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Petitioner: AZHAR ALI VS Respondent: Sh. MUHAMMAD RAEES SHAMSI AND 2 OTHERS
Court Name: Sindh High Court Judge(s): Nasir Aslam Zahid, Ajmal Mian, Syed Sajjad Ali Shah Title: AZHAR ALI vs Sh. MUHAMMAD RAEES SHAMSI AND 2 OTHERS Case No.: Suit No, 115 of 1977 Date of Judgment:1983-05-01 Reported As: PLD 1984 Karachi 38 Result: Order accordingly
JUDGMENT
JUDGMENT ' AJMAL MIAN, J.-The following two points have been referred to the Full Bench :- (1) Whether the insurer who has insured the vehicle against third party risks, is liable although the real owner of the vehicle at the time of the accident is not the person named in the insurance policy ?, (2) Whether a driver who is permitted to drive the insured vehicle will be deemed to be an insured under the insurance policy, though his name is not specifically mentioned in the policy ? If sq, whether the insurance company will be liable if such driver is found to be ' The relevant facts leading to the snaking of above reference to the Full Benclf are that the" above suit was filed by one Azhar Ali for a sum of Rs, 60,000 as damages on account of pecuniary loss suffered by him because of the death of 'his son as a result of an accident, which took place on 6- 3-1916 and the vehicle involved was a. Suzuki van owned by one Muhammad . Raees Shamsi, defendant No, 1 and driven by one Azad Badshah, defendant No, 2, Thee above vehicle was insured with Messrs Eastern General Insurance- Company Ltd., which was impleaded as defendant No, 3. The insurance company contested the above 'claim inter alia on the ground that the insurance policy was in the name of the previous owner, namely, one Muhammad Shagil and not in the name of Muhammad Rues Shamsi, defendant No, 1. It may be pertinent to point out that Muhammad Raees Shamsi purchased the above vehicle during the currency of the insurance policy but as the registration book was not transferred in his name, he obtained the renewal of the insurance policy in the name of the previous owner Muhammad Shagil and not in his own name. The above suit was tried by Nasir Aslam Zahid, J. Who felt that there were conflicting S. B. And D. B. Views of this Court
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on the above two points and, therefore, referred the matter to the Honourable Acting Chief Justice for making reference to a Full Bench. The above reference has been accordingly made. ' The above case was argued on behalf of the plaintiff by Mr. Aziz Shaikh Advocate, on behalf of defendant No, 1 by Mr. Munawar Ghani (who adopted the arguments of Mr. Aziz Shaikh) and on behalf of defendant No, 3, the insurance company by Mr. Riazul Hasan Advocate, Messrs A. A. Fazeel and G. H. Malik Advocates appeared as amicus curiae in the above case. 2. (a) Mr. Aziz Shaikh, learned counsel for the plaintiff has urged that since any driver holding a valid driving licence is a specified person in the insurance policy notwithstanding the transfer of the ownership of the vehicle by Muhammad Shagil to Muhammad Raees, the right of third party is not affected. (b) On the other hand Mr. Riazul Hassan, learned counsel for defendant No, 3 has contended that after the transfer of the vehicle by Muhammad Shagil to Muhammad Raees Shamsi the insurance policy lapsed and any renewal obtained by Muhammad Raees Shamsi in the name of the previous owner was of no legal consequence. His further submission was that a contract of insurance is not assignable without the consent of the insurance company concerned and that it is a contract for all intents and purposes except that there are certain peculiarities e.g. (i) it is a contract of uberrimae fides. (ii) an insured should have insurable interest at the time of obtaining an insurance policy ; (iii) in case of any ambiguity in the insurance policy, the same is to be resolved in favour of the insured and not in favour of the insurer. (c) Mr. A. A. Fazeel has urged following points: (i) That if any driver without any qualification/condition is a person specified in the insurance policy the insurance company will be liable notwithstanding any transfer of the ownership of the vehicle. (ii) That an insurance company can avoid the liability on the grounds referred to in section 96(2) of the Motor Vehicles Act, 1939. (iii) That even a transferee of a vehicle is an owner of vehicle in terms of section 2(24) of the Motor Vehicles Ordinance, 1965, and, he can obtain a valid insurance policy notwithstanding the fact that registration record is not changed in this favour. (d) Mr. G. H. Malik has contended as follows : "(i) A policy of insurance is a contract between an insurer and an insured and, therefore, all the rules of an ordinary contract are applicable subject to special rules/conditions because of the nature of transaction by virtue of any enactment and the rules thereunder. (ii) The contract of insurance relating to third party risks is a contract of indemnity, whereby the insurer undertakes to indemnify the insured for the loss resulting from the use of a vehicle. (iii) That a person in order to obtain a valid insurance policy must have insurable interest. (iv) The insurance policy may also cover use of the vehicle by any other person or persons than the owner and that the right of such other person depends on the existence of a valid policy. (v) The right which the third person may have, cannot 1 enforced under general law of contract unless he can show that the insured has obtained the policy as a trustee for his benefit. (vi) That a third party may enforce right under an insurance policy not under general law but because of the statutory provisions contained in sections 95, 96 etc. Of the Motor Vehicles Act, 1939. 