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C.M.A. No.4163/2019

IN THE HIGH COURT OF JUDICATURE AT MADRAS

Reserved onPronounced on

13.12.2023 19.01.2024

CORAM

THE HONOURABLE MR. JUSTICE M.DHANDAPANI

C.M.A. NO.4163 OF 2019

AND

C.M.P. NO.23525 OF 2019

M/s.Iffco Tokio General Insurance Co. Ltd.

Rep. By its Manager

2

nd

Floor, Near Vemala Kalyana Mandapam

By Pass Road, Hosur, Krishnagiri District. .. Appellant

- Vs -

1.Mr. Shajahan

1.R.Sankaran .. Respondents

Civil Miscellaneous Appeal filed u/s 173 of the Motor Vehicles Act

against the order and decreetal order dated 31.01.2019 made in M.C.O.P.

No.613 of 2014 on the file of the Motor Accident Claims Tribunal, Chief

Judicial Magistrate, Dharmapuri.

For Appellant :Mr. M.B.Raghavan, for

M/s. M.B.Gopalan Associates

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For Respondents:Mr. S.Sathiaseelan for R-1

No Appearance for R-2

JUDGMENT

The present appeal is filed against the order passed by the Motor

Accident Claims Tribunal, Chief Judicial Magistrate, Dharamapuri, in M.C.OP.

No.613/2014 in and by which the Tribunal directed the appellant to pay

compensation to the claimants and recover the same from the owner of the

vehicle. Assailing the said order, by contending that the any person travelling

in a private vehicle would not be covered under an Act Only Policy, the

present appeal has been filed by the insurance company.

2. For the sake of convenience, the parties will be referred to as

claimant, insurance company and the owner of the vehicle will be referred to

as the 2

nd

respondent, as arrayed in the present appeal.

3. The short facts leading to the filing of the present appeal are as

under :-

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On 21.8.2014, at about 4.45 a.m., when the claimant was travelling in

the car belonging to the 2

nd

respondent, which was driven by one Tamilarasu

in Morappur – Dharmapuri main road in a rash and negligent manner, near

Solaikottai the car dashed against a Tamarind tree in which the claimant

suffered grievous injuries including fracture to the left leg and right leg and

the Femur bone and Tibia were fractured. Therefore, the claim petition was

preferred before the Tribunal seeking compensation to be paid jointly and

severally by the insurance company and the 2

nd

respondent.

4. The main ground canvassed by the insurance company before the

Tribunal to extricate itself from the liability to pay the compensation is that

the policy taken by the 2

nd

respondent was a liability only policy, which runs

for the period 25.06.2014 to 24.06.2015 and that the 2

nd

respondent, who is

the owner of the car had not paid any additional premium to cover the risk of

the passengers/occupants travelling in the car and, therefore, the claimant is

not entitled to any compensation at the hands of the insurance company, as

the insurance company is not vicariously liable to indemnify the insured

under an Act Only Policy with regard to the occupants who are inside the

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vehicle as such of those persons, who are travelling in the vehicle would not

be covered under the Act Only Policy in the absence of additional premium

being paid.

5. Before the Tribunal, the claimant examined himself as P.W.1 and

marked Exs.P-1 to P-10. On the side of the insurance company, R.W.1 was

examined and the copy of the policy was marked as Ex.R-1. On the basis of

the oral and documentary evidence, the Tribunal held that any person beyond

the insurer and the insured would fall within the ambit of “authorised

representative” as the claimant was employed by the owner of the private

vehicle, viz., the 2

nd

respondent and, therefore, would be entitled to

compensation at the hands of the insurance company, which is to indemnify

the claimant, but could recover the same from the 2

nd

respondent, viz., the

owner of the vehicle, for the reasons stated in the impugned order.

Aggrieved by the said order, the present appeal has been filed.

6. Learned counsel appearing for the appellant submitted that when

the Act Only Policy did not cover liability of passengers in a private vehicle as

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it is not a statutory compulsion u/s 147 of the Act, no liability can be fastened

on the appellant to indemnify the claimant. It is the further submission of the

learned counsel that when there is additional premium paid by the owner for

the vehicle for coverage of the passenger in a private car, the passenger

cannot be brought within the ambit of “third party”, and the direction of the

Tribunal directing the appellant to pay the compensation and, thereafter, to

recover the same from the 2

nd

respondent is wholly misconceived. Further, it

is the submission of the learned counsel that the finding that the claimant

was employed under the 2

nd

respondent is wholly erroneous as is evident

from the averments made by the claimant and even otherwise, the

authorised representative of the owner in the private vehicle is

distinguishable from third party as provided for u/s 147 (1)(b) (i) of the Act,

1988 and, therefore, the finding rendered by the Tribunal is erroneous and

deserves to be set aside.

7. In support of his submissions, learned counsel for the appellant

placed reliance on the following decisions :-

i) New India Assurance Co. Ltd. – Vs – Asha Rani &Ors.

(2003 ACJ 1);

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ii)United India Insurance Co. Ltd. – Vs – Tilak Singh (AIR

2006 SC 1576);

iii)Oriental Insurance Co. Ltd. – Vs – K.V.Sudhakaran &

Ors. (AIR 2008 SC 2729)

iv)New India Assurance Co. Ltd. – Vs – Meenakshi &Ors.

(MANU/TN/1536/2023); and

v) The New Indian Assurance Co. Ltd. – Vs –

S.Krishnasamy (MANU/TN/3049/2014 :: 2016 ACJ 5)

8. Per contra, learned counsel appearing for the claimant submitted

that the policy issued by the insurance company has to specifically state that

the occupant of a private car is excluded from the purview of “third party”,

which is to be mentioned in the Terms and Conditions of the insurance policy

and the Proposal-cum-Declaration and further submitted that even if the

policy specifically excludes the occupant from being brought within the ambit

of third party, the said condition runs contrary to the statutory provision and,

thereby, the said condition is wholly illegal. It is the further submission of the

learned counsel that the terms and conditions of the policy and the proposal-

cum-declaration having not been marked before the Tribunal, the same

cannot be the basis to negate the claim of the claimant, which has been

properly appreciated by the Tribunal.

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9. It is the further submission of the learned counsel that in the

absence of specific exclusion of the occupant of the car from the purview of

“Third Party” in the terms and conditions, the claimant would squarely fall

within the definition of “third party” as defined under Section 145 (g) of the

Act, 1988.

10. It is the further submission of the learned counsel that the policy

even if it is an “Act only Policy”, falls u/s 147 (1) (b) of the Act, and in the light

of the definition found u/s 145 (g), the claim made by the occupants of the

private car is maintainable and in this regard, reliance is placed on the

decision of the Division Bench of this Court in National Insurance Co. Ltd. –

Vs – V.S.R.Kumaresan (1989 SCC OnLine Mad 201) and Natarajan – Vs –

D.Chandrasekaran (2004 (1) CTC 284).

11. Learned counsel for the claimant further submitted that the

definition of “Third Party”, as provided for u/s 145 (g) is an inclusive

definition, as per which, the Government is brought as a specific inclusion.

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This clearly shows that the intention of the Parliament is not to exclude any

class of persons from the purview of the benevolent legislation. It is the

further submission of the learned counsel that the word “includes” used in

Section 145 (g) enlarges the scope and meaning of the expression “third

party” so as to comprehend “third party” not only such things as they signify

according to their natural import but also those things which the clause

declares that they shall include. In support of the aforesaid contention,

reliance is placed on the following decisions :-

i) P.Kasilingam – Vs – PSG College of Technology (1995

Supp. (2) SCC 248);

ii)N.D.P.Namboodripad – Vs – Union of India (2007 (4)

SCC 502); and

iii)Hamdard (Wakf) Laboratories – Vs – Deputy Labour

Commissioner (2007 (5) SCC 281)

12. It is therefore the submission of the learned counsel that a “third

party” to the exclusion of the insurer and the insured would include all other

persons, including the occupant of the car or a person walking on the road

and all such persons falling within the scope would be “third party” and

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would be entitled to compensation from the insurance company, even on an

Act Only Policy.

13. Learned counsel for the claimant further submitted that whether a

passenger travelling in a private car would be covered by third party risk or

not was considered by the Apex Court in the decision in Bhagyalakshmi – Vs

– United India Insurance Co. Ltd. (2009 (7) SCC 148) and in view of the

conflicting decisions of the Apex Court as to whether the passenger of a car

would not be a “third party” or not, the matter was referred to a Larger

Bench to decide the issue, which has been answered in favour of the

appellant therein. Therefore, the said decision is squarely applicable to the

present case as well.

14. It is the further submission of the learned counsel that the

decisions relied on by the learned counsel for the insurance company in Asha

Rani, Tilak Singh, K.V.Sudhakaran and Balakrishnan case (supra) have

decided the issue only as to whether pillion rider of the two wheeler or

occupant of a private car are covered under an “Act Only Policy”; rather the

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issue as to whether pillion rider of a two wheeler or occupant of a private car

would fall within the ambit of “third party” in line with Section 145 (g) of the

Act has not been decided. Therefore, the said decisions would not in any way

help the appellant to further their case.

15. It is the further submission of the learned counsel that Section 145

(g) is an inclusive definition and interpretation of “third party” appearing in

the said provision was not brought to the attention of the Apex Court and in

the absence of any authoritative pronouncement by the Apex Court, the

decisions in Kumaresan, Chandrasekaran case and also in Royal Sundaram

Alliance Insurance Co. Ltd. – Vs – A.Meenakshi (2009 (1) TN MAC 249 (DB)

and New India Assurance Co. Ltd. – Vs – Murugan (2017 (1) TN MAC 184)

should form the basis of this Court in deciding the issue and, accordingly, the

answer has to be necessarily given in favour of the claimant.

16. Learned counsel for the claimant further submitted that though the

earlier Division Benches in Kumaresan, Chandrasekaran, Meenakshi and

Murugan case have taken a view that the “third party” would include even an

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occupant of the car as also a pillion rider, however, the later Division Benches

in the case of New India Assurance Co. Ltd. – Vs – N.Krishnasamy (2015 (1)

TN MAC 19) and New India Assurance Co. Ltd. – Vs – Meenakshi (2023 SCC

OnLine Mad 133), have held that the occupant of the car and pillion rider of

two wheeler would not be third parties so as to claim compensation in the

absence of payment of additional premium under comprehensive/package

policy. However, the latter decisions have not taken into consideration the

former decisions, which decisions are in line with Section 145 (g) of the Act.

