U.P. STATE ROAD TRANSPORT CORPORATION versus RAJENDRI DEVI & ORS. on 8 June 2020

1. Leave granted.

2. In the present case, death occurred to a 45 year old who wason a cycle and hit by a bus on 16.08.2001. The Motor Accident ClaimsTribunal (hereinafter referred to as ‘MACT’) found that it was as aGresult of rash and negligent driving by the driver of the bus, which washired by the appellant-Uttar Pradesh State Road Transport Corporationunder an agreement between it and the bus owner. Ultimately findingthat the income would be Rs.18,000/- per year, minus one-third, andwith a multiplier of 13, Rs.1.65 lakhs + 8 per cent interest was awardedHby the MACT, but it was held, following Rajasthan State Road

Transport Corporation v. Kailash Nath Kothari (1997) 7 SCC 481[“Kailash Nath Kothari”], that it is only for the appellant-Corporation topay this entire amount and not the insurance company. This was held asfollows:

“15. The bus is a private one. It ran under the control of theUPSRTC. The ld. counsel for the Insurance Company has arguedthat the bus under the control of UPSRTC devolved theresponsibility of payment of any compensation upon UPSRTCbecause it is not the owner who is in control of the bus but theCorporation who controls the working of the driver. The ld. counselfor the company cites Rajasthan State Road Transport Corporationversus Kailash Nath Kothari 1997 ACT 1148. I find the case lawreferred to applies squarely to the present case at hand. TheUPSRTC O.P. No. 3, and not the O.P. No. 1 and 2, is responsibleto pay the award.”

3. In the High Court, by a judgment dated 27.09.2016, the samejudgment of Kailash Nath Kothari (supra) was referred to and followed,making it clear, therefore, that the appellant alone is vicariously liable topay the victim’s family the amount of compensation that has been ordered.It was therefore also stated, referring to the agreement between theCorporation and the owner of the vehicle, as follows:

“Much emphasis has been laid by learned counsel for the appellanton Clause 10 of the agreement between the appellant and theowner to wriggle out of its responsibility to make payment ofcompensation. There is no reference of the said agreement inthe impugned award. No such ground has been taken in the memoof appeal that it was filed before the Tribunal but has not beenconsidered. In any view of the matter, even if such a clauseexists in the agreement, it is between the appellant and the ownerand shall not affect the rights of the claimants to receivecompensation flowing from the provisions of the Act. Thus, thefirst argument advanced by learned counsel for the appellant isdevoid of any force and not liable to be accepted.”

4. Having heard learned counsel appearing for all the parties, weare of the view that the judgment relied upon, viz., Kailash Nath Kothari(supra), is itself distinguishable for the reason that the judgment itselfrecords as follows:

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A“3. . . . The insurance company took the plea, in its reply to theclaim petitions, that the bus at the time of the accident was underthe control of the RSRTC, therefore, it was the liability of theRSRTC to pay compensation and the insurance company wasnot liable. It was further pleaded by the insurance company thatthe liability of the insurance company, in any event, was limitedBand its liability could not exceed Rs.75000/- in respect of all theclaim petitions arising out of one accident. . . .

4. . . . Issue No. 2 was also decided in favour of the claimpetitioners but it was held that in the light of the terms of thepolicy of insurance and relevant provisions of the Act, the liabilityCof the insurance company was limited, in respect of the accident,to a total amount of Rs.75,000/- only.”

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“7. . . . Learned counsel appearing for the insurance company,Ddid not question the finding on Issue No. 2 and submitted that thespecified amount had since been paid by the insurance company.. . .”

In addition to this, the Court also held, relying upon the definitionof “owner” in Section 2(19) of the Motor Vehicles Act (as it then stood),as follows:E

“17. The definition of owner under Section 2(19) of the Act isnot exhaustive. It has, therefore, to be construed, in a wider sense,in the facts and circumstances of a given case. The expressionowner must include, in a given case, the person who has the actualFpossession and control of the vehicle and under whose directionsand commands the driver is obliged to operate the bus. To confinethe meaning of “owner” to the registered owner only would in acase where the vehicle is in the actual possession and control ofthe hirer not be proper for the purpose of fastening of liability incase of an accident. The liability of the “owner” is vicarious forGthe tort committed by its employee during the course of hisemployment and it would be a question of fact in each case as toon whom can vicarious liability be fastened in the case of anaccident. . . .”

