THE HIGH COURT OF SIKKIM : GANGTOK

(Civil Appellate Jurisdiction)

Dated : 12th June, 2023

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SINGLE BENCH : THE HON‟BLE MRS. JUSTICE MEENAKSHI MADAN RAI, JUDGE
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MAC App. No.06 of 2021
0

Appellant : Suresh Khati

versus

Respondents : Santosh Chetry @

Santosh Chettri and Others

Appeal under Section 173 of the Motor Vehicles Act, 1988

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Appearance
Ms. Navtara Sarda, Advocate (Legal Aid Counsel) for the Appellant.
None for Respondent No.1.
Mr. Deven Rai, Advocate for Respondent No.2.
Mr. Umesh Ranpal, Advocate (Legal Aid Counsel) for Respondent
No.3.
None for Respondent No.4.
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JUDGMENT
Meenakshi Madan Rai, J.
1. The Learned Motor Accidents Claims Tribunal, East

Sikkim, at Gangtok (for short, “Claims Tribunal”), vide the

impugned Judgment, dated 05-08-2020, computed the total

compensation payable to the Claimant as ₹ 24,11,279/-(Rupees

twenty four lakhs, eleven thousand, two hundred and seventy

nine) only and ordered that the Insurer, OP No.1, pay the

compensation amount to the Claimant, with interest @ 9% per

annum, from the date of filing of the Claim Petition till full and final

payment. It was further ordered that, OP No.1 was at liberty to

recover the same from the OPs No.2, 3 and 4 in accordance with

law.
 MAC App. No.06 of 2021 2

Suresh Khati vs. Santosh Chetry @ Santosh Chettri and Others

2. The Appellant being aggrieved by the Judgment and

Award supra, in MACT Case No.60 of 2017 (Santosh Chetry alias

Santosh Chettri vs. The Branch Manager, National Insurance

Company Ltd. and Others), dated 05-08-2020, is before this Court.

3. Before proceeding further with the matter, to bring

clarity with regard to the parties, their order of appearance before

the Claims Tribunal and before this Court are being delineated

hereunder;

(i) Appellant, (owner of the vehicle) was OP No.2

before the Claims Tribunal.

(ii) Respondent No.1 (survivor of the accident) was

Claimant before the Claims Tribunal.

(iii) Respondent No.2 (Insurer) was OP No.1 before

the Claims Tribunal.

(iv) Respondent No.3, (authorized driver) and

Respondent No.4, (unauthorized driver) were OP No.3

and OP No.4, respectively before the Claims Tribunal.

4. The parties shall be referred to in terms of their

appearance before this Court.

5. Advancing her arguments, Learned Legal Aid Counsel

for the Appellant, contended that, the Appellant had handed over

the vehicle in accident, Chevrolet Spark (Taxi), bearing registration

No.SK-01-T-2614, to Respondent No.3, the driver employed by

him for the vehicle, who possessed a valid license and was the

authorized driver of the vehicle. That, Respondent No.3 being

inebriated at the relevant time had handed over the vehicle to

Respondent No.4. The accident occurred on account of the rash

and negligent driving of Respondent No.4. The Claims Tribunal,

 MAC App. No.06 of 2021 3

Suresh Khati vs. Santosh Chetry @ Santosh Chettri and Others

ordered the Insurance-Company, Respondent No.2, to pay the

compensation amount to the Respondent No.1, which was then to

be realised from the Appellant, the Respondent No.3 and the

Respondent No.4. Learned Counsel for the Appellant further urged

that, in the Synopsis of arguments submitted before the Claims

Tribunal, she had relied on the ratio of this High Court in Binod

Kumar Agarwal vs. Ratna Kumar Chettri and Others1, which the Claims

Tribunal failed to consider. That, the ratio supra of this High Court

had referred to the Judgment of the Hon‟ble Supreme Court in

Skandia Insurance Company Ltd. vs. Kokilaben Chandravadan and

Others 2 , wherein it was held that the exclusion clause in the

contract of insurance, making the owner absolutely liable,

irrespective of circumstances leading to an unlicensed driver

driving the vehicle, must be “read down”, being in conflict with the

main statutory provision. Further, while discussing the extent of

vicarious liability of the owner, it was held that the owner was not

liable when the accident was caused by the unlicensed person,

when the licensed driver employed by the owner left the vehicle

unattended, contrary to express or implied orders of the owner. It

was canvassed that, as the facts supra are similar to the instant

Appeal, the Appellant be absolved from paying the insurer,

Respondent No.2, as erroneously ordered in terms of the impugned

Judgment, dated 05-08-2020.

