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2008 DIGILAW 2772 (RAJ)

Branch Manager, United India Insurance Co. Ltd. v. Nagammal

2008-12-23

D.MURUGESAN, P.K.MISRA, SUDHANSU JYOTI MUKHOPADHAYA

body2008
Judgment Hon'ble MISRA, J.—Learned single Judge raised some doubt regarding applicability of the ratio of a Division Bench decision of the Madras High Court reported in 2006(1) MLJ 154 (M/s. United India Insurance Company Ltd., vs. Selvam and others) and referred the matter to a Larger Bench by observing as follows :- "28. In the light of the latest decisions of the Supreme Court, exonerating the Insurance Company from its liability to pay compensation for the death/injury to the gratuitous passenger travelling in a goods vehicle, substantial doubt arises whether the decision of the Division Bench of this Court made in 2006(1) MLJ 154 could be followed. 29. In view of the latest decisions of the Supreme Court, in my considered view, the decision of the Division Bench of this Court made in 2006(1) MLJ 154 is to be clarified." Thereafter, the present Full Bench has been constituted by the Honourable the Chief Justice. 2. The precise question to be answered is whether the Insurer can be directed to pay compensation to the claimant in a case where the deceased and/or the injured was travelling as a gratuitous passenger in a goods vehicle and recover the same thereafter from the owner of such goods vehicle. 3. Before considering the aforesaid question, it would be appropriate to notice the relevant statutory provisions contained in the Motor Vehicles Act, 1988, (hereinafter referred to as the Act). Chapter XI of the Act contains provisions relating to insurance of Motor vehicles against third party risks. Section 146 envisages that no Motor Vehicle can be used in a public place unless a policy of insurance complying with the requirement of the Chapter is in force. Section 147 envisages the requirement of policies and limits of liability. As per Section 147(1)(b) in order to comply with the requirement of the Chapter, the policy must insure to the extent specified in 147(2). Such policy should insure inter alia against any liability which may be incurred by the insured in respect of the death of or bodily injured to any person including owner of the goods or his authorised representative carried in the vehicle or against death of or bodily injury to any passenger of a public service vehicle. However, the proviso to Section 147(1) clearly indicates that such policy shall not be required, inter alia, if a person is being carried in any goods vehicle. However, the proviso to Section 147(1) clearly indicates that such policy shall not be required, inter alia, if a person is being carried in any goods vehicle. In other words, the policy is required to cover the liability in respect of the owner of the goods or his authorised representative carried in a goods vehicle, but is not required to cover the liability in respect of passengers travelling in such vehicles. Section 147(3) contemplates that the policy shall be of no effect unless and until a certificate of insurance is issued in prescribed form. Section 149(1) envisages the duty of insurer to satisfy judgments and awards against persons insured in respect of third party risks. Section 149(2) encapsulates the defences which are available to the Insurer. The defences, which are contemplated, as per Section 149(2), are : (a) 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 the vehicle- (a) for hire or reward, where the vehicle is on the date of the 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 liability for injury caused or contributed to by conditions of war, civil war, riot or civil commotion; or (b) that the policy is void on the ground that it was obtained by the non-disclosure of a material fact or by a representation of fact which was false in some material particular." As per Section 149(4), after the issuance of certificate of insurance, "... so much of the policy as purports to restrict the insurance of the persons insured thereby by reference to any conditions other than those in clause (b) of sub-section (2) shall, as respects such liabilities as are required to be covered by a policy under clause (b) of sub-section (1) of Section 147, be of no effect. Provided that any sum paid by the insurer in or towards the discharge of any liability of any person which is covered by the policy by virtue only of this sub-section shall be recoverable by the insurer from that person." Under Section 149(5), if the amount exceeds the amount for which the insurer is otherwise liable under the policy, the insurer is entitled to recover the excess from the person insured. 4. It is thus seen that Section 149 itself contemplates that under certain contingencies, even though ultimately the insurer may not be liable, it is required to satisfy the award and recover the same subsequently from the owner. 5. Before considering the question, which is specifically in issue, in the present case, namely, whether the doctrine of pay and recover can be made applicable, it is first necessary to analyse in brief whether there is any requirement under Section 147 to cover the liability in respect of a passenger travelling in a goods vehicle. 6. A similar question arising under the Motor Vehicles Act, 1939, was considered in the decision reported in 1999 ACJ 1 = RLW 1999(2) SC 214 (Mallawwa and Others vs. Oriental Insurance Co. Ltd. and Others). There were several appeals under consideration. In some of the appeals before the Supreme Court, the deceased persons were the owners of the goods, who were accompanying the goods in goods vehicles, and, in some other appeals, the deceased persons were travelling as passengers in goods vehicles on payment of fare. The Supreme Court, while analysing the requirement of policies and limits of liability as envisaged under Section 95 of the Motor Vehicles Act, 1939, observed that the Insurance Company was not liable to cover the liability in respect of hirer of the goods travelling in a goods vehicle or a passenger travelling in a goods vehicle. In the said case, the Supreme Court approved the observation made by the Full Bench of the Orissa High Court in 1994 ACJ 138 (New India Assurance Co. In the said case, the Supreme Court approved the observation made by the Full Bench of the Orissa High Court in 1994 ACJ 138 (New India Assurance Co. Ltd. vs. Kanchan Bewa) and also observed that the earlier decision of the Supreme Court in 1977 ACJ 343 (Pushpabai Purshottam Udeshi vs. Ranjit Ginning and Pressing Co.) was in consonance with the interpretation rendered by the Supreme Court. The aforesaid decision of the Supreme Court was rendered in the context of the provisions contained in the Motor Vehicles Act, 1939. The Motor Vehicles Act, 1988, came into force with effect from 1st July, 1989. 