The main legal point established in the judgment is that the insurance company can raise a defense based on the driver's invalid license and breach of insurance contract, while also emphasizing the owner's obligation to ensure that the driver holds a valid license for the vehicle being driven.

S.B. Sinha, J.—Leave granted.

Respondent No. 3 herein is owner of a jeep bearing registration No. BR 03 P 9011. The said vehicle admittedly was being used as a taxi and, thus, a commercial vehicle. One Ram Lal was working as a Khalasi in the said taxi. He used to drive the said vehicle sometimes. He had a driving licence. Driving licence, however, was granted to him for driving a Light Motor Vehicle. The said taxi met with an accident on 14.8.2000 at about 1 p.m. as a result whereof a girl aged about 12 years, Km. Anjali Rai, died.

2. On an allegation made in that behalf that the said taxi was being driven rashly and negligently by the aforementioned Ram Lal, a claim petition in terms of Sections 163A and 166 of the Motor Vehicles Act, 1988 (for short “the Act”) was filed by the First and the Second Respondents herein. The said taxi admittedly was insured with the Appellant herein. One of the issues raised in the said proceeding was as to whether the driver of the said jeep was having a valid and effective licence. Another question which arose was as to whether the said Ram Lal was driving the said vehicle.

3. The learned Tribunal did not go into the said question. It inter alia held that the said Ram Lal had been driving the said vehicle having regard to the fact that he had been shown as the accused in the criminal case. However, as regard the question as to whether by permitting the said Ram Lal to drive the said vehicle, the Respondent No. 3 herein violated the terms and conditions of contract of licence, the learned Tribunal relying on or on the basis of the decision of this Court in New India Assurance Co., Shimla v. Kamla and Others,I (2002) ACC 346 (SC)=(2001) 4 SCC 342, held that the Insurance Company cannot get rid of its third party liability as the said question arises only between the owner of the vehicle and the insurance company. It was further held:

“Insurance Company can recover this amount from owner of vehicle. This legal proposition is fully applicable in this matter. So, Issue No. 3 is decided in favour of Petitioners.”

4. The appeal preferred thereagainst by the Appellant herein before the High Court was dismissed on the premise that no appeal was maintainable wherefor reliance was placed by the High Court on a decision of this Court in National Insurance Company Ltd., Chandigarh v. Nicolletta Rohtagi and Others, III (2002) ACC 292 (SC)=JT 2002 (7) SC 251. As regard the purported statutory liability of the Appellant, it was held:

“the mere fact that there was violation of the terms and conditions subject to which the insurance policy had been issued, cannot have the effect of exonerating the insurer from the statutory liability cast upon him in this regard to pay the amount to the third party victim.”

It was further held:

“It will, therefore, be open to the insurer appellant to initiate an appropriate proceeding for the refund of the amount paid by it to the claimants and establish the breach of the terms and conditions subject to which the insurance policy had been issued.”

Hence, this appeal.

5. The contention raised on behalf of the Appellant was that the High Court was palpably in error as violation of the terms and conditions of the contract of insurance is a matter which comes within the purview of any of the ‘statutory defences’ which can be raised by an insurer under Sub-section (2) of Section 149 of the Act. The statutory bar as regards raising a defence on the part of the insurance company is confined to the quantum of damages only.

6. The learned Counsel appearing on behalf of the Respondent conceded that the appeal preferred by the Respondent was maintainable. However, relying on or on the basis of a decision of this Court in Oriental Insurance Co. Ltd. v. Nanjappan and Others, I (2004) ACC 524 (SC)=(2005) SCC (Cri.) 148, he argued that the insurance company may pay the awarded amount to the claimants and recover the same from the owner of the vehicle.

7. In a proceeding arising out of