United India Insurance Co. Ltd. v. Haris and Annamma Mathew

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE C.T.RAVIKUMAR & THE HONOURABLE MRS. JUSTICE MARY JOSEPH THURSDAY, THE 21ST DAY OF JANUARY 2016 / 1ST MAGHA, 1937 **MFA.No. 207 of 2010** AGAINST THE ORDER IN W.C.No.41/2005 of COMMISSIONER FOR WORKMENS COMPENSATION, KOZHIKODE DATED 15-04-2010 ## **APPELLANT** /2ND OPPOSITE PARTY UNITED INDIA INSURANCE CO.LTD. MAIN ROAD, THAMARASSERY, REPRESENTED BY ITS MANAGER, REGIONAL OFFICE, HOSPITAL ROAD,, ERNAKULAM, KOCHI-11. BY ADV.SRI.GEORGE CHERIAN (THIRUVALLA) ## **RESPONDENTS** /APPLICANT & 3RD OPPOSITE PARTY: 1. HARIS, S/O.HUSSAIN, PALAKKAL (HOUSE) P.O.VAYALIDA, UNNIKULAM (VIA), KOZHIKODE, KOZHIKODE, PIN 673 001. 2. SMT.ANNAMMA MATHEW, NEDIYALIMOOLAYIL, KOODATHAI BAZAR, KOZHIKODE, PIN 673001. R2 BY ADV. SRI.ARUN.B.VARGHESE R2 BY ADV. SRI.JAYKAR.K.S. R2 BY ADV. SMT.M.RAMYA RAMACHANDRAN R2 BY ADV. SRI.K.V.SACHIDANANDAN R1 BY ADV. SRI.AVM.SALAHUDIN THIS MISC. FIRST APPEAL HAVING BEEN FINALLY HEARD ON 21-01-2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ## **C.T.RAVIKUMAR & MARY JOSEPH, JJ. --------------------------------------------------M.F.A. No.207 of 2010** **---------------------------------------------------** Dated this the 21[st] day of January, 2016 ## **JUDGMENT** ## **C.T.RAVIKUMAR, J.** The United India Insurance Co. Ltd., which was the 2[nd] opposite party in W.C.No.41/2005 on the files of the Commissioner for Workmen's Compensation, Kozhikode filed this appeal against the order dated 15.04.2010 passed thereon, whereby the application filed by the first respondent/applicant therein under Section 22 of the Workmen's Compensation Act, 1923 (hereinafter referred to as 'the Act' for short) was ordered in favour of the applicant and the appellant herein was saddled with the liability to indemnify the second respondent herein/3[rd] opposite party therein. Essentially, this appeal has been filed mainly contending that the Commissioner went wrong in holding that the appellant is vicariously liable to indemnify the second respondent/3[rd] opposite party when the insured died on M.F.A.No.207/2010 2 22.09.2002 and the policy was renewed suppressing the material facts, on 10.01.2004. 2. The contention of the learned counsel for the appellant is that the appellant ought not have been saddled with the liability to indemnify the second respondent/3[rd] opposite party in the light of Section 149(2)(b) of the Motor Vehicles Act (for short `M.V. Act'). To appreciate the said contention an encapsulation of relevant facts is essential. The first respondent herein had filed the aforesaid application under Section 22 of the Act for compensation for the personal injuries sustained by him on 02.11.2004 in a motor vehicle accident. His contention was that he was a loading and unloading worker under the first opposite party in his mini lorry bearing Reg.No.KL-11/B-6489, the vehicle which is involved in the accident. It is stated therein that on 02.11.2004 at about 9 a.m., while the applicant/first respondent was loading the boller into the mini lorry at Vayalida quarry, a big boller fell down on his right hand and his hand jammed between the boller and the mini lorry and M.F.A.No.207/2010 3 consequently, he sustained injuries. He was taken to Medical College Hospital, Kozhikode and ultimately his right ring finger and little finger were amputated. In the accident he had also sustained fracture dislocation of PIPJ right middle finger, as well. In the application it is stated that he was then drawing a monthly wages of Rs.6,000/- and the application was filed claiming a total compensation of Rs.1 lakh. Notice was issued to the first opposite party, the husband of the second respondent herein. It was returned with endorsement “expired”. Consequently, the second respondent, who was the wife of the first opposite party was impleaded as opposite party No.3. Though notice was issued to the 3[rd] opposite party for appearance and filing written statements, evidently, none had entered appearance and filed written statements on her behalf and consequently, the second respondent was declared _ex-parte_ . The second opposite party, the insurer filed a written statement admitting the insurance coverage of the vehicle and denying the averments in the application. Evidently, the second opposite party has also taken up the M.F.A.No.207/2010 4 contention that the first opposite party/the actual insured died on 22.09.2002 and that his legal heirs obtained an insurance policy on 10.01.2004 in the name of the deceased person, suppressing his death and therefore, the contract of insurance itself is void _ab initio_ . On the side of the applicant/first respondent