' 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 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.
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 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 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) :- "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 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 1736 (2) AIR 1966 Mad. 244 {{FOOT NOTE}} ' the facts were that the owner of the car obtained a comprehensive policy covering third party risks. During the currency of the policy, he sold the car, of which the company had no knowledge.
Subsequently, the car knocked down the plaintiff and injured him. In a suit by the plaintiff the question arose whether the insurance company was liable to pay the plaintiff's claim. It was held by a Division Bench of the Madras High Court that section 96(1) of the Motor Vehicles Act itself pre- supposes and proceeds on the basis that there was a subsisting policy, and that in the absence of express stipulation to the contrary in the policy, the continued ownership of the car with the insured was basic condition to the subsistence of the policy. It was further held that once the subject- matter of the policy was gone and parted with by the insured by sale or transferred the policy automatically lapsed and there was nothing for the insurer to avoid it. It may be pointed out that the above Division Bench case overruled the aforesaid learned Single Judge judgment reported in AIR 1961 Mad. 208 and relied upon in PLD 1966 Kar.
152.
(vii) In the case B. P. Venkatappa Setty v. Lakshmiah and another, a Division Bench of the Mysore High Court held that an insurance policy is personal contract between the parties for indemnifying the insured in case of an accident covered under the policy. It was further held that where the vehicle is transferred by an insured to another person, the insurance policy lapses upon the transfer and in such a case the benefit of policy is not available to the transferee without an express agreement with the insurance company. It was also held that the duty of the insurer to cover third party risk could arise only if at the time of the accident there is in force a policy of insurance in relation to the motor vehicle involved in the accident.
(c)(i) In the case of Fida Hussain v. Masood Ahmed, the question before Inamullah, J. (as he then was) was, whether a notice under section 96(1) and (2) of the Motor Vehicles Act, 1939 could be issued to insurance company, which had insured the vehicle involved in the accident in a suit in which the insured was not impleaded as a party. It was held that sub-clauses (1) and (2) of section 96 contemplate a suit having been filed against the person insured and only then the question. Of notice to the insurance company under said clause (2) of section 96 of the Act would be competent. It may also be stated that in the above case incidentally Mr. A. A. Fazeel Advocate had appeared for the insurance company. Though, he opposed the notice, but conceded that the driver would be entitled to claim indemnity under paragraph 3 of the insurance certificate from the insurance company if the suit is decreed.
(ii) The case of Fida Hussain v. Messrs Queensland Insurance Co. Ltd. (1) is a judgment given by a Division Bench comprising of B. Z. Kaikaus and Wahiduddin Ahmad, JJ., (as then they were) against the aforesaid judgment of Inamullah, J., referred to hereinabove in para. (i). The above appeal was allowed and it was held that no distinction can be drawn between the persons insured and the persons in whose name the policy stands for interpreting the term "insured person" used in section 96(1) of the Motor Vehicles Act on the basis of the terms of the insurance policy. It was further held that the above section does not contemplate that a suit must be filed against the person who has obtained the insurance policy but it also applies to those cases where the suit is filed against the person {{FOOT NOTE}}
(1) PLD 1959 Kar. 216 {{FOOT NOTE}} ' for whose benefit the policy has been obtained. In other words, in the above case it was held that since the driver was covered under the insurance policy, the suit against him without impleading the owner of the car was competent and that a notice under section 96(1) could be competently issued to the insurance company in a suit brought by the person claiming damages on account of loss of life or injuries.
(iii) In the case of Bashir Begum and others v. Muhammad Ali Premji and another the facts were that one Sher Ali Durrani husband of plaintiff No, 1 and father of plaintiffs Nos. 2 to 4 (who were minors) met with an accident on 20th April, 1974 at 6-00 a.m. Resulting into his death on account of the collision of his motor cycle with a passenger bus bearing No, K. P. 547 belonging to defendant No,
1. In the above suit the insurance company was also impleaded and their defence was that the bus was insured with them by one Abdul Hayee and was transferred to defendant No, 1 without their knowledge and that the insurance policy was also fraudulently transferred in the name of defendant No,
1. However, upon trial of the suit it was held that the policy was in fact transferred by the insurance company in favour of the purchaser. After having held this, Wahiduddin, J., held that the defences open to the insurance company under section 96(2) of the Motor Vehicles Act are those which are specified therein and no other defence. It may be advantageous to reproduce herein-below the relevant observation : "Mr. Khilnani was perfectly justified in his contention that the scope of the defence open to an insurance company under section 96(2) of the Motor Vehicles Act is of a very limited character.
Section 96(2) of the Motor Vehicles Act provides that the insurance company is entitled to defend the action firstly on the ground that the policy was cancelled by mutual consent or by virtue of any provision giving rise to the liability or that either before or not later than 14 days after the happening of the accident the insurer has commenced proceedings for cancellation of the certificate after compliance with the provisions of section 105 ; secondly, that there has been a breach of a specified condition of the policy about the use of the vehicle and thirdly that 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. The plea taken by defendant No, 2 is not covered by any of the conditions stated above. In my opinion, therefore, on this ground the defence taken by defendant No, 2 cannot be taken into consideration I am fortified in my view by the decision of the Supreme Court of India in British India General Insurance Co. Ltd. v. Captain Itbar Singh and others AIR 1959 SC 1331. After careful consideration of the matter I am satisfied that defendant No, 2 is liable to meet the claim of the plaintiff under policy Exh. 12/3 read with Exh. 9/3."
