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2008(4) CPR 270 (SC)
SUPREME COURT OF INDIA
(FROM NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION, NEW DELHI)
Dr. Arijit Pasayat and S.H. Kapadia, JJ.
National Insurance Co. Ltd. —Appellant
versus
Laxmi Narain Dhut —Respondent
Civil Appeal No. 1140 of 2007
(Arising out of SLP (C) No. 25305 of 2004)
With
Civil Appeal No. 1141 to 1151 of 2007
(Civil Appeal No. 1141/2007 @ SLP (C) No. 1617/2005)
(Civil Appeal No. 1142/2007 @ SLP (C) No. 12857/2005)
(Civil Appeal No. 1143/2007 @ SLP (C) No. 15728/2005)
(Civil Appeal No. 1144/2007 @ SLP (C) No. 869/2006)
(Civil Appeal No. 1145/2007 @ SLP (C) No. 5048/2006)
(Civil Appeal No. 1146/2007 @ SLP (C) No. 6208/2006)
(Civil Appeal No. 1147/2007 @ SLP (C) No. 11596/2005)
(Civil Appeal No. 1148/2007 @ SLP (C) No. 8608/2006)
(Civil Appeal No. 1149/2007 @ SLP (C) No. 16568/2006)
(Civil Appeal No. 1150/2007 @ SLP (C) No. 22203/2005)
(Civil Appeal No. 1151/2007 @ SLP (C) No. 22957/2005)
Decided on 2-3-2007
Held : In each of the impugned judgments the concerned High Court held that the principles laid down by this Court in National Insurance Co. Ltd. v. Swaran Singh (2004 (3) SCC 297) is applicable even to claims other than third party claims. Some of these appeals also relate to orders passed by the National Consumer Disputes Redressal Commission, New Delhi (in short the ‘Commission’) where a similar view has been taken. (Para 3)
The High Court and the Commission seem to have proceeded on the basis that the defences available to insured are only those provided in Section 149(2) of the Act and the said provision has to be interpreted strictly in view of the fact that it is a social legislation. (Para 15)
Section 149 is part of Chapter XI which is titled “Insurance of Motor Vehicles against Third Parties”. A significant factor which needs to be noticed is that there is no contractual relation between the insurance company and the third party. The liabilities and the obligations relatable to third parties are created only by fiction of Sections 147 and 149 of the Act. (Para 16)
Where the claim relates to own damage claims, it cannot be adjudicated by the insurance company. But it has to be decided by an other forum i.e. forum created under the Consumer Protection Act, 1985 (in short the ‘CP Act’). Before the Tribunal, there were essentially three parties i.e. the insurer, insured and the claimants. On the contrary, before the consumer forums there were two parties i.e. owner of the vehicle and the insurer. The claimant does not come in to the picture. Therefore, these are cases where there is no third party involved. (Para 20)
In the background of the statutory provisions, one thing is crystal clear i.e. the statute is beneficial one qua the third party. But that benefit cannot be extended to the owner of the offending vehicle. The logic of fake license has to be considered differently in respect of third party and in respect of own damage claims. (Para 23)
“Golden Rule” of interpretation of statutes is that statutes are to be interpreted according to grammatical and ordinary sense of the word in grammatical or liberal meaning unmindful of consequence of such interpretation. It was the predominant method of reading statutes. More often than not, such grammatical and literal interpretation leads to unjust results which the Legislature never intended. The golden rule of giving undue importance to grammatical and literal meaning of late gave place to ‘rule of legislative intent’. The world over, the principle of interpretation according to the legislative intent is accepted to be more logical. (Para 27)
The inevitable conclusion therefore is that the decision in Swaran Singh’s case (supra) has no application to own damage cases. The effect of fake license has to be considered in the light of what has been stated by this Court in New India Assurance Co., Shimla v. Kamla and Ors. (2001(4) SCC 342). Once the license is a fake one the renewal cannot take away the effect of fake license. (Para 37)
As noted above, the conceptual difference between third party right and own damage cases has to be kept in view. Initially, the burden is on the insurer to prove that the license was a fake one. Once it is established the natural consequences have to flow. (Para 38)
In view of the above analysis the following situations emerge:
1. The decision in Swaran Singh’s case (supra) has no application to cases other than third party risks.
2. Where originally the license was a fake one, renewal cannot cure the inherent fatality.
3. In case of third party risks the insurer has to indemnify the amount and if so advised to recover the same from the insured.
