Absence Of Fitness Certificate Is Fundamental Breach Of Insurance Policy : 5 Judges’ Bench Of Kerala HC Overrules 3 Judges’ Bench

The question before the 5 judge bench of the Kerala High Court in PAREED PILLAI vs ORIENTAL INSURANCE CO. LTD., was  "Does the law declared by a Full Bench of this Court in Augustine V.M. Vs. Ayyappankutty @ Mani  stand correct in declaring that, the absence of 'Permit' or 'Fitness Certificate' to the transport vehicle is only a 'technical breach' and not a 'fundamental breach', in so far as it stands contrary to the law declared by the Apex Court in National Insurance Company Vs. Challa Bharathamma (later corrected as National Insurance Company Vs. Challa Upendra Rao. For having not made even a reference to the decision of the Apex Court, is not the above verdict liable to be declared as 'per incurium' ?

And has the Full Bench considered the necessity for having a 'Fitness Certificate', 'Permit', 'Certificate of Registration' and 'deemed absence of Registration', as envisaged under Section 56 of the M.V. Act ?"

For the first question, the court held that it has been made clear by the Apex Court in the ruling rendered on 22.11.2017 in M.S. Middle High School Vs. HDFC ERGO General Insurance Co. Ltd. case that the view taken by the Full Bench of this Court in Augustine's case cannot be held to be valid and it was disapproved to the extent holding that the insurer was liable, even if there was breach of conditions of the policy. Since the declaration made by the Full Bench in Augustine's case, is clearly contrary to the law declared by the Apex Court in Challa Upendra Rao's case, the view taken by the Full Bench in Augustine's case is liable to be declared as 'per incurium'. It is ordered accordingly.

The question whether absence of valid Permit to a transport vehicle at the time of accident is a 'fundamental breach' or a 'technical breach' had come up for consideration again before the Apex Court recently in Amrit paul Singh and Another Vs. TATA AIG General Insurance Co. Ltd. and the Apex Court held that the offending truck was not having a valid Permit on the date of accident which was not a technical breach to attract the dictum in National Insurance Co. Ltd. Vs. Swaran Singh and others' case. The Bench held that the exceptions carved out under Section 66 (3) of the Act are to be pleaded and proved by the insured/owner and this burden cannot be shifted to the shoulders of the insurer. It has accordingly been declared that, the use of a transport vehicle in a public place without Permit is a fundamental/statutory infraction and the principles laid down in Swaran Singh's case [cited supra] and Lakshmi Chand Vs. Reliance General Insurance cannot be applicable in this regard. The Apex Court held, in such circumstances, that the verdict passed by the High Court affirming the stand of the Tribunal directing the insurer to satisfy the liability and to have it recovered from the owner/insured was in consonance with the principles stated in Swaran Singh's case [cited supra] and other cases pertaining to 'pay and recover principle'.

The bench held that from the above, it is quite evident that the law stands settled by the Apex Court as per the decision Challa Upendra Rao' case [cited supra] and the latest ruling in Amrit paul's case [cited supra]. This being the position, the dictum laid down by the Full Bench of this Court in Augustine V.M. Vs. Ayyappankutty @ Mani and others holding that the absence of valid Permit or Fitness Certificate is not a fundamental breach, but a technical breach and that no right of recovery can be given to the insurer is not at all correct. It accordingly stands overruled. Consequently, the dictum in Thara G. Vs. Syamala S. is restored and the contrary view expressed in Sethunath Vs. John

Varghese case stands declared as incorrect.