7. The question of liability of the Insurance Company in respect of a passenger travelling in a goods vehicle, as per the 1988 Act, came to be considered in the decision reported in 2000 ACJ 1 : (2000) 1 SCC 237 = RLW 2000(1) SC 98 (New India Assurnce Co. Ltd. vs. Satpal Singh and others). In the said case, the deceased minor girl was travelling in a goods vehicle. Accident had taken place on 11.3.1990. The Tribunal had directed payment of Rs.25,000/- was compensation to the claimants, who were the father, brother and sister of the deceased. The High Court, while enhancing the compensation, negatived the contention of the Insurance Company that the insurer had no liability as the deceased was a gratuitous passenger in a truck. The Supreme Court upheld the decision of the High Court by observing:- "10. The result is that under the new Act an insurance policy covering third-party risk is not required to exclude gratuitous passengers in a vehicle, no matter that the vehicle is of any type or class. Hence the decisions rendered under the old Act vis-`-vis gratuitous passengers are of no avail while considering the liability of the insurance company in respect of any accident which occurred or would occur after the new Act came into force." 8. This decision of the Supreme Court had only a very short tenure as it was overruled by the subsequent decision reported in 2003 ACJ 1 : (2003) 2 SCC 223 = RLW 2003(2) SC 213 (New India Assurance Co. Ltd. vs. Asha Rani and others). In such decision, decided on 3.12.2002, the Supreme Court specifically overruled the decision in Satpal Singh's case, by observing as follows :- "9. Ltd. vs. Asha Rani and others). In such decision, decided on 3.12.2002, the Supreme Court specifically overruled the decision in Satpal Singh's case, by observing as follows :- "9. In Satpal's case, 2000 ACJ 1 (SC) the Court assumed that the provisions of Section 95(1) of the Motor Vehicles Act, 1939 are identical with Section 147(1) of the Motor Vehicles Act, 1988, as it stood prior to its amendment. But a careful scrutiny of the provisions would make it clear that prior to the amendment of 1994 it was not necessary for the insurer to insure against the owner of the goods or his authorised representative being carried in a goods vehicle. On an erroneous impression this Court came to the conclusion that the insurer would be liable to pay compensation in respect of the death or bodily injury caused to either the owner of the goods or his authorised representative when being carried in a goods vehicle the accident occurred. If the Motor Vehicles Amendment Act of 1994 is examined, particularly Section 46, by which the expression 'injury to any person' in the original Act stood substituted by the expression 'injury to any person including owner of the goods or his authorised representative carried in the vehicle', the conclusion is irresistible that prior to the aforesaid Amendment Act of 1994, even if the widest interpretation is given to the expression 'to any person' it will not cover either the owner of the goods or his authorised representative being carried in the vehicle. ... The judgment of this Court in Satpal case, therefore, must be held to have not been correctly decided and the impugned judgment of the Tribunal as well as that of the High Court accordingly are set aside and these appeals are allowed. It is held that the insurer will not be liable for paying compensation to the owner of the goods or his authorised representative on being carried in a goods vehicle when that vehicle meets with an accident and the owner of the goods or his representative dies or suffers any bodily injury." 8.1 Justice Sinha, while agreeing with the aforesaid view, in his concurring judgment, observed that "... Keeping in view the provisions of 1988 Act, we are of the opinion that as the provisions thereof do not enjoin any statutory liability on the owner of a vehicle to get his vehicle insured for any passenger travelling in a goods vehicle, the insurers would not be liable therefor." 9. The ratio of the aforesaid decision was subsequently followed in Oriental Insurance Co. Ltd. vs. Devireddy Konda Reddy and Others (2003 ACJ 468). It is, however, to be noticed that the decisions in Asha Rani's case and Devireddy Konda Reddy's case related to the accident which had occurred after 1988 Act but before prior to 1994 amendment came into force. 10. In relation to an accident which had occurred in the year 1999, the question as to whether the liability in respect of a passenger travelling in a goods vehicle was required to be covered or not came to be considered in the decision reported in 2004 ACJ 428 : (2004) 2 SCC 1 (National Insurance Co. Ltd. vs. Baljit Kaur and others). In the above case, the Supreme Court had an occasion to examine the question "... whether an insurance policy in respect of a goods vehicle would also cover gratuitous passengers ...". It was observed:- "20. It is, therefore, manifest that in spite of the amendment of 1994, the effect of the provision contained in Section 147 with respect to persons other than the owner of the goods or his authorized representative remains the same. Although the owner of the goods or his authorized representative would now be covered by the policy of insurance in respect of a goods vehicle, it was not the intention of the legislature to provide for the liability of the insurer with respect to passengers, especially gratuitous passengers, who were neither contemplated at the time the contract of insurance was entered into, nor was any premium paid to the extent of the benefit of insurance to such category of people." 11. In 2004 ACJ 721 : (2004) 13 SCC 224 (Oriental Insurance Co. Ltd. vs. Nanjappan and others), the Supreme Court by following the decisions in Asha Rani's case and Baljit Kaur's case held that the Insurance Company was not liable to pay in respect of the liability arising on account of the death of a passenger travelling in a goods vehicle. 