6. Learned Legal Aid Counsel for Respondent No.3

submitted that he is also to be exempted from making payment to

the Respondent No.2, in view of the fact that, he had allowed

Respondent No.4 to drive the vehicle being conscious of the

1
SIKKIM LAW JOURNAL 2017, VOLUME 40, PART I, SL. NO.39, Page 239-249
2
(1987) 2 SCC 654
 MAC App. No.06 of 2021 4

Suresh Khati vs. Santosh Chetry @ Santosh Chettri and Others

circumstance that he was not in a position to drive at the relevant

time. That, Respondent No.4 had caused the accident,

nevertheless, the Appellant being the owner of the vehicle was

vicariously liable to indemnify the claim put forth and not the

Respondent No.3 as erroneously ordered by the Claims Tribunal.

7. Per contra, Learned Counsel for the Respondent No.2

advanced the argument that the Respondent No.2, Insurance-

Company had paid the compensation as ordered. That, despite the

order of the Claims Tribunal, the amounts as ordered were yet to

be recovered from the Appellant, the Respondent No.3 and the

Respondent No.4, who being responsible for the accident, were

liable to pay the Insurance-Company, as correctly ordered by the

Claims Tribunal.

8. Respondents No.1 and 4 went unrepresented, despite

due service of Notice.

9. The rival contentions put forth have been heard at

length and considered. All documents on record including the

evidence and the impugned Judgment have been duly perused.

(i) This Court is now to consider whether the Claims

Tribunal erred in ordering the Respondent No.2 to pay the

compensation and recover the same from the Appellant, the

Respondents No.3 and 4.

(ii) Before embarking on the above exercise, the facts

pertaining to the instant matter are briefly set out. Respondent

No.1, the survivor of the vehicular accident, sought compensation

of a sum of ₹ 1,02,28,560.80/- (Rupees one crore, two lakhs,

twenty eight thousand, five hundred sixty and eighty paisa) only,

with interest @ 12%, on account of injuries sustained by him, on

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Suresh Khati vs. Santosh Chetry @ Santosh Chettri and Others

06-04-2016, at around 2200 hours, near Hotel Sonam Palgay,

Deorali Bazar Road, Gangtok, when the vehicle in which

Respondent No.3 amongst others, was travelling, driven by

Respondent No.4, met with an accident. That, the authorized

driver, Respondent No.3, at the relevant time, was inebriated and

was unable to drive the vehicle in accident and had insisted that

Respondent No.4 drive it, who accordingly took the wheel. On his

inability to control the vehicle, it collided with a parked truck,

loaded with cement. Consequent, thereto the Respondent No.1,

the cleaner/handy boy of the parked truck, bearing registration

No.SK-01-D-1704, who was untying the ropes of the loaded truck,

was hit by the vehicle of the Appellant, causing him grievous

injuries. He was evacuated and admitted to the STNM Hospital,

Gangtok, on the same night, where his left leg, knee downward,

was amputated, having been crushed between the two vehicles.

The amputation resulted in 70% disability of the Respondent No.1.

The Compensation was claimed inter alia on grounds that on

account of the accident and the resultant amputation, he had lost

his opportunities of future earnings as he was rendered unqualified

for obtaining employment in the Government or the Army and

consequential retiral benefits, free medical assistance to himself

and his parents and travelling concessions etc.

10. In the first instance, while considering the impugned

Judgment, it is noticed that the Respondent No.1 had claimed to

have been earning a monthly income of ₹ 12,000/-(Rupees twelve

thousand) only, which the Claims Tribunal doubted, in the absence

of any documentation. His salary was accordingly placed at ₹

7,000/-(Rupees seven thousand) only, per month, which has not

 MAC App. No.06 of 2021 6

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been objected to by the Respondent No.2. Respondent No.1 being

born on 10-04-1994 was aged about 21 years, 11 months and 26

days on the date of accident i.e., 06-04-2016. The Claims Tribunal

observed that the age of the Respondent No.1 was 21 years at the

time of accident, based on his PAN Card, Exhibit 46 and original

Aadhar Card, Exhibit 47. The age of the survivor was not assailed

by Respondent No.2.

