Page 1

REPORTABLE

IN THE SUPREME COURT OF INDIA  CIVIL APPELLATE JURISDICTION

CIVIL  APPEAL NO.   5      OF 2013 (Arising out of SLP(C) No. 20127 of 2011)

Manager, National Insurance Co. Ltd.           ……  Appellant

   Vs.

Saju P. Paul and Another        ……Respondents

JUDGMENT

R.M. LODHA, J.  

Leave granted.

2. The appellant,  insurance company,  is  in appeal  by special  

leave  against  the  judgment  and  order  dated  23.03.2011  whereby  the  

Division Bench of the Kerala High Court  allowed the review petition  and  

reviewed its order dated 09.11.2010 and held that the insurance company  

was liable to pay compensation in sum of Rs. 2,88,000/- with 9% interest  

1

Page 2

thereon to the claimant awarded by the Motor Accident Claims Tribunal in  

its award dated 23.07.2002.

3. The question of law that arises in this appeal is as to whether  

having regard to the provisions of the Motor Vehicles Act, 1988 (for short,  

‘1988 Act’), the insurance company is liable to pay compensation for the  

bodily injury caused to the claimant who was travelling in a goods vehicle  

as a spare driver though he was employed as a driver in another vehicle  

owned by the owner of the vehicle under the policy of insurance.  

4. The above question arises in this way.  Saju P. Paul, claimant  

(Respondent No. 1),  was a heavy vehicle  driver.  He was employed with  

Respondent No. 2 as a driver in some other vehicle.  On 16.10.1993, he  

was travelling in a goods vehicle bearing No. KL-2A/3411 in the cabin.  The  

goods  vehicle was being driven by one Jayakumar.  In that vehicle, many  

other persons were also travelling.    At Nilackal, due to rash and negligent  

driving of the driver Jayakumar, the  goods vehicle capsized.  As a result of  

which the claimant suffered fracture and injuries. The claimant remained  

under treatment for quite some time and the injuries that he sustained in  

the accident rendered him permanently disabled.   In the claim petition filed  

by  him before  the  Motor  Accident  Claims  Tribunal,  Pathanamthitta  (for  

short,  ‘the Tribunal’),  he claimed  compensation of  Rs.3,00,000/-.    The  

owner and insurer were  impleaded as respondent no. 2 and respondent  

no. 3 respectively in the claim petition.  

2

Page 3

5. The  insurer  filed  its  written  statement  and  opposed  the  

claimant’s claim insofar as it was concerned. The insurer set up the plea  

that  the  vehicle  was  a  goods  vehicle  and  the  risk  of  the  passengers  

travelling  in  the  goods  vehicle  was  not  covered  under  the  policy  of  

insurance.  It  was  stated  in  the  written  statement  that  nearly  50  

unauthorised passengers were travelling at the time of accident; they were  

not traveling in the vehicle in pursuance of  the contract  of  employment,  

such as loading and unloading nor they were travelling as the owner of the  

goods  or  the  representative  of  the  owner  of  the  goods  and hence the  

insurer could not be saddled with any liability.

6. The Tribunal,  after  recording  the evidence and hearing  the  

parties, on 23.07.2002, passed an award in favour of the claimant holding  

that he was entitled to a total compensation of Rs. 3,00,000/-. The liability  

of the insurer was made joint and several with the owner and driver.

7. Being not satisfied with the award of the Tribunal, the insurer  

filed an appeal before the Kerala High Court. The Division Bench of that  

Court by relying upon decisions of this Court in New India Assurance Co.  

Ltd. v.  Asha Rani and others1 and National Insurance Co. Ltd. v.  Cholleti  

Bharatamma and Others2  allowed the appeal of the insurer vide judgment  

and order dated 09.11.2010.  The Division Bench held that insurer was not  

liable  as  gratuitous  passengers  travelling  in  a  goods  vehicle  were  not  

1  (2003) 2 SCC 223 2  (2008) 1 SCC 423

3

Page 4

covered under the policy and the claimant shall be entitled to recover the  

awarded amount from the owner or driver of the vehicle.