12. Ltd. vs. Nanjappan and others), the Supreme Court by following the decisions in Asha Rani's case and Baljit Kaur's case held that the Insurance Company was not liable to pay in respect of the liability arising on account of the death of a passenger travelling in a goods vehicle. 12. The fact that the Insurance Company has no liability to cover the risk in respect of a passenger travelling in a goods vehicle has been subsequently reiterated in 2007 ACJ 1043 = RLW 2007(2) SC 1098 (New India Assurance Co. Ltd. vs. Vedwati and others) and 2008 ACJ 2144 (National Insurance Co. Ltd. vs. Kaushalaya Devi and others). 13. In a very recent decision reported in 2008 ACJ 1149 (National Insurance Co. Ltd. vs. Prema Devi), the Supreme Court, after referring to other decisions on such aspect, has reiterated that the Insurance Company is not liable to cover the liability in respect of a passenger travelling in a goods vehicle. 14. Let us now take stock of the discussions so far made. It is now apparent that under the Motor Vehicles Act, 1939, the Insurance Company was not required to cover the liability in respect of a passenger, whether gratuitous or otherwise travelling in a goods vehicle. Of course the liability in respect of a driver, cleaner or coolie was required to be covered to the extent envisaged under the Workmen Compensation Act. Though there was some doubt regarding extension of coverage to owner of the goods or the agent of the owner of the goods accompanying the goods in a goods vehicle, it was held in Mallawwa's case that the Insurance Company was not required to cover such liability. The position underwent a slight change after 1988 Act came into force, particularly after the amendment effected in the year 1994. After such amendment, the insurer is required to cover the liability in respect of owner of the goods or his agent accompanying the goods in a goods vehicle. The doubt, which was created in Satpal Singh's case, relating to requirement of covering the liability in respect of a passenger travelling in a goods vehicle, was laid to rest in Asha Rani's case and in more emphatic terms in Baljit Kaur's case and several other cases noticed above. The doubt, which was created in Satpal Singh's case, relating to requirement of covering the liability in respect of a passenger travelling in a goods vehicle, was laid to rest in Asha Rani's case and in more emphatic terms in Baljit Kaur's case and several other cases noticed above. The position of law is now clear that the insurer is not liable to pay compensation in respect of a liability arising on account of death or injury to a passenger in a goods vehicle other than the liability in respect of such accident where the owner of the goods or its authorised agent is travelling in such goods vehicle. 15. Stage is now set to consider whether the Insurer can be directed to pay such compensation to the claimant and recover the same subsequently from the Insured. This doctrine of pay and recover in the context of Section 149 has been recognised by the Supreme Court in several decisions such as in AIR 2001 SC 1419 : (2001) 4 SCC 342 = RLW 2001(3) SC 382 (New India Assurance Co. vs. Kamla and Others), wherein it was observed:- "21. A reading of the proviso to sub-section (4) as well as the language employed in sub-section (5) would indicate that they are intended to safeguard the interest of an insurer who otherwise has no liability to pay any amount to the insured but for the provisions contained in Chapter XI of the Act. This means, the insurer has to pay to the third parties only on account of the fact that a policy of insurance has been issued in respect of the vehicle, but the insurer is entitled to recover any such sum from the insured if the insurer were not otherwise liable to pay such sum to the insured by virtue of the conditions of the contract of insurance indicated by the policy. 22. To repeat, the effect of the above provisions is this: when a valid insurance policy has been issued in respect of a vehicle as evidenced by a certificate of insurance the burden is on the insurer to pay to the third parties, whether or not there has been any breach or violation of the policy conditions. 22. To repeat, the effect of the above provisions is this: when a valid insurance policy has been issued in respect of a vehicle as evidenced by a certificate of insurance the burden is on the insurer to pay to the third parties, whether or not there has been any breach or violation of the policy conditions. But the amount so paid by the insurer to third parties can be allowed to be recovered from the insured if as per the policy conditions the insurer had no liability to pay such sum to the insured. . . . 25. The position can be summed up thus: The insurer and the insured are bound by the conditions enumerated in the policy and the insurer is not liable to the insured if there is violation of any policy condition. But the insurer who is made statutorily liable to pay compensation to third parties on account of the certificate of insurance issued shall be entitled to recover from the insured the amount paid to the third parties, if there was any breach of policy conditions on account of the vehicle being driven without a valid driving licence. . . . In the present case, if the Insurance Company succeeds in establishing that there was breach of the policy condition, the Claims Tribunal shall direct the insured to pay that amount to the insurer. In default the insurer shall (sic - not?) be allowed to recover that amount (which the insurer is directed to pay to the claimant third parties) from the insured person." 16. The above legal position was analysed with much more detail in AIR 2004 SC 1531 : (2004) 3 SCC 297 = RLW 2004(2) SC 161 (National Insurance Co. Ltd. vs. Swaran Singh and Others), wherein it was observed :- "77. Proviso appended to sub-section (4) of Section 149 is referable only to sub-section (2) of Section 149 of the Act. It is an independent provision and must be read in the context of Section 96(4) of the Motor Vehicles Act, 1939. Furthermore, it is one thing to say that the insurer will be entitled to avoid its liability owing to breach of terms of a contract of insurance but it is another thing to say that the vehicle is not insured at all. Furthermore, it is one thing to say that the insurer will be entitled to avoid its liability owing to breach of terms of a contract of insurance but it is another thing to say that the vehicle is not insured at all. If the submission of the learned counsel for the petitioner is accepted, the same would render the proviso to sub-section (4) as well as sub-section (5) of Section 149 of the Act otiose; nor can any effective meaning be attributed to the liability clause of the insurance company contained in sub-section (1) of Section 149. The decision in Kamla case (supra) has to be read in the aforementioned context. 