The insurer's liability for third party risks under the Motor Vehicles Act, 1939 can be avoided only if the conditions specified in section 96(2) are satisfied.

Headnote:
MOTOR VEHICLES ACT, 1939 - SECTIONS 94, 95, 96 - INSURANCE OF MOTOR VEHICLES AGAINST THIRD PARTY RISKS - LIABILITY OF INSURER - CONDITIONS FOR AVOIDANCE OF LIABILITY - BREACH OF PERMIT CONDITION - NOT A BREACH OF PURPOSE FOR WHICH PERMIT ISSUED - INSURER LIABLE TO PAY COMPENSATION.
Fact of the Case:

A truck carrying goods and its owners met with an accident. The heirs of the deceased pedestrians filed claims for compensation under the Motor Vehicles Act, 1939. The Tribunal held the owner-driver liable and exonerated the insurance company on the ground that the truck was carrying more than seven passengers, which is prohibited under Rule 118 of the Motor Vehicles Rules, 1959.
Finding of the Court:

The court held that the insurance company was liable to pay compensation as there was no breach of any condition specified in the policy. The court reasoned that the truck was being used essentially for carrying the goods and the breach of the permit condition was not a breach of the purpose for which the permit was issued.
Issues: Whether the insurance company can be absolved of its liability to pay compensation under the Act.
Ratio Decidendi: The court held that the insurer can avoid his liability only if the conditions specified in section 96(2) of the Motor Vehicles Act, 1939 are satisfied. The court held that the breach of the permit condition was not a breach of the purpose for which the permit was issued and therefore, there was no contravention of Clauses (b)(i)(a) or (b)(i)(c) of section 96(2).
Final Decision: The court allowed the appeals and directed the insurance company to pay compensation to the claimants.

JUDGMENT - P.B. SAWANT, J.:---There are two appeals filed by the owner of a truck which is a goods vehicle against the decisions of the Accident Claims Tribunal, Ahmednagar, making him liable to pay compensation to the claimants under the Motor Vehicles Act, 1939.

2. The relevant facts leading to both the appeals are as follows:---

The accidents in question took place at about 9-30 a.m. on the 28th July, 1982 near Chandnapuri Shivar on Sangamner-Pune Road. The truck in question bearing Motor Vehicle No. MWA 548 was owned and driven by appellant Raghunath. At the relevant time, it was loaded with 700 baskets full of tomatoes. Along with tomato baskets, the truck was also carrying 15 to 16 owners thereof. Some of them were sitting in the receptacle of the truck and two of them were sitting by the side of the driver. As the truck proceeded after crossing a corner, according to the appellant, a jeep car came from the front and on the wrong side of the road. He therefore, tried to avert a collision, with the result that he took the truck to the extreme side of the road on his side. However, about 2 to 3 persons were working at the time on the left hand side of the road from which side the truck was proceeding ahead. As a result of the appellant's attempt to avert the collision with the jeep, the truck went into the nearby agricultural field and turned turtle. Two of the persons who were walking came under the truck and died on the spot. The heirs and legal representatives of the two deceased thereafter filed the present claims for compensation before the Tribunal. The claims were resisted by the appellant as well as by the New India Assurance Limited with which the truck was insured during the relevant period. The appellant resisted the claims on various counts including the ground that since the truck was insured, the insurance company alone was liable to pay the compensation. The insurance company on the other hand took the stand that since at the relevant time the truck was also carrying passengers for which purpose admittedly the truck had no permit, the company had no liability to pay the compensation and it was the owner and the driver of the truck who were liable to pay the same. It is not necessary to refer to the other defences raised by the appellant-owner of the truck and the insurance company before the Tribunal, since the only point which is involved in and canvassed by the appellant in the present appeal is whether it is the owner or the insurance company who is liable to pay the compensation.

3. The Tribunal on the basis of the pleadings and the evidence on record came to the conclusion that the negligence was proved and it was only the owner of the vehicle who was also the driver at the relevant time, who was liable to pay the compensation amount of Rs. 25,000/- in each case. The Tribunal exonerated the insurance company from the liability to pay the compensation on the ground that the truck was carrying more than seven persons as passengers which is prohibited under Rule 118 of the Motor Vehicles Rules, 1959, (hereinafter referred to as the Rules). However, the Tribunal in the operative part of the order, also stated as follows : "The question of liability of the Insurance Company to make initial payment under section 96 of the Motor Vehicles Act, 1939, however, is kept open." We will deal with this observation at the proper time. Suffice it to say at this stage that since the Tribunal allowed the claims-applications against the appellant-owner-driver of the truck and dismissed it against the insurance company, the appellant-owner driver has preferred these two appeals.

4. As stated earlier, the only point which is argued before us by the appellant as well as the respondent Insurance Company is whether on the admitted facts of the case, the insurance company can be absolved of its liability to pay compensation under the Act.

5. There is no dispute that the truck had a permit to ply for hire for carrying goods. At the

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