8. The claimant sought review of the order dated 09.11.2010 and,  

as noted above, by the impugned order that review application has been  

allowed. While allowing the review application, the Division Bench held as  

under:

“It  has  already  been  noticed  that  the  petitioner  was  admittedly a spare driver of the vehicle.  It may be true that  he was not driving the vehicle at the relevant point of time;  but he was directed to go to the worksite by his employer as  a spare driver in the vehicle.   Therefore, by no stretch of  imagination,  it  can  be  said  that  the  petitioner  was  not  travelling in the vehicle in the course of his employment and  as  directed  by  his  employer.   Section  147(1)(b)(i)  takes  within  its  fold  any  liability  which  may be  incurred  by  the  insurer in respect of the death or bodily injury to any person.  Therefore, the argument of the insurance company that no  goods  were  being  carried  in  the  vehicle  at  the  time  of  accident and therefore, the petitioner was only a gratuitous  passenger cannot be countenanced at all.  Even otherwise,  the first proviso to Section147(1) will  cast a liability on the  insurer  to  indemnify  the  owner  in  respect  of  the  injury  sustained by the employee of the insured arising out of and  in the course of his employment.”

9. It is appropriate to quote Section 147 of the 1988 Act as was  

obtaining on the date of accident, i.e., 16.10.1993, which reads as follows :

“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  or  damage to any property of a third party caused by or arising  out of the use of the vehicle in a public place;

4

Page 5

(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— (i) to cover liability in respect of the death, arising out of and  in  the  course  of  his  employment,  of  the  employee  of  a  person insured by the policy or in respect  of  bodily  injury  sustained by such an employee arising  out  of  and in  the  course of his employment other than a liability arising under  the  Workmen's  Compensation  Act,  1923  (8  of  1923),  in  respect  of  the  death  of,  or  bodily  injury  to,  any  such  employee— (a) engaged in driving the vehicle, or (b) if it is a public service vehicle engaged as a conductor of  the vehicle or in examining tickets on the vehicle, or (c) if it is a goods carriage, being carried in the vehicle, or (ii) to cover any contractual liability. Explanation.—For  the  removal  of  doubts,  it  is  hereby  declared that the death of or bodily injury to any person or  damage to any property of a third party shall be deemed to  have been caused by or to have arisen out of, the use of a  vehicle  in  a  public  place  notwithstanding  that  the  person  who is  dead or  injured or  the property  which is  damaged  was not in a public place at the time of the accident, if the  act  or  omission  which  led  to  the  accident  occurred  in  a  public place. (2)  Subject  to  the  proviso  to  sub-section  (1),  a  policy  of  insurance  referred  to  in  sub-section  (1),  shall  cover  any  liability  incurred  in  respect  of  any  accident,  up  to  the  following limits, namely— (a)  save as provided in  clause (b),  the amount of  liability  incurred; (b) in respect of damage to any property of a third party, a  limit of rupees six thousand: Provided that any policy of insurance issued with any limited  liability and in force, immediately before the commencement  of this Act, shall continue to be effective for a period of four  months after such commencement or till the date of expiry of  such policy whichever is earlier. (3)  A policy  shall  be of no effect  for  the purposes of this  Chapter unless and until  there is issued by the insurer in   favour  of  the  person  by  whom  the  policy  is  effected  a  certificate of insurance in the prescribed form and containing  the prescribed particulars of any condition subject to which  the policy is issued and of any other prescribed matters; and  

5

Page 6

different forms, particulars and matters may be prescribed in  different cases.  (4)  Where  a cover  note issued by the insurer  under  the  provisions of this Chapter or the rules made thereunder is  not followed by a policy of insurance within the prescribed  time, the insurer shall, within seven days of the expiry of the  period of the validity of the cover note, notify the fact to the  registering authority in whose records the vehicle to which  the cover note relates has been registered or to such other  authority as the State Government may prescribe. (5)  Notwithstanding anything  contained in  any law for  the  time being in force, an insurer issuing a policy of insurance  under this section shall be liable to indemnify the person or   classes of persons specified in the policy in respect of any  liability which the policy purports to cover in the case of that  person or those classes of persons.”