(i) The Claims Tribunal taking into consideration the

documents pertaining to the medical expenses incurred by the

Respondent No.1, calculated such expenses at ₹ 16,679/-(Rupees

sixteen thousand, six hundred and seventy nine) only. In addition

to the above amount, at Paragraph 32 of the impugned Judgment,

the following computations were made;

“32. We may as such add the following amounts to

the figures of medical expenses arrived at above. ₹
7,000/- towards loss of earnings during the period of
his treatment(he was admitted in the hospital for one
month w.e.f 06.04.2016 to 05.05.2016); ₹ 2,50,000/-
towards future medical expenses given the extent of
his disablement and his young age; ₹ 1,00,000/-
towards pain and sufferings; ₹ 3,00,000/- towards
loss of amenities and enjoyment of life including loss
of marital prospects and marital happiness; ₹
50,000/- towards conveyance charges(and cost of
attendant); ₹1,00,000/- towards food and
nourishment. We may further add the amount under
the head „loss of future earnings‟ which would be as
follows. Since the monthly salary of the claimant has
been taken as ₹ 7,000/- we may add 40% of the said
salary towards prospects in view of his age in which
case the amount would come to ₹ 7,000/- + ₹
2,800/-(40%) = ₹ 9,800/-per month. As such his
annual income would be ₹ 9,800/- x 12 months = ₹
1,17,600/-. If multiplier of 18(as applicable here in
view of the age of the claimant i.e., 21 years) is
applied, the amount would come to ₹ 1,17,600/- x 18
= ₹ 21,16,800/-. In view of 75% permanent physical
functional disability the amount under the head „loss
of future income‟ would be 75% of 21,16,800/- which
would come to 15,87,600/-. The overall amount
would as such come to ₹ 24,11,279/-(Rupees Twenty
four lakhs eleven thousand two hundred and seventy
nine) only.” (emphasis supplied)
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Suresh Khati vs. Santosh Chetry @ Santosh Chettri and Others

11. Section 147 of the Motor Vehicles Act, 1988

(hereinafter, the “MV” Act) lays down the requirements of Policies

and limits of liability. In order to comply with the requirements of

Chapter XI of the MV Act, a policy of insurance must be a policy

which is issued by a person, who is an authorized insurer and

insures the person or classes of persons specified in the policy, to

the extent mentioned in Sub-section 2 of Section 147 of the MV

Act. The object of obtaining an insurance policy is to ensure that it

covers the liability incurred by the insured, in respect of death or

bodily injury to any person, carried in the vehicle of the insured or

damage to any property of a third party, caused by or arising out

of the use of the vehicle. The provision mandates a compulsory

coverage of insurance for passengers travelling in public transport

vehicle, passenger vehicle, goods vehicle along with goods and the

workmen under the Workmen‟s Compensation Act, 1923, employed

in connection with the motor vehicle, etc.

(i) Section 149 of the MV Act lays down the duty of the

insurer to satisfy Judgments and Awards against persons insured,

in respect of third party risk.

(ii) It is not in dispute that the vehicle was duly insured

vide Insurance policy, Exhibit B, Respondent No.2 being the insurer

and the Appellant the owner of the insured vehicle.

(iii) That, the contract of insurance is a contract of

indemnity is no more res integra. The insurer is an indemnifier,

while the insured is an indemnity holder. Thus, the essence of the

contract of insurance is to indemnify the insured against the claim

of a third party. The expression „third party‟ means a person who

is not a party to the contract, but beneficiary of the contract and

 MAC App. No.06 of 2021 8

Suresh Khati vs. Santosh Chetry @ Santosh Chettri and Others

has the right to enforce the terms of contract against the insurer

and the insured.

(iv) In National Insurance Company Limited vs. Yellamma and

Another
3
, the Supreme Court, at Paragraph 11, observed as

follows;

“11. A contract of insurance like any other contract, is

a contract between the insured and the insurer. The amount
of premium is required to be paid as a consideration for
arriving at a concluded contract. …………..”

