One bench of the Supreme Court wants to reverse beneficial precedents in road accident insurance.
Three benches of the Supreme Court (SC) recently expressed doubts over the correctness of earlier decisions of the court relating to insurance coverage in the Motor Vehicles Act. Therefore, each bench referred those questions to larger benches. All these issues concerned payment of compensation by insurance companies.
The first involved the controversial second schedule of the Act which provides a table to calculate compensation in road accidents. The court had, in the past, described the table as “unworkable” and an example of bad arithmetic. The latest judgment dealing with the schedule, Reshma Kumari vs Madan Mohan, found even more discrepancies. Describing the problem in the context of the facts of the case, the judgment said: “It defies logic as to why in a similar situation, the insured person or his heirs would get a lesser amount than the one specified in the schedule.”
The second case, Bhagyalakshmi vs United Insurance Co, pointed out difference of views in earlier judgments regarding the liability of the insurer for the death of a person travelling in a private car. The company argued that it was not liable to pay compensation according to its standard form of contract.
It is the third reference which causes worry. It resurrected a question which was answered in a long series of judgments passed by larger benches and even Constitution benches. In this case, National Insurance Co vs Parvatheneni, a two-judge bench wanted a larger bench to examine the power of the court to ask the insurer to pay compensation in road accidents though the insurer was legally not bound to pay it to the victims. The reference seems to be unnecessary and a negative answer might affect the interest of the weaker sections of society.
The issue arose thus: In a number of cases, the offending vehicles were driven by persons without valid licences, and the owners either did not check their documents or were negligent in doing so. Therefore, the insurance company had no liability to pay compensation as the terms of the policy had been violated. In such cases, the SC has been asking the insurer to pay the victims first and then recover the amount from the guilty driver or owner. This was done to help illiterate or poor widows or dependents who would otherwise be forced to live a life of penury because of the loss of their bread-winners. They cannot be burdened with a civil case against the vehicle owner and his normally untraceable driver. The damages ordered by Indian courts are anyway small, hardly more than Rs 2,00,000 in ordinary cases.
Such orders are passed by the Supreme Court under Article 142 of the Constitution, which grants it the power to pass any order to do “complete justice”. Rules written by humans cannot envisage all situations in life and therefore, plenary laws bestow certain amount of discretion on the courts to do complete justice.
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This extraordinary power has been used by the SC in several cases. It interfered in matters like: Concessional supply of foodgrains to workers notwithstanding orders of the labour court, recovery of ration money allowance, allotment of accommodation to employees, eviction of tenants, fixing rent, compelling parties to compromise and irretrievable breakdown of marriages. A strict application of rules would have been unjust and insensitive in such cases.
In some instances, the court went so far as to ask the winning party to pay the loser because of peculiar circumstances. In Wakf Board vs Biradavon (1999), the petition of the person who moved the court was dismissed, but still the board was asked to pay the disputed amount “as a goodwill gesture”. In State of Punjab vs Devinder Kaur (1999), the court awarded family pension to the mother of a person who died “in view of the pathetic circumstances” of the case. The family pension scheme did not include parents in the definition of family.
In the Union Carbide case, a Constitution bench discussed the power of the Supreme Court under Article 142 and emphasised that it worked at an “entirely different level” and was of a “different quality”. Prohibitions and limitations contained in ordinary laws cannot act as such under Article 142. It was the propriety which mattered; there was no question of lack of jurisdiction, the judgment emphasised.
In the face of such overwhelming precedents, many of them written by eminent judges sitting in Constitution benches, it was superfluous and harsh to refer the issue of payment of damages to a larger bench for review. Such a bench takes years to be constituted. Till then the poor claimants will get nothing from either the insurer or the guilty owners. This newfound doubt expressed by a small bench is the delight of the insurance companies.