Therefore, alternatively it is pleaded that even if this Court is not inclined to

accept the contentions raised on behalf of the claimant, this Court, as a

matter of judicial discipline, shall refer the matter to be placed before a

Larger Bench to settle the conflict in the decisions.

17. In support of the aforesaid submissions, learned counsel for the

claimant placed reliance on the following decisions on various legal

contentions advanced supra :-

i) Ramanlal Bhailal Patel – Vs – State of Gujarat

(2008 (5) SCC 449);

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ii)Samir Agarwal – Vs – Competition Commission

(2021 (3) SCC 136);

iii)P.Mohanraj – Vs – Shah Brothers Ispat Pvt. Ltd.

(2021 (6) SCC 258);

iv)National Insurance Co. Ltd. – Vs.

V.S.R.Kumaresan (1989 SCC OnLine Mad 201

(DB);

v) Natarajan – Vs – D.Chandrasekaran (2004 (1) CTC

284);

vi)Royal Sundaram Alliance Ins. Co. Ltd. – Vs –

A.Meenakshi (2009 (1) TN MAC 249 (DB));

vii)New India Assurance Co. Ltd. – Vs – Murugan

(2017 (1) TN MAC 184);

viii)Amrit Lal Sood – Vs – Kausalya Devi Thapar (1998

(3) SCC 744 (Larger Bench));

ix)Jugal Kishore – Vs – Ramlesh Devi (2004 (1) TN

MAC 482 (MP – FB));

x) Dr. S.Jayaram Shetty – Vs – National Insurance

Co. Ltd. (2002 SCC OnLine Kar 267 (DB));

xi)Oriental Insurance Co. Ltd. – Vs – Radharani

(1997 SCC OnLine MP 204 (DB));

xii)Oriental Insurance Co. Ltd. – Vs – Ajayakumar

(1999 SCC OnLine Ker 291 (FB));

xiii)Bhagyalakshmi – Vs – United India Insurance Co.

Ltd. (2009 (7_) SCC 148);

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xiv)Mohana Krishnan S – Vs – K.Balasubramaniyam

(2022 (2) TN MAC 536 (SC));

xv)National Insurance Co. Ltd. – Vs – Balakrishnan

(2013 (1) SCC 731)

xvi)New India Assurance Co. Ltd. – Vs – Meenakshi

(2023 SCC OnLine Mad 1833 (DB)); and

xvii)National Insurance Co. Ltd. – Vs – Pranay Sethi

(2017 (16) SCC 680)

18. Replying to the submissions advanced on behalf of the claimant,

learned counsel for the insurance company submitted that all the decisions,

which the claimant has pressed into service relates to a Package

Policy/Comprehensive Policy and not an Act Only Policy. It is the stand of the

insurance company that while Package Policy/Comprehensive Policy

specifically covers occupants, however, the Act Only Policy does not extend

the scope to the occupants of the vehicle in the absence of any additional

premium being paid and, therefore, the decisions in Asha Rani, Tilak Singh

and Balakrishnan case are squarely attracted and necessarily the insurance

company is not liable to indemnify the claimant.

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19. It is the further submission of the learned counsel that even the

decision in Mohana Krishnan case (supra), has spelt out that the issue of the

occupant of a private car falling within the ambit of “third party” has not been

decided with reference to an Act Only Policy and that being the position, the

decision in Asha Rani, Tilak Singh and Balakrishnan case would stand

attracted.

20. This Court gave its anxious consideration to the submissions

advanced by the learned counsel appearing on either side and perused the

materials available on record and also the various decisions, which have been

placed before this Court for consideration.

21. Exhaustive arguments were advanced on behalf of the claimant to

persuade this Court to come to the conclusion that Section 145 (g), which

defines “third party” to include the Government and is an inclusive definition,

with a wide sweep and, therefore, any person, other than the first and second

party, viz., the insurer and the insured would fall within the ambit of “third

party” defined u/s 145 (g), and the occupant of the private vehicle, therefore,

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would fall within the scope of “any person” appearing in Section 147 (1)(b)(i)

of the Act, 1988 over and above the owner or his authorised representative,

and, therefore, the claimant should be given the benefit of Section 145 (g)

and, thereby, the insurance company would be jointly and severally liable,

along with the 2

nd

respondent, to pay compensation to the claimant in terms

of Section 147 and 149 of the Act.

22. In the above scenario, the question that falls before this Court for

consideration is –

Whether the term “any person” found in Section 147

(1)(b)(i) of Act, 1988 would fall within the definition of

“third party” as found in Section 145 (g) so as to include

the occupant of a private vehicle, who is a gratuitous

passenger covered by the terms of an Act Only Policy,

irrespective of the fact that no additional premium is

paid towards such person for extending the coverage

under the Act Only Policy.

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23. The question, as coined above, therefore pertains only to a private

vehicle, which is used for personal purposes by the owner of the vehicle and

is not a vehicle, which is used for the transportation of goods or a passenger

vehicle, which will fall within the realm of public service vehicle, in which

passengers are carried for hire or reward. Therefore, the person travelling in

the transport vehicle and public service vehicle would be gratuitous

passengers, as it is a voluntary act of the person travelling in the vehicle and

that too, for hire or reward and, therefore, it will attract only the rigour of

Section 147 (1)(b)(ii).

24. Before this Court ventures into addressing the issue as also the

question framed for consideration, the types of policies which are normally

extended to the owner, thereby, indemnifying him from the rigours of

payment in the event of any unfortunate happening, by the insurance

companies requires a broader outline so as to appreciate the aforesaid

contentions and to arrive at a just and reasonable decision, be it an

affirmative decision or a reference to a Larger Bench.

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25. Two types of policies are normally issued by the insurance

companies on the basis of the approval by the Insurance Regulatory

Development Authority with tweaks as is found beneficial between the

parties to the insurance, viz., the insurer and the insured. One of the type of

policy is generally called the “Act Only Policy” and the other policy is a

Comprehensive Policy which is normally called a “Package Policy”. As

denoted by the term Package Policy or Comprehensive Policy, the policy

covers all the persons who are injured in the accident as also the instances,

viz., death of a person or bodily injury to any passenger and damage to

property of a third party, in respect of private vehicle, and it includes the

owner of the goods or his authorised representative insofar as transport

vehicle. Therefore, where the policy covers the owner of the goods or his

authorised representative, it is to be presumed that the vehicle involved is a

goods vehicle. Therefore, in respect of an occupant of a private vehicle,

which is covered by a Package Policy, the policy covers indemnification by the

insurer against all claims made by all the parties beyond the first and second

party, viz., insurer and the insured. However, in respect of an Act Only Policy,

the liability of the insurer to indemnify the claimant is only with reference to

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third parties, who are outside the vehicle and not with reference to the

occupants of the private vehicle, as additional premium is required to be paid

to cover the occupants of the private vehicle. In this scenario, it is the stand

of the insurance company that where no additional premium is paid in

respect of the occupants of a private vehicle in respect of an Act Only Policy,

no liability stands fastened on the insurer to indemnify the occupants of the

private vehicle involved in an accident.

26. This has been in vogue and has been followed and the Apex Court

in very many decisions has reiterated the same. However, the issue that is

sought to be canvassed is with regard to the interpretation to be given to the

definition of “third party” as is found in Section 145 (g) of the Motor Vehicles

Act, 1988 (for short ‘Act, 1988’), which, according to the claimant, would also

take the occupant of the private vehicle within the fold of third party and the

occupant of the private vehicle would stand covered under the definition of

“third party”.

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27. Normally Courts are bound to decide the issue with regard to a

provision of law on the touchstone of the intent of the Parliament in enacting

the law. But what is to be stressed here is the fact that the intent of the

Parliament is based on sound logic on the basis of the necessities of the public

based on which law is drawn up. Therefore, there may be a departure in the

legal meaning from literal meaning, which a word necessarily carries, but the

literal meaning would definitely have a nexus to the legal meaning, so as to

enable the Parliament to define a term. Therefore, in such a scenario, this

Court, deviating from the routing procedure of trying to decipher the intent of

the Parliament from the usage of the words, which forms the provisions of

law, keeping in mind the fact that the Motor Vehicles Act is a benevolent

legislation aimed at protecting the interest of third parties, who are the

beneficiaries under the Act, would analyze the definition of “third party” as

defined u/s 145 (g) of Act, 1988 on the basis of the logic and ground realities

that necessitated the employment of the various words in the provisions,

which would not only reveal the intent of the Parliament, but would also

affirm the firm belief that every law that is formulated is based on sound

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logic, which is interpreted by the Courts, as logic is always the guiding factor

in the enactment of any laws, as no law can defy logic.

28. On the above scale, this Court would now proceed to analyse the

intention of the Parliament in defining “third party” as given in Section 145

(g), which, prior to its amendment in the year 2019, stood as under :-

“145. Definitions…..

(g) “third party” includes the Government.”

29. The aforesaid Section 145 (g) is nestled in Chapter IX. By way of

Motor Vehicles (Amendment) Act, 2019, which came into force on 9.8.2019,

the definition of “third party” was amended under sub-section (i) of Section

145, as hereunder :-

“145. Definitions…..

(i) “third party” includes the Government, the

driver and any other co-worker on a transport vehicle.”

30. On and from the amendment in the year 2019, the entities that

would fall within the ambit of third party has been spelt out. The necessity

for bringing in the driver and co-worker in a transport vehicle within the

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meaning of “third party” is only with regard to covering them for the purpose

of compensation, which, if not included, would result in the said persons,

being not considered for compensation as transport vehicle is considered a

separate class of vehicle. Insofar as goods vehicle, Section 147 (1)(b)(i) takes

into account the owner of the goods and authorised representative and

insofar as public service vehicle, passenger alone is taken into account.

Therefore, coverage extends to three types of vehicles, viz., i) a private

vehicle, ii) goods transport vehicle and iii) public service vehicle. Only for the

said purpose, the driver and co-worker in a transport vehicle, which is a

public service vehicle, but used in the transportation of goods, have been

brought within the ambit of “third party”. However, even in the said

amendment, there is a specific mention only about transport vehicle and it

does not in any manner speak about private vehicles and whether the

occupant of a private vehicle would be a third party. Only on that basis, the

above arguments have been canvassed by either side by laying emphasis on

the various provisions of the Act, 1988.