(iii)In the case of Mst. Hamida Begum v. Suleman Jan and others the suit was filed by the mother of the deceased Muzaffar Hussain Khan, who was killed in an accident on 8-2-1957 having been run over by a bus at the footpath. Defendant No, 1 Suleman Jan averred that he was not the owner of the bus nor was connected with it in any manner at the time of the accident as he had sold it out to one Mahboob Ali in the year 1954. Defendant No, 2 Muhammad 'Shard was the new owner filed an evasive reply and inter alma contended-that insurance Company defendant No, 2 was liable but the insurance Company pleaded that they were given no intimation of the fatal accident and that the insurance policy stood in favour of the defendant No, 1 and was at no time transferred in favour of any body else and for that reason the policy could not be invoked by any other party.
Defendant No, 5, the driver admitted that the bus belonged to defendant No, 2 Muhammad Sharif but denied having caused death on account of rash and negligent driving. The period of insurance policy which was then in force was from 16th December, 1958 to 17th December, 1957. Defendant No, 1 Suleman Jan had denied that he had obtained this policy but it was proved that the purported signature in Urdu was not of Suleman Jan. Defendant No, 2 Muhammad Sharif in his letter dated 29th March, 1957 addressed to the insurance company admitted the factum that he could not get the transfer of policy effected in his name due to some unavoidable circumstances. It seems that the bus changed several hands after it was sold by defendant No, 1 Suleman Jan. A. S. Faruqui, J., after relying on the case of Peters decided by Goddard, J., referred to hereinabove held that the insurance company was not liable. The relevant observations are as follows :- "For the reasons given above I hold that the defendant No, 2, Muhammad Sharif, who has been held by me to have been the owner of the bus at the time of the accident, was not insured with the defendant No, 4 and, therefore, the indemnity provided for by the policy cannot be extended to him. The result is that the plaintiff cannot recover from the Insurance Company.
(v) The case of Messrs Pak. Insurance Co. Ltd. v. Mst. Bashir Begum alias Farzana and others (1) is a judgment of Division Bench comprising of Qadeeruddin Ahmed and Illahi Bakhsh Khamisani, JJ.
Against the judgment of Wahiduddin, J. Reported in PLD 1960 Kar.
785. The Division Bench maintained the judgment of the learned Single Judge and repelled the contention of the learned counsel for the appellant that the insurance company was not liable as the accident had taken place at 6-00 a.m. Early in the morning on 20th April, 1954 and the policy was transferred in favour of the new purchaser on the very day. It was observed by Khamisani, J.
That "Apart from that, the fact that the insurance policy was transferred on the 20th of April 1954, in the name of defendant No, 1 will not make the slightest difference in so far as the liability of the appellant is concerned. The bus in question was admittedly insured with the appellants and this insurance policy was effective from the 10th of March, 1954 to the 9th of March, 1955. The incident which resulted in the death of the deceased occurred on the 20th of April, 1954, during the subsistence of this insurance policy. The appellants, therefore, in our opinion, will be bound to pay the damages under the Fatal Accidents Act regardless of whether the insurance policy stood in the name of Abdul .Hai Khan or in the name of Muhammad Ali Premji defendant No, 1" Qadeeruddin, J., while concurring with the conclusion arrived at by Khamisani, J., observed that : "Insurance policy was validly obtained and its period was subsisting at the time of the accident as well as the time of change of name of the insured. In the above circumstances, the liability of the insurers {{FOOT NOTE}}
(1) L D 1966 Ka. 152 {{FOOT NOTE}} (2) ' with respect to the victim of the accident to compensate his dependents under the Fatal Accidents Act, 1855, is not affected."
' Reliance was placed by Qadeeruddid, J., on the case of Madras Motor Insurance Company v.
Muhammad Mustafa (1), referred to hereinabove without discussing the facts and certain observations of Mr. Chaudhry in his book on the Motor Vehicles Act, 5th Edition, were quoted with approval. Incidentally it may be mentioned that the above case was decided on 7th October, 1965.
' The unreported case of Muhammad Sharif Chohan v. Hamida Begum and others L.P.A. 61/1961 is a judgment by a Division Bench comprising of Illahi Bux Khamisani, and H. T. Raymond, JJ. Against the judgment of A. S. Farooqui, J. Reported in PLD 1961 Kar. 529 referred to herein-above. The above Division Bench upheld the judgment of A. S. Farooqui, J. And dismissed the appeal through the above judgment dated 3-2-1966. It may be advantageous to quote hereinbelow relevant portion of para. 6 of the judgment, which reads as follows :- "We have considered the arguments of the learned counsel and we are clearly of the view that there is no substance in them. In order to bring the case of the appellant within section 96 (1) it is necessary to establish the liability of respondent No, 3 as required to be covered by a policy under clause (b) of subsection (I) of section 95 of the Motor Vehicles Act. Clause (b) of subsection (1) of section 95 of the Motor Vehicles Act reads as under : "95 (1) (b) insures the person or classes of person specified in the police to the extent specified in subsection (2) against any liability which may be insured by him or them in respect of the death of or bodily injury to any person caused by or arising out of the use of the vehicle in a public place in the provinces and the Capital of the Federation or in a reciprocating territory."