3.. Learned counsel for the parties have cited a number of cases of English, Indian and Pakistani jurisdictions. In my view, it will be appropriate to deal first with the cases of English and Indian jurisdictions and thereafter, I will take up the cases of the Pakistani jurisdiction. English Cases (1) Tattersall v. Drysdale Reprint Edition 1935 All L R 112. (ii) Peters v. General Accident and Life Assurance Corpn. Ltd. (1937) 4 All E L R 628. (iii) Peters v. General Accident Fire and Life Assurance Corpn. Ltd. (1938) 2 All E L R 267.
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Indian Cases (i) Des Raj Pahwa and another v. The Concord of India Insurance Co. Ltd., Calcutta AIR 1951 Pb. 114. (ii)Birsingh and another v. Sm. Hashi Rashi Banerjee and others AIR 1956 Cal. 555. (iii) Madras Motor Insurance Co. Ltd., Madras v. Muhammad Mr. Stafa Badsha and others AIR 1961 Mad. 208. (iv) Gyarsilal Jagnnathprasad Mor v. Pandit Sitacharan Dubey and others AIR 1963 Mad. Pradh. 164. (v) New Asiatic Insurance Co. Ltd. V. Pessumal Dhanamal Aswani and others AIR 1964 SC 1736. (vi) M. Bhoopathy and others v. M. S. Vijayalakshmi and another AIR 1966 Mad. 244. (vii) B. P. Venkatappa Setty v. B. N. Lakshmiah and another AIR 1973 Mys. 350. Pakistani Cases (i) Fida Hussain v. Masood Ahmed PLD 1957 Kar. 546. (ii) Fida Hussain v. Messrs Queens-land Insurance Co. Ltd. PLD 1959 Kar. 216. (iii) Bashir Begum and others v. Muhammad All Premji and another PLD 1960 Kar. 785.. (iv) Mst. Hamida Begum v. Suleman Jan and others PLD 1961 Kar. 529. (v) Messrs Pak Insurance Co. Ltd. v. Mst. Bashir Begum alias Farzana and others PLD 1966 Kar. 152. (vi) Unreported case L. P. A. No, 61/1961 Muhammad Sharif Chohan v. Hamida Begum and others, decided on 3-2-1966. (vii) Abdul Majid Khan Y. The Eastern General Insurance Co. Ltd. PLD 1970 Kar. 70. (viii) Messrs Pakistan Motor Owners Mutual Insurance Co. Ltd., Lahore v. Din Muhammad and S others 1970 SCM R 212. (ix) Rukaya Bai and S others v. Secretary of Defence, Government of Pakistan, Islamabad and 4 others PLD 1976 Kar. 131. (x) Mst. A,veshabi v. Abdul Ghafoor and others P L P 1977 Kar, $42, (xi) Mrs. Dianat Fatima and 8 others v. Mir Abbas Khan and 2 others PLD 1980 Kar. 271. (a)(i) In the Tattersall v. Drysdale's case relevant facts were that Dr. Tattersall on 10th November 1931 insured himself against third party risks in respect of a Morris Oxford car under a policy subscribed by the London and Edinburgh Insurance Company Ltd. He changed his car from time which changes were duly endorsed on the policy. By endorsement, dated November 8, 1932 the insurance was enlarged so as to give full cover and not merely cover against liability to third parties. The last car which he owned before the events which resulted in the filing of case was a 16 horse-power Standard covered by an endorsement, dated April 11, 1934. Dr. Tattersall wanted to change his car and with above view in August, 1934, he made an agreement with Messrs Gray Brothers and Kemp. Ltd., motor-car dealers, of which one Mr. Gilling was a director. However, he did not wish to have immediate delivery of a new car as he did not make up his mind which of the new
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cars he wanted. However, it was agreed that Dr. Tattersall would be given adjustment of a sum of 180 in respect of his Standard Car, which he was to transfer to Messrs Gray. On 13th August Messrs Gray requested Dr. Tattersall to hand over the possession of his Standard Car as they were having a good customer, which he did. The said car was sold by Messrs Gray to Mrs. Ha) on 15th August. But Dr. Tattersall was lent another car i,e, Riley Saloon, which was owned by one of the directors of the company, namely, Mr. Gilling which was insured under a Lloyd's Eclipse policy, of which the defendant was one of the underwriters. Dr. Tattersall, the plaintiff in the suit was involved in a serious accident while driving the lent car Riley Saloon and had to pay 2,150 as damages. He brought the action against the defendant on the basis of the insurance policy issued in favour of Mr. Gilling in respect of aforesaid Riley Car which was lent to him. The defendant resisted the above claim on the ground that the plaintiff was not an insured under the said policy and, therefore, was not entitled to ask for indemnity. The above case was tried by