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2001 DIGILAW 505 (KER)

New India Assurance Co. v. Ramachandran

2001-09-19

R.RAJENDRA BABU, V.P.MOHAN KUMAR

body2001
Judgment :- R. Rajendra Babu, J. New India Insurance Co., the 3rd respondent in O.P. 1952/92 before the Motor Accidents Claims Tribunal, Palakkad, has come up in appeal, challenging the award of compensation by the above Tribunal. Sreekala, a girl aged 17 years, sustained injuries in a motor traffic accident on 28.4.1992 while she was travelling in a bus bearing No. KLG 8180. The lorry bearing No. KLG 1240 hit against the above bus and thus Sreekala sustained injuries and later succumbed to the injuries. The parents and the brother of the deceased (respondents 1 to 3 herein) approached the Tribunal making a claim of compensation of Rs. 7,54,000/- from the driver, owner and the insurer of both the vehicles. The appellant was the insurer of the offending vehicle, the lorry. The Tribunal, after considering the evidence, awarded a total compensation of Rs. 4,04,072/- with interest at 12% from the date of petition. It was further held that the appellant, the insurer of the offending vehicle viz., the lorry was liable to deposit the entire compensation amount. Aggrieved by the above award, the insurance company has come up in appeal challenging, mainly, the quantum of compensation. 2. Heard the learned counsel for the appellant and the respondents. 3. The parents and brother of deceased Sreekala, a girl aged 17 years, filed the petition before the Tribunal making a claim of Rs. 7,54,000/- towards compensation. The appellant, the insurer, along with the owner and the driver of the lorry, filed a joint written statement before the Tribunal contending that the accident occurred solely due to the negligence of the driver of the bus and as such the appellant as well as the owner and the driver of the lorry were not liable to pay any compensation. It was further contended that the amount claimed was exorbitant and unallowable. The Tribunal after taking evidence found that the accident occurred solely due to the rash and negligent driving of the lorry by its driver. The above finding regarding negligence was not challenged. The Tribunal awarded a total compensation of Rs. 4,04,072/-. In fact, the quantum awarded by the Tribunal alone was challenged by the insurance company. Respondents 1 to 3, the parents and the brother of the deceased, filed a cross objection contending that the amount awarded was not adequate but it was too low and hence claimed enhanced compensation. 4. The Tribunal awarded a total compensation of Rs. 4,04,072/-. In fact, the quantum awarded by the Tribunal alone was challenged by the insurance company. Respondents 1 to 3, the parents and the brother of the deceased, filed a cross objection contending that the amount awarded was not adequate but it was too low and hence claimed enhanced compensation. 4. The main argument advanced by the learned counsel for the appellant was that the deceased was a girl aged 17, a student who passed Plus Two Examination and the award of compensation fixing monthly income at Rs. 5000/- and adopting a multiplier of 9 was totally wrong and unjustifiable when the father and mother were aged 48 and 44 respectively. The learned counsel for respondents 1 to 3 contended that the appeal at the instance of the insurance company challenging the quantum was not maintainable as the appellant had not obtained permission of the Tribunal under S.170 of the Motor Vehicles Act for contesting the case on grounds other than those specified under S.149(2) of the Motor Vehicles Act. The learned counsel for the appellant, relying on the reservation clause in the policy, argued that the appellant was fully entitled to prefer an appeal challenging the quantum in view of the reservation clause in the policy. It was submitted by the learned counsel for the appellant that when there was a reservation clause in the policy, the insurer would be free to raise all contentions, those were available to the insured ie., even challenging the allegations of negligence as well as quantum of compensation. The above reservation clause in the policy relied on by the appellant ie., condition No. 2 in the policy reads as follows: "No admission offer, promise or payment shall be made by the Insured without the written consent of the Company which shall be entitled if it so desires to take over and conduct in the name of the Insured, the defence or settlement of any claim or to prosecute in his name for its own benefit any claim for indemnity or damages or otherwise and shall have full discretion in the conduct of any proceedings or in the settlement of any claim and the Insured shall give all such information and assistance as the Company may require. If the Company shall make any payment in settlement of any claim and such payment includes any amount not covered by this policy, the Insured shall repay to the Company the amount not so covered." The above clause in the policy would authorise the insurance company to raise all contentions that could be raised by the insured. Thus the above reservation clause in the policy empowered the insurance company to contest the case raising all contentions apart from those grounds