I959

.:.\!a_v II

168 SUPREME COURT REPORTS [1960(1)]

BRITISH INDIA GENERAL

INSVBANCE CO., LTD .

v.

CAPTAIN ITBAR SINGH AND OTHERS

(S. K. DAs, A. K. SARKAR and K. SuBBA RAo, JJ.)

Motor Car Insuranc.:--Suit for damages by third party­

Insurance companv added defendants-Defence if other than statutory

available-Interpretation of-Motor Vehicles Act, I939 (4 of I9J9),

SS. 95, 96, .

A suit claiming damages, for negligent driving was filed

aginst the o\vner of a motor car, \V ho \vas insured against third

party risks. The insurer, was subsequently added as defendant

to the suit under

s.

g6(z) ;of the Motor Vehicles Act, 1939. It

contended that the defence available to it was not restricted to

the grounds enumerated

ins.

9ti(2) of the Act, but that it was

entitled to take all defences including those

on which the assured

himself could have relied for his defence, subject only

to the

restriction

that it could not in view of s. 96(3) of the Act rely on

the conditions

of the policy as a defence.

H cld, that an insurer made a defendant to the action under

s.

96(2) of the Act was not entitled to defend it on a ground not

specified in that section.

CIVu. APPELLATE JURISDICTION: Civil Appeals Nos.

413,

and 414 of 1958.

Appeals from

the order dated April 27, 1955, of the

Punjab High Court in Civil Revisions Nos. 81-D of

1953 and 96-D of 1953 respectively.

I959· April 2I. 22, 23, 24.-C. K. Daphtary, Solicitor­

Ge11erat for India, Ram Behari Lal, D. K. Kapur and Sardar

Bahadur, for the appellants. The question in the present

appeals turn .around s. 96 of the Motor Vehicles Act, 1939.

The purpose of sub-s. (z} of s-96 is to state those gronnds

based on the policy of insurance on which the insurer may

rely for his defence. Sub-section (3} makes certain conditions

of

the policy of no effect as against the 3rd party. Both sub­

ss. (2} and (3) are concerned only with the conditions of the

policy. They should not be interpreted so as to oust other

defences the insurer may wish to take e.g. that there was no

accident

or that the plaintiff was negligent or that there was

contributory negligence etc.

When a person is joined as a

party he has the right to take all defences permissible in law.

(Subba Rao, ].-Did the insurer have a right to be joined

as a party, apart from the statute? Could he be joined under

Order I, Rule IO, of the Code of Civil Procedure 1)

S.C.R. SUPREME COURT REPOHTS 169

I am not basing my case on Order l, Rule ro of the Code

of Civil Procedure. Apart from the statute, the)~urer

would not be liable to the third party, but only to the assured.

[Das,

J.-Is it not correct that the statute gives the insurer

a right to

be joined as a party which he did not have pre­

viously ?

If so, the right cannot be extended beyond what

the statute

gives.]

It is true that the statute gives a right to the insurer to

become a party to the action by the injured pErson which he

did not have previously,

but the real question before the

court is whether sub-s. (2) limits the right to defend on the

grounds stated in that sub-section. In my submission, sub­

s. (2) exhausts only the defences based on the conditions of

the policy which

the insurer may wish to take. If it was

intended

that these were to be the only defences open to the

insurer the

word "only" should have been used instead of the

words "any' of" before the words "the following grounds."

What the legislature meant was that the insurer could defend

the action "also" on the grounds stated in sub-s. (2) in addi­

tion to

other grounds. If the court finds the section is

clear

no words can be added. However, I submit the section is

ambiguous.

It can mean either that the insurer can 'take

other defences

or that he is limited to the matters stated in

in sub-s.

(2). The

Court should interpret the section to give

effect to

the interests of justice. The insurer is made liable

to satisfy the judgment. It would be an extreme

hardship

if he were not allowed to defend the action on merits. Apart

from the situations coming within sub-s. (2) the insurer would

be condemned unheard. The legislatµre could not have

intended such a result. Even the cases which h'lld

that the

defences of the insurer are limited to those stated in sub­

s. (2) recognise that this causes hardship. LL.R. 1953 Born.

109, I.L.R. 1955 Born. 39 and I.L.R. 1955 Born. 278. In those

cases

the hardship was sought to be overcome by allowing

the insurer to defend in the name of the insured. I do not . say that this latter procedure is correct, but it shows that

there is hardship.

[Sarkar,

J.-How can that be done?