(v) In Sohan Lal Passi vs. P. Sesh Reddy and Others4, it was

observed that when the insured had taken all precaution by

appointing a duly licensed driver, to drive the vehicle in question

and it was not established that it was the insured who had allowed

the vehicle to be driven by a person not duly licensed, due to which

the accident occurred, then the Insurance-Company cannot

repudiate its statutory liability, on the grounds of contravention of

condition of policy, including its liability in case of vehicle being

driven by person not duly licensed.

(vi) In New India Assurance Co., Shimla vs. Kamla and Others5,

the Supreme Court, at Paragraph 25, observed as follows;

“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 be
allowed to recover that amount (which the insurer is
directed to pay to the claimant third parties) from the
insured person.” (emphasis supplied)

3 (2008) 7 SCC 526

4 (1996) 5 SCC 21
5 (2001) 4 SCC 342
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Suresh Khati vs. Santosh Chetry @ Santosh Chettri and Others

(vii) In National Insurance Co. Ltd. vs. Swaran Singh and

Others6, a three Judge Bench of the Supreme Court observed inter

alia as follows;

“48. Furthermore, the insurance company with a

view to avoid its liabilities is not only required to show that
the conditions laid down under Section 149(2)(a) or (b) are
satisfied but is further required to establish that there has
been a breach on the part of the insured. By reason of the
provisions contained in the 1988 Act, a more extensive
remedy has been conferred upon those who have obtained
judgment against the user of a vehicle and after a certificate
of insurance is delivered in terms of Section 147(3). After a
third party has obtained a judgment against any person
insured by the policy in respect of a liability required to be
covered by Section 145, the same must be satisfied by the
insurer, notwithstanding that the insurer may be entitled to
avoid or to cancel the policy or may in fact have done so.
The same obligation applies in respect of a judgment against
a person not insured by the policy in respect of such a
liability, but who would have been covered if the policy had
covered the liability of all persons, except that in respect of
liability for death or bodily injury.” (emphasis supplied)

(viii) It was also further held that the breach of policy

condition e.g. disqualification of the driver or invalid driving license

of the driver, as contained in Sub-section (2)(a)(ii) of Section 149

of the MV Act, has to be proved to have been committed by the

insured, for the insurer to avoid any liability. The insurer is also to

prove that the insured was guilty of negligence and failed to

exercise reasonable care in the matter of fulfilling the condition of

the policy, regarding use of vehicles by a duly licensed driver, or

one who was not disqualified to drive at the relevant time. Mere

absence of, fake or invalid driving license or disqualification of the

driver for driving at the relevant time, are not in themselves

defences available to the insurer against either the insured or the

third parties.

(ix) At Paragraph 110 (ix) and (x), of the citation (ibid), it

was observed as follows;

6
(2004) 3 SCC 297
 MAC App. No.06 of 2021 10

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“110. ………………………………………………………………….
(ix) The Claims Tribunal constituted under Section
165 read with Section 168 is empowered to adjudicate all
claims in respect of the accidents involving death or of
bodily injury or damage to property of third party arising in
use of motor vehicle. The said power of the Tribunal is not
restricted to decide the claims inter se between claimant or
claimants on one side and insured, insurer and driver on the
other. In the course of adjudicating the claim for
compensation and to decide the availability of defence or
defences to the insurer, the Tribunal has necessarily the
power and jurisdiction to decide disputes inter se between
the insurer and the insured. The decision rendered on the
claims and disputes inter se between the insurer and insured
in the course of adjudication of claim for compensation by
the claimants and the award made thereon is enforceable
and executable in the same manner as provided in Section
174 of the Act for enforcement and execution of the award
in favour of the claimants.

(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.” (emphasis supplied)

(x) That, where the Insurance-Company was able to

establish that the owner handed over the vehicle to an

unauthorized person, the Appellant shall initially satisfy the award

and thereafter, if so advised, recover the same from the insured.

(xi) It is evident from all of the afore extracted citations

that only when the insurer is able to prove that there has been a

breach of condition of the insurance policy that the Tribunal can

conclude that the insurer is liable to be reimbursed by the insured,

for the compensation and other amounts which it had paid to the

third party under the award of the Tribunal. In other words „pay
 MAC App. No.06 of 2021 11

Suresh Khati vs. Santosh Chetry @ Santosh Chettri and Others

and recover‟ can only be ordered by the Tribunal when a breach of

the policy conditions are established by the insurer.

