Reportable IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS.6026-6027 OF 2007

United India Insurance Co. Ltd. … Appellant

Vs.

Shila Datta & Ors. … Respondents

With  

Civil Appeal No. 6717 of 2004 Civil Appeal Nos. 798-800 of 2006 Civil Appeal Nos. 1891 of 2008 Civil Appeal No. 1889 of 2008 Civil Appeal No. 4917 of 2008 SLP(C) Nos. 9302-9305/2005 SLP(C) No. 5364/2006 SLP(C) No. 8789/2006 SLP(C) No. 10128/2006 SLP(C) No. 10130/2006 SLP(C) No. 10131/2006 SLP(C) No. 10132/2006  SLP(C) No. 10133/2006 SLP(C) No. 10164/2006 SLP(C) No. 10211/2006 SLP(C) No. 10217/2006 SLP(C) No. 10269/2006 SLP(C) No. 10315/2006 SLP(C) No. 10390/2006 SLP(C) No. 10511/2006 SLP(C) No. 10797/2006 SLP(C) No. 12121/2006 SLP(C) No. 12747/2006

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SLP(C) No. 13966/2006 SLP(C) No. 16460/2006 SLP(C) No. 17258/2006 SLP(C) No. 18540/2006 SLP(C) No. 20966/2006 SLP(C) No. 6359/2007 SLP(C) No. 6380/2007 SLP(C) No. 7905/2007 SLP(C) No. 14962/2007 SLP(C) No. 2022/2008 SLP(C) No. 3556/2008 SLP(C) No. 5073/2008 SLP(C) No. 5383/2008 SLP(C) No. 7108/2008 SLP(C) No. 13916/2008 SLP(C) No. 14121/2008 SLP(C) No. 14125/2008 SLP(C) No. 14129/2008 SLP(C) No. 14131/2008 SLP(C) No. 14134/2008 SLP(C) No. 14144/2008 SLP(C) No. 14148/2008 SLP(C) No. 14152/2008 SLP(C) No. 16018/2008 SLP(C) No. 16066/2008 SLP(C) No. 19472/2008 SLP(C) No. 19275-85/2008 SLP(C) No. 21888-889/2008 SLP(C) No. 25491/2008 SLP(C) No. 26470/2008 SLP(C) No. 121/2009 SLP(C) No. 5531-5532/2009 SLP(C) No. 9983/2009 SLP(C) No. 17965/2009 SLP(C) No. 19701/2009 SLP(C) No. 22535/2009 SLP(C) No. 29055/2009 SLP(C) … CC NO. 2854-55/2009

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J U D G M E N T

R.V.RAVEENDRAN, J.

A  Two  Judge  Bench  of  this  Court  made  the  following  order  of  

reference in this case on 3.12.2007:  

“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. Nicolletta Rohtagi and Ors., - 2002 (7) SCC 456, which is  said to 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-à- vis the right of the aggrieved 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.  

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) :  

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(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 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  ‘noticee’  (a  

person to whom a notice is served as required by section 149(2) of the Act)  

in  a  claim proceedings  and  an  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 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).

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(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 co-appellant 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 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.

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(v) The Motor Vehicles Act, 1988 (‘Act’ for short) 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.  

Relevant Legal Provisions

4. We may refer to the position of an insurer and insured in the scheme  

contained in Chapters XI and XII of the Act.  

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 :  

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(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)  [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  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 organized racing and speed testing, or (c) for a purpose not allowed by the permit under which the vehicle is  

used, where the vehicle is a transport vehicle, or

(ii) a condition excluding driving by a named person or persons or by any  person  who  is  not  duly  licensed,  or  by  any  person  who  has  been  disqualified for holding or obtaining a driving licence during the period of  disqualification; or

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

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(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.

x x x x

(7) No insurer to whom the notice referred to in sub-section (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-section (2) or in the  corresponding law of the reciprocating country, as the case may be.”