' This clause deals with the insurance of a person or classes of person specified in the policy to the extent specified in subsection (2) of this section against any liability which may be incurred by him or them in respect of the death or bodily injury to any person caused by or arising out of the use of the vehicle in a public place. The other condition for the purpose of bringing the case of the appellant within section 96 (1) of the Motor Vehicles Act is that the insurers will be called upon to pay to the person entitled to the benefit of the decree any sum not \ exceeding the sum assured, if a judgment in respect of such a liability is obtained against any person insured under the policy. It is quite clear in section 96 (1) that the liability or the insurers to pay to the person entitled to the benefit of the decree will arise only after judgment against the insured has been obtained. The condition precedent, therefore, for the liability of the insurer is that a judgment and decree must be obtained against an insured person. In this particular case the judgment and decree has been obtained against the appellant who is admittedly not an insured person. The insured person in this case is Suleman Jan respondent No, 2 and not the appellant. In the event of the judgment having not been obtained against Suleman Jan, the insured, the liability of the insurers i. e. Respondent No, 3, to pay to the person entitled to receive the amount for which the policy exists, will not arise. We are strengthened in our view by the case of Gyarsilal v. {{FOOT NOTE}}
(1) AIR 1961 Mad. 208 {{FOOT NOTE}} (2)
' Sitacharan (1). We are consequently of the view that respondent No,. 3 is not liable to pay the whole or any part of the amount of the decree to respondent No, 1 or to indemnify the appellant on account of any subsequent payment made by him to respondent No, I.
' It may be pointed out that the above Division Bench judgment is a judgment subsequent to-the aforesaid judgment of the D. B. Reported in PLD 1966 Kar 152. In this judgment without referring to the above reported judgment of the Division Bench a view which appears to be contrary was found favour with the Division Bench and incidentally the judgment was written by Illahi Bakhsh Khamisani, J. Who was also the author of the main judgment in the above D. B. Reported case.
(vii)In the case of Abdul Majid Khan v. The Eastern General Insurance Co. (2) a Division Bench, held that in case of ambiguous expressions in an insurance policy, the same are to be construed against the insurance company which has issued the insurance policy.
(viii)In the case of Messrs Pakistan Motor Owners Mutual Insurance Co. Ltd. Lahore v. Din Muhammad and 5 others (3), the Supreme Court while declining to grant leave to appeal against the judgment of the High Court decreeing the suit in favour of heirs of one Khushi Muhammad, who while driving a tractor was killed in a collision with the bus owned by respondent No, 5 and driven by respondent No, 6 and insured by the petitioner observed that there was no warrant for the construction sought to be placed by the learned counsel for the petitioner that it is permissible to an insurance company to resist the suit by a third party on the grounds other than the grounds specified in section 96 (2) of the Motor Vehicles Act. It was also held by the Supreme Court that all other grounds of defence other than specified in the above subsection (2) of section 96 are by necessary implication excluded by these words. It may be advantageous to quote hereinbelow the relevant observation.
"All other grounds of defence are by necessary implication excluded by these words. This is further vouched by subsection (6) of section 96 which lays down that : ' No insurer to whom the notice referred to in subsection (2) or subsection (2-A) has been given shall be entitled to avoid his liability to any person entitled to the benefit of any such judgment as is referred to in subsection (1) or subsection (2-A) otherwise than in the manner provided for in subsection (2) .....
' As seen the terms of subsection (2) do not entitle an insurance company to defend the action by a third party on grounds of limitation or negligence as was set out in the written statement of the petitioner."
(vii)In the case of Rukavabai and 5 others v. Secretary of Defence, Government of Pakistan Islamabad and 4 others (4), Mushtak Ali Kazi, J. After reviewing the case law held that where a case is transferred alongwith the policy, the transfer must be consented to by the insurance company and after the assent there will be novation of contract and the liability in respect of the transferee would be accepted by the insurance company. It was held that since the van involved in the accident was transferred to the purchaser\ {{FOOT NOTE}}
(1) AIR 1965 Madh. Pra. 164 (2) PLD 1970 Kar. 70
(3) 1970 SCMR 212 (4) PLD 1976 Kar. 131 {{FOOT NOTE}} ' without the consent of the insurance company, the insurance company was not liable and that the policy had lapsed. It was also observed that unless there is judgment against persons insured in respect of the third party risk section 96 (1) will have no application. In the above case the transferee of the vehicle had claimed indemnity from the insurance company though the insurance policy was not transferred in his favour with the consent of the insurance company.
(x) The facts of the case of Mst. Ayeshabi v. Abdul Ghafoor and others (1) were that the suit for damages in respect of a fatal accident, in which deceased R. P. Hamza lost his life was filed by his widow for her own benefit and for the benefit of her minor children on account of pecuniary loss.