herein, he himself was examined as AW1 and Exts.A1 and A2 were got marked. The second opposite party/appellant did not adduce any oral or documentary evidence. After considering the evidence on record, taking into account the fact that the permanent partial disablement is only 24%, and the monthly wages earned by the injured was Rs.4,000/- and also the fact that at the time of accident the applicant was aged only 31 years, the Commissioner found that he is entitled to receive a lumpsum amount towards compensation in terms of Section 4(1)(c)(i) of the Act and the amount of compensation thereunder was assessed as Rs.1,18,627/-, as per the impugned order. The appellant herein was directed to deposit the said amount with simple interest at the rate of M.F.A.No.207/2010 5 12% per annum from the date of the accident and in default of payment, the applicant was entitled to realise 25% of such amount towards penalty. 3. As noticed hereinbefore, the main contention of the appellant is that the actual insured who was the first opposite party died on 27.09.2002 and thereafter the legal heirs of the deceased insured obtained an insurance policy in respect of the aforesaid vehicle on 10.01.2004 in the name of the deceased person after suppressing the factum of his death and therefore, the contract of insurance itself became void _ab initio_ . Evidently, such a contention has been taken based on the specific provision under Section 149(2)(b) of the M.V.Act. For a proper disposal of this appeal, it is worthwhile to refer to Section 149 of the M.V.Act, to the extent it is relevant for the purpose of this case. It reads as follows: ## _**149. Duty of insurers to satisfy judgments and awards against persons insured in respect of third party risks.**_ _(1) If, after a certificate of insurance has been issued...._ _(2) No sum shall be payable by an insurer......_ M.F.A.No.207/2010 6 _(a) that there has been a ......._ _(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._ 4. The learned counsel appearing for the appellant contended that in view of the factual position obtained in this case that the first respondent, the insured died on 22.09.2002 and the policy was obtained in respect of the said vehicle on 10.01.2004 in the name of the deceased person suppressing the factum of his death, Section 149(2)(b) would attract as the material fact that the insured died on 22.09.2002 was not disclosed and it could also be said that there was misrepresentation of fact in respect of a material particular. Thus, under both heads the policy which was obtained on 10.01.2004 has to be treated as void _ab initio_ . In such circumstances, taking into account the fact that the accident had occurred on 02.11.2004 and that the policy was void by virtue of Section 149(2)(b) of the M.V.Act the Commissioner ought not have made the appellant/opposite M.F.A.No.207/2010 7 party No.2 liable to indemnify the liabilities on the vehicle of the opposite party No.3. Though the 3[rd] opposite party remained _ex parte_ before the Commissioner on receiving notice in this proceedings she entered appearance. The learned counsel for the second respondent/3[rd] opposite party therein contended that the Commissioner was right in making the appellant liable to indemnify the liabilities on the vehicles of the opposite party No.3. To support the said contention the learned counsel relied on a decision of the Hon'ble Apex Court in _**United India Insurance Co.Ltd.** v._ _**Santro Devi and others**_ reported in _**2009(1) SCC 558**_ . The learned counsel relying on the said decision contended that when the fact that a policy was obtained in respect of the vehicle on 10.01.2004 and the accident had occurred on 02.11.2004 that is, within the period of coverage, the appellant cannot be permitted to disown the liability to indemnify the insured, rather, the liabilities on the vehicle belonging to the second respondent. The learned counsel appearing for the appellant contended that the decision of the Hon'ble Apex Court in M.F.A.No.207/2010 8 _**Santro Devi'** case (supra)_ is inapplicable in this case and to buttress the said contention the learned counsel relied on the decision of a learned Judge of this Court in M.A..CA.No.375 of 2010. It is contended that the decision in M.A.C.A.No.375 of 2010 is applicable to this case taking into account the factual aspects. It is further contended that virtually, a mere perusal of the provision under Section 149(2)(b) of the M.V. Act itself would reveal that in view of the indisputable facts obtained in this case there was either suppression or non-disclosure of material facts or it could also be said that there was representation of fact which was false in some material particular, inasmuch as the factum of death of the first opposite party/the deceased insured on 22.09.2002 was not disclosed while obtaining policy on 10.01.2004. 