10. By the Motor Vehicles (Amendment) Act, 1994 (for short, ‘1994  

Amendment Act’),    Section 147 came to be amended.  The expression  

“including owner of the goods or his authorised representative carried in the  

vehicle” was added in Section 147. The amended Section 147  has been  

considered by this Court in various decisions, some of which we intend to  

refer  a little later.

11. In New India Assurance Company v. Satpal Singh and others3,   

this Court with reference to the  provisions in the Motor Vehicles Act, 1939  

and the  provisions in 1988 Act,  particularly Section 147,  held that under  

the 1988 Act an insurance policy covering third party risk was not required  

to exclude gratuitous passengers in a vehicle no matter that the vehicle is  

of any type or class. It was also held that the earlier decisions of this Court  

rendered under the 1939 Act  vis-à-vis gratuitous passengers were of no  

avail while considering the liability of the insurance company in respect of  

3  (2000) 1 SCC 237

6

Page 7

any accident which occurred or would occur after the 1988  Act came into  

force.

12. The correctness of the judgment in Satpal Singh3 was doubted,  

inter alia, in  Asha Rani1 .  It was felt that  Satpal Singh3   needed re-look  

insofar as cases covered under the 1988 Act prior  to its  amendment in  

1994 were concerned. A three-Judge Bench in Asha Rani1 noticed Section  

147  of  the  1988  Act  prior  to  its  amendment  in  1994  and  after  its  

amendment in 1994 and held in paragraph 9 of the Report (Pgs. 231-232)  

as follows :

“In Satpal case [(2000) 1 SCC 237] the Court assumed that  the provisions of Section 95(1)  of the Motor Vehicles Act,  1939 are identical with Section 147(1) of the Motor Vehicles  Act, 1988, as it stood prior to its amendment. But a careful   scrutiny of the provisions would make it  clear that prior to  the amendment of 1994 it was not necessary for the insurer  to insure against the owner of the goods or his authorised  representative  being  carried  in  a  goods  vehicle.  On  an  erroneous impression this Court came to the conclusion that  the insurer would be liable to pay compensation in respect  of the death or bodily injury caused to either the owner of  the  goods  or  his  authorised  representative  when  being  carried  in  a  goods  vehicle  the  accident  occurred.  If  the  Motor  Vehicles  Amendment  Act  of  1994  is  examined,  particularly  Section 46,  by which the expression “injury to  any  person”  in  the  original  Act  stood  substituted  by  the  expression  “injury  to  any  person  including  owner  of  the  goods  or  his  authorised  representative  carried  in  the  vehicle”,  the  conclusion  is  irresistible  that  prior  to  the  aforesaid  Amendment  Act  of  1994,  even  if  the  widest  interpretation is given to the expression “to any person” it  will not cover either the owner of the goods or his authorised  representative being carried in the vehicle. The objects and  reasons  of  clause  46  also  state  that  it  seeks  to  amend  Section 147 to include owner of the goods or his authorised  representative  carried  in  the  vehicle  for  the  purposes  of  liability  under the insurance policy. It is no doubt true that  sometimes  the  legislature  amends  the  law  by  way  of  amplification and clarification of an inherent position which  

