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CASE NO.:

Appeal (civil) 5385 of 2001

PETITIONER:

NEW INDIA ASSURANCE CO. LTD.

Vs.

RESPONDENT:

ASHA RANI & ORS.

DATE OF JUDGMENT: 17/08/2001

BENCH:

A.P. Misra & U.C. Banerjee

JUDGMENT:

with

C.A. 16793-16796 of 1996 National Insurance Co. Vs.

Bhag Devi & Ors. ETC.

C.A. 229 of 1999 Satyabama Vs.

Uttam Namdeo Patil & ANR.

CA No. 5386-5410 of 2001 Oriental Insurance Co. Ltd. Vs.

(arising out of SLP © No.4098-4122 of 2001) Ganeshlal Nathuji Chaudhary & 0rs.

CA No. 5411-16 of 2001 Oriental Insurance Co. Ltd., A.P.

(arising out of SLP © No.11427-11432of 2001)Vs. A.P. Paper Mills & Ors.

CA No. 5417 of 2001 Oriental Insurance Co. Ltd. Vs.

(arising out of SLP © No. 11760 of 2001) Potuganti Chimmannagari Basavamma

& Ors.

CA No. 5418-27 of 2001 K.E. Suhara Vs.

(arising out of SLP © No.10938-10947 of 2000) National Insurance Co. LTD. & Ors.

C.A. No. 4458 of 1999 Vidha Devi (Dead) Thru Ram Prasad Mittan

Vs. Meera Bai

C.A. Ndo. 5223 of 2000 New India Assurance Co. Ltd. And

Anr. VS. Chaman Lal & Anr.

CA No. 5428-32 of 2001 M/S United India Insurance Co. Ltd. Vs.

(arising out of SLP © No. 12889-93of 2001) Bharamavva & Ors.

C.A. No. 1697 of 1999 The Oriental Insurance Co. Ltd. Vs.

K.J. Abraham & Ors.

CA No. 5433-44 of 2001 National Insurance Co. Ltd. Vs.

(arising out of SLP © No. 12627-38 of 2000) Lala & Ors.

C.A. No. 6237 of 1997 National Insurance Co. Vs.

Roshni Devi & Ors.

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C.A. No. 272-77 of 1999 Oriental Insurance Co. Ltd. Vs.

Shanti & Ors.

CA No. 5445-50 of 2001 New India Assurance Co. Ltd. Vs.

(arising out of SLP © No. 8116-220f 2001) Shanta Devi & Ors.

CA No. 5451-52 of 2001 New India Assurance Co. Ltd. Vs.

(arising out of SLP © No. 6956-57 of 2001) Lehri & Ors.

CA No. 5453-56 of 2001 Oriental Insurance Co. Ltd. Vs.

(arising out of SLP © No. 10419-22 of 2001) Pagedala Venkata Narasamma & Ors.

Etc. Etc.

C.A. No.3843 of 2000 United India Insurance Co. Ltd. Vs.

Ladhu Devi & Ors.

J U D G E M E N T

MISRA, J.

The aforesaid sets of appeals were listed under category two out of the

three categories as referred in Civil Appeal No. 5010 of 1999. The

arguments were heard, compositively for all the three categories. We have

delivered judgment today for category one and three, while we are passing

this order for the appeals falling under category two. The appeals falling

under first category were those which fell under the Motor Vehicles Act,

1939 (hereinafter referred to as Old Act). The appeals falling under second

category are those which falls under Motor Vehicles Act 1988 (hereinafter

referred to as new Act), prior to its 1994 amendment, while the appeals

falling under category three were those falling under the new Act but those

after the 1994 amendment.

Learned counsel for the insurance company submits, that in New

India Assurance Compay vs. Satpal Singh and Ors. (2000) 1 SCC 227 this

Court held that insurance company is liable to pay compensation in all cases

where the deceased or injured persons are gratuitous passengers including

owner or his representative of the goods while travelling in a goods carriage

under Section 147 of the new Act. He seeks reference of this point to a

larger Bench as it vitally affects Insurance Company and as relevant

provisions of the new Act were not placed before this Court and if it were

placed, a different conclusion would have come.

This Court in Satpal Singh (Supra) held:

The result is that under the new Act an insurance

policy covering third-party risk is not required to exclude

gratuitous passengers in a vehicle, no matter that the

vehicle is of any type or class. Hence the decisions

rendered under the old Act vis-à-vis gratuitous

passengers are of no avail while considering the liability

of the insurance company in respect of any accident

which occurred or would occur after the new Act came

into force.