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31. In fact, at a particular point, while placing reliance on various

decisions, learned counsel for the claimant also urged this Court to either

refer the matter before a Larger Bench in view of conflicting decisions

between the Division Benches of this Court or to await the outcome of the

reference made by the Apex Court in the decision in Mohana Krishnan case

(supra).

32. The Apex Court, in Mohana Krishnan case had come to a conclusion

that there exists no decision, which speaks clearly about third party with

particular reference to Act Only Policy and in that regard, had referred the

following issue to a Larger Bench for consideration :-

“2. Learned counsel for the insurance company relies upon

two judgments of this Court reported as 2006 (4) SCC 404 and

2008 (7) SCC 428 to contend that a pillion rider on a motorcycle

is not a third party, therefore, the insurance company is not

liable to indemnify the insured on account of the injuries or

death of such pillion rider.

3. The basis of the said argument is Indian Motor Tariff

Endorsement No. 70, which is to the effect that in “Act Only”

policy, the insured has to pay extra premium to cover the

pillion rider.

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4. However, the question as to whether the third party

includes all other persons other than the insured, who is the

first party and the insurer, who is the second party. Therefore,

all other persons who are neither the insured nor the insurer

will be third party and will be covered by the Act Only policy,

we have prima facie reservation about the view expressed.

Such question is required to be determined authoritatively.

5. Therefore, the Registry to place the matter before

Hon’ble the Chief Justice of India to constitute a larger bench to

consider the question of law as mentioned above by an

appropriate Bench.”

(Emphasis Supplied)

33. What manifests from the said decision is that the Apex Court had

felt that there was no decision, which conclusively speaks about the

interpretation to be given to the term “any person” occurring under Section

147 (1)(b)(i) of the Act, 1988 so as to hold that it falls within the periphery of

the definition of “third party” under Section 145 (g) of Act, 1988, which has

necessitated the reference. Further, it transpires that the Apex Court has

spelt out that all the decisions rendered on the subject pertains to

Comprehensive Policy/Package Policy and not touching upon Act Only Policy

and, therefore, according to the Apex Court, reference stood necessitated.

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34. Though a reference has been made by the Apex Court on the above

issue, which issue is at present canvassed in the present appeal, the said

reference would in no way restrain or preclude this Court from analysing the

issue as to whether the term “any person” found in Section 147 (1) (b)(i)

would fall within the ambit of “third party” by means of the inclusive

definition found in Section 145 (g) of Act, 1988. Though certain decisions

have been placed before this Court to canvass that there are differing

decisions of this Court, which necessitates this Court, on the basis of judicial

etiquette, to refer the case to a Larger Bench to resolve the conflict, for the

reasons spelt out below and the various decisions, to which this Court’s

attention was drawn, which throw light on the above issue that has fallen for

consideration, this Court is inclined to take up the issue and proceed to

analyse the same on the basis of the ratio laid down in the aforesaid decisions

coupled with the provisions of law to which advertence has been made in the

various decisions.

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35. Various decisions have been relied upon by the learned counsel on

either side touching upon the ambit of third party, and for the purpose of a

holistic consideration of the issue, the relevant decisions, which have a

bearing on the issue will be discussed at the appropriate place.

36. On the basis of the aforesaid decisions, Sections 95 (1) (b) of Act,

1939, which has since been amended by inclusion of Chapter XI, with more

particular reference to Section 147 which is a pari materia provision, are

quoted hereunder for consideration, as that was the basis on which all the

judgments were rendered :

Section 95 (1) (b) of Act, 1939

95. Requirements of Policies and limits of liability –

In order to comply with the requirements of this policy of

insurance must me of policies and limits of liability-(1) In order

to comply with the requirements of this Chapter a policy of

insurance must be a policy which-

(a) is issued by a person who is an authorised insurer or by

a ??-???rative society allowed under section 108 to transact

the business of an insurer, and

(b) insures the person or classes of person specified in the

policy to the extent specified in sub-section (2) against any

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liability which be incurred by him them in respect of the death

of bodily injury to any person caused by or arising out of the

use of the vehicle in a public place:

Provided that a policy shall not be required-

(i) to cover liability in respect of the death arising out of

and in the course of his employment of the employee of a

person insured by the policy or in respect of bodily injury

sustained by such an employee arising out of and in the course

of his employment, other than a liability arising under the

Workmen's Compensation Act, 1923, in respect of the death of,

or bodily injury to, any such employee-

(a) engaged in driving the vehicle, or

(b) if it is a public service vehicle, engaged as a conductor of

the vehicle or in examining tickets on the vehicle, or

(c) if it is a goods vehicle, being carried in the vehicle, or

(ii) except where the vehicle is a vehicle in which

passengers are carried for hire or reward or by reason of or in

pursuance of a contract of employment to cover liability in

respect of the death of or bodily injury to persons being carried

in or upon or entering or mounting or alighting from the vehicle

at the time of the occurrence of the event out of which a claim

arises, or

(iii) to cover any contractual liability.

(2) Subject to the proviso to sub-section (1), a policy of

insurance shall cover any liability incurred in respect of any one

accident up to the following limits, namely: -

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(a) where the vehicle is a goods vehicle, a limit of twenty

thousand rupees in all, including the liabilities, if any, arising

under the Workmen's Compensation Act, 1923, in respect of of

the death of, or bodily injury to, employees (other than the

driver), not exceed- ing six in number, being carried in the

vehicle;

(b) where the vehicle is a vehicle in which passengers are

carried for hire or reward or by reason of or in pursuance of a

contract of employment, in respect of persons other than

passengers carried for hire or reward, a limit of twenty

thousand rupees, and in respect of passenger a limit of twenty

thousand rupees in all, and four thousand rupees in respect of

an individual passenger. if the vehicle is registered to carry not

more than six passengers excluding the driver or twenty

thousand rupees in respect of an individual passengers, if the

vehicle is registered to carry more than six passengers

excluding the driver,

(c) where the vehicle is a vehicle of any other class the

amount of the liability incurred.”

Section 146 of Act, 1988

“146. Necessity for insurance against third party risk –

No person shall use, except as a passenger or cause or

allow any other person to use, a motor vehicle on public place

unless there is in force in relation to the use of the vehicle by

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that person or that other person, as the case may be, a policy

of insurance complying with the requirements of this Chapter:

Provided that in the case of a vehicle carrying, or meant to

carry, dangerous or hazardous goods, there shall also be a

policy of insurance under the Public-Liability Insurance Act

1991 (6 of 1991).

Explanation. A person driving a motor vehicle merely as a

paid employee, while there is in force in relation to the use of

the vehicle no such policy as is required by this sub-section,

shall not be deemed to act in contravention of the sub-section

unless he knows or has reason to believe that there is no such

policy in force.

Sub-section (1) shall not apply to any vehicle owned by the

Central Government or a State Government and used for

Government purposes unconnected with any commercial

enterprise.

(3) The appropriate Government may, by order, exempt

from the operation of sub section (1) any vehicle owned by any

of the following authorities, namely (a) the Central

Government or a State Government, if the vehicle is used for

Government purposes connected with any commercial

enterprise.(b) any local authority:(e) any State transport

undertaking:

Provided that no such order shall be made in relation to any

such authority unless a fund has been established and is

maintained by that authority in accordance with the rules

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made in that behalf under this Act for meeting any liability

arising out of the use of any vehicle of that authority which

that authority or any person in its employment may incur to

third parties.

Explanations For the purposes of this sub-section,

appropriate Government" means the Central Government or a

State Government, as the case may be, and

(i) in relation to any corporation or company owned by the

Central Government or any State Government, means the

Central Government or that State Government.

(ii) in relation to any corporation or company owned by the

Central Government and one or more State Governments,

means the Central Government:

(iii) in relation to any other State transport undertaking or

any local authority, means that Government which has control

over that undertaking or authority.“

Section 147 of Act, 1988

“147. Requirements of policies and limits of liability.

(1) In order to comply with the requirements of this

Chapter, a policy of insurance must be a policy which –

(a) is issued by a person who is an authorised insurer; and

(b) insures the person or classes of persons specified in the

policy to the extent specified-in sub-section (2)-

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(i) against any liability which may be incurred by him in

respect of the death of or bodily injury to any person including,

owner of the goods or his authorised representative carried in

the vehicle or damage to any property of a third party caused

by or arising out of the use of the vehicle in a public place;

(ii) against the death of or bodily injury to any passenger of

a public service vehicle caused by or arising out of the use of

the vehicle in a public place:

Provided that a policy shall not be required-

(i) to cover liability in respect of the death, arising out of

and in the course of his employment, of the employee of a

person insured by the policy or in respect of bodily injury

sustained by such an employee arising out of and in the course

of his employment other than a liability arising under the

Workmen's Compensation Act, 1923 (8 of 1923), in respect of

the death of, or bodily injury to, any such employee-

a) engaged in driving the vehicle, or

(b) if it is a public service vehicle engaged as a conductor of

the vehicle or in examining tickets on the vehicle, or if it is a

goods carriage, being carried in the vehicle, or

(c) to cover any contractual liability.

(ii) Explanation. For the removal of doubts, it is hereby

declared that the death of or bodily injury to any person or

damage to any property of a third party shall be deemed to

have been caused by or to have arisen out of, the use of a

vehicle in a public place

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(a) engaged in driving the vehicle, or

(b) if it is a public service vehicle engaged as a conductor of

the vehicle or in examining tickets on the vehicle, or if it is a

goods carriage, being carried in the vehicle, or

(c) to cover any contractual liability.

Explanation. For the removal of doubts, it is hereby

declared that the death of or bodily injury to any person or

damage to any property of a third party shall be deemed to

have been caused by or to have arisen out of, the use of a

vehicle in a public place notwithstanding that the person who is

dead or injured or the property which is dam was not in a

public place at the time of the accident, if the act or omission

which he the accident occurred in a public place.

(2) Subject to the proviso to sub-section (1), a policy of

insurance referred to section (1), shall cover any liability

incurred in respect of any accident, up to the follow limits,

namely: -

(a) save as provided in clause (b), the amount of liability

incurred;

(b) in respect of damage to any property of a third party, a

limit of rupees six thousand:

Provided that any policy of insurance issued with any

limited liability and in force immediately before the

commencement of this Act, shall continue to be effective for a

period of four months after such commencement till the date

of expiry of such policy whichever is earlier.