specified in S.149(2) of the Motor Vehicles Act. A joint written statement was filed by the insurance company along with the owner and the driver of the vehicle challenging the allegation of negligence on the lorry driver and also the quantum of compensation claimed by the claimants. Learned counsel for the insurance company was allowed by the Tribunal to cross-examine the witnesses though no petition was filed by the insurer under S.170 of the Motor Vehicles Act seeking permission to raise all contentions available to the insured. The learned counsel for the appellant placed reliance on the decision of the Full Bench of this Court in New India Assurance Co. Ltd. v. Celine (1993(1) KLT 159) to substantiate his arguments. There a Full Bench of this Court considered elaborately the scope and ambit of the reservation clause in the policy and held that the insurer would be entitled to defend or to contest the claim on all grounds open to the insured in addition to the grounds mentioned in the statute on the basis of the reservation clause in the policy. There it was held: "15. In the light of the above principles of law, it is therefore, clear that the insurance company has a right to defend to take action against the third party in its own name, on the basis of the assignment by the insured in favour of the insurer in respect of the former 's rights against third parties. It is not necessary in the case of assignment that the action by the insurer should be in the name of the insured". The Full Bench was placing reliance on the decision of the Supreme Court in British India General Insurance Co. It is not necessary in the case of assignment that the action by the insurer should be in the name of the insured". The Full Bench was placing reliance on the decision of the Supreme Court in British India General Insurance Co. Ltd. v. Itbar Singh (AIR 1959 SC 1331) wherein it was held: "The Statute (Motor Vehicles Act, 1939) has no doubt created a liability in the insurer to the injured person but the statute has also expressly confined the right to avoid that liability to certain grounds specified in it. It is not for us to add to those grounds and therefore to the statute for reasons of hardship. We are furthermore not convinced that the statute causes any hardship. First, the insurer has the right provided he has reserved it by the policy, to defend the action in the name of the assured and if he does so, all defences open to the assured can then be urged by him The Full Bench of this Court was of the view that the insurance company had the right to defend the claim on all grounds available to the insured, if there was a reservation clause in the policy which was in the nature of an assignment of the right of the insured to take action against third parties. The Full Bench of this Court further held: "For the aforesaid reasons, we hold that the appellant-insurance company can take advantage of the 'reservation clause' which is in the nature of assignment by the insured of his rights against the third party, and the insurer can defend any action filed by the third party by conducting the same in its own name (insurer). In such a case, the insurer can raise all defences which the insured could have raised, and obviously the insurer is not confined to the limited defences mentioned in S.96(2) of the Motor Vehicles Act". A Full Bench of the Jammu & Kashmir High Court also has taken the same view in United India Fire & Genl. Ins. Co. Ltd. v. Lakshmi S. Ganjoo (1982 ACJ 470). A Full Bench of the Jammu & Kashmir High Court also has taken the same view in United India Fire & Genl. Ins. Co. Ltd. v. Lakshmi S. Ganjoo (1982 ACJ 470). In paragraph 34 of its judgment it was held: "Where the terms of the policy of insurance provides that the insurer has a right to defend the action in the name of the insured, the insurer shall have the right to defend and if he does so, all the defences as are open to the insured can be urged by the insurer both to resist the claim as well as the award". 5. Placing reliance on the decision of a Full Bench of this Court in 1993 (1) KLT 159 (supra) a Division Bench of this Court in National Insurance Co. Ltd. v. Leela (1998 (1) KLT 564) held that when there was a reservation clause in the policy, the insurer was entitled to raise all contentions apart from the statutory defence available to the insurer under S.149(2) of the Motor Vehicles Act. There it was held: "In the instant case the Insurance Company had specifically reserved their right in the Insurance Policy. Since the right was reserved under Condition No. 2 in the policy we are of the view that the Insurance Company is at liberty to raise all the contentions and defending the action not only in its name but also in the name of the insured. It is open to the insurer to reserve a right in the policy of insurance to defend the action in the name of the assured and in case, there is such a reservation, all defence open to the assured can be urged by him". 