12. That, having been said while considering the rival

contentions canvassed, it is imperative to refer to the Judgment of

this Court in Binod Kumar Agarwal (supra), wherein at Paragraphs

15 to 19, it was observed as follows;

“15. In Skandia Insurance Company ltd. [(1987) 2 SCC

654] relied on by the Appellant, the Supreme Court took up
the question as to whether the insurer is entitled to claim
immunity from a decree obtained by the dependents of the
victim of a fatal accident, on the ground that the insurance
policy provided “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 license during the period of
disqualification and that such exclusion was permissible in
the context of Section 96(2)(b)(ii)”. The facts therein were
that a truck had come from Barejadi and had been unloaded
at Baroda. The driver had gone to bring snacks from the
opposite shop, leaving the engine running with the key in
the ignition and not in the cabin of the truck as alleged by
him. The driver was grossly negligent in leaving the truck
with its running engine in the control of the cleaner, which
became the immediate cause of the accident. The Claims
Tribunal found the owner of the car viz; insured, to be
vicariously liable along with the driver and the cleaner. The
High Court, inter alia, held that the owner never gave
permission to the cleaner to drive and therefore, the owner
even though he had become liable by reason of his vicarious
liability, could not be held guilty of the breach of the
contractual condition embodied in the policy of insurance.
Thus, the insurer could not plead any exemption on the
ground that the owner had committed breach of the
specified condition. Before the Supreme Court, it was
contended on behalf of the Insurance Company that since
admittedly there was an exclusion clause, the insurance
company would not be liable if at the point of time when the
accident occurred, the person who had been driving the
vehicle was not a person duly licensed to drive the vehicle.
It was immaterial that the insured had engaged a licensed
driver and had entrusted the vehicle for being driven by
him. Once it was established that the accident occurred
when an unlicensed person was at the wheels, the Insurance
Company would be exonerated from the liability. The
validity of this argument advanced in order to assail the
view taken by the High Court was to be tested in the light of
the provisions contained in Sections 96(1) and 96(2)(b)(ii)
of the Act of 1939. The Supreme Court before doing so
discussed several decisions of various High Courts on the
same issue viz; in Sardar Nand Singh v. Abhyabala Debi [AIR
1955 Ass 157], the view taken therein was that the master is
undoubtedly liable for the wrongful act, conduct or
negligence of his servant, where the act or conduct or
negligence occurs in the course of the masters employment
 MAC App. No.06 of 2021 12

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or in furtherance of his interest, notwithstanding the fact

that the servant may have been prohibited from doing such
an act. However, the High Court proceeded to absolve the
Insurance Company from the liability in the light of Section
96(2) of the Act of 1939 without examining or analyzing the
provisions of the said section and had taken for granted that
once it is established that the vehicle was driven by an
unlicensed person, the Insurance Company stood
exonerated.

16. In Shankar Rao vs. M/s Babulal Fouzdar and

Anr. [AIR 1980 MP 154], the High Court exonerated the Insurance
Company for the reason that, according to one of the terms
of the policy of insurance, the insurer‟s liability is subject to
the condition, that, the person driving the vehicle holds a
license to drive a vehicle or has held and is not disqualified
from holding or obtaining such a license and provided he is
in the employment of the insured and is driving on his order
or with his permission. Unless the person driving the vehicle
falls in that category, the insurer is not liable under the
policy and is therefore exempted from indemnifying the
insured. In Orissa State Commercial Transport Corporation,
Cuttack v. Dhumali Bewa [AIR 1982 Ori 70], the High Court
concluded that the Insurer was not liable as the vehicle was
driven by a person who had no driving license and the
accident did not take place in a public place. The decision in
Dwarka Prasad Jhunjhunwala and Anr. v. Sushila Devi [AIR
1983 Pat 246], was also taken up for consideration, where the
liability of the owner was shifted to the Insurer as the
vehicle was insured.

