The question that has come up for consideration is whether the insurer can be directed to pay compensation to an injured in a motor traffic accident when the insured has been found not liable for the compensation.

2. Abdul Lathef, the first respondent, herein was travelling as a passenger in a bus bearing Reg. No. KEF, 7990. The vehicle was owned by the 3rd respondent and the 2nd respondent was the driver of the bus. A lorry hit against the bus and thereby the first respondent sustained injuries. The lorry which hit against the bus could not be traced out. The injured claimed Rs. 50,000/- towards compensation against the driver, owner and insurer of the bus as OP (MV) 2950/90 before the Motor Accidents claims Tribunal, Perumbavoor. The owner, driver and the insurer of the bus contended that there was no negligence on the part of the driver of the bus in causing the accident and hence they were not liable for the compensation. After consider in the evidence, the Tribunal found that there was no negligence from the part of the driver of the bus in causing the accident and as such the driver and owner of the bus were not liable to compensate the injured. But placing reliance on the decision of the Single Judge of the High Court of Bombay in Peter Morris Lobo and another V. Sonal Maganlal Shingala and others (1991 ACJ 215), the Tribunal found that the insurer of the bus was liable for the compensation. The Tribunal assessed the total compensation to be paid to the injured at Rs. 28,653/- and directed the Insurance Company, the appellant, to pay the compensation amount. Aggrieved by the above award passed by the Motor Accidents Claims Tribunal, Perumbavoor in OP (MV) 2950/90, the Insurer, the National Insurance Company Ltd., the 3rd respondent in the OP filed this appeal.

3. The main argument advanced by the learned counsel for the Insurance Company, the appellant was that when the Tribunal found the driver and owner of the bus not liable for compensation, the Tribunal should not have found the insurer of the above vehicle alone liable for the compensation, as the liability of the insurer was to reimburse the liability incurred by the insured. It was further submitted that the claim for compensation was based on the principles of common law that the injured should establish negligence on the part of the driver or owner of the vehicle. But a single judge of the High Court of Bombay in 1991 ACJ 2115 held:

“Sec. 95(1b)(i) evidently makes the insurance company liable against any liability which may be incurred by the insured and since the insured is not or cannot be made liable in this case as her or his driver is not found negligent, the case will not fall under sub-clause (i) of clause (b) of sub-section (1) of Sec. 95. Sub-clause (ii) of clause (b) of sub-sec. (1) of sec. 95, however, uses a different expression. It does not make the insurance company liable in respect of liability which may have been incurred by the insured. It makes the insurance company liable straightway against the death of or bodily injury to any passenger of a public service vehicle in a public place. The emphasis in this sub-clause is on the nature and situation of the vehicle at the time of the accident rather than on the liability of the insured in respect of the vehicle.

The learned Judge of the High Court of Bombay was placing reliance on an observation made by the Supreme Court in Minu B. Media and another v. Balakrishna Ramachandra Nayan and another (1977 A.C. J. 118) in support of his view. In the above case, the Supreme Court observed that having regard to the changed conditions of modern society where a large number of motor vehicles were put on road exposing a large number of innocent third parties to grave accidents it was necessary in public interest to take the view that proof of negligence was unnecessary on the part of drivers of moor vehicles before claiming compensation. But in a later decision in Gujarat State Board Transport Corpor