BHAGWAN DASS v. KASTURI LAL — 1973 DIGILAW 239 (DEL)

JUDGMENT : Dalip K. Kapur, J. 1. On the night between 15th and 16th February, 1963, truck No. PNE 4834 was involved in a collision with a bullockcart which was being driven by Bhagwan Dass. The truck being driven by Kasturi Lal its owner was Gopal Dass. The truck was said to be insured with Northern India Motor Insurance Company Ltd. As a result of the collision, Bhagwan Dass suffered injuries and the bullocks died. Consequently, Bhagwan Dass filed an application u/s 110A of the Motor Vehicles Act before the Motor Accidents Claims Tribunal, Delhi claiming an award for compensation on account of damages and injuries suffered as a result of the collision. A sum of Rs. 30,000/- was claimed in all. In these proceedings, Kasturi Lal, Gopal Dass and M/s. Northern India Motor Insurance Company Ltd, were Respondents as the truck driver, the truck owner and the Insurance Company with whom the truck was insured, respectively. The collision was admitted by the first two Respondents. and the only question for determination was whether the accident was caused by the rash or negligent driving of Kasturi Lal. The insurance company Respondent No. 3 claimed that the vehicle was not insured with it. The Motor Vehicle Accidents Claims Tribunal by its judgment dated 30th April, 1966, held that the accident was caused by the rash and negligent driving of truck No. PNE 4838 which was being driven by Kasturi Lal; it was also held that there was no culpable negligence by Bhagwan Dass, the driver of the bullock-cart which was involved in the accident. On this basis, the Tribunal awarded a sum of Rs. 3,950/- as compensation to the Petitioner Bhagwan Dass. The quantification of the damages has been detailed in the judgment and I need not refer to the same as the same is not seriously in challenge in this appeal. The quantification has been made under various headings which have been referred to by learned Counsel for the Appellant, but the approximation made cannot be set aside except on a retrial which is a procedure the Appellant wants to avoid. The Motor Vehicle Accidents Claims Tribunal dismissed the claim against the insurance Company on the ground that the vehicle was not insured with the insurance company. This is the part of the judgment to which the Petitioner Bhagwan Dass objects, and consequently he has appealed to this Court. 2. The Motor Vehicle Accidents Claims Tribunal dismissed the claim against the insurance Company on the ground that the vehicle was not insured with the insurance company. This is the part of the judgment to which the Petitioner Bhagwan Dass objects, and consequently he has appealed to this Court. 2. The notices of this appeal were served on the Respondents sometime ago. The first Respondent was served by affixation and has not put in appearance. The other two Respondents have also not put in appearances inspite of service. Registered actual date notices were sent to the three Respondents. The notice addressed to the first Respondent has come back unserved. It is not necessary to issue any further notice to that part because in any case he was served by affixation in the first place and secondly, no relief is prayed for by the Appellant against that Respondent. As far as the other two Respondents are concerned, actual date notices have been sent to them by registered post, but they have not put in appearance. No further relief is claimed against the first two Respondents beyond what was granted by the Tribunal itself. The only party interested in this appeal is the third Respondent, M/s. Northern India Motor Insurance Company Ltd. That Company has not put in appearance inspite of service. The question of law which has been raised by Mr. G.R. Chopra in support of the Appellant's case is of some importance, but, unfortunately I have to deal with the appeal ex-parte I now proceed to deal with the question raised before me. 3. The issue framed by the Tribunal in respect of the liability of the Insurance Company was in the following terms:- (2) Whether the truck in question was insured with M/s. Northern India Motor Insurance Company Ltd. at the time of accident? On this issue, the Petitioner was unable to say anything beyond stating that the vehicle was properly and duly insured with this company. It is interesting, however, to notice the form in which the Insurance Company denied its liability as pleaded in its written statement. It said: The Respondent has not been able to trace any policy having been issued in respect of the vehicle in question for the relevant date. The alleged cover was not valid as on the date of accident. It is interesting, however, to notice the form in which the Insurance Company denied its liability as pleaded in its written statement. It said: The Respondent has not been able to trace any policy having been issued in respect of the vehicle in question for the relevant date. The alleged cover was not valid as on the date of accident. It is therefore, denied that the vehicle was insured on the date of alleged accident. In a subsequent application made to the Tribunal, the Insurance Company stated that it had not been