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 and limits of liability.—(1) In order to  comply with the requirements of this Chapter, a policy of insurance must  be a policy which –

(a) is issued by a person who is an authorized insurer; and (b) insures the person or classes of persons specified in the policy to the  

extent specified in sub-section (2)—

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

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

Provided that a policy shall not be required—” xxx xxx xxx

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  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  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 :-

“168. Award of the Claims Tribunal.—On receipt of an 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, 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  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:”

4.5) Section  170  deals  with  impleading  insurer  in  certain  cases  and  is  

extracted below :-

“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  

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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.”

Section 173 deals with appeals and relevant part thereof is extracted below :-

“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  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:”

Nature of a claim petition under the Motor Vehicles Act, 1988

5. 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 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 refer to  

the  following  significant  aspects  in  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 an application for  

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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) 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 proceedings are suo moto initiated by the Tribunal.   

(iii) In a proceedings initiated  suo moto by the tribunal,  the owner and  

driver are the respondents. The insurer is not a respondent,  but a noticee  

under  section  149(2)  of  the  Act.  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 issue a notice under section 149(2) of  

the Act. If the insurer is impleaded as a party, it is issued as a regular  notice  

of the proceedings.  

(iv) The words ‘receipt of an application for compensation’ in section 168  

refer not only to an application filed by the claimants claiming compensation  

but also to a suo motu registration of an application for compensation  under  

section 166(4) of the Act on the basis of a report of an accident under section  

158(6) of the Act.  

(v) Though  the  tribunal  adjudicates  on  a  claim  and  determines  the  

compensation, it does not do so as in an adversarial litigation. On receipt of  

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an  application  (either  from  the  applicant  or  suo  motu registration),  the  

Tribunal gives notice to the insurer under section 149(2) of the Act, gives an  

opportunity of being heard to the parties to the claim petition as also the  

insurer, holds an inquiry into the claim and makes an award determining the  

amount of compensation which appears to it to be just. (Vide Section 168 of  

the Act).

(vi) The  Tribunal  is  required  to  follow such  summary  procedure  as  it  

thinks fit. It may choose one or more persons possessing special knowledge  

of and matters relevant to inquiry, to the assist it in holding the enquiry (vide  

section 169 of the Act).

(vii) The  award  of  the  Tribunal  should  specify  the  person/s  to  whom  

compensation should be paid. It should also specify the 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. (Vide section 168 of the Act).

(viii) The  Tribunal  should  deliver  copies  of  the  award  to  the  parties  

concerned within 15 days from the date of the award. (Vide section 168 (2)  

of the Act).

We have referred to the aforesaid provisions to show that 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 enquiry, in accordance with the statute.

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The decision in     NICOLLETTA ROHTAGI   

6. In National Insurance Co. Ltd. vs. Nicolletta Rohtagi – 2002 (7) SCC  

456,  a  three  Judge  Bench  of  this  Court  considered  the  following  two  

questions :  

(i) Non-filing of an appeal by the insured amounted to failure to contest  

the claim and that the right to contest included the right to file an appeal  

against the award of the Tribunal.  

(ii) Where despite the existence of the facts postulated in section 170 of  

the MV Act, 1988, the Tribunal does not implead the insurance company to  

contest the claim on grounds available to the insured or the persons against  

whom claim has  been  made,  or  in  such  a  situation  rejects  the  insurer’s  

application  for  permission  to  contest  the  claim  on  merit  or  where  the  

claimant has obtained an award by playing fraud, in such cases the insurer  

has a right of appeal to contest the award on merits.  

The three Judge Bench, after referring to the decisions in Shankarrayya vs.   

United  Insurance  Co.  Ltd.  –  1998  (3)  SCC  140,  Narendra  Kumar  vs.   

