Sood & Anr Vs. Smt. Kaushalya Devi Thapar & Ors  INSC 166 (17 March 1998)
M. Srinivasan Srinivasan, J.
On August 25, 1970 the fiat car owned by the second
appellant collided with a goods carrier on Shimla-Kalka National Highway near Kandaghat Post office. The car
was being driven by the first appellant, a brother of the Second appellant. The
car was insured with the fifth respondent.
Sarup Thapar, an advocate of Chandigarh who
was travelling in the car got injured and was hospitalised for some time. He
approached the Motor Accidents claims Tribunal, Solan and Srimur Districts
claiming compensation of Rs. 1,25,000/-. The owners and drivers of both the
vehicles as well as the insurers were impleaded as parties.
Tribunal found that the accident occurred due to negligence of the driver of
the car and passed an award for Rs. 15,800/- against the appellants and the
fifth respondent herein. The claimant filed an appeal in the High Court
claiming more compensation while the insurer (5th respondent), filed an appeal
disputing its liability to satisfy the claim. The claimant's appeal was allowed
by a learned judge in part and the compensation was enhanced to Rs. 20,800/-.
The learned judge held that the claimant was a gratuitous passenger travelling
in the car and the insurer was therefore not liable.
That judgment was assailed in two Letters Patent Appeals, one by the legal
representatives of the Claimant and another by the driver of the vehicle who is
the first appellant herein. A Division Bench of the High Court dismissed the
appeal filed by the 1st appellant confirming the view of the single judge that
the insurer is not liable as the claimant was only a passenger in the vehicle.
In the other appeal, the Bench enhanced the compensation to Rs.56,600/-. The
driver and the owner of the car have preferred these appeals on special leave.
question to be decided is whether the insurer, is liable to satisfy the claim
for compensation made by the person travelling gratuitously in the car. the
factual findings are not in dispute before us but for the contention of the
appellants that the amount of compensation awarded by the Division Bench is
excessive. We have no difficulty in repelling that contention as we find the
materials on record to be sufficient to support the award of enhanced by
sufficient to support the award of enhanced compensation.
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, 1936 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.
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, 278,
420 Pa. 566. Type of policy which protects
against all risks and perils except those specifically enumerated."
relevant clauses in the policy before us are found in 'SECTION - II LIABILITY
TO THIRD PARTIES'. They are:-
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 costa
and expenses which the Insured shall become legally liable to pay in respect of
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.
to property other than property belonging to the Insured or held in trust by or
in the custody or control of the insured.
Company will pay all costs and expenses incurred with its written consent.
terms of and subject to the limitations of the indemnity which is granted by
this Section b to the insured the Company will indemnify and Driver who is
driving the Motor Car on the insured order or with his permission provided that
not entitled indemnity under any other Policy
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
Under the heading General Exceptions the company's liability is excluded inter alia
in respect of any accident occurred whilst the car is being used otherwise than
in accordance with the limitations as to use or bring driven by any person
other than a Driver. The Limitations as to use set out in the policy are not
relevant in this case as it is not the case of the insurer that there is a
violation thereof. The term 'Driver' is expressly defined in the policy as any
of the following:
The insured may also drive a Motor car belonging to him and not hired to him under
a Hire Purchase Agreement.
that the person driving hold is a licence to drive the Motor car or has held
and is not disqualified for holding or obtaining such a licence".
Thus under Section 11 1(a) of the policy the insurer has agreed to indemnify
the insured against all sums which the insured shall become legally liable to
pay in respect of death of or bodily injury to any person.' The expression 'any
person' would undoubtedly include an occupant of the car who is gratuitously
traveling in the car. The remaining par of clause (a) relates to cases of death
or injury arising out of and in the course of employment of such person by the
insured. In such cases the liability of the insurer is only to the extent
necessary to meet the requirements of Section 95 of the Act. In so far as
gratuitous passengers are concerned there is no limitation in the policy as
such. Hence under the terms of the policy, the insurer is liable to satisfy the
award passed in favour of the claimant. We are unable to agree with the view
expressed by the High Court in this case as the terms of the policy are
Learned counsel of the appellants has drawn our attention to the following
judgments in which similar clauses in insurance policy have been considered and
a similar view has been expressed:
Madras Motor and General Insurance Co. Ltd. Versus Katanreddi Subbareddy and
others 1975 A.C.J. 95,
The premier Insurance Co. Ltd. and others Versus Gambhirsing Galabsing and
others AIR 1975 Gujarat 133,
Agarwal versus Saraswati Bai and another 1975 A.C.J. 355, We approve of the
reasoning in the above judgments.