7

Page 8

is there in the statute, but a plain meaning being given to the  words used in the statute, as it stood prior to its amendment  of 1994, and as it  stands subsequent to its amendment in  1994 and bearing in mind the objects and reasons engrafted  in the amended provisions referred to earlier, it is difficult for   us to construe that the expression “including owner of the  goods  or  his  authorised  representative  carried  in  the  vehicle”  which  was  added  to  the  pre-existing  expression  “injury to any person” is either clarificatory or amplification of  the  pre-existing  statute.  On  the  other  hand  it  clearly  demonstrates that the legislature wanted to bring within the  sweep  of  Section  147  and  making  it  compulsory  for  the  insurer to insure even in case of a goods vehicle, the owner  of the goods or his authorised representative being carried  in a goods vehicle when that vehicle met with an accident  and the owner of the goods or his representative either dies  or suffers bodily injury. The judgment of this Court in Satpal   case  therefore  must  be  held  to  have  not  been  correctly  decided and the impugned judgment of the Tribunal as well  as  that  of  the  High  Court  accordingly  are  set  aside  and  these appeals are allowed. It is held that the insurer will not   be liable for paying compensation to the owner of the goods  or his authorised representative on being carried in a goods  vehicle  when that  vehicle  meets with an accident and the  owner of the goods or his representative dies or suffers any  bodily injury.”

13. S.B. Sinha, J. in his supplementary judgment in  Asha Rani1 ,  

while concurring with the above, observed as follows (Pg. 235):

“26. In view of the changes in the relevant provisions in the  1988 Act vis-à-vis the 1939 Act, we are of the opinion that  the  meaning  of  the  words  “any  person”  must  also  be  attributed having regard to the context in which they have  been used i.e. “a third party”. Keeping in view the provisions  of the 1988 Act, we are of the opinion that as the provisions  thereof do not enjoin any statutory liability on the owner of a  vehicle  to  get  his  vehicle  insured  for  any  passenger  travelling in a goods vehicle, the insurers would not be liable  therefor. 27. Furthermore, sub-clause (i) of clause (b) of sub-section  (1) of Section 147 speaks of liability which may be incurred  by the owner of a vehicle in respect of death of or bodily   injury to any person or damage to any property of a third  party caused by or arising out of the use of the vehicle in a  

8

Page 9

public  place,  whereas  sub-clause  (ii)  thereof  deals  with  liability  which may be incurred by the  owner of  a vehicle   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. 28.  An  owner  of  a  passenger-carrying  vehicle  must  pay  premium  for  covering  the  risks  of  the  passengers.  If  a  liability other than the limited liability provided for under the  Act is to be enhanced under an insurance policy, additional  premium is required to be paid. But if the ratio of this Court's  decision in New India Assurance Co. v. Satpal Singh [(2000)  1 SCC 237] is taken to its logical  conclusion, although for  such passengers, the owner of a goods carriage need not  take out an insurance policy, they would be deemed to have  been covered under the policy wherefor even no premium is  required to be paid.

14. Asha Rani1 has been relied upon in Oriental Insurance Co. Ltd.  

v. Devireddy Konda Reddy and Others4 wherein  it was held as under (Pgs.  

342-343):

“….The  difference  in  the  language  of  “goods  vehicle”  as  appearing in the old Act and “goods carriage” in the Act is of  significance. A bare reading of the provisions makes it clear  that the legislative intent was to prohibit goods vehicle from  carrying any passenger. This is clear from the expression “in  addition  to  passengers”  as  contained  in  the  definition  of  “goods vehicle” in the old Act. The position becomes further  clear  because the  expression  used is  “goods carriage”  is  solely for the carriage of “goods”. Carrying of passengers in  a goods carriage is not contemplated in the Act. There is no  provision  similar  to  clause (ii)  of  the proviso appended to  Section  95  of  the  old   Act  prescribing   requirement    of   insurance  policy.  Even  Section  147  of  the  Act  mandates  compulsory coverage against death of or bodily injury to any  passenger of “public service vehicle”. The proviso makes it  further clear that compulsory coverage in respect of drivers  and  conductors  of  public  service  vehicle  and  employees  carried in goods vehicle would be limited to liability  under  the Workmen's Compensation Act, 1923 (in short “the WC  Act”).  There  is  no  reference  to  any  passenger  in  “goods  carriage”.