The insurance company appeared in response to a notice under section 96 of the Motor Vehicles Act, 1939. In its written statement, the company denied the factum that the bus was owned by defendant No, 2 on the material date and also the factum that the bus was driven by defendant No,
1. It was also pleaded that he insurance was effected by one Habib Ahmed, who had failed to inform the company of the accident in violation of the condition in force under the insurance policy. Said Habib Ahmed was not impleaded as a party. It was expressly also denied that any insurance policy was issued in favour of defendant No,
2. However, Zafar Hussain Mirza, J. (as he then was) quoted with approval the observation of the Supreme Court of India in the case of New Asiatic Insurance Co. v. Pessumal Dhanamal Aswani and others (2) referred to hereinabove in para.
(4) (b) (v) to the effect that third parties' right to recover any amount under or by virtue of the provision of the Motor Vehicles Act is not affected by any condition in the policy. It may be advantageous to quote hereinbelow para. 12 of the above judgment which reads as follows :- "12. In New Asiatic Insurance Co. v. Pessumal, the policy provided as under "The company will indemnify any driver who is driving the motor car on the insured's order or with his permission, provided that such driver is not entitled to indemnify under any other policy. Upon the plea of the Insurance Company that the driver had the cover of another policy, the Indian Supreme Court held that the proviso is not really a classification of drivers but is a restriction on the right of the driver to recover any damages he had to pay, from the company, but this has nothing to do with the liabiiity which the driver has incurred to third party for injuries caused to it. It was further held that once the company had undertaken liability to third parties incurred by persons specified in the policy the third parties right to recover any amount under or by virtue of the provisions of the Motor Vehicles Act is not affected by conditions in the policy. In the instant case the language of the relevant term of the policy relating to the driver is couched in much wider terms than in the reported case. Here there is no qualification that the driver to be entitled to indemnity must be one who should be driving the vehicle on the insured's order or with his permission. The dictum laid down in the decision is, therefore, applicable with greater force in the present case and the insurance company cannot, therefore, avoid its liability by pleading the absence of the main insured's permission. In this view of the matter, the entire argument of Mr. Shaikh Haider {{FOOT NOTE}}
(1) PLD 1977 Kar. 542 (2) AIR. 1964 SC 1736 {{FOOT NOTE}} ' becomes irrelevant and untenable. By virtue of section 95 the Driver, Conductor and Passengers whoever they may be at the material time as a class of person were clearly insured unconditionally in the policy. It will not be proper to add the condition that only a driver in the employment of the main insured person was intended to be covered by the insurance as no such qualification has been imposed terms of the policy. The intention was, therefore, clearly to extend insurance cover to any driver irrespective of the fact whether he was acting in employment of the owner or otherwise. I am accordingly inclined to hold that defendant No, I was the insured person under the policy."
(xi) In the case of Mrs. Dianat Fatima and 8 others v. Mir Abbas Khan and 2 others (1), I followed the above unreported judgment of the Division Bench, and the aforesaid Single judgments of Faruqui, J and of Mushtak Ali Kazi, J. ; and held that the insurance company was not liable as the transferee of the car was not insured. It may be observed that neither the effect of sections 95 and 96 of the Act was considered nor the above judgment of Zafar Hussain Mirza, J. Was cited and referred to, and, therefore, the above case is of no assistance to the above two points in issue.
5. From the above-cited and discussed cases, it is evident that the consistent view taken in the cases of English jurisdiction is that once an insured transfers the ownership of the insured vehicle to any person without the consent of the insurer concerned, the policy lapses and even a third party cannot maintain an action for damages but where the insured owner of the insured vehicle parts with the possession of the same temporarily and allows another person to use it in terms of the insurance policy, the insurer remains liable even if the accident occurs while the insured vehicle was in temporary use of another person. This is the ratio in the above case of Tattersal v. Drysdale in which Mr. Gilling had lent his car to Dr. Tattersall for the period till the time the latter would have got a new car. The Indian Courts more or less adopted the above English Courts' view. However, in the case of Madras Motor Insurance Company v. Muhammad Mustafa Badshah and others (2) referred to hereinabove in para. 4 (b) (iii) a learned Single Judge of the Madras High Court deviated from the above view and held that notwithstanding the transfer of the ownership in the car to another person insurance company remains liable as it can avoid the liability only on the grounds specified in subsection (2) of section 96 of the Motor Vehicles Act, 1938, which does not include a ground of transfer without the permission of the insurance company. But this view of the learned Single Judge did not hold ground very long as it was subsequently overruled by a Division Bench of the Madras High Court in the case of M. B. Venkatappa Setty v. B. N. Lakshmiah (3) referred to hereinabove in para. 4(b) (vi). In the other case of Indian jurisdiction referred to hereinabove, in which it has been held that a third party was entitled to a decree against the insurers are based on the finding that there was in fact transfer of the insurance policy concerned with the express or implied assent of the insurance company concerned in favour of the purchasers. Coming to the cases of Pakistani jurisdiction, it may be observed that the first case which has come bearing on the points in issue is the case of Bashir Begum and others v. Muhammad All Premji (4) referred to hereinabove in para. (4) (c)(iii), in which Waheeduddin, J. (as he then was) concluded that there was transfer of the {{FOOT NOTE}}
