New India Assurance Company Limited vs Sanabhai Mangalbhai Machhi

The present appellant, Insurance Company, being aggrieved and dissatisfied with the award passed by the Motor Accident Claims Tribunal (Auxiliary), Vadodara in MACP No.983 of 1996 dated 30.11.2010 awarding compensation of Rs.2,17,000/- with interest at the rate of 7.5% p.a. from the date of filing of the claim petition, preferred this appeal under Section 173 of the Motor Vehicles Act, 1988.

The short facts of the present case are that on 24.04.1996, deceased Maheshbhai was traveling in a capacity of passenger in the Ambassador Car bearing registration No.GBQ -2774 from Dabhoi to Kelanpur. The aforesaid car was driven by the opponent No.1. That, as the opponent No.1 lost the control over steering, the car went on the wrong side of the road and turned turtle attacking a road side tree. Because of such incident, the deceased sustained grievous head injuries and was immediately shifted to SSG Hospital. On 26.04.1996, he expired. As per the say of the original-applicants, the incident occurred due to sole rash and negligent driving of the car by the opponent No.1. As per the averments, the deceased was aged about 24 years and was stout and healthy. He was earning Rs.3000/- per month by doing masonry work and was assisting the original-applicants. The applicants were depending upon the income of the deceased. Due to untimely death of the deceased, the applicants have undergone mental pain, shock and suffering. The applicants were required to incur expenses towards funeral and after death ceremony. Hence, the applicants have claimed in all Rs.4,00,000/- by way of compensation under above mentioned different heads.

Notices were served to the Owner and Insurance company of the Motor vehicle and they appeared before the tribunal. Reply was filed by the Insurance company - respondent No.3 vide Exh.36 denying allegations regarding compensation, age, income, occupation etc. However, it was admitted that the liability of the opponent would be as per the terms and conditions of the Policy. It is further contended that the said vehicle was insured only for third party risk and the policy is an Act policy for private car and hence, no liability can be fastened upon the replying opponent. It was requested to dismiss the claim with costs.

The learned Tribunal, after recording all the evidence and hearing parties, was pleased to allow the petition by awarding compensation of Rs.2,17,000/- to the claimants with interest at the rate of 7.5% per annum from the date of application till realization.

Heard learned advocate Mr. Palak Thakkar for the appellant - Insurance company, Mr. Rajesh Shah, learned advocate for the respondent No.3, Mr. MTM Hakim learned advocate for the respondent Nos.1 and 2- original claimants.

Learned advocate Mr. Palak Thakkar for the appellant submitted in his arguments that the Tribunal has erred in holding that Insurance company is liable to satisfy the award when the risk of the deceased who was mere occupant/ passenger of a private car was not covered under the "Act only" policy of the private car. It is submitted that the Insurance policy of the private car was an "Act only" policy which was placed on record. It is also submitted that the full text of the policy or the terms and conditions of the policy was not required to be placed on record for determining whether the policy was an "Act only" policy or not. It is further submitted that the tribunal has committed error in holding that an occupant/passenger of a private car was a third party and covered under the expression "any person" used in Section 147 of the Motor Vehicles Act, 1988. It was requested by him to allow the appeal by setting aside the impugned judgment and order.

In support of his submission, reliance is placed on different judgments by learned advocates reported in 2013(1) SCC 731, 2006 (4)SCC 404, 2008 (7)SCC 428. Reliance is also placed on judgment dated 07.02.2012 passed by the Co-ordinate Bench of this Court in First Appeal No.2214 of 1999 and requested to quash and set aside the impugned award by allowing this appeal.

On the other hand, Mr. Rajesh Shah, learned advocate for respondent No.3 submitted that the owner of the motor vehicle was not rightly joined as party which clarifies from the petition itself. No process was served by the claimants to the owner of the motor vehicle. It is further submitted that no right of cross examination was given to the owner of the motor vehicle. That, panchnama of the place of offence was prepared and produced before the tribunal wherein also registration number of the motor vehicle is not shown. According to owner of the motor vehicle, none joined before the tribunal. That, the evidence produced on record, name of the owner of the vehicle was not mentioned. That, no adverse order could be passed against the owner of the motor vehicle. That, affidavit is also filed to clarify the position. Therefore, learned advocate Mr. Shah submitted that considering the evidence placed on record, the appeal may be dismissed.

Mr. MTM Hakim, learned advocate for the respondent Nos.1 and 2 has drawn attention of this Court to the findings and reasons assigned by the Tribunal and submitted that no terms and conditions of the policy were produced on record by the appellant before the Tribunal. It is further submitted that in the Insurance policy produced on record, there is disclosure of endorsement No.5 and 19 attached with the policy, however, no such endorsement were produced on record before the tribunal. It is further submitted that if this entire policy showing terms and conditions was produced by the appellant then clear picture of any additional amount covering risk of the passenger would be reflected and found correct position. That, in absence of correct picture, without producing full text of the policy by the Insurance Company, the tribunal has rightly held liable the Insurance Company to pay compensation to the claimants. It is also submitted that it was the liability of the Insurance company to prove projected of conditions if any of the policy. That, no evidence was produced by the appellant before the tribunal to prove that it was "Act only" policy and insurance of the passenger was covered or not. In support of his arguments, reliance is placed on judgment reported in 2014 (14) SCC 146. In alternative, he submitted that if the Court comes to the conclusion, the Insurance company would require to be exonerated from the liability of paying compensation amount awarded by the tribunal is deposited and out of it certain amount was withdrawn by the applicants. Hence, Insurance company may not be permitted to withdraw the remaining amount. Insurance company can be permitted to withdraw from the owner of the motor vehicle. Therefore, he requested to dismiss the appeal and in alternate to pass the order as argued by him.