4  (2003) 2 SCC 339

9

Page 10

14.1. Then in paragraphs 10 and 11 of the Report (Pg. 343), this  

Court held  in  Devireddy Konda Reddy4  as under :

“10. The inevitable conclusion, therefore, is that provisions  of the Act do not enjoin any statutory liability on the owner of  a  vehicle  to  get  his  vehicle  insured  for  any  passenger  travelling in a goods carriage and the insurer would have no  liability therefor. 11. Our view gets support from a recent decision of a three- Judge Bench of this Court in New India Assurance Co. Ltd.  v. Asha Rani [(2003) 2 SCC 223]  in which it has been held  that Satpal Singh case [(2000) 1 SCC 237] was not correctly  decided. That being the position, the Tribunal and the High  Court were not justified in holding that the insurer had the  liability to satisfy the award.”

15. In  Cholleti  Bharatamma2,  this  Court was concerned with the  

question  about  the  liability  of  the  insurance  company  to  indemnify  the  

owner of the vehicle in respect of death of passengers travelling in goods  

vehicle.  The  Court  considered  the  applicability  of  Section  147  as  it  

originally  stood  under  1988  Act  and  after  its  amendment  in  1994.   In  

relation to the accident that occurred on 16.12.1993 i.e., prior to the 1994  

amendment  in SLP(C) 7237-39/2003, this Court set aside the judgment of  

the  High  Court  and  allowed  the  appeal  of  the  insurance  company  by  

observing as follows (Pg. 430):

“14. The date of accident being 16-12-1993, the amendment  carried  out  in  the  year  1994 in  Section  147 of  the  Motor  Vehicles Act would not be applicable. 15. The Motor Accidents Claims Tribunal,  Nalgonda, by a  judgment  and  award  dated  13-11-1997  awarded  various  sums overruling  the  defence  of  the  appellant  herein  that  they  were  unauthorised  passengers.  The  High  Court,  however, by reason of the impugned judgment, relying on or  on  the  basis  of  a  decision  of  this  Court  in  Satpal  Singh  [(2000) 1 SCC 237] directed as under:

1

Page 11

“The  learned  counsel  for  the  Insurance  Company  submitted that the issue involved in these appeals is  squarely  covered  by  the  decision  of  the  Supreme  Court  in  New  India  Assurance  Co.  Ltd. v.  Satpal   Singh [(2000) 1 SCC 237], wherein Their  Lordships  held  that  under  the  Motor  Vehicles  Act,  1988  all  insurance policies  covering third-party  risks are not  required  to  exclude  gratuitous  passengers  in  the  vehicle though vehicle is of any type or class. In  view of  the  proposition  of  law laid  down by  the  Supreme Court  in  the  decision  stated  supra,  these  appeals are dismissed. No costs.”

16. Following the aforementioned principles, the impugned  judgment  cannot  be  sustained  which  is  set  aside.  The  appeals are allowed accordingly.”

15.1. With reference to the accident that took place on 24.12.1993  

(prior  to  1994 amendment)  in  SLP(C)  Nos.  7241-43/2003,  this  Court  in  

Cholleti Bharatamma2   in paragraphs 17,18,19,20 and 21 (Pgs. 430-431)  

held as under :

“17. In the aforementioned case, accident took place on 24- 12-1993.  The  respondents  herein  filed  a  claim  petition  claiming compensation for the death of one Kota Venkatarao  who had allegedly paid a sum of Rs 20 for travelling in the  lorry. The Tribunal held:

“In  the  absence  of  rebuttal  evidence  from  the  deceased and some others who travelled in the said  vehicle in the capacity of owner of the luggage which  was carried by them at the time of accident, it cannot  be said that it is a violation of the policy, since it is not  fundamental breach so as to afford to the insurer to  eschew the liability altogether as per the decision in  B.V. Nagaraju v. Oriental Insurance Co. Ltd. [(1996) 4   SCC 647 : AIR 1996 SC 2054]”

