Ors. Vs. United Insurance Co., Ltd. & ANR.  INSC 948 (6 May 2009)
IN THE SUPREME COURT
OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 3335 OF 2009 (Arising
out of SLP (C) No.10136 of 2007) Bhagyalakshmi and others ... Appellants Versus
United Insurance Co. Ltd. and another etc. ... Respondents
S.B. SINHA, J.
of an insurance company for death of a person travelling in a private car
arises for consideration in this appeal.
however, adverting to the said question, we may notice the fact of the matter.
M.N. Lingappa (hereinafter
referred to as `the deceased') while travelling in a private car owned by one
Shri K.N. Narayanajoshi, respondent No.7 herein met with an accident and
succumbed to the resulting injuries. Appellants are his heirs and legal
They filed an
application for grant of compensation of Rs.1,50,00,000/- (Rupees one crore
fifty lakhs) before the Motor Accident Claims Tribunal, Tumkur (for short `the
Tribunal') in terms of Section 166 of the Motor Vehicles Act, 1988 (for short
learned Tribunal by its order, awarded a compensation of Rs.98,64,428/-.
No. 1 preferred an appeal there against before the High Court of Karnataka at
Bangalore. The claimants also filed cross-objections.
core question that arose for consideration before the High Court was as to
whether the insurance policy covered the risk of the passenger travelling in
the car. The High Court by its impugned judgment answered the said question in
favour of the 1st respondent.
P.S. Patwalia, learned senior counsel appearing on behalf of the appellants
would contend :- 2 i) The insurance policy being a comprehensive one, the High
Court committed a serious error in opining that the risk of a passenger
travelling in the car was not covered there under.
ii) Having regard to
the fact that the second proviso appended to Section 95(1)(b) of the Motor
Vehicles Act, 1939 was deleted by the Parliament 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.
P.R. Sikka, learned counsel on behalf of respondent No.1- Insurance Company
would contend that the respondent having not paid the requisite amount of
premium, the High Court judgment is unassailable.
policy in question was in respect of a private car. It was valid for the period
6.10.1995 and 5.10.1996, the relevant clauses whereof are as under :
"SECTION II -
LIABILITY TO THIRD PARTIES
1. Subject to the
limits of liability 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 vehicle against all sums which the insured shall become legally
liable to pay in respect of:
i) death of 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 the
employment of such person by the insured.
(ii) Damage to
property other than property belonging to the insured or held in trust or in
the custody or control of the insured."
may notice the nature of the policy, which is Private Car `B' Policy:
" PRIVATE CAR
`B' POLICY Whereas the insured by a proposal and declaration dated as stated in
the Schedule which shall be the basis of this contract and is deemed to be
incorporated herein has applied to the Company for the insurance contained and
has paid the premium mentioned in the schedule as consideration for such
insurance in respect of accidental loss or damage occurring during the period
NOW THIS POLICY
That subject to the
Terms Exceptions and Conditions contained herein or endorsed or expressed
SECTION I. LOSS OR
DAMAGE The Company will indemnify the insured against loss or damage to the
vehicle insured hereunder and / or its accessories whilst thereon a. By fire
explosion self ignition or lightning.
b. By burglary
housebreaking or theft.
c. By riot and
d. By earthquake
(fire and shock damage).
e. By Flood, Typhoon,
Tempest, Hurricane, Storm, Inundation, Cyclone, Hailstorm, and Frost.
f. By accidental
g. By malicious act.
h. By terrorist
i. whilst in transit
by road, rail, inland, waterway lift, elevator or air.
j. By landslide
Subject to a
deduction for depreciation at the rates mentioned below in respect of parts
1. For all rubber,
nylon, plastic parts, tyres and tubes, batteries - 50%
2. For all parts made
of glass - Nil
3. For all other
parts Age of Motor Car 0% of depreciation Upto 6 months Nil Between 6 months
and 1 year 5% Between 1 year and 2 years 10% Between 2 years and 3 years 15%
Between 3 years and 4 years 25% Between 4 years and 5 years 35% Between 5 years
and 6 years 40% Between 10 years 50% 5 The company shall not be liable to make
any payment in respect of :- a) Consequential loss, depreciation, wear and
tear, mechanical and electrical break down, failures or breakages;
b) Damage to tyres
and tubes unless the Motor Car is damaged at the same time when the liability
of the company shall be limited to 50% of the cost of replacement, and c) any
accidental loss or damage suffered whilst the insured or any person driving
with the knowledge and consent of the insured is under the influence of
intoxicating liquor or drugs.
