Section 149 — Duty of insurers to satisfy judgments and awards against persons insured in respect of third party risks.

149. Duty of insurers to satisfy judgments and awards against persons insured in respect of 

third party risks.—(1) If, after a certificate of insurance has been issued under sub-section (3) of  

section 147 in favour of the person by whom a policy has been effected, judgment or award in respect of 

any such liability as is required to be covered by a policy under clause (b) of sub-section (1) of  

section 147 (being a liability covered by the terms of the policy)
1
[or under the provisions of section 

163A] is obtained against any person insured by the policy, then, notwithstanding that the insurer may be 

entitled to avoid or cancel or may have avoided or cancelled the policy, the insurer shall, subject to the 

provisions of this 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 on that sum by 

virtue of any enactment relating to interest on judgments. 

(2) No sum shall be payable by an insurer under sub-section (1) in respect of any judgment or award 

unless, before the commencement of the proceedings in which the judgment or award is given the insurer 

had notice through the Court or, as the case may be, the Claims Tribunal of the bringing of the 

proceedings, or in respect of such judgment or award so long as execution is stayed thereon pending an 

appeal; and an insurer to whom notice of the bringing of any such proceedings is so given shall be entitled 

to be made a party thereto and to defend the action on any of the following grounds, namely:— 

(a) that there has been a breach of a specified condition of the policy, being one of the following 

conditions, namely:— 

(i) a condition excluding the use of the vehicle— 

(a) for hire or reward, where the vehicle is on the date of the contract of insurance a 

vehicle not covered by a permit to ply for hire or reward, or 

(b) for organised racing and speed testing, or 

(c) for a purpose not allowed by the permit under which the vehicle is used, where the 

vehicle is a transport vehicle, or 

(d) without side-car being attached where the vehicle is a motor cycle; or 

(ii) a condition excluding driving by a named person or persons or by any person who is not 

duly licensed, or by any person who has been disqualified for holding or obtaining a driving 

licence during the period of disqualification; or 

(iii) a condition excluding liability for injury caused or contributed to by conditions of war, 

civil war, riot or civil commotion; or 

(b) 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. 

(3) Where any such judgment as is referred to in sub-section (1) is obtained from a Court in a 

reciprocating country and in the case of a foreign judgment is, by virtue of the provisions of section 13 of 

the Code of Civil Procedure, 1908 (5 of 1908) conclusive as to any matter adjudicated upon by it, the 

insurer (being an insurer registered under the Insurance Act, 1938 (4 of 1938) and whether or not he is 

registered under the corresponding law of the reciprocating country) shall be liable to the person entitled 

                                                           
1. Ins. by Act 54 of 1994, s. 47 (w.e.f. 14-11-1994). 



78 

 

to the benefit of the decree in the manner and to the extent specified in sub-section (1), as if the judgment 

were given by a Court in India: 

Provided that no sum shall be payable by the insurer in respect of any such judgment unless, before 

the commencement of the proceedings in which the judgment is given, the insurer had notice through the 

Court concerned of the bringing of the proceedings and the insurer to whom notice is so given is entitled 

under the corresponding law of the reciprocating country, to be made a party to the proceedings and to 

defend the action on grounds similar to those specified in sub-section (2). 

(4) Where a certificate of insurance has been issued under sub-section (3) of section 147 to the person 

by whom a policy has been effected, so much of the policy as purports to restrict the insurance of the 

persons insured thereby by reference to any conditions other than those in clause (b) of sub-section (2) 

shall, as respects such liabilities as are required to be covered by a policy under clause (b) of  

sub-section (1) of section 147, be of no effect: 

Provided that any sum paid by the insurer in or towards the discharge of any liability of any person 

which is covered by the policy by virtue only of this sub-section shall be recoverable by the insurer from 

that person. 

(5) If the amount which an insurer becomes liable under this section to pay in respect of a liability 

incurred by a person insured by a policy exceeds the amount for which the insurer would apart from the 

provisions of this section be liable under the policy in respect of that liability, the insurer shall be entitled 

to recover the excess from that person. 

(6) In this section the expressions “material fact” and “material particular” means, respectively 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 and the expression “liability covered 

by the terms of the policy” means a liability which is covered by the policy or which would be so covered 

but for the fact that the insurer is entitled to avoid or cancel or has avoided or cancelled the policy. 

(7) No insurer to whom the notice referred to in sub-section (2) or sub-section (3) has been given 

shall be entitled to avoid his liability to any person entitled to the benefit of any such judgment or award 

as is referred to in sub-section (1) or in such judgment as is referred to in sub-section (3) otherwise than in 

the manner provided for in sub-section (2) or in the corresponding law of the reciprocating country, as the 

case may be. 

Explanation.—For the purpose of this section, “Claims Tribunal” means a Claims Tribunal 

constituted under section 165 and “award” means an award made by that Tribunal under section 168.