Gratuitous passengers-Insurance claim pay and recover principle. Insurance Company first to pay award to victims then recover it from vehicle’s owner-Supreme Court
ABCAUS Case Law Citation:
ABCAUS 1136 (2017) (02) SC
Question for determination:
Whether the appellants were entitled for an order against the Insurer of the offending vehicle to pay the awarded sum to the appellants and then to recover the said amount from the owner of the offending vehicle.
Important Case Laws Cited/relied upon:
Oriental Insurance Co. Ltd. vs. Nanjappan & Ors., (2004) 13 SCC 224,
Bhagyalakshmi & Ors. vs. United Insurance Company Ltd. & Anr., (2009) 7 SCC 148
Manager, National Insurance Company Limited vs. Saju P. Paul & Anr., (2013) 2 SCC 41
National Insurance Co. Ltd. vs. Baljit Kaur & Ors., (2004) 2 SCC
National Insurance Co. Ltd. vs. Challa Upendra Rao & Ors., (2004) 8 SCC 517
National Insurance Co. Ltd. vs. Kaushalaya Devi & Ors., (2008) 8 SCC 246,
National Insurance Co. Ltd. vs. Roshan Lal,
National Insurance Co. Ltd. vs. Parvathneni & Anr., (2009) 8 SCC 785.
Brief Facts of the Case:
In 2001, two persons along with some other passengers were travelling in Tata Sumo died on spot due to a head-on-collusion between the Tata Sumo and a Truck.
Families of the deceased persons preferred claim petitions before the Motor Accident Claims Tribunal against the owner of the Tata Sumo (respondent No.1), owner of the Truck (respondent No. 2), the insurer of the Tata Sumo-United India Insurance Co. Ltd. (respondent No.3) and New India Assurance Company Ltd., Insurer of the Truck (respondent No.4). The claim petitions were not contested by the owners of the vehicles.
The Tribunal, partly allowed both the claim petitions. The Tribunal held that Tata Sumo was a private car driven by the driver in a rash and negligent manner and at a high speed, which resulted in the accident. It was also held that the driver of the Truck was not negligent in driving the Truck. The Tribunal further held that all the passengers including the two deceased were travelling in Tata Sumo for hire and hence they were held to be “gratuitous passengers”. It was held that due to this reason, United India Insurance Company Ltd., the insurer of Tata Sumo was not liable. Accordingly, the Insurance Company was exonerated from the liability and the award was passed only against the owner of Tata Sumo in both the claim cases. The owner of the Truck and the New India Assurance Co. Ltd.-Insurer of the Truck were held not liable as the driver of the Truck was not found negligent in driving the Truck.
Dissatisfied with the award, the claim petitioners filed appeals under Section 173 of the Motor Vehicle Act, 1988 ( “the Act”) before the High Court for enhancement of the compensation amounts awarded by the Tribunal. The other ground raised before the High Court was that it was the liability of the Insurance Company of the offending vehicle to compensate the claimants jointly and severally with the owner of the Tata Sumo and in any event, the direction to pay the compensation by the insurer of offending vehicle and then to recover from its insured should have been passed against the Insurer.
The High Court dismissed the appeals and held that the insurer was not liable because the passengers or occupants were being carried in a private vehicle as “gratuitous passengers”
Aggrieved by the judgment of the High Court, the claimants had filed the present special leave petitions before the Supreme Court.
Contentions of the Appellants:
The single argument advanced was that both the Courts below erred in not applying the principle of “pay and recover” against the insurer of the Tata Sumo. It was submitted that when the driver of the Tata Sumo was held negligent in his driving, which caused the accident, the insurer of the offending vehicle should have been made liable to pay the awarded sum or in any event. Thus, a direction to pay and recover the awarded sum ought to have been issued against the Insurer of the offending vehicle.
Observations made by the Supreme Court:
The Hon’ble Supreme Court observed that in the case of Saju P. Paul & Anr. the entire previous case laws were considered and examined the question in the context of Section 147 of the Motor Vehicle Act, 1988. In the said case, while allowing the appeal filed by the Insurance Company by reversing the judgment of the High Court, it was held on facts that since the victim was travelling in offending vehicle as “gratuitous passenger” and hence, the Insurance Company cannot be held liable to suffer the liability arising out of accident on the strength of the insurance policy.
It was further observed that the Court keeping in view the benevolent object of the Act and other relevant factors arising in the case, issued the directions against the Insurance Company to pay the awarded sum to the claimants and then to recover the said sum from the insured in the same proceedings by applying the principle of “pay and recover”.
The Apex Court noted that the facts of the present case was somewhat identical to the facts of the case in case of Saju P. Paul & Anr as the deceased were found travelling as “gratuitous passengers” in the offending vehicle and it was for this reason, the insurance companies were exonerated. The According to the Hon’ble Supreme Court there was marked similarity in the facts of this case and the one involved in Saju P. Paul’s Case.
The Court was of the view that the direction to United India Insurance Company being the insurer of the offending vehicle which was found involved in causing accident due to negligence of its driver needs to be issued directing them to first pay the awarded sum to the appellants and then to recover the paid awarded sum from the owner of the offending vehicle (Tata Sumo).
The appeals were allowed. It was directed that United India Insurance Company Ltd. shall pay the awarded sum to the appellants. Thereafter United India Insurance Company Ltd. would be entitled to recover the entire paid awarded sum from the owner of the offending Vehicle (Tata Sumo) in these very proceedings by filing execution application against the insured.
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