In the event of the
Motor car being disabled by reason of loss or damage covered under this Policy
the Company will bear the reasonable cost of protection and removal to the
nearest repairers and of redelivery to the insured but not exceeding in all Rs.
1000/- in respect of any one accident.
The insured may
authorise the repair of the Motor car necessitated by damage for which the
Company may be liable under this Policy provided that :
a) the estimated cost
of such repair does not exceed Rs.500/-;
b) the Company is
furnished forthwith with a detailed estimate of the cost; and c) the insured
shall give the Company every assistance to see that such repair is necessary
and the charge reasonable."
the amount of premium paid was Rs.605/-. It is in two parts. Part I refers to
`Own Damage' - premium on vehicle and non- electrical accessories wherefor a
sum of Rs.400/- was paid, apart from the basic premium for the liability `fire
and thief' amounting to Rs.160/- In addition a sum of Rs.15/- was paid towards
`Increased Third Party Property Limit'.
the contention of Mr. Patwalia is that as the liability to third party covers
death of or bodily injury to any person including occupants carried in the
vehicle, the contention of Mr. Sikka is that only a sum of Rs.15/- having been
paid towards third party limit, the policy cannot be said to have covered the
life of passenger traveling in the car.
business of insurance is governed by the Insurance Act, 1938 (for short `the
1938 Act'), Section 64-VB whereof reads as under :- "Section 64VB - No
risk to be assumed unless premium is received in advance (1) No insurer shall
assume any risk in India in respect of any insurance business on which premium
is not ordinarily payable outside India unless and until the premium payable is
received by him or is guaranteed to be paid by such person in such manner and
within such time as may be prescribed or unless and until deposit of such
amount as may be prescribed, is made in advance in the prescribed manner.
(2) For the purposes
of this section, in the case of risks for which premium can be ascertained in
advance, the risk may be assumed not earlier 7 than the date on which the
premium has been paid in cash or by cheque to the insurer.
the premium is tendered by postal money order or cheque sent by post, the risk
may be assumed on the date on which the money order is booked or the cheque is
posted, as the case may be.
(3) Any refund of
premium which may become due to an insured on account of the cancellation of a
policy or alteration in its terms and conditions or otherwise shall be paid by
the insurer directly to the insured by a crossed or order cheque or by postal
money order and a proper receipt shall be obtained by the insurer from the
insured, and such refund shall in no case be credited to the account of the
(4) Where an
insurance agent collects a premium on a policy of insurance on behalf of an
insurer, he shall deposit with, or despatch by post to, the insurer, the
premium so collected in full without deduction of his commission within twenty-four
hours of the collection excluding bank and postal holidays.
(5) The Central
Government may, by rules, relax the requirements of sub-section (1) in respect
of particular categories in insurance policies."
II-B of the 1938 Act provides for Tariff Advisory Committee and Control of
Tariff Rates. Section 64-UC provides for power of the Advisory Committee to
regulate rates, advantages etc. Sub-section (4) of Section 64- UC makes the
decision of the Advisory Committee final. Sub-section (5) of Section 64-UC
provides that where an insurer is guilty of breach of any rate, advantage, term
or condition fixed by the Advisory Committee, he shall be deemed to have
contravened the provisions of the Act.
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.
question is as to whether the policy in question is a comprehensive policy or
only an Act policy.
