Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1964 Supreme(SC) 149

SUPREME COURT OF INDIA
24th April, 1964
K. SUBBA RAO, K.C. DAS GUPTA AND RAGHUBAR DAYAL, JJ.
New Asiatic Insurance Co. Ltd. (in both appeals), Appellant
Versus
Pessumal Dhanamal Aswaniand others (in both appeals), Respondents.
Civil Appeals Nos. 1043 - 1044 of 1963.
Advocates Appeared
Mr. S. T. Desai, Senior Advocate (Mr. V. N. Thakar, Advocate and M/s. J. B. Dadachanji, O. C. Mathur and Ravinder Narain, Advocates of M/s. J. B. Dadachanji and Company, with him), for Appellant; (In both Appeals); Mr. G. S. Pathak, Senior Advocate, (M/s. O. P. Malhotra and I. N. Shroff, Advocates, with him), for Respondent No. 1 (in both the appeals); Mr. V. J. Merchant Advocate of M/s. Gagrat and Co., for Respondents Nos. 2 and 4 to 7 (In C. A. No. 1043 of 1963) : 1737

Advocates:
G.S.PATHAK, GAGRAT JANEDRA LAL, I.M.SHROFF, J.B.DADACHAN, O.C.MATHUR, O.P.MALHOTRA, Ravindra Narayan

A policy of insurance issued under the Motor Vehicles Act, 1939, which indemnifies any person driving the insured car with the insured's permission, covers the liability of the driver to third parties, even if the driver is entitled to indemnity under another policy.

Headnote:
MOTOR VEHICLES ACT - INSURANCE - LIABILITY TO THIRD PARTIES - POLICY ISSUED BY COMPANY - DRIVER PERMITTED TO DRIVE CAR - LIABILITY OF COMPANY TO THIRD PARTIES - INTERPRETATION OF POLICY PROVISIONS.
Fact of the Case:

Pesumal, driving a car owned by Asnani, met with an accident resulting in the death of one person and injuries to another. Both the deceased's heirs and the injured person filed suits against Pesumal for damages. The company that insured Asnani's car issued a notice under Section 96(2) of the Motor Vehicles Act, 1939, to the company that insured Pesumal's car. The company that insured Asnani's car challenged the validity of the notice and sought to be added as a party to the suits. The High Court held that the notice was valid and that the company that insured Asnani's car was liable to satisfy any judgment that might be passed against Pesumal.
Finding of the Court:

The Supreme Court held that the company that insured Asnani's car was liable to satisfy any judgment that might be passed against Pesumal. The Court interpreted the policy provisions and held that Pesumal was a person insured under the policy issued by the company that insured Asnani's car. The Court also held that the proviso in the policy excluding drivers entitled to indemnity under any other policy was a condition affecting the rights of the insured and the persons to whom the cover of the policy was extended, and did not come in the way of third parties' claim against the company.
Issues: Whether the company that insured Asnani's car was liable to satisfy any judgment that might be passed against Pesumal.
Ratio Decidendi: The Court held that the company that insured Asnani's car was liable to satisfy any judgment that might be passed against Pesumal because: * The policy issued by the company that insured Asnani's car indemnified any person driving the car with the insured's permission, which included Pesumal. * The proviso in the policy excluding drivers entitled to indemnity under any other policy was a condition affecting the rights of the insured and the persons to whom the cover of the policy was extended, and did not come in the way of third parties' claim against the company.
Final Decision: The Supreme Court dismissed the appeals filed by the company that insured Asnani's car.

Judgment

RAGHUBAR DAYAL, J. :These appeals by special leave arise in the following circumstances.

2. S. N. Asnani owned Chevrolet Car bearing registered No. AA 4431. He insured it with the New Asiatic Insurance Co. Ltd., hereinafter referred to as the company, under a policy dated November 26, 1957. Asnani permitted Pesumal Dhanamal Aswani, hereinafter called Pesumal to drive that car. When Pesumal was driving the car with Daooji Radhamohan Meherotra and Murli Dholandas in the car, the car met with an accident as a result of which Meherotra died and Murli received injuries.

3. Pesumal himself owned a Pontiac car which had been insured with the Indian Trade and General Insurance Co. Ltd., under policy No. Bombay P. C. 42733-2 dated November 18, 1957.

4. The heirs of Meherotra instituted suit No. 70 of 1959 against Pesumal for the recovery of Rs. 2,50,000/- by way of damages with interest. Murli instituted suit No. 71 of 1959 against Pesumal to recover Rs. 1,50,000/- by way of damages.

5. Notices under S. 96(2) of the Motor Vehicles Act, 1939, Act IV of 1939 hereinafter called the Act were issued to the New Asiatic Insurance Co. Ltd. The notice was given to the company as the defendant s liability to third parties had been insured with it under its policy No. MV/4564. The company then took out Chamber Summons and it was contended that notice under S. 96(2) of the Act was bad in law and should be set aside and that the company was not liable to satisfy any judgment which might be passed in the suit against the defendant. Alternatively, it was prayed that the company be added as a party defendant to the suit or be authorised to defend the suit in the name of the defendant. Tarkunde, J., held the notice issued to the company in the suits, under S. 96(2) of the Act, to be bad in law, and accordingly, set them aside.

6. The plaintiffs then filed Letters Patent Appeals which were allowed and the Chamber Summonses were dismissed. It was directed that the trial Judge would hear the alternative prayers in the Chamber Summonses and make the necessary orders. It is against this order in each of the appeals that the company has preferred these appeals after obtaining special leave.

7. To appreciate the contentions of the parties in these appeals, reference may be made to certain provisions in the two policies. The various provisions in the two policies are identical in matters affecting the question for determination before us. We therefore set out the relevant provisions from the policy issued by the company and would refer to differences, if any, at the proper place.

8. The policy is described as Private Car (Comprehensive policy) The policy issued by the other company does not so describe it but it is also a Comprehensive Policy as the premium charged is on that basis. The policy insures, under Section I against loss or damage under Section II against liability to third parties and under Section III against liability for medical expenses. Thereafter follow the general exceptions and conditions.

9. Para 1 of Section II indemnifies the insured, i.e. Asnani who effected the policy, in the event of accident caused by or arising out of the use of the motor car, against all sums which he may become legally liable to pay in respect of death or of bodily injury to any person. Paras 3 and 4, generally known as Other drivers Extension Clause and Other Vehicles Extension Clause respectively, are material and are set out in full :

"3. In terms of and subject to the limitations of the indemnity which is granted by this section to the Insured the Company will indemnify any driver who is driving the Motor Car on the Insured s order or with his permission provided that such driver :-

(a) is not entitled to indemnity under any other policy;

(b) shall as though he were the Insured observe, fulfil and be subject to the terms, exceptions and conditions of the policy in so far as they can apply.

4. In terms of and subject to the limitations of the indemnity whic

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