5. We have heard the learned counsel for the appellant and also the learned counsel for the respondents. 6. In the light of the question involved in this case certain indisputable facts have to be highlighted. The fact is that in respect of vehicle bearing Reg.No.KL/11B-6489 an M.F.A.No.207/2010 9 insurance policy was obtained on 10.01.2004 in the name of the first opposite party before the Commissioner namely N.V.Mathew, who is the husband of the second respondent herein. In fact, the actual insured of the vehicle who is the first opposite party therein had died much earlier, viz., on 22.09.2002. A perusal of the impugned order would also reveal that the appellant herein took up a specific contention before the Commissioner that the first opposite party/the insured had died on 22.09.2002 and thereafter, the legal heirs of the deceased/insured obtained the policy in respect of the vehicle on 10.01.2004, in the name of the deceased person, suppressing the factum of his death and therefore, the contract of insurance was void _ab initio_ . A scanning of the impugned order would further reveal that the contention that the contract of insurance has become void _ab initio_ was repelled by the Commissioner relying on the decision of the Hon'ble Apex Court in _**Santro Devi** 's case (supra)._ Essentially, the Commissioner held that the opposite party No.2/appellant herein had failed to establish that the policy M.F.A.No.207/2010 10 was obtained by fraud and therefore, held the opposite party No.2 viz., the appellant herein vicariously liable to indemnify the liabilities arising out of the accident involving the vehicle of opposite party No.3. First of all, it has to be held that the findings of the Commissioner that opposite party No.2/appellant herein, is vicariously liable to indemnify the liabilities on the vehicle of the opposite party No.3 cannot be sustained for the simple reason that the second respondentthe insurer, could not be held in law vicariously liable to indemnify the opposite party No.3. In that context, it has to be noted that in respect of an accident, if the driver and the owner of the offending vehicle is different, it is the jural relationship of Master-Servant, Employer-Employee or etc., would create vicarious liability on the owner. Necessarily, if the owner of the vehicle holds a valid insurance policy, the insurer would then be liable to indemnify the insured going by the conditions of the policy. In this case, the indisputable facts referred hereinbefore, would reveal that in respect of the vehicle in question the insured was the first opposite M.F.A.No.207/2010 11 party before the Commissioner. True that, he is the late husband of the second respondent/third opposite party. He died on 22.09.2002. Thereafter, an insurance policy was obtained in respect of the said vehicle on 10.01.2004 in the name of Sri.N.V.Mathew, who was then, a dead person. Evidently, the contention of the appellant herein is that the policy was obtained on 10.01.2004 in the name of the deceased person suppressing the material fact that at that point of time the insured N.V.Mathew was no more and that he died on 22.09.2002. It is to be noted that those facts viz., the first opposite party therein died on 22.09.2002 and that a policy was obtained on 10.01.2004 in the name of that dead person were not at all disputed before us by the second respondent who was the third opposite party. As noticed hereinbefore, the second respondent/third opposite party did not enter appearance before the Commissioner and therefore, the fact is that on her behalf nothing is on record to show that while obtaining the policy on 10.01.2004 in the name of the deceased person the fact of his death was not M.F.A.No.207/2010 12 suppressed. In the said circumstances, taking into account the aforesaid aspects the question to be looked into, with reference to Section 149(2)(b) of the M.V.Act, is whether the policy in question became void on any or both the grounds under Section 149(2)(b) of the M.V. Act. Firstly, the question is whether it was obtained by non-disclosure of the material fact and secondly, whether it was obtained by a representation of a fact which was false in some material particulars. While considering the said position another factum may also assume relevance. In this context, it is also relevant to refer to Section 50 of M.V. Act which deals with transfer of ownership. Sub Section (2) of Section 50 of the Act reads thus: _“_ _**50. Transfer of ownership-** (1) Where the ownership of any