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CASE NO.:

Appeal (civil) 6295 of 2003

PETITIONER:

United India Insurance Co. Ltd.

RESPONDENT:

Jyotsnaben Sudhirbhai Patel & Ors.

DATE OF JUDGMENT: 11/08/2003

BENCH:

K.G. Balakrishnan & P. Venkataramma Reddi.

JUDGMENT:

J U D G M E N T

(Arising out of SLP[C] No. 13002 of 2002)

K.G. BALAKRISHNAN, J.

Leave granted.

Aggrieved by the order passed by the Division Bench of the Gujarat High

Court, the United India Insurance Company has come up in appeal by way of

special leave. The appellant was the third respondent in a motor accident claim

preferred by respondents 1 to 3 herein, who are legal heirs of one Sudhirbhai

Jayrambhal Patel who died in a motor accident on 27.8.1994. Respondents 1 to

3 claimed a total compensation of Rs.80 lacs and the Motor Accident Claims

Tribunal (Special), Vadodra, passed an award for RS.32,50,000/- with interest at

the rate of 12% per annum from the date of application till realisation. From the

impugned judgment of the Tribunal dated 15.5.1999, it appears that the first

respondent, the driver of the offending vehicle and the second respondent, the

owner of the vehicle appeared before the Tribunal, but did not file any written

statement refuting the allegations made in the petition. The Tribunal has stated

that these respondents did not step into the witness box to explain the

circumstances and the manner in which the actual mishap took place. It was

further stated that in view of that, the Tribunal was compelled to draw an adverse

inference against them. These observations have been made in paragraph 18

of the judgment of the Tribunal.

Before the Tribunal, the appellant Insurance Company filed a petition

under Section 170 of the Motor Vehicles Act, 1988 (hereinafter referred to as 'the

Act') praying that the appellant herein be allowed to contest the proceedings.

That application was granted by the Tribunal by a cryptic order; "Granted as

prayed for". After the award was passed by the Tribunal, the appellant filed an

appeal before the Gujarat High Court impleading the legal heirs of the deceased

and also the driver and owner of the offending vehicle as respondents. When the

appeal came up for consideration, the Division Bench was of the view that in

view of Section 149(2) of the Act, the appeal under Section 170 was not

maintainable, especially in view of the observations made by this Court in

Shankarayya vs United India Insurance Co. Ltd. AIR 1998 SC 2968,

and the appeal preferred by the appellant was dismissed. Aggrieved by the

same, the present appeal is filed by the United India Insurance Company

Limited.

We heard the appellant's counsel and also counsel for the respondents.

The short question that arises for consideration is whether the appeal

preferred by the appellant before the High Court was maintainable or whether it

was barred by the provisions of the Motor Vehicles Act. It is now a settled

position that an insurer can contest the proceedings before the Motor Accident

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Claims Tribunal only on any of the grounds prescribed under Section 149 (2) of

the Act and unless a specific order is passed by the Tribunal under Section 170,

the insurer cannot contest the claim on grounds other than the grounds

mentioned in sub-section (2) of Section 149 of the Act. It is relevant to extract

Section 149 and 170 of the Motor Vehicles Act. Sub-section (2) of Section 149 of

the Motor Vehicles Act, 1988 reads as under:

"(2) No sum shall be payable by an insurer under sub-section (1) in

respect of any judgment or award unless, before the

commencement of the proceedings in which the judgment or award

is given the insurer had notice through the Court or, as the case

may be, the Claims Tribunal of the bringing of the proceedings, or

in respect of such judgment or award so long as execution is

stayed thereon pending an appeal; and an insurer to whom notice

of the bringing of any such proceedings is so given shall be entitled

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

following grounds, namely:-

(a) that there has been a breach of specified condition of the

policy, being one of the following conditions, namely:-

(i) a condition excluding the use of the vehicle---

(a) for hire or reward, where the vehicle is on the date of the

contract of insurance a vehicle not covered by a permit to ply for

hire or reward, or

(b) for organised racing and speed testing, or

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

vehicle is used, where the vehicle is a transport vehicle, or

(d) without side-car being attached where the vehicle is a motor

cycle; or

(ii) a condition excluding driving by a named person or persons or

by any person who is not duly licenced, 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

(b) that the policy is void on the ground that it was obtained by the

non-disclosure of a material fact or by a representation of fact

which was false in some material particular."

