S.C. Manchanda, J.
1. This is an application under Article 227 of the Constitution by the New India Assurance Company, Ltd., (hereinafter referred to as the Insurance Company) against the order of the Additional Civil Judge, Allahabad dated 23rd January, 1963 and the 16th August, 1963, whereby the Insurance Company was not permitted to take up pleas other than those specifically provided for under Section 96 Sub-clause (2) of the Motor Vehicles Act, 1939 (hereinafter referred to as the Act) and the rejection of the subsequent application wherein the Insurance Company had asked for permission to defend the suit in the name of the assured who was not coming forward to contest the suit.
2. The facts lie within a narrow compass and they are these: A motor truck No. U. P. C. 5818 belonging to the assured, Sri Ram Swarup Shukla respondent No. 6, which was being driven by Shamlal the driver, respondent No. 7, was insured with the Insurance Company against third party risk as required under the provisions of the Motor Vehicles Act. On the 30th of March, 1961 while the said vehicle was plying on the public road it met with an accident near the crossing of the Thornhill Road and Lowther Road, Civil Lines, Allahabad as a result of which Sri Babu Ram Saxena the husband of the opposite party No. 1 and opposite parties Nos. 2 to 5 died. The opposite parties Nos. 1 to 5 had filed a suit against the Insurance Company and the opposite parties Nos. 6 and 7 claimed a sum of Rs. 10,000 by way of damages --eight thousand was on account of the death and Rs. 2000 on account of the shocks suffered by the opposite parties Nos. 1 to 5. The suit is No. 26 of 1962 and was filed in the Court of the Additional Civil Judge, Allahabad. The Insurance Company has been arrayeu as a defendant in the said suit in the capacity of an insurer. The owner of the vehicle opposite party No. 6 has put in appearance but opposite party No. 7 has not done so and neither of them have filed any written statement nor are they contesting the suit. In fact, the owner opposite party No. 6 has more or less admitted the claim of the assured and has made a statement that he does' not want to oppose or contest the proceedings.
3. The Insurance Company filed a written statement and raised objections on the merit apart from those which were open to it under Section 96 (2) of the Act. An objection was taken by the opposite parties Nos. 1 to 5 against the pleadings of the petitioner under Order 6 Rule 16 read with Section 151 of the Code of Civil Procedure. The Additional Civil Judge after hearing the parties passed the impugned order dated, the 23rd of January 1963, directing that the Insurance Company will not be entitled to raise pleas not specified in Section 96 Sub-clause (2) of the Motor Vehicles Acl and such pleas as were in contravention of Section 96 (2) of the Act will be scored out. Subsequently, on the 23rd of February, 1963 the Additional Civil Judge proceeded to strike off such pleas as did not conform to the provisions of Section 96 (2) of the Act. Thereupon, on 2-2-1963 the petitioner moved another application under Section 151, C. P. C, seeking permission pf the Court to contest the suit in the name and on behalf of the defendants Nos. 1 and 2 (being opposite parties Nos. 6 and 7 in the present petition). The opposite parties Nos. 1 to 5 objected to this application of the petitioner. An application for review was also filed against the order of the Additional Civil Judge dated, the 23rd January, 1.963 by the Insurance Company. These two applications were heard and disposed of by the Additional Civil Judge by his order dated, the 16th August, 1963. These applications were rejected except that the Insurance Company was allowed to raise the plea that it was not liable in respect of the claim of Rs. 2000/- for mental shock, as not being covered by the terms of the insurance policy. The result has been that in substance the entire defence of the Insurance Company has been struck off, and as the opposite parties Nos. 6 and 7 are not contesting the suit a decree against the Insurance Company will automatically follow. This writ petition is directed against the said orders dated, the 23rd of January and 16th August, 1963.
