In Public Interest Narasimhan Vijayaraghavan
In Public Interest
Narasimhan Vijayaraghavan
Preamble
Today is Friday. 1st April,2022. April Fools Day.A transformational day to remind ourselves to be anything but foolish. Chapter XI Motor Vehicles Act takes effect from this day. An important part of the dramatic changes, includes the introduction of a new statutory defence for insurance companies vis a vis their demarcated defences under Sec.150(2) of the said Act.
Restricted Defences of Insurance Companies
It is settled law that defences of an insurance company are confined to those provided under Sec.150(2) ( earlier Sec.149(2) and Sec.96(2)).Supreme Court had upheld the restriction imposed, to point out that – compulsory motor insurance was put in place to ensure that innocent accident victims got the benefit of certainty of compensation from the insurance companies.
And the intention of Parliament is to provide succour and relief to accident victims. And the outlook and concern was not to enable insurers to run their businesses on commercial lines- Captain Itbar Singh. ( https://indiankanoon.org/doc/135147/) (1959) and Kokilaben Chandravadan ( https://indiankanoon.org/doc/1182839/) (1987) . And this position of law has remained unchanged.
Under the influence of Alcohol – Own/Vehicle Damage claim
Till 31st March,2022, motor insurers were not entitled for the defence of drivers being ‘under the influence of alcohol/drunks’ vide Sec.185 of MV Act,1988- under Sec.149(2)(now Sec.150(2)), in relation to Third Party claims. The said defence on ‘drunken droving’ was available to insurers only in relation to contractual Own Damage/Vehicle damage claims.
A defence enabled under Sec.I of the motor insurance policy. And not one under Sec.II of it. Supreme Court has made it clear in Pearl Beverages case ( https://indiankanoon.org/doc/25720691/?type=print) (2021).
Pay and Recovery Remedies
Hitherto, the constitutional courts still had allowed the insurers the defence of ‘drunken driving’ in Third Party claims, with a rider to direct insurance companies to ‘pay the award sums with liberty to recover the same from owners of motor vehicles or insureds”. ( Legally, such liberty also was wrong, since the said defence was not at all available in the first place- but that is another story).
Read the decision of Madras High Court in Jaffer Sadiq – (https://www.casemine.com/judgement/in/56ea7d05607dba36e94575c3 ) (2012) for clarity on this ‘pay and recover proposition’.
New Dispensation as of 01.04.2022
While so, on and from 1st April,2022 legitimately and statutorily, insurance companies can avail the defence of ‘drunken driving’ in Third Party claims. Read Sec.150(2)(a)(ii) as it stands now. But that is not the major change.
Change is in the catch. There is a huge change in the language under Sec.150(4) in comparison to the equivalent Sec.149(4) in vogue, till 31st March, 2022.
New Sec.150(4) is Old Sec.149(4)
Read Sec.150(4) in comparison to Sec.149(4). Sec. 149(2)(b) stood with – ( b) reading- 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.
This clause (b) has been deleted in the present Sec.150(4).Clause (b) made the telling difference in Sec.149(2) and (4) to protect victims till 31.03.2022, to get compensation. To enable and ensure certainty of compensation from insurance companies.
Read the decision in Jaffer Sadiq ( cited supra) – which identified the huge safety net which Parliament had thoughtfully or inadvertently provided.
Now, insurers have lobbied hard to get clause (b) removed from Sec.150(4) and let only sub section (2) vis a vis Sec150(2) to remain.,
Impact of deletion of ‘clause (b)’ in Sec.150(4)
Sec.149(4) is now Sec.150(4) under Chapter XI.
Previously Sec.149(4) till 31.03.2022 read as follows.
(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 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:
Now Sec.150(4) as of 01.04.2022 reads as follows:
(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.
Now compare the two provisions- Sec.149(4) as it stood till 31.03.2022 and Sec.150(4) as it stands on and from 01.04.2022.
