Date of the Judgment: 7 January 2020
Citation: (2020) INSC 14
Judges: Ashok Bhushan, J., M. R. Shah, J.
Can the legal heirs of a person who was driving a borrowed vehicle claim compensation under Section 163A of the Motor Vehicles Act, 1988, from the insurance company of the same vehicle, when the accident was caused by another vehicle? The Supreme Court addressed this question in a recent judgment, clarifying the scope of no-fault liability in motor accident claims. The court examined whether the borrower of a vehicle steps into the shoes of the owner, thereby forfeiting the right to claim compensation as a third party under Section 163A of the Motor Vehicles Act. The bench comprised Justices Ashok Bhushan and M. R. Shah, with the majority opinion authored by Justice M. R. Shah.
Case Background
On October 2, 2006, Chotelal alias Shivram died in a vehicular accident while riding a motorcycle with registration number RJ 02 SA 7811. The accident occurred due to the rash and negligent driving of another motorcycle bearing registration number RJ 29 2M 9223. The appellants, legal heirs of the deceased, filed a claim petition before the Motor Accident Claims Tribunal, Laxmangarh (Alwar), Rajasthan, under Section 163A of the Motor Vehicles Act, 1988. The claim was filed only against the owner and insurance company of the motorcycle Chotelal was riding (RJ 02 SA 7811), not against the owner, driver, or insurer of the other motorcycle (RJ 29 2M 9223) involved in the accident.
Timeline
| Date | Event |
|---|---|
| October 2, 2006 | Vehicular accident resulting in the death of Chotelal alias Shivram. |
| 2006 | Claim petition filed by the legal heirs of the deceased. |
| February 24, 2009 | Motor Accident Claims Tribunal awards compensation of Rs. 3,67,000 to the claimants. |
| May 10, 2018 | High Court of Judicature for Rajasthan at Jaipur sets aside the Tribunal’s award, dismissing the claim petition. |
| January 7, 2020 | Supreme Court partly allows the appeal, awarding a compensation of Rs. 1 lakh. |
Course of Proceedings
The Motor Accident Claims Tribunal ruled in favor of the claimants, awarding a compensation of Rs. 3,67,000 with 6% interest per annum. The Tribunal held that the insurance company of the motorcycle driven by the deceased was liable to pay the compensation under Section 163A of the Motor Vehicles Act, 1988. The insurance company appealed to the High Court of Judicature for Rajasthan at Jaipur. The High Court allowed the appeal, setting aside the Tribunal’s award and dismissing the claim petition. The High Court reasoned that the claim should have been filed against the owner of the vehicle whose driver was negligent (RJ 29 2M 9223), as per the FIR. The original claimants then appealed to the Supreme Court.
Legal Framework
The case primarily revolves around Section 163A of the Motor Vehicles Act, 1988, which deals with the concept of no-fault liability in motor accident claims. This section allows for compensation to be awarded to the victims of accidents or their families without the need to prove negligence on the part of the vehicle owner or driver. The relevant provisions are:
- Section 163A, Motor Vehicles Act, 1988: “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 authorised insurer shall be liable to pay in the case of death or permanent disablement due to an 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.” This section provides for compensation based on a structured formula without requiring proof of fault.
- Section 2(30), Motor Vehicles Act, 1988: Defines “owner” as “a person in whose name a motor vehicle stands registered, and where such person is a minor, the guardian of such minor, and in relation to a motor vehicle which is the subject of a hire-purchase, agreement or an agreement of lease or an agreement of hypothecation, the person in possession of the vehicle under that agreement.” This definition is crucial for determining liability under the Act.
The interplay between these sections and the concept of “third party” is central to the case. The court also considered the contract of insurance and its terms regarding liability for the owner/driver in case of a personal accident.
Arguments
Appellants’ (Original Claimants’) Arguments:
- The High Court erred in dismissing the claim petition because it was filed under Section 163A of the Motor Vehicles Act, 1988, which does not require proof of negligence.
- The claim petition was based on the principle of no-fault liability. The claimants had the option to file either under Section 166 (fault-based) against the owner of the offending vehicle (RJ 29 2M 9223) or under Section 163A (no-fault) against the owner of the vehicle driven by the deceased (RJ 02 SA 7811).