How can the insurer

be allowed

to defend in the name of the insured ? How is the

record to be kept? There is no provision under which it can

be done, not even under s.

151 of the Code of Civil Procedure.]

Probably not. But that question does not arise for deter­

mination in this appeal. The hardship recognised

by the

Bombay cases can be avoided if the interpretation of sub­

s. (2) suggested by me is accepted. 22

r959

British India

General 1 ns.

Co.

v.

Itbar Singh

I959

llrilish 111di11

Gc11cra.l I us, Co.

v.

ltbar Si11gh

170 SUPREME COURT REPORTS [1960(1))

[Das, J.-How is tlt;it interpretation possible in the face of

sub-~ (6) ?]

Sub-section (6) only prohibits the insurer from avoiding

liability in a 'manner' othvr than that stated in sub-s. (2).

The 'manner' of avoiding liability stated in sub-s. (2) is that

the insurer should apply to be made a party. Consequently,

the insurer can avoid liability only by being joined as a party.

The word •manner' in the context of sub-s. (6) refers only to

the procedure the insurer may follow, not to the grounds the

insurer may wish to take. Hence the insurer can avoid

liability only by being joined as a party, but can take any

defences, he chooses including those stated in sub"s. (2).

Otherwise the third party and the assured may collude and

a judgment may be P'"sed which the insurer would be bound

to satisfy without having had an opportunity of defending

himself. Or the case may go by default against the assured

or may be compromised. The real party affected is the

insurer and yet he is given no right to be heard except on

the limited grounds stated in sub-s. (2). The assured is only

a nominal party and is not likely to be interested in contest­

ing the case, as the decree has tv be satisfied by the insurer.

The legislature could not ha,·e intended such a result. It is

contrary to natural justice that a party likely to be affected

by the proceedings should not be heard on the merits.

T. I'. S. Clzaida (with him, Dipak Datta Chaudhry) for

the respondent. Chapter VIII of the ~lotor Vehicles Act,

lQ39, is based on various English Statutes (See Report of

Motnr Vehicles Insurance Committee 1936-37 known as the

Roughton Committee). For a proper appreciation of s. 96 it

is necessary to consider the historical development of the

law relating to compubory third party insurance in England.

Before 1930, there was no system of compulsory insurance

in respect of third party risks in England. In the event of

an accident the injured third party had a right to sne the

motorist an<l recover dan1ages. But if the motorist 'vas a

man of straw, the injured party was in practice unable to

obtain compensation. This was the situation the various

l~oad Traffic Acts \Vere designed to avoid.

Even in those cases in which the motorist had taken out

an insurance .Policy, difficulties arose in the way of the injured

third parfr recoYering compensation. The injured third party

had no direct right of action against the insurer. In the event

of the insolvency of the assured, the injured third party

would rank as an ordinarv creditor and would not receive

complete satisfaction for his decree. The Third Parties Rights

S.C.R. SUPREME COURT REPORTS 171

Against Insurers Act, 1930, created a system of statutory

subrogation in such cases. (Halsbury, 3rd Edn .. Vol. 22,

pp. 339, 372). The provisions of this Act have been sub­

stantially reproduced ins. 97 of the Motor Vehicles Act. As

a

result the third party can sue the insurer directly in these

cases.

Next the Road Traffic Act,

1930, introduced a scheme of

compulsory insurance. Section 3s(1) made third party insur­

ance compulsory. Section 94(1) of the Motor Vehicles Act is

worded in

the same way. Similarly s. 36 of the English Act

is

substantially reproduced ins. 95 of the Motor Vehicles Act.

Section 38 of the Act of 1930 made certain conditions of the

policy ineffective so far as third parties were con10erned. The

object was

that claims of injured third parties should not

fail because

the assured had not complied with or committed

a

breach of certain conditions in the policy.

(Shawcross on

Motor Insurance, 2nd

Edu .. pp.

219, 277).

