Page 1 Reportabl

e

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 8163 OF 2012

(Arising out of S.L.P. (Civil) No. 1232 of 2012)

National Insurance Company Ltd. ... Appellants

Versus

Balakrishnan & Another ... Respondents

J U D G M E N T

Dipak Misra, J.

Leave granted.

2.The singular issue that arises for consideration in this

appeal is whether the first respondent, the Managing Director

of the respondent No. 2, a company registered under the

Companies Act, 1956, is entitled to sustain a claim against the

appellant-insurer for having sustained bodily injuries.

Succinctly stated, the facts are that the respondent No. 1 met

with an accident about 8.30 p.m. on 23.3.2001 while

travelling in the Lancer car bearing registration No. TN 49 K

Page 2 2750 belonging to the respondent No. 2, as it dashed against a

bullock cart near Muthandipatti Pirivu Road-I. He knocked at

the doors of the Motor Accident Claim Tribunal (for short “the

the tribunal”) in MACOP No. 357 of 2004 under Sections 140,

147 and 166 of the Motor Vehicles Act, 1988 (for brevity “the

Act”) claiming compensation of Rs.20,00,000/- jointly and

severally from the appellant as well as the company on the

foundation that the vehicle in question was insured with the

appellant-company. Be it noted, the amount was calculated

on the basis of pecuniary and non-pecuniary damages.

3.The insurer resisted the claim on the grounds that the

claimant had suppressed the fact that he was the Managing

Director of the company and hence, the application deserved

to be thrown overboard; that even if the petition was

entertained the insurance company could not be held liable to

indemnify the respondent as the appellant was himself the

owner being the Managing Director and under no

circumstances he could be treated as a third party; that the

policy taken by the company did not cover an occupant in the

vehicle but only covered the owner for a limited quantum and

hence, the claim was not allowable as sought for.

2

Page 3 4. The tribunal, in its award dated 19.4.2007, addressed to

the issues of rash and negligent driving of the driver, injuries

sustained by the insured and the liability of the insurance

company. On the basis of the material brought on record, it

came to hold that the accident had occurred due to rash and

negligent driving of the driver of the 1

st

respondent; that the

claimant was injured in the accident; that regard being had to

the injuries sustained he was entitled to get Rs.8,63,200/- as

compensation with interest @ 7.5% per annum from the date

of the petition till the date of deposit; and that the insurance

company was liable to indemnify as the owner of the vehicle

was the company, and the injured was travelling in the car as

a third party.

5.Being dissatisfied with the award passed by the tribunal,

the insurer preferred C.M.A. (M.D.) No. 1624 of 2008 before

the Madurai Bench of Madras High Court and in appeal it was

urged that the victim, the Managing Director, who was

running the hospital in the name of his deceased father, was

the legal owner of the car though the vehicle was insured in

the name of the company and, therefore, the liability was to

the limited extent as stipulated in the policy. It was also

3

Page 4 canvassed, in any case, he was a non-fare paying passenger in

the car for which no extra premium was paid and hence, the

liability could not be fastened on the insurer. The High Court

treated the company to be the owner of the vehicle and

repelled the stand that the Managing Director was the owner,

and further held that as he was only an occupant of the car

the insurance company was liable to indemnify the owner for

the claim put forth by the victim. It is worthy to note that the

High Court opined that if no premium is paid to cover the

owner, the insurer is not liable to make good the loss but if

another person travels with the owner and suffers injuries the

insurer is liable to pay the compensation. Being of this view,

the High Court dismissed the appeal. Hence, the present

appeal by the insurer.

6.We have heard the learned counsel for the parties and

perused the record. As has been indicated at the beginning,

the seminal issue is whether the appellant-company is liable

to make good the compensation determined by the tribunal to

the victim in the accident. On a scrutiny of the award passed

by the tribunal which has been given the stamp of approval by

the High Court, it is manifest that the 1

st

respondent was the

4

Page 5 Managing Director of the respondent No. 2 and the vehicle was

registered in the name of the company but the Managing

Director had signed on behalf of the company in the R. C.

book of the car that was involved in the accident. The High

Court has returned a finding that the company and the

Managing Director are two different legal entities and hence,

the Managing Director cannot be equated with the owner. On

that foundation, the claimant has been treated as a passenger

and, accordingly, liability has been fastened on the insurer.