motor vehicle registered under this Chapter is transferred,...._ _(2)Where-_ - _(a) the person in whose name a motor vehicle stands registered dies, or_ - _(b) a motor vehicle has been purchased or acquired at a public auction conducted by,_ - _or on behalf of, Government,_ M.F.A.No.207/2010 13 _the person succeeding to the possession of the vehicle or, as the may be, who has purchased or acquired the motor vehicle, shall make an application for the purpose of transferring the ownership of the vehicle in his name, to the registering authority in whose jurisdiction he has the residence or place of business where the vehicle is normally kept, as the case may be, in such manner, accompanied with such fee, and within such period as may be prescribed by the Central Government.”_ 7. Thus, in terms of Section 50 of the M.V. Act, where the person in whose name a motor vehicle stands registered dies, the person succeeding to the possession of the vehicle concerned shall have to make an application for the purpose of transferring the ownership of the vehicle in his name, to the registered authority having jurisdiction with reference to his residence or place of business, wherein the vehicle is normally kept, accompanied with such fee and within such period as prescribed by the Central Government. The manner of making application for transfer of ownership, payment of fee and the period within which it has to be done are prescribed by the Central Government in the Central Motor Vehicles Rules, 1989. Rule 56 provides for the transfer of ownership on death of the owner of a vehicle. It reads M.F.A.No.207/2010 14 ## thus: _“_ _**56. Transfer of ownership on death of owner of the vehicle.-** (1) Where the owner of a motor vehicle dies, the person succeeding to the possession of the vehicle may for a period of three months, use the vehicle as if it has been transferred to him where such person has, within thirty days of the death of the owner informs the registering authority of the occurrence of the death of the owner and of his own intention to use the vehicle._ _(2) The person referred to in sub-rule(1) shall apply in Form 31 within the period of three months to the said registering authority for the transfer of ownership of the vehicle in his name, accompanied by._ _(a) the appropriate fee as specified in Rule 81;_ - _(b) the death certificate in relation to the_ - _registered owner._ - _(c) the certificate of registration; and_ - _(d) the certificate of insurance.”_ 8. Thus, a conjoint reading of Section 50 of the M.V. Act and Rule 56 of the Central Motor Vehicles Rules 1989, would reveal that on the death of the owner of a vehicle in whose name the Motor Vehicle in question was registered, the person succeeding to the possession of the said vehicle shall have to apply in form No.31 to the registered authority concerned, within a period of three months of the death of the owner. Going by Rule 56(2) of the Central Rules, along with the application for transfer of M.F.A.No.207/2010 15 ownership the certificate of insurance also has to be submitted. In this case, the actual insured and the registered owner of the vehicle was the first opposite party and he died on 22.09.2002. There is no case for the second respondent before us that subsequently, in terms of the statutory provisions, the ownership was transferred in her name. In that context, the action in getting a policy on 10.01.2004 in the name of the deceased insured viz., her late husband has to be looked into. The learned counsel for the appellant attempted to canvass the position that there is nothing on record to show that it was the second respondent, who applied for the policy on 10.01.2004. In that case, it has to be noted that before the Commissioner evidently, the appellant took up a contention that the policy was obtained on 10.01.2004 in the name of the insured person who died on 22.09.2002 suppressing the factum of death and therefore, the contract of insurance became void. Obviously, the second respondent did not dispute this fact and in fact, as noticed hereinbefore, she had not even cared to enter M.F.A.No.207/2010 16 appearance and to contest the matter. Even when that be the circumstance, the second respondent has not cared or even attempted to bring on record any material in this appeal to refute the said contention. The learned counsel for the second respondent attempted to canvass another position, virtually, relying on the decision in _**Santro Devi** 's case (supra)_ that the appellant had no case that the policy was obtained on 10.01.2004 by fraud. A careful scanning of the provision under Section 149(2)(b) of the Act would reveal the hollowness of the said contention and that it would also reveal that it is nothing but a claptrap. It is evident from Section 149(2)(b) of M.V. Act that the expression 'fraud' has not been used there at all. To consider the tenability of the contention raised by the counsel for the second respondent the meaning of the term 'fraud' has to be looked into. In the decision in _**S.P.Chengalearaya Naidu(dead) by LRS** v._ _**Jagannath(dead) by LRS and others**_ reported in _**AIR 1994 SC 853**_ the Hon'ble Apex Court held that a fraud is an Act of _'deliberate deception with the desire of securing_ M.F.A.No.207/2010 17 _something by taking unfair advantage on another and further that it is a deception in order to gain another's loss'_ . 