(1) PLD 1980 Kar. 271 (2) AIR 1961 Mad. 208
(3) AIR 1966 Mad. 244 (4) PLD 1960 Kar. 785 {{FOOT NOTE}} ' insurance policy in respect of the insured vehicle involved with the consent of the insurance company in favour of the purchaser and, therefore, the insurance company was liable. It was further held by him that the only defences available to an insurance company were those mentioned in subsection (2) of section 96 of the Motor Vehicles Act. The above judgment of Waheeduddin, J. Was assailed in L. P. A., which was heard by a Division Bench comprised of Qadiruddin Ahmed and Ellahi Bux Khamisani, JJ. But the above judgment was maintained. (See PLD 1966 Kar. 155) quoted hereinabove in para. 4 (c) (v). However, certain observations were made by both the above learned Judges in their separate judgments, which indicate that they were of the view that notwithstanding the transfer of the ownership of the insured vehicle without the consent of the insurance company, the latter remains liable. Since the finding of Wahiduddin, J. That the insurance policy pertaining to the vehicle involved was in fact transferred in favour of the purchaser with the consent of the insurance company, was maintained by the above Division Bench, the above observations purporting to hold that notwithstanding the transfer of the ownership of the insured vehicle involved without the consent of the insurance company, the latter remains liable are not ratio decidendi in the above case as they were not required for deciding the case and, therefore, are obiter dictum. It can be said that the first case of Pakistani jurisdiction directly on the paints in issue is the case of Mst. Of Hamida Begi m v. Suleman Jan and others (1) referred to herein-above in para. 4 (c) (iv) in which the insured vehicle involved in the accident was transferred by the insured without the consent of the insurance company and thereafter it changed many hands. It was held by A. S. Faruqui, J. As pointed out hereinabove that insurance company was not liable as the transfer of the insured vehicle by the insured was not with consent of the insurance company. It was also held that the renewal of the insurance policy obtained by the purchaser in the name of the insured was of no consequence. The above judgment of Faruqui, J. Was maintained in L. P. A. By a Division Bench comprised of Illahi Bux Khamisani and H. T.
Raymond, JJ. Through the unreported judgment referred to hereinabove in para 4 (c) (vi). The above view was followed by Mushtak Ali Kazi, J. In the case of Rukaya Bai and 5 others v. Secretary of Defence, Government of Pakistan (2) referred to hereinabove in para. (c) (ix) and also by me in the case of Mst. Dianat Fatima and 8 others v. Mir Abbas Khan and 2 others (3) referred to hereinabove in para. 4 (c) (ix). I seems that the above case decided by me is the last reported case of this Court on the points in issue but as pointed out hereinabove that the judgment of Zafar Hussain Mirza, J. In the case of Ayeshabi Abdul v. Ghafoor and others (4) was not brought to my notice and the effect of sections 95 and 96 of the Motor Vehicles Act, 1938 was also not canvassed before me. In the above 1977 Karachi case Zafar Hussain Mirza, J. Took the view that if a driver is also a specified person in the insurance policy without any qualification, the insurance company remains liable to a third party under the insurance policy notwith-standing the transfer of the ownership of the vehicle involved without the consent of the insurance company. In my view strictly speaking there is no inconsistency between the above view and the view found favour with the learned Judges of this Court in the aforesaid other cases, namely, Hamida Begum, Mst. Rukaya Bai and Mst. Dianat Fatima referred to {{FOOT NOTE}}
(1) PLD 1966 Kar. 152 (2) PLD 1976 Kar. 131
(3) PLD 1980 Ku, 271 (4) PLD 1977 Kar. 542 {{FOOT NOTE}} ' hereinabove, as the question whether the driver concerned could be treated as an insured person independently from the owner of the insured vehicle was not considered in the above cases. The above aspect was touched upon indirectly by Wahiduddin, J. In the aforesaid D. B. Case of Fida Husain v. Messrs Queens Land Insurance Co. Ltd. (1) referred to hereinabove in para. 4(c) (ii), in which it was held that no distinction can be drawn between the persons insured and the person in whose name the policy stands. It was held that a notice under section 96 (1) of the Motor Vehicles Act, 1938 could be competently served on the insurance company in respect of a suit, to which the owner of the insured vehicle in whose name the policy was issued, was not made a party but the driver of the insured vehicle, was sued in respect of liabilit9 covered by section 95 (1) (b) of the above Act.
6. (a) In order to Judge, as to whether the view found favour with Zafar Hussain Mirza, J. Is in consonance with law, a reference is to be made to the relevant provisions of the Motor Vehicles Act, 1938 (hereinafter referred to as the Act), which are retained by virtue of a saving clause in the Motor Vehicles Ordinance, 1965.
' It may be observed that subsection (1) of section 94 of the Act provides that no person shall use except as a passenger, cause or allow any other person to use a motor vehicle in a public place, unless there is in force in relation to the use of the vehicle by that person or that other person, as the case may be, a policy of insurance complying with the requirements of Chapter VIII of the Act. It excludes a person driving the motor vehicle merely as a paid employee if he has no knowledge that there was no insurance policy in force in terms of the above Chapter. Uner subsection (2) of the above section operation of the above subsection (1) has been excluded in respect of the vehicles belonging to the Central Government and Provincial Government etc.