The learned counsel appearing for the insurer would contend

that assuming he is the owner being a signatory in the R.C.

book, the liability of the company is limited upto

Rs.2,00,000/- and under no circumstances a non-fare paying

passenger would be covered under the policy. In oppugnation,

the learned counsel for the respondent-claimant has proponed

that barring the insurer and the insured, all others are third

parties and, therefore, he is covered by the policy. It is also

urged by him that as he had travelled as an occupant in a

private car he is a third party vis-à-vis the insurer and hence,

it is bound to indemnify the owner as the risk of the third

party is covered.

5

Page 6 7.As per the command of Section 146 of the Act, the owner

of a vehicle is obliged to obtain an insurance for the vehicle to

cover the third party risk. Section 147 deals with the

requirements of policies and limits of liability. Section 147 (1)

which is relevant for the present purpose is reproduced

below:-

“147. Requirement 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) insurers the person or classes of persons

specified in the policy to the extent specified in

sub – section (2) –

(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

6

Page 7 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

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

vehicle, or

(ii) 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 damaged was

not in a public place at the time of the

accident, if the act or omission which led to

the accident occurred in a public place.”

On a scanning of the aforesaid provision, it is evident

that the policy of insurance must be a policy which complies

with the conditions enumerated under Section 147 (1) (a) &

(b). It also provides where a policy is not required and also

stipulates to cover any contractual liability.

8.In United India Insurance Co. Ltd., Shimla v. Tilak

Singh and Others

1

, this Court referred to the concurring

1

(2006) 4 SCC 404

7

Page 8 opinion rendered in a three-Judge Bench decision in New

India Assurance Co. Ltd. V. Asha Rani

2

and ruled thus:-

“In our view, although the observations made in

Asha Rani case were in connection with carrying

passengers in a goods vehicle, the same would

apply with equal force to gratuitous passengers in

any other vehicle also. Thus, we must uphold the

contention of the appellant Insurance Company

that it owed no liability towards the injuries

suffered by the deceased Rajinder Singh who was a

pillion rider, as the insurance policy was a statutory

policy, and hence it did not cover the risk of death

of or bodily injury to a gratuitous passenger.”

It is worthy to note that in the said case the controversy

related to gratuitous passenger carried in private vehicle.

9.In Oriental Insurance Co. Ltd. v. Jhuma Saha (Smt)

and Others

3

, the controversy related to fastening of liability

on the insurer for the death of the owner of a registered

vehicle, Maruti van. The Court observed that the accident did

not involve any other motor vehicle than the one which he was

driving and as the liability of the insurer Company is to the

extent of indemnification of the insured against the

respondent or an injured person, a third person or in respect

of damages of property, the insured cannot be fastened with

2

(2003) 2 SCC 223

3

(2007) 9 SCC 263

8

Page 9 any liability under the provisions of the Motor Vehicles Act,

and, therefore, the question of the insurer being liable to

indemnify the insured does not arise. Thereafter, the Bench

referred to the decision in Dhanraj v. New India Assurance

co. Ltd.

4

and ruled thus:-

“The additional premium was not paid in respect of

the entire risk of death or bodily injury of the owner

of the vehicle. If that be so, Section 147 (b) of the

Motor Vehicles Act which in no uncertain terms

covers a risk of a third party only would be

attracted in the present case.”

10.In National Insurance Co. Ltd. v. Laxmi Narain

Dhut

5

, after elaborately referring to the analysis made in Asha

Rani (supra), the Bench stated thus:-

“Section 149 is part of Chapter XI which is titled

“Insurance of Motor Vehicles against Third-Party

Risks”. A significant factor which needs to be

noticed is that there is no contractual relation

between the insurance company and the third

party. The liabilities and the obligations relatable to

third parties are created only by fiction of Sections

147 and 149 of the Act.”

In the said case, it has been opined that although the statute

is a beneficial one qua the third party, yet that benefit cannot

be extended to the owner of the offending vehicle.

