Madhya Pradesh High Court
Magma Hdi Genera Insurance Company … vs Dilliram on 20 June, 2025
Author: Gurpal Singh Ahluwalia
Bench: G. S. Ahluwalia
NEUTRAL CITATION NO. 2025:MPHC-GWL:12672
1 CR-663-2024
IN THE HIGH COURT OF MADHYA PRADESH
AT GWALIOR
BEFORE
HON'BLE SHRI JUSTICE G. S. AHLUWALIA
ON THE 20th OF JUNE, 2025
CIVIL REVISION No. 663 of 2024
MAGMA HDI GENERA INSURANCE COMPANY LIMITED
Versus
DILLIRAM AND OTHERS
Appearance:
Shri B.K. Agrawal - Advocate for the petitioner / insurance company.
None for the respondents.
ORDER
This civil revision under Section 115 of CPC has been filed against the
award dated 15.05.2024 passed by Fourth MACT. District Bhind in MACC
NO.19/2023.
2. It is submitted by counsel for the petitioner that the offending
vehicle was being plied without any permit and fitness and, accordingly, the
claims tribunal rightly held that the vehicle was being driven in
contravention of the conditions of insurance policy. However, has wrongly
applied the principle of “pay and recover”. It is submitted that once the
vehicle was being plied in contravention of the insurance policy, then the
claims tribunal should not have applied the principle of “pay and recover”.
3. Heard learned counsel for the petitioner.
4. The Supreme Court in the case of Amrit Paul Singh and Anr. Vs.
Tata AIG General Insurance Company Ltd. , reported in (2018) 7 SCC 558
has held that the insurance company is liable to with liberty to recover the
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same from the owner / insured even when the vehicle was being plied
without valid permit and fitness certificate.
5. This Court in the case of Cholamandalam MS General Insurance
Company Limited Registered Office Hari Nivas Towers Vs. Munni Bai and
Others by order dated 11.03.2025 passed in M.A. No. 5819/2024 has held as
under:-
“4. Section 149 of the Act, which was earlier in existence, reads as
under:-
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 under sub-
section (3) of section 147 in favour of the person by whom a
policy has been effected, judgment or award in respect of any
such liability as is required to be covered by a policy under
clause (b) of sub-section (1) of section 147 (being a liability
covered by the terms of the policy) 1 [or under the provisions
of section 163A] is obtained against any person insured by
the policy, then, notwithstanding that the insurer may be
entitled to avoid or cancel or may have avoided or cancelled
the policy, the insurer shall, subject to the provisions of this
section, pay to the person entitled to the benefit of the decree
any sum not exceeding the sum assured payable thereunder,
as if he were the judgment debtor, in respect of the liability,
together with any amount payable in respect of costs and any
sum payable in respect of interest on that sum by virtue of
any enactment relating to interest on judgments.
(2) No sum shall be payable by an insurer under sub-
section (1) in respect of any judgment or award unless,
before the commencement of the proceedings in which
the judgment or award is given the insurer had notice
through the Court or, as the case may be, the Claims
Tribunal of the bringing of the proceedings, or in
respect of such judgment or award so long as execution
is stayed thereon pending an appeal; and an insurer to
whom notice of the bringing of any such proceedings is
so given shall be entitled to be made a party thereto and
to defend the action on any of the following grounds,
namely:–
(a) that there has been a breach of a specified
condition of the policy, being one of the following
conditions, namely:–
(i) a condition excluding the use of the
vehicle–
(a) for hire or reward, where the vehicle
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is on the date of the contract of
insurance a vehicle not covered by a
permit to ply for hire or reward, or
(b) for organised racing and speed
testing, or
(c) for a purpose not allowed by the
permit under which the vehicle is used,
where the vehicle is a transport vehicle,
or
(d) without side-car being attached
where the vehicle is a motor cycle; or
(ii) 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 licence during the period of
disqualification; or
(iii) a condition excluding liability for injury
caused or contributed to by conditions of
war, civil war, riot or civil commotion; or
(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.