To Section 95 of the old Act the corresponding section is Section 147

of the new Act, which deals with liability to pay the compensation. The

relevant portion of Section 95 under the old Act and Section 147 of the new

Act is quoted hereunder:

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Section 95: Requirements of policies and limits of liability- (1) In

order to comply with the requirements of this Chapter, a policy of

insurance may be a policy which, -

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

operative society allowed under section 108 to transact the business of an

insurer], and

(b) insures 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 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 no be required

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

course of his employment, of the employees 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 Workmens 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 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;

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 to 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.]

(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 :-

[(a) where the vehicle is a goods vehicle, a limit of one lakh and fifty

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

Workmens Compensation Act, 1923, in respect of the death of, or bodily

injury to, employees (other than the driver), not exceeding 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, -

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(i) in respect of persons other than passengers carried for hire

or reward, a limit of fifty thousand rupees in all;

(ii) in respect of passengers, a limit of fifteen thousand rupees

for each individual passenger;]

(c) save as provided in clause (d), where the vehicle is a vehicle of any

other class, the amount of liability incurred;

(d) irrespective of the class of the vehicle, a limit of rupees [six

thousand] in all in respect of damage to any property of a third party]

Section 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; or

(b) insures 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](brought in by amendment through Act No. 54 of 1994)

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 no be required

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

course of his employment, of the employees 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 Workmens 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.]

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

insurance referred to in sub-section (1), shall cover any liability incurred

in respect of any one accident, up to the following 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:

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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 or till the date of expiry of such policy whichever is

earlier.

By comparing these two sections, what emerges is that clause (ii) to

the proviso of Section 95(1)(b) under the old Act has been deleted and

clause (iii) has been re-numbered as (ii) in Section 147 of the new Act. Sub-

Section (2) of Section 95 is also modified under the new Act through sub-

sections (2) of Section 147, which refers to quantum of compensation to

which we are not concerned. The submission for the insurance company is,

the earlier decision in Mallawwa (Smt.) & Ors. Vs. Oriental Insurance Co.

Ltd. & Ors., (1999) 1 SCC 403 held insurance company not liable to pay

the compensation but it has been distinguished in Satpal Singh (Supra) that

it was under the old Act while the case in hand is under the new Act. The

submission is, mere deletion of sub-clause (ii) to the proviso of Section 95

(1)(b) under the old Act by itself would make no difference to hold the

liability to fall on the insurance company. This apart some of the

distinguishing features in the new Act, to which attention was not drawn

would make a difference in drawing the conclusion.

The first striking distinguishing feature pointed out is with reference

to the definition of the goods vehicle as defined under the old Act and the

goods carriage as defined under the new Act. Section 2(8) of the old Act

defines good vehicle:

2(8): goods vehicle means any motor vehicle

constructed or adapted for use for the carriage of goods,

or any motor vehicle not so constructed or adapted when

used for the carriage of goods solely or in addition to

passengers.

Under the new Act goods vehicle is substituted by the words goods

carriage. There is no definition of goods vehicle. It is defined under

Section 2(14) of the New Act as hereunder:

Section 2(14): goods carriage means any motor

vehicle constructed or adapted for use solely for the

carriage of goods, or any motor vehicle not so

constructed or adapted when used for the carriage of

goods.

The significant difference between the two definitions is that under the

old Act the definition includes or in addition to passengers, while these

words are deleted while defining the goods carriage under the new Act.

The submission is, this exclusion itself is indicative that passengers are not

to travel in a goods carriage.. The second distinguished feature pointed out is

with reference to Section 149 under the new Act. The submission is, by

virtue of sub-section (2) of Section 149 the defence which is permissible to

the insurer is obliterated, in view of the declaration of law in Satpal Singh

(Supra). The relevant portion of Section 149 sub-section (2) is quoted

hereunder:

149: Duty of insurers to satisfy judgments and awards against persons

insured in respect of third party risks (1)..

(2) No sum shall be payable by an insurer under sub-section(1) in

respect of any judgment or award unless, before the commencement of

the proceedings in which the judgment or award is given the insurer had

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

bringing of the proceedings, or in respect of such judgment or award so

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long as execution is stayed thereon pending an appeal; and an insurer to

whom notice of the bringing of any such proceedings is so given shall be

entitled to be made a party thereto and to defend the action on any of the

following grounds, namely:-

(a) that there has been a breach of a specified condition of the

policy, being one of the following conditions, namely:-

(i) a condition excluding the use of the vehicle

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

of the contract of insurance a vehicle not covered by a

permit to ply for hire or reward, or

(b) for organised racing and speed testing, or

(c) for a purpose not allowed by the permit under

which the vehicle is used, where the vehicle is a transport

vehicle, or

(d) without side-car being attached where the vehicle is

a motor cycle; or

(ii) a condition excluding driving by a named person or persons

or by any person who is not duly licensed, or by any person

who has been disqualified for holding or obtaining a driving

licence during period of disqualification; or

(iii) a condition excluding liability for injury caused or

contributed to by conditions of war, civil war, riot or civil

commotion; or

(b) that the policy is void on the ground that it was obtained by

the non-disclosure of a material fact or by a representation of fact

which was false in some material particular.