We may, however,
notice that in National Insurance Co. Ltd. v. Jugal Kishore, [ (1988) 1 SCC 626
], this Court opined :- "6. We have accordingly perused the photostat copy
of the policy to ascertain whether risk for any amount higher than the amount
of Rs 20,000 contemplated by clause (b) aforesaid was covered.
Our attention was
invited by learned counsel for the respondents to the circumstance that at the
right-hand corner on the top of p.1 of the policy the words "Commercial
were printed. On this
basis and on the basis that the premium paid was higher than the premium of an
"act only" policy it was urged by the learned Counsel for the
respondents that the liability of the appellant was unlimited and not confined
to Rs 20,000 only. We find it difficult to accept this submission. Even 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. In case, however, it is got comprehensively
insured a higher premium than for an "act only" policy is payable
depending on the estimated value of the vehicle. Such insurance entitles the
owner to claim reimbursement of the entire amount of loss or damage suffered up
to the estimated value of the vehicle calculated according to the rules and
regulations framed in this behalf. Comprehensive insurance of the vehicle and
payment of higher premium on this score, however, do not mean that the limit of
the liability with regard to third party risk becomes unlimited or higher than
the statutory liability fixed under sub-section (2) of Section 95 of the Act.
For this purpose a specific agreement has to be arrived at between the owner
and the insurance company and separate premium has to be paid on the amount of
liability undertaken by the insurance company in this behalf. Likewise, if risk
of any other nature for instance, with regard to the driver or passengers etc.
in excess of statutory liability, if any, is sought to be covered it has to be
clearly specified in the policy and separate premium paid therefor. This is the
requirement of the tariff regulations framed for the purpose.
Coming to the
photostat copy of the policy in the instant case it would be seen that Section
2 thereof deals with liability to third parties. Sub-section (1) minus the
proviso thereto reads as hereunder:
"(1) Subject to
the Limits of Liability the Company will indemnify the insured against all sums
including claimant's cost and expenses which the insured shall become legally
liable to pay in respect of-- (i) death or bodily injury to any person caused
by or arising out of the use (including the loading and or unloading) of the
motor vehicle (ii) damage to property caused by the use (including the loading
and/or unloading) of the motor vehicle." "
however, the schedule of the policy indicated the limits of the liability of
the amount paid. However, in the present case the schedule of the policy does
not indicate the limits of liability. It does not indicate exclusion of any
person. It takes any person including `insured'. Such person indisputably would
come within the purview of the liability to third party to which we have
referred to heretobefore.
There being no
limitation with regard to coverage, in terms of the provisions of the Act, no
upper limit is fixed. Liability of the insurer, thus unlike the old Act, may
not be limited.
Oriental Insurance Co. Ltd. v. Rajni Devi, [ (2008) 5 SCC 736 , this Court has
held :- "7. It is now a well-settled principle of law that in a case where
third party is involved, the liability of the insurance company would be
compensation is claimed for the death of the owner or another passenger of the
vehicle, the contract of insurance being governed by the contract qua contract,
the claim of the insurance company would depend upon the terms thereof. The
Tribunal, in our opinion, therefore, was not correct in taking the view that
while determining the amount of compensation, the only factor which would be
relevant would be merely the use of the motor vehicle."
Patwalia has relied upon the decision of this Court in Amrit Lal Sood v.
Kaushalya Devi Thapar, [ (1998) 3 SCC 744 ], wherein upon considering the
meaning of the terms, `comprehensive policy' and `comprehensive insurance' it
was held :- "8. Thus under Section II(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"
include an occupant of the car who is gratuitously travelling in the car. The
remaining part 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. Insofar 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 unambiguous."
