1. Motor accident death — Bus hired by State Road Transport Corporation — Dispute over liability for compensation between Corporation and Insurance Company under Motor Vehicles Act. (Para 2 )
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SUPREME COURT OF INDIA
ROHINTON FALI NARIMAN, NAVIN SINHA, B.R. GAVAI, JJ.
U.P. State Road Transport Corporation — Appellant
Versus
Rajendri Devi And Others — Respondent
Civil Appeal No. 2526 of 2020 (Arising Out of SLP (C) No. 25793 of 2017)
Decided on : 08-06-2020
Important Points
Under the Motor Vehicles Act, 1988, if an insured vehicle plies under a contract with a State Transport Corporation, the Insurance Company is liable to pay compensation to third parties. Private agreements between the Corporation and the vehicle owner cannot override the statutory liability of the insurer.
Subject
Motor Vehicle Accident - Liability for Compensation
Act Referred
Headnote
Motor vehicles Act, 1988 - Section 2(19), 146 – Appeal - Motor Accident Claims Tribunal - Rash and negligent driving – Causing death – Claiming compensation - Death occurred to a 45 year old who was on a cycle and hit by a bus - Motor Accident Claims Tribunal found that it was as a result of rash and negligent driving by driver of bus, which was hired by appellant-Uttar Pradesh State Road Transport Corporation under an agreement between it and bus owner. Ultimately finding that income would be Rs.18,000/- per year, minus one-third, and with a multiplier of 13, Rs.1.65 lakhs + 8 per cent interest was awarded by MACT – Held, driver was employed by owner of bus but evidently through Clause 4.4 of agreement, reproduced hereinabove, driver was supposed to drive bus under instructions of conductor who was appointed by Corporation. said driver was also bound by all orders of Corporation. Thus, it can safely be inferred that effective control and command of bus was that of appellant - Corporation had become owner of vehicle for specific period. If Corporation had become owner even for specific period and vehicle having been insured at instance of original owner, it will be deemed that vehicle was transferred along with insurance policy in existence to Corporation and thus Insurance Company would not be able to escape its liability to pay amount of compensation - Liability to pay compensation is based on a statutory provision. Compulsory insurance of vehicle is meant for benefit of third parties. liability of owner to have compulsory insurance is only in regard to third party and not to property. Once vehicle is insured, owner as well as any other person can use vehicle with consent of owner. Section 146 of Act does not provide that any person who uses vehicle independently, a separate insurance policy should be taken. purpose of compulsory insurance in Act has been enacted with an object to advance social justice." - Appeal allowed.
Legal Category Hierarchy
Advocates:
Advocate Appeared:
For the Appellant :Ms. Garima Prashad, Advocate
For the Respondent:Mr. Maibam N. Singh, Advocate and Mr. Pramod Dayal, Advocate
Advocate Appeared:
For the Appellant :Ms. Garima Prashad, Advocate
For the Respondent:Mr. Maibam N. Singh, Advocate and Mr. Pramod Dayal, Advocate
Table of Contents
2. Corporation claimed indemnity via agreement; Insurance Company argued Corporation's control over the vehicle shifted liability for compensation. (Para 2 , 3 )
3. The court distinguished the 1939 and 1988 Acts' definitions of owner and held that internal indemnity agreements do not bind third-party claimants. (Para 4 , 5 , 6 )
4. For insured vehicles hired by a Corporation, the Insurance Company is liable for third-party compensation regardless of private contracts between the owner and Corporation. (Para 5 , 6 )
5. Appeal allowed — Insurance Company directed to pay the awarded compensation amount with interest. (Para 7 )
6. Is the Insurance Company liable for compensation when a vehicle is plying under a contract with a State Road Transport Corporation?
Yes. If the vehicle is insured and used under a contract with the Corporation, the Insurance Company cannot escape liability to pay third-party compensation, as the Corporation is deemed the owner for that period and the insurance policy is considered transferred to the Corporation. (Para 5 )
7. Does an agreement between a vehicle owner and a hiring Corporation shifting liability for accidents bind the accident victim?