Yarenissa – 1998 (9) SCC 202, Chinnamma George vs. N. K. Raju – 2000  

(4) SCC 130, ad Ritu Devi vs. New Delhi Insurance Co. Ltd. – 2000 (5) SCC  

113, held as under :  

“It was urged by learned counsel appearing for the insurance company that  if an insured has not filed any appeal, it means he has failed to contest the  claim and that the right to contest include the right to contest by filing an  

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appeal against the award of the Tribunal as well, and in such a situation an  appeal by the insurer questioning the quantum of compensation would be  maintainable. We have earlier  noticed that motor  vehicle  accident  claim is a tortious  claim directed against tort-feasors who are the insured and the driver of  the  vehicle  and the insurer  comes  to  the  scene as  a  result  of  statutory  liability created under the Motor Vehicles Act. The legislature has ensured  by enacting Section  149 of the Act that the victims of motor vehicle are  fully compensated and protected. It is for that reason the insurer cannot  escape from its liability to pay compensation on any exclusionary clause  in the insurance policy except those specified in Section 149(2) of the Act  or where the condition precedent specified in Section 170 is satisfied.

For the aforesaid reasons, an insurer if aggrieved against an award, may  file an appeal only on those grounds and no other. However, by virtue of  Section  170 of the 1988 Act, where in course of an enquiry the Claims  Tribunal  is  satisfied  that  (a)  there  is  a  collusion  between  the  person  making a claim and the person against whom the claim has been made or  (b) the person against whom the claim has been made has failed to contest  the claim, the tribunal may, for reasons to be recorded in writing, implead  the insurer and in that case it is permissible for the insurer to contest the  claim also on the grounds which are available  to the insured or to  the  person against whom the claim has been made. 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.”

A careful reading of the said decision shows that issues (i) and (ii) raised  

before us did not arise for consideration in Nicolletta Rohtagi, nor were they  

considered therein.  

Re: Point No.(i) : The position in cases where the claimants implead the  insurer as a respondent in the claim petition.  

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7. The scheme of the Motor Vehicles Act, 1988 as contained in Chapters  

XI (Insurance of Motor Vehicles against Third Party risks) and XII (Claim  

Tribunals) proceeds on the basis that an insurer need not be impleaded as a  

party to the claim proceedings and it should only be issued a 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 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 the claim proceedings.  

8. 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, 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  

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which are available under section 149(2), but also all other 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 be available to it.

9. The Act does not require the claimants to implead the insurer as a  

party respondent.  But if the claimants choose to implead the insurer as a  

party,  not  being a  noticee  under  section  149(2),  the  insurer  can  urge  all  

grounds and not necessarily the limited grounds mentioned in section 149(2)  

of the Act. 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 section  

149(2) of the Act. The entire scheme and 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  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  

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the other grounds relating to merits available to the insured-respondent. 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 section 149(2) of the  

Act.

10. 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  

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  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 of the grounds mentioned in section  

149(2). Section 170 of the Act also 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 the owner/driver or where the owner/driver has  

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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 of  

the claim, who was till then only a notice, shall be treated as a party to the  

proceedings. The insurer so impleaded, without prejudice to the provisions  

of section 149(2), will have the right to contest the claim on all or any of the  

grounds that are available to the driver/owner.  

11. 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  

party-respondent. But it can however be made a party-respondent either by  

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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.

Re : Point (ii) : Maintainability of a joint appeal by the owner of the  vehicle (Insured) and Insurer

12. There is no dispute that when an award is made by the Tribunal, the  

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 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.  

13. This question came up for consideration of a Two Judge Bench of this  

Court with reference to the provisions of the Motor Vehicles Act, 1939 (‘Old  

Act’ for short) in Narendra Kumar vs. Yarenissa – 1998 (9) SCC 202. This  

Court held :  