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(3) A policy shall be of no effect for the purposes of this

Chapter unless and is issued by the insurer in favour of the

person by whom the policy until the is effected a certificate of

insurance in the prescribed form and containing the prescribed

particulars of any condition subject to which the policy is issued

and of any other prescribed matters; and differ forms,

particulars and matters may be prescribed in different cases.”

37. On a clear reading of the aforesaid provisions, it transpires that

Section 146 (1) of Act, 1988, mandates the necessity for holding a valid

insurance policy for operating a vehicle complying with the requirements of

Chapter XI. Thus, the necessity for carrying a policy of insurance is brought

within sub-section (1) to Section 146, which is mandatory in nature.

38. While Section 95 (1)(b) relates to a private vehicle in which person

is carried and the liability of the insurer to cover the death or bodily injury of

such person, the clause (i) of proviso to Section 95 (1) (b) pertains to the

liability of the insurer in respect of an employee carried in the said vehicle,

which is indemnifiable except in case where the liability arises under the

Workmen’s Compensation Act and clause (ii) of the said proviso relates to the

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liability towards passengers, who are carried for hire or reward or by reason

of or in pursuance of a contract of employment.

39. However, Section 147 (1)(b)(i) is a pari materia provision to Section

95 (1) (a), however, the amendment carries within it a rider that it includes

the owner of the goods or his authorised representative carried in the vehicle,

who shall also stand indemnified. Sub-section (2) to Section 147 determines

the extent of liability that is indemnifiable by the insurer in respect of an

accident that is coverable under the policy of insurance. Therefore, there is a

clear prescription in sub-section (2) to Section 147 that the insurer shall cover

any liability incurred in respect of any accident. However, the term “any

liability” could be taken to mean a claim made by the occupant of a private

vehicle, for whom the insurance company had not given any indemnity to the

of the insured.

40. It is to be pointed out that the policy of insurance is a contract

entered into between the first party and the second party, viz., the insurer

and the insured and is governed by the provisions of the Contract Act. Both

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the parties, viz., the insurer and the insured are guided by the terms of the

contract, meaning thereby, that whatever is agreed by the insurer to be

indemnified on behalf of the insured will be payable by the insurer upon the

any claim being made.

41. On the basis of the said contract, as per the mandate under Section

146 (1), the policy is issued by the insurance service providers under two

categories, viz., (i) Comprehensive Policy/Package Policy and (ii) Act Only

Policy/Liability Policy, which is not in dispute. An Act Only Policy/Liability

Policy covers the liability of the insured by the insurer in respect of liabilities,

which have been specifically undertaken to be covered by the insurer in the

said policy, meaning thereby, that the liability to third party by the insurer,

which is the basis of the coverage would be only to the extent of the persons,

or classes of persons, who are undertaken to be insured. Therefore, the

indemnification would be only on the basis of the terms agreed between the

first and the second party and the scope for payment of compensation cannot

be enlarged to classes of persons, who are not covered by payment of

additional premium and, thereby, the insurer is not liable to indemnify.

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42. In case of a Comprehensive Policy/Package Policy, as the name

signifies, is a comprehensive policy, which covers the liability of the insured,

thereby indemnified by the insurer, of all such persons, be it the occupants of

the vehicle or a person outside the vehicle and any other person, towards any

claim made by such persons, including the driver of the vehicle as also the

damage to property of the third party. In a nutshell, a Comprehensive

Policy/Package Policy is an extended version of the Act Only Policy or in other

words, the Act Only Policy is a miniature version of the Comprehensive

Policy/Package Policy. Therefore, be it the Act Only Policy or the

Comprehensive Policy/Package Policy, the liability is covered by the terms of

the contract entered into between the first and second party. The Act Only

Policy is issued at the behest of the insured, whereby limited liability is

fastened on the insurer, as per the terms of the contract agreed between the

parties. Therefore, determination of the liability of the insurer would be on

the basis of the type of policy, which has been taken by the insured.

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43. Only in the above context the larger question has befallen for

determination, as aforesaid, as to whether “any person” as found in Section

147 (1)(b)(i) is an inclusive definition so as to bring the occupant of the

vehicle to be a “third party” as defined under Section 145 (g) of Act, 1988.

44. The term “third party” as defined in Oxford Advanced Learner’s

Dictionary (New 9

th

Edn.), is as under :-

“third party – a person who is involved in a situation in

addition to the two main people involved”.

45. From the above, on a broader conspectus, any person, other than

the two main people involved, viz., the insurer and the owner of the

vehicle/insured, who are basically the first and second party, would fall

within the purview of third party. However, Section 147 (1) (b) mandates

that “a policy of insurance must be a policy which insures the person or

classes of persons specified in the policy to the extent specified in sub-section

(2). From the above, it is clear that the policy is guided by the terms and

conditions agreed between the two contracting parties as specified in the

contract of insurance and, therefore, the said provision should not be read in

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isolation, but in conjunction with the terms and conditions accepted to

between the contracting parties.

46. Only in the aforestated scenario the Act Only Policy is brought into

forefront by the appellant, wherein with respect to a claim made by the

occupant of the vehicle, in the absence of any additional premium being paid,

the said person cannot be brought within the ambit of third party and,

therefore, the occupant of the vehicle is excluded from the purview of

payment of compensation It is to be noted that there is a separate premium

payable in respect of persons, who are occupants of the vehicle as also for the

owner-cum-driver of the vehicle, for specific extension of third party

coverage to the said persons, even from the various decisions which have

been placed before this Court for consideration. However, in this regard, the

exclusion of the occupant of a private vehicle from the ambit of third party,

since the terminology used in Section 147 (1) (b) (i) is “any person” is pressed

into service on behalf of the claimant to submit that the said exclusion is

against the statutory prescription under Section 145 (g) and, therefore, is not

sustainable as “third party” u/s 145 (g) an inclusive definition with a very

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wide sweep and takes within its fold all persons other than the first and

second party.

47. Section 147 (1)(b) (i), which has been extracted above, provides

that a policy of insurance must be a policy, which insures the person or

classes of persons specified in the policy to the extent specified in sub-section

(2) against any liability which may be incurred by him in respect of death of

or bodily injury to any person including owner of the goods or his authorised

representative carried in the motor vehicle or damage to any property of a

third party caused by or arising out of the use of the motor vehicle in a public

place.

48. Sub-section (2) of Section 147 provides the liability coverable by

the insurer in respect of the accident of which clause (i) provides the cover

upto the limit of liability and clause (ii) relates to the liability towards

property damage of a third party. Sub-section (2) to Section 147 uses the

term “shall cover any liability incurred”, but the said coverage is subject to

the proviso to sub-section (1) which is relatable to death or bodily injury

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arising out of and in the course of employment of an employee. The cover

provided upto the limit of liability is in respect of third party risks, which is

not disputed by the insurance company. However, the third party risks,

according to the appellant, is guided by the terms accepted between the

insurer and the insured.

49. In the said backdrop, Section 147 (5) assumes significance. Section

147 (5) provides a non obstante clause which provides that notwithstanding

anything contained in any law for the time being in force, an insurer issuing a

policy of insurance under this section shall be liable to indemnify 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.

50. From the non obstante clause, it is clear that Parliament has left

the determination of class of persons who shall be covered by the insurer

pursuant to the contract between the parties and, therefore, the guiding

factor in the indemnification of liability is on the basis of the contract entered

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into between the insurer and the insured. Therefore, the terms of the policy

of insurance is the basis which guides the determination of persons, who

would be entitled for compensation at the hands of the insurer. The Act Only

Policy, which is issued, even as per the deemed acceptance between the

contracting parties, spells out the persons, who would be indemnified by the

insurer on behalf of the insured. Only in the said scheme, the two versions of

insurance policies are being issued, viz., Act Only Policy and Comprehensive

Policy/Package Policy.

51. In this backdrop, a perusal of Section 147 (1) (b) (i) of Act 1988,

enjoins upon the insurer to cover liability in respect of death of or bodily

injury to any person, including owner of the goods or his authorised

representative carried in the vehicle or damage to any property of a third

party caused by or arising out of the use of the vehicle. The said Section

employs dual terms, viz., (i) any person and (ii) any property of a third party.

52. In the aforesaid backdrop, this Court would consider the decisions,

which have a bearing on this case, more especially the decision in

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Chandrasekaran case to appreciate the contentions advanced on behalf of

the parties.

53. In Chandrasekaran case (supra), the Division Bench, after

considering Section 95 (1) (b) of Act, 1939 vis a vis Section 147 of Act, 1988

and placing reliance upon the decision in Amrit Lal Sood (supra), held as

under:-

“19. The Apex Court also in the decision in Amrit Lal Sood v.

Kayushalya Devi Thapar, AIR 1988 S.C. 1433, dealt with the

said expression "third party" and found that it would include

occupants of the car who had gratuitously travelled in the car.

But for the Clause (ii) of the proviso to Section 95 of the Act

1939, the "Act only policy" covers the risk of pillion rider as it

comes under the definition "any person" as mentioned in

Section 95(1)(b) of the Old Act. The same scope could be

applied to the New Provision and the legislature, as stated

above, has omitted Clause (ii) of proviso creating an obligation

on the insured to specifically cover the liability with respect to

the passengers other than the passengers mentioned under the

proviso (ii) of Section 95(1)(b) of the Act 1939. Since the said

proviso has been omitted and the restriction has been taken

away thereby the insurance company which had covered third

party risk under the "Act only policy" issued under Section 147

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of the Act, liable to pay the claim of the pillion rider who is a

gratuitous passenger.”

54. The above view has been arrived at by the Division Bench by

adopting the analogy that what is provided for in the comprehensive policy,

as dealt with in Amrit Lal Sood case would stand enlarged to an Act Only

Policy as well on the ground that the intention of the Legislature is clear by

the omission of clause (ii) of proviso to Section 95 (1)(b) of Act, 1939 while

incorporating Chapter XI and more particularly Section 147 of Act, 1988.

55. It is clear that the Division Bench has transposed the benefits of the

Comprehensive Policy/Package Policy into the Act Only Policy by applying the

aforesaid ratio in Amrit Lal Sood case and had arrived at the said finding,

notwithstanding the fact that the interpretation of “any person” found in

Section 95 (1)(b) as one who would also be entitled to compensation was

premised on the basis of the terms and conditions in the policy of insurance

entered between the parties therein. In the considered view of this Court, the

interpretation given in respect of a Comprehensive Policy read along with the

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contractual obligations undertaken in terms of the contract of assurance, as

made in Amrit Lal Sood can be imported into an Act Only Policy only after

reading the terms and conditions of the Act Only Policy and not otherwise.