able to trace any cover and had sent a notice to the alleged owner Mr. Gopal Dass which had been received back unserved. In the circumstances, the company denied that the vehicle was insured. Thus, the Insurance Company was as evasive as it possibly could be on the question whether the vehicle in question was insured. The evidence of the Petitioner at the trial was followed by the evidence of the Respondents. In the course of his examination Gopal Dass, the owner of the truck was able to produce a cover note for the vehicle involved in the accident which has been exhibited as Rule 1. This cover note is for the period 12th November, 1962 to 11th May, 1963. It is, however, a provisional cover note which is valid only for 15 days. I shall presently refer to the language of this cover-note and it is only sufficient to say at this stage that it elapses by its language after 15 days. By itself, this cover-note would not cover the insurance of this vehicle beyond 15 days from its commencement. Thus, on its own language, the cover-note would not cover the vehicle on the date of the accident. Relying on its language, the insurance company urged before the Motor Vehicle Accidents Claims Tribunal that even if this cover note had been issued by the insurance company, it did not cover the vehicle on the date of the accident. The finding of the Tribunal on this aspect was that the cover-note was genuine and did cover the vehicle in question. He particularly referred to the fact that no evidence had been led by the Insurance Company to rebut the cover-note. The finding of the Tribunal on this aspect was that the cover-note was genuine and did cover the vehicle in question. He particularly referred to the fact that no evidence had been led by the Insurance Company to rebut the cover-note. On the other hand, the Tribunal held that inspite of the issue of the cover note, it did not cover the vehicle beyond a period of 15 days on the express language used in the document. Thus, the cover note according to the Tribunal expired on 27th November, 1962, whereas the accident took place on 16th February, 1963 and thus, the vehicle was not insured with the third Respondent on the date of the accident. This decision has been challenged by Mr. Chopra as being entirely unwarranted in view of the provisions of the Motor Vehicles Act, 1939. I will presently refer to the various provisions which are applicable to a case like the present, but before doing so, I may reproduce the language of the cover-note. The document says:- Shri Goal Doss s/o L. Mast Ram of Pan pat, District Carnal having made a proposal of Insurance in writing on 11.11.1962 and having paid to the company the sum of Rs.... in respect of the Motor Vehicle described in the Schedule below for Act/Third Party/Comprehensive insurance risk the same is hereby provisional accepted subject to the ordinary printed terms and conditions of the Company's policy. This interim insurance shall subsist until a certificate of insurance or a policy is delivered or notice given that the proposal has been declined but shall absolutely cease and come to an end under all circumstances at the expiry of 15 days from the date of commencement of risk as specified in the Schedule below. Below this there is a schedule which shows that the risk commenced at 6.00 p.m. on 12th November, 1962 up to 11th May, 1963. On the face of this document, it appears to expire at the end of 15 days from 12th November 1962 and thus terminates on 27th November, 1962. This is the view taken by the Tribunal itself. It is, however, important to remember the manner in which the cover note has been issued, which is also stated in the cover note. It has been issued as a result of a proposal made by Mr. Gopal Dass the owner of the vehicle. This is the view taken by the Tribunal itself. It is, however, important to remember the manner in which the cover note has been issued, which is also stated in the cover note. It has been issued as a result of a proposal made by Mr. Gopal Dass the owner of the vehicle. That proposal in the usual course of affairs has either to be accepted or declined. This clearly appears on the face of the cover-note itself. Now, only one of these things could have occurred. The proposal could either have been accepted or it could have been rejected. The Insurance Company has deliberately refrained from giving any evidence at all to show whether the insurance proposal was declined or accepted and consequently the third Respondent has left the matter at large, leaving the Petitioner who is not a party to the insurance policy, to attempt the proof of what is not at all within his knowledge. In my view, a presumption has to be drawn against the Insurance Company in the circumstances, for keeping back from the Court very substantial evidence which would have informed the Court of the true state of affairs. This fact was wholly within the knowledge of the Insurance Company and not in the knowledge of Bhagwan Dass, the Petitioner. Clearly, there has been an attempt to compel the Court to hold that the Insurance Company was not liable, by keeping back from the Court the true document which would have shown the real factual position existing at the time of the accident. This is a ground which by itself could lead to a reversal of the judgment delivered by the Tribunal. I am, however, not basing my judgment solely on this point. I am also referring to the various provisions under the Motor Vehicles Act, 1939, which are enacted for the purpose of protecting the rights of third parties, who may be involved in accidents. 