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“The question, however, is if such a joint appeal is preferred must it be  dismissed in toto or can the tortfeasor, the owner of the offending vehicle,  be permitted to pursue the appeal while rejecting or dismissing the appeal  of the insurer. If the award has gone against the tortfeasors it is difficult to  accept the contention that the tortfeasor is not "an aggrieved person" as  has  been  held  by  some  of  the  High  Courts  vide  Kantilal  &  Bros.  v.  Ramarani  Debi,  1980  ACJ  501,  New  India  Assurance  Co.  Ltd.  v.  Shakuntla Bai, 1987 ACJ 224, Nahar Singh v. Manohar Kumar, (1993) 1  ACJ 269, Radha Kishan Sachdeva v. Fit, Lt. L.D. Sharma, (1993) 27 DRJ  18 (Del) merely because under the scheme of Section 96 if a decree or  award has been made against the tortfeasors the insurer is liable to answer  judgment "as if a judgment-debtor". That does not snatch away the right of  the tortfeasors who are jointly and severally liable  to answer judgment  from preferring an appeal under Section 110-D of the Act. If for some  reason or the other the claimants desire to execute the award against the  tortfeasors because they are not in a position to recover the money from  the insurer the law does not preclude them from doing so and, therefore,  so long as the award or decree makes them liable to pay the amount of  compensation they are aggrieved persons within the meaning of Section  110-D and would be entitled to prefer an appeal. But merely because a  joint appeal is preferred and it is found that one of the appellants, namely,  the insurer was not competent to prefer an appeal, we fail to see why the  appeal by the tortfeasor, the owner of the vehicle, cannot be proceeded  with after dismissing or rejecting the appeal of the insurer. To take a view  that the owner is not an aggrieved party because the Insurance Company is  liable in law to answer judgment would lead to an anomalous situation in  that no appeal would lie by the tortfeasors against any award because the  same logic applies in the case of a driver of the vehicle. The question can  be decided a little differently. Can a claim application be filed against the  Insurance Company alone if the tortfeasors are not the aggrieved parties  under Section 110-D of the Act? The answer would obviously be in the  negative. If that is so, they are persons against whom the claim application  must be preferred and an award sought for otherwise the insurer would not  be  put  to  notice  and  would  not  be  liable  to  answer  judgment  as  if  a  judgment-debtor.  Therefore,  on  first  principle  it  would  appear  that  the  contention  that  the  owner  of  a  vehicle  is  not  an  aggrieved  party  is  unsustainable.  For the reasons stated above, we are of the opinion that even in the case of  a joint appeal by insurer and owner of offending vehicle if an award has  been made against the tortfeasors as well as the insurer even though an  appeal filed by the insurer is not competent, it may not be dismissed as  such. The tortfeasor can proceed with the appeal after the cause-title is  suitably amended by deleting the name of the insurer.”  

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14. When the issue again came up for consideration before another Two  

Judge bench of this Court in  Chinnama George & Ors. vs. N. K. Raju &   

Anr. – 2000 (4)  SCC 130, with reference to the provisions of the Motor  

Vehicles Act, 1988, this Court agreed with Narendra Kumar that the owner  

of the vehicle is an aggrieved person, but held that a joint appeal would not  

be maintainable. This Court held :

“Admittedly, none of the grounds as given in Sub-section (2) of Section  149 exist for the insurer to defend the claims petition. That being so, no  right existed in the insurer to file appeal against the award of the Claims  Tribunal. However, by adding N.K. Raju, the owner as co-appellant, an  appeal was filed in the High Court which led to the impugned judgment.  None of the grounds on which insurer could defend the claims petition  was the subject matter of the appeal as far as the insurer is concerned. We  have already noticed above that we have not been able to figure out from  the impugned judgment as to how the owner felt aggrieved by the award  of  the  Claims  Tribunal.  The  impugned  judgment  does  not  reflect  any  grievance of the owner or even that of the driver of the offending bus  against the award of the Claims Tribunal. The insurer by associating the  owner or the driver in the appeal when the owner or the driver is not an  aggrieved person cannot be allowed to mock at the law which prohibit the  insurer from filing any appeal except on the limited grounds on which it  could defend the claims petition. We cannot put our stamp of approval as  to  the  validity  of  the  appeal  by  the  insurer  merely  by  associating  the  insured. Provision of law cannot be undermined in this way. We have to  give effect to the real purpose to the provision of law relating to the award  of compensation in respect of the accident arising out of the use of the  motor vehicles and cannot permit the insurer to give him right to defend or  appeal on grounds not permitted by law by a backdoor method. Any other  interpretation will produce unjust results and open gates for the insurer to  challenge any award. We have to adopt purposive approach which would  not defeat the broad purpose of the Act. Court has to give effect to true  object of the Act by adopting purposive approach. xxxxxxxx There is  no dispute with the proposition so laid by this  Court.  But the  insurer cannot maintain a joint appeal along with the owner or the driver if  defence on any ground under Section 149(2) is not available to it. In that  situation joint appeal will be incompetent. It is not enough if the insurer is  struck out from the array of the appellants. The appellate court must also  