But the Act of 1930 did not go far enough. In 1934 another

Road Traffic Act was passed the object of which was to

compel insurers to satisfy judgments obtained against

the

insured

(Shawcros.;, ibid p. 271). This Act contemplated three

separate actions between the various parties. The first action

was

by

thti injured third party against the assured. By

s. 10(1) of that Act, which is reproduced ins. 96(1), the insurer

was obliged to satisfy the decree against

the assured. If the

insurer failed to do so, the third party had a right of action

against

the

insurer, based on the judgment obtained against

the assured. (Shawcross, p. 296; Halsbury, 3rd Edn., Vol. 22,

pp. 374-5). This was the second action. It is doubtful if

even the defence of collusion would be open to the insurer in

the second action. (Shawcross, p. 296). Then s. 10(2) of the

Road Traffic Act of 1934, is substantially reproduced in

s. 96(2)(a). By this provision in certain events the insurers

liability ceases. To appreciate s. 96(2)(b) it is necessary to

keep in mind

s. 38 of the Road Traffic Act of

1930 and s. 12

of the Road Traffic Act of 1934· Both these latter sections

made certain conditions of

the policy ineffective against third

parties. Whilst drafting the Motor

Vehicles Act the legisla­

ture reversed the manner of statement. In s. 96(2)(b) the

legislature has stated affirmatively what are the conditions

on which

the insurer can rely as against a third party. This

was done to avoid

doubt and uncertainty.

Then s.

10(3) of the Road Traffic Act, 1934, gave the

insurer a right to obtain a declar .. tion that he was not liable

on

the policy due to non-disclosure or misrepresentation as to

I959

British

India

General J11s. Co.

v.

Itbar Singh

I959

British India

Genetal Ins. Co.

v.

Itbar Singh

172 SUPREME COURT REPORTS [1960(1)]

a material fact. In this action a notice had to be sent to the

third party injured who was given a right to join as a party and

oppos~ the action. This was the third action. The same result

is achieved by s. 96(2)(c). Whats. 96 does is to roll up-into

one these three actions which occurred in English Law. This

saves time and money and enables the three parties invoh·ed

to have their respective rights and liabilities settled in one

action.

Buts. 96 does not give any parly greater rights than it

would have had in English Law. At common law the insurer

had no right to intervene in the action by the injured party

against the insnred and oppose the claim on merits, e.g., that

there was no accident or negligence or that there was contribu­

tory negligence etc. The insurer could avoid liability only by

showing that he was not liable for some reason connected

with

the policy. This is the right which sub-s. (2) preserves.

It does

not give additional rights to the insurer o\·er what

he would have had at common law or in accordance with the

English Statutes. On the interpretation suggested by t~he

Solicitor-General the insurer would get a right he never had

before. This is contrary to the object of Chapter VIII which

is to

protect the injured third party and not the insurer.

The insurer

is neither a necessary nor a proper party under

Order r, Rule ro, Cnde of Civil Procedure, in the action by

the injured third party agaimt the assured.

[Subha Rao, J.-You need not deal \Vith Order r, Rule ro,

Code of Civil 'Procedure, as the Solicitor-Gelleral has not

relied on it.]

There is no ambiguity in s. 96(2). The sub-section clearly

specifies the defences open to the insurer and it is not per­

missible to add to those defences. This is put beyond doubt

by sub-s. (6). It prevents the insurer from avoiding liabili1y

in a

'manner' other than that stated in sub-s. (2). The

'manner' provided by sub-s. (2) is by joining as a party and

defending on the grounds

stated. Therefore, ' manner' refers

to both the procedure and the grounds. Tu hold otherwise

is to make sub-s. (2) unnecessary. If the Legislature intended

that the insurer should be able to defend on grounds other

than those stated in sub-s. (z) all it needed to say was that

the insurer would be entitled to join as a party. As sub-s. (2)

specifies the defences the intention was clearly to limit the

insurer to those defences.

[Subba Rao, ].-Suppose the injured third party and the

insured collude or judgment is allowed to go hy default, could

not

the insurer have the judgment set aside or bring a suit to

have it set aside?]

S.C.R SUPREME COURT REPORTS 173

In my submission even a suit for this purpose is barred

as that would contravene sub-s. (6). Such a suit would enable

the insurer to avoid liability in a • inanner' which sub-s. (6)

does not allow ..