4

(2004) 8 SCC 553

5

(2007) 3 SCC 700

9

Page 10 11.In Oriental Insurance Company Ltd. v. Meena Variyal

and Others

6

, the facts were that a Regional Manager of the

company, which was the owner of the vehicle, was himself

driving a vehicle of the company and met with an accident and

eventually succumbed to the injuries. It was contended by the

insurer before this Court that the policy did not cover the

employee of the owner who was driving the vehicle while

attending the business of the employer-company and the

deceased was not a third party in terms of the policy or in

terms of the Act. It was also urged that the same would be the

position even if the deceased was only travelling in the car in

his capacity as a Regional Manger of the owner-company and

the vehicle was being driven by the driver. This Court

observed that a contract of insurance is ordinarily a contract

of indemnity and when a car belonging to an owner is insured

with the insurance company and it is being driven by a driver

employed by the insured, when it meets with an accident, the

primary liability under law for payment of compensation is

that of the driver. Once the driver is liable, the owner of the

vehicle becomes vicariously liable for payment of

compensation. It is this vicarious liability of the owner that is

6

(2007) 5 SCC 428

1

Page 11 indemnified by the insurer. Dealing with the said liability, the

Bench analysed the language employed under Section 147 (1)

of the Act and observed as follows:-

“The object of the insistence on insurance under

Chapter XI of the Act thus seems to be to

compulsorily cover the liability relating to their

person or properties of third parties and in respect

of employees of the insured employer, the liability

that may arise under the Workmen's Compensation

Act, 1923 in respect of the driver, the conductor

and the one carried in a goods vehicle carrying

goods. On this plain understanding of Section 147,

we find it difficult to hold that the Insurance

Company, in the case on hand, was liable to

indemnify the owner, the employer Company, the

insured, in respect of the death of one of its

employees, who according to the claim, was not the

driver. Be it noted that the liability is not one

arising under the Workmen's Compensation Act,

1923 and it is doubtful, on the case put forward by

the claimant, whether the deceased could be

understood as a workman coming within the

Workmen's Compensation Act, 1923. Therefore, on

a plain reading of Section 147 of the Act, it appears

to be clear that the Insurance Company is not liable

to indemnify the insured in the case on hand.”

12.After so stating, the Bench adverted to the decisions in

National Insurance Co. Ltd. v. Swaran Singh

7

, Laxmi

Narain Dhut (supra), Asha Rani (supra) and Tilak Singh

(supra) and opined that a policy in terms of Section 147 of the

Act does not cover persons other than third parties.

Eventually, it ruled thus:-

7

(2004) 3 SCC 297

1

Page 12 “The victim was the Regional Manager of the

Company that owned the car. He was using the car

given to him by the Company for use. Whether he is

treated as the owner of the vehicle or as an

employee, he is not covered by the insurance policy

taken in terms of the Act—without any special

contract—since there is no award under the

Workmen's Compensation Act that is required to be

satisfied by the insurer. In these circumstances, we

hold that the appellant Insurance Company is not

liable to indemnify the insured and is also not

obliged to satisfy the award of the Tribunal/Court

and then have recourse to the insured, the owner of

the vehicle.”

13.In Oriental Insurance Company Ltd. v. Sudhakaran K.

V. and Others

8

, a two-Judge Bench, while dealing with the

issue whether a pillion rider on a scooter would be a third

party within the meaning of Section 147 of the Act, after

referring to number of authorities, stated thus:-

“The contract of insurance did not cover the owner

of the vehicle, certainly not the pillion-rider. The

deceased was travelling as a passenger, stricto

sensu may not be as a gratuitous passenger as in a

given case she may not (sic) be a member of the

family, a friend or other relative. In the sense of the

term which is used in common parlance, she might

not be even a passenger. In view of the terms of the

contract of insurance, however, she would not be

covered thereby.

xxx xxx xxx xxx xxx

The law which emerges from the said decisions,

is: (i) the liability of the insurance company in a

8

(2008) 7 SCC 428

1

Page 13 case of this nature is not extended to a pillion-rider

of the motor vehicle unless the requisite amount of

premium is paid for covering his/her risk; (ii) the

legal obligation arising under Section 147 of the Act

cannot be extended to an injury or death of the

owner of vehicle or the pillion-rider; (iii) the pillion-

rider in a two-wheeler was not to be treated as a

third party when the accident has taken place

owing to rash and negligent riding of the scooter

and not on the part of the driver of another vehicle.”

14.In New India Assurance Company Limited v.

Sadanand Mukhi and Others

9

, the son of the owner of the

insured while driving the motor cycle met with an accident

and died. The accident allegedly took place as a stray dog

came in front of the vehicle. The stand of the insurance

company was that in view of the relationship between the

deceased and the owner of the vehicle being father and son the

deceased was not a third party. The Bench relied on the

decisions in Tilak Singh (supra), Jhuma Saha (supra),

Meena Variyal (supra), Laxmi Narain Dhut (supra) and

United India Insurance Co. Ltd. v. Davinder Singh

10

and

came to hold that the insurance company was not liable to

indemnify the owner.