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be satisfied that a defence which is permitted to be taken by the insurer  under  the  Act  was  taken  in  the  pleadings  and was  pressed  before  the  Tribunal.  On  the  appellate  court  being  so  satisfied  the  appeal  may  be  entertained  for  examination  of  the  correctness  or  otherwise  of  the  judgment  of  the Tribunal  on the  question  arising from/relating  to  such  defence taken by the insurer If the appellate court is not satisfied that any  such  question  was  raised  by  the  insurer  in  the  pleadings  and/or  was  pressed  before  the  Tribunal,  the  appeal  filed  by  the  insurer  has  to  be  dismissed as not maintainable. The court should take care to ascertain this  position  on  proper  consideration  so  that  the  statutory  bar  against  the  insurer in a proceeding of claim of compensation is not rendered irrelevant  by the subterfuge of the insurance company joining the insured as a co- appellant in the appeal filed by it. This position is clear on a harmonious  reading of the statutory provisions in Sections 147, 149 and 173 of the  Act. Any other interpretation will defeat the provision of Sub-section (2)  of  Section  149  of  the  Act  and  throw  the  legal  representatives  of  the  deceased or the injured in the accident to unnecessary prolonged litigation  at the instance of the insurer.”

This issue did not arise for consideration of the Three Judge Bench decision  

in Nicolletta Rohtagi, as the question therein was whether an insurer could  

file an appeal.  

15. On a careful  consideration, we are of the view that the decision in  

Chinnamma  George to  the  extent  it  holds  that  a  joint  appeal  is  not  

maintainable, does not lay down the correct law. As observed in Narendra  

Kumar, the owner of the vehicle does not cease to be an aggrieved person,  

merely because the insurer is ultimately liable under the terms of the policy  

or under section 149 of the Act. If the owner by himself, can file an appeal  

as  an  aggrieved  person  and  such  appeal  is  maintainable,  we  fail  to  

understand how the presence of the insurer as a co-appellant would make the  

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appeal not maintainable. Whether the owner joins the insurer or the insurer  

joins the owner, makes no difference to the fact that owner continues to be a  

person aggrieved.  

16. When a joint appeal is filed, to say that the insurer is not an aggrieved  

person and the owner of the vehicle is also not an aggrieved person, would  

lead to an anomalous situation and would border on an absurdity. Without  

entering upon the question whether an insurer is an aggrieved person (which  

requires to be considered separately), we make it clear that on account of the  

insurer being a co-appellant, will not affect the maintainability of the appeal.  

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 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. 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.  

Re : Points (iii) to (v)

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17. We may next consider the cases where the insurer is only a noticee  

under section 149(2) and has not been impleaded as a party to the claim  

proceedings. The basic premises in Nicolletta Rohtagi is that the insurer can  

contest  a  motor-accident  claim  for  compensation  only  on  the  grounds  

mentioned  in  section  149(2)  of  the  Act.  The  contention  of  Insurance  

Companies is that an Insurer can deny liability under the policy only on the  

grounds mentioned in section 149(2) of the Act (even though several other  

grounds may be available under the terms of the policy); and where it does  

not deny liability or avoid liability under policy of insurance, it can certainly  

assist  the Tribunal in arriving at the just compensation, by contesting any  

unjust or illegal or erroneous claim by the claimants. We find considerable  

force in the contention that where a notice is issued under section 149(2) of  

the Act, the insurer as ‘noticee’ (as contrasted from a ‘party’) can not ‘deny’  

its 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.  In  this  context,  we may rely upon the observation of  this  

Court in National Insurance Co. Ltd. v. Jugal Kishore - 1988 (1) SCC 626,  

referring to section 96(6) of the old Act (Motor Vehicles Act, 1939):  

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“….Secondly, from the words "to avoid his liability" used in Sub-section  (6) of Section 96 it is apparent that the restrictions placed with regard to  defences available to the insurer specified in Sub-section (2) of Section 96  are applicable to a case where the insurer wants to avoid his liability. In  the instant case the appellant is not seeking to avoid its liability but wants  a determination of the extent of its liability which is to be determined, in  the  absence  of  any  contract  to  the  contrary,  in  accordance  with  the  statutory provision contained in this behalf in Clause (b) of Sub-section  (2) of Section 95 of the Act...”