78. Sub-section (5) of Section 149 which imposes a liability on the insurer must also be given its full effect. The insurance company may not be liable to satisfy the decree and, therefore, its liability may be zero but it does not mean that it did not have initial liability at all. Thus, if the insurance company is made liable to pay any amount, it can recover the entire amount paid to the third party on behalf of the assured. If this interpretation is not given to the beneficent provisions of the Act having regard to its purport and object, we fail to see a situation where beneficent provisions can be given effect to. Sub-section (7) of Section 149 of the Act, to which pointed attention of the Court has been drawn by the learned counsel for the petitioner, which is in negative language may now be noticed. The said provision must be read with sub-section (1) thereof. The right to avoid liability in terms of sub-section (2) of Section 149 is restricted as has been discussed hereinbefore. It is one thing to say that the insurance companies are entitled to raise a defence but it is another thing to say that despite the fact that its defence has been accepted having regard to the facts and circumstances of the case, the Tribunal has power to direct them to satisfy the decree at the first instance and then direct recovery of the same from the owner. These two matters stand apart and require contextual reading. . . . 99. These two matters stand apart and require contextual reading. . . . 99. It is, therefore, evident from the discussions made hereinbefore that the liability of the insurance company to satisfy the decree at the first instance and to recover the awarded amount from the owner or driver thereof has been holding the field for a long time. . . . 102. We may, however, hasten to add that the Tribunal and the court must, however, exercise their jurisdiction to issue such a direction upon consideration of the facts and circumstances of each case and in the event such a direction has been issued, despite arriving at a finding of fact to the effect that the insurer has been able to establish that the insured has committed a breach of contract of insurance as envisaged under sub-clause (ii) of clause (a) of sub-section (2) of Section 149 of the Act, the insurance company shall be entitled to realise the awarded amount from the owner or driver of the vehicle, as the case may be, in execution of the same award having regard to the provisions of Sections 165 and 168 of the Act. . . . 103. Although, as noticed hereinbefore, there are certain special leave petitions wherein the persons having the vehicles at the time when the accidents took place did not hold any licence at all, in the facts and circumstances of the case, we do not intend to set aside the said awards. Such awards may also be satisfied by the petitioners herein subject to their right to recover the same from the owners of the vehicles in the manner laid down therein. But this order may not be considered as a precedent. . . . 105. The summary of our findings to the various issues as raised in these petitions is as follows: . . . (i) to (ix) omitted as not necessary for our purpose (x) Where on adjudication of the claim under the Act the Tribunal arrives at a conclusion that the insurer has satisfactorily proved its defence in accordance with the provisions of Section 149(2) read with sub-section (7), as interpreted by this Court above, the Tribunal can direct that the insurer is liable to be reimbursed by the insured for the compensation and other amounts which it has been compelled to pay to the third party under the award of the Tribunal. Such determination of claim by the Tribunal will be enforceable and the money found due to the insurer from the insured will be recoverable on a certificate issued by the Tribunal to the Collector in the same manner under Section 174 of the Act as arrears of land revenue. The certificate will be issued for the recovery as arrears of land revenue only if, as required by sub-section (3) of Section 168 of the Act the insured fails to deposit the amount awarded in favour of the insurer within thirty days from the date of announcement of the award by the Tribunal. (xi) The provisions contained in sub-section (4) with the proviso thereunder and sub-section (5) which are intended to cover specified contingencies mentioned therein to enable the insurer to recover the amount paid under the contract of insurance on behalf of the insured can be taken recourse to by the Tribunal and be extended to claims and defences of the insurer against the insured by relegating them to the remedy before regular court in cases where on given facts and circumstances adjudication of their claims inter se might delay the adjudication of the claims of the victims." 17. The above decisions of the Supreme Court are in the context of the provisions contained in Section 149(4) and Section 149(5) corresponding to Section 96(4) and Section 96(5) of the Motor Vehicles Act, 1939. 18. Stage is now set to consider whether doctrine of "pay and recover" can be invoked in other cases, even though Section 149 is not as such applicable? We have already noticed that in Baljit Kaur's case it was categorically held that the Insurance Company is not obliged to cover the liability in respect of a passenger travelling in a goods vehicle. Even though the doctrine of pay and recover as envisaged in Section 149(4) and 149(5) was not applicable, the Supreme Court, however, in the said case, applied the theory of pay and recover in the peculiar facts and circumstances as is apparent from the observations made by the Supreme Court in the said decision to the following effect :- "21. The upshot of the aforementioned discussions is that instead and in place of the insurer the owner of the vehicle shall be liable to satisfy the decree. The upshot of the aforementioned discussions is that instead and in place of the insurer the owner of the vehicle shall be liable to satisfy the decree. The question, however, would