The telling deletion in clause (b) (clause (b) of sub-section (2)) now. Clause (b) of sub section (2) in Sec.149- made all the difference. The defence of insurer was confined to only when policy of insurance was void for suppression of material fact – Read Jaffer Sadiq ( supra).
In view of deletion of clause (b) (of sub section (2) ) from Sec.150- and letting only sub section (2) remain- all defences under sub section (2) would be available to insurers- to seek and avoid liability.
It was Sec.150 (4), inclusive of clause (b) that enabled courts to direct pay and recovery. By confining the defence to policy being void for suppression of material fact. And not for other defences as – not duly licensed, use of vehicle for a purpose other than permitted, no Permit to ply etc.
Now that clause (b) stands deleted- such direction to pay and recovery may not be possible in respect of accidents occurring after 01.04.2022. That is a transformational change, helping insurance companies and harming victims.
No more directions to ‘ Pay & Recover’ Possible
The fallout is huge. The insurance companies shall have to be exonerated from liability,in relation to this demarcated defence, now made available to them viz. drunken driving under Sec.185. The insurance companies cannot be asked to ‘pay and recover’, which was possible when clause(b) was available.
So, if the insured driver was found ‘under the influence of drinks/drugs as contemplated in Sec.185- and ingredient of 30 mg in 100 ml of blood was Tested and found- then on such proof being adduced- insurance companies may have to be exculpated from liability, in respect of accidents occurring on or after this April Fools Day.
The only hope is insurance companies ‘foolishly’ failing to prove their defence , which precedents reveal, they are eminently capable of.
Scary Statistics
Now to the Scary Statistics. There is a death every six minutes on the roads in India. India is high up occupying 11th rank, in the world, in number of accidents. Drunken Driving contributes 18%-24% as the trigger for accidents. Only 0.6% of those are recorded in FIRs. And of them of 0.1% are Tested . And fewer are prosecuted under Sec.185. Even lesser convicted, if at all. ( Mostly on plea bargaining and friendly admission of guilt and a rap on the knuckles with a fine).
Sale/Consumption of Liquor
Kerala tops as the State in India with the highest per capita consumption of alcohol. But Tamil Nadu pips it in sales with 16 lakh litres and a few kilos of drug sales. And there are 60 lakh patrons, on a daily basis. Sales of alcohol is a milch cow in terms of State revenue. For all States sans Bihar and Gujarat- where Prohibition is in force.
Despite liquor stores staying shut for months in 2021 , Tamil Nadu consumed more alcohol in FY21 than ever before. According to a government reply in the legislative assembly, the Tamil Nadu State Marketing Corporation (TASMAC), which holds the monopoly over the sale of alcohol in the state, reported revenues of Rs 33,811 crore in FY 21, which is its highest ever. The collection is 2 percent higher than TASMAC’s previous record of Rs 33,133 crore reported for FY20.
Going by sales trends, this fiscal is also set to break new highs in alcohol sales across the state. As of July 2021, TASMAC sales have clocked Rs 7,907.61 crore in FY22. The company has handed out increments of Rs 500 to Rs 25,000 to its employees across 5,402 liquor outlets and 2,808 bars. Drink to that !
Impact on We The People
In such a scenario, We the People as users of the roads are in serious jeopardy. Every citizen is a potential accident victim. In case of accidents occurring after 01.04.2022, involving drunken drivers- Sec.185 compliant that is- the insurance company may walk away smiling while the victims’ families go crying to seek compensation from owners of motor vehicles who are ‘men of straw’ as apex court put it.
Comforting Thought- Past Experience
Rest assured however. The comforting thought and reality is the utter callousness, indifference and inability of powers that be, including inadequate manpower and insufficient Testing kits/logistics in the ground, to enforce Sec.185.
As on date, the record is abysmal. Good for the victims? Or bad for them?
It may be exacerbated, after 01.04.2022, in the name of misplaced sympathy to victims to obtain compensation from insurance companies.
Who will suffer? We the People, of course. Beware.
( Author of Motor Vehicles Laws, LexisNexis Butterworths,26th edition, 2019 and practising advocate, Madras High Court)
