NEW INDIA ASSURANCE CO LTD Vs. CELINE

JUDGEMENT

(1.) This reference to a Full Bench has been made for a decision on the correctness of the Division Bench ruling in United India Insurance Co. Ltd. v. Surendran Nair ( 1990 (1) KLT 10 ). The point in issue is whether in view of the provisions of S.96(2) and (6) of the Motor Vehicles Act, 1939, it is open to the insurer to rely on a 'reservation clause' in the Policy and then to raise all the defences open to the insured against the third party, in an action for compensation filed by the third party. The respondents claimants contend, on the basis of the ruling in Surendran Nair's case (supra) that, notwithstanding the existence of any 'reservation clause' in the policy, it is not permissible for the insurer to either contend that there is no negligence on the part of the insured or that the quantum of compensation awarded against the insured is excessive even when the quantum is within the statutory limits in S.95(2). It is true that the ruling in Surendran Nair's case (supra) supports the respondents' case for saying that inspite of a 'reservation clause', the insurer cannot take such defences before the Tribunal or file an appeal against the award raising such pleas. The decision states that S.96(2) and (6) of the Act permit only certain specific defences to be taken by the insurer and that the said defences are exhaustive. It further says that it is only in the limited class of cases where S.110C(2A) applies that the insurer can raise defences other than those stated in S.96(2). S.100C(2A) permits the insurer to take all defences when it is impleaded suo motu by the Tribunal upon being satisfied that there is collusion between the claimants and the insured or where the insured is ex parte. The question is whether S.96(2) and S.110C(2A) are exhaustive and whether the insurer can, when there is a 'reservation clause', raise all pleas available to the insured including pleas of want of negligence of the insured or that the award is excessive.

(2.) The contention on behalf of the insurer by learned counsel Sri. P. V.R. Kaimal is that S.96(2) and S.96(4) deal with cancellation or avoidance of a contract of insurance. He submits that when an insurer accepts the policy but denies liability under the policy, on the basis of a 'reservation clause' in the policy, S.96(2) and (a) cannot come in the way. It is also argued that S.110C(2A) is only an enabling provision and that, if there is a 'reservation clause' in the policy, the insurer can take all defences upon to the insured against the claimants -even if there is no collusion between the insured and the claimants and even if the insured is not ex parte as stated in S.110C(2A). It is argued, therefore, that the insured could, in view of the 'reservation clause' contend that there is no negligence on the part of the insured or his servants or that the quantum of compensation is on the high side, even though it is within the upper limit mentioned in S.95(2).

(3.) On the other hand, it is contended for the claimants by Sri. T.G.Rajendran, Sri. Ravindran, Sri. Sreekumar and others that S.96(2) bars the insurer from raising the above contentions. It is also contended that except in the cases specified in S.110C(2A), the insurer cannot raise defences other than those stated in S.96(2). Reliance is also placed on S.96(1), S.96(3) and S.96(4) to say that the insurer is bound to pay the entire award amount and is then to recover excess from the insured. It is also pointed out that in some of these cases before us, extra premium is paid by the insured to make the insurer liable to an 'unlimited' sum and, therefore, the appeals have to be dismissed without going into any question of negligence or correctness of the quantum of compensation.