(emphasis in original)

In this view of the matter, it was therefore held that since theinsurance company’s liability was limited only to Rs.75,000/- which hadbeen paid, the insurance company would, on the facts of that case, notbe liable to pay anything more. On this count, therefore, the amountpayable beyond Rs.75,000/- was mulcted on to the Corporation in thatcase.

5. In a subsequent judgment, viz., Uttar Pradesh State RoadTransport Corporation v. Kulsum and Ors. (2011) 8 SCC 142[“Kulsum”], this Court stated the question of law that arose forconsideration as follows:

“3. The question of law that arises for consideration in the instantand connected appeals is formulated as under: if an insured vehicle(in this case a mini bus) is plying under an agreement of contractwith the Corporation, on the route as per permit granted in favourof the Corporation, in case of an accident, whether the InsuranceCompany would be liable to pay compensation or would it be theresponsibility of the Corporation or the owner?”

It then referred to the definition of “owner” under Section 2(30)[1]of the Motor Vehicles Act, 1988 and contrasted it with the definition of“owner” in Section 2(19)[2] of the 1939 Act.

It then went on to distinguish Kailash Nath Kothari (supra) asfollows:

“16. In Kailash Nath Kothari [Rajasthan State Road TransportCorporation v. Kailash Nath Kothari (1997) 7 SCC 481], aquestion had arisen with regard to theliability of the insurancecompany, where the bus plied as per the contract with RajasthanState Road Transport Corporation. However, the said case wasdealing with the earlier Motor Vehicles Act of 1939. Taking intoconsideration the definition of “owner” as it existed then in Section 1 “2(30) ‘owner’ means a person in whose name a motor vehicle stands registered, andwhere such person is a minor, the guardian of such minor, and in relation to a motorvehicle which is the subject of a hire-purchase agreement, or an agreement of lease or anagreement of hypothecation, the person in possession of the vehicle under thatagreement;”

2 “2(19) ‘owner’ means, where the person in possession of a motor vehicle is a minor,the guardian of such minor, and in relation to a motor vehicle which is the subject of ahire-purchase agreement, the person in possession of the vehicle under that agreement;”

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2(19) of the old Act, it has been held in para 17 as under: (SCCpp.487-88)

“17. The definition of ‘owner’ under Section 2(19) of the Act isnot exhaustive. It has, therefore to be construed, in a wider sense,in the facts and circumstances of a given case. The expressionB‘owner’ must include, in a given case, the person who has theactual possession and control of the vehicle and under whosedirections and commands the driver is obliged to operate the bus.To confine the meaning of ‘owner’ to the registered owner onlywould in a case where the vehicle is in the actual possession andcontrol of the hirer not be proper for the purpose of fastening ofCliability in case of an accident. The liability of the ‘owner’ isvicarious for the tort committed by its employee during the courseof his employment and it would be a question of fact in each caseas to on whom can vicarious liability be fastened in the case of anaccident. In this case, Shri Sanjay Kumar, the owner of the busDcould not ply the bus on the particular route for which he had nopermit and he in fact was not plying the bus on that route. Theservices of the driver were transferred along with complete‘control’ to RSRTC, under whose directions, instructions andcommand the driver was to ply or not to ply the ill-fated bus onthe fateful day. The passengers were being carried by RSRTC onEreceiving fare from them. Shri Sanjay Kumar was therefore notconcerned with the passengers travelling in that bus on theparticular route on payment of fare to RSRTC. Driver of the bus,even though an employee of the owner, was at the relevant timeperforming his duties under the order and command of theFconductor of RSRTC for operation of the bus. So far as thepassengers of the ill-fated bus are concerned, their privity ofcontract was only with the RSRTC to whom they had paid thefare for travelling in that bus and their safety therefore becamethe responsibility of the RSRTC while travelling in the bus. Theyhad no privity of contract with Shri Sanjay Kumar, the owner ofGthe bus at all. Had it been a case only of transfer of services ofthe driver and not of transfer of control of the driver from theowner to RSRTC, the matter may have been somewhat different.But on facts in this case and in view of Conditions 4 to 7 of theagreement (supra), the RSRTC must be held to be vicariouslyHliable for the tort committed by the driver while plying the bus under contract of the RSRTC. The general proposition of law andthe presumption arising therefrom that an employer, that is, theperson who has the right to hire and fire the employee, is generallyresponsible vicariously for the tort committed by the employeeconcerned during the course of his employment and within thescope of his authority, is a rebuttable presumption.”