4. It is to be noted that Chapter 8 of the Act, deals with the insurance of motor vehicles against third party risks. This part of the enactment is intended to safeguard the rights of third parties who may be involved in motor vehicle accidents. The provisions of Section 94, particularly Sub-section (1), are intended to prevent any vehicle being driven on the road without a third party risk insurance. This part of the enactment is intended to safeguard the rights of third parties who may be involved in motor vehicle accidents. The provisions of Section 94, particularly Sub-section (1), are intended to prevent any vehicle being driven on the road without a third party risk insurance. Thus, if a motor vehicle is involved in an accident with some person, who claims damages, it is the Insurance Company which is made liable by forcing the vehicle's owner to get the vehicle insured before he can legally drive the same on the road. The relevant part of this section reads- No person shall use except as a passenger or cause or allow any other person to use a motor vehicle in a public place, unless there is in force in relation to the use of the vehicle by that person or that other person, as the case may be, a policy of insurance complying with the requirements of this Chapter. This is a mandatory provision. No vehicle can be driven on the road without any insurance policy concerning third party risks. Section 125 of the Act makes it a criminal offence to drive a motor vehicle which is not insured; such offence is punishable with imprisonment which may be as much as three months, or with a fine, or both. Thus, the provisions of Section 94 are made enforceable by Section 125 of the Act. There is a further protection to third parties by reason of the obligation of Insurance Companies to inform the Registering authority that an insurance policy has ceased to cover a vehicle. This is provided for in Section 105 of the Motor Vehicles Act, 1939, which compels the insurer, i.e., the company to inform the Registering Authority within seven days of the cancellation or suspension of the policy. Further protection is provided to third parties by Section 89 and 106 of the Act. The provisions of Section 89 compel the driver of a motor vehicle to inform the police of any accident in which any person has been injured or property damaged. In the present case, there is evidence that a police official was informed and even a criminal prosecution took place which led to the conviction of the 1st Respondent. Evidence in this behalf consists of the statement of P.W. 8, Sardul Singh, Sub-Inspector. In the present case, there is evidence that a police official was informed and even a criminal prosecution took place which led to the conviction of the 1st Respondent. Evidence in this behalf consists of the statement of P.W. 8, Sardul Singh, Sub-Inspector. Now, Section 106 of the Act provides that, at the time of an accident the driver of the motor vehicle has to produce the certificate of insurance before the police officer in order that the policy may determine whether the vehicle in question is being driven in accordance with Section 94 of the Motor Vehicles Act, 1939, or not. It is the duty of the police in such circumstances to ascertain whether the vehicle in question is covered by a policy covering third party risks. There is a purpose in this provision. A third party has no knowledge of the existence of an insurance policy. He cannot be expected to enquire from various Insurance Companies as to whether the vehicle in question is insured with them or not. This duty has been placed on the police to determine whether the vehicle is covered by a policy within the scope of Section 94 of the Act. I am making all these observations, because it seems to me that the Insurance Company denied its liability merely for the purpose of keeping the policy concealed. The obvious policy of the law is to bring the policy to light and other provisions compel the Insurance Company to show how a policy has come to an end, e.g., Section 105. 