- The deceased was not the owner of the vehicle (RJ 02 SA 7811) but was an employee of the owner, making him a third party.
- Section 163A of the Motor Vehicles Act, 1988, is a beneficial provision enacted as a measure of social security.
- The claimants only needed to prove that the death resulted from an accident arising out of the use of a motor vehicle.
- The legal heirs of the deceased were entitled to compensation from the owner and insurer of the vehicle driven by the deceased, as he was not the owner.
- The compensation should be enhanced to Rs. 5,00,000, as per the amended Second Schedule of the Motor Vehicles Act, 1988.
Respondent’s (Insurance Company’s) Arguments:
- The deceased was not a third party concerning the insured vehicle (RJ 02 SA 7811) as he had borrowed it from the owner.
- The claimants should have sought compensation from the owner of the negligent vehicle (RJ 29 2M 9223).
- Only third-party claims are payable under the Motor Vehicles Act, 1988.
- The deceased stepped into the shoes of the owner by borrowing the vehicle, thus, not being entitled to compensation from the insurer.
- The insurance policy covers the liability incurred by the insured in respect of death or bodily injury to any person (including an 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. Section 147 does not require an insurance company to assume risk for death or bodily injury to the owner of the vehicle.
- The contract of insurance specifically provides that in case of personal accident, the owner-cum-driver is only entitled to a sum of Rs. 1 lakh.
- The amendment to the Second Schedule of the Motor Vehicles Act, 1988, is not applicable retrospectively.
| Claimant’s Submissions | Insurance Company’s Submissions |
|---|---|
| Claim under Section 163A doesn’t require proof of negligence. | Deceased was not a third party as he borrowed the vehicle. |
| Claimants had the option to file under Section 163A against the vehicle driven by the deceased. | Claim should have been against the owner of the negligent vehicle. |
| Deceased was an employee of the owner, making him a third party. | Only third-party claims are payable under the Act. |
| Section 163A is a beneficial provision for social security. | Deceased stepped into the shoes of the owner, forfeiting third-party claim. |
| Claimants only needed to prove death resulted from a motor vehicle accident. | Insurance policy covers third-party claims, not the owner. |
| Compensation should be enhanced to Rs. 5,00,000 as per the amended schedule. | Amendment to the schedule is not retrospectively applicable. |
| Legal heirs are entitled to compensation from the insurer of the vehicle driven by the deceased. | Owner-driver is only entitled to Rs. 1 lakh under the insurance contract. |
Issues Framed by the Supreme Court
The Supreme Court framed the following issues for consideration:
- Whether, in the facts and circumstances of the case, and where the driver, owner, and insurance company of another vehicle involved in an accident (whose driver was negligent) are not joined as parties to the claim petition, and the claim petition is filed only against the owner and insurance company of another vehicle which was driven by the deceased himself, and the deceased being in the shoes of the owner of the vehicle driven by himself, whether the insurance company of the vehicle driven by the deceased himself would be liable to pay the compensation under Section 163A of the Motor Vehicles Act, 1988?
- Whether the deceased, not being a third party to the vehicle No. RJ 02 SA 7811, being in the shoes of the owner, can maintain the claim under Section 163A of the Motor Vehicles Act, 1988, from the owner of the said vehicle?