17. After considering the aforesaid decisions as

reflected hereinabove, the Supreme Court found that the
Judgments were buttressed by „ipse dixit‟ rather than
rationality and, inter alia, observed that the question
therefore deserves to be examined afresh on its own merits
on principle. It opined that the proposition is incontrovertible
that, so far as the owner of the vehicle is concerned, his
vicarious liability for damages arising out of the accident
cannot be disputed, having regard to the general principles
of law, as also having regard to the violation of the
obligation imposed by Section 84 of the Act of 1939, which
provides that no person driving or in charge of motor vehicle
shall cause or allow the vehicle to remain stationary in any
public place, unless there is in the driver‟s seat a person
duly licensed to drive the vehicle or unless the mechanism
has been stopped and a brake or brakes applied or such
other measures taken as to ensure that the vehicle cannot
accidentally be put in motion in the absence of the driver.

18. However, in the case of Skandia Insurance

Company ltd. [(1987) 2 SCC 654], the appellant had contended
that the exclusion clause is strictly in accordance with the
statutorily permissible exclusion embodied in Section
96(2)(b)(ii) of the Act of 1939 and that under the
circumstances the appellant Insurance Company is not
under a legal obligation to satisfy the judgment procured by
the respondents. Being in disagreement with the argument
canvassed, the Supreme Court held in Paragraph 12 as
follows;
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“12. The defence built on the exclusion clause

cannot succeed for three reasons, viz;-

1. On a true interpretation of the relevant

clause which interpretation is at peace with the
conscience of Section 96, the condition excluding
driving by a person not duly licensed is not absolute
and the promisor is absolved once it is shown that he
has done everything in his power to keep, honour,
and fulfil the promise and he himself is not guilty of a
deliberate breach.

2. Even if it is treated as an absolute promise,

there is substantial compliance therewith upon an
express or implied mandate being given to the
licensed driver not to allow the vehicle to be left
unattended so that it happens to be driven by an
unlicensed driver.

3. The exclusion clause has to be „read down‟ in

order that it is not at war with the „main purpose‟ of
the provisions enacted for the protection of victims of
accidents so that the promisor is exculpated when he
does everything in his power to keep the promise.”

19. The Supreme Court while reflecting on the

reasons for insuring against third party risk was of the
opinion that the provision has been inserted in order to
protect the members of the Community travelling in vehicles
or using the roads, from the risk attendant upon the user of
motor vehicles on the road. If an accident occurs and
compensation is awarded to the victims, then there ought to
be a guarantee that, the compensation, would be
recoverable from the persons held liable for the
consequences of the accident. Thus, the legislature has
made it obligatory that no motor vehicle shall be used,
unless a third party insurance is in force. Further, in order
to make the protection real, the legislature has also
provided that the judgment obtained shall not be defeated
by incorporation of the exclusion clause other than those
authorized by Section 96 of the Act of 1939 and by
providing that except and save to the extent permitted by
Section 96 of the Act of 1939, it will be the obligation of the
Insurance Company to satisfy the judgment obtained
against the persons insured against third party risks. It was
thus concluded that Section 96(2)(b)(ii) of the Act of 1939,
extends immunity to the Insurance Company if a breach is
committed of; “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 license during the period of
disqualification…..” That, if the insured was not at fault and
had not done anything he should not have, or was not
amiss in any respect, how could it be conscientiously
posited that he had committed a breach. It is only when the
insured himself places the vehicle in charge of a person
who does not hold a driving license that it can be said that
he is guilty of the breach of the promise that the vehicle
will be driven by a licensed driver. Unless, the insured is at
fault and is guilty of a breach, the insurer cannot escape
from the obligation to indemnify the insured and
successfully contend that he is exonerated, having regard
to the fact that the promisor (the insured) committed a
 MAC App. No.06 of 2021 14

Suresh Khati vs. Santosh Chetry @ Santosh Chettri and Others

breach of his promise. Therefore, it was concluded that the

exclusion clause does not exonerate the insurer.”
(emphasis supplied)

(i) In the case of Binod Kumar Agarwal (supra), it was clear

that the insured had given the vehicle in the hands of his

authorized and licensed driver. The insured though not travelling

in the same vehicle was of the firm belief that his employee would

be driving the vehicle. That, as held in Skandia Insurance Company

Ltd. (supra), when the insured had done everything within his

power inasmuch as he had engaged a licensed driver and placed

the vehicle in-charge of the said driver with the express or implied

mandate that it would be driven by him, it cannot be said that the

insured is guilty of any breach of the terms of the Insurance policy.