5. The definition of 'Certificate of Insurance' is to be found in Section 93(b) of the Motor Vehicles Act, 1939. It runs as follows: Certificate of Insurance" means a certificate issued by an authorised insurer in pursuance of Sub-section (4) of Section 95; and includes a cover note complying with such requirements as may be prescribed, and where more than one certificate has been issued in connection with a policy, or where a copy of a certificate has been issued, all those certificate or that copy, as the case may be. This definition shows that a certificate of insurance includes a cover-note. This means that the cover note referred to earlier in this case, is a certificate of insurance for the purpose of this section. This definition shows that a certificate of insurance includes a cover-note. This means that the cover note referred to earlier in this case, is a certificate of insurance for the purpose of this section. Now, if there was a cover note, the defences open to the Insurance Company were not the defences open to the owner of the insured vehicle or the driver thereof but only those defences which are prescribed by Section 96 of the Act. That section allows an Insurance company to avoid liability for third party risks in three situations which are dealt with in Sub-section (2) thereof, Section 96(2)(a) allows the Insurance Company to avoid third party liability if it can show that the policy was cancelled by mutual consent or by virtue of any provision contained therein before the accident occurred. Further, the Insurance Company has also to show that the certificate of insurance was surrendered to the insurer or that the person to whom the certificate was issued gave an affidavit stating that the certificate had been lost. Alternatively, the Insurance Company can show that it had commenced proceedings for cancellation of the certificate after complying with Section 105 of the Act. In other words, in order to avoid liability, the Insurance Company, Respondent No. 3 had to establish that the cover note had lapsed, and the certificate surrendered or proceedings had been taken to get the certificate, after giving notice u/s 105 to the Registering Authority. The other portions of Section 26(2) do not apply to the case, but I reproduce the Sub-section for convenience before proceeding to refer to the other relevant portions of the Act. The other portions of Section 26(2) do not apply to the case, but I reproduce the Sub-section for convenience before proceeding to refer to the other relevant portions of the Act. Section 96(2) reads:- No sum shall be payable by an insurance under Sub-section (1) in respect of any judgment unless before or after the commencement of the proceedings in which the judgment is given the insurer had notice through the Court of the bringing of the proceedings, or in respect of any judgment so long as execution is stayed thereon pending an appeal; and an insurer to whom notice of the bringing of any such proceedings is so given shall be entitled to be made a party there to and to defend the action on any of the following grounds, namely:- (a) That the policy was cancelled by mutual consent or by virtue of any provision contained therein before the accident giving rise to the liability, and that either the certificate of insurance was surrendered to the insurer or that the person to whom the certificate was issued has made an affidavit stating that the certificate has been lost or destroyed, or that either before or not later than fourteen days after the happening of the accident the insurer has commenced proceedings for cancellation of the certificate after compliance with the provisions of Section 105; or (b) that there has been a breach of a specified condition of the policy, being one of the following conditions, namely:- (i) a condition excluding the use of vehicle. (a) for hire or reward, where the vehicle is on the date of contract of insurance a vehicle not covered by a permit to ply for hire or reward, or (b) for organised racing and speed-testing, or (c) for a purpose not allowed by the permit under which the vehicle is used where the vehicle is a transport vehicle, or (d) without side-car being attached where the vehicle is a motor-cycle; or (ii) a condition excluding driving by a named person or persons or by any person who is not duly licensed, or by any person who has been disqualified for holding or obtaining a driving licence during the period of disqualification; or (iii) a condition excluding liablity from injury caused or contributed to by conditions of war, civil war, riot or civil commotion; or (c) that the policy is void on the ground that it was obtained by non-disclosure of a material fact or by a representation of fact which was false in some material particular. As already indicated by me, the only relevant portion of the grounds reproduced above is the one concerning the expiry of the certificate of insurance according to its own terms. As held by the Tribunal, the cover note shows that it expires on 27th November, 1962, which was before the accident on 15th and 16th February, 1963. Thus, it could be urged by the Insurance Company that the company was not liable, because of the provision of Section 96(2)(a) of the Act. This was the case of the company, which has been accepted by the Tribunal. However, reference to the other provisions of the Motor Vehicles Act, 1939, show that it was not sufficient to point out that the cover note had lapsed. There are other provisions, which are intended to cover the situation. A third party is a complete stranger to the contract between the owner of the vehicle and the Insurance Company and the Legislature had made provision to prevent a fraud being played against a third party. It has, therefore, enacted that when a cover note or certificate of insurance expires, notice of this fact has to be given to