The assumption that as a noticee under section 149(2), the insurer cannot  

raise any contention other than those 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 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 quantum.  

All  that  section  149(2)  says  is  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.   

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18. Let us take by way of example, a case where the deceased was aged  

20  years  and  the  annual  loss  of  dependency  was  Rs.1,00,000/-  to  the  

dependants.  The multiplier  applicable would be 18 and the compensation  

would be Rs.18 lakhs. But if the tribunal holds that as the life expectancy  of  

the  deceased  was  70  as  per  evidence  and  therefore,  it  would  apply  a  

multiplier of 50 (that is 70-20), instead of 18 and as a consequence, awards  

Rs.50 lakhs as compensation, should the insurer be without remedy if the  

owner and driver do not care to file an appeal, as the liability under the Act  

is that of the insurer.    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 any correction. The fact that the compensation is not likely to be  

interfered, may also encourage the Motor Accident Claims Tribunal to make  

awards  which  may  not  be  fanciful  reasonable.  We  fail  to  see  why  the  

insurance company cannot challenge the judgment of the tribunal, if it  is  

erroneous. The 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. It is difficult  to countenance the submission that a person who is  

required to a sum of money, from his pocket,  has no right even to say :  

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20. In British India General Insurance Co.Ltd. v. Captain Itbar Singh &   

Ors. -- AIR 1959 SC 1331, a three Judge Bench of this Court held as under:

“….The Statute has no doubt created a liability in the insurer to the injured  person but the statute has also expressly confined the right to avoid that  liability to certain grounds specified in it. It is not for us to add to those  grounds  and  therefore  to  the  statute  for  reasons  of  hardship.  We  are  furthermore not convinced that the statute causes any hardship. First, the   insurer has the right, provided he has reserved it by the policy, to defend   the action in the name of the assured and if he does so, all defences open   to the assured can then be urged by him and there is no other defence that  he claims to be entitled to urge. He can thus avoid all hardship if any, by  providing for a right to defend the action in the name of the assured and  this he has full liberty to do….”

(emphasis supplied)

Nicolletta Rohtagi did not consider the issue with reference to the situation  

where the insurer is enabled by a specific term in the insurance 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  issue  was  covered by a  binding three-Judge Bench  judgment  in  

British India General Insurance. Be that as it may.  

21. However,  in view of the decision in  Nicolletta Rohtagi,  we cannot  

decide points (iii) to (v) in favour of the Insurers.  For the aforesaid reasons,  

28

in  so  far  as  issues  (iii)  to  (v)  are  concerned,  we  are  of  the  view  that  

Nicolletta Rohtagi requires reconsideration by a larger bench.  

Conclusion  

22. We accordingly answer the points arising from the reference as under:  

(i) Points  (i)  and  (ii)  are  held  in  favour  of  the  Insurers.  The  matters  

covered by points (i) and (ii) are to be placed before the respective benches  

for consideration accordingly.

(ii) Points (iii) to (v) which may come in conflict with Nicolletta Rohtagi,  

are referred to a larger Bench. We accordingly direct these  matters (that is,  

cases 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 before the Hon’ble  

Chief Justice for constituting a larger bench to consider points (iii), (iv) and  

(v) raised by the insurers.  

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20. The parties to file memos indicating whether their cases are covered  

by points (i) and (ii) or under points (iii) to (iv) to enable the Registry to  

place the matters appropriately.  

……………………………J [R. V. Raveendran]

……………………………J [H. L. Dattu]

……………………………J

[K. S. Radhakrishnan] New Delhi;  October 13, 2011.  

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