9

(2009) 2 SCC 417

10

(2007) 8 SCC 698

1

Page 14 15.At this juncture, we may refer with profit to a two-Judge

Bench decision in Bhagyalakshmi and others v. United

Insurance Company Limited and another

11

wherein the

learned Judges took note of the contention of the learned

senior counsel for the claimant-appellant which was to the

effect that after the deletion of the second proviso appended to

Section 95(1)(b) of the Motor Vehicles Act, 1939 in the 1988

Act, the liability of a passenger in a private vehicle must also

be included in the policy in terms of the provisions of the 1988

Act. The Bench reproduced the policy, referred to Section 64-B

of the Insurance Act, 1938, took note of the role of the Tariff

Advisory Committee and referred to the decisions in Amrit Lal

Sood and Another v. Kaushalya Devi Thapar and

Others

12

, Asha Rani (supra), Tilak Singh (supra), Jhuma

Saha (supra) and Sudhakaran K. V. and Others (supra)

and observed thus :-

“Before this Court, however, the nature of policies

which came up for consideration were Act policies.

This Court did not deal with a package policy. If the

Tariff Advisory Committee seeks to enforce its

decision in regard to coverage of third-party risk

which would include all persons including

occupants of the vehicle and the insurer having

11

(2009) 7 SCC 148

12

(1998) 3 SCC 744

1

Page 15 entered into a contract of insurance in relation

thereto, we are of the opinion that the matter may

require a deeper scrutiny.”

On a perusal of the aforesaid paragraph, it is clear as

crystal that the decisions that have been referred to in

Bhagyalakshmi (supra) involved only “Act Policies”. The

Bench felt that the matter would be different if the Tariff

Advisory Committee seeks to enforce its decision in regard to

coverage of third party risk which would include an occupant

in a vehicle. It is worth noting that the Bench referred to

certain decisions of Delhi High Court and Madras High Court

and thought it appropriate to refer the matter to a larger

Bench. Be it noted, in the said case, the Court was dealing

with comprehensive policy which is also called a package

policy. In that context, in the earlier part of the judgment, the

Bench had stated thus:-

“The policy in question is a package policy. The

contract of insurance if given its face value covers

the risk not only of a third party but also of persons

travelling in the car including the owner thereof.

The question is as to whether the policy in question

is a comprehensive policy or only an Act policy.”

16.Thus, it is quite vivid that the Bench had made a

distinction between the “Act policy” and “comprehensive

1

Page 16 policy/package policy”. We respectfully concur with the said

distinction. The crux of the matter is what would be the

liability of the insurer if the policy is a

“comprehensive/package policy”. We are absolutely conscious

that the matter has been referred to a larger Bench, but, as is

evident, the Bench has also observed that it would depend

upon the view of the Tariff Advisory Committee pertaining to

enforcement of its decision to cover the liability of an occupant

in a vehicle in a “comprehensive/package policy” regard being

had to the contract of insurance.

17.At this stage, it is apposite to note that when the decision

in Bhagyalakshmi (supra) was rendered, a decision of High

Court of Delhi dealing with the view of the Tariff Advisory

Committee in respect of “comprehensive/package policy” had

not come into the field. We think it apt to refer to the same as

it deals with certain factual position which can be of

assistance. The High Court of Delhi in Yashpal Luthra and

Anr. V. United India Insurance Co. Ltd. and Another

13

,

after recording the evidence of the competent authority of

Tariff Advisory Committee (TAC) and Insurance Regulatory and

13

2011 ACJ 1415

1

Page 17 Development Authority (IRDA), reproduced a circular dated

16.11.2009 issued by IRDA to CEOs of all the Insurance

Companies restating the factual position relating to the

liability of Insurance companies in respect of a pillion rider on

a two-wheeler and occupants in a private car under the

comprehensive/package policy. The relevant portion of the

circular which has been reproduced by the High Court is as

follows:-

“IRDA

Ref: IRDA/NL/CIR/F&U/073/11/2009

16.11.2009

To

CEOs of all general insurance companies

Re: Liability of insurance companies in respect of

occupants of a Private car and pillion rider on a

two-wheeler under Standard Motor Package Policy

(also called Comprehensive Policy).