Section 170 of the Motor Vehicles Act reads as under:

"170. Impleading insurer in certain cases. â\200\223 Where in the

course of any inquiry, the Claims Tribunal is satisfied that â\200\223

(a) there is collusion between the person making the claim and

the person against whom the claim is made, or

(b) the person against whom the claim is made has failed to contest

the claim, it may for reasons to be recorded in writing, direct that

the insurer who may be liable in respect of such claim, shall be

impleaded as a party to the proceeding and the insurer so

impleaded shall thereupon have, without prejudice to the provisions

contained in sub-section (2) of section 149, the right to contest the

claim on all or any of the grounds that are available to the person

against whom the claim has been made.

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This Court in Shankarayya's case (supra) held that the Insurance

Company when impleaded as a party by the Tribunal can be permitted to contest

the proceedings on merits only if the conditions precedent mentioned in Section

170 are found to be satisfied and for that purpose the Insurance Company has

to obtain order in writing from the Tribunal which should be a reasoned order by

the Tribunal and unless that procedure is followed the Insurance Company

cannot have a wider defence on merits than what is available to it by way of

statutory defence.

In a series of other decisions too, the same view was taken. In Rita Devi

(Smt.) & Ors. vs. New India Assurance Co. Ltd. & Anr. (2000) 5

SCC 113, this Court held that if the Insurance Company had not obtained leave

from the Tribunal before filing the appeal, the appeal preferred by the Insurance

Company before the High Court would not be maintainable in law.

In Chinnama George & Ors. vs. N. K. Raju & Anr. (2000) 4

SCC 130, it was held that the insurer can defend the proceedings before the

Claims Tribunal only on certain limited grounds mentioned in Section 149(2) of

the Act and if these grounds are not available to the insurer, then a joint appeal

by the owner of the motor vehicle and the Insurance Company may not be of any

avail and the Insurance Company is legally bound to satisfy the award and it

cannot be termed as 'a person aggrieved by the award' and therefore the insurer

would be barred from filing an appeal against the award of the Tribunal.

H.S. Ahammed Hussain & Anr. vs. Irfan Ahammed & Another

(2002) 6 SCC 52 was a case where the insurer and the insured jointly filed an

appeal. This Court held that even though the appeal filed by the Insurer was not

maintainable, the appeal need not be dismissed and the insured may proceed

with the appeal. This Court stated as under :

"Thus, the decision of this Court in the case of Chinnama Gerorge

can be of no avail to the appellant and we do not find any merit in

the submission that joint appeal by the insurer as well as the

insured was not maintainable. In such an eventuality, the course

which a court should adopt is as noticed in the case of Narendra

Kumar to delete the name of the insurer from the cause title and

proceed with the appeal of the insured and decide the same on

merit."

The lone dissenting view was expressed by this Court in United India

Insurance Co. Ltd. vs. Bhushan Sachdeva & Ors. (2002) 2 SCC 265.

There, it was held that it is open to the Insurance Company to invoke the right

under Section 173 of the Act and maintain an appeal against the award made by

the Tribunal. It was held that the insurer shall be treated as a person

aggrieved by the award as the amount of compensation is to be paid by the

Insurance Company. The Court also went on to observe that failure to file an

appeal by the insurer would amount to 'failed to contest' and therefore, the

Insurer can maintain an appeal under Section 173 of the Act.