(3) Where any such judgment as is referred to in sub-
section (1) is obtained from a Court in a reciprocating
country and in the case of a foreign judgment is, by
virtue of the provisions of section 13 of the Code of
Civil Procedure, 1908 (5 of 1908) conclusive as to any
matter adjudicated upon by it, the insurer (being an
insurer registered under the Insurance Act, 1938 (4 of
1938) and whether or not he is registered under the
corresponding law of the reciprocating country) shall be
liable to the person entitled to the benefit of the decree
in the manner and to the extent specified in sub-section
(1), as if the judgment were given by a Court in India:
Provided that no sum shall be payable by the insurer in
respect of any such judgment unless, before the
commencement of the proceedings in which the
judgment is given, the insurer had notice through the
Court concerned of the bringing of the proceedings and
the insurer to whom notice is so given is entitled under
the corresponding law of the reciprocating country, to
be made a party to the proceedings and to defend the
action on grounds similar to those specified in sub-
section (2).
(4) Where a certificate of insurance has been issued
under sub-section (3) of section 147 to the person by
whom a policy has been effected, so much of the policy
as purports to restrict the insurance of the personsSignature Not Verified
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insured thereby by reference to any conditions other
than those in clause (b) of sub-section (2) shall, as
respects such liabilities as are required to be covered by
a policy under clause (b) of sub-section (1) of section
147, be of no effect: Provided that any sum paid by the
insurer in or towards the discharge of any liability of
any person which is covered by the policy by virtue
only of this sub-section shall be recoverable by the
insurer from that person.
(5) If the amount which an insurer becomes liable under
this section to pay in respect of a liability incurred by a
person insured by a policy exceeds the amount for
which the insurer would apart from the provisions of
this section be liable under the policy in respect of that
liability, the insurer shall be entitled to recover the
excess from that person.
(6) In this section the expressions “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.
(7) No insurer to whom the notice referred to in sub-
section (2) or sub-section (3) has been given shall be
entitled to avoid his liability to any person entitled to
the benefit of any such judgment or award as is referred
to in sub-section (1) or in such judgment as is referred
to in sub-section (3) otherwise than in the manner
provided for in sub-section (2) or in the corresponding
law of the reciprocating country, as the case may be.
Explanation.–For the purpose of this section, “Claims
Tribunal” means a Claims Tribunal constituted under
section 165 and “award” means an award made by that
Tribunal under section 168.”
(Emphasis supplied)
5. Thereafter, Section 149 of the Act was renumbered as Section
150 of the Act, which reads as under:
150. 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 under sub-
section (3) of section 147 in favour of the person by whom a
policy has been effected, judgment or award in respect of any
such liability as is required to be covered by a policy under
clause (b) of sub-section (1) of section 147 (being a liability
covered by the terms of the policy) or under the provisions of
section 164 is obtained against any person insured by the
policy, then, notwithstanding that the insurer may be entitled
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to avoid or cancel or may have avoided or cancelled the
policy, the insurer shall, subject to the provisions of this
section, pay to the person entitled to the benefit of the award
any sum not exceeding the sum assured payable thereunder,
as if that person were the decree holder, in respect of the
liability, together with any amount payable in respect of
costs and any sum payable in respect of interest on that sum
by virtue of any enactment relating to interest on judgments.
(2) No sum shall be payable by an insurer under sub-section
(1) in respect of any judgment or award unless, before the
commencement of the proceedings in which the judgment or
award is given the insurer had notice through the court or, as
the case may be, the Claims Tribunal of the bringing of the
proceedings, or in respect of such judgment or award so long
as its execution is stayed pending an appeal; and an insurer to
whom notice of the bringing of any such proceedings is so
given shall be entitled to be made a party thereto, and to
defend the action on any of the following grounds, namely: –
(a) that there has been a breach of a specified condition
of the policy, being one of the following conditions,
namely:-
(i) a condition excluding the use of the vehicle –
(A) for hire or reward, where the vehicle is
on the date of the contract of insurance a
vehicle not covered by a permit to ply for
hire or reward; or
(B) for organised racing and speed testing; or
(C) for a purpose not allowed by the permit
under which the vehicle is used, where the
vehicle is a transport vehicle; or
(D) without side-car being attached where the
vehicle is a two-wheeled vehicle; or
(ii) a condition excluding driving by a named
person or by any person who is not duly licenced
or by any person who has been disqualified for
holding or obtaining a driving licence during the
period of disqualification or driving under the
influence of alcohol or drugs as laid down in
section 185; or
(iii) a condition excluding liability for injury
caused or contributed to by conditions of war, civil
war, riot or civil commotion; or
(b) that the policy is void on the ground that it was
obtained by nondisclosure of any material fact or by
representation of any fact which was false in some
material particular; or
(c) that there is non-receipt of premium as required
under section 64VB of the Insurance Act, 1938 (4 of
1938).