There is no hardship caused by giving full effect to·the

section as it stands. The possibilities of collusion are remote,

and indeed illusory. (Shawcross. p. 29(1). By s. 9C>(3) the

insurer is given a

right to recovC:'r from the insured any sums

paid by him which he

was not bound to pay due to breaches

of conditions in

the policy, but which conditions have been

made ineffective as against the third party. Sub-section (4)

of the same section gives the

insurt-r the rig lit to recover from

the assured the excess which he is nude to pay by virtue of

s. 95,

over his obligations in the policy. The Judgment is

still against

the assured who

is the party primarily liable. It

is only made executable against the insurer. Apart from

this,

by s. 1(3) of the

l\Iotor Vehicles Act, 1939, the legislature

gave insurers six years to insert provisions in their policies

and take such other steps to protect themselves against the

assured committing them to liability as they thought fit.

l\lust insurers insert the control of proceedings clause in the

policy (Halsbury, 3rd Edn., Vol. 22, p. 338). Some one had to

bear the loss ultimately, and the legislature has tri,,d so far as

possible to ensure that the loss falls on the person causing the

accident. But, if the insured is i1ipecunious the choice is

between allowing

the loss to fall on the injured party or the

insurer. The legislature, in its

wisd1m1 has provided that in

such a

situation the loss shall

fall on the insurer. It is a part

of the insurer's business to suffer such losses and when enter­

ing

the contract of insurance he contemplates that he might

be called upon to pay the loss.

Now,

the Bombay cases referred to by the Solicitor­

General

are right in so far as

ther hold that the insurer can

defend only on the grounds stated in suh-s. (2). Those cases

are wrong in proceeding on the ass1~mption that there is

hardship caused to the insurer by thi-; view. They are based

on a misunderstanding of

the cases of

Windsor v. Chalcraft,

[1939] I K.B. 279 and f acques v. Harrison, 12 Q B.D. 136,

and on appeal, 12 Q.B.D. 165. It was not noticed in the

Bombay casf's that the provisions of Indian Law equivalent

to s. 24(5) of the Judicature Act and Order 27, Rule 15,

R.S.C., were not as wide as the English provisions. Order 9,

Rule 7, Code of Civil Procedure, allows an e:x-parte decree to

be set aside only at the instance of the defendant whilst

there is no such limitation in 0. 27, R. 15, R.S.C. There is

1959

British India

Central Ins. Co.

v.

Itiar Singh

r959

British I nd-ia

General Ins. Co.

v.

/tbilr Singh

174 SUPREME COURT REPORTS [1960(1)]

no procedure known to

law by which the insurer can be

allowed to defend in the name of the insured. This cannot be

done

under s. 151,

C.P.C ... as it would contravenes. 96(6) and

allow the insurer to avoid liability in a 'manner' other than

the· one allowed. The Bombay cases have not noticed sub-s. (6)

at all. The procedure stated in those cases is untenable.

[Sarkar, ].-Are we called upon to decide that point in

this

case?

~pparently there is a revision petition pending in

the High Court between the same parties in which that

question awaits determination. Should we express an opinion

on

that point ?]

The Solicitor-General has adopted it as a part of his

reasoning. He has said

that if the insurer can take all the

defences in the name of the insured, that is an additional

reason why sub-s. (2) should not be interpreted so as to limit

the defences available to the insurer. I want to show that

view is wrong. (The

Court disallowed this branch of the

argument).

In the case reported as Windsor v. Chalcraft, [1939] l K.B.

279, the dissenting judgment of Slesser, L.J., ·states the

correct position. The judgment of Greer, L.J., shows that he

was in considerable

doubt as to the correct position in

law,

but felt himself bound by the earlier judgments reported in

Jacques v. Harrison, 12 Q.B.D'. 165. Mckinnon, L.J., proceeded

on

the footing that the assured was only a nominal defendant.

As already submitted this is not correct. Even in English

Law

the insurer could recover against the assured. (Halsbury,

3rd Edn., Vol. 22, pp.

374, 379, 385). The case of Windsor v.

Chalcraft was decided in May 1938. The Motor Vehicles Act

was passed in

February,

1939· It is legitimate to assume that

the persons who drafted the Act were aware of this case. I

submit

that the real purpose of sub-s. (6) was to give effect to

the view of

Slesser, L.J.

[Das, ].-That is rather far fetched.]

I

submit it is not. Even in England the view of

Slesser, L.J.,

seems to have been approved. Subsequent English cases

show

that the principle of Windsur v. Chalcraft is not

to be extended.

See Murfin v. Aslibridge [1941] l All E.R.

23r. It was not necessary to expressly overrule the case of

Windsor v. Chalcraft as in 1946 the Motor Insurers Bureau

was set up in England, as a result of which an insurer is

bound

to

satisfy a judgment obtained by a third party

against a motorist even if the motorist was not insured

(Halsbury, 3rd Edn., Vol. 22, pp. 382 et. seq., Shawcross,

ibid, Introduction LXXXVII et. seq.) This shows how strong

S.C.R. SUPHEME COURT REPORTS 175

the attempt to protect the third party has been. Actually

the words of s. 96(2) and (6) are clear to show that the

insurer can take only the defences mentioned in sub-s. (2)

But if there be any doubt, a consideration of the historical

development of the law and the objects to be attained puts it

beyond doubt that the legislature intended this result.