18.  The  High  Court,  however,  relying  upon  Satpal  Singh  [(2000) 1 SCC 237] opined:

“This  issue raised in  this  appeal  is  covered by the  decision  of  the  Supreme  Court  in  New  India  Assurance  Co.  Ltd. v.  Satpal  Singh wherein  Their  Lordships  held  that  under  the  Motor  Vehicles  Act,  1988 all  insurance policies covering third-party risks  are not required to exclude gratuitous passengers in  the  vehicles  though  the  vehicle  is  of  any  type  or  

1

Page 12

class. Following the same, the appeal  is dismissed.  No order as to costs.”

19. It is now well settled that the owner of the goods means  only the person who travels in the cabin of the vehicle. 20. In this case, the High Court had proceeded on the basis  that they were gratuitous passengers. The admitted plea of  the  respondents  themselves  was  that  the  deceased  had  boarded the lorry and paid an amount of Rs 20 as transport   charges.  It  has  not  been  proved  that  the  deceased  was  travelling in the lorry along with the driver or the cleaner as  the owner of the goods. Travelling with the goods itself does  not  entitle  anyone to  protection  under  Section  147 of  the  Motor Vehicles Act. 21. For the reasons aforementioned, this appeal is allowed.”

16. In the present case, Section 147 as originally existed  in 1988  

Act is applicable and, accordingly, the judgment of this Court in Asha Rani1   

is  fully  attracted.  The  High  Court  was  clearly  in  error  in  reviewing  its  

judgment and order delivered on 09.11.2010 in review petition filed by the  

claimant by applying Section 147(1)(b)(i).  The High Court committed grave  

error in holding that Section 147(1)(b)(i)  takes within its fold any liability  

which may be incurred by the insurer in  respect of the death or bodily  

injury to any person. The High Court also erred in holding that the claimant  

was travelling in the vehicle in the course of his employment since he was  

a spare driver in the vehicle although he was not driving the vehicle at the  

relevant time but he was directed to go to the worksite by his employer.  

The High Court erroneously assumed that the claimant died in the course  

of employment and overlooked the fact that  the claimant was not in any  

manner  engaged on the vehicle  that  met  with  an accident  but  he was  

employed as a driver in another vehicle owned by M/s. P.L. Construction  

1

Page 13

Company.  The insured (owner of  the vehicle)   got insurance cover  in  

respect of the subject goods vehicle for driver and cleaner only and not for  

any other employee.  There is no insurance cover for the spare driver in the  

policy.    As a matter of law, the claimant did not cease to be a gratuitous  

passenger though he claimed that he was a spare driver. The insured had  

paid premium for one driver and  one cleaner and, therefore,  second driver  

or for that purpose ‘spare driver’  was not covered under the policy.

17. The High Court misconstrued the proviso following sub-section  

(1) of Section 147 of the 1988 Act.  What is contemplated by proviso to  

Section 147 (1)  is that the policy shall not be required to cover liability in  

respect of death or  bodily injury  sustained by an employee arising out of  

and in the course of his employment other than a liability arising under the  

Workmen’s Compensation Act, 1923.   The claimant was admittedly not  

driving the vehicle  nor he  was engaged in driving the said vehicle. Merely  

because he was travelling in a cabin would not make his case different  

from  any other gratuitous passenger.   

18. The  impugned  judgment  is  founded  on  misconstruction  of  

Section  147.  The  High  Court  was  wrong in  holding  that  the  insurance  

company shall be liable to indemnify the owner of the vehicle and pay the  

compensation to the claimant as directed in the award by the Tribunal.

19. The next question that arises for consideration is whether in  

the peculiar facts of this case a direction could be issued to the  insurance  

1

Page 14

company to first satisfy the awarded amount in favour of the claimant and  

recover the same from the owner of the vehicle (respondent no. 2 herein).  