(b) Whereas subsection (1) of section 95 provides that in order to comply with the requirements of the above Chapter, an insurance policy should be issued by an authorized insurer (who is defined in sub-clause (a) of section 93 or a co-operative Society allowed under section 108 of the Act). It further provides that the insurance policy shall insure the person or classes of persons specified in the policy to the extent specified in sub-clause (2) of the above section 95, in respect of the death or bodily injury to any person caused or arising out of the use of the vehicle in a public place in Pakistan or in reciprocating territory (which is defined in clause (c) of section 93). It may be pertinent to point out here that under clause (b) of subsection (1) of section 95 of the Act, it is not obligatory that an insurance policy should only provide a cover to the owner of the vehicle against any liability, which he may incur by causing death or bodily injury to a third person by using the insured vehicle in a public place, but the above cover may extend even to classes of persons. In other words, it admits the possibility of insuring of a person or persons other than the owner of the vehicle in respect of any liability which he/they may incur by using the insured vehicle in a public place causing death or bodily injury to any person. However, the application of the above subsection is excluded in respect of the cases specified in subsection which are not relevant for the points in issue and, therefore, need not be referred to herein. {{FOOT NOTE}}
(1) PLD 1959 Kar. 216 {{FOOT NOTE}} ' It may also be pointed out that subsection (2) of the above section specifies the maximum liability of an insurer in relation to an insurance policy issued in terms of subsection (1) of section 95.
Furthermore, subsection (4) provides that a policy shall have no effect unless and until the insurer issues in favour of a person by whom the policy is effected, a certificate of the insurance in the prescribed form. It may further be pointed out that subsection (5) of section 95 is of significance to the points in issue, which provides that notwithstanding anything elsewhere contained in any law, a person issuing a policy of insurance under this section shall be liable to indemnity the person or classes of persons specified in the policy in respect of any liability which the policy purports to cover in the case of that person or those classes of persons. It may be noticed that above subsection has been couched in the same phraseology as above clause (b) of subsection (1) inasmuch as it provides that an insurer is liable to indemnify the person or classes of persons. In other words, the above subsection (5) also admits the possibility of raising of a claim for a indemnity in respect of any liability, which may be incurred by a person other than the owner of the vehicle on account of death or bodily injury to any person caused by or arising out of the use of the insured vehicle in a public place.
(c) It may also be pertinent to refer to subsection (1) of section 96 of the Act, which provides that if after the certificate of insurance has. Been issued under subsection (4) of section 95 in favour of the person by whom a policy has been effected, judgment in respect of any such liability as is required to be covered, by a policy under clause (b) of subsection (1) of section 95 (being a liability covered by the terms of the policy) is obtained against any person insured by the policy, then, notwithstanding that the insurer shall, subject to the provisions of_ the above section, pay to the person entitled to the benefit of the decree any sum not exceeding the sum assured payable thereunder, as if he were the judgment-debtor in respect of the liability together with any amount payable in respect of costs and any sum payable in respect of interest of that sum by virtue of any enactment relating to interest on judgments. However, subsection (2) of the above section lays down that no sum shall be payable under section (1) unless before or after the commencement of the proceeding, in which the judgment is given the insurer had notice from the Court nor the insurer shall be liable to pay in respect of any judgment as long as execution is stayed thereon pending an appeal. It also provides that upon receipt of the notice from the Court of the proceeding, the insurer shall be entitled to be made a party thereto and to defend the action on any of the grounds specified therein, namely.
(i) that the policy was cancelled by mutual consent or by virtue of any provision contained in the policy before the accident giving rise to the liability occurs.
(ii) That either the certificate of insurance was surrendered to the insurer or that the person to whom the certificate was. Issued has made an affidavit stating that the certificate has been lost or destroyed.
(iii) That before or not later than the 14 days after the happening of the accident, the insurer has commenced proceeding for cancellation of the certificate after compliance with the provision of section 105.
(iv) That there has been a breach of specified condition of the policy being one .Of the conditions mentioned in clauses (b) (c) (d) (e) or subsection (2) prohibiting use of the insured vehicle, namely, for hire or reward where the vehicle is on the date of contract of insurance a vehicle not covered by a permit to ply for hire or reward, for organized racing and speed testing, for a purpose not allowed by the permit under which the vehicle is used where the vehicle is a public service vehicle or the goods vehicle, or without side-car being attached, where the vehicle is a motor cycle or a condition excluding liability for driving of the insured vehicle by a person who is excluded by name or does not hold a valid driving licence or is disqualified from obtaining licence or a condition which excludes the liability for injury caused or contributed to by conditions of war, civil war, riot or civil commotion if conditions so provide.
' It may further be stated that clause (e) of subsection (2) of the above section 96 also provides further defence, namely, that the policy is void on the ground that it was obtained by the non- disclosure of a material fact or by representation of fact, which was false in some material particular. It may also be pointed out that the expressions "material fact" or "material particular" have been defined in subsection (5) of section 96 as a fact or particular of such a nature as to influence the judgment of a prudent insurer in determining, whether he will take the risk and if so, at what premium and on what conditions.