The term “any person” appearing in Section 147 (1)(b)(i1) should be looked

up in conjunction with the contractual obligation cast upon the insurer based

on the policy of insurance and it cannot be looked at in isolation as the

decision in Amrit Lal Sood has conjunctively the provision vis-a-vis the terms

of the contract.

56. The claimant has also relied on the decision of the Division Bench

of this Court in A.Meenakshi case (supra). However, the said decision would

not in any way be applicable or further the present case for the simple reason

that it pertains to a gratuitous passenger travelling in a private care, which is

covered under a Comprehensive Policy/Package Policy.

57. In fact, all the decisions relied on by the learned counsel on either

side deal only with a Comprehensive Policy/Package Policy and such being

the case, the policy would squarely attract the insurer to indemnify the

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claimants, even be it occupants of a private vehicle, as the comprehensive

policy covers such liability. In this regard, useful reference can be had to the

decision of the Apex Court in Balakrishnan case (supra), wherein the Apex

Court, while adverting to the decision of the Delhi High Court in Yashpal

Luthra – Vs – United India Insurance Co. Ltd. (2011 ACJ 1415 (Del)), held as

under :-

“25. It is also worthy to note that the High Court, after

referring to individual circulars issued by various insurance

companies, eventually stated thus:

“27. In view of the aforesaid, it is clear that the

comprehensive/package policy of a two wheeler covers

a pillion rider and comprehensive/package policy of a

private car covers the occupants and where the vehicle

is covered under a comprehensive/package policy, there

is no need for Motor Accident Claims Tribunal to go into

the question whether the Insurance Company is liable

to compensate for the death or injury of a pillion rider

on a two-wheeler or the occupants in a private car. In

fact, in view of the TAC's directives and those of the

IRDA, such a plea was not permissible and ought not to

have been raised as, for instance, it was done in the

present case.”

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26. In view of the aforesaid factual position, there is no

scintilla of doubt that a "comprehensive/package policy" would

cover the liability of the insurer for payment of compensation

for the occupant in a car. There is no cavil that an "Act Policy"

stands on a different footing from a "Comprehensive/Package

Policy". As the circulars have made the position very clear and

the IRDA, which is presently the statutory authority, has

commanded the insurance companies stating that a

"Comprehensive/Package Policy" covers the liability, there

cannot be any dispute in that regard. We may hasten to clarify

that the earlier pronouncements were rendered in respect of

the "Act Policy" which admittedly cannot cover a third party

risk of an occupant in a car. But, if the policy is a

"Comprehensive/Package Policy", the liability would be

covered. These aspects were not noticed in the case of

Bhagyalakshmi (supra) and, therefore, the matter was referred

to a larger Bench. We are disposed to think that there is no

necessity to refer the present matter to a larger Bench as the

IRDA, which is presently the statutory authority, has clarified

the position by issuing circulars which have been reproduced in

the judgment by the Delhi High Court and we have also

reproduced the same.”

(Emphasis Supplied)

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58. From the above, it is evident that advisory had been given by the

Insurance Regulatory Development Authority to all the insurance companies

that where comprehensive policy/package policy is taken, it would cover the

occupants of the private vehicle as well. Further, the Supreme Court had

gone on to hold that in respect of “Act Policy” admittedly it cannot cover third

party risk of an occupant in a car, but insofar as a comprehensive

policy/package policy, the same would cover the occupant in a car.

Therefore, this decision only furthers the case to the extent that insofar as

Comprehensive Policy/Package Policy, the occupant of the private vehicle

would stand covered for the purpose of claiming compensation, as premium

has been paid for the said coverage under the terms of contract entered into

between the insurer and the insured but no ratio has been laid down that the

term “any person” appearing in Section 147 (1)(b)(i) would fall within the

contours of the definition of “third party” u/s 145 (g).

59. In the above backdrop, it would be worthwhile to refer to the

decision in Amrit Lal Sood case (supra), which had formed the basis for

arriving at a finding by the Division Bench in Chandrasekaran case (supra)

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that the term “any person” appearing in Section 147 (i)(b)(ii) of Act, 1988,

would fall within the periphery of “third party” as defined u/s 145 (g) of Act,

1988. The relevant portion of the order is quoted hereunder :-

“4. The liability of the insurer in this case depends on the

terms of the contract between the insured and the insurer as

evident from the policy. Section 94 of the Motor Vehicles Act,

1939 compels the owner of a motor vehicle to insure the

vehicle in compliance with the requirements of Chapter VIII of

the Act. Section 95 of the Act provides that a policy of

insurance must be one which insures the person against any

liability which may be incurred by him in respect of death or

bodily injury to any person or damage to any property of third

party caused by or arising out of the use of the vehicle in a

public place. The section does not however require a policy to

cover the risk to passengers who are not carried for hire or

reward. The statutory insurance does not cover injury

suffered by occupants of the vehicle who are not carried for

hire or reward and the insurer cannot be held liable under

the Act. But that does not prevent an insurer from entering

into a contract of insurance covering a risk wider than the

minimum requirement of the statute whereby the risk to

gratuitous passengers could also be covered. In such cases

where the policy is not merely a statutory policy, the terms

of the policy have to be considered to determine the liability

of the insurer.

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5. In the present case, the policy is admittedly a

'Comprehensive Policy'. Comprehensive insurance' has been

defined in Black's Law Dictionary 5th edition as 'All risk

insurance' which in turn is defined as follows:-

"Type of insurance policy which ordinarily covers

every loss that may happen, except by fraudulent acts

of the insured. Miller v. Boston Ins. Co. 218 A. 2d 275.

Type of policy which protects against all risks and perils

except those specifically enumerated."

6. The relevant clauses in the policy before us are found in

'SECTION-II LIABILITY TO THIRD PARTIES'. They are:-

"1. The Company will indemnify the Insured in the

event of accident caused by or arising out of the use of

the Motor Car against all sums including claimant's

costs and expenses which the Insured shall become

legally liable to pay in respect of

(a) death of or bodily injury to any person but

except so far as is necessary to meet the requirements

of Section 95 of the Motor Vehicles Act, 1939, the

Company shall not be liable where such death or injury

arises out of and in the course of the employment of

such person by the insured.

(b) damage to property other than property

belonging to the Insured or held in trust by or in the

custody or control of the insured.

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2. The Company will pay all costs and expenses

incurred with its written consent.

3. In terms of and subject to the limitations of the

indemnity which is granted by this Section to the

insured the Company will indemnify any Driver who is

driving the Motor Car on the Insured order or with his

permission provided that such Driver

(a) is not entitled indemnity under any other Policy

(b) shall as though he were the Insured observe

fulfil and be subject to the terms exceptions conditions

and limitations of this policy in so far as they can

apply."

(Emphasis Supplied)

60. From the above decision, it is emphatically clear that an insurer is

not prevented from covering wider risk than the minimum requirement of the

statute u/s 147 whereby the risk to gratuitous passengers could also be

covered, in which case the policy is not merely a statutory policy and,

therefore, it has to be construed in accordance with the terms of the policy to

determine the liability of the insurer.

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61. In this regard, it becomes necessary for this Court to look at the

language employed in Section 147 (1)(b)(i) of Act, 1988. Sub-clause (ii) of

clause (b) of sub-section (1) of Section 147 of Act, 1988 casts liability on the

insurer to insures the person or class of persons specified in the policy to the

extent specified in sub-section (2) against any liability which may be incurred

by him in respect of the death of or bodily injury to any person including

owner of the goods or his authorised representative carried in the vehicle or

damage to any property of a third party caused by or arising out of the use of

the vehicle in a public place.

62. Section 95 (1) (b) of Act, 1939, which stood prior to the aforesaid

amendment is to the effect that it insures the person or classes of persons

specified in the policy to the extent specified in sub-section (2) against any

liability which may be incurred 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.

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63. A careful consideration of the two pari materia provisions show

that barring the inclusion of the owner of the goods or his authorised

representative carried in the vehicle, both the provisions remain almost

unaltered.

64. Section employs two different terms, viz., “any person” and

“damage to any property of a third party. The necessity of usage of two

different terms assumes significance. Had the Parliament really not intended

to bring “any person” within the fold of third party, it could very well have

used the word “third party” instead of the word “any person”. Therefore,

necessarily, the intention of the Parliament is to include “any person” within

the ambit of “third party” as defined u/s 145 (g).

65. However, the non obstante clause u/s 147 (5) stands in the way

when it comes to the liability of the insurer to indemnify the insured. Section

147 (5) makes the insurer liable to indemnify the person or class 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. There is a

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definitive intention of the Parliament, which is writ large on the said

provision, which gives the parties to the contract the leverage to enter into

such terms as they deem fit and proper so long as the statutory cover is

extended in respect of the vehicle. In this regard, the decision in Amrit Lal

Sood case assumes importance.

66. In Amrit Lal Sood case (supra), the Supreme Court, in unambiguous

terms has held that the Section does not require a policy to cover the risk to

passengers who are not carried for hire or reward and that the statutory

insurance does not cover injury suffered by occupants of the vehicle who are

not carried for hire or reward and the insurer cannot be held liable under the

Act. This clearly shows that it is within the domain of the contracting parties

to agree to the terms and conditions of the coverage and the persons to

whom it will stand extended. The Supreme Court, in unequivocal terms, has,

therefore, held that the liability of the insurer in the case depends on the

terms of the contract between the insurer and the insured as would be

evident from the policy.

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67. Therefore, it is to be stated without any semblance of doubt that

insofar as an Act Only Policy is concerned, the liability of the insurer is

dependent on the terms of the contract between the insured and the insurer,

which is provided in the policy and it is always open to the contracting

parties, to enlarge the scope by giving a wider cover than the minimum

requirement envisaged under the statute.

68. Therefore, the non obstante clause provided u/s 147 (5) is the

source of power from which the insurer and the insured decide the persons,

who would stand covered under the Act Only Policy and such a contract has

to be the basis for determining as to whether the occupant of the private

vehicle would fall within the ambit of “third party” for the purpose of making

a claim for compensation, though in actuality, the term “any person” would

fall within the ambit of “third party”.