The High Court has placed reliance on the judgment of this court in Pushpabai Purshottam
Udeshi & Ors. Versus M/S. Ranjit Ginning & Pressing Co. (p) Ltd. & Anr. (1977) 2 S.C.C. 745. That
judgment was based upon the relevant clause in the insurance policy in that
case which restricted the legal liability of the insurer to the statutory
requirement under Section 95 of Motor vehicles Act. That decision will have no
bearing in the present case in as much as the terms of the policy here are wide
enough to cover a gratuitous occupant of the vehicle.
Our attention has also been drawn to the judgment of this court in National
Insurance. Co. Ltd., New Delhi Versus Jugal Kishore and others AIR 1988 S.C.
719. It is held in that case that though it is not permissible to use a vehicle
unless it is covered at least under an "act only" policy, it is not
obligatory for the owner of a vehicle to get it comprehensively insured, but it
is open to the insurer to take a policy covering a higher risk.
Learned counsel for the appellants has placed reliance on the Judgment in New
Asiatic Insurance Co. Ltd. Versus Pessumal Dhanamal Aswani and Ors. 1964 (7)
S.C.R. 867 in support of the claim of the first appellant. In that case, the
insurer permitted another person to drive his car and while the said person was
driving the car, it met with an accident. The driver of the car faced an action
question was whether the insurance policy would enable the said driver to claim
indemnity from the insurance company. On a consideration of the terms of the
policy, the court held that the company would be liable to indemnify him. In
the course of the judgment, the court said:
Act contemplates the possibility of the policy of insurance undertaking
liability to third parties providing such a contract between the insurer and
insured, that is, the person who effected the policy, as would make the company
entitled to recover the whole or part of the amount it has paid to the third
party from the insured. The insurer thus acts as security for the third party
with respect to its realising damages for the injuries suffered, but vis a vis
the insured, the company does not undertake that liability or undertakes it to
a limited extent.
in view of such a possibility that various conditions are laid down in the
policy. Such conditions, however, are effective only between the insured and
the company, and have to be ignored when considering the liability of the
company to third parties. this is mentioned prominently in the policy itself
and is mentioned under the heading 'Avoidance of certain terms and rights of
recover', as well as in the form of 'An Important Notice' in the schedule to
the policy. the avoidance clause says that nothing in the policy or any
endorsement there an shall affect the right of any person indemnified by the
policy or any other person indemnified by the policy or any other person to recover
an amount under or by virtue of the provisions of the Act. It also provides
that the insured will repay to the company all sums paid by it which the
company would not have been liable to pay but for the said provisions of the
Act. The 'Important Notice' mentions that any payment made by the company by
reason of wider terms appearing in the by reason of wider terms appearing in
the certificate in order to comply with the Act is recoverable from the
insured, and refers to t he avoidance clause.
contract between the insured and t he company may not provide for all take
liabilities which the company has to undertake vis a vis the third parties, in
view of the provisions of the Act.
of opinion that once the company had undertaken liability to third parties
incurred by the persons specified in the policy, the third parties' right to
recover any amount under or by virtue of the provisions of the Act is not
affected by any condition in the policy. Considering this aspect of the terms
of the policy, it is reasonable to conclude that proviso (a) of para 3 of
Section it is a mere condition affecting the rights of the insured who effected
the policy and the persons to whom the cover of the policy was extended by the
company, and does not come in the way of third parties claim against the
company on account of its claim against a person specified in para 3 as one to
whom cover of the policy was extended".
the policy in the present case also, there is a clause under the heading:
OF CERTAIN TERMS AND RIGHT OF RECOVERY –
reads thus: "Nothing in this policy or any endorsement hereon shall effect
the right of any person indemnified by this policy or any other person to
recover an amount under or by virtue of the provisions of the Motor Vehicles
Act. 1939, Section 96, But the Insured shall repay to the Company all sums paid
by the Company which the Company would not have been liable to pay but the said
The above clause does not enable the insurance company to resist or avoid the
claim made by the claimant. the clause will arise for consideration only in a
dispute between he insurer and insured. The question whether under the said
clause the insurer can claim repayment from the insured is left open. The
circumstance that the owner of the vehicle did not file an appeal against t he
judgment of single judge of the High court under the letters Patent may also be
relevant in the event of a claim by the insurance company against the insured
for repayment of the amount. We are not concerned with that question here.
the result, we hold that the insurance company is also liable to meet the claim
of the claimant and satisfy the award passed by the Tribunal and modified by
the High Court. The judgment of the High Court in so far as it exonerates the
insurance company (5th respondent herein) from the liability, is set aside. The
award passed by the Division Bench of the High Court can be enforced against
the 5th respondent also. The appeal is allowed to t he extent indicated above.
The parties will bear their respective costs.