9. In State of _**Andrapradesh and Another v. T.Suryachandra Rao**_ reported _**AIR 2005 SC 3110**_ the Apex Court considered the meaning of the expression 'fraud'. According to the Apex Court 'fraud' means an intention to deceive whether it is from an expectation of advantage to the party himself or from the ill will towards the other, is immaterial. Thus, it is evident that essentially, 'fraud' must have the element of intention to deceive another person. Now, to know the legislative intention behind the provision under Section 149(2)(b) of M.V. Act as extracted earlier, it has to be viewed critically. It would reveal that nowhere in the said provision any indication regarding the requirement of an element of fraud is shown top attract the provision thereunder, to make a policy void. The two situations or grounds which would make an insurance policy void, going by _' ' -_ the said provision, are _non disclosure of material facts_ and ` _a representation of facts which was false in some material_ M.F.A.No.207/2010 18 _' particular, while obtaining the policy ._ Thus, it can be seen that if a representation of the facts while obtaining a policy was found to be false in some material particulars that would essentially make the policy void. So also, non-disclosure of a material fact would also make it void. While considering the scope of Section 149(2)(b), sub-section (6) of Section 149 of the M.V. Act also assumes relevance. It reads thus : ## _“_ _**149. Duty of insurers to satisfy judgments and awards against persons insured in respect of third party risks.**_ ................ _(6) In this section the expression “material fact” and “material particular” means, respectively a fact or particular of such a nature as to influence the judgment of a prudent insurer in determining whether he will take the risk and, if so, at what premium and on what conditions, and the expression “liability covered by the terms of the policy” means a liability which is covered by the policy or which would be so covered but for the fact that the insurer is entitled to avoid or cancel or has avoided or cancelled the policy.”_ 10. In view of sub-section (6) of Section 149 and also taking into account the `fact' which was suppressed in this case it cannot be said that the said particular fact which M.F.A.No.207/2010 19 was suppressed in this case was not one which could not fall under the expression either `material fact' or `material particulars'. Definitely, the disclosure of the factum of the death of the insured or the particulars of his death by the second respondent would have definitely influenced the judgment of the prudent insurer for determining whether he should take the risk. No prudent insurer would issue a policy in the name of a dead person primarily for the reason that the insurance itself is a contract by nature and there cannot be a contract with a dead person. In the contextual situation, Sections 146 and 147 of the M.V. Act are also worthy to be noticed. They would undoubtedly suggest that the owner of a vehicle is bound to take an insurance policy against third party risk. In the said circumstances, by virtue of the provisions under Section 50 of the M.V. Act, Rule 56(2) of the Central Motor Vehicles Rules and Sections 146 and 147 of the M.V.Act, the position obtained is to the effect that a person succeeding to the possession of the vehicle consequently to the death of the insured owner of a vehicle in whose name M.F.A.No.207/2010 20 the vehicle in question was registered has also a duty to see that there is valid insurance against the third party before using it or allowing it to be used. The discussion as above would reveal that by no stretch of imagination it could be said that a policy would be rendered void only if the insured at the time of obtaining the same committed a fraud. As noticed hereinbefore, the word 'fraud' is not embodied in the said Section and if there is representation of a fact which was false in respect of some material particulars, that