4. The petition raises an interesting question which has far-reaching consequences on Insurance Companies in general who are saddled with vicarious liabilities in respect of third party risk under Section 96 of the Motor Vehicles Act. The question is whether the defences open under Section 96 (2) when a notice was issued to the insurer under Section 96 (1) are exhaustive and in no circumstances can the insurer he allowed to take pleas on merits, even in a case where the assured and the third party are in collusion or there is a specific term in the insurance policy itself which permits the insurer to take over the defence of the suit from the assured.
5. The second part of the question posed does not require much elaboration in view of the recent decision of the Supreme Court in British India General Insurance Co. Ltd. v. Capt. Itbar Singh, AIR 1959 SC 1331, which were appeals by the Insurance Company from a decision of the Punjab High Court reported in Itbar Singh v. P. S. Gill, (S) AIR 1955 Punj 187. Though the Supreme Court dismissed those appeals, nevertheless, it observed:--
'The statute has no doubt created a liability in the insurer to the insured person but the statute has also expressly confined the right to avoid that liability to certain grounds specified in it. It is not for us to add to those grounds and, therefore, to the statute for reasons of hardship. We are further more not convinced that the statute causes any hardship. First, insurer has a right provided he has reserved it by the policy to defend the action in the name of the assured and if it is so, all defences open to the assured can then be urged by him and there is no other defence that he claims to be entitled to urge. He can thus avoid all hardship, if any, by providing for a right to defend the action in the name of the assured, and this he has full liberty to do.'
Therefore, if the insurer has the full liberty, as laid down by the Supreme Court, to protect itself by contract or by inserting a clause in the policy itself that it will have a right to defend the action in the name of the assured then the insurer will not be limited by the defences open to it under Section 96 (2) of the Act but all the defences which could be taken by the assured himself would be open to it. The Supreme Court, however, made it clear that in such a case the defence to the action will have to be in the name of the assured by the insurer.
6. In this view of the matter if, in the present case there was such a clause in the policy of insurance it would undoubtedly be open to the insurer to defend the action in the name of the assured. Mr. Jagdish Swarup learned counsel for the petitioner frankly conceded that the aforesaid part of the decision of the Supreme Court was not noticed by him at the time when this petition was drafted. He therefore obtained permission for filing supplementary affidavit asserting that the original insurance policy was in fact filed before the Additional Civil Judge on the 16th May 1963, which contained the following clause:--
''No admission, offer, promise, payment or indemnity shall be made or given by or on behalf of the insured without the written consent of the company which shall be entitled if it so desires to take over and conduct in the name of the insured a defence or settlement of any claim or to prosecute in the name of the insured for its own benefit any claim for Indemnity or damages or otherwise and shall have full discretion in the conduct of any proceeding or in the settlement of any claim and the insured shall give all such information and assistance as the Company may require.'
Such a clause would fall clearly within the ratio of the decision of the Supreme Court and would entitle the insurer to defend the action for and on behalf of the assured to the same extent and in the like manner as it was open to the assured.
7. The learned counsel for the opposite parties does not deny that the policy of insurance was filed, but contends that that was not the ground which was taken before the lower Court. It is further contended that the portion of the judgment of the Supreme Court relied upon herein above was only an obiter dicta and one which a learned Single Judge of the Punjab High Court in the case of British India General Insurance Co. Ltd. v. Capt. Itbar Singh, AIR 1960 Punj 131 had explained as such. It is also contended that another Division Bench of the Punjab High Court in the ease of Vanguard Fire and General Insurance Co. Ltd. v. Sarla Devi, AIR 1959 Punj 297, had taken the view that the inherent powers of the Court under Section 151 C. P. C. could not be invoked to nullify the effect of Section 96(2) of the Motor Vehicles Act. That would not be possible even if there was a clause in the insurance policy itself permitting the insurer to sue on behalf of the assured.
8. These contentions are without force. The single bench decision of the Punjab High Court in the case of Capt. Itbar Singh, was an off-shoot of the decision given by the Division Bench and reported in (S) AIR 1955 Punj 187, between the same parties. The Division Bench after holding that only the defences provided under Section 96 (2) were open to the insurer where he had been impleaded as a defendant went on to observe in the penultimate paragraph:--
'Insurers in the several matters, on showiny sufficient cause may be permitted to defend the action affecting them on merits in the name of the original defendant or defendants as the case may be.'