69. Reading Section 147 (1)(b)(i) in tandem with Section 147 (5), it

becomes unambiguously clear that the contract entered into between the

insurer and the insured would be the guiding factor in determining the

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persons, who would stand covered under the policy for the purpose of

liability of the insurer as per the statutory prescription and such prescription

could be expanded by the contracting parties by entering into a wider

contract. So the terms of the contract entered into between the first and

second party is the basis on which the liability of the insurer should be gauged

as is envisaged under Section 147 (5) and mere recourse to Section 147

(1)(b)(i), merely on the usage of the term “any person” would not be the basis

to determine the liability of the insurer towards the occupants of the private

vehicle, when the policy, which has been entered into is a policy, which is for

the fulfilment of the statute.

70. In this regard, the ratio laid down by the Apex Court in Deddappa

& Ors. – Vs – The Branch Manager, National Insurance Co. Ltd. & Ors. (2008

(2) TN MAC 138 (SC)), touching on the aspect of contractual liability in a

contract between two contracting parties would be an apt reference and in

that context, the Apex Court held thus :-

“22. A contract is based on reciprocal promise. Reciprocal

promises by the parties are condition precedents for a valid

contract. A contract furthermore must be for consideration .

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23. In today's world payment made by cheque is ordinarily

accepted as valid tender. Section 64VB of the 1938 Act also

provides for such a scheme.

24. Payment by cheque, however, is subject to its

encashment. In Damadilal and Ors. v. Parashram and Ors.

MANU/SC/0476/1976 : AIR1976SC2229 , this Court observed:

On the ground of default, it is not disputed that the

defendants tendered the amount in arrears by cheque

within the prescribed time. The question is whether this

was a lawful tender. It is well- established that a

cheque sent in payment of a debt on the request of the

creditor, unless dishonoured, operates as valid

discharge of the debt and, if the cheque was sent by

post and was met on presentation, the date of payment

is the date when the cheque was posted....

25. Recently again in New India Assurance Co. Ltd. v.

Harshadbhai Amrutbhai Modhiya and Anr.

MANU/SC/8127/2006 : (2006)IILLJ782SC , although in the

context of the Workmen Compensation Act, 1923,

Balasubramanyan, J opined:

It is not brought to our notice that there is any other

law enacted which stands in the way of an insurance

company and the insured entering into a contract

confining the obligation of the insurance company to

indemnify to a particular head or to a particular

amount when it relates to a claim for compensation to

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a third party arising under the Workmen's

Compensation Act. In this situation, the obligation of

the insurance company clearly stands limited and the

relevant proviso providing for exclusion of liability for

interest or penalty has to be given effect to. Unlike the

scheme of the Motor Vehicles Act the Workmen's

Compensation Act does not confer a right on the

claimant for compensation under that Act to claim the

payment of compensation in its entirety from the

insurer himself.

It was further observed:

The law relating to contracts of insurance is part of

the general law of contract. So said Roskill, L.J. in

Cehave v. Bremer. This view was approved by Lord

Wilberforce in Reardon Smith v. Hansen- Tangen All ER

p. 576 h wherein he said:

“It is desirable that the same legal principles should

apply to the law of contract as a whole and that

different legal principles should not apply to different

branches of that law.”

A contract of insurance is to be construed in the first

place from the terms used in it, which terms are

themselves to be understood in their primary, natural,

ordinary and popular sense. (See Colinvaux's Law of

Insurance, 7th Edn., para 2- 01.) A policy of insurance

has therefore to be construed like any other contract.

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On a construction of the contract in question it is clear

that the insurer had not undertaken the liability for

interest and penalty, but had undertaken to indemnify

the employer only to reimburse the compensation the

employer was liable to pay among other things under

the Workmen's Compensation Act. Unless one is in a

position to void the exclusion clause concerning liability

for interest and penalty imposed on the insured on

account of his failure to comply with the requirements

of the Workmen's Compensation Act of 1923, the

insurer cannot be made liable to the insured for those

amounts.

26. We are not oblivious of the distinction between the

statutory liability of the Insurance Company vis-à-vis a third

party in the context of Sections 147 and 149 of the Act and its

liabilities in other cases. But the same liabilities arising under a

contract of insurance would have to be met if the contract is

valid. If the contract of insurance has been cancelled and all

concerned have been intimated thereabout, we are of the

opinion, the insurance company would not be liable to satisfy

the claim.

27. A beneficial legislation as is well known should not be

construed in such a manner so as to bring within its ambit a

benefit which was not contemplated by the legislature to be

given to the party. In Regional Director, Employees' State

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Insurance Corporation, Trichur v. Ramanuja Match Industries

MANU/SC/0203/1984 : (1985)ILLJ69SC , this Court held:

“We do not doubt that beneficial legislations should

have liberal construction with a view to implementing

the legislative intent but where such beneficial

legislation has a scheme of its own there is no warrant

for the Court to travel beyond the scheme and extend

the scope of the statute on the pretext of extending the

statutory benefit to those who are not covered by the

scheme.”

(Emphasis Supplied)

71. In succinct terms, the Supreme Court, in the aforesaid decision, has

clearly spelt out that the duty of the insurance company in case of statutory

liability cannot be inflated and the insurer is always bound to honour the part

of the contract, which has been agreed to. But, where the contract of

insurance has not provided for certain things, including the same by mere

implication of giving an interpretation that what is interpreted is what was

intended by the Parliament is stretching the interpretation too long, thereby,

defeating the purpose of the provisions of the Contract Act and negating the

agreement between the contracting parties, which terms are bound by the

provisions of the Contract Act. As stated in the aforesaid judgment, contract

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is a reciprocal promise and both the parties to the contract are governed by

the terms of the contract and no additional liability can be imposed on either

party, which has not been a part of the terms of the contract. So, the liability

of the insurer is more specifically determined by the terms in the contract, as

what is sought to be mandated by the Act is only the necessity for holding a

statutory policy and not to have a wider coverage, which has not been agreed

between the parties.

72. Necessarily, as held in Deddappa’s case, beneficial legislations

should have liberal construction with a view to implementing the legislative

intent but where such beneficial legislation has a scheme of its own there is

no warrant for the Court to travel beyond the scheme and extend the scope of

the statute on the pretext of extending the statutory benefit to those who are

not covered by the scheme. The intent of the Legislature is only to the extent

of having a statutory policy u/s 147 and not a comprehensive policy, which

alone would cover the risk of the occupants of the private vehicle. Therefore,

the terms of the contract entered into would be governing the liability of the

insurance company in the matter of occupants of the private vehicle.

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73. The position of law, as looked at and deciphered by this Court

through the aforesaid provisions, finds favour in the decision in Jayaram

Shetty case (supra) which sheds some light in the manner in which the word

“third party” should be looked at and the benefits extended to the class of

persons. Authoring the said decision, T.S.Thakur, J. (as His Lordship then

was), heading the Division Bench of the Karnataka High Court has held as

under :-

“11. The term 'third party' has not been defined

exhaustively in the Act. Section 145(g) gives an inclusive

definition and simply states that 'third party' will include the

Government. That does not however present much difficulty, in

understanding the true meaning and import of the term. The

term 'third party' must necessarily refer to a party other than

those, who are parties to the contract of insurance. For a

contract of insurance, the insurer is one party while the policy

holder is the other party. Any person or persons other than the

said two party or parties would necessarily be referred to as

third parties. That is precisely how the expression third party

appearing in Chapter XI has to be understood. Considerable

support for that view is available from the meaning given to

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the words "third party risk" in Stroud's Judicial Dictionary,

which explains third party risks in the following words.--

"Third party risks (Road Traffic Act, 1930 (Clause

43), Section 35 of the Road Traffic Act, 1972 (Clause

20), Section 143) connotes that the insurer is one party

to the contract, that the policy-holder is another party,

and that the claims made by others in respect of the

negligent use of the car may be naturally described as

claims by third parties (Digby v. General Accident Fire

and Life Assurance Corporation, 1943 AC 121).

12. The argument that the insured owner of a motor

vehicle involved in a motor accident can also claim to be a third

party must therefore be rejected on first principles alone.

13. The issue can be viewed from another angle

also. Section 147 enjoins that the policy issued by the

authorised insurer should insure the person specified in the

policy against any liability which may be incurred by him in

respect of death of or bodily injury to any person specified in

Sub-section (1)(b)(i) and (ii). The critical expression "against

any liability, which may be incurred by him" in Section

147(1)(b)(i) leaves no manner of doubt that the policy of

insurance, which the owner obtains from the authorised insurer

is meant to insure the owner or the holder of the policy against

any liability that he may incur qua third parties whether such

liability be on account of death or bodily injury to any such

person or damage to any property owned by him. In terms of

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Sub-section (1)(b)(ii), the policy must also insure the owner

against the death of or bodily injury caused by or arising out of

the use of the vehicle if it is a public service vehicle used in a

public place. In other words, if no liability arises against the

holder of the policy, the same cannot arise against the

Insurance Company. That position of law is fairly well-settled

by the decision of the Supreme Court in Oriental Insurance

Company Limited v. Sunita Rathi and Ors.,. The High Court had

in that case while exempting the owner of the vehicle made the

insurer liable to pay the compensation. The Court declared that

approach to be erroneous and held that liability of the insurer

arises only when the liability of the insured has been made out

for purposes of indemnifying the insurer under the contract of

insurance. To the same effect is the decision of the Supreme

Court in Minu B. Mehta and Anr. v. Balkrishna Ramchandra

Nayan and Anr.,. The claim had in that case arisen under the

old Act. The Court was examining the provisions of Section

95 corresponding to Section 147 of the new Act. It observed.--

"The insurance policy is only to cover the liability of

a person which he might have incurred in respect of

death or bodily injury. The accident to which the owner

or the person insuring is liable is to the extent of his

liability in respect of death or bodily injury and that

liability is covered by the insurance. It is therefore

obvious that if the owner has not incurred any liability

in respect of death or bodily injury to any person there

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is no liability and it is not intended to be covered by the

insurance. The liability contemplated arises under the

law of negligence and under the principle of vicarious

liability. The provisions as they stand do not make the

owner or the Insurance Company liable for any bodily

injury caused to a third party arising out of the use of

the vehicle unless the liability can be fastened on him. It

is significant to note that under Sub-clause (ii)

of Section 95(1)(b) of the Act, the policy of insurance

must insure a person against the death or bodily injury

to any passenger of a public service vehicle caused by or

arising out of the use of the vehicle in a public place.

