1999 Supreme(AP) 455

Andhra Pradesh High Court
Judges : P.VENKATRAMA REDDY, T.CH.SURYA RAO
Divisional Manager, New India Assurance Company Ltd., Ongole - Appellant
Versus
Tumu Gurava Reddy - Respondent
Decided On : 07-13-99

Headnote:Motor Vehicles Act, 1988 - Sections 140, 145 and 147 ; Part - IX and X - Liability of - Insurance Company - Insurer liable both under Fault liability as well under No fault liability - Liability under section 140 being absolute, not be settled by taking up any defence.

       Held : Unless the insured is at fault and guilty of breach, the insurer cannot escape from the obligation to indemnify the insured and successfully contend that he is exonerated having regard to the fact that the promisor committed a breach of his promise. The burden is, therefore, upon the insurer to establish that the owner of the vehicle is guilty of willful breach of the condition embodied in the policy.

       the burden is upon the appellant to establish that the insured has committed willful breach of the condition embodied in the policy by entrusting the vehicle to a driver who was not duly licensed. It being pure question of fact shall have to be proved by adducing evidence alinude and shall be decided with reference to the facts and circumstances of that case.

       The innate circumstances emerging from the evidence on record that the said Bala Raju was employed by the APSRTC and worked therein for nearly a decade and the fact that the insurer deputed its Officers to Bangalore for conducting investigation which eventually disclosed that the licence purported to have been issued by the authority at Bangalore was in fact a fake licence would negate the contention of the learned Standing Counsel for the Insurer that there has been willful breach of the condition. Having taken all pains in adducing the relevant evidence to show that the licence possessed by the driver Bala Raju is not genuine, the insurer could not show that the owner of the Tractor having knowledge of the said fact employed the driver and thereby wilfully committed breach of the condition embodied in the policy in regard thereto. The intrinsic value of the evidence emanating from the record certainly exculpates the 1st respondent owner from the guilty of breach of condition. The 1st respondent cannot legitimately be expected to conduct an enquiry before employing the driver in the wake of the fact that he worked for nearly a decade in APSRTC that the licence possessed by him in fact is genuine licence or not. The attendant circumstances will not warrant any inference that the 1st respondent had every reason to believe that the licence possessed by the driver was a fake licence. For the above reasons we arc of the clear view under the facts and circumstances of this case that the insurer failed to establish that the 1st respondent owner of the vehicle committed a willful breach of the promise by entrusting the vehicle to a driver having had the knowledge that the licence possessed by the driver was a fake licence. Of course, as afore discussed, it is a pure question of fact and is to be considered with reference to the facts and circumstances of each case, although the burden is upon the insurer to prove the same.

       No fault liability is an Act Policy .

       From the back-drop under which the provisions providing for no fault liability came to be incorporated in the statute, the intention of the Parliament in having legislated the same pursuant to the clarion call given by the Apex Court in various judgments, the philosophy behind these provisions in making the insurance of the Motor Vehicles compulsory, the changes brought into the Act and the relevant rules framed thereunder in sequel thereto clearly establish that the liability of the insurer is not confined to Chapter XI of the Act alone but is also inclusive of the liability under Chapter X. In other words, the insurer is liable both under fault liability and no fault liability. Once it is an Act Policy, nonpayment of any separate premium by the insured for no fault liability is of no consequence. It is for the insurer to collect the premium. In any view of the matter, the liability of the insured to pay the compensation under no fault liability being absolute and when the insured suffered a decree in regard thereto, the insurer shall indemnify the owner in accordance with the provisions of Section 149 of the Act regardless of the fact whether it is fault liability or no fault liability.

       The words any liability used in Section 147 (1) (b) (i) shall have to be construed with reference to the definition of the word "liability" as given in clause (c) of Section 145 in the same Chapter XI. It may be mentioned here that the owner of the vehicle is vicariously liable for the tortious act of the driver. The liability of the insurer as can be seen from Section 149 is to indemnify the owner against any liability of the owner under any judgment or Award. The owner is obviously liable to pay compensation to the victim regardless of the fact that it is a fault liability or no fault liability subject, however, to the limitation of the compensation payable in fixed amount, as envisaged by Section 140 of the Act. This liability of the owner under the decree passed by a Tribunal against him shall be indemnified by the insurer under Section 149 of the Act. Any judgment to the contra without considering the background under which Section 92-A has come to be incorporated under the old Act, and the consequential changes that have been made in the other cognate sections to give effect to that intendment of the Parliament incorporating Section 92-A will suffer from the vice of per incurium and cannot, therefore, hold the field. Therefore, we are of the considered view that the Insurance Company is liable under no fault liability also.

       The provision is to be read down so as to be in peace and harmony with the object and purpose of the Legislation. Indeed it has been done so by interpreting the word breach by the Apex Court by construing the same as not mere breach, but as willful breach . Similarly, Section 149 is to be construed when it comes to no fault liability in such a fashion ultimately to sub serve the principle of social justice . Viewed in that perspective, the irresistible conclusion is that the liability under Section 140 being absolute, it shall not be scuttled by taking up any defence. However, this is not germane, albeit not wholly in appropriate, as the position is no more res Integra and is squarely covered by the judgment of the Apex Court in National insurance Co. Ltd. , (supra ). The Apex Court has simply gone by the provisions of the Act nonetheless it is binding on us. It has been held that the insurer can take up the defence available to it under Section 149 of the Act even in respect of the claims under no fault liability. In other words, once the insurer is not liable under the policy for the fault liability for breach of any conditions mentioned therein, it is equally not liable in respect of no fault liability. In view of the judgment of the Apex Court, we have to invariably hold that the insurer can validly take the defence available under Section 149 of the Act even in respect of no fault liability. For the above reasons, we are unable to accept the view of the learned single Judge that the defence available under Chapter XI, or the breach of terms of policy cannot be invoked by the insurer in a claim under Section 140 of the Act.

       To sum up, the burden is upon the insurer to prove that (1) the owner of the vehicle has committed not mere breach, but willful breach of the conditions embodied in the policy (2) the insurer is liable under Section 149 of the Motor Vehicles Act to indemnify the owner of the vehicle involved in the accident who suffered a decree for both fault liability as well as no fault liability, and (3) the insurer can validly take the defence available under Section 149 of the Act not only in respect of fault liability, but also in respect of no fault liability.