by itself is sufficient to make a policy void. Such is the case with respect to non-disclosure of a material fact, as well. What is a material fact and what is a material particular could be seen from the provision under sub-section (6) of Section 149 of the Act. We have already held that the death of the actual insured on 22.09.2002 was suppressed while obtaining the policy on 10.01.2004 and it cannot be said that it was not non-disclosure of a material fact and there was no false representation of a material particular. In the said circumstances, taking into account the suppression in this M.F.A.No.207/2010 21 case, we have no hesitation to hold that the policy obtained on 10.01.2004 was void by virtue of the operation of Section 149(2)(b) of M.V. Act. 11. The question is whether the decision in _**Santro Devi** 's case (supra)_ would still make the appellant liable to indemnify the third respondent. We are afraid, a careful scanning of the dictum laid down in the said decision would make it clear that, that cannot be applied in this case for more than one reasons. In _**Santro Devi** 's case(supra)_ the vehicle involved was one which was purchased under hypothecation. The Hon'ble Apex Court held that though the owner of the vehicle was one Athmaram Sharma, taking note of the indisputable fact the Hon'ble Apex Court found that the contract of insurance in that case was entered into by the bank concerned viz., SBI with and the appellant viz., the United India Insurance Co. Ltd. and further that the premium was paid by the Bank. The Apex Court had also taken into account the fact that the renewal of the contract of insurance was used to be done by the bank itself. In such M.F.A.No.207/2010 22 circumstances, it is evident that in that case the contract was essentially between the bank and the insurance company. However, in this case, initially the contract was in between the first opposite party in W.C..No.41/2005, who is the late husband of the second respondent herein and the appellant -insurance company. The insurance policy was not actually renewed. Evidently, what was done in this case is that a policy was obtained on 10.01.2004 subsequent to his death on 22.09.2002, suppressing the factum of his death. Going by the specific averments of the appellant herein which were taken note of by the Commissioner in the impugned order, the appellant took up the contention that it was the legal heirs of the deceased/insured who obtained the policy on 10.01.2004 in the name of the deceased person suppressing the factum of his death. Even now, those averments are not at all controverted by the second respondent. In the said circumstances, certainly in the light of the specific provisions under Section 149(2)(b) of M.V. Act the appellant is justified in taking out the plea that the policy obtained on 10.01.2004 M.F.A.No.207/2010 23 in respect of the vehicle in question bearing Reg.No.KL-11/B6489 is void _ab initio_ . If that be so, the impugned order whereby the appellant herein was held vicariously liable to indemnify the liabilities on the vehicle of the opposite party No.3 cannot be sustained. In fact, the appellant is not liable to indemnify the second respondent/the third opposite party in W.C..No.41 of 2005. 12. Going by the condition of an insurance policy, certainly, an insurer is liable only to indemnify the insured. In this case, in view of the impact of Section 149(2)(b) of M.V. Act and the facts expatiated above, it cannot be said that the third opposite party was entitled to get indemnified. In such circumstances, if the amount awarded has already been deposited by the appellant and if that amount was released to the applicant, the appellant would be entitled to recover the same in accordance with law, from the second respondent or from the estate of the first opposite party, that is, the deceased-insured. It is made clear that if the amount is not yet deposited and disbursed the applicant/the first M.F.A.No.207/2010 24 respondent herein would be entitled to resort appropriate legal steps for recovering the amount under the impugned award from the second respondent or from the estate of the first opposite party as the finding that the appellant is not liable to indemnify the second respondent/the third opposite party will not amount to interfere with the vicarious liability of the second respondent/the third opposite party and as such, she is liable to compensate the applicant/the first respondent. In short, it is made clear that this appeal is allowed only to the extent whereby the appellant was held liable to indemnify the third opposite party. Appeal is allowed as above. Sd/- **C.T.RAVIKUMAR, JUDGE** Sd/- **MARY JOSEPH, JUDGE** vs