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PETITIONER:

NEW INDIA ASSURANCE COMPAFIY

Vs.

RESPONDENT:

SHRI SATPAL SINGH AND ORS.

DATE OF JUDGMENT: 02/12/1999

BENCH:

K.T.Thomas, M.B.Shah

JUDGMENT:

THOMAS, J.

Leave granted.

A 10 year old girl met with her death in a truck

accident. Her name was Dupinder Kaur. The accident

occurred while she was travelling in the truck on 11.3.1990.

She died on the spot. Her father, brother and sister made a

joint claim for compensation under the Motor Vehicles Act,

1988 (for short the 'new Act). The Motor Accident Claims

Tribunal before which the claim was made passed an award in

a sum of Rs.25,000/~ to the claimants. The owner of the

truck was found liable to

pay the compensation amount. M/s. New India

Assurance Company, the insurer had been directed to make the

amount good with interest, as the vehicle was then covered

by an insurance policy issued by that company.

The claimants as well as the Insurance Company

challenged the said award. The farmer was dissatisfied with

the quantum of compensation awarded. The Insurance Company

was aggrieved as the liability was imposed on them. The

Insurance Company put forward a contention that the deceased

Dupinder Kaur was a gratuitous passenger in the truck and

hence no liability can be fastened with the insurer, but

that contention was repelled.

A Division Bench of the High Court dismissed the

appeal filed by the Insurance Company but allowed the other

appeal by doubling the compensation amount. Hence this

appeal by special leave at the instance of the Insurance

Company. After hearing learned counsel for the appellant we

felt that it is not necessary to send notice to the

respondents to contest the appeal as there is no scope for

absolving the Insurance Company from liability.

Learned counsel for the appellant ' banked on the

decision of a three Judge Bench this Court in Mallawwa and

ors. Vs. Oriental Insurance Co. Ltd and ors. [1999 (1)

SCC 403} to disclaim liability on the premise that the

victim of the accident was gratuitous passenger in the

vehicle covered by the insurance policy. But the said

decision was rendered under Section 95 of the Motor Vehicles

Act, 1939 (which can be referred to as 'the old Act' ). The

aforesaid provision contained a rider in clause (ii) of the

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proviso to sub-section (1) which is abgent in the

corresponding provision in the New Act. To pinpoint the

said distinction we extract Section 95(1) of the old Act as

under:

"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 3 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

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 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) 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."

As per ".the proviso when read .with its clause (ii)

It is clear that the policy of insurance shall not be

required to cover liability in respect of the death of or

bodily injury to persons who wore gratuitous passengers of

that vehicle. This Court, has' held in Pushpabai Parshottam

Udeshi and others vs. M/s. Ranjit Ginning & Pressing Co.

pvt. Ltd. and anr. [AIR 1977 sc 1735 » 1977 (2) SCC 745)

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as under:

"Sections 95(a) and 95(b)(l) of the Motor Vehicles Act

adopted the provisions of the .English Road Traffic Act,

1960, and excluded the liability or the insurance company

regarding the risk to the passengers. Section 95 provides

that a policy of insurance must be a policy which insures

the persons against any liability which may be incurred by

him in respect of death or bodily injury bo 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.

The plea that the words 'third party",are wide enough to

cover all persons except the person and the insurer is

negatived as the insurance cover is not available

to the passengers made clear by the proviso to

sub-section which provides that a policy shall not be

required. ............ Therefore it is not required that a

policy of insurance should cover risk to the passengers who

are nob carried for hire or reward. As under Section 95 the

risk to a passenger in a vehicle

who is not carried out hire of reward

is not required to be insured the plea of the counsel

for the insurance-. company will have to be accepted and

the insurance company held not liable under the requirements

of the Motor Vehicles Act."

in fact the said ratio has been approved by the three

Judge Banch in Mallava vs. Oriental Insurance Co. Ltd.

(supra). At .the same time learned Judges pointed out that

the old Act is now repealed by the new Acr and Section 147

of the new Act correspondinq to Section 95 of the old Act

has been siubstantially altered and hence the above

interpretation ,of Section 95 of the old Act will govern the

cases which have arisen under the old Act.

Proviso to Section 147 (1) of the. new Act 'shows

that it is a recast by provision by placng the erstwhile

clause (iii) as the present clause (ii) In- other words,

clause (ii) of the proviso in Section 95(1) of the old Act

is totally non-existent in the proviso to Section 147 (1) of

the new Act.

Under Section 147 of the new Act, the policy must be a

policy which 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) 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.

The proviso to the said sub-section is not relevant

here a it pertains to death or bodily injury to the employee

mentioned therein. Sub-section (2) provides that a policy

of insurance shall cover any liability incurred in respect

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of any accident, up to the following limits, namely:-

(i). save as provided in clause (b) the amount of

liability incurred;

(ii) in respect of damage to any proporty 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 or till the date of expiry of such policy

whichever is earlier.

Hence, under sub-section (2), there is no upper

limitation for the insurer regarding the amount of

compensation awarded in respect, of death or bodily injury

of a victim ot the accident, It is therefore, apparent that

the limit contained in the old Act has been removed and the

policy should insure the liability incurred and cover injury

to any person including owner of the goods or his authorised

representative carried in the vehicle. The Legislature has

also taken care even the policies which were in force on the

date of commencement of the Act by specifically providing

that any policy of insurance containing any limit regarding

insurer's liability shall continue to be effective for a

period of four months from commencement of the Act or till

the date of expiry of such policy, whichever is earlier.

This means, after the said period of four months a new

insurance policy consistent with the new Act is required to

be obtained.

The resuit 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 chat the

vehicle is of any type or class. Hence the decisions

rendered under the old Act vis-a-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.

The Division Bench of the High Court has rightly

repelled the contention of the appellant - insurance company

on the aforesaid score. We therefore, dismiss these

appeals.