No. An agreement between the Corporation and the bus owner regarding liability for negligence or compensation is a private contract and does not bind third parties, such as victims, who are not privy to the agreement. (Para 6 )
8. How does the definition of owner differ between the Motor Vehicles Act 1939 and the Motor Vehicles Act 1988 regarding liability?
The 1939 Act's definition was not exhaustive and focused on actual possession and control. The 1988 Act provides a more distinct definition under Section 2(30), focusing on the registered owner or the person in possession under hire-purchase, lease, or hypothecation agreements. (Para 4 , 5 )
JUDGMENT :
R.F. Nariman. J. - Leave granted.
2. In the present case, death occurred to a 45 year old who was on a cycle and hit by a bus on 16.08.2001. The Motor Accident Claims Tribunal (hereinafter referred to as 'MACT') found that it was as a result of rash and negligent driving by the driver of the bus, which was hired by the appellant-Uttar Pradesh State Road Transport Corporation under an agreement between it and the bus owner. Ultimately finding that the income would be Rs.18,000/- per year, minus one-third, and with a multiplier of 13, Rs.1.65 lakhs + 8 per cent interest was awarded by the MACT, but it was held, following Rajasthan State Road Transport Corporation vs. Kailash Nath Kothari (1997) 7 SCC 481 ["Kailash Nath Kothari"], that it is only for the appellant-Corporation to pay this entire amount and not the insurance company. This was held as follows:
"15. The bus is a private one. It ran under the control of the UPSRTC. The ld. counsel for the Insurance Company has argued that the bus under the control of UPSRTC devolved the responsibility of payment of any compensation upon UPSRTC because it is not the owner who is in control of the bus but the Corporation who controls the working of the driver. The ld. counsel for the company cites Rajasthan State Road Transport Corporation versus Kailash Nath Kothari 1997 ACT 1148. I find the case law referred to applies squarely to the present case at hand. The UPSRTC O.P. No. 3, and not the O.P. No. 1 and 2, is responsible to pay the award."
3. In the High Court, by a judgment dated 27.09.2016, the same judgment of Kailash Nath Kothari (supra) was referred to and followed, making it clear, therefore, that the appellant alone is vicariously liable to pay the victim's family the amount of compensation that has been ordered. It was therefore also stated, referring to the agreement between the Corporation and the owner of the vehicle, as follows:
"Much emphasis has been laid by learned counsel for the appellant on Clause 10 of the agreement between the appellant and the owner to wriggle out of its responsibility to make payment of compensation. There is no reference of the said agreement in the impugned award. No such ground has been taken in the memo of appeal that it was filed before the Tribunal but has not been considered. In any view of the matter, even if such a clause exists in the agreement, it is between the appellant and the owner and shall not affect the rights of the claimants to receive compensation flowing from the provisions of the Act. Thus, the first argument advanced by learned counsel for the appellant is devoid of any force and not liable to be accepted."
4. Having heard learned counsel appearing for all the parties, we are of the view that the judgment relied upon, viz., Kailash Nath Kothari (supra), is itself distinguishable for the reason that the judgment itself records as follows:
"3. . . . The insurance company took the plea, in its reply to the claim petitions, that the bus at the time of the accident was under the control of the RSRTC, therefore, it was the liability of the RSRTC to pay compensation and the insurance company was not liable. It was further pleaded by the insurance company that the liability of the insurance company, in any event, was limited and its liability could not exceed Rs. 75000/- in respect of all the claim petitions arising out of one accident. .. .
4. ... Issue No. 2 was also decided in favour of the claim petitioners but it was held that in the light of the terms of the policy of insurance and relevant provisions of the Act, the liability of the insurance company was limited, in respect of the accident, to a total amount of Rs.75,000/-only."
xxx xxx xxx"
7. . . . Learned counsel appearing for the insurance company, did not question the finding on Issue No. 2 and submitted that the specified amount had since been paid by the insurance company. . . ."
In addition to this, the Court also held, relying upon the definition of "owner" in Se
