SHAMANNA AND ANOTHER versus THE DIVISIONAL MANAGER THE ORIENTAL INSURANCE CO. LTD. AND ORS.

Citation: [2018] 9 S.C.R. 486 · Decided: 08-08-2018 · Supreme Court of India · Bench: RANJAN GOGOI · Disposal: Case Partly allowed
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Judgment (excerpt)

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SUPREME COURT REPORTS
[2018] 9 S.C.R.
SHAMANNA AND ANOTHER
v.
THE DIVISIONAL MANAGER
THE ORIENTAL INSURANCE CO. LTD. AND ORS.
(Civil Appeal No. 8144 of 2018)
AUGUST 08, 2018
[RANJAN GOGOI AND R. BANUMATHI, JJ.]
Compensation: Motor Vehicles Accident – Third party risk –
Liability of insurer – Son of appellants/claimants was travelling in
a Jeep which was driven in a negligent manner due to which he
sustained injuries and died in the hospital – Claim petition –
Tribunal directed the insurance company to pay the compensation
to claimants and granted liberty to the insurance company to
recover the same from the owner of the offending vehicle –
Tribunal awarded compensation of Rs.3,55,500/-– High Court set
aside the award passed by the Tribunal and held that only the owner
of the offending vehicle was liable to make the payment of the
compensation awarded by the Tribunal, and enhanced the
compensation awarded by the Tribunal from Rs.3,55,500/- to
Rs.4,94,700/- – On appeal, held: The award passed by the Tribunal
directing the insurance company to pay the compensation amount
awarded to the claimants and thereafter, recover the same from the
owner of the vehicle in question, is in accordance with the
Judgment passed by Supreme Court in Swaran Singh and Laxmi
Narain Dhut cases – High Court ought not to have interfered with
the award passed by the Tribunal directing the first respondent to
pay and recover from the owner of the vehicle – The impugned
judgment of the High Court exonerating the insurance company
from its liability and directing the claimants to recover the
compensation from the owner of the vehicle set aside – However,
order of the High Court enhancing the compensation from
Rs.3,55,500/- to Rs.4,94,700/- affirmed – Award passed by the
Tribunal restored.
Partly allowing the appeal, the Court
HELD: 1. Doctrine of “pay and recover” was considered
by the Supreme Court in Swaran Singh case wherein the Supreme
  [2018] 9 S.C.R. 486
486
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Court examined the liability of the insurance company in cases of
breach of policy condition due to disqualifications of the driver or
invalid driving licence of the driver and held that in case of third
party risks, the insurer has to indemnify the compensation amount
to the third party and the insurance company may recover the
same from the insured. [Para 6] [490-D-E]
2. In the instant case, to deny the benefit of ‘pay and
recover’, what seems to have substantially weighed with the High
Court is the reference to larger Bench made by the two-Judge
Bench in National Insurance Co. Ltd. v. Parvathneni and another.
In Parvathneni case, the Supreme Court pointed out that Article
142 of the Constitution of India does not cover such type of cases
and that “if the insurance company has no liability to pay at all,
then, it cannot be compelled by order of the court in exercise of its
jurisdiction under Article 142 of the Constitution of India to pay the
compensation amount and later on recover it from the owner of the
vehicle”. The above reference in Parvathneni case was disposed
of by the three-Judges Bench keeping the questions of law open
to be decided in an appropriate case. Since the reference to the
larger bench in Parvathneni case was disposed of by keeping the
questions of law open, therefore the decision in Swaran Singh
case followed in Laxmi Narain Dhut and other cases hold the
field. [Paras 11 and 12] [494-B-F]
3. Thus, the award passed by the Tribunal directing the
insurance company to pay the compensation amount awarded to
the claimants and thereafter, recover the same from the owner of
the vehicle in question, is in accordance with the judgment passed
by this Court in Swaran Singh and Laxmi Narain Dhut cases.
The High Court wrongly interfered with the award passed by the
Tribunal directing the first respondent to pay and recover
from the owner of the vehicle. The impugned judgment of the
High Court exonerating the insurance company from
its liability and directing the claimants to recover
the compensation from the owner of the vehicle is set
aside and the award passed by the Tribunal is restored. [Para 12]
[494-F-H]
SHAMANNA   v. THE DIVISIONAL MANAGER
 ORIENTAL INSURANCE CO. LTD.
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SUPREME COURT REPORTS
[2018] 9 S.C.R.
National Insurance Company Ltd. v. Swaran Singh and
Others (2004) 3 SCC 297 : [2004] 1 SCR 180 ; National
Insurance Co. Ltd. v. Laxmi Narain Dhut (2007) 3 SCC
700 : [2007] 3 SCR 579 – relied on.
Oriental Insur
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