It is this part of the observation of the Punjab High Court which the Supreme Court upon appeal would appear to have endorsed, that under certain circumstances and one such circumstance mentioned by the Supreme Court was where there is a term in the policy itself, it would be open to the insurers to defend the action affecting them on the merits. It is, therefore not correct to say that the said observations of the Supreme Court were merely obiter dicta and even if they were obiter dicta it would require to be given the greatest weight and followed by this Court.
9. After the said decision of the Division Bench of the Punjab High Court and pursuant to the observations made by it, the insurers applied for permission to defend the action in the name or the assured. It was that matter which came up before the learned single Judge of the Punjab High Court. Therefore, the only question for consideration by the learned single Judge was whether the insurers had made out 'sufficient cause' to permit them to defend the action in the name of the assured. The learned Judge found as a fact that the assured was diligently defending the action and was not agreeable to the insurer being permitted to defend in his name, He however went on to make certain observations as to the principles which regulate the procedure in such a case and the effect of the aforesaid decision of the Supreme Court inter partes. It is these observations which the learned counsel for the respondents presses into service and urges that the observations of the Supreme Court have been held by the learned single Judge to be obiter dicta and therefore should not be treated as decisive of the matter which arises in the present petition. This cannot be acceded to. As already observed the aforesaid passage relied upon by Mr. Jagdish Swamp from the judgment of the Supreme Court was not obiter dicta. But, even if it was it has to be followed by the Courts. In any event the further observations of the learned single Judge, if I may say so with all respect, would themselves be only obiter dicta because they were not necessary for the decision and were made after lie had, pursuant to the directions of the Division Bench, come to the conclusion that there was no sufficient cause for permitting the insurers to defend the action in the name of the assured. Therefore, the observations if any made by him as to the effect of the Supreme Court decision would itself be obiter. In these circumstances little or no assistance can be derived by the respondents in the present case from that decision.
10. The case of the Vanguard Fire and General Insurance Co., AIR 1959 Punj 297, which is also a Division Bench case of the Pun-jab High Court would appear to be in conflict with the portion of the judgment of the earlier Division Bench in the case of Capt. Itbar Singh, (S) AIR 1955 Punj 187, where a power was reserved, upon sufficient cause being shown, for the insurer to be permitted to defend the action in the name of the assured. The attention of the later Division Bench does not appear to have been drawn to the penultimate paragraph of the judgment of the earlier Division Bench of the same Court. Be that as it may, after the pronouncement of the Supreme Court in the case AIR 1959 SC 1331, it is now no longer possible to hold that in no circumstance can an insurer be permitted to raise a defence outside those specifically provided under Section 96 (2) of the Act.
11. On a consideration of the position under the common law and the English Motor Traffic Act of 1930 and 1934, the view expressed by Chagla C. J. in Royal Insurance Co. Ltd, v. Abdul Mahpmad Meharalli, (S) AIR 1955 Born 39, the decision of the Punjab High Court in ((S) AIR 1955 Punj 187), and in AIR 1959 Punj 297, and the decision of the Supreme Court in the ease AIR 1959 SC 133L I am inclined to hold that the insurer is confined to the defences under Section 96 (2) only where he has been impleaded as a defendant, but not in a case where the insurer has made an express contract or otherwise has reserved the right to defend the action in the name of the assured. In such circumstances the insurer cannot he restricted to raising only the defences under Section 96 (2) of the Act, but he would be entitled to take all defences in the like manner and to the like extent as could have been raised by the assured himself.
12. For the reasons given above, I would quash the order of the Additional Civil Judge, Allahabad dated the 16th August 1963 and direct the disposal of the suit in accordance with law. The petition is allowed but in the circumstances of the case there will be no order as to costs.