JUDGMENT :

K.N. PHANEENDRA, J.

This Special Full Bench is constituted by the Order of Hon’ble the Chief Justice dated 01.07.2015 to decide an important question of law raised by the learned Single Judge in MFA No.30131/2010.

2. At the outset, it is necessary to extract the order of reference dated 18.04.2013 as under:

“Dr.JRJ:18.04.2013

MFA NO.30131/2010 (MV)

ORDER

1. The Insurer of offending vehicle involved in motor vehicle accident occurred on 24.04.2006 is in appeal, questioning the direction of the Tribunal to discharge the award in favour of the respondents and to recover it from the insured – owner of the vehicle.

2. From what the learned counsel on both sides have adverted to, it is seen from the records, occurrence of accident on 24.04.2006 at 11.00 AM involving tempo 407 bearing Reg.No.KA-28/B-5434 and consequent injuries to the occupants of the vehicle and validity of the insurance covered, provided by the Appellant in respect of that vehicle to indemnify the owner of it, is not in dispute.

3. The finding of the Tribunal that accident was result of negligent driving of that vehicle has also reached finality as the same is not questioned by the insurer or the driver of the insured. The moot question raised by the appellant – Insurance Company in this appeal is that there was violation of the terms of insurance policy and therefore the case falls under sub-section (2) of Section 149 of the MOTOR VEHICLES ACT , 1988 (hereinafter referred to as the ‘Act’ for brevity) and not under sub-section (1) of Section 149 of the Act. Therefore, they contend they cannot be directed to pay and recover from the insured owner.

4. Learned counsel has placed reliance on the decision of this Court in the case of Oriental Insurance Company Limited Vs. K.C. Subramanyam and another reported in ILR 2012 KAR 5241, wherein the division bench of this Court has differentiated the circumstances covered by sub-section (1) of Section 149 of the Act and sub-section (2) of Section 149 of the Act to hold that by virtue of sub-section (7) of Section 149 of the Act, the Insurance Company cannot be directed to pay and recover, if it has a valid defence to prove that there was a violation of terms of insurance policy.

5. The claim advanced by the claimants was basically on the ground that a driver of the offending vehicle was rash and negligent. The appellant – Insurance Company had admitted issuance of policy vide Ex.D-1, which shows it is issued in respect of goods vehicle and the appellant has collected Rs.8,274/- as a premium, which is undoubtedly more than the basic premium prescribed by TRI to be paid in respect of said class of vehicle. The break up figures mentioned in the Schedule to the Ex.D-1 is that the Company has collected apart from high premium for the coverage of third party risk, an additional sum to cover two more employees apart from those covered statutorily by Sections 147 and 149 of the Act.

6. The contention of the Insurance Company was they were gratuitous passengers carried in the goods vehicle and therefore it has no liability. The learned Member of the Tribunal accepted that plea and held that the Insurance Company can recover the amount ordered to be paid to claimants from the insured – owner.

7. In this appeal the direction is questioned on the ground as there is a violation of the condition of the insurance policy. There could be no direction to pay and recover. Such a plea has to be tested from language of Section 149 of the Act, which clearly postulates as follows :

149. Duty of Insurers to satisfy judgments and awards against persons insured in respect of third party risk. – (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