be as to whether keeping in view the fact that the law was not clear so long such a direction would be fair and equitable. We do not think so. We, therefore, clarify the legal position which shall have prospective effect. The Tribunal as also the High Court had proceeded in terms of the decision of this Court in Satpal Singh, 2000 ACJ 1 (SC) = RLW 2000(1) SC 98. The said decision has been overruled only in Asha Rani, 2003 ACJ 1 (SC) = RLW 2003(2) SC 213. We, therefore, are of the opinion that the interest of justice will be subserved if the appellant herein is directed to satisfy the awarded amount in favour of the claimant, if not already satisfied, and recover the same from the owner of the vehicle. For the purpose of such recovery, it would not be necessary for the insurer to file a separate suit but it may initiate a proceeding before the executing court as if the dispute between the insurer and the owner was the subject-matter of determination before the Tribunal and the issue is decided against the owner and in favour of the insurer." 19. Subsequently, in Nanjappan's case, the Supreme Court followed the aforesaid decision by observing as follows :- "8. Therefore, while setting aside the judgment of the High Court we direct in terms of what has been stated in Baljit Kaur case, 2004 ACJ 428 (SC) that the insurer shall pay the quantum of compensation fixed by the Claims Tribunal, about which there was no dispute raised, to the respondent claimants within three months from today. For the purpose of recovering the same from the insured, the insurer shall not be required to file a suit. It may initiate a proceeding before the executing court concerned as if the dispute between the insurer and the owner was the subject-matter of determination before the Tribunal and the issue is decided against the owner and in favour of the insurer. Before release of the amount to the claimants, owner of the vehicle shall be issued a notice and he shall be required to furnish security for the entire amount which the insurer will pay to the claimants. Before release of the amount to the claimants, owner of the vehicle shall be issued a notice and he shall be required to furnish security for the entire amount which the insurer will pay to the claimants. The offending vehicle shall be attached, as a part of the security. . . ." 20. In 2007 Supreme Appeals Reporter (Civil) 683 : (2007) 7 SCC 56 = RLW 2007(4) SC 3013 (Oriental Insurance Co. Ltd. vs. Brij Mohan and Others), while dealing with a labourer who was travelling in a trolley attached to a tractor and holding that the liability was not required to be covered under Section 147 of the Motor Vehicles Act, Justice S.B. Sinha observed as follows:- "13. However, respondent no. 1 is a poor labourer. He had suffered grievous injuries. He had become disabled to a great extent. The amount of compensation awarded in his favour appears to be on a lower side. In the aforementioned situation, although we reject the other contentions of Ms Indu Malhotra, we are inclined to exercise our extraordinary jurisdiction under Article 142 of the Constitution of India so as to direct that the award may be satisfied by the appellant but it would be entitled to realize the same from the owner of the tractor and the trolley wherefor it would not be necessary for it to initiate any separate proceedings for recovery of the amount as provided for under the Motor Vehicles Act. 14. It is well settled that in a situation of this nature this Court in exercise of its jurisdiction under Article 142 of the Constitution of India read with Article 136 thereof can issue suit directions for doing complete justice to the parties. 15. In National Insurance Co. Ltd. vs. Kusum Rai & Others (2006) 4 SCC 2005 = RLW 2006(3) SC 1863), this Court observed: "19. Thus, although we are of the opinion that the appellant was not liable to pay the claimed amount as the driver was not possessing a valid licence and the High Court was in error in holding otherwise, we decline to interfere with the impugned award, in the peculiar facts and circumstances of the case, in exercise of our jurisdiction under Article 136 of the Constitution but we direct that the appellant may recover the amount from the owner in the same manner as was directed in Nanjappan" 21. It may be noticed that in Kusum Rai's case ((2006) 4 SCC 2005 = RLW 2006(3) SC 1863), Section 149(4) was apparently applicable. However, the same principle was extended in the above case by invoking Article 142 of the Constitution. 22. Following the Kusum Rai's case, in Premkumari and Others vs. Prahlad Dev and Others ((2008) 3 MLJ 568 (SC)), it was observed :- "10. In the case of National Insurance Co. Ltd. vs. Kusum Rai and Others., (2006) 4 SCC 250 = RLW 2006(3) SC 1863, the vehicle was being used as a taxi. It was, therefore, a commercial vehicle. The driver of the said vehicle was required to hold an appropriate licence therefor. Ram Lal, who allegedly was driving the said vehicle at the relevant time, was holder of a licence to drive light motor vehicle only. He did not possess any licence to drive a commercial vehicle. Therefore, there was a breach of condition of the contract of insurance. In such circumstances, the Court observed that the appellant National Insurance Co. Ltd., therefore, could raise the said defence while considering the stand of the Insurance Company. This Court, pointing out the law laid down in Swaran Singh (supra) concluded that the owner of the vehicle cannot contend that he has no liability to verify the fact as to whether the driver of the vehicle possessed a valid licence or not. However, taking note of the fact that the owner has not appeared, the victim was aged only 12 years, the claimants are from a poor background and to avoid another round of litigation, applying the decision in Oriental Insurance Co. Ltd. vs. Nanjappan, (2004) 13 SCC 224 and finding that though the appellant Insurance Company was not liable to pay the claimed amount as the driver was not possessing a valid licence and the High Court committed an error in holding otherwise, in the peculiar facts and circumstances of the case and in exercise of jurisdiction under Article 136 of the Constitution declined to interfere with the impugned judgment therein and permitted the appellant Insurance Company to recover the amount from the owner of the vehicle." 