C. K. Daphtary, in reply. It is wrong that at common law

the insurer could not be brought in as a party. At common

law

the guarantor or indemnifier could be brought in by

means of

third party procedure (see l.L.R. 35 All. 168 and

Halsbury, 3rd Edn., Vol. 18, p. 535 and

Gray v. Lewis, L.R.

(1873) 8

Ch. 1035, 1058).

Apart from the common law, the insurer could also be

joined as a

party under

0. l, R. ro, Code of Civil Procedure.

I

rely on the case of

United Provinces v. Atiqa Begitm,

[1941] A.C. 16. A person should be joined as a party if his

presence is necessary for

an effectual and complete adjudica­

tion.

On this principle the insurer ought to be joined as a

party, and thus can take all defences.

Chawla, in

reply : The passage cited by the Solicitor­

General from Halsbury,

3rd Edn., Vol. 18, p. 535, is actually

against him.

The foot note (e) shows that at common law

the insurer could not be joined as a party to the action by

the insured. Third party procedure did not exist at

Common

Law. Even under third party procedure in England it is

doubtful

whether this could be done (Shawcross, pp. 150-151).

In any case there is no third party procedure in Punjab.

The cases 35 All. 168 and (1873) L.R. 8

Ch. A. 1035 are also

against him.

The insurer is neither a necessary nor a proper party as

there can be a complete and effectual adjudication without

his presence. The decree is to be a against

the assured, not

against

the insurer.

Cur.

adv. vult.

1959. May 11. The Judgment of the Court was

delivered

by

SARKAH. J.-These two appeals arise o'.lt of two suits

and have been heard together. The suits had been

filed against owners

of motor cars for recovery of

damages suffered

by the plaintiffs as a

result. of the

negligent driving

of the cars. The owners of the cars

were insured against

third party risks and the insurers

were subsequently added

as defendants to the suits

I959

British Jnd;a

General Ins. Co.

v.

Jtbar Singh

Sarka•]:

I959

British India

General Ins. Co.

v.

Itbar Singh

Sarkar].

176 SUPREME COURT REPORTS [1960(1)]

under the provisions of sub-s. (2) of s. 96 of the Motor

Vehicles Act, 193!). The terms of that sub-section will

have to be set out later, but it may now be stated that

it provided that an insurer added as a party to an

action under it was entitled to defend on the grounds

enumerated in it.

On being, added aH defendants, the insurers filed

written statements taking defences other than those

mentioned in that sub-section. The plaintiffs contend­

ed that the written statements should be taken off the

records as the insurers could defend the action only on

the grounds mentioned in the sub-section and on no

others. A question thereupon arose in the suits as to

what defences were available to the insurers. In one

of tho suits it was held that the insurer could take only

the defences specified in that sub-section and in the

other suit the view taken was that the insurers were

not confined to t.hose defences. Appeals were perferred

from these decisions to the High Court of Punjab.

The ·High Court held that the insurers could defend the

actions only on the grounds mentioned in the sub­

section and on no others. Hence these appeals by the

insurers.

The quest.ion is whether the defences available to an

insurer added as a party under s. 96(2) are only those

mentioned there. A few of the provisions of the Motor

Vehicles Act have now to be referred to. Section 94

of the Act makes insurance against third party risk

compulsory. Section 05 deals with the requirements

of the policies of such insurance and the limits of the

liability to be covered thereby. Sub-section (1) of this

section provides :

" ............ a policy of insurance must be a policy

which-

( a) ............................................................. .

(b) insures t.he person or classes of person speci­

fied in the policy to the extent specified in sub­

section (2) ag>tinst any liability which may be in­

curred by him 6r them in respect of the death or

bodily injury to any person caused by or arising out

of the use of the vehicle in a public place."

S.C.R. SUPREME COURT REPORTS 177

Sub-section (2) of s. 95 specifies the limits of the

liability for whicli insurance has to be effected, and it

is enough to say .that it provides that in respect of

private ca.rs, which the vehicles with which these

appeals are concerned were,

the insurance has to be

for

the entire a.mount of the liability incurred. Then

comes

s. 96 round which the arguments advanced in

this case have turned

and some of its provisions have

to be set out.

