Date of the Judgment: May 17, 2018
Citation: (2018) INSC 425
Judges: Dipak Misra, CJI., A.M. Khanwilkar, J.
Can an insurance company avoid liability if the insured vehicle did not have a valid permit at the time of the accident? The Supreme Court of India recently addressed this question in a case involving a fatal motor vehicle accident. The court held that using a vehicle without a valid permit is a fundamental breach of law, allowing the insurer to avoid liability. This judgment clarifies the responsibilities of vehicle owners and the extent of insurance coverage. The judgment was authored by Dipak Misra, CJI.
Case Background
On February 19, 2013, Jagir Singh was traveling on his motorcycle in Pathankot when a truck bearing temporary registration No. 2 PB-06-6894, owned by Amrit Paul Singh and driven in a rash and negligent manner, hit him. Jagir Singh sustained multiple injuries and died while being taken to the hospital. The legal representatives of Jagir Singh filed a claim petition before the Motor Accident Claims Tribunal, Pathankot, seeking compensation of Rs. 36,00,000.
The insurance company, Tata AIG General Insurance Co. Ltd., contested the claim, arguing that the truck was being driven in violation of the insurance policy terms. They also contended that the driver did not have a valid driving license and that the vehicle lacked the necessary permit on the date of the accident. The owner and driver of the truck asserted that the vehicle was insured, registered, and the driver possessed the required license. They also submitted a copy of the route permit for the truck.
Timeline
| Date | Event |
|---|---|
| September 2012 | Truck purchased. |
| December 20, 2012 | Truck insured. |
| February 19, 2013 | Accident occurred; application for route permit made. |
| February 26, 2013 | Truck registered. |
| February 27, 2013 | Route permit issued. |
| November 20, 2014 | Motor Accident Claims Tribunal (MACT) passed the award. |
Course of Proceedings
The Motor Accident Claims Tribunal (MACT), Pathankot, ruled that the insurance company was not liable to pay compensation, relying on the Supreme Court’s decision in National Insurance Co. Ltd. v. Challa Bharathamma and others. The tribunal quantified the compensation at Rs. 15,63,120 and directed the insurer to pay the amount, with 9% interest from the date of the award, and recover it from the owner and driver of the truck.
The owner of the truck appealed the MACT’s decision before the High Court of Punjab and Haryana at Chandigarh. The High Court upheld the tribunal’s decision, stating that even if the owner had applied for the permit before the accident, it would not allow the owner to ply the vehicle without a permit. The High Court distinguished the cases cited by the appellant, including Ashok Kumar Khemaka v. Oriental Insurance Company Ltd., National Insurance Company Limited v. Kamlesh Kaur and others, and Moti Ram v. ICICI Lombard and others.
Legal Framework
The Supreme Court referred to the following provisions of the Motor Vehicles Act, 1988:
- Section 2(28) defines “motor vehicle” or “vehicle” as any mechanically propelled vehicle adapted for use upon roads.
- Section 2(31) defines “permit” as a permit issued by a State or Regional Transport Authority authorizing the use of a motor vehicle as a transport vehicle.
- Section 2(47) defines “transport vehicle” as a public service vehicle, a goods carriage, an educational institution bus or a private service vehicle.
- Section 66(1) states that no owner of a motor vehicle shall use or permit the use of the vehicle as a transport vehicle in any public place without a permit.
“No owner of a motor vehicle shall use or permit the use of the vehicle as a transport vehicle in any public place, whether or not such vehicle is actually carrying any passengers or goods save in accordance with the conditions of a permit granted or countersigned by a Regional or State Transport Authority or any prescribed authority.” - Section 66(3) lists exceptions to the requirement of a permit, including vehicles owned by the government, local authorities, or used for specific purposes like police, fire brigade, or ambulance services.
- Section 149(2) specifies the grounds on which an insurer can defend against a claim, including breach of policy conditions such as using the vehicle for hire or reward without a permit, or driving by an unlicensed person.
Arguments
The appellants argued that the truck was sent for body fabrication and met with an accident when driven out of the workshop. They contended that the insurance policy was in force, and the insurer was obligated to indemnify them. They argued that the absence of a route permit was not a fundamental breach of the policy conditions, citing National Insurance Co. Ltd v. Swaran Singh and others.
The respondent-insurer argued that the vehicle was being used in contravention of the Motor Vehicles Act, 1988, as it did not possess a route permit at the time of the accident. The insurer contended that this was a breach of the policy conditions, absolving them of liability.
| Main Submission | Sub-Submissions |
|---|---|
| Appellants’ Submission |
|
| Respondent-Insurer’s Submission |
|
Issues Framed by the Supreme Court
The Supreme Court addressed the following issue:
- Whether the insurer can avoid liability under Section 149(2) of the Motor Vehicles Act, 1988, due to the absence of a valid permit for the vehicle at the time of the accident?