23. Learned counsel for the Insurance Company has, however, submitted that there are several recent decisions of the Supreme Court, wherein there is no direction to the Insurance Company to pay the amount and recover the same from the owner and, therefore, the ratio of such decisions should be followed by simply observing that the Insurance Company is not liable in such cases. 24. For example, in Vedwati's case (cited supra), the Supreme Court had simply concluded that the Insurance Company was not liable to cover the liability in respect of a passenger travelling in a goods vehicle. Even though there was reference to the decision in Baljit Kaur's case, yet no direction was issued to the Insurance Company to pay the amount to the claimant and to recover the same from the owner thereafter. Similarly, no such direction was issued in 2008 ACJ 2144 and 2008 ACJ 1149 (cited supra). 25. Though the Supreme Court has jealously protected the interest of third party wherever possible, it has indicated its disinclination to extend the doctrine of "pay and recover" to other cases. For example, the principle of pay and recover as enshrined in Section 149(4) and 149(5) and interpreted in Swaran Singh's case, came to be considered in AIR 2007 SC 1563 : (2007) 3 SCC 700 = RLW 2007(3) SC 2012 (National Insurance Co. Ltd. vs. Laxmi Narain Dhut), wherein it was observed as follows :- "24. In the background of the statutory provisions, one thing is crystal clear i.e. the statute is beneficial one qua the third party. But that benefit cannot be extended to the owner of the offending vehicle. The logic of fake licence has to be considered differently in respect of the third party and in respect of own damage claims. . . . 39. In view of the above analysis the following situations emerge: 1. The decision in Swaran Singh case1 has no application to cases other than third-party risks. 2. Where originally the licence was a fake one, renewal cannot cure the inherent fatality. 3. In case of third-party risks the insurer has to indemnify the amount, and if so advised, to recover the same from the insured. 4. The concept of purposive interpretation has no application to cases relatable to Section 149 of the Act. 2. Where originally the licence was a fake one, renewal cannot cure the inherent fatality. 3. In case of third-party risks the insurer has to indemnify the amount, and if so advised, to recover the same from the insured. 4. The concept of purposive interpretation has no application to cases relatable to Section 149 of the Act. The High Courts/Commission shall now consider the matter afresh in the light of the position in law as delineated above." 26. The aforesaid position was again reiterated in AIR 2007 SC 1609 : AIR 2007 SC 1609 (Oriental Insurance Co. Ltd. vs. Meena Variyal & Others), wherein it was observed:- "13. We shall now examine the decision in Swaran Singh (supra) on which practically the whole of the arguments on behalf of the claimants were rested. On examining the facts, it is found that, that was a case which related to a claim by a third party. In claims by a third party, there cannot be much doubt that once the liability of the owner is found, the insurance company is liable to indemnify the owner, subject of course, to any defence that may be available to it under Section 149(2) of the Act. In a case where the liability is satisfied by the insurance company in the first instance, it may have recourse to the owner in respect of a claim available in that behalf. . . . 14. It is difficult to apply the ratio of this decision to a case not involving a third party. The whole protection provided by Chapter XI of the Act is against third-party risk. Therefore, in a case where a person is not a third party within the meaning of the Act, the insurance company cannot be made automatically liable merely by resorting to Swaran Singh (supra) ratio. This appears to be the position. This position was expounded recently by this Court in National Insurance Co. Ltd. vs. Laxmi Narain Dhut [2007(4) SCALE 36 = RLW 2007(3) SC 2012]. . . . . . . 20. We are thus satisfied that based on the ratio in Swaran Singh (supra)the Insurance Company cannot be made liable in the case on hand to pay the compensation first and to recover it from the insured, the owner of the vehicle. . . . . . . 20. We are thus satisfied that based on the ratio in Swaran Singh (supra)the Insurance Company cannot be made liable in the case on hand to pay the compensation first and to recover it from the insured, the owner of the vehicle. The deceased being an employee not covered by the Workmen s Compensation Act, of the insured, the owner of the vehicle, has not to be covered compulsorily under the Act and only by entering into a special contract by the insured with the insurer could such a person be brought under coverage. There is no case that there is any special contract in that behalf in this case. . . . . . . 26. On the facts of this case, there is no finding that Mahmood Hasan, another employee of the owner was driving the vehicle. Even if he was, there is no finding of his negligence. The victim was the Regional Manager of the Company that owned the car. He was using the car given to him by the Company for use. Whether he is treated as the owner of the vehicle or as an employee, he is not covered by the insurance policy taken in terms of the Act 'without any special contract' since there is no award under the Workmen's Compensation Act that is required to be satisfied by the insurer. In these circumstances, we hold that the appellant Insurance Company is not liable to indemnify the insured and is also not obliged to satisfy the award of the Tribunal/Court and then have recourse to the insured, the owner of the vehicle. The High Court was in error in modifying the award of the Tribunal in that regard. 27. In AIR 2007 SC 2870 = 2008(1) RLW (SC) 309 (National Insurance Co. Ltd. vs. Anjana Shyam & Others), it was observed :- "14. It is true that the provisions in Chapter XI of the Act are intended for the benefit of third parties with a view to ensure that they receive the fruits of the awards obtained by them straightaway with an element of certainty and not to make them wait for a prolonged recovery proceeding as against the owner of the vehicle. It is true that the provisions in Chapter XI of the Act are intended for the benefit of third parties with a view to ensure that they receive the fruits of the awards obtained by them straightaway with an element of certainty and not to make them wait for a prolonged recovery proceeding as against the owner of the vehicle. But from that, it would not be possible to take the next step and find that the Insurance Company is bound to cover liabilities not covered by the contract of insurance itself. The Act only imposes an obligation to take out insurance to cover third-party risks and in the case of stage carriages, the passengers to be carried in the vehicle and the passengers to be carried in the vehicle can be understood only as passengers authorised or permitted to be carried in the vehicle. 