(emphasis in original)

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“18. In our considered opinion, in the light of the drastic and distinctchanges incorporated in the definition of “owner” in the old Actand the present Act, Kailash Nath’s case [Rajasthan State RoadTransport Corporation v. Kailash Nath Kothari (1997) 7 SCC481] has no application to the facts of this case. We were unableto persuade ourselves with the specific question which arose inthis and connected appeals as the question projected in theseappeals was neither directly nor substantially in issue, in KailashNath’s case [Rajasthan State Road Transport Corporation v.Kailash Nath Kothari (1997) 7 SCC 481]. Thus, reference tothe same may not be of much help to us. Admittedly, in the saidcase, this Court was dealing with regard to earlier definition of“owner” as found in Section 2(19) of the old Act.”

Finally, the insurance company was held liable stating:

Finally, the insurance company was held liable stating:

“29. In the instant case, the driver was employed by Ajay Vishen,the owner of the bus but evidently through Clause 4.4 of theagreement, reproduced hereinabove, driver was supposed to drivethe bus under the instructions of the conductor who was appointedby the Corporation. The said driver was also bound by all ordersof the Corporation. Thus, it can safely be inferred that effectivecontrol and command of the bus was that of the appellant.

30. Thus, for all practical purposes, for the relevant period, theCorporation had become the owner of the vehicle for the specificperiod. If the Corporation had become the owner even for thespecific period and the vehicle having been insured at the instanceof original owner, it will be deemed that the vehicle was transferredalong with the insurance policy in existence to the Corporationand thus the Insurance Company would not be able to escape itsliability to pay the amount of compensation.

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A31. The liability to pay compensation is based on a statutoryprovision. Compulsory insurance of the vehicle is meant for thebenefit of the third parties. The liability of the owner to havecompulsory insurance is only in regard to third party and not tothe property. Once the vehicle is insured, the owner as well asany other person can use the vehicle with the consent of the owner.BSection 146 of the Act does not provide that any person who usesthe vehicle independently, a separate insurance policy should betaken. The purpose of compulsory insurance in the Act has beenenacted with an object to advance social justice.”

6. The law laid down in Kulsum’s case (supra) squarely appliesCto the facts of the present case. Also, the argument based on Clause 10,which states as follows, “CLAUSE 10: The second party (Bus owner) shall have full liabilityfor any fault, negligence, accident, or other illegal acts of the driverand liability for payment of any compensation or other duesDwhatsoever in this regard shall be that of the owner of the bus orInsurance Company under the Acts. In no case, the First party(Petitioner Corporation) shall have any liability for fault, negligence,accident, or other illegal acts of the driver. In case any paymentis made by the First Party in compliance of any order of anyECourt, etc., the First Party shall be authorized to recover the same.”

is only between the Corporation and the bus owner and does notbind anybody who is not privy to the aforesaid agreement, least of all,the victim.

7. In this view of the matter, the appeal is allowed and the sumFawarded by the MACT will now be payable only by the InsuranceCompany with interest at the stated rate, within a period of three monthsfrom today.

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Ankit Gyan

Appeal allowed.

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