(3) Where any such judgment or award as is referred to in
sub-section (1) is obtained from a court in a reciprocatingSignature Not Verified
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country and in the case of a foreign judgment is, by virtue of
the provisions of section 13 of the Code of Civil Procedure,
1908 conclusive as to any matter adjudicated upon by it, the
insurer (being an insurer registered under the Insurance Act,
1938 and whether or not that person is registered under the
corresponding law of the reciprocating country) shall be
liable to the person entitled to the benefit of the decree in the
manner and to the extent specified in sub-section (1), as if the
judgment or award were given by a court in India:
Provided that no sum shall be payable by the insurer in
respect of any such judgment or award unless, before the
commencement of the proceedings in which the judgment or
award is given, the insurer had notice through the court
concerned of the bringing of the proceedings and the insurer
to whom notice is so given is entitled under the
corresponding law of the reciprocating country, to be made a
party to the proceedings and to defend the action on grounds
similar to those specified in sub-section (2).
(4) Where a certificate of insurance has been issued under
sub-section (3) of section 147 to the person by whom a
policy has been effected, so much of the policy as purports to
restrict the insurance of the persons insured thereby, by
reference to any condition other than those in sub-section (2)
shall, as respects such liabilities as are required to be covered
by a policy under clause (b) of sub-section (1) of section 147,
be of no effect.
(5) No insurer to whom the notice referred to in sub-section
(2) or sub-section (3) has been given shall be entitled to
avoid his liability to any person entitled to the benefit of any
such judgment or award as is referred to in sub-section (1) or
in such judgment as is referred to in sub-section (3)
otherwise than in the manner provided for in sub-section (2)
or in the corresponding law of the reciprocating country, as
the case may be.
(6) If on the date of filing of any claim, the claimant is not
aware of the insurance company with which the vehicle had
been insured, it shall be the duty of the owner of the vehicle
to furnish to the tribunal or court the information as to
whether the vehicle had been insured on the date of the
accident, and if so, the name of the insurance company with
which it is insured.
Explanation. – For the purposes of this section, –
(a) “award” means an award made by the Claims
Tribunal under section 168;
(b) “Claims Tribunal” means a Claims Tribunal
constituted under section 165;
(c) “liability covered by the terms of the policy” means
the 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; andSignature Not Verified
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(d) “material fact” and “material particular” mean,
respectively, a fact or particular of such a nature as to
influence the judgment of a prudent insurer in
determining whether he shall take the risk and, if so, at
what premium and on what conditions.
6. On comparison of both the sections, it is clear that the proviso
to sub-section 4 and sub-section 5 of Section 149 of the Act have
been omitted and are no more part of Section 150.
7. Now, the only question for consideration is as to what is the
effect of omission of proviso to sub-section 4 and sub-section 5 of
Section 149 of the Act.
The Supreme Court in the case of Swaran Singh (supra) has
held as under:
102. The summary of our findings to the various issues
as raised in these petitions are as follows:
(i) Chapter XI of the Motor Vehicles Act, 1988
providing compulsory insurance of vehicles
against third party risks is a social welfare
legislation to extend relief by compensation to
victims of accidents caused by use of motor
vehicles. The provisions of compulsory insurance
coverage of all vehicles are with this paramount
object and the provisions of the Act have to be so
interpreted as to effectuate the said object.
(ii) Insurer is entitled to raise a defence in a claim
petition filed under Section 163 A or Section 166
of the Motor Vehicles Act, 1988 inter alia in terms
of Section 149(2)(a)(ii) of the said Act.