Goddard, J. (as he then was). Goddard, J., while interpreting section 36(4) of the Road Traffic Act, 1930 held that as tb doctor was driving the car with the permission of the insured Mr. Gilling, the defendant was liable. Reference to a number of earlier cases decided by the English Courts as well as by the Privy Council was made while arriving at the above conclusion. It may be advantageous to reproduce hereinbelow the relevant observations in the above case :- "The position, therefore, in my judgment, being that the plaintiff was driving the Riley with the permission of Mr. Gilling at the time of the accident, and that he was not entitled to indemnity under any other policy, I have now to consider whether he can claim indemnity against the defendant by virtue of section 36(4) of the Road Traffic Act, 1930. Considering that no less an authority than Scrutton, L. J. Has said that he had read this subsection several times without understanding it ; see Jones v. Birch Bros. I naturally approach its construction with considerable diffidence. But with regard to the opening words of the section : "Notwithstanding anything in any enactment," I have the advantage of the decision of the Court of Appeal in Mc. Cormick v. National Motor and Accident Insurance Union Ltd. As I understand that case, these words exclude any consequences that might otherwise result from the operation of the Life Assurance Act, 1774. In Williams v. Baltic Insurance Association of London (5), it had been held in a Court of first instance that this Act did not apply to a policy of motor insurance, and it seems, therefore, that this provision is inserted to preserve that decision to that extent, and to guard against the possibility of a higher Court taking a different view." ' The Eclipse policy which I am considering provides that : "The insurance shall extend to indemnify any person who is driving on the assured's order or with his permission in respect of any legal liability as aforesaid." ' that is, to third parties. It has been decided by the Judicial Committee in Vandepitte v. Preferred Accident Insurance Corporation, that this clause confers no rights on such a person either at common law or in equity unless there was an intention on the part of the assured to create a trust for such person, or unless the assured was acting with the privity and consent of such person so as to be contracting on his behalf. ' The question is, therefore, whether the statute has conferred a right of action on such a person and hereby altered the law. Does the Section merely mean that, in spite of the provisions of the Life Assurance Act, 1774, the insurers shall indemnify the assured against any liability which the policy purports to cover, or does it mean that freed from any difficulties caused by the Life Assurance Act, 1774, as to insurable interest and as to the absence of any name in the policy other than that of the assured, the insurers shall indemnify every one whom they have said they will indemnify, in respect of the liability they have indicated ? ' In my judgment, both the policy of the Act and the words used point to the latter conclusion being the right one. The Act was aimed at the protection of the public by providing that there should be a
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body of insurers behind every driver of a car. As I said earlier in this judgment, this clause had been common, and I think universal, in all private motor car policies for many years. Parliament may be supported to have known that this was, so, and it seems to me no unreasonable supposition that they should enact that, if insurers say that they undertake the insurance of person driving with the assured's permission, statutory effect should be given to their undertaking. The fact that the section mentions "classes of persons" seems to me to support this view. It is, I should think, difficult to envisage a motor car policy in which a class of persons contract with the underwriters ; the latter contract with A, or with A, B and C, or with A. B. Ltd. But if they say they will also cover the friends or servants of the assured in respect of certain liabilities, it seems to me that they are 'specifying a class of persons and that the policy purports tc cover the liabilities of that class." (iii) The case of Petters v. General Accident and Life Assurance Corpn. Ltd. Was initiated upon an insurance policy under the provision of section 10 of the Road Traffic Act to recover the amount of judgment in respect of personal injuries suffered by Mr. John Peters. His action was based on a judgment obtained by him against one Christopher Pope for the sum of 387.75.8d and also 117 as cost on account of being knocked down by a motor van driven by said Mr. Pope. The above van was insured by the previous owner Mr. Coomber under an insurance policy valid upto 30th September, 1935 who sold his car to Mr. Pope in July, 1935 for 10. 