15. In spite of the relevant provisions of the statute, insurance still remains a contract between the owner and the insurer and the parties are governed by the terms of their contract. The statute has made insurance obligatory in public interest and by way of social security and it has also provided that the insurer would be obliged to fulfil his obligations as imposed by the contract and as overseen by the statute notwithstanding any claim he may have against the other contracting party, the owner, and meet the claims of third parties subject to the exceptions provided in Section 149(2) of the Act. But that does not mean that an insurer is bound to pay amounts outside the contract of insurance itself or in respect of persons not covered by the contract at all. In other words, the insured is covered only to the extent of the passengers permitted to be insured or directed to be insured by the statute and actually covered by the contract. . . . . We are of the view that the Insurance Company can be made liable only in respect of the number of passengers for whom insurance can be taken under the Act and for whom insurance has been taken as a fact and not in respect of the other passengers involved in the accident in a case of overloading. . . . We are of the view that the Insurance Company can be made liable only in respect of the number of passengers for whom insurance can be taken under the Act and for whom insurance has been taken as a fact and not in respect of the other passengers involved in the accident in a case of overloading. . . . In other words, the higher of the 42 awards will be taken into account and it would be the sum total of those higher 42 awards that would be the amount that the Insurance Company would be liable to deposit. It will be for the Tribunal thereafter to direct distribution of the money so deposited by the Insurance Company proportionately to all the claimants, here all the 90, and leave all the claimants to recover the balance from the owner of the vehicle. In such cases, it will be necessary for the Tribunal, even at the initial stage, to make appropriate orders to ensure that the amount could be recovered from the owner by ordering attachment or by passing other restrictive orders against the owner so as to ensure the satisfaction in full of the awards that may be passed ultimately." 28. In (2008) 1 SCC (Cri) 517 : (2008) 2 SCC 595 = 2008(2) RLW 1358 (SC) (Deddappa and Others vs. Branch Manager, National Insurance Co. Ltd.), the accident took place on 6.2.1998, when the tempo being rashly and negligently driven by Respondent No.2, who was the driver-cum-owner of such tempo, ran over the daughter of the appellant. The vehicle was purportedly insured with the National Insurance Company Limited for the period from 17.10.1997 to 16.10.1998, but the cheque issued for such insurance having been dishonoured, the policy had been cancelled. The cheque, dated 15.10.1997, had been returned on 21.10.1997 with an endorsement "fund insufficient". The cancellation of the policy was intimated to the owner as well as the RTO vide letter dated 6.11.1997 and the accident took place much after such communication. It was observed:- "18. The ratio of the said decision was, however, noticed by this Court in New India Assurance Co. Ltd. vs. Rula. The cancellation of the policy was intimated to the owner as well as the RTO vide letter dated 6.11.1997 and the accident took place much after such communication. It was observed:- "18. The ratio of the said decision was, however, noticed by this Court in New India Assurance Co. Ltd. vs. Rula. It was held that ordinarily a liability under the contract of insurance would arise only on payment of premium, if such payment was made a condition precedent for taking effect of the insurance policy but such a condition which is intended for the benefit of the insurer can be waived by it. It was opined: "13. - If, on the date of accident, there was a policy of insurance in respect of the vehicle in question, the third party would have a claim against the Insurance Company and the owner of the vehicle would have to be indemnified in respect of the claim of that party. Subsequent cancellation of the insurance policy on the ground of non-payment of premium would not affect the rights already accrued in favour of the third party." The dicta laid down therein clarifies that if on the date of accident the policy subsists, then only the third party would be entitled to avail the benefit thereof. . . . 24. We are not oblivious of the distinction between the statutory liability of the insurance company vis-`-vis a third party in the context of Sections 147 and 149 of the Act and its liabilities in other cases. But the same liabilities arising under a contract of insurance would have to be met if the contract is valid. If the contract of insurance has been cancelled and all concerned have been intimated thereabout, we are of the opinion, the insurance company would not be liable to satisfy the claim." There was no direction to the insurer to pay the amount and recover the same. 29. In 2008(2) Supreme 451 (Sardari & Others vs. Sushil Kumar & Others), the accident took place on 10.2.1985 and the claim application was under Section 110-A of the Motor Vehicles Act, 1939. The plea of the Insurance Company was that the driver of the tractor did not hold a valid and effective license. The High Court directed that compensation should be paid by the owner, which was challenged by the claimants / appellants. It was observed:- "7. The plea of the Insurance Company was that the driver of the tractor did not hold a valid and effective license. The High Court directed that compensation should be paid by the owner, which was challenged by the claimants / appellants. It was observed:- "7. Although, in terms of a contract of insurance, which is in the realm of private law domain having regard to the object for which Section 147 and 149 of the Act had been enacted, the social justice doctrine as envisaged in the preamble of the Constitution of India has been given due importance. The Act, however, itself provides for the cases where the insurance Company can avoid its liability. Avoidance of such liability would largely depend upon violation of the conditions of contract of insurance. Where the breach of conditions of contract is ex-facie apparent from the records, the Court will not fasten the liability on the Insurance Company. In certain situations, however, the Court while fastening the liability on the owner of the vehicle may direct the Insurance Company to pay to the claimants the awarded amount with liberty to it to recover the same from the owner." It is to be noted that the Supreme Court did not apply the doctrine of "pay and recover". 