,  more so when nothing had been

brought on record that the said fact was known to the appellant

financier or that it was done in collusion with the financier.  

22. The Court held that when the intention of the legislature is

quite  clear to  the effect  that  a registered owner of the vehicle

should not be held liable if the vehicle is not in his possession

and control and there was evidence on record that the

respondent  No. 2, plied the vehicle  without the insurance in

violation of the statutory provision contained in Section 146 of

the Act, the High Court could not have mulcted the liability on

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the financier and finally, the financer was absolved of the

liability.

23. In the  case  at  hand, it is clearly  demonstrable from  the

materials brought on record that the vehicle at the time of the

accident did not  have a permit.  The appellants had taken the

stand  that the  vehicle  was  not involved in the  accident.  That

apart, they had not stated whether the vehicle had temporary

permit  or  any other  kind of  permit.  The exceptions  that  have

been carved out under Section 66 of the Act, needless to

emphasise, are to be pleaded and proved. The exceptions cannot

be taken aid of in the course of an argument to seek absolution

from liability. Use of a vehicle in a public place without a permit

is a fundamental statutory infraction.  We are disposed to think

so in view of the series of exceptions carved out in Section 66.

The said situations cannot be equated with absence of licence or

a fake licence or a licence for different kind of vehicle, or, for that

matter, violation of a condition of carrying  more number of

passengers. Therefore, the principles laid down in  Swaran

Singh  (supra) and Lakhmi Chand  (supra) in that regard would

not be applicable to the case at hand. That apart, the insurer had

taken the plea that the vehicle in question had no permit. It does

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not require the wisdom of the “Tripitaka”, that the existence of a

permit of any nature is a matter of documentary evidence.

Nothing has been brought on record by the insured to prove that

he had a permit of the vehicle. In such a situation, the onus

cannot be cast on the insurer. Therefore, the tribunal as well as

the High Court had directed the insurer was required to pay the

compensation amount to the  claimants  with interest  with the

stipulation that the insurer shall be entitled to recover the same

from the owner and the driver. The said directions are in

consonance with the principles stated in Swaran Singh  (supra)

and other cases pertaining to pay and recover principle.  

24. In view of the aforesaid analysis,  we do not perceive any

merit in the appeal and, accordingly, the same stands dismissed

without any order as to costs.       

 ……………………….....CJI.     (Dipak Misra)

  ………………………….….J.                      (A.M. Khanwilkar)

New Delhi; May 17, 2018