20. In  National Insurance Co. Ltd. v.  Baljit Kaur and others5,  this  

Court was confronted with a similar situation. A three-Judge Bench of this  

Court in paragraph 21 of the Report (Pg. 8) held as under :

“21. The upshot of  the aforementioned discussions is that  instead and in place of the insurer the owner of the vehicle   shall be liable to satisfy the decree. The question, however,  would be as to whether keeping in view the fact that the law  was not  clear  so long such a direction  would be fair  and  equitable.  We  do  not  think  so.  We,  therefore,  clarify  the  legal  position  which  shall  have  prospective  effect.  The  Tribunal as also the High Court had proceeded in terms of  the decision of this Court in Satpal Singh. The said decision  has been overruled only in Asha Rani. We, therefore, are of  the opinion that the interest of justice will be subserved if the  appellant herein is directed to satisfy the awarded amount in  favour of the claimant, if not already satisfied, and recover  the same from the owner of the vehicle. For the purpose of  such recovery, it would not be necessary for the insurer to  file a separate suit but it  may initiate a proceeding before  the executing court as if the dispute between the insurer and  the  owner  was the  subject-matter  of  determination  before  the Tribunal and the issue is decided against the owner and  in favour of the insurer. We have issued the aforementioned  directions having regard to the scope and purport of Section  168 of the Motor Vehicles Act, 1988, in terms whereof, it is   not  only  entitled  to  determine the amount of  claim as put  forth by the claimant for recovery thereof from the insurer,  owner or driver of the vehicle jointly or severally but also the  dispute between the insurer on the one hand and the owner  or driver of the vehicle involved in the accident inasmuch as  can be resolved by the Tribunal in such a proceeding.”

21. The above position has been followed by this Court in National  

Insurance Co. Ltd. v.  Challa Bharathamma & Ors.6,  wherein this Court in  

paragraph 13  (Pg. 523) observed as under:

5  (2004) 2 SCC 1 6  (2004) 8 SCC 517

1

Page 15

“13. The residual question is what would be the appropriate  direction.  Considering  the  beneficial  object  of  the  Act,  it  would be proper for the insurer to satisfy the award, though  in law it has no liability. In some cases the insurer has been  given the option and liberty to recover the amount from the  insured. For the purpose of recovering the amount paid from  the owner, the insurer shall not be required to file a suit. It  may  initiate  a  proceeding  before  the  executing  court  concerned  as  if  the  dispute  between the  insurer  and  the  owner  was the  subject-matter  of  determination  before  the  Tribunal and the issue is decided against the owner and in  favour of the insurer. Before release of the amount to the  claimants,  owner  of  the  offending  vehicle  shall  furnish  security for the entire amount which the insurer will  pay to  the claimants. The offending vehicle shall be attached, as a  part of the security. If necessity arises the executing court  shall  take  assistance  of  the  Regional  Transport  Authority  concerned.   The  executing  court  shall  pass  appropriate  orders in accordance with law as to the manner in which the  owner of the vehicle shall  make payment to the insurer. In  case there is any default  it  shall  be open to the executing  court to direct realisation by disposal of the securities to be  furnished  or  from any  other  property  or  properties  of  the  owner of  the vehicle  i.e.  the insured.  In  the  instant  case,  considering  the  quantum  involved,  we  leave  it  to  the  discretion  of  the  insurer  to  decide  whether  it  would  take  steps for recovery of the amount from the insured.”