That, it is only in case of a breach or a violation of the promise on

the part of the insured that the insurer can hide under the umbrella

of the exclusion clause and avoid payment of compensation to the

third party or as in this case seek to recover it from the Appellant,

the Respondents No.3 and 4. That, in Paragraph 14 of Skandia

Insurance Company Ltd. (supra), it was succinctly pointed out that in

view of this provision, apart from the implied mandate to the

licensed driver not to place an unlicensed person in-charge of the

vehicle, there is also a statutory obligation on the said person not

to leave the vehicle unattended and not to place it in-charge of an

unlicensed driver. That, what is prohibited by law must be treated

as a mandate to the employee and should be considered sufficient

in the eye of law for excusing non-compliance with the conditions.

It cannot therefore in any case be considered as a breach on the

part of the insured.

 MAC App. No.06 of 2021 15

Suresh Khati vs. Santosh Chetry @ Santosh Chettri and Others

(ii) The observation in Skandia Insurance Company Ltd.

(supra), was affirmed by a three Judge Bench in Sohan Lal Passi

(supra), which in turn came up for discussion before a three Judge

Bench of the Supreme Court in Swaran Singh and Others (supra),

where it was observed that an Insurance-Company cannot shake

off its liability to pay compensation only by saying that at the

relevant point of time, the vehicle was driven by a person who did

not have a license.

(iii) In Sohan Lal Passi (supra), the Supreme Court

elucidated and observed that;

“12. ………………………………………………………………………………
96. ……………………………………………………………………..

………………………………. If the insured has taken all precautions

by appointing a duly licensed driver to drive the vehicle in
question and it has not been established that it was the
insured who allowed the vehicle to be driven by a person not
duly licensed, then the insurance company cannot repudiate
its statutory liability under sub-section (1) of Section 96. In
the present case far from establishing that it was the
appellant who had allowed Rajinder Pal Singh to drive the
vehicle when the accident took place, there is not even any
allegation that it was the appellant who was guilty of
violating the condition that the vehicle shall not be driven by
a person not duly licensed. From the facts of the case, it
appears that the appellant had done everything within his
power inasmuch as he has engaged a licensed driver
Gurbachan Singh and had placed the vehicle in his charge.
While interpreting the contract of insurance, the tribunals
and courts have to be conscious of the fact that right to
claim compensation by heirs and legal representatives of the
victims of the accident is not defeated on technical grounds.
Unless it is established on the materials on record that it
was the insured who had wilfully violated the condition of
the policy by allowing a person not duly licensed to drive the
vehicle when the accident took place, the insurer shall be
deemed to be a judgment-debtor in respect of the liability in
view of sub-section (1) of Section 96 of the Act. It need not
be pointed out that the whole concept of getting the vehicle
insured by an insurance company is to provide an easy
mode of getting compensation by the claimants, otherwise
in normal course they had to pursue their claim against the
owner from one forum to the other and ultimately to
execute the order of the Accident Claims Tribunal for
realisation of such amount by sale of properties of the owner
of the vehicle. The procedure and result of the execution of
the decree is well known.”
 MAC App. No.06 of 2021 16

Suresh Khati vs. Santosh Chetry @ Santosh Chettri and Others

(iv) Despite the clear and concise Judgment of this Court,

explaining the provisions of law with due reference to the law laid

down by the Hon‟ble Supreme Court, vide its afore cited Judgments

and reference to it by Learned Counsel for the Appellant before the

Claims Tribunal, the Claims Tribunal disregarded the Judgment and

remained in ignorance of the observations on the issue not only of

this Court but also of the Hon‟ble Supreme Court. As a result, the

Claims Tribunal has not been able to comprehend the provisions of

Sections 147 and 149 of the MV Act. It is clear, the Appellant as

the owner of the vehicle in accident had placed his driver,

Respondent No.3, in-charge of the vehicle, the said driver had a

valid and effective license at the time of the accident. That, it was

Respondent No.3, who has acted irresponsibly and in an inebriated

condition handed over the vehicle to Respondent No.4. The vehicle

had been placed in the charge of Respondent No.3 with the express

and implied mandate that it would be driven by him and none else.

Consequently, there is no breach of the terms of the contract by

the Appellant.