The view taken in the above decision was not accepted by a three Judge

bench of this Court in National Insurance Co. Ltd., Chandigarh vs. Nicolletta

Rohtagi & Ors. (2002) 7 SCC 456, which considered the question elaborately

and held that the right of appeal is not an inherent right and as the Insurance

Company is permitted to contest only on the grounds stated in Section 149(2) of

the Motor Vehicles Act, the insurer cannot file an appeal on any other ground,

except in accordance with the procedure prescribed under Section 170 of the

Act. In that case, this Court observed as follows :

"The aforesaid provisions show two aspects. Firstly, that

the insurer has only statutory defences available as provided in

sub-section (2) of Section 149 of the 1988 Act and secondly, where

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the Tribunal is of the view that there is a collusion between the

claimant and the insured, or the insured does not contest the claim,

the insurer can be made a party and on such impleadment the

insurer shall have all defences available to it. Then comes the

provision of Section 173 which provides for an appeal against the

award given by the Tribunal. Under Section 173, any person

aggrieved by an award is entitled to prefer an appeal to the High

Court. Very often the question has arisen as to whether an insurer

is entitled to file an appeal on the grounds available to the insured

when either there is a collusion between the claimants and the

insured or when the insured has not filed an appeal before the High

Court questioning the quantum of compensation. The consistent

view of this Court had been that the insurer has no right to file an

appeal to challenge the quantum of compensation or finding of the

Tribunal as regards the negligence or contributory negligence of

offending vehicle."

In view of the aforesaid decisions on the point and on a consideration of

the relevant provisions under the Motor Vehicles Act, it is plain and clear that the

Insurance Company can contest the claim preferred before the Tribunal only on

the statutory grounds prescribed under Section 149(2) of the Act, but, if there is

collusion between the person making the claim and the person resisting the claim

or if the person against whom the claim is made has failed to contest the claim,

the Insurance Company can step in and seek permission of the Tribunal and

make a prayer for getting itself impleaded as a party to the proceeding and

the insurer so impleaded can then contest the proceeding on grounds other

than the grounds enumerated in sub-section 2 Section 149 of the Act. This is an

enabling provision in the event of a collusion between the claimant and the

insured or the tortfeaser.

In the instant case, the Insurance Company was impleaded as third

respondent. The driver and owner of the vehicle, though appeared before the

Tribunal, did not contest the proceedings. They did not file the written statement

nor did they choose to give evidence before the Tribunal. Admittedly, the

appellant filed an application under Section 170 of the Act seeking permission of

the Tribunal to contest the proceedings giving the necessary details. The award

passed by the Tribunal also evidently shows that pursuant to this permission, the

counsel for the appellant-Insurance Company cross-examined the witnesses

produced by the claimant to prove the negligence of the offending vehicle.

Unfortunately, however, the Tribunal, while passing its orders on the petition filed

under Section 170 of the Act only stated that the prayer was granted, though the

mandate of Section 170 (b) of the Motor Vehicles Act states that the Tribunal

while passing an order shall record its reasons. This Court in Shankarayya's

case (supra) had emphasised this aspect. But it is very much evident in this

case that the driver and the owner of the motor vehicle did not file the written

statement and failed to contest the proceedings. The Tribunal could have

merely recorded that fact while allowing the application. In a situation

contemplated by clause (b) of Section 170, nothing more was required than

recording that indisputable fact. For failure to do so, the appellant shall not

suffer prejudice. Therefore, the appellant-Insurance Company was justified in

contesting the proceedings on the grounds other than those enumerated under

sub-Section (2) of Section 149 of the Act, pursuant to the permission granted by

Court. For the same reason, the Insurance Company can be legitimately

considered to be 'person aggrieved' within the meaning of Section 173 of the Act.

Having regard to the above facts, we are constrained to hold that the High

Court should not have dismissed the appeal on the sole ground that the appellant

had not obtained reasoned order permitting it to contest under Section 170 of the

Act. In the result, we allow this appeal, set aside the judgment and order

passed by the Division Bench of the High Court and remand the matter to the

High Court. We request the High Court to hear and dispose of the appeal on

merits in accordance with law.

There will be no order as to costs.

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