5 were paid and 5 remaining were to be paid at Mr. Peope's convenience. On receiving 5 he handed over the car as well as the insurance policy. Mr. Pope while driving the above car was involved in the above accident on 8th September, 1935 causing injuries to Mr. Peters. The above case was also tried by Goddard, J. (as he then was), but it was dismissed as it was held that upon parting with the ownership and possession of the car and the insurance policy without the consent of the Insurance company, the policy had lapsed. It may be advantageous to reproduce hereinbelow relevant observation :- "As to the question of what happened to the policy, I think the policy lapsed. I think that there was thereafter no policy in existence upon this car, because the only person who was insured was Mr. Coomber, and Mr. Coomber had parted with the car, I think that, unless I held that, I should be going behind the principle in the case in the House of Lords known as Rogerson v. Scottish Automobile and General Insurance Co. Ltd. And I should also be disregarding which I could do a great deal more easily my own decision in the case of Tattersall v. Drysdale. If I thought that decision was wrong, I should not hesitate to say that I thought it was wrong, if I thought better opinions prevailed, but I do not see any reason at present to doubt that my decision in that case correctly followed the decision in Rogerson's case. The two cases are not quite the same. They were both cases in which the owner of a car who had insured it sold that car and bought another. In Rogerson's case, the owner met with an accident in his new car ; and the question was whether or not he was using the car in substitution for the insured car, because the extension clause in Rogerson's case gave protection to a car owner if he was temporarily using another car in substitution for the insured car. The House of Lords held that the subject of insurance was a motor car, and that, if the motor car was sold, the insurance lapsed, and was at an end, and the extension clause went with the policy. In Tattersall v Drysdale the facts were really much the same, but the point arose in a different way. Mr. Tattersall had bought a car which he had insured with one company. He parted with his interest in that car, and he got another c,ar, insured with another company. The question was whether the extension clause applied, because it applied only if there was no other policy in force as regards car. I held that the policy was not in force, because he had sold his car." (iii) The above case of Peters v. General Accident and Life Assurance Corpn. Was taken in an appeal to the Court of Appeal but the judgment of Goddard, J., was upheld and while dismissing the appeal the following observations were made by Sir Wilfrid Greene (whereas Scott, L. J., and Mackinnon, L. J. Agreed with him) :-
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"The answer to that is, in my opinion, short and clear. At the date when the accident took place, the entire property in this car was vested in Pope. He had bought the car. On the sale of the car, {{FOOT NOTE}} (1) 1937 All E L R 628 {{FOOT NOTE}} ' the property passed to him, and, although Mr. Comyns Carr at one stage of the argument appeared to suggest that it had not, yet, when his attention was called to the evidence, he felt himself constrained to give up that point. The property, therefore, passed to the purchaser long before this accident took place. The circumstance that he had not paid the whole of the purchase price is irrelevant for that purpose, because that circumstance does not leave in the vendor, Mr. Coomber, any interest in the car." (b)(i) In case of Des Raj Pahwa and another v. The Concord of India Insurance Co. Ltd., Calcutta, Falshaw, J., of the East Punjab High Court held that a motor insurance policy does not remain in force, if there is a change of ownership of the car insured unless there is an agreement between the Insurance Company and the new owner to the effect that the policy shall remain in force. In the above case a stranger to the Insurance policy sought to enforce an arbitration clause which was declined. (ii) In the case of Birsingh and others v. Sm. Hashmi Banerjee and others, a Division Bench of the Calcutta High Court while dealing with an appal against the judgment/decree passed by the trial Court upheld the decree with certain modification and also held that the insurance policy was transferred to the new purchasers in respect of the lorry which was one. Of the vehicles involved in the accident with the assent of the insurance company. It may be advantageous to reproduce hereinbelow paragraph 75 of the above judgment, which reads as follows :- "If it be taken to have been proved in the present case that there was a clause in the policy requiring the insured to obtain the assent of the insurer of the change of ownership and if we had held that no such assent had been given, it would have been impossible to make the insurer liable for the accident in question which had happened after the transfer had taken place. In view of the decision already made that such a clause has not been proved to have been included