Treatment of the Issue by the Court
| Issue | Court’s Decision and Reasoning |
|---|---|
| Liability of the insurance company under Section 163A when the claim is against the vehicle driven by the deceased. | The Court held that the insurance company of the vehicle driven by the deceased is not liable under Section 163A, as the deceased, being a borrower, steps into the shoes of the owner and is not considered a third party for the purposes of the claim. |
| Maintainability of claim under Section 163A by the deceased who is in the shoes of the owner. | The Court ruled that the deceased, being in the shoes of the owner, cannot maintain a claim under Section 163A against the owner of the vehicle. The claim should have been filed against the owner and insurer of the negligent vehicle. |
Authorities
The Supreme Court considered the following authorities:
| Authority | Court | How it was used |
|---|---|---|
| Ningamma v. United India Insurance Co. Ltd. (2009) 13 SCC 710 | Supreme Court of India | The Court relied on this case to hold that when a person borrows a vehicle, they step into the shoes of the owner and cannot claim compensation under Section 163A of the Motor Vehicles Act, 1988, from the insurer of the same vehicle. |
| New India Assurance Co. Ltd. v. Sadanand Mukhi (2009) 2 SCC 417 | Supreme Court of India | This case was cited to support the view that the borrower of a vehicle is not entitled to compensation from the insurer under the Act. |
| Dhanraj v. New India Assurance Co. Ltd. (2004) 8 SCC 553 | Supreme Court of India | This case was used to highlight that an insurance policy covers the liability incurred by the insured for third-party claims and does not require the insurance company to assume risk for the death or bodily injury of the owner of the vehicle. |
| Oriental Insurance Co. Ltd. v. Rajni Devi (2008) 5 SCC 736 | Supreme Court of India | The Court referred to this case to emphasize that the liability under Section 163A is on the owner of the vehicle, and a person cannot be both a claimant and a recipient. The terms of the insurance contract govern the claim. |
| National Insurance Co. Ltd. v. Ashalata Bhowmik (2018) 9 SCC 801 | Supreme Court of India | This case was used to reiterate that parties are governed by the terms and conditions of the contract of insurance. |
| Naveen Kumar v. Vijay Kumar (2018) 3 SCC 1 | Supreme Court of India | The Court distinguished this case, stating it was not applicable to the facts, as that case dealt with the issue of who is considered the registered owner of a vehicle. |
| Oriental Insurance Co. Ltd. v. Jhuma Saha (2007) 9 SCC 263 | Supreme Court of India | This case was considered in the context of determining liability under Section 163A of the Act. |
| National Insurance Co. Ltd. v. Laxmi Narain Dhut (2007) 3 SCC 700 | Supreme Court of India | This case was considered in the context of determining liability under Section 163A of the Act. |
| Premkumari v. Prahlad Dev (2008) 3 SCC 193 | Supreme Court of India | This case was considered in the context of determining liability under Section 163A of the Act. |
Judgment
| Submission by the Parties | How the Court Treated the Submission |
|---|---|
| Claimants argued that the claim was maintainable under Section 163A as it is a no-fault liability provision. | The Court rejected this argument, stating that while Section 163A is based on no-fault liability, the deceased, being a borrower of the vehicle, stepped into the shoes of the owner and could not claim compensation from the insurer of the same vehicle. |
| Claimants contended that the deceased was an employee of the owner of the vehicle and thus a third party. | The Court found no evidence to support the claim that the deceased was an employee and concluded he was a permissible user/borrower of the vehicle. |
| Claimants argued for enhanced compensation of Rs. 5,00,000 as per the amended Second Schedule. | The Court rejected this claim, stating that the amendment was not applicable retrospectively to the case. |
| Insurance company argued that only third-party claims are payable under the Act. | The Court agreed with this argument, stating that the deceased was not a third party with respect to the insured vehicle. |
| Insurance company contended that the deceased stepped into the shoes of the owner and was not entitled to compensation. | The Court upheld this argument, relying on the precedent set in Ningamma v. United India Insurance Co. Ltd. |
| Insurance company submitted that the owner-driver is entitled to a maximum of Rs. 1 lakh as per the insurance contract. | The Court accepted this submission and awarded Rs. 1 lakh to the claimants. |
How each authority was viewed by the Court?
- Ningamma v. United India Insurance Co. Ltd. (2009) 13 SCC 710*: The court followed this authority, stating that a borrower of a vehicle steps into the shoes of the owner and cannot claim compensation under Section 163A from the insurer of the same vehicle.
- Dhanraj v. New India Assurance Co. Ltd. (2004) 8 SCC 553*: The court cited this authority to highlight that an insurance policy covers third-party liabilities and does not require the insurance company to assume risk for death or injury to the owner of the vehicle.
- Oriental Insurance Co. Ltd. v. Rajni Devi (2008) 5 SCC 736*: The court considered this authority to emphasize that the liability under Section 163A is on the owner of the vehicle, and a person cannot be both a claimant and a recipient.
- National Insurance Co. Ltd. v. Ashalata Bhowmik (2018) 9 SCC 801*: The court relied on this authority to reiterate that the parties are governed by the terms and conditions of the insurance contract.