6. The learned counsel for the respondents 1 to 3 argued that the Insurance Company was not entitled to raise any contentions other than the statutory contentions available to the insurer under S.149(2) of the Motor Vehicles Act unless permission was obtained from the Tribunal under S.170 of the Motor Vehicles Act to contest on all grounds available to the insured. It was further submitted that the Insurance Company was not entitled to raise contentions other than those specified under S.149(2) of the Motor Vehicles Act as the insurer had not obtained permission under S.170 of the Motor Vehicles Act and hence the appeal was not maintainable. It was further submitted that the Insurance Company was not entitled to raise contentions other than those specified under S.149(2) of the Motor Vehicles Act as the insurer had not obtained permission under S.170 of the Motor Vehicles Act and hence the appeal was not maintainable. Reliance was placed on the decision of the Supreme Court in Shankarayya v. United India Insurance Co. Ltd. ((1998) 3 SCC 140). That was a case where the Insurance Company had joined with the insured in filing a joint written statement and contested the matter. But the permission under S.170 was not obtained for contesting the case on all grounds. The insurer filed an appeal before the appellate court challenging the quantum of compensation. The High Court, in appeal, reduced the compensation awarded by the Tribunal. The above order was set aside by the Supreme Court and the order of the Tribunal was upheld. There the Supreme Court held: "The Insurance Company when impleaded as a party by the Court can be permitted to contest the proceedings on merits only if the conditions precedent mentioned in S.170 are found to be satisfied and for that purpose the Insurance Company has to obtain an order in writing from the Tribunal and which should be a reasoned order by the Tribunal. Unless that procedure is followed, the Insurance Company cannot have a wider defence on merits than what is available to it by way of statutory defence. It is true that the claimants themselves had joined Respondent 1 Insurance Company in the claim petition but that was done with a view to thrust the statutory liability on the Insurance Company on account of the contract of the insurance. That was not an order of the Court itself permitting the Insurance Company which was impleaded to avail of a larger defence on merits on being satisfied on the aforesaid two conditions mentioned in S.170. That was not an order of the Court itself permitting the Insurance Company which was impleaded to avail of a larger defence on merits on being satisfied on the aforesaid two conditions mentioned in S.170. Consequently, it must be held that on the facts of the present case, Respondent 1 Insurance Company was not entitled to file an appeal on merits of the claim which was awarded by the Tribunal." The learned counsel for respondents 1 to 3 placed reliance on the decision of the Supreme Court in Chinnamma George v. N.K. Raju ((2000) 4 SCC 130) wherein it was held: "The Supreme Court cannot put its stamp of approval as to the validity of the appeal by the insurer merely by associating the insured. Provision of law cannot be undermined in this way. The Court must give effect to the real purpose to the provision of law relating to the award of compensation in respect of the accident arising out of the use of the motor vehicle and cannot permit the insurer the right to defend or appeal on grounds not permitted by law by using a backdoor method. Any other interpretation will produce unjust results and open the gates for the insurer to challenge any award. The Court has to give effect to true object of the Act by adopting a purposive approach". There the Supreme Court further held that the insurer cannot be a person aggrieved by the award of the Tribunal and as such the insurer was not entitled to file an appeal challenging the award. In the above-cited decisions viz. (1998) 3 SCC 140 and (2000) 4 SCC 130 the question regarding the legal effect of a reservation clause in the policy was not at all considered by the Supreme Court and in those cases the question was only with respect to the filing of an appeal by the insurer when the insurer had not obtained permission under S.170 of the Motor Vehicles Act for raising contentions other than those statutory contentions available to the insurer. Hence the above cited decisions cannot be of much significance in so far as the present case is concerned. 7. Hence the above cited decisions cannot be of much significance in so far as the present case is concerned. 7. The learned counsel for respondents 1 to 3 advanced an argument that as the appellant had not specifically pleaded in the written statement that they were entitled to contest the case on the basis of the reservation clause in the policy and that they failed to produce the policy to establish the same, the Insurance Company was not entitled to set up such a plea for the first time before the appellate court. We have gone through the joint written statement filed by the appellant along with the owner and the driver of the offending vehicle. The appellant had not raised a specific plea regarding the existence of a reservation clause in the policy and about their right to contest the case raising all contentions on the basis of the reservation clause in the policy in the written statement. Further, the policy was not produced before the Tribunal. It would be pertinent to note that no such