NATIONAL INSURANCE CO. LTD. versus SWARAN SINGH AND ORS.

Citation: [2004] 1 S.C.R. 180 · Decided: 05-01-2004 · Supreme Court of India · Bench: V.N. KHARE, D.M. DHARMADHIKARI, S.B. SINHA · Disposal: Dismissed

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Judgment (excerpt)

A 
NATIONAL INSURANCE CO. LTD. 
V. 
SWARAN SINGH AND ORS. 
JANUARY 5, 2004 
B 
[V. N. KHARE, CJ, D.M. DHARMADHIKARI AND S.B. SINHA, JJ.] 
Motor Vehicles Act, 1988: Ss. 3, 149(2(a)(ii), (4), (5) & (7), 165 and 
/ 
168/The Third Parties (Rights against Insurers) Act, 1930: 
C 
Claim Petition-Awards by the Motor Vehicles Claims Tribunal-Liability 
of insurer to third party-Defence available to insurer-Interpretation a/-
Held: Motor Vehicles Act is a social welfare legislatio,'1 extending relief to 
victims/third party by awarding compensation-Breach of policy condi1ions 
by the insured could be raised as defence but such breaches have to be 
established by the insurer-The Insurer must also establish that the breaches 
D had contributed to the cause of the accident to absolve himself from liability-
!nvalid driving licence/disqualification of the driver not available as defences 
to insurer-If vehicle, at the time of accident, driven by a person having 
learner's licence, insurer would be liable to satisfy the decree. 
Power of the Motor Vehicles Tribunal-Held: Empowered to adjudicate 
E all claims in respect of Motor Vehicles accidents-It cannot be restricted to 
decide such claims inter se between the claimants on one side and the, insured/ 
insurer and driver on !he other--Awards enforceable/executable in terms of 
Section 174 of the Act-If insurer satisfactorily proves its defence, 1he Tribunal 
may issue a certificate to the Cof/ector directing rccove1y of compensation! 
F 01her amounts from the insured-If determination of rights of the parties inter 
se delays adjudication of the case of the victims, the Tribunal could relegate 
them before regular court. 
Words and Phrases: 
The rule of main purpose' and the concept of 'fundamental breach'-
G Meaning of in the context of Section 149 (2) of the Motor Vehicles Act, 1988. 
'Effective licence '-Meaning of in the context of Motor Vehicles Acl, 
1988. 
The questions involved in these petitions pertain to interpretation 
If 
180 
( 
..,_. 
\ 
NATIONAL INSURANCE CO.LTD. 1·. SW ARAN SINGH 
181 
of Section 149 (2)(a)(ii), (4) & (5) vis-a-vis the proviso appended to sub- A 
sections (4) & (5) thereof of the Motor Vehicles Act, 1988. 
On behalf of the petitioner-insurer, it was contended that the insurer 
has an absolute right to raise a defence in terms of Section 149(2)(a)(ii) of 
the Act; that the insurer requires to prove/establish that the vehicle 
involved in the accident was driven by a person who was not duly insured; B 
that a person cannot be said to be duly insured unless he has been granted 
a permanent licence for driving a particular vehicle in terms of provisions 
of Chapter II of the Act; that when the defence raised by the insurer is 
established, the liability shifted to the owner/driver of the vehicle; and that 
the Tribunal/Court cannot direct the insurer to pay the compensation. C 
However, the owner/driver of the vehicle could be directed to make 
payment of compensation to the victim. 
On behalf of the respondents/third party claimants, it was submitted 
that a driver once licensed, unless he is disqualified, would continue to be 
a duly licensed person; that once a person has been duly licensed, defence 
under Section 149 of the Act would not be available to the insurer even if D 
the licence was not renewed up to 5 years since its expiry; that the right 
of insurer to avoid the claim of the third party would arise only when the 
,,~ 
policy was obtained by misrepresentation of material facts and by fraud; 
that the burden to prove the defence raised hy the insurer as to any breach 
or violation of the policy would be upon the insurer; and that it is not E 
sufficient for the insurer to prove that the person driving the vehicle at 
the time of accident was not duly licensed but it must also be established 
that there was a breach on the part of the insured. 
Dismissing the petition, the Court 
HELD: I. The provision for compulsory insurance has been F 
incorporated in the Motor Vehicles Act with a view to protect the rights 
of a third party. The intention of the Parliament became further evident 
r 
when in the Motor Vehicles Act, 1939, a new chapter being Chapter VllA 
dealing with insurance of motor vehicles against third party risks was 
introduced and the benelicent provisions contained in the Motor Vehicles G 
Act, 1988 were further made liberal by reason of the amendments carried 
out therein from time to time in aid of the third party claims by

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