- (1.) A Two Judge Bench of this Court made the following order of reference in this case on 3.12.2007: "One of the contentions raised in these appeals is the correctness of a three-Judge Bench decision of this Court in National Insurance Co. Ltd., Chandigarh vs. Nicolletta Rohtagi and Ors., 2002 7 SCC 456, which is said to be pending consideration in a large number of cases before this Court. Assailing the correctness of the aforesaid decision Mr. Atul Nanda submits that therein the liability of the insurer to reimburse the insured on two premises, namely, (1) just compensation; and (2) whose liability would be to pay, as envisaged under sub-section (1) of section 149 vis-'- vis the right of the aggrieved persons (Which would include the insured) to prefer an appeal in terms of section 173 of the Motor Vehicles Act, had not been considered in the backdrop of the history in which sub-section (1) of section 149 was enacted. Apart from the question raised by Mr. Nanda, we are of the opinion that the matter may be considered from other angles, namely, whether the insurer shall be wholly without any remedy even if the amount of compensation is determined in violation of the standard formula envisaged under the second schedule of the Act or in clear violation of the ratio (s) laid down by this Court. We, therefore, are of the opinion that it is a fit case where the matter should be referred to larger Bench. We direct accordingly. Let the records of the case be placed before Hon'ble the Chief Justice of India for appropriate orders."
(2.) On the said reference made, the following questions arise for our consideration, in regard to the position of an Insurer, under the Motor Vehicles Act, 1988 ('Act' for short) : (i) Whether the insurer can contest a motor accident claim on merits, in particular, in regard to the quantum, in addition to the grounds mentioned in section 149(2) of the Act for avoiding liability under the policy of insurance (ii) Whether an insurer can prefer an appeal under section 173 of the Motor Vehicles Act, 1988, against an award of the Motor Accident Claims Tribunal, questioning the quantum of compensation awarded
(3.) The insurance companies have urged the following five points for our consideration, which are independent grounds in support of their contention that insurance companies are not barred from questioning the quantum of compensation either before the Motor Accidents Claims Tribunal or in appeals arising from the awards of the Tribunal : (i) There is a significant difference between insurer as a 'noticee' (a person to whom a notice is served as required by section 149(2) of the Act) in a claim proceedings and an insurer as a party-respondent in a claim proceedings. Where an insurer is impleaded by the claimants as a party, it can contest the claim on all grounds, as there are no restrictions or limitations in regard to contest. But where an insurer is not impleaded by the claimant as a party, but is only issued a statutory notice under section 149 (2) of the Act by the Tribunal requiring it to meet the liability, it is entitled to be made a party to deny the liability on the grounds mentioned in section 149(2). (ii) When the owner of the vehicle (insured) and the insurer are aggrieved by the award of the Tribunal, and jointly file an appeal challenging the quantum, the mere presence of the insurer as a co-appellant will not render the appeal, as not maintainable. When insurer is the person to pay the compensation, any interpretation to say that it is not a 'person aggrieved' by the quantum of compensation determined, would be absurd and anomalous. (iii) When an insurer is aggrieved by the quantum of compensation, it is not seeking to avoid or exclude its liability, but merely wants determination of the extent of its liability. The restrictions imposed upon the insurers to defend the action by the claimant or file an appeal against the judgment and award of the Tribunal will apply, only if it wants to file an appeal to avoid liability and not when it admits its liability to pay the amount awarded, but only seeks proper determination of the quantum of compensation to be paid. (iv) Appeal is a continuation of the original claim proceedings. Section 170 provides that if the person against whom the claim is made, fails to contest the claim, the insurer may be permitted to resist the claim on merits. If and when an award is made by the Tribunal which is excessive, arbitrary or erroneous, the owner of the vehicle has to challenge the same by filing an appeal before the High Court. If the insured (owner of the vehicle) fails to challenge an award even when it is erroneous or arbitrary or fanciful, it can be considered that the insured has failed to contest the same and consequently under section 170, the High Court or the tribunal may permit the insurer to file an appeal and contest the award on merits. (v) The Motor Vehicles Act, 1988 ('Act' for short) creates a liability upon the insurer to satisfy the judgments and awards against the insured. The Act expressly restricts the right of the insurer to avoid the liability as insurer, only to the grounds specified in section 149(2) of the Act. Though it is impermissible to add to the grounds mentioned in the statute, the insurer has a right, if it has reserved such a right in the policy, to defend the action in the name of the insured. If it opts to step into the shoes of the insured, it can defend the action in the name of the insured and all defences open to the insured will be available to it and can be urged by it. Its position contesting a claim under section 149(2) of the Act is distinct and different, when it is contesting the claim in the name of or on behalf of the insured owner of the vehicle. In cases, where it is authorized by the policy to defend any claim in the name of the insured, and the insurer does so, it can not be restricted to the grounds mentioned in section 149(2) of the Act, as the defence is on behalf of the owner of the vehicle. Relevant Legal Provisions ;