What is liability of Insurance company towards third party in case of motor accident?

In the present, we are concerned with the liability of the
appellant Insurance
Company towards a third party, the deceased
herein. The law laid down by the Apex Court in Swaran Singh's case
(supra) and followed thereafter, is that the burden of proof lies upon
the Insurance Company to establish its defence, and in order to avoid
its liability towards the insured, it has to prove that the insured was
guilty of negligence and failed to exercise reasonable care in the
matter of fulfilling conditions of the policy regarding driving of vehicle
by a duly licensed driver or one who was not disqualified to drive at
the relevant time. In the absence of any such evidence, the insurer
cannot avoid its liability to pay the compensation to a third party,
particularly when the undisputed position is that the vehicle was
insured on the date of the accident with an Act policy. The insurer
remains liable to a third party and can institute the separate
proceedings to recover the said amount of compensation from the
owner or the driver of the offending vehicle, as is permissible in law.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH, NAGPUR
First Appeal No.684 of 2005
The Divisional Manager,

Versus
Vandana wd/o Prabhakar Gaigol,

Coram : R.K. Deshpande, J.
Dated : 18 th December, 2014
Citation; 2015(7)ALLMR407


1. In Motor Accident Claim Petition No.65 of 2003 filed under

Section 166 of the Motor Vehicles Act, 1988, the appellantInsurance
Company, along with the owner and the driver of the offending
vehicle, i.e. Tractor bearing registration No.MH30/
E7161,
and
Trailer bearing registration No.MH30/
E2846,
has been held jointly
and severally liable to pay the compensation of Rs.2,75,000/with
proportionate costs and 9% per annum interest from the date of the
petition till the payment is made in full to the claimant Nos.1 to 6
and 8. The Insurance Company has, therefore, preferred this appeal
claiming exoneration from the liability of payment of compensation on
the defence that the driver of the offending vehicle was not holding
the effective driving licence, as contemplated by Section 3 of the
Motor Vehicles Act.
2. The factual position is as under :
The accident in question occurred on 2012003,
and as a
result of rash and negligent driving of the offending vehicle, the
husband of claimant No.1, father of claimant Nos.2 to 6, and son of
claimant Nos.7 and 8, died. The driver of the offending vehicle was
holding a licence to drive the offending vehicle, but it expired on
2611999,
that is much before the date of the accident. The licence

was renewed on 2112003,
that is immediately on the next date of
occurring the accident. The Tribunal has recorded the finding that “no
evidence is forthcoming that the driver was disqualified or had
incurred any disqualification prior to the accident in question in
getting his licence renewed after a period of about three years, after its
expiry”. It has been held that “by putting the Tractor at the time of
accident at the hands of the respondent No.1 by the respondent No.2,
he cannot be said to have committed the breach of condition of policy
that too fundamental one entitling the respondent No.3 to get
exoneration from liability”.
3. My attention is invited by the learned counsels appearing for
the parties to the following decisions :
(i) (2003) 3 SCC 338,
United India Insurance Company Ltd. v. Lehru and
others.
(ii) (2004) 3 SCC 297,
National Insurance Co. Ltd. v. Swaran Singh and
others.
(iii) 2009 (1) Mh.L.J. 566,
Ram Babu Tiwari v. United India Insurance Company
Ltd.

The defence of the appellantInsurance
Company in the written
statement is to the effect that “the respondent No.3 is not liable to pay
the compensation to the claimants, because at the relevant time, the
respondent No.1 was not holding the effective driving licence to drive
the tractor and trolley in question”. It is urged by Shri Pophaly, the
learned counsel appearing for the appellantInsurance
Company, that
undisputedly the licence had expired on 2611999
and no application
for renewal was submitted within a period of thirty days, as required
by Section 15 of the Motor Vehicles Act. He further submits that
thereafter within a period of ninety days also, there was no renewal of
licence and, therefore, the fact remains that on the date of the
accident, the driver of the offending vehicle was not holding the
effective driving licence.
4. The point for determination is as under :
Whether the insurer was liable to be discharged on the
defence that the driver of the offending vehicle was not
holding effective driving licence, as contemplated by
Section 3 of the Motor Vehicles Act?

5. In the present, we are concerned with the liability of the
appellantInsurance
Company towards a third party, the deceased
herein. The law laid down by the Apex Court in Swaran Singh's case
(supra) and followed thereafter, is that the burden of proof lies upon
the Insurance Company to establish its defence, and in order to avoid
its liability towards the insured, it has to prove that the insured was
guilty of negligence and failed to exercise reasonable care in the
matter of fulfilling conditions of the policy regarding driving of vehicle
by a duly licensed driver or one who was not disqualified to drive at
the relevant time. In the absence of any such evidence, the insurer
cannot avoid its liability to pay the compensation to a third party,
particularly when the undisputed position is that the vehicle was
insured on the date of the accident with an Act policy. The insurer
remains liable to a third party and can institute the separate
proceedings to recover the said amount of compensation from the
owner or the driver of the offending vehicle, as is permissible in law.
The order passed by the Tribunal can, therefore, be modified to that
extent.
6. In the present case, it is neither the stand taken nor the
evidence led to prove that the insured was guilty of negligence and

failed to exercise due care in the matter of fulfilling conditions of the
policy regarding driving of vehicle by a duly licensed driver. The
Insurance Company cannot, therefore, be discharged from the liability
of a third party. The appeal is, therefore, dismissed. It is made clear
that the appellantInsurance
Company shall be at liberty to institute
appropriate proceedings against the owner and the driver of the
offending vehicle to recover the amount of compensation paid to the
claimants, and neither the judgment of the Tribunal nor this judgment
shall come in the way of the Insurance Company. No order as to costs.
7. It is informed that the appellantInsurance
Company has
deposited the entire amount in this Court, out of which 50% amount
was permitted to be withdrawn by the claimants. In view of the order
passed in this appeal, the claimants will be entitled to withdraw the
balance amount lying in this Court with interest, if any accrued
thereon.
Judge