specific ground had been raised in the appeal memorandum also claiming a right to contest the case raising all contentions on the basis of the reservation clause in the policy. The learned counsel for respondents 1 to 3 argued that in the absence of raising such a specific contention regarding the right to contest the case on the strength of the reservation clause in the policy, in the written statement filed before the Tribunal and in the appeal memorandum, the Insurance Company was not at all entitled to get any relief even if they had a right to contest on the basis of the reservation clause in the policy. The learned counsel for respondents 1 to 3 placed reliance on the decision of the Supreme Court in National Insurance Co. Ltd. v. Jugal Kishore ((1998) 1 SCC 626). That was a case where the policy was not produced before the Tribunal and the insurance company had raised a plea regarding the limitations imposed in the policy. There the Supreme Court held: "Therefore, in all such cases where the insurance company concerned wishes to take a defence in a claim petition that its liability is not in excess of a statutory liability, it would file a copy of the insurance policy along with its defence". There the Supreme Court held: "Therefore, in all such cases where the insurance company concerned wishes to take a defence in a claim petition that its liability is not in excess of a statutory liability, it would file a copy of the insurance policy along with its defence". In Chinnamma George v. N.K. Raju (2000) 4 SCC 130 (cited supra) the Supreme Court held: "The appellate court must also be satisfied that a defence which is permitted to be taken by the insurer under the Act was taken in the pleadings and was pressed before the Tribunal. On the appellate court being so satisfied the appeal may be entertained for examination of the correctness or otherwise of the judgment of the Tribunal on the question arising from/relating to such defence taken by the insurer. If the appellate court is not satisfied that any such question was raised by the insurer in the pleadings and/or was pressed before the Tribunal, the appeal filed by the insurer has to be dismissed as not maintainable." The above decisions would make it clear that the party to the proceedings intending to contest the matter had to plead and raise such definite or specific contentions in the written statement before the Tribunal. Thus when the insurer was placing reliance on the reservation clause in the policy, the insurer had to plead in the written statement and raise the contention before the Tribunal that the insurer had the right and was entitled to contest the case on all grounds available to the insured on the basis of the reservation clause in the policy and also to produce the policy to substantiate the above contention. S.149(2) of the Motor Vehicles Act specify the statutory grounds available to the insurer for avoiding the policy. If the insurer wants to contest the case on grounds other than those specified in S.149(2) of the Motor Vehicles Act, the statute stipulate that the insurer should obtain the permission of the Tribunal (S.170 of the Motor Vehicles Act). Thus the statute itself prescribe the statutory grounds available to the insurer and also permit the insurer to contest on other grounds on the basis of permission from the court when the conditions under S.170 are satisfied. Thus the statute itself prescribe the statutory grounds available to the insurer and also permit the insurer to contest on other grounds on the basis of permission from the court when the conditions under S.170 are satisfied. But the reservation clause in the policy is in the form of an assignment of the right available to the insured in favour of the insurer on the basis of a contract between the parties. As per the reservation clause the insurer gets a valid right to contest the matter on the basis of the assignment of the right of the insured as against third parties. As it is in the form of an assignment of the right of the insured as against third parties, the insurer is entitled to contest the matter on the basis of the reservation clause and we do not think that it is necessary to obtain permission from the court as stipulated under S.170 of the Motor Vehicles Act for raising all contentions in the name of the insured when there is a reservation clause in the policy. But it is incumbent on the part of the insurer to plead and raise the contention in the written statement before the Tribunal that in view of the reservation clause in the policy, he is entitled to defend the case on all grounds available to the insured and that he has to produce the policy to establish the above reservation clause in the policy. No separate order under S.170 of the Motor Vehicles Act need be obtained from the court for contesting the case on all grounds on the strength of the reservation clause in the policy. In the present case the insurer had not made any such contentions in the written statement filed before the Tribunal and had not produced the policy. No such contentions were raised in the appeal memorandum also. But long after the filing of the appeal memorandum, the policy was produced and an argument on the basis of the reservation clause in the policy was advanced for the first time and the insurer cannot be permitted to raise such a contention for the first time before the appellate court that too without raising such a ground in the appeal memorandum. Hence the appellant is not entitled to rely on the reservation clause in the policy and to raise all contentions that are available to the insured though there is a reservation clause in the policy. 