in Oriental Insurance Co. Ltd. v. Cheruvakkara Nafeessu, [ (2001) 2 SCC 491], a
Division Bench of this Court distinguished Jugal Kishore (supra) and following
Amrit Lal (supra) held as under :-:
"9. The reliance
of the learned counsel for the appellant on New India Assurance Co. Ltd. v. Shanti
Bai and National Insurance Co. Ltd. v. Jugal Kishore is of no help to him
inasmuch as in 12 those cases the effect of judgment in Amrit Lal Sood case
has not been considered. In Shanti Bai case the Court was dealing with the
effect of a comprehensive policy vis-`-vis the liability of the insurer in
respect of third-party risk on the basis of the estimated value of the vehicle
and found that the limit of liability with regard to third-party risk does not
become unlimited or higher than the statutory liability only on account of
entering into a comprehensive policy. It was pointed out that the comprehensive
policy only entitles the owner to claim reimbursement of the entire amount of
loss or damage suffered up to the estimated value of the vehicle which did not
mean the limit of liability with regard to third-party risk becoming unlimited
or higher than the statutory liability. In the case of National Insurance Co.
Ltd. v. Jugal Kishore this Court observed that the liability under the policy
could not exceed the statutory liability under Section 95 of the Act only on
the ground that the insured had undertaken comprehensive insurance of the
vehicle. The payment of higher premium on that score, however, did not mean
that the limit of liability with regard to third-party risk became unlimited or
higher than the statutory liability fixed under sub-section (2) of Section 95
of the Act."
may also notice that in New India Assurance Co. v. Satpal Singh, [(2000) 1 SCC
237 ],this Court held as under :- "10. The proviso to the said sub-section
is not relevant here as 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 of any accident, up to the following
"(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 or till the date of expiry of
such policy whichever is earlier."
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
of 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 of 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 the 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."
with regard to goods carriage vehicle Satpal Singh (supra) was overruled in New
India Assurance Co. Ltd. v. Asha Rani, [ (2003) 2 SCC 223 ], wherein it was
observed :- "23. The applicability of the decision of this Court in
Mallawwa v. Oriental Insurance Co. Ltd.2 in 14 this case must be considered
keeping that aspect in view. Section 2(35) of the 1988 Act does not include
passengers in goods carriage whereas Section 2(25) of the 1939 Act did as even
passengers could be carried in a goods vehicle.
The difference in the
definitions of "goods vehicle" in the 1939 Act and "goods
carriage" in the 1988 Act is significant. By reason of the change in the
definitions of the terminology, the legislature intended that a goods vehicle
could not carry any passenger, as the words "in addition to
passengers" occurring in the definition of goods vehicle in the 1939 Act
categorically states that "goods carriage" would mean a motor vehicle
constructed or adapted for use "solely for the carriage of goods".
Carrying of passengers in a "goods carriage", thus, is not
contemplated under the 1988 Act."
of Mr. Patwalia is that whereas carrying of passenger in a goods carriage
vehicle is prohibited, it is not so in a private car. Learned counsel may be
correct but we must notice that in a large number of decisions rendered by this
Court it has been held that a passenger would not be a third party within the
meaning of the provisions of the Act. We may notice some of them.
United India Insurance Co. Ltd. v. Tilak Singh, [ (2006) 4 SCC 404], it was
held :- "21. 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 15 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
This Court in
Oriental Insurance Co. Ltd. v. Jhuma Saha, [(2007) 9 SCC 263 ] has held :-
"10. The deceased was the owner of the vehicle.
For the reasons
stated in the claim petition or otherwise, he himself was to be blamed for the
accident. The accident did not involve motor vehicle other than the one which
he was driving.
The question which
arises for consideration is that the deceased himself being negligent, the
claim petition under Section 166 of the Motor Vehicles Act, 1988 would be
11. 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. Thus, if the insured cannot be fastened with any liability under the
provisions of the Motor Vehicles Act, the question of the insurer being liable
to indemnify the insured, therefore, does not arise."
In Oriental Insurance
Co. Ltd. v. Sudhakaran K.V., [(2008) 7 SCC 428] this Court has opined :-
"17. This Court in a catena of decisions has categorically held that a
gratuitous passenger in a 16 goods carriage would not be covered by a contract
of insurance entered into by and between the insurer and the owner of the
vehicle in terms of Section 147 of the Act. (See New India Assurance Co. Ltd.
v. Asha Rani."