Insurers’ attention is drawn to wordings of Section

(II) 1 (ii) of Standard Motor Package Policy (also

called Comprehensive Policy) for private car and

two-wheeler under the (erstwhile) India Motor Tariff.

For convenience the relevant provisions are

reproduced hereunder:-

‘Section II - Liability to Third Parties

1. Subject to the limits of liabilities as laid down in

the Schedule hereto the company will indemnify the

insured in the event of an accident caused by or

arising out of the use of the insured vehicle against

1

Page 18 all sums which the insured shall become legally

liable to pay in respect of -

(i) death or bodily injury to any person including

occupants carried in the vehicle (provided such

occupants are not carried for hire or reward) but

except so far as it is necessary to meet the

requirements of Motor Vehicles Act, the Company

shall not be liable where such death or injury arises

out of and in the course of employment of such

person by the insured.’

It is further brought to the attention of insurers that

the above provisions are in line with the following

circulars earlier issued by the TAC on the subject:

(i) Circular M.V. No. l of 1978 - dated 18th March,

1978 (regarding occupants carried in Private Car)

effective from 25th March, 1977.

(ii) MOT/GEN/10 dated 2nd June, 1986 (regarding

pillion riders in a two-wheeler) effective from the

date of the circular.

The above circulars make it clear that the insured

liability in respect of occupant(s) carried in a private

car and pillion rider carried on two-wheeler is

covered under the Standard Motor Package Policy . A

copy each of the above circulars is enclosed for

ready reference.

The Authority vide circular No.

066/IRDA/F&U/Mar-08 dated March 26, 2008

issued under File & Use Guidelines has reiterated

that pending further orders the insurers shall not

vary the coverage, terms and conditions wording,

warranties, clauses and endorsements in respect of

covers that were under the erstwhile tariffs.

Further the Authority, vide circular No.

019/IRDA/NL/F&U/Oct-08 dated November 6,

2008 has mandated that insurers are not permitted

to abridge the scope of standard covers available

under the erstwhile tariffs beyond the options

permitted in the erstwhile tariffs. All general

1

Page 19 insurers are advised to adhere to the afore-

mentioned circulars and any non-compliance of the

same would be viewed seriously by the Authority .

This is issued with the approval of competent

authority.

Sd/-

(Prabodh Chander)

Executive Director”

[emphasis supplied]

18.The High Court has also reproduced a circular issued by

IRD dated 3.12.2009. It is instructive to quote the same:-

“IRDA

IRDA/NL/CIR/F&U/078/12/2009

3.12.2009.

To

All CEOs of All general insurance companies (except

ECGC, AIC, Staff Health, Apollo)

Re: Liability of insurance companies in respect of

occupant of a private car and pillion rider in a two-

wheeler under Standard Motor Package Policy (also

called Comprehensive Policy).

Pursuant to the Order of the Delhi High Court dated

23.11.2009 in MAC APP No. 176/2009 in the case

of Yashpal Luthra v. United India and Ors., the

Authority convened a meeting on November 26,

2009 of the CEOs of all the general insurance

companies doing motor insurance business in the

presence of the counsel appearing on behalf of the

Authority and the leaned amicus curie.

Based on the unanimous decision taken in the

meeting by the representatives of the general

insurance companies to comply with the IRDA

circular dated 16th November, 2009 restating the

1

Page 20 position relating to the liability of all the general

insurance companies doing motor insurance

business in respect of the occupants in a private car

and pillion rider on a two wheeler under the

comprehensive/package policies which was

communicated to the court on the same day i.e.

November 26, 2009 and the court was pleased to

pass the order (dt. 26.11.2009) received from the

Court Master, Delhi High Court, is enclosed for your

ready reference and adherence. In terms of the said

order and the admitted liability of all the general

insurance companies doing motor insurance

business in respect of the occupants in a private car

and pillion rider on a two-wheeler under the

comprehensive/package policies, you are advised to

confirm to the Authority, strict compliance of the

circular dated 16

th

November, 2009 and orders dt.