8. The learned counsel for the appellant has placed reliance on the decision of a Division Bench of this Court in National Insurance Co. Ltd. v. Leela(1999 ACJ 542). That was a case where the insurance company was allowed to raise all defences available to the insurer in the appellate stage. There the insurer has filed a petition before the appellate court along with the appeal seeking permission to set up all defence available to the insured on the basis of the reservation clause in the policy and it was allowed. But in the present case the insurance company had not raised such a contention in the appeal memorandum and no petition had been filed along with the appeal or subsequently to permit the appellant to raise all the defence in view of the reservation clause in the policy. Hence we do not think that the above decision cited supra can have any application in the present case. So far as the present case is concerned, the insurance company cannot be permitted to contest on all grounds though there is a reservation clause in the policy as no such contention has been raised either before the Tribunal or before the appellate Court in the appeal memorandum. 9. Another argument advanced by the learned counsel for the appellant was that the compensation amount awarded by the Tribunal was exorbitant and unconscionable. As the deceased girl was only aged 17. fixing compensation on the basis of a monthly income of Rs. 5000/-, and adopting a multiplier of 9, when the parents were 48 and 44, was totally unjustifiable. It is true that the deceased was a brilliant girl having academic distinction. She had secured prizes and awards in competitions like elocution, essay writing, short story writing etc. and also in various items of sports. According to respondents 1 to 3 the deceased should have become a doctor and she had appeared for the medical entrance examination. The Tribunal held that even if she could not have become a doctor, she would have got a post having at least Rs. and also in various items of sports. According to respondents 1 to 3 the deceased should have become a doctor and she had appeared for the medical entrance examination. The Tribunal held that even if she could not have become a doctor, she would have got a post having at least Rs. 5000/- towards salary and she should have earned at the above rate from her age of 21 and she should have got married only at the age of 30 and after deducting 1/3rd for her personal expenses, the balance 2/3rd Rs. 3334A p.m. was taken as the monthly contribution and a multiplier of 9 was adopted. The above approach was totally unjustifiable as the possibility of such a girl, earning at the age of 21, was too remote. The Tribunal has fixed the contribution holding that the deceased would have got married only at the age of 30 and till then she might have been contributing 2/3rd of her income to the family. The above approach that she might have remained unmarried till the age of 30 was unreal and wrong. The award of compensation fixing 9 as the multiplier and Rs. 3334/- as the monthly contribution was exorbitant and unrealistic and the amount awarded on the above count was exorbitant. 10. The Tribunal allowed Rs. 2000/- towards transporting expenses, Rs. 2000/-towards funeral expenses, Rs. 10,000/- towards compensation for pain and suffering. The amount awarded on the above counts was quite reasonable. But the award of Rs. 30,000/- towards loss of love and affection also was on the higher side. In fixing the compensation the appellant placed reliance on the decision of the Karnataka High Court in D. Nagappa v. General Manager, Karnataka State Road Transport Corporation (1996 ACJ 921). That was a case where a student of M.D. Final Year died in a motor traffic accident. The claimants were the father aged 60 and two brothers. There the court awarded a total compensation of Rs. 2 lakhs. Though the amount of compensation awarded in the present case was exorbitant, the Insurance Company is not entitled to challenge the quantum as that is not one of the grounds envisaged under S.149(2) of the Motor Vehicles Act and the Insurance Company cannot be treated as a party aggrieved by the award. 2 lakhs. Though the amount of compensation awarded in the present case was exorbitant, the Insurance Company is not entitled to challenge the quantum as that is not one of the grounds envisaged under S.149(2) of the Motor Vehicles Act and the Insurance Company cannot be treated as a party aggrieved by the award. The Insurance Company cannot be permitted to contest the quantum on the basis of the reservation clause in the policy also as such a ground was not raised in the written statement before the Tribunal. Hence this appeal at the instance of the insurance company is not maintainable and has only to be dismissed. In the result this appeal is dismissed.