The submission is, Sub-section (2) declares that no sum is payable by the

insurer, if any of the grounds mentioned under various sub-clauses of the

sub-section (2) is proved to exist. For example, no sum is payable by the

insurer under sub-section (2) if there has been a breach of specified

conditions of the policy, namely, where the vehicle on the relevant date is

not covered by a permit to ply for hire or reward and if it plies for the same,

i.e., in case the insured uses the vehicle for a purpose not allowed by the

permit. If a permit for a goods carriage is not meant for the passengers to be

carried and if passengers travel, the insurer would not be liable to pay the

compensation. This defence of the insurer would not be available which

stands negated in view of the declaration of law in Satpal Singh (Supra).

This apart, submission is also with reference to the deletion of sub-

clause (ii) of proviso to Section 95 (1)(b) of the old Act that this by itself

would make no difference for drawing conclusion different from what was

declared by this Court in Malwa (Smt.) supra, if various earlier decisions of

courts and amendment under the old Act is taken into consideration.

We may usefully refer here the decision of the Karnataka High Court

in Oriental Insurance Co. Ltd. vs. Smt. Irawwa and Ors. AIR 1992

Karnataka 321. This judgment has very significantly brought the difference

between Section 147 of the new Act and Section 95 of the old Act with

reference to the definition clause. It reads:

It may be seen that S.147 of the 1988 Act, like

S.95 of the 1939 Act, apart from prescribing the

compulsory coverage in respect of third party risks,

prescribed the compulsory coverage against death of or

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bodily injury to any passenger in a Public Service

Vehicle caused by or arising out of the use of the

vehicle in a public place. The proviso to S.147 of the

1988 Act which is similar to the corresponding Proviso to

S.95(1) of the 1939 Act, makes it clear that compulsory

coverage in respect of drivers of any motor vehicle,

conductors of public service vehicles and employees

carried in a goods vehicle shall be limited to the liability

under the Workmens Compensation Act. Under

S.147(2) of the Act, while the liability in respect of

damage to any property of third party is limited to Rs.

Six thousand as regards the liability in respect of

passengers as also third parties it is made equal to the

liability incurred. Section 2(35) of the 1988 Act which

defines Public Service Vehicle is similar to S. 2(25) of

the 1939 Act and does not include a goods carriage. The

difference in the definition goods vehicle given in S.2(8)

of the 1939 Act and the goods carriage given in S.2(14)

of the 1988 Act is significant. While the definition given

in the 1939 Act gave an indication, goods vehicle could

carry some passengers, the definition in 1988 Act omits

the words in addition to passengers and states that

goods carriage means any motor vehicle constructed or

adapted for use solely for the carriage of goods.

Therefore, the question whether risk in respect of

passengers carried in a goods vehicle should be covered

by an insurance policy does not arise at all under the

1988 Act.

This question of the liability of the insurance company in respect of

gratuitous passengers travelling in a goods vehicle has been in issue before

various High Courts under the old Act which has led to the conflicting

judgments. As we have recorded earlier, Satpal Singh (Supra) held,

insurance company liable both for the gratuitous passengers and the owners

or his representative of the goods, while interpreting Section 147 of the new

Act. This was based on the fact of deletion of Clause (ii) of the proviso of

the Section 95(1) of the old Act. It is relevant to refer to some of the

decisions with brief background history both of the interpretation and

incorporation of the said sub-clause (ii) of Section 95 of the old Act and its

exclusion, to see whether the decision of Satpal Singh (Supra) requires

reconsideration. It is not in dispute in Mallawwa (Smt.) and Ors. vs.

Oriental Insurance Co. Ltd. and Ors. (1999) 1 SCC 403, this Court while

interpreting Section 95(1) including the said sub-clause (ii) held the

insurance company not liable to pay compensation either to the gratuitous

passengers or to the owners of the goods.

The full Bench of the Karnataka High Court in National Insurance

Co. Ltd. Vs. Dundamma, 1992 ACJ 1, while interpreting the said proviso

(ii) held that this proviso takes care of passengers in public service vehicle

only because of the words used therein, namely, in which passengers are

carried for higher or reward. However, in view of proviso (i) it was held

that insurer would be liable to pay compensation to the employees and the

owner of a goods vehicle.