- Naveen Kumar v. Vijay Kumar (2018) 3 SCC 1*: The court distinguished this case, stating that it was not applicable to the facts at hand.
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily influenced by the legal principle that a person cannot be both a claimant and a recipient under the same provision of law. The Court emphasized that Section 163A of the Motor Vehicles Act, 1988, is intended to provide compensation to third parties who are not the owners of the vehicle. By borrowing the vehicle, the deceased effectively stepped into the shoes of the owner, thus losing the status of a third party for the purposes of claiming compensation under Section 163A from the insurer of the same vehicle. The Court also relied heavily on the terms of the insurance contract, which specified that the owner/driver is only entitled to a sum of Rs. 1 lakh in case of a personal accident. The Court also considered the precedents set by previous judgments, particularly the case of *Ningamma*, which established that a borrower of a vehicle is not considered a third party for the purposes of claiming compensation under Section 163A from the same vehicle’s insurer.
| Sentiment | Percentage |
|---|---|
| Legal Precedent (Ningamma Case) | 30% |
| Contractual Terms of Insurance | 25% |
| Principle of “Claimant vs. Recipient” | 25% |
| Third-Party Status | 20% |
| Ratio | Percentage |
|---|---|
| Fact | 30% |
| Law | 70% |
The court’s reasoning was based on the interpretation of Section 163A of the Motor Vehicles Act, 1988, and the relevant case laws. The court also considered the terms of the insurance contract, which limited the liability of the insurance company in the case of personal accidents involving the owner of the vehicle. The court rejected the argument that the deceased was an employee of the owner, finding no evidence to support this claim. The court also rejected the claim for enhanced compensation, stating that the amendment to the Second Schedule was not applicable retrospectively.
The majority opinion was delivered by Justice M. R. Shah, with Justice Ashok Bhushan concurring. There were no dissenting opinions.
The court quoted:
- “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 authorised insurer shall be liable to pay in the case of death or permanent disablement due to an 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.”
- “a person in whose name a motor vehicle stands registered, and where such person is a minor, the guardian of such minor, and in relation to a motor vehicle which is the subject of a hire-purchase, agreement or an agreement of lease or an agreement of hypothecation, the person in possession of the vehicle under that agreement.”
- “the liability under Section 163A of the Act is on the owner of the vehicle as a person cannot be both, a claimant as also a recipient”
Key Takeaways
- A person who borrows a vehicle steps into the shoes of the owner and cannot claim compensation under Section 163A of the Motor Vehicles Act, 1988, as a third party from the insurance company of the same vehicle.
- Claims under Section 163A must be made against the owner and insurer of the vehicle that caused the accident, not the vehicle being driven by the deceased if the deceased was the borrower of the vehicle.
- The terms and conditions of the insurance contract are paramount in determining the liability of the insurance company.
- Amendments to the Motor Vehicles Act, 1988, are not always applied retrospectively.
Directions
The Supreme Court directed that the original claimants shall be entitled to a sum of Rs. 1 lakh only with interest at 7.5% per annum from the date of the claim petition until realization.
Development of Law
The ratio decidendi of this case is that a borrower of a vehicle is not considered a third party for the purposes of claiming compensation under Section 163A of the Motor Vehicles Act, 1988, from the insurer of the same vehicle. This decision reinforces the principle that the no-fault liability provision under Section 163A is intended for third parties and not for those who step into the shoes of the owner. It also confirms that the terms of the insurance contract are critical in determining the extent of the insurance company’s liability. This position of law is consistent with the previous judgments of the Supreme Court, particularly the case of *Ningamma*, and does not represent a change in the previous position of law.
Conclusion
The Supreme Court partly allowed the appeal, modifying the High Court’s order. The Court clarified that while Section 163A of the Motor Vehicles Act, 1988, provides for no-fault liability, it does not extend to the borrower of a vehicle who is considered to be in the shoes of the owner. The claimants were awarded Rs. 1 lakh, as per the terms of the insurance contract, with interest at 7.5% per annum. The judgment underscores the importance of understanding the nuances of third-party liability and the limitations of no-fault compensation under the Motor Vehicles Act, 1988.