Under Section 95(1)(b), Clause (ii) of the Act the liability

of the person arises when bodily injury to any passenger

is caused by or use of the vehicle in a public place. So

far as the bodily injury caused to a passenger is

concerned it need not be due to any act or liability

incurred by the person. It may be noted that the

provisions of Section 95 are similar to Section 36(1) of

the English Road Traffic Act, 1930, the relevant portion

of which is to the effect that a policy of insurance must

be policy which insures a person in respect of any

liability which may be incurred by him in respect of

death or bodily injury to any person caused by or arising

out of the use of the vehicle on road. The expression

"liability which may be incurred by him" is meant as

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covering any liability arising out of the use of the

vehicle. It will thus be seen that the person must be

under a liability and that liability alone is covered by the

insurance policy".

(emphasis supplied)

14. Keeping the above in view, the claim made by the

appellant against the Insurance Company for payment of

compensation was clearly misconceived. That is because the

accident in question had not given rise to any liability against

the insured viz., the claimant in the instant case. It was

admittedly not a case where the insured had vis-avis a third

party incurred any liability for death, injury or loss to property

so as to render the Insurance Company liable to reimburse any

such loss. So long as no liability arose qua the insured, the

liability of the Insurance Company, which is consequential and

dependent upon any such liability against insured would also

not arise. The decision of a Single Bench of this Court in United

India Insurance Company Limited, Gulbarga v. Siddanna

Nimbanna Jawali and Anr., 2001(3) Kar. L.J. 240 : ILR 2001 Kar.

1670 and that of a High Court of Madras in United India

Insurance Company Limited, Salem v. Lakshmi and Ors.,

correctly state the legal position. The first limb of the argument

advanced by Mr. Shankar must therefore fail and is accordingly

rejected.

15. That leaves us with the alternative submission made by

Mr. Shankar that since the occupants of the private car owned

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by the appellant were themselves insured against death or

personal injury, there is no reason why the owner, who is also

one of such occupants at the time of the accident could not be

deemed to be similarly covered for payment of compensation.

The argument must fail for two reasons. Firstly, because the

occupants of a private car are covered in terms of Endorsement

5 to the policy, which reads as under.--

"Accidents to unnamed passengers other than the

insured and his paid driver or cleaner (private cars

only):

In consideration of the payment of an additional

premium it is hereby understood and agreed that the

Company undertakes to pay compensation on the scale

provided below for bodily injury as hereinafter defined

sustained by any passenger other than the insured

and/or his paid driver, attendant or cleaner and/or a

person in the employ of the insured coming within the

scope of the Workmen's Compensation Act, 1923, and

subsequent amendments of the said Act and engaged

in and upon the service of the insured at the time such

injury is sustained whilst mounting or dismounting from

or travelling in the motor car and caused by violent

accidental external and visible means which

independently of any other cause shall within three

calendar months of the occurrence of such injury result

in".

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16. It is evident from the above that while passengers

travelling in a private car, are covered against death or bodily

injury resulting from the accident involving the vehicle, the

insurance cover qua the insured is specifically excluded. The

insurance cover provided to the occupants, it is noteworthy,

does not flow from the provisions of Section 147 of the Act.

It on the contrary flows from the wider cover, which the

insured has secured beyond the minimum prescribed

under Section 147 by paying an additional premium . In case

the insured obtains such a wider cover under the terms of the

policy, the Insurance Company will be liable to undertake the

liability. What is however clear is that the liability to

compensate the occupant injured in any such event will flow

not from the requirements of Section 147, but on the terms

of the policy issued to the insurer. The legal position in this

connection is no longer res integra having been

authoritatively settled by the Supreme Court in Amrit Lal

Sood and Anr. v. Smt. Kaushalya Devi Thapar and Ors.,

where the Court observed.--

"Section 95 requires a policy to cover the risk to

passengers who are not carried for hire or reward. The

statutory insurance does not cover injury suffered by

occupants of the vehicle who are not carried for hire or

reward and the insurer cannot be held liable under the

Act. But that does not prevent an insurer from entering

into a contract of insurance covering a risk wider than

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the minimum requirement of the statute whereby the

risk to gratuitous passengers could also be covered. In

such cases where the policy is not merely a statutory

policy, the terms of the policy have to be considered to

determine the liability of the insurer".

17. It may be recalled that the insurance cover to occupants

travelling in a private car without hire or reward was extended

pursuant to the decision of the Supreme Court in Civil Appeal

No. 2071 of 1998 stating that the insurers are not liable in

respect of the insured's liability for passengers carried in a

private vehicle on the ground that Section 95 of the old Act did

not require the insurance policy to cover such liability. It was

consequent upon the said decision that the Tariff Advisory

Committee had issued circulars amending the existing policies

with effect from 25th of March, 1977. The legal position

however remains unaltered by the said amendment and

extension of the insurance coverage for the occupants remains

optional as there is no compulsion under Section 147 of the Act

to provide for any such insurance. The decision of a Single

Bench of this Court in Shanthabai and Ors. v. Shekappa and

Ors., has dealt with the genesis of the extended cover for

passengers travelling in private car.”

(Emphasis Supplied)

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74. The above decision relied on by the claimant leans more in favour

of the insurance company rather than the claimants. From the above, it is

very clear that though all the parties other than the first and second party,

viz., the insurer and the insured, are deemed to be third parties, however, in

respect of policy cover, as held in the aforesaid decision, the same is not

guided by Section 147 (1)(b)(i) of the Act, 1988; rather, the same is guided by

the terms of the policy, which has been entered into between the insurer and

the insured. As held in the aforesaid decision, the requirement to pay would

only flow from the wider cover, which the insured has secured beyond the

minimum prescribed under Section 147 by paying an additional premium, in

which case alone, the insurer would be liable to compensate the occupant of

the private vehicle, in case of any claim. But for the payment of additional

premium, the liability of the insurer to compensate the occupants of the

private vehicle, even if they fall under the definition of “third party” would

stand extinguished insofar as the insurer is concerned as no liability has been

undertaken by the insurer on behalf of the insured to indemnify the claim of

the occupants of a private vehicle as the occupants are not agreed to be

covered under the Act Only Policy. Therefore, the liability to compensate the

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occupant injured in any such event will flow not only from the requirements

of Section 147, but would be only on the basis of the terms of the policy

issued.

75. From the above, it is clear that the occupant of a private vehicle,

though would be deemed to be a third party, but in the absence of specific

inclusion of the occupant of the private vehicle by the contracting parties by

paying additional premium for the purpose of covering the liability of the

insured, the liability would not stand transposed on the insurer on behalf of

the owner of the vehicle. In fine, additional premium over and above the

minimum prescribed should have been paid for indemnifying the claim of a

passenger of a private vehicle. Therefore, in respect of an Act Only Policy,

which is the minimum prescribed u/s 147, third party would necessarily be

taken to mean a person outside the vehicle and would not include the

occupant of the private vehicle; however, if additional premium is paid

enabling the said cover in the contract of insurance, then the occupant of the

vehicle would stand covered under the Third Party Risk. Therefore, beyond

the minimum prescription u/s 147 of Act, 1988, a wider policy could be taken

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for covering the occupant of the private vehicle, in which case the occupant

would also fall within the ambit of third party, by paying additional premium

as agreed between the first and second party, viz., the insurer and the insured

for the purpose of claiming compensation.

76. When the Three Judge Bench of the Supreme Court in Amrit Lal

Sood has clearly spelt out the situations in which the insurance company

would be liable to indemnify the insured and in respect of an Act Only Policy,

and has specifically held that in the absence of a wider cover having been

accepted between the contracting parties, the liability of the insurance

company would be only to the extent of the coverage agreed between the

contracting parties, the Division Bench, in Chandrasekaran case (supra),

without taking into consideration that the policy in Amrit Lal Sood is a

comprehensive policy, had imported the ratio laid down in the said decision

erroneously to the case before it and had come to the conclusion that the

said decision is squarely applicable even with regard to an Act Only Policy, by

holding that the intent of the Legislature is writ large in the omission of clause

(ii) of proviso to Section 95 95 (1)(b) in Section 147 of Act, 1988,

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notwithstanding the fact that in Amrit Lal Sood, the Apex Court had clearly

negated that the occupant of the private vehicle would not be entitled to

compensation in the absence of any additional premium being paid.

Therefore, with great respect, the interpretation has been erroneously

arrived at by the decision of the Division Bench with regard to Act Only Policy

by taking cue from the decision in Amrit Lal Sood, though the said case stood

on a different footing, viz., which was a case covered by a Comprehensive

Policy.

77. Therefore, the mere inclusion of all the persons within the ambit of

third party as defined u/s 145 (g) of Act, 1988 would not enure to the benefit

of the claimant, who is an occupant of the private vehicle, as the liability to

compensate the occupant of the private vehicle for any death or bodily injury

will flow not from the requirements of Section 147 but in relation to the

terms agreed between the insurance company and the owner of the vehicle.

78. From the above discussion, this Court holds that “any person” as

found in Section 147 (1)(b)(i) would fall within the definition of “third party”

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as defined u/s 145 (g) of Act, 1988 and all persons irrespective of their

position, would be deemed to be “third party” but the indemnification of the

insurer towards payment of compensation would flow only from Section 147

(5), which would be based on the terms of the contract entered into between

the contracting parties, viz., the insurer and the insured and, therefore,

reading Section 147 (1)(b)(i) and 147 (5) together, the occupant of the

private vehicle would not be entitled for claiming compensation unless the

terms of the policy spells out the intention of the contracting parties towards

the occupant, by means of wider coverage under the policy and not

otherwise, which alone would have been the intent of the Legislature while

enacting the amendment in the year 1988.

79. The above view of this Court is strengthened on the premise that if

not, the necessity of the non obstante clause u/s 147 (5) would not have been

required. Both Act, 1939 as well as Act, 1988 has the very same non obstante

clause, but only Section 95 (1)(b) and Section 147 (1)(b)(i) have been worded

in a different manner, the necessity for which has been explained in the

preceding portion of the order. Therefore, all along, the intention of the

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Legislature was to leave the contracting parties to finalize the terms of the

policy between them, while statutorily mandating carrying of a minimum

policy, which would take care of the parties outside the vehicle, in the event

of the vehicle meeting with an accident.