"Section 96. (I) If, after a certificate of insurance

has been issued under sub-section (4) of section 95

in favour of the person by whom a policy has been

effected, judgment in respect

of any such liability

as

is required to be covered by a policy under clause (b)

of sub-section (I) of section 95 (being a liability

covered

by the terms of the policy) is obtained

against

any person insured by the policy, then, not­

withstanding that the insurer may qe 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

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

a.mount

pa.ya.hie in respect of costs and any sum

pa.ya.hie in respect of interest .on that su..m by virtue

of any enactment relating to interest on· judgments.

(2) No sum shall be payable by a.n insurer under

sub-section

(1) in respect· of any judgment unless

before

or after the commencement of the proceedings

in which the judgment is given the insurer

had notice

through

'the Court of the bringing of the proceedings,

or in respect of any judgment so long as execution is

stayed thereon pending

an appeal; and an insurer to

whom notice

of the bringing of any such proceeding

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 the policy was cancelled by mutual

con­

sent or by virtue of any provision contained therein

before the accident giving rise to the liability,

and

~~

r959

British India

General Ins. Co.

v.

Itbar Singh

Sarkar].

I959

British India

General Ins. Co.

v.

Itbar Singh

Sarkar J.

178 SUPREME COURT REPORTS [1960(1)]

that either the certificate of insurance was surrender­

ed to the insm~er or that the person to whom the

certificate was issued has made an affidavit stating

that the certificate has been lost or destroyed, or

that either before or not later than fourteen days

after the happening of the accident the insurer has

commenced proceedings for cancellation of the certi­

ficate after compliance with the provisions of sec­

tion 105; or

(b) that there has been a breach of a specified con­

dition 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 on reward, or

(b) for organised racing and -~eed testing, or

(c) for a purpose not allowed by the permit under

which the vehicle is used, where the vehicle is a

public service vehicle or a goods vehicle, or

(d) without side-car being attached, where the

vehicle in a motor cycle ; 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

(e) that the policy is void on the ground that it

was obtained by the non-disclosure ofa material fact

or by

a representation of fact which was false in

some material particular.

(2A) ........................................................... .

(3) Where a certificate ofinsurance has been issued

under sub-section (4) of section 95 to the person by

whom a policy has been effected, so much of the

policy as purports to restrict the insurance of the

S.C.R. SUPREME COURT REPORTS 179

persons insured thereby by reference to any condi­

tions other than those in clause (b) of sub-section (2)

shall, as respects such liabilities as are required to be

covered

by a policy under clause (b)

o{Jmb-section (1)

of section 95, be of no effect :

Provided that any sum paid by the insurer in or

towards the discharge of any liability or any person

which is covered

by the policy by virtue only of this

sub-section shall be recoverable

by the insurer from

that person.

(4) If

the amount which an insurer becomes liable

under this section to pay in respect of a liability

incurred by a person insured by a policy exceeds the

amount for which the insurer would apart from the

provisions of this section be liable under the policy

in respect of that liability, the insurer shall be

entitled

to recover the excess from that person.

( 5)

.....•......•..•...• -.......•..•.........•....................

(6) No insurer to whom the notice referred to in

sub-section (2) has been given shall be entitled to

avoid his li11.bility to any person entitled to the

benefit of any such judgment as is referred to in sub­

section (1) otherwise than in the manner provided

for

in sub-section

(2)."

It may be stated that the policies that were effected

in these cases were in terms of the Act and the certific­

ate of insurance mentioned in s. 96 had been duly

issued.

It will have been noticed that sub-s. (1) of s. 96

makes

an insurer liable on the judgment obtained by

the injured person against the assured. Sub-section (2)

provides that no sum shall be payable by the insurer

under sub-s. (1) unless he has been given notice of the

proceedings resulting in that judgment,· and that an

insurer who has been given such a notice shall be

entitled to be made a

party to the

action and to defend

it on the grounds enumerated.. The contention of the

appellants is that when an insurer becomes a party to

an action under sub-s. (2), he is entitled to defend it on

all grounds available at law ineluding the grounds on

which

the assured himself could have relied for his

I959

British India

General Ins.

Co.

v.

Itbar

Singh

Sarkar].

z959

British India

General Ins. Co.

v.

ltbar Singh

Sar/ear].