13. In conclusion, summing up all the discussions which

have emanated hereinabove, it is apparent that the insurer cannot

escape its liability when it has failed to establish breach of the

policy conditions. The question of pay and recovery in the case of

an insured vehicle, as ordered by the Claims Tribunal would arise

only in the eventuality of proof, that, there was a breach of the

policy conditions. In the absence of such breach, as in the instant

case, where it has been established that the owner had put a

licensed driver in-charge of his vehicle, the question of pay and

recovery does not arise. The Claims Tribunal has clearly

 MAC App. No.06 of 2021 17

Suresh Khati vs. Santosh Chetry @ Santosh Chettri and Others

misdirected itself on this aspect and erroneously ordered recovery

of the insured amount from the Appellant, the Respondent No.3

and the Respondent No.4.

14. The said order of recovery of the Award amount from

the Appellant, the Respondent No.3 and Respondent No.4 is thus

set aside.

15. Before concluding the matter it is relevant to mention

here that Section 168 of the MV Act provides for award of the

Claims Tribunal. It requires no reiteration that if there are

materials it would be open to the Tribunal to award compensation

that it deems „just‟. That, having been said it appears that the

Claims Tribunal has also failed to abide by the decision of the

Constitutional Bench of the Hon‟ble Supreme Court in National

Insurance Company Limited vs. Pranay Sethi and Others7, wherein it

was held in no uncertain terms that „future prospects‟ for those

below 40 years of age would be computed at 50% and not 40% as

calculated by the Claims Tribunal.

16. Hence, the compensation computed by the Claims

Tribunal is set aside.

17. The compensation is computed afresh as below;

Annual income of the deceased (Rs.7,000/- x 12) Rs. 84,000.00

Add 50% of Rs.84,000/- as Future Prospects (+) Rs. 42,000.00

[In terms of the Judgment of National Insurance
Company Limited vs. Pranay Sethi and Others : (2017)
16 SCC 680]

Net yearly income Rs. 1,26,000.00

Multiplier to be adopted „18‟

[The age of the deceased at the time of death was about „21‟
and the relevant multiplier as per Judgment of Sarla Verma :
(2009) 6 SCC 121 is „18‟] (Rs.1,26,000/- x 18 = Rs.22,68,000/-)

Therefore, compensation for loss of future earning

based on his 70% disablement [Rs.22,68,000/- x 70%] (+) Rs.15,87,600.00
[As per the decision of SCI in Sri Anthony vs. the Managing Director,
KSRTC : Civil Appeal No.2551 of 2020 dated 10-06-2020)

7
(2017)16 SCC 680
 MAC App. No.06 of 2021 18

Suresh Khati vs. Santosh Chetry @ Santosh Chettri and Others

Add Actual medical expenses (+) Rs. 16,679.00

Add One month salary during the period of

hospitalisation (+) Rs. 7,000.00

Add Pain, suffering, disfigurement and disability (+) Rs. 3,00,000.00

[In terms of the Judgment of Mohd. Sabeer alias Shabir Hussain vs.
Regional Manager, U.P. State Road Transport Corporation : 2022
SCC OnLine 1701]

Add Loss of amenities (loss of prospects of marriage) (+) Rs. 2,00,000.00

[In terms of the Judgment of Mohd. Sabeer (supra)

Add Future medical expenses including attendant (+) Rs. 5,00,000.00

charges [In terms of the Judgment of Parminder Singh vs.
New India Assurance Company Limited and Others : (2019) 7 SCC 217]
Total = Rs.27,37,279.00

(Rupees twenty seven lakhs, thirty seven thousand, two hundred and seventy nine) only.

18. The Respondent No.2 shall pay the compensation

computed at ₹ 27,37,279/- (Rupees twenty seven lakhs, thirty

seven thousand, two hundred and seventy nine) only, to the

Respondent No.1 within a period of two months from today, with

interest @ 9% per annum, failing which the Respondent No.2 shall

pay interest @ 12% per annum, from the date of filing of the Claim

Petition i.e., 01-08-2017, till full realization, duly deducting the

amounts, if any, already paid by the Respondent No.2 to the

Respondent No.1.

19. Appeal disposed of accordingly.

20. Copy of this Judgment be transmitted to the Claims

Tribunal for information, along with its records.

( Meenakshi Madan Rai )

Judge
12-06-2023

Approved for reporting : Yes

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