(iii) The breach of policy condition e.g.,
disqualification of driver or invalid driving licence
of the driver, as contained in sub-section (2)(a)(ii)
of section 149, have to be proved to have been
committed by the insured for avoiding liability by
the insurer. Mere absence, fake or invalid driving
licence 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. To avoid its liability towards
insured, the insurer has 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 duly licensed driver or one who was not
disqualified to drive at the relevant time.
(iv) The insurance companies are, however, with a
view to avoid their liability must not only establish
the available defence(s) raised in the said
proceedings but must also establish ‘breach’ on the
part of the owner of the vehicle; the burden of
proof wherefor would be on them.
(v) The court cannot lay down any criteria as to
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how said burden would be discharged, inasmuch
as the same would depend upon the facts and
circumstance of each case.
(vi) Even where the insurer is able to prove breach
on the part of the insured concerning the policy
condition regarding holding of a valid licence by
the driver or his qualification to drive during the
relevant period, the insurer would not be allowed
to avoid its liability towards insured unless the
said breach or breaches on the condition of driving
licence is/ are so fundamental as are found to have
contributed to the cause of the accident. The
Tribunals in interpreting the policy conditions
would apply “the rule of main purpose” and the
concept of “fundamental breach” to allow defences
available to the insured under section 149(2) of the
Act.
(vii) The question as to whether the owner has
taken reasonable care to find out as to whether the
driving licence produced by the driver, (a fake one
or otherwise), does not fulfil the requirements of
law or not will have to be determined in each case.
(viii) If a vehicle at the time of accident was driven
by a person having a learner’s licence, the
insurance companies would be liable to satisfy the
decree.
(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 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
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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.
(xi) The provisions contained in sub-section (4)
with proviso thereunder and sub-section (5) which
are intended to cover specified contingencies
mentioned therein to enable the insurer to recover
amount paid under the contract of insurance on
behalf of the insured can be taken recourse of by
the Tribunal and be extended to claims and
defences of insurer against insured by relegating
them to the remedy before regular court in cases
where on given facts and circumstances
adjudication of their claims inter se might delay
the adjudication of the claims of the victims.”
It is clear from paragraph 102 (x) that Supreme Court in the
case of Swaran Singh (supra) has held that where, on adjudication
of the claim, the Tribunal comes to the conclusion that the insurer
has satisfactorily proved its defence, then the Tribunal can also
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. Similarly, paragraph 102 (xi) provides
that the provisions contained in sub-section 4 with the proviso
thereunder and sub-section 5 are intended to cover specified
contingencies mentioned therein to enable the insurer to recover
the amount. If the insurance company is held jointly and severally
liable, then there is no question of the application of paragraph
102 (x) of the judgment passed in the case of Swaran Singh
(supra). Therefore, it is clear that Para 102(x) would apply where
the insurer has successfully proved its defence.
8. So far as Section 149 (5) is concerned, it is with regard to the
extent of liability, and the present case is not covered by the
erstwhile provision of Section 149 (5) of the Act. Proviso to sub-
section 4 of Section 149 had given authority to the insurer to
recover the compensation from the insured if any compensation
amount is paid. However, in the present case, the insurance
company has been exonerated from the liability on the ground of
violation of terms and conditions of the insurance policy. The
insurance policy is a statutory contract entered into between the
insurer and the insured for the benefit of the third party. If the
insured has violated the conditions of the insurance policy, it is a
matter between the insurer and the insured, and the third party
cannot be made to suffer by going for execution against a private
person instead of the insurer. Therefore, in considered opinion of
this Court, paragraph 102 (x) of the judgment in the case of
Swaran Singh (supra) would apply even if the proviso to sub-
section 4 and sub-section 5 of Section 149 of Act has been
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omitted, and that has not brought any difference in the application
of the principle of pay and recover.
9. No other argument is advanced by counsel for appellant.”
6. In view of the judgment passed by the Supreme Court in the case of
Amrit Paul Singh (supra) and by this Court in the case of Munni Bai (supra) ,
this Court is of the considered opinion that the claims tribunal has rightly
applied the principle of “pay and recover”.
7. Accordingly, this revision fails and is hereby dismissed.
(G. S. AHLUWALIA)
JUDGE
AKS
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