80. The logic behind the above would have flown from the

understanding of the Legislature that the owner of a private vehicle does not

normally carry passengers for hire or reward, which is taken care of u/s 147

(1)(b)(ii), but it is restricted to his friends and relatives, who alone would be

the occupants of the private vehicle. In such an event, the said persons

cannot be construed to be third parties for the purpose of falling within the

third party risk coverage and if at all the owner of the vehicle intends to cover

such persons, necessarily, a wider cover ought to be taken which would be

spelt out in the terms of the policy. Therefore, the Legislature had, in its

wisdom, left it to the prudent choice and discretion of the owner of the

vehicle to opt for taking a wider cover for the occupants of the car, as also for

the owner in addition, by paying a separate premium as addition to the base

premium and had not mandated the owner to carry insurance beyond the

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statutory prescription u/s 147 as has been held in Jayaram Shetty case

(supra). Therefore, suffice to say, that if the additional premium is not paid

towards coverage for the occupants and owner of the vehicle, in respect of

Act Only Policy, the insurance company is not liable to indemnify the

occupants of the private vehicle.

81. Now turning to the facts of the case, it is the case of the insurance

company that the policy in issue is an Act Only Policy and, therefore, the

insurance company is not liable to compensate the claimant for the injuries

suffered by him in the accident. It is the further case of the insurance

company that when the insurance company is not liable to pay any

compensation, the question of paying the compensation and recovering the

same does not arise.

82. Before proceeding further with the facts of the case and the

contentions advanced therein, it would not be out of context for this Court to

point out that the order of the Tribunal does not reveal the manner in which it

has interpreted an Act Only Policy to be one which would make the insurance

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company to pay the compensation. Further, this Court is at a loss to

understand as to how the order ordering recovery could be passed, when

liability has been fastened on the insurance company. Further, what is more

intriguing is the fact that on the above set of facts, a finding has been

rendered by the Tribunal that the claimant is an employee of the owner of the

vehicle, though even in the very case of the claimant, it has been admitted

that the claimant is not in any way associated with the owner of the vehicle.

Further, the Tribunal has passed the order on the premise that the claimant is

an employee under the owner of the vehicle and, therefore, he would be

entitled to compensation by invoking Section 147 (1)(b)(i) notwithstanding

the fact that the parties have not canvassed employer-employee relationship

between the claimant and the owner of the vehicle.

83. Be that as it may. To appreciate the above contention advanced on

behalf of the insurance company, it is necessary for this Court to look at the

policy of insurance, which is marked on behalf of the claimant as Ex.P-3 and

by the insurance company as Ex.R-1. Both the exhibits are one and the same,

but for Ex.R-1 providing the terms of liability with regard to the coverage

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extended by the insurer. The said policy document is not disputed by the

claimant.

84. On a closer look at the schedule of premium payment, it reveals

that Part-A pertains to ‘Own Damage Premium’ while Part-B pertains to

‘Third Party Premium’. Under Part-B relating to ‘Third Party Premium’, the

following are the amount paid for extending the coverage :-

B.Third Party Premium (Rs.)

Basic Premium

Bi Fuel Kit (IMT 25)

1332.00

0.00

Add :

Legal Liability to Driver (IMT 28)

Legal Liability to Employee (IMT 29)

PA to Passenger (IMT 16)

Rallies (IMT 31)

PA Owner Driver CSI Rs.200000

Geographical Area Extension (IMT 1)

IMT 15

50.00

0.00

0.00

0.00

100.00

0.00

Less :

Third Party Property Damage (IMT 20)

Limit of Liability Under Section II-I (ii) 750000

0.00

Any other Loading Discount

Net (B) 1482.00

Total Premium Taxable Value (A + B) Rs.

Add Service Tax (183.17) + Swacch Bharat Cess

(0.00) + Krishi Kalyan Cess (0.00)

Rs.1482.00

183.17

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Premium Paid (Total Invoice Value) Rs. 1665.17

Since you, as insured, have declared that you do not have a valid

driving license, the PA coverage for Owner-Driver will not be

applicable. In case, you obtain driving license during the currency

of the policy, you need to endorse the coverage by payment of

premium.

85. The terms and conditions which have been accepted by the

insurance company, viz., the appellant herein, to indemnify the liability on

behalf of the owner of the vehicle, which is available along with the policy

and which forms part of the policy, are quoted hereunder :-

“Policy Wording for Private Car

** * * * * *

I) LIABILITY TO THIRD PARTIES

1. Subject to the Limit of liability as laid down in the

schedule hereto, the Company will indemnify the insured in the

event of accident caused by or arising out of the use of the

Motor Vehicle anywhere in India against all sums including

claimant’s costs expenses which the insured shall become

legally liable to pay in respect of

i) Death or bodily injury to any person so far as it is

necessary to meet the requirements of the Motor Vehicles Act

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ii) Damage to property other than property belonging to

the insured or held in trust or in the custody or control of the

insured upto the limit specified in the schedule.

2. The Company will also pay all costs and expenses

incurred with its written consent.

3. In terms of and subject to the limitations of the

indemnity which is granted by this policy to the insured, the

Company will indemnify any driver who is driving the Motor

Vehicle on the insured’s order or with insured’s permission

provided that such drive shall as though he/she were the

insured observe fulfil and be subject to the terms exceptions

and conditions of this policy in so far as they apply.

4. In the event of the death of any person entitled to

indemnity under this policy the Company will in respect of the

liability incurred by such person indemnify his/her personal

representative in terms of and subject to the limitations of this

Policy provided such personal representative shall as though

such representative was the insured observe fulfil and be

subject to the terms exceptions and conditions of this Policy in

so far as they apply.

** * * * * *

GENERAL EXCEPTIONS

** * * * * *

4. Except so far as is necessary to meet the requirements of

the Motor Vehicles Act, the Company shall not be liable in

respect of death or bodily injury to any person (other than a

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passenger carried by reason of or in pursuance of a contract of

employment) being carried in or upon or entering or mounting

or alighting from the Motor Vehicle at the time of the

occurrence of the event out of which any claim arises.

** * * * * *”

86. A careful perusal of the policy of insurance, more particularly the

schedule of premium and the terms on which the first and the second party

had agreed with regard to the class of persons to be covered for the purpose

of payment of indemnification by the appellant, the schedule of premium

shows that while the driver has been indemnified, and be covered under the

limits of liability under Section II-I (ii) as shown in the Third Party Premium

schedule and so is the personal accident cover for the owner of the vehicle,

however, crucially, the personal accident to passenger has not been covered

under the policy by paying any additional premium, meaning thereby, there is

exclusion with regard to indemnification as regards the occupant of the car

other than the driver, which would be to the extent of the limits of liability of

Rs.7,50,000/- and personal accident with regard to the owner, who himself

when being the driver to the extent of Rs.2,00,000/-. From the above, it

transpires that no additional premium having been paid towards

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indemnification of the passenger in the vehicle, no compensation would be

payable to the occupant of the vehicle in case any claim is filed against the

insurer.

87. Pausing here for a moment, a look at the conditions relating to

Liability to Third Parties, as has been agreed between the insurer and the

insured, it reveals that under sub-clause (i) of clause 1 thereof, a condition

has been prescribed that the liability would be with regard to death of or

bodily injury to any person so far as it is necessary to meet the requirements

of the Motor Vehicles Act. Further, in the General Exceptions, there is a

condition prescribed under clause (4) that except so far as is necessary to

meet the requirements of the Motor Vehicles Act, the Company shall not be

liable in respect of death or bodily injury to any person (other than a

passenger carried by reason of or in pursuance of a contract of employment).

From this, it is abundantly evident that there is a clear exclusion of the

occupant of the car from being indemnified by the insurer and coupled with

the fact that in the Schedule of Premium, no specific amount having been paid

as premium for covering the occupant of the car in respect of any claim, the

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insurance company cannot be made liable to pay any compensation to the

claimant, who is the occupant of the car and whose presence is not connected

with any contract of employment.

88. At the risk of repetition, the above view of this Court gets

strengthened by the observations in Amrit Lal Sood case (supra), more

particularly, para-6 of the said decision, in which Liability to Third Parties, as

has been agreed in the contract before the Supreme Court is extracted. In

sub-clause (a) of clause (1) thereof, the condition prescribed is that the

insurer would indemnify against “death or bodily injury to any person but

except so far as is necessary to meet the requirements of Section 95 of the

Motor Vehicles Act........”. There is a clear mandate in the said condition that

indemnification would be to the level to meet the requirements of Section 95.

As discussed above, the policy in the said case therein was a comprehensive

policy and, therefore, it was necessary for the insurer to indemnify and in the

aforesaid circumstance, the Apex Court held that the expression “any person”

appearing in Section 95 as it stood, would undoubtedly include the occupant

of the car who is gratuitously travelling in the car. But in the case on hand,

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the policy is an Act Only Policy and further no additional premium having

been paid for covering the occupant of the car and further the terms of

liability clearly excluding the occupant of the car, the claimant would not be

entitled for any compensation at the hands of the insurer. That being the

case, as held in Jayaram Shetty case (supra), the policy being a mere statutory

policy with no strings attached thereto with respect to indemnification of

persons, who had occupied the car other than the driver/owner of the car,

the insurance company would not be in any way liable to pay any

compensation to the claimant as the terms of the contract entered into

between the appellant and the 2

nd

respondent herein, read in conjunction,

would absolve the insurance company of any liability towards the occupant of

the car, viz., the claimant, so long as the statutory prescription has been

complied with.

89. For the reasons aforesaid, this Court is of the considered view that

the judgment and decree passed by the Tribunal directing the insurance

company to pay the compensation to the claimant, viz., the 1

st

respondent

herein and to recover the same from the 2

nd

respondent, viz., the owner of

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the vehicle, suffer the vice of illegality and is arbitrary, unreasonable and is

liable to be interfered with.

90. Accordingly, this civil miscellaneous petition is allowed setting

aside the order and decreetal order dated 31.01.2019 made in M.C.O.P.

No.613 of 2014 by the Motor Accident Claims Tribunal, Chief Judicial

Magistrate, Dharmapuri. The insurance company is at liberty to withdraw the

amount, if any, deposited. Consequently, connected miscellaneous petition is

closed. There shall be no order as to costs in this appeal.

19.01.2024

Index : Yes / No

GLN

To

The Chief Judicial Magistrate

Motor Accident Claims Tribunal

Dharmapuri.

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C.M.A. No.4163/2019

M.DHANDAPANI, J.

GLN

PRE-DELIVERY JUDGMENT IN

C.M.A. NO.4163 OF 2019

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Pronounced on

19.01.2024

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