the registering authority. The absence of such a notice would clearly indicate that the cover note had not lapsed. Before continuing this discussion, let me now refer to the provisions. First I turn to Section 95(4A) of the Act. The absence of such a notice would clearly indicate that the cover note had not lapsed. Before continuing this discussion, let me now refer to the provisions. First I turn to Section 95(4A) of the Act. It reads: Where a cover note issued under the provisions of this chapter or the rules made thereunder is not followed by a policy of insurance within the prescribed time, the insurer shall, within seven days of the expiry of the period of the validity of the cover note, notify the fact to the registering authority in whose records the vehicle to which the cover note relates has been registered or to such other authority as the State Government may prescribe. This Sub-section shows that if a cover note is not followed by a policy of insurance, then the insurer has to inform the registering authority. In the cover note which I have reproduced above, two contingencies were provided for. It was stated that a proposal had been received by the company which was under consideration of the company. The cover note stated: "This interim insurance shall subsist until a certificate of insurance or a policy is delivered or a notice given that the proposal has been declined." Two results could follow, the policy could be issued or the proposal could be declined. If it was declined, then a notice should have been issued u/s 95(4A) of the Act to the registering authority or other authority as prescribed by the section. No such notice has been proved and, therefore, it follows that the proposal was not declined. Thus, it was not open to the Insurance Company to contend that the cover note had expired. Then I turn to Section 103 which states as follows:- 103. Effect of certificate of insurance. No such notice has been proved and, therefore, it follows that the proposal was not declined. Thus, it was not open to the Insurance Company to contend that the cover note had expired. Then I turn to Section 103 which states as follows:- 103. Effect of certificate of insurance. When an insurer has issued a certificate of insurance in respect of a contract of insurance between the insurer and the insured person, then- (a) if and so long as the policy described in the certificate has not been issued by the insurer to the insured, the insurer shall, as between himself and any other person except the insured, be deemed to have issued to the insured person a policy of insurance conforming in all respects with the description and particulars stated in such certificate; and (b) if the insurer has issued to the insured the policy described in the certificate, but the actual terms of the policy are less favourable to persons claiming under or by virtue of the policy against the insurer either directly or through the insured then the particulars of the policy as stated in the certificate, the policy shall, as between the insurer and in any other person except the insured, be deemed to be in terms conforming in all respects with the particulars stated in the said certificate. It is to be noted that this section, particularly Sub-section (a) shows that once a certificate has been issued, it shall be deemed that a policy has been issued conforming with the description and particulars stated in the certificate. The definition of 'certificate of insurance' is given in Section 93(b), which shows that a cover note is a certificate of insurance. Thus, it has to be deemed in relation to third parties that a policy corresponding with the details given in the cover note has been issued concerning a vehicle. However, this deeming provision only applies in relation to third parties and not concerning either the insurer or the insured. This means that the court has to draw a legal inference that the policy mentioned in the cover note has in fact been issued concerning the vehicle in question. However, this deeming provision only applies in relation to third parties and not concerning either the insurer or the insured. This means that the court has to draw a legal inference that the policy mentioned in the cover note has in fact been issued concerning the vehicle in question. The effect of the two provisions I have just reproduced shows that, firstly the court has to draw a presumption that a policy of insurance was issued according to the agreement, and secondly in terms of the cover note it has to be held that a policy was in fact issued, because no notice concerning the termination of the cover note has been proved on record as required by Section 95(4A) of the Act. 6. There is yet another section that aids the Appellant's case. That section is Section 104(1). It reads: Whenever the period of cover under a policy of insurance issued under the provisions of this chapter is terminated or suspended by any means before its expiration by effluxion of time the insured person shall within seven days after such termination or suspension deliver to the insurer by whom the policy was issued the latest certificate of insurance given by the insurer in respect of the said policy, or, if the said certificate has been lost or destroyed, make an affidavit to that effect. This provision shows that if the period of cover under a policy is terminated before the date of expiry, the certificate of insurance has to be surrendered. The very fact that the certificate of insurance has not proved to have been surrendered shows that it was in fact subsisting. On the face of the cover note, it was for the period 12th November, 1962 to 11th May, 1963. The provisional cover was only for 15 days. If the provisional cover had not been followed by a policy, or a further certificate, it should have been surrendered. The absence of surrender shows that the cover was in fact continuing. 