180 SUPREME COURT REPORTS (1960(1))

defence and that the only restriction on the insurer's

right of defence is that he cannot rely on the conditions

of the policy which sub-s. (3) makes as of no effect.

This is

the contention which we have to examine in

these appeals.

To

start with it is necessary to remember that apart

from the statute an insurer has no right to be made a

party to the action by the injured person against the

insured causing the injury. Sub-section (2) of s. 96

however gives him the right to be made a party to the

suit and to defend it. The right therefore is created by

statute and its content necessarily depends on the

provisions of the statute, The question then really is,

what are the defences that sub-s. (2) makes available

to an insurer ? That clearly is a question of

interpreta­

tion of the sub-section.

Now

the language of sub-s. (2) seems to us to be

perfectly plain and to admit of no doubt or confusion.

It is that an insurer to whom the requisite notice of

the action has been given

"shall be entitled to be made

a party thereto and to defend the action on any of the

following grounds, namely," after which comes an

enumeration of the grounds. It would follow that an

insurer is entitled to defend on any of the grounds

enumerated

and no others. If it were not so, then of

course no grounds need have been enumerated. When

the grounds of defence have been specified, they cannot

be added to. To do that would be adding words to the

statute.

Sub-section (6) also indicates clearly how sub-s. (2)

should be

read. It says that no insurer to whom the

notice of the action has been given shall be entitled to

avoid his liability under sub-s. (1) "otherwise than in

the manner provided for in sub-section. (2)". Now the

only manner of avoiding liability provided for in sub­

s. (2) is by successfully raising any of the defences

therein mentioned. 1t comes then to this that the

insurer cannot avoid his liability except by establishing

such defences. Therefore sub-s. (6) clearly contemplates

that he cannot take any defence not mentioned in sub­

s. (2). If he could, then he would have been in a posi­

tion to avoid his liability in a manner other than that

S.C.R. SUPREME COURT REPORTS 181

provided for in suh-s. (2). 'l'hat is prohibited by

sub-s. (6).

We therefore think that sub-s. (2) clearly provides

that an insurer made a defendant to the action is not

entitled to take any defence which is not specified in it.

Three reported decisions were cited

at the bar and

all of them proceeded on the basis that an insurer had

no right to defend the action except on the grounds

mentioned

in sub-s. (2). These are Sarup

Singh v.

Nilka'lli Bhaskar (

1

), Royal Insurance Go. Ltd. v. Abdul

Mahomed (2) and The Proprietor, Andhra Trading Go. v.

K. Muthuswamy(

3

). It does not appear however to

·have been seriously contended in any of these cases

that the insurer could defend the action on a ground

other than one of those mentioned in sub.s. (2).

The learned counsel for the respondents, the plain­

tiffs in the action, referred us to the analogous English

statute, The Road Traffic Act, 1934, in support of the

view that the insurer is restricted in his defence to the

grounds set out in sub-s. (2). But we do not think it

necessary to refer to the English statute for guidance

in the interpretation of the section that we have to

construe.

We proceed now to consider

the arguments advanced

by the learned Solicitor-General who appeared for the

appellants. He contended that there was nothing in

sub-s.

(2) to restrict the

defence of an insurer to the

grounds therein enumerated. To support his conten­

tion, he first referred to sub-s. (3) of s. 96 and said that

it indicated that the defences that were being dealt

with in sub-s. (2) were only those based on tho condi­

tions of the policy. His point was that sub-s. (2)

permitted defences on some of those conditions and

and sub-s. (3) made the rest of the conditions of no

effect,

thereby preventing a defence being based on any

of them. He said that these two sub-sections read

together show

that sub-s. (2) was not intended to

deal

with any defence other than those arising out of the

conditions of the policy, and as to other defences there­

fore sub-s. (2) contained no prohibition. He further

(1) l.L.R. [1953] Born. 296. (2) LL.R. (1954] Born. 1422.

(3) A.I.R. 1956 Mad. 464.

1959

British India

General Ins.

Co.

v.

[tbar

Singh

Sarkar].

I959

British India

General Ins. Co.

v.

Tibor Singh

Sarkar].

182 SUPREME COURT REPORTS [1960(1))

said that as under sub-s. (2) an insurer was entitled to

be made a defendant to the action it followed that he

had the right to take all legal defences excepting those

expressly prohibited.

We

think that this contention is without foundation.