4. The concept of purposive interpretation has no application to cases relatable to Section 149 of the Act.
The High Courts/Commissions shall now consider the matter afresh in the light of the position in law as delineated above. (Para 39 and 40)
Result : Appeals allowed.
Dr. Arijit Pasayat, J.—Leave granted.
2. In all these cases identical questions are involved and therefore the appeals are disposed of by this common judgment.
3. In each of the impugned judgments the concerned High Court held that the principles laid down by this Court in National Insurance Co. Ltd. v. Swaran Singh1 is applicable even to claims other than third party claims. Some of these appeals also relate to orders passed by the National Consumer Disputes Redressal Commission, New Delhi (in short the ‘Commission’) where a similar view has been taken.
4. Since there has been elaborate analysis of the factual position it would be appropriate to decide the basic principles in law and ask the High Courts/Commissions to decide the cases afresh keeping in mind the view expressed in the present judgment.
5. The decision in Swaran Singh’s case (supra) applied to claims which involved only the insurance company and the owner of the vehicle i.e. where there was no third party involved. It has been highlighted by learned counsel for the appellants that Swaran Singh’s case (supra) was rendered in the background of Section 149 of the Motor Vehicles Act, 1988 (in short the ‘Act’) which has no application to cases where there is no third party involved.
6. In response, learned counsel appearing for the respondents have submitted that there can be no difference of approach in cases where the dispute relates to the claim relating to the insurer and the insured. According to them, purposive interpretation of provisions is called for in view of the fact that the statute itself is a beneficial piece of legislation.
7. In order to appreciate the rival submissions, few provisions of the Act and the corresponding provisions in the Motor Vehicles Act, 1939 (hereinafter referred to as the ‘Old Act’) would be necessary.
8. Section 149 of the Act relates to duty of insurers to satisfy judgments and awards against persons insured in respect of third party risks. The language of the provision is clear that it only relates to third party risk. The corresponding provision in the Old Act is Section 96. Section 166 of the Act relates to application for compensation. The same corresponds to Section 110-A of the Old Act. Section 168 of the Act relates to award of the Claims Tribunal which corresponds to Section 110-B of the Old Act. Section 170 deals with impleadment of the insurer in certain cases. Section 149 of the Act needs to be noted in full. The same reads as follows:
“149. Duty of Insurers to satisfy judgments and awards against persons insured in respect of third party risks—(1) If, after a certificate of insurance has been issued under sub-section (3) of Section 147, in favour of the person by whom a policy has been effected, judgment or award in respect of any such liability as is required to be covered by a policy under clause (b) of sub-section (1) of Section 147 (being a liability covered by the terms of the policy) or under the provisions of Section 163-A) is obtained against any person insured by the policy then, notwithstanding that the insurer may be entitled to avoid or cancel or may have avoid or cancelled the policy, the insurer shall, subject to the provisions of this section, pay to the person entitled to the benefit of the decree any sum not exceeding the sum assured payable thereunder, as if were the judgment debtor, in respect of the liability, together with any amount payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any enactment relating to interest on judgments.
(2) No sum shall be payable by an insurer under sub-section (1) in respect of any judgment or award unless, before the commencement of the proceedings in which the judgment or award is given the insurer had notice through the Court or, as the case may be, the Claims Tribunal of the bringing of the proceedings, or in respect of such judgment or award so long as execution is stayed thereon pending an appeal; and an
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