26.11.2009 of the High Court. Such compliance on

your part would also involve:

(i)withdrawing the plea against such a contest

wherever taken in the cases pending before the

MACT, and issue appropriate instructions to

their respective lawyers and the operating

officers within 7 days;

(ii)with respect to all appeals pending before the

High Courts on this point, issuing instructions

within 7 days to the respective operating

officers and the counsel to withdraw the

contest on this ground which would require

identification of the number of appeals

pending before the High Courts (whether filed

by the claimants or the insurers) on this issue

within a period of 2 weeks and the contest on

this ground being withdrawn within a period of

four weeks thereafter;

(iii)With respect to the appeals pending before the

Hon'ble Apex Court, informing, within a period

of 7 days, their respective advocates on record

about the IRDA Circulars, for appropriate

2

Page 21 advice and action. Your attention is also

drawn to the discussions in the CEOs meeting

on 26.11.2009, when it was reiterated that

insurers must take immediate steps to collect

statistics about accident claims on the above

subject through a central point of reference

decided by them as the same has to be

communicated in due course to the

Honourable High Court. You are therefore

advised to take up the exercise of collecting

and collating the information within a period of

two months to ensure necessary & effective

compliance of the order of the Court. The

information may be centralized with the

Secretariat of the General Insurance Council

and also furnished to us.

IRDA requires a written confirmation from you on

the action taken by you in this regard.

This has the approval of the Competent Authority.

Sd/-

(Prabodh Chander)

Executive Director”

[emphasis added]

19.It is extremely important to note here that till 31

st

December, 2006 the Tariff Advisory Committee and, thereafter,

from 1

st

January, 2007, IRDA functioned as the statutory

regulatory authorities and they are entitled to fix the tariff as

well as the terms and conditions of the policies by all

insurance companies. The High Court had issued notice to

the Tariff Advisory Committee and the IRDA to explain the

factual position as regards the liability of the insurance

2

Page 22 companies in respect of an occupant in a private car under the

“comprehensive/ package policy”. Before the High Court, the

Competent Authority of IRDA had stated that on 2

nd

June,

1986, the Tariff Advisory Committee had issued instructions

to all the insurance companies to cover the pillion rider of a

scooter/motorcycle under the “comprehensive policy” and the

said position continues to be in vogue till date. It had also

admitted that the “comprehensive policy” is presently called a

“package policy”. It is the admitted position, as the decision

would show, the earlier circulars dated 18

th

March, 1978 and

2

nd

June, 1986 continue to be valid and effective and all

insurance companies are bound to pay the compensation in

respect of the liability towards an occupant in a car under the

“comprehensive/package policy” irrespective of the terms and

conditions contained in the policy. The competent authority of

the IRDA was also examined before the High Court who stated

that the circulars dated 18

th

March, 1978 and 2

nd

June, 1986

of the Tariff Advisory Committee were incorporated in the

Indian Motor Tariff effective from 1

st

July, 2002 and they

continue to be operative and binding on the insurance

companies. Because of the aforesaid factual position, the

2

Page 23 circulars dated 16

th

November 2009 and 3

rd

December, 2009,

that have been reproduced hereinabove, were issued.

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

referring to individual circulars issued by various insurance

companies, eventually stated thus:-

“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.”

21.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

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Page 24 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.

22.In view of the aforesaid legal position, the question that

emerges for consideration is whether in the case at hand, the

policy is an “Act Policy” or “Comprehensive/Package Policy”.

There has been no discussion either by the tribunal or the

High Court in this regard. True it is, before us, Annexure P-1

has been filed which is a policy issued by the insurer. It only

mentions the policy to be a “comprehensive policy” but we are

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Page 25 inclined to think that there has to be a scanning of the terms

of the entire policy to arrive at the conclusion whether it is

really a “package policy” to cover the liability of an occupant in

a car.

23.In view of the aforesaid analysis, we think it apposite to

set aside the finding of the High Court and the tribunal as

regards the liability of the insurer and remit the matter to the

tribunal to scrutinize the policy in a proper perspective and, if

necessary, by taking additional evidence and if the conclusion

is arrived at that the policy in question is a

“Comprehensive/Package Policy”, the liability would be

fastened on the insurer. As far as other findings recorded by

the tribunal and affirmed by the High Court are concerned,

they remain undisturbed.

24.Consequently, the appeal is allowed to the extent

indicated above and the matter is remitted to the tribunal for

the purpose of adjudication as directed hereinabove. There

shall be no order as to costs.

……………………………… .J.

[K. S. Radhakrishnan]

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Page 26 ……………………………… .J.

[Dipak Misra]

New Delhi;

November 20, 2012.

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