22.  In  National Insurance Company Limited v.  Kaushalaya Devi  

and Others7.   In  paragraph 15 of the Report (pg. 250), the Court observed  

as follows:

“15. For the reasons aforementioned, civil appeal arising out  of SLP (C) No. 10694 is allowed and civil appeal arising out  of  SLP (C) No. 9910 of 2006 is  dismissed.  If  the amount  deposited  by  the  Insurance  Company  has  since  been  withdrawn by the first respondent, it  would be open to the  Insurance  Company  to  recover  the  same  in  the  manner  specified by the High Court. But if the same has not been  withdrawn the  deposited  amount  may be  refunded  to  the  Insurance Company and the proceedings for realisation of  the  amount  may  be  initiated  against  the  owner  of  the  

7  (2008) 8 SCC 246

1

Page 16

vehicle.  In  the  facts  and  circumstances  of  the  case,  however, there shall be no order as to costs.”

  23. We  are  informed  that  by  an  order  dated  19.01.2007  in  

National  Insurance  Co.  v.  Roshan  Lal  and  Another  [SLP  (C)  No.  

5699/2006] in light of the argument raised before a two-Judge Bench that  

the direction ought not to be issued to the insurance company to discharge  

the  liability  under  the  award  first  and then recover  the  same from the  

owner, the matter has been referred  to the larger Bench by the following  

order:

“Having regard to the submissions urged before us, we are  of the view that this petition may be placed for consideration  before  a  larger  Bench.  We  notice  that  in  some  of  the  decisions  such a direction  was made in  cases where the  compensation  had  already  been  paid  by  the  insurer,  but  there are observations therein which support the view that  such a direction can be made in all cases where the owner  has  insured  his  vehicle  against  third  party  risks.  In  Baljit  Kaur’s case (supra) which is a judgment rendered by three  Hon’ble Judges, such a direction was made in the special  circumstances noticed by the Court in paragraph 21 of the  report.   There  are  observations in  Oriental  Insurance Co.  Ltd.  Vs. Ranjit Saikia and Ors.  (2002) 9 SCC 390 which  may support the contention of the petitioners before us.”

24. In National Insurance Company Ltd. v. Parvathneni & Another  

[SLP(C)….CC No. 10993 of 2009], the following two questions have been  

referred to the larger Bench for consideration:

(1) If an Insurance Company can prove that it does not have  any liability to pay any amount in law to the claimants under  the  Motor  Vehicles  Act  or  any  other  enactment,  can  the  Court yet compel it to pay the amount in question giving it   liberty to later on recover the same from the owner of the  vehicle.   

1

Page 17

(2)    Can such a direction be given under Article 142 of the  Constitution,  and what is the scope of Article  142?  Does  Article 142 permit the Court to create a liability where there  is none?”

25. The pendency of consideration of the above questions by a  

larger  Bench does not mean that the course that was followed in  Baljit   

Kaur5   and  Challa Bharathamma6   should not be followed, more so in a  

peculiar  fact  situation  of  this  case.   In  the  present  case,  the  accident  

occurred in 1993.   At that time,  claimant was 28 years’ old.  He  is now  

about 48 years.  The claimant was  a driver on heavy  vehicle and due to  

the accident he has been rendered permanently disabled.  He has not been  

able to get compensation so far due to stay order passed by this Court.  He  

cannot be compelled to struggle further for recovery of the amount. The  

insurance company  has already  deposited  the entire  awarded amount  

pursuant to the order of  this  Court  passed on 01.08.2011 and the said  

amount has been invested in a fixed deposit  account.  Having regard to  

these peculiar facts of the case in hand, we are satisfied that the claimant  

(Respondent No. 1) may be allowed to withdraw the amount deposited by  

the insurance company  before  this  Court  along-with accrued interest.  

The insurance company (appellant)  thereafter may recover the amount so  

paid   from the owner  (Respondent  No.  2  herein).  The recovery  of  the  

amount  by  the insurance company  from the  owner  shall  be  made  by  

following the procedure as laid down by this Court in the case of  Challa  

Bharathamma6 .

1

Page 18

26. Appeal is allowed and disposed of as above with no order as  

to costs.      

    …………………….J.                   (R.M. Lodha)

                        ..…………………….J.       (Anil R. Dave)

NEW DELHI. JANUARY 3, 2013.       

1