in the present case, and also that even if such a clause had appeared, the insurer having failed to produce the necessary documents which were under the insurance law in their custody, the insurer must be held to be liable to indemnify the owner of the vehicle as on the day that the accident had taken place." (ii) In the, case of Madras Motor Insurance Co. Ltd. Madras v. Muhammad Mustafa Badsha and others, a learned Single Judge of the Madras High Court held that a sale of vehicle by the insured during the currency of the policy will not affect the liability of the insurer to the third parties injured by the accident. It was pointed out that the transfer of the vehicle by the insured is not a ground included in section 96(2) of the Motor Vehicles Act, 1939, on which the policy could have been avoided. (iii) In the case of Gyarsilal Jagnnath Prasad Mor v. Pandit Sitacharan Dubey and others, a Division Bench of Madhya Pradesh High Court held that a contract of insurance policy is a contract of personal indemnity and the insured cannot claim the insurance amount when he does not suffer any loss or damage. It was further held that where car insured against damage, third party risks, is transferred by the owner to another person, the owner himself retaining no interest in the car and if the car is subsequently involved in an accident causing damage and injuries to others, the owner cannot recover from the insurer any amount for the reason that he cannot be said to have suffered, any loss and further the purchaser of the car cannot also in the absence of.Any assignment of the policy in his favour or special statutory provision claim the insurance amount. However, it was held on the basis of the facts proved that insurance company was liable as it had
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impliedly assented to the transfer inasmuch as the insured and the purchaser informed the insurance company about the transfer and sent the policy to the company for recognition of the transfer but company did not return the policy and did not send any reply. The decree in favour of the third party for the personal injuries suffered by him inter alia was maintained. (v) In the case of New Asiatic Insurance Co. v. Pessumal Dhanamal Aswani and others (1), the question before the Supreme Court of India was, whether a third party can maintain an action against the insurance company which insured a vehicle involved in the accident against third party risks if the insured vehicle was driven by a third person with the permission of the insured. The facts of the above case were that S. N. Asnani owned a Chevrolet Car which he got insured from the New Asiatic Insurance Co. Ltd., under a policy dated 26th November, 1957. The above car met with an accident when Pessumal was driving the Car. With Daooji, Radhamohan, Meherotra and Murli Dholandas with the permission of Asnani insured as a result of which Meherotra died and Murli received injuries. Pessumal himself owned a Pontiac car which had been insured with Indian Trade and General Insurance Co. Ltd. The heirs of Meherotra instituted a suit against Pessumal for the recovery of Rs, 2,50,000 by way of damages with interest, whereas Murli instituted a suit against Pessumal for recovery of Rs, 1,50,000. Notices under section 96(2) of the Motor Vehicles Act, 1939 were issued to Messrs New Asiatic Insurance Co. Ltd. Which were resisted. Learned Single Judge of the Bombay High Court recalled the notices. The plaintiffs filed L. Ps., which were allowed and the cases were remanded to the learned Single Judge for examining the alternative prayers to impleaded the insurance company as a party. Against the above judgment of L. P. A. Bench, appeals were filed in the Supreme Court, which were dismissed. It may be advantageous to reproduce hereinbelow paragraph 22 of the above judgment, which reads as follows :- "Thus the contract between the insured and the company may not provide for all the liabilities which the company has to undertake vis-a-vis the third parties, in view of the provisions of the Act. We are of opinion that once the company had undertaken liability to third parties incurred by the persons specified in the policy, the third parties' right to recover any amount under or by virtue of the provisions of the Act is not affected by any condition in the policy. Considering this aspect of the terms of the policy, it is reasonable to conclude that proviso (a) of paragraph 3 of section II is a mere condition affecting the rights of the insured who effected the policy and the persons to whom the cover of the policy was extended by the company, and does not come in the way of third parties' claim against the company on account of its claim against a person specified in paragraph 3 as one to whom .Cover of the policy was extended. (v) In the case of M. Bhoopathy (died)Rand others v. M. S. Vijayalakshmi and another (2), decided by a Division Bench of the Madras High Court) {{FOOT NOTE}} (1) AIR 1904 SC…
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