Treatment of the Issue by the Court
| Issue | Court’s Decision |
|---|---|
| Whether the insurer can avoid liability due to the absence of a valid permit? | The Court held that using a vehicle without a valid permit is a fundamental breach of law, allowing the insurer to avoid liability. The Court distinguished between the absence of a permit and other breaches like a fake license or violation of passenger limits. |
Authorities
The Supreme Court considered the following authorities:
| Authority | Court | How it was used |
|---|---|---|
| National Insurance Co. Ltd. v. Challa Bharathamma and others, (2004) 8 SCC 517 | Supreme Court of India | Cited as a precedent where the court ruled that plying a vehicle without a permit is an infraction, and the insurer is not liable. |
| Ashok Kumar Khemaka v. Oriental Insurance Company Ltd., 2014 (3) RCR (Civil) 1018 | High Court of Punjab and Haryana | Distinguished by the High Court as not applicable to the present case. |
| National Insurance Company Limited v. Kamlesh Kaur and others, 2006 (3) RCR (Civil) 634 | High Court of Punjab and Haryana | Distinguished by the High Court as not applicable to the present case. |
| Moti Ram v. ICICI Lombard and others, 2015 ACJ 1793 | High Court of Punjab and Haryana | Distinguished by the High Court as not applicable to the present case. |
| National Insurance Co. Ltd v. Swaran Singh and others, (2004) 3 SCC 297 | Supreme Court of India | Discussed regarding the interpretation of Section 149(2)(a)(ii) of the Motor Vehicles Act, 1988, concerning driving licenses. The court distinguished the facts of the present case. |
| Sohan Lal Passi v. P . Sesh Reddy and others, (1996) 5 SCC 21 | Supreme Court of India | Cited to emphasize that the party alleging a breach must prove it. |
| United India Insurance Co. Limited v. Lehru, (2003) 3 SCC 338 | Supreme Court of India | The court expressed its general agreement with the approach of the Bench in this case, which dealt with fake driving licenses. |
| Lakhmi Chand v. Reliance General Insurance, (2016) 3 SCC 100 | Supreme Court of India | Discussed regarding the breach of policy conditions, but the court distinguished the facts of the present case. |
| Oriental Insurance Co. Ltd. v. Meena Variyal and others, (2007) 5 SCC 428 | Supreme Court of India | Cited to emphasize that the insurer must establish a breach on the part of the insured to avoid liability. |
| HDFC Bank Limited v. Reshma and others, (2015) 3 SCC 679 | Supreme Court of India | Discussed regarding the liability of a financier in motor accident cases. The court distinguished the facts of the present case. |
| Purnya Kala Devi v. State of Assam and other, (2014) 14 SCC 142 | Supreme Court of India | Discussed regarding the definition of “owner” under Section 2(30) of the Motor Vehicles Act, 1988. |
Judgment
| Submission | Court’s Treatment |
|---|---|
| Appellants’ submission that the insurance policy was in force and the insurer was liable. | Rejected. The Court held that the absence of a valid permit was a fundamental breach of the policy, absolving the insurer of liability. |
| Appellants’ submission that the vehicle met with an accident while being driven out of the workshop after body fabrication. | The Court noted that the appellants had not stated whether the vehicle had a temporary permit or any other kind of permit. The exceptions under Section 66 of the Act must be pleaded and proved. |
| Respondent-insurer’s submission that the vehicle did not have a valid permit at the time of the accident. | Accepted. The Court agreed that the vehicle did not have a permit, which was a fundamental breach of the law. |
The Supreme Court held that the absence of a permit is a fundamental breach of the Motor Vehicles Act, 1988. The court distinguished this from cases involving driving licenses, where the insurer must prove that the insured was negligent in allowing an unlicensed driver to operate the vehicle.
The court emphasized that the exceptions under Section 66 of the Act must be pleaded and proven and cannot be used in arguments to seek absolution from liability. The court stated that the existence of a permit is a matter of documentary evidence, and the onus was on the insured to prove that they had a permit.
The court upheld the directions of the tribunal and the High Court that the insurer was required to pay the compensation amount to the claimants with interest, with the stipulation that the insurer shall be entitled to recover the same from the owner and the driver.
The Court stated that the principles laid down in Swaran Singh and other cases pertaining to the “pay and recover” principle were applicable in the present case.
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily influenced by the fundamental nature of the statutory requirement for a permit under the Motor Vehicles Act, 1988. The Court emphasized that using a vehicle without a permit is a clear violation of the law, unlike other breaches such as a fake driving license or overloading, which may involve a degree of negligence. The Court also stressed the importance of documentary evidence to prove the existence of a permit, placing the onus on the vehicle owner.
| Reason | Percentage |
|---|---|
| Fundamental breach of law | 40% |
| Documentary evidence of permit | 30% |
| Distinction from other breaches | 20% |
| Statutory requirement of permit | 10% |
| Category | Percentage |
|---|---|
| Fact | 20% |
| Law | 80% |
Logical Reasoning
Key Takeaways
- Vehicle owners must ensure their vehicles have the necessary permits before using them in public places.
- Insurers can avoid liability if a vehicle is used without a valid permit at the time of an accident.
- The onus is on the vehicle owner to prove the existence of a permit, not on the insurer to prove its absence.
- This judgment clarifies that the absence of a permit is a fundamental breach of the law, distinct from other breaches like driving without a valid license.
Directions
The tribunal and the High Court had directed the insurer to pay the compensation amount to the claimants with interest, with the stipulation that the insurer shall be entitled to recover the same from the owner and the driver. The Supreme Court upheld the same directions.
Development of Law
The ratio decidendi of this case is that using a vehicle without a valid permit is a fundamental breach of the Motor Vehicles Act, 1988, allowing the insurer to avoid liability. This judgment reinforces the importance of adhering to statutory requirements and clarifies the distinction between the absence of a permit and other breaches of policy conditions. It also clarifies that the onus to prove the existence of a permit lies on the owner of the vehicle.
Conclusion
The Supreme Court dismissed the appeal, upholding the High Court’s decision. The Court reiterated that using a vehicle without a valid permit is a fundamental breach of the Motor Vehicles Act, 1988, and that the insurer is not liable to pay compensation in such cases. The court also upheld the “pay and recover” principle, allowing the insurer to recover the compensation amount from the vehicle owner and driver after paying the claimants.