7. The next important section, which has some bearing on the case is Section 105. That section reads:- 105. The provisional cover was only for 15 days. If the provisional cover had not been followed by a policy, or a further certificate, it should have been surrendered. The absence of surrender shows that the cover was in fact continuing. 7. The next important section, which has some bearing on the case is Section 105. That section reads:- 105. Duty of insurer to notify registering authority cancellation or suspension of the policy- Whenever a policy of insurance issued under the provisions of this Chapter is cancelled or suspended by the insurer who has issued the policy, the insurer shall within seven days notify such cancellation or suspension to the registering authority in whose record the registration of the vehicle covered by the policy of insurance is recorded or to such other authority as the State Government may prescribe. This provision shows that when a policy has terminated, the registering authority has to be informed. Thus, if the cover note, referred to in this case, had expired as alleged by the Insurance Company on 27th November, 1962, the registering authority would have been informed either u/s 95(4A) or u/s 105 of the Act. The failure of the Insurance Company to produce proof of any such information is indicative of the fact that the cover note did not in fact expire on 27th November, 1962, as alleged. 8. There is yet another point in favour of the Appellant. The provision of Section 96(2)(A) shows that Insurance Company can avoid liability if it shows that the policy has lapsed and the certificate of insurance has been surrendered. No surrender at all has been established on record. Failing surrender, the section permits the Insurance Company to prove that the certificate of insurance was lost and an affidavit was given in that behalf or proceedings were commenced to cancel the policy. None of these facts have been proved by the Insurance Company. The case of the Insurance Company is, in fact, based entirely on the lapse of the cover note on its face. This is not sufficient for the purpose of Section 96(2)(a) of the Act. All the ingredients necessary to constitute a complete defence have to be established. 9. In this connection, I may refer to the judgment of the Supreme Court in British India General Insurance Co. Ltd. Vs. Captain Itbar Singh and Others. This is not sufficient for the purpose of Section 96(2)(a) of the Act. All the ingredients necessary to constitute a complete defence have to be established. 9. In this connection, I may refer to the judgment of the Supreme Court in British India General Insurance Co. Ltd. Vs. Captain Itbar Singh and Others. In that case, it was urged on behalf of the company that the defences even outside Section 96 could be urged on behalf of the Insurance Company. The Supreme Court rejected this contention. It stated the quested posed before it thus:- The question then really is, what are defences that Sub-section (2) makes available to an insurer? That clearly is a question of interpretation of the Sub-section. After dealing with various parts of this provision the Supreme Court stated the law thus:- It would follow that an insurer is entitled to defend on any of the grounds enumerated and no others. If it were not so, then of course no grounds need have been enumerated. When the grounds of defence have been specified, they cannot be added to the statute. Relying on these observations, I hold that the grounds on which the Insurance company has been allowed to avoid liability namely that the cover note had elapsed by efflux of time, was not a defence sufficient to avoid liability u/s 96(2), and was thus no defence at all. It was open to the Insurance company to avoid liability by alleging that the cover note had expired, but it had also to establish all the other requirements set out in Section 96(2)(a) of the Act. This it has not done and consequently, I reverse the judgment of the Motor Vehicle Accidents Claims Tribunal and decide the second issue thus: I hold that the Insurance Company, Respondent No. 3, was, liable for third party risks on the date of the accident. Consequently, the award of the Tribunal will have to be altered and I, therefore, alter it to say that the award for Rs. 3,950/- would be enforceable against all the Respondents together with costs. The Appellant will also get the costs of this appeal.