' It may also be stated that subsection (6) of section 96 of the Act reiterates that no insurer to whom a notice referred to in subsection (2) and subsection (2-A) has been issued, shall be entitled to avoid his liability to any person entitled to the benefit of any such judgment as is referred to in subsection (1) or subsection (2-A) otherwise than in the manlier provided for in subsection (2) i. e.
Grounds referred to herein-above.
(d) It may also be mentioned that there are certain other provision in the Act which indicate that the intention of the Legislature was to preserve the right of third party to obtain the benefit under insurance policy In respect of liability incurred by the insured by using an insured vehicle. For example sections 97 and 101 purport to nullify the effect of insolvency of an insured, so that the third parties' rights are not prejudiced.
7. From the above discussed provisions of the Act, the following principles are deducible:
(1) That an insurance policy against third party risks need not be C for the benefit of the owner of the vehicle alone' but it may extent cover to person or classes of persons specified in the insurance policy.
(ii) That the, liability under an insurance policy issued in terms of section 95(1) of the. Act is to meet any liability which may be incurred by the specified person or persons in respect of death o bodily injury to any person caused by or arising out of the us of the insured vehicle in a public place in Pakistan or reciprocating territory subject to the exclusion of the cases referred to hereinabove in para. 5(a).
(iii) That the statutory liability of an insurer is to the extent of the amounts mentioned in clauses (a),
(b) and (c) of subsection (2) of section 95.
(iv) That notwithstanding any thing else where contained in any law an insurer is liable to indemnify the person or classes of persons specified in the policy in respect of any liability which the police purports to cover in the case of that person or those classes on persons.
(v) That if an insurer is served with a notice by a Court in respect o proceeding pertaining to the liability covered by clause (b) of subsection (1) of section 95, the decree obtained in such a proceeding can be executed against the insurer as if he were a judgment-debtor notwithstanding that the latter may be entitled to avoid or cancel or may have avoided or cancelled the policy.
(vi) That if an insurer after receiving a notice under subsection (1) o section 95 of the Act chooses to become a party to the proceeding, he can defend the claim only on the grounds mentioned in clauses (a) (b) (c) (d) and (e) of subsection (2) of section 96 and o no other ground.
(vii) That the liability to third parties incurred by the persons specified in the policy in terms of sections 95 and 96 of the Act is not affected by any condition in the policy.
8. The preponderance of the view obtaining in Pakistan seems to be that if a claim is made and a proceeding is commenced by a third party in respect of a liability covered under clause (b) of subsection (1) of section 95 the only grounds of defence available to an insurance company are those mentioned in subsection (2) of the above section. Waheeduddin, J., in the aforesaid case of Bashir Begum and others v. Muhammad Ali Premji (1), expressly held so, which judgment was upheld by a D. B. The above view was reiterated in unambiguous terms by the Honourable Supreme Court of Pakistan in the case of Messrs Pakistan Motors Owner Mutual Insurance Co. Ltd.
Lahore v. Din Muhammad and 5 others (2). The above view also found favour with Zafar Hussain Mirza, J. In the aforesaid Karachi case of 1977. However, I may point out that in order to maintain an action against an insurer, it is incumbent to show that the person or classes of persons specified in the policy have incurred any liability in terms of clause (b) of subsection (1) of section 95. In other words, if th liability incurred is by a person other than the person or classes of person specified in the policy, the insurer shall not be liable. It is only when it is shown that the liability was incurred during the currency of the policy by the person or classes of persons specified in the policy, the above sub-,D section (2) of section 96 is attracted to.
' To put it precisely, it may be observed that in order to determine, whether an insurer is liable or not, the basic question which is to be firs determined is, as to whether the liability has arisen out of an acciden resulting in death or bodily injury, while using the insured car in a publi place, by the person or classes of persons specified in the policy. If the answer to the above query, is in the affirmative, the insurer shall be liable to indemnify the liability to the extent mentioned in subsection (2) {{FOOT NOTE}}
(1) PLD 1960 'Car. 785 (2) 1970 SCMR 212 {{FOOT NOTE}} ' of section 95 subject to the defences mentioned in subsection (2) of section 96.
(a) It may be mentioned that Zafar Hussain Mirza, J. In the above case of Mst. Ayeshabi was dealing with an insurance certificate which was couched in identical terms as the insurance certificate in the instant case, in which the present reference has been made. It may be advantageous to reproduce para. 5 of the insurance certificate in question, which reads as follows:- ' Any persons provided the person driving holds a valid licence to drive the vehicle."