30. From a conspectus of the decisions, thus analysed, it is now apparent that before Asha Rani's case was decided, the decision in Satpal Singh's case was holding the field and such latter decision was overruled only in Asha Rani's case. Under such peculiar circumstances in Baljit Kaur's case it was observed, that even though the Insurance Company was not liable to pay the compensation in respect of a passenger in a goods vehicle, yet since the law was not clear before Asha Rani's case was decided, the doctrine of prospective overruling was applied and a direction was issued in the interest of justice directing the Insurance Company to satisfy the award and recover the same from the owner of the vehicle. In other words, even though the statutory provision under Section 149(4) and Section 149(5) was not applicable, the Supreme Court applied the Doctrine of 'pay and recover'. In other words, even though the statutory provision under Section 149(4) and Section 149(5) was not applicable, the Supreme Court applied the Doctrine of 'pay and recover'. The ratio of the said decision has been applied selectively in some of the later decisions and in some of the subsequent decisions, the doctrine of 'pay and recover' in respect of matters which are not strictly covered under Sections 149(4) and 149(5) has not been applied by the Supreme Court depending upon the facts and circumstances of a particular case. Therefore, it cannot be said as an inexorable principle of law that in each case where the liability is in respect of a passenger in a goods vehicle, which is not required to be covered under Section 147 of the Act, the Insurance Company would be directed to first pay the amount and thereafter recover the same from the owner and such discretion is obviously with the Court either to apply such principle or not. 31. Thus from an analysis of the statutory provisions as explained by the Supreme Court in various decisions rendered from time to time, the following picture emerges : (i) The Insurance Policy is required to cover the liability envisages under Section 147, but wider risk can always be undertaken. (ii) Section 149 envisages the defences which are open to the Insurance Company. Where the Insurance Company is not successful in its defence, obviously it is required to satisfy the decree and the award. Where it is successful in its defence, it may yet be required to pay the amount to the claimant and thereafter recover the same from the owner under such circumstance envisaged and enumerated in Section 149(4) and Section 149(5). (iii) Under Section 147 the Insurance Company is not statutorily required to cover the liability in respect of a passenger in a goods vehicle unless such passenger is the owner or agent of the owner of the goods accompanying such goods in the concerned goods vehicle. (iii) Under Section 147 the Insurance Company is not statutorily required to cover the liability in respect of a passenger in a goods vehicle unless such passenger is the owner or agent of the owner of the goods accompanying such goods in the concerned goods vehicle. (iv) Since there is no statutory requirement to cover the liability in respect of a passenger in a goods vehicle, the principle of "pay and recover", as statutorily recognised in Section 149(4) and Section 149(5), is not applicable ipso facto to such cases and, therefore, ordinarily the Court is not expected to issue such a direction to the Insurance Company to pay to the claimant and thereafter recover from the owner. (v) Where, by relying upon the decision of the Supreme Court in Satpal Singh's case, either expressly or even by implication, there has been a direction by the Trial Court to the Insurance Company to pay, the appellate court is obviously required to consider as to whether such direction should be set aside in its entirety and the liability should be fastened only on the driver and the owner or whether the Insurance Company should be directed to comply with the direction regarding payment to the claimant and recover thereafter from the owner. (vi) No such direction can be issued by any trial court to the Insurance Company to pay and recover relating to liability in respect of a passenger travelling in a goods vehicle after the decision in Baljit Kaur's case merely because the date of accident was before such decision. The date of the accident is immaterial. Since the law has been specifically clarified, no trial court is expected to decide contrary to such decision. (vii) Where, however, the matter has already been decided by the trial court before the decision in Baljit Kaur's case, it would be in the discretion of the appellate court, depending upon the facts and circumstances of the case, whether the doctrine of 'pay and recover' should be applied or as to whether the claimant would be left to recover the amount from the person liable i.e., the driver or the owner, as the case may be. 32. With the above clarifications, the reference is answered. 32. With the above clarifications, the reference is answered. The learned single Judge has already categorically held that the claimant was a passenger in a goods vehicle and the contention that he was the owner of the goods travelling in the goods vehicle has not been accepted. The learned Single Judge is now required to consider as to whether in the facts and circumstances of the case, the doctrine of 'pay and recover' can be applied even though the liability in respect of a person, who was travelling in a goods vehicle, was not statutorily required to be covered under the policy.