Similar question came before the full Bench of the Rajasthan High

Court, Jaipur Bench in Santra Bai and Ors. vs. Prahlad and Ors. 1985 ACJ

762. This decision contains a detailed discussion on the question, whether

the said proviso is confined to public service vehicle only or takes within its

hold goods vehicle also. It was held that the owner of the goods or his

employee, if he travels in the goods vehicle, has to be taken to be a person

carried for reward, if not for hire. Then with reference to the definition of

goods vehicle and with reference to the words used in proviso (ii) it was

pointed out that the legislature has not used the term public service vehicle

but used the words where the vehicle is a public vehicle in which

passengers are carried. It was held, the word used therein would also

include goods vehicle and such goods vehicle can also carry passengers for

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hire or reward. Thereafter came the full Bench of the Orissa. In New India

Assurance Company Ltrd. Vs. Kanchan Bewa and Ors. II (1994) ACC 117

(FB). This full Bench considered the aforesaid two full Benches and came

to the conclusion different from what was held in the said two Benches. The

Court held:

The conclusion is irresistible unless a vehicle is a

vehicle meant for carrying passengers for hire or reward

or the said vehicle by reason of or in pursuance of

contract of employment is required to cover the liability

in respect of death of or bodily injury to persons being

carried in or upon, the insurer will not be liable to pay

compensation. Admittedly, the owner of goods who has

hired a goods vehicle does not become a person

travelling on the vehicle in pursuance of a contract of

employment and even if he is carrying his goods after

hiring the vehicle, the vehicle does not become a vehicle

meant for carrying passengers for hire or reward and

consequently, would not come within the proviso (ii) to

section 95(1)(b). To come under the first part of Section

95(1)(b), proviso (ii), the vehicle in question must be a

vehicle which is meant for carrying passengers for hire or

reward and consequently, a goods vehicle will not come

within the proviso. We, therefore, state that proviso to

Section 95(1)(b) did not apply to the passengers carried

for hire or reward in a goods vehicle and it is restricted to

such passengers carried in a public service vehicle.

As aforesaid, in view of the said conflict in the decision, when the

matter came before this Court it settled the issue in the case of Mallawwa

(Smt.) (Supra). This Court in this case approved the aforesaid full Bench

decision of the Orissa High Court. This Court held, while interpreting

Section 95(1)(b)(i) and proviso (ii) under the old Act, only a vehicle which

is used for a systematically carrying of passengers can be said to be a vehicle

in which passengers are carried for hire or reward, hence persons travelling

in goods vehicle, whether owners of the goods or passengers on payment of

fare or gratuitous passengers, could not be covered by proviso (ii) hence the

insurer of the goods vehicle is not liable to pay compensation. This decision

also considered and affirmed the decision of this Court in the case of

Pushpabai Purshottam Udeshi and Ors. vs. M/s. Ranjit Ginning & Pressing

Co. (P) Ltd. and Anr. (1977) 2 SCC 745.

Then came the new Act and the similar question is raised under it.

We find corresponding to Section 95 of the old Act is Section 147 of the

new Act. The only difference we find in Section 147(1) of the new Act from

Section 95(1) of the old Act is that proviso (ii) which was under the old Act

stands deleted and (iii) is re-numbered as (ii). There is also amendment to

sub-Section (2) to Section 95 of the old Act in sub-section (2) of Section 147

of the new Act which is in respect of quantum to which we are not

concerned.

It is because of this deletion of clause (ii) to the proviso to Section 95

(1)(b) of the old Act has been interpreted in Satpal Singh (Supra) to bring

liability on the insurer to pay both for the gratuitous passengers and the

owner or his representative of the goods travelling in a goods carriage.

We feel as some of the striking features of the new Act were not

brought to the notice of this Court which we are recording hereunder may

have bearing to the conclusion which was arrived at in Satpal Singh (Supra),

Viz., (a) Difference between the definition of Goods Vehicle under the old

and Goods Carriage under the new Act. Under the old Act goods

vehicles is defined under Section 2(8) and under the new Act Section 2(14)

defines goods carriage. The significant difference is, under the old Act the

goods vehicle could be used for the carriage of goods or in addition to

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passengers while in definition of goods carriage the words or in addition

to passengers stand deleted. The submission is, now goods carriage cannot

carry any passenger. The other striking feature is with reference to Section

149(2) of the new Act. It is submitted that the defence available to the

insurer under it would be obliterated in view of the declaration of law in

Satpal Singh (Supra). Under New Act, it would be a breach of condition in

case vehicle is used for a purpose other than for which permit has been

issued. Thus in a case a permit is issued for a goods carriage it would not

include any passengers and in case they travel it would be contrary to the

mandate of the statute and thus in view of Section 149(2) no liability could

be passed on to the insurance company. This apart, the effect of the deletion

of sub-clause (ii) to the proviso to Section 95(1)(b) in the new Act also

requires reconsideration.

Accordingly we feel it appropriate in view of what we have recorded

above, Satpal Singh (Supra) requires reconsideration by a larger Bench. Let

this matter be placed before Honble the Chief Justice for constituting a

larger Bench.

..J

(A.P. Misra)

..J

(U.C. Banerjee)

August 17, 2001