' In the above-quoted insurance certificate specified person, is any person provided the person driving holds a valid driving licence. The wordings of the above certificate are different from -the clauses, which were the subject-matter of interpretation by Goddard, J: (as be then was) in the above cited and discussed case of Tattersall v. Drysdale and before the Supreme Court of India in the case of New Asiatic Insurance Co. Ltd. v. Pessumal Dhanamal Aswani and others inasmuch as in the said cases the cover was extended to any person driving on the assured's order or with his permission, whereas in the instant case there is no such requirement. It may be observed that the above-quoted para. 5 of the insurance certificate, is susceptible to two interpretations, namely, any persons mean the person or persons in employment contemplation of the insured but liberal construction of the above para. Will cover any person holding 'a valid driving licence. Zafar Hussain Mirza, J. Preferred the latter interpretation and pointed out that the driver, conductor and passengers whoever they may be at the material time is a class of persons insured and that it was not warranted to add a condition that only a driver. In the employment of the main insured person was intended to be covered by the insurance policy. However, I may point out that if the above insurance1 certificate would have been couched differently, for example providing against above para. 5 "Owner or any person driving with his permission or order having a valid driving licence", in that event, 'it would not have been possible to take the above view, which found favour With Zafar Hussain Mirza, J. I am inclined to subscribe to the above view found favour with Zafar Hussain Mirza, J. As it is a beneficial view and also seems to be in consonance with the spirit of the provisions of the Act highlighted hereinabove in para. 6.
10. It will not be out of context to point out that from the aforesaid case. Of Mst. Begum and subsequent cases including the case from which the present reference has arisen, it is evident that a practice is obtaining among the transporters, namely, vehicles are sold and they change many hands through open letters without getting the registration record mutated in the name of a purchaser. We had put a query to Mr. Riazul Hasan, learned 'counsel for 'the insurance company, as to whether an insurance company will be liable in case an insurance policy is issued by it in the name of the previous owner after having been sold that the insured vehicle has been transferred to the person applying for renewal. He has candidly submitted that in such an event the insurance company will be gable if the above facts are proved.' I am also inclined to hold that if an insurer after having been told that the person, who has applied for renewal of the insurance policy is not the insured but a purchaser from the insured and in spite of having been told this, the insurer, renews the policy, it will not be open to him to defend the action if brought for enforcing liability in terms of sections 95 and 96 of the Act, on the ground that the renewal was obtained by a stranger to the policy as the insurer will be estopped from raising such a plea.
11. It may also be pointed out that section 2(24) of the Motor Vehicles Ordinance, 1965, defines an owner inter alia means a person in whose name the motor vehicle is registered and also a transferee of the vehicle. In other words, a transferee for the purpose of the Motor Vehicles Ordinance, 1965, becomes an owner of the vehicle and acquires insurable interest notwithstanding that the registration of the vehicle remains in the name of the previous owner. In the above English case of Peters v. Gent ral Accident and Life Assurance Corporation Ltd. Goddard, J. (as he then was) while trying the original action and Sir Wilfrid Greene sitting in Cow of appeal with Scott, L. J.
And Mackinnon, L. J. And also A. S. Faruqi, J. In the above case of Mst. Hamida Begum took the view that the property in the insured vehicles stood transferred upon sale to the purchasers in the absence of any reservation of any interest by the previous owners notwithstanding the fact that the registration of the vehicles remained in the name of the previous owners. In fact the above view has been reiterated by providing the definition of an owner in subsection (24) of section 2 of the Motor Vehicles Ordinance, 1965, referred to hereinabove. The effect of which seems to be that even a purchaser of a vehicle in whose name registration is not transferred becomes the owner of the vehicle and acquires insurable interest to obtain an insurance policy in his own name even without getting the registration changed.
12. We are not called upon to decide, as to whether in the case from which the present reference has arisen the plaintiff is entitled to succeed against the insurance company as it will be for fife .
Learned Single Judge hearing the suit, to decide the same. We are only required to answer the above two points referred to heremabove in para. 1 in general terms. My answers to the above two questions are as follows:-
(1) That an insurer shall be liable under the insurance policy against third party risks in case the action is brought in respect of the liability , incurred by the person or classes of persons specified in the insurance' policy in terms of clause (h) of subsection (1) of section 95 notwithstanding the transfer of ownership of the insured vehicle. .
(2) The question whether a driver can be deemed to be an insured under the insurance policy will depend on the terms of the insurance certificate or the insurance policy. If he is covered by the person or classes of persons specified in the policy he shall be deemed to be an insured person under the insurance policy.
13. Before parting with the above discussion, it may be suggested that suitable amendments may be made in sections 95 and 96 of the Act, in order to put the matter beyond controversy as the present provisions are so worded that it leaves scope for raising pleas, which may defeat the claim of a third party. It may be pointed out that no less than a Jurist of Scrutton, L. J.'s eminence while construing a corresponding section of section 96 of the Act, namely, section 36(4) of the English Road Traffic Act, 1930, in the case of Jones v. Birc Bros. Observed that he had read the above section several times without understanding it and Goddard, J. (as he then was) in the above judgment of Tattersall v. Drysdale felt diffident while construing the above provision. It may be provided that notwithstanding anything contained in The law or in any instrument and notwithstanding any transfer of the ownership of the insured vehicle during the currency of the insurance policy or otherwise the insurer shall remain liable to the extent of the statutory liability imposed under subsection (2) of section 95 of the Act.
14. Before concluding the above discussion I on my own behalf and on behalf of my learned brothers may record our gratitude to Messrs A. A. Fazeel and G. H. Malik Advocates who have appeared as amicus curiae and have rendered valuable assistance in concluding the above reference.
' SAJJAD ALI SHAH, J.-I agree. NASIR ASLAM ZAHID, J.-I agree.