Sub-section

(2) in fact deals with defences other than

those based on the conditions of a policy. Thus cl. (a)

of that sub-section

pe~mits an insurer to defend an

action on the ground that the policy has been duly

cancelled provided the conditions set out in that clause

have been satisfied. Clause ( c) gives him the right to

defend the action on the ground that the policy is void

as

having been obtained by non-disclosure of

a material

fact or a material false representation of fact. Therefore

it cannot be said that in enacting sub-s.(2) the legislature

was contemplating only those defences which were

based on

the conditions of the policy.

It also seems to us that even if sub-s.(2) and sub-s.(3)

were confined only

to defences based on the

condi­

tions of the policy that would not have led to the

conclnsion that the legislature thought that other

defences not based on such conditions, would be open

to an insurer. If that was what the legislature intend­

ed, then there was nothing to prevent it from express­

ing its intention. What the legislature has done is to

enumerate in sub-s. (2) the defences available to an

insurer and to provide by sub-s. (6) that he cannot

avoid his liability excepting by means of such defen­

ces. In order that sub-s. (2) may be interpreted in the

way the learned Solicitor-General suggests we have

to add words to it. The learned Solicitor-General

concedes this

and says that the only word that has to

be added is the word

" also" after the word "grounds".

But even this the rules of interpretation do not permit

us to do unless the section as it stands is meaningless

or of doubtful meaning, neither of which we think it

is. The addition suggested will, in our view, make

the language used unhappy and further effect a

complete change

in the' meaning of the words used in

the sub-section.

As

to sub-s. (6) the learned Solicitor-General

con­

tended that the proper reading of it was that an

S.C.R. SUPREME COURT REPORTS 183

insurer could not avoid his liability except by way of

a defence upon being made a party to the action

under sub-s.

(2). He contended that the word "manner" in sub-s. (6) did not refer to the defences

specified

in sub.s. (2) but only meant, by way of

defend­

ing the suit the'right to do which is given by sub-s. (2).

We think that this is a very forced construction of

sub-s. (6) and we are 'Unable to adopt it. The only

manner of avoiding liability provided for in· sub-s. (2)

is through the defences therein mentioned. Therefore

when sub-s.

(6) talks of avoiding liability in the

manner provided in sub-s. (2), it necessarily refers to

these defences. If the contention of the learned

Solicitor-General was right, sub-s.

(6) would have

pro­

vided that the insurer would not be entitled to avoid

his liability except by defending

the action on being

made a party thereto.

There is another ground on which the learned

Solicitor-General supported

the contention that all

defences are open to

an insurer excepting those taken

away by sub-s. (3). He said that before the Act

came

into force, an injured person had no right of recourse

to the insurer and that it was s. 96(1) that made the

judgment obtained by the injured person against the

assured binding on

the insurer and gave him a right

against the insurer. He then said that that being so,

it is only fair that a person sought to be made bound

by a judgment should be entitled to resist his

liabi­

lity under it by all defences which he can in law

advance against the passing of it.

Again, we find the contention wholly unacceptable.

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

con­

vinced 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 an_d if he does so, all defences open to the

assqred 9an then be urged by him and there is no

I95

British India

General Ins.

Co.

v.

Itbar

Singh

Sarkar].

r959

British India

Gsmral Ins. Co.

v.

ltbar Singh

Sarkar].

184 SUPREME COURT REPORTS [1960(1)]

othe~ 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. Secondly,

if he has been made to pay something which on the

contract of the policy he was not bound to pay, he

can under

the proviso to sub.a. (3) and under aub-s. (4)

recover it from the assured. It was said that the

assured

might be a man of straw and the insurer

might not be able to recover anything from him. But

the answer to that is that it is the insurer's bad luck.

In such circumstances the injured person also would

not

have been able to recover the damages suffered by

him from the assured, the person causing the injuries.

The loss

had to fall on some one and the statute has

thought fit that it shall be borne by the insurer. That

also .seems to us to be equitable for the loss falls on the

insurer in the course of his carrying on his business,

a

business out of which he makes profit, and he could

so arrange his business

that in the net result he would

never suffer a loss.

On the other hand, if the loss

fell

on the injured person, it would be due to no fault

of his; it would have been

a loss suffered by him

arising out of an incident in the happening of which

he had no hand at a.II.

We therefore feel that the the plain words of sub-s.(2)

should prevail

and that no ground exists to lead us to

adopt the extra.ordinary course of adding anything to

it. We think that the High

Court was right in the

view that it took,

In the result these appeals are dismissed with costs.

Appeals dismissed.