The avoidance clause in an insurance policy is ineffective if it is contrary to the non-avoidance clause in the policy or if it is not one of the conditions mentioned in Clause (b) of Sub-section (2) of Section 96 of the Motor Vehicles Act.

Headnote:
MOTOR VEHICLES ACT - INSURANCE - DRIVER EXTENSION CLAUSE - AVOIDANCE CLAUSE - NON-AVOIDANCE CLAUSE - LIABILITY OF INSURER - SECTION 96(3) - INTERPRETATION.
Fact of the Case:

The defendant, Pesumal, was driving a car owned by Shamdas Nathumal Asvani with the consent and knowledge of the owner. The deceased Meherotra and the injured Murli Dholandas accompanied the defendant on the drive. Due to the defendant's rash and negligent driving, there was a collision between the car and a motor truck, resulting in Meherotra's death and Murli Dholandas' severe injuries. The heirs of Meherotra and the injured Murli Dholandas filed suits for damages against the defendant. The New Asiatic Insurance Co. Ltd., which had insured Aswani in respect of the car, took out a Chamber Summons for the discharge of the notice issued to them under Section 96(1) of the Motor Vehicles Act, claiming that the insurance policy did not cover the defendant due to the avoidance clause in Clause 3 of the policy.
Finding of the Court:

The court held that the avoidance clause in the insurance policy was ineffective and that the respondent insurance company was liable to indemnify the plaintiffs under Section 96 of the Motor Vehicles Act. The court also held that the defendant was entitled to appeal the order of the learned Judge discharging the notice against the respondent company as he was a person aggrieved by the order.
Issues: 1. Whether the avoidance clause in the insurance policy was effective in avoiding the liability of the insurer? 2. Whether the respondent insurance company was liable to indemnify the plaintiffs under Section 96 of the Motor Vehicles Act? 3. Whether the defendant was entitled to appeal the order of the learned Judge discharging the notice against the respondent company?
Ratio Decidendi: 1. The court held that the avoidance clause in the insurance policy was ineffective because it was contrary to the non-avoidance clause in Section III of the policy and also because it was not one of the conditions mentioned in Clause (b) of Sub-section (2) of Section 96 of the Motor Vehicles Act. 2. The court held that the respondent insurance company was liable to indemnify the plaintiffs under Section 96 of the Motor Vehicles Act because the defendant was insured by the respondent in respect of the vehicle by the use of which the accident was committed. 3. The court held that the defendant was entitled to appeal the order of the learned Judge discharging the notice against the respondent company because he was a person aggrieved by the order.
Final Decision: The court dismissed the prayers (a) and (b) of the Chamber Summons in both the suits and directed the learned trial judge to hear the Chamber Summonses as regards the prayers (c) and (d) therein and make such orders as the justice of the cause may require. The 1st respondent Company was ordered to pay the costs of both the appeals and also of the hearing of the Chamber summonses before the learned Judge.

JUDGMENT - 1. These two appeals Nos. 10 and 11 of 1962, arise out of two suits Nos. 70 and 71 of 1959 filed by the nears of one Daooji Radhamohan Meherotra and by one Murli Uholandas respectively for damages in respect of a car accident which resulted in the death of Daooji and serious injury to Murli while the car was Winy driven by the defendant Pesumal.

2. The short facts are that both the deceased Meherotra and Murli Dholandas accompanied the defendant on 13th March 1958 on a motor drive front Bombay to Poona by a motor ear belonging to one Shamdas Nathurnal Asvani. The defendant was in charge of the car and he was driving it with the consent and knowledge of Shamdas Narnumal Asvani. The plaintiffs allege that he was driving it rashly and negligently and while doing so, between Mile stones 93 and 94 there was a collision between the car and motor truck bearing No. BYT 2216 as a result of which Mehrorotra died and Murli Dholandas stitfered severe injuries. The heirs of Meherctra, and the injured Murli Dholandas have filed these two suits respectively and claimed damages from the defendant.

3. The Plaintiffs got a notice issued to the new Asiatic Insurance Co. Ltd., under Section 96 (1) of the Motor Vehicles Act since this company had insured Aswani in respect of the car which was being driven by thee defendant. After the notice was received, the New Asiatic Insurance Co. took out a Chamber Summons for the discharge of the notice. It came before Mr. justice Tarkunde who agreed with its contentions and discharged the notice. The Defendant Pesumai has appealed against the order of the learned Judge.

4. The contention urged on behalf of the insurer was that the insurance policy did not cover the defenaant because of the proviso contained in clause 3 which was a driver extension clause. Clause 3 reads thus:--

"In terms of and subject to the limitations of the indemnity which is granted by this section to the insured the company will indemnity any driver who is driving the Motor Car on the Insureds order or with his permission provided that such Driver (a) is not entitled TO indemnity under any other policy".

We may call this proviso the avoidance clause. The insurer respondent places reliance on this clause, cause a extends the insurance cover to any driver who is not the owner of We car and indemnities him if he is driving the motor car on the order of the Insured or with his permission provided that he is not entitled to indemnity under any other policy. Clause 4 is the vehicle extension clause which indemnifies the Insured, in the present case the owner of the car which was involved in the accident, which he drove personally a private Motor Car not belonging to him and not hired to hint under a Hire Purcnase Agreement. At the relevant time the defendant himself was insured in respect of a car owned by him with the Indian trade and General insurance Co. Ltd. whose policy also contained similar vehicle extension clause. because of the indemnify provided by the vehicle extension clause in his policy in respect of his own vehicle with Indian Trade and General insurance Co. Ltd. the respondent plausibly contended that it was discharged from all liability under clause 3 of the policy issued by it. the learned Judge relied upon the proviso contained in Clause 3 of that policy and held that as the defendant was insured by the Indian Trade and General insurance Co. By its Clause 4 in respect of a car not belonging to him, the respondent Co., i. e. the New Asiatic insurance Co. Ltd., was relieved of its liability to indemnity the defendant.

5. It may, however be noted that the attention of the learned judge does not seem to have keen invited to one important clause in the policy, that clause is contained in Section III of the policy at p. 70 of the Paper BOOK in Appeal No. 10 of 1962 and roads as follows:--

"Nothing in this Policy or any endorsement nereon shall affect the right of any person indemnified by this Policy or any other person to

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Judicial Analysis