It was held: -
"25. The law which emerges from the said decisions, is: (i) the liability
of the insurance company in a 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
[See also New India
Assurance Company Ltd. v. Sadanand Mukhi and others, (2009) 1 SCALE 252 ].
this Court, however, the nature of policies which came up for consideration
were Act polices. 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 entered into a contact of insurance in relation thereto,
we are of the opinion that the matter may require a deeper scrutiny.
may notice that the effect of package policy in relation to three wheelers,
came up before the Delhi High Court in United India Insurance Company, (MAC
App. No.980/2006 etc. decided on 31st May, 2007) wherein it has been opined :-
"33. Tilak Singh's case (Supra) holds that the proposition of law in Asha
Rani's Case (Supra) in relation to goods vehicle shall apply with equal force
to 'gratuitous passenger' in any other vehicle also. As noted herein above
Tilak Singh's case (supra) related to a statutory policy. It would be pertinent
to mention here that Tilak Singh's case (supra) related to the death of a
pillion rider on a two wheeler scooter and his legal representatives had
claimed compensation against the registered owner of the scooter and the
insurer. The two wheeler scooter was insured for third party risk for the
period 07/03/1989 to 06/03/1990 and the accident had taken place on 31.10.1989.
The Court found that the Insurance Policy covering the risks did not contain an
endorsement of IMT 70 covering liability to pillion riders and, therefore, in
that context held that the Insurer Company was not liable to indemnify the
insured and pay compensation to the legal representatives of the deceased. I
may indicate here that IMT-70 is no longer in operation and as per Section 3 of
the present tariffs even a pillion rider is covered by Third Party risks unless
he happens to be an employee of the insured for which extra premium is to be
required to be paid.
34. To summarize,
where the policy is a statutory policy or an act only policy, a gratuitous
passenger in a private vehicle would not be covered for a bodily injury or
death under the policy of 18 insurance. But, nothing prevents the insurance
company from issuing a wider coverage i.e. assuming a greater risk liability.
As in the instant case, where the policy is a Package Policy for Private Cars,
terms of the policy and the applicable conditions as notified by the Tariff
Advisory Committee would have to be looked into to determine the risk liability
assumed by the insurer."
question as to whether gratuitous passengers travelling in a private car or
pillion riders carried on two-wheelers are automatically covered under a
package policy/comprehensive policy came up also before The Madras High Court
recently in Royal Sundaram Insurance Co. Ltd. v. V. A. Meenakshi and Ors.
(C.M.A No. 312 of 2009). The Division Bench of the Court, after observing the
judgment of this court and various High Courts on the subject, dismissing the
appeal filed by the insurance company and affirming the order of the Tribunal
awarding compensation of Rs. 19.10 Lakh to the legal representatives of the
deceased passenger of the insured vehicle, held that:
it is clear from the Act itself, the words of the policy and the decision in
Amritlal Sood's case (supra) that a Comprehensive Policy covers the risk of a
gratuitous passenger to the extent of the liability incurred. We may imagine
what will happen in a case where the owner is driving his car covered by a
He is accompanied by
his wife and children. There is an accident as in this case. The wife and
children are permanently disabled by the injuries. If we agree with the
appellant Insurance Company, those pathetic claimants will not get any
The law never
intended this to happen. That is why the TAC explicitly came out with the
clarificatory Circular in 1978. We cannot forget that the words used are
"third party" and "Comprehensive", so we cannot deny this
relief to the third party occupant in a car covered by a Comprehensive
[See also the
decisions of High Court of Karnataka in National Insurance Company Limited v.
Pattabhi Ramaiah and Ors. (M.F.A No. 5921 and 7045 of 2006 (M.V)) and Delhi
High Court in United India Insurance Co. Ltd. v. Alka Mangla and Ors. (AIR 2008
therefore, are of the opinion that the matter requires consideration by a
Larger Bench. We order accordingly. Let the papers be placed before the learned
Chief Justice for appropriate orders.
[ S.B. Sinha ]