Heard learned counsels for the respective parties and having perused the documents on record, few facts emerges from the record are undisputed. That, the deceased Maheshbhai was traveling in motor vehicle, while he was coming from Dabhoi to Kelanpur in the Ambassador Car, bearing Registration No.GBQ -2774 driven by its driver. The complaint of this accident was lodged by the complainant and the same was produced on record vide Exh.19 filed by the Head Constable on duty of Vernama Police Station on receiving information from the applicant- Maheshbhai. The Panchnama of scene of occurrence was conducted by the Head Constable of Vernama Police Station and the topography of the scene of accident was scrutinized. Indisputedly, the tribunal considered submissions advanced before it and the documents to prove the negligency on the part of the driver of the motor vehicle involved in the accident and answered issue No.1 in the affirmative. So far as fixing liability of paying compensation by Insurance Company is concerned, Tribunal has observed that the Insurance Company was failed to establish by producing relevant documents and cogent evidence of amount of premium, not charged by the Insurance company as well as no specific contract between the owner of the motor vehicle and Insurance company. It was further observed by the tribunal that in absence of any cogent evidence produced by the insurance company, benefit of statutory liability will not be available to it. It was undisputed fact that the policy of the motor vehicle involved in the accident was produced at Exh.34. If we consider the policy produced on record by the Insurance Company, however, no witness was examined by the appellant, nor full text policy of the Insurance company contained all the terms and conditions attached with the policy with relevant documents were produced on record. Name of the opponent no.2, being owner of the motor vehicle, was shown and insured of the motor vehicle. It is not disputed fact that the motor vehicle involved in the accident was insured with the opponent no.3 - present appellant from 18.03.1996 to 17.03.1997 and the accident was occurred on 24.04.1996, and therefore, at the relevant point of time, i.e on the day of accident, the policy was in force. If, we consider the policy Exh.34, it does not cover unlimited risk. Further, it transpires from the policy that at the right side it was clearly stated that "Act only" or "Act policy". The tribunal could not ignore the conditions clearly mentioned in the policy at Exh.34 that it was not "Act policy". If we consider further conditions of the policy, the amount of premium covering third party risk was never covered by the present appellant from the owner of the motor vehicle or it was never found in special contract. From these documents, it was clear that third party risk was never covered by the present appellant while issuing "Act only policy". The total premium paid by the owner of the motor vehicle was Rs.184/-only. The basic amount of premium shown in the policy was Rs.160/- and by adding Rs.15/- (Rupees Fifteen Only) on account of P.A. Benefits and 5% surcharge was Rs.9/- only, total amount of premium Rs.184/- was recovered. The schedule of premium shows that no further amount was paid by the owner of the motor vehicle. In the column of number of passenger, capital benefits for legal liability to paid IMT19/driver, no premium was collected by the present appellant being Insurance company of the motor vehicle as well as paid by the owner of the motor vehicle to the present appellant. The policy itself was clearly showing the premium paid to the insurance company by the owner of the motor vehicle and the passenger covering risk of the motor vehicle. There was no disclosure of receiving premium of third party by the present appellant or covering third party risk from the owner of the motor vehicle. When, the clauses of the policy Exh.34 were undisputed and were clear in terms, in absence of any other evidence of examining any witness by the present appellant, the conditions and the schedule as shown in the policy, cannot be ignored by the tribunal.

As per the opinion of this Court, considering the factual aspects and circumstances of this case, no further evidence in this regard to show that if this much premium is paid, did not cover unlimited risk and this much premium is equivalent to act policy, would not be required to be proved by the present appellant. This Court would like to refer judgment passed in First Appeal No.2214 of 1999 dated 07.02.2012 by this Court wherein para 14 reads as under:

"14. The issue is no longer res integra and is squarely covered by the decision of the Apex Court in the case of Oriental Insurance Co. Ltd. (vjn) Meena Variyal & ors., 2007 ACJ 1284. Facts in the said case were very similar to those involved in the present appeal. The vehicle was owned and insured by the Company. The deceased died when the vehicle met with an accident in which he was travelling. It is unclear whether the deceased himself was driving the vehicle or the vehicle was being driven by driver Mahmood Hasan at the time of the accident. The Apex Court considered the legal situation in both the eventualities. The Court was of the opinion that if the deceased himself was driving the vehicle at the time of the accident, the situation would be that on such count itself, heirs of the deceased may not be entitled to claim any compensation. The Apex Court also considered the alternative situation that if it was found that the deceased was a mere passenger and the vehicle was being driven by Mahmood Hasan, the driver. In that background, the Apex Court considered the policy and the provisions contained in section 147 of the Act and came to the following conclusion :-

"10. Chapter XI of the Act bears a heading,"Insurance of Motor Vehicles against third party risks". The definition of "third party" is an inclusive one since Section 145(g) only indicates that "third party" includes the Government. It is Section 146 that makes it obligatory for an insurance to be taken out before a motor vehicle could be used on the road. The heading of that Section itself is "Necessity for insurance against third party risk". No doubt, the marginal heading may not be conclusive. It is Section 147 that sets out the requirement of policies and limits of liability. It is provided therein that in order to comply with the requirements of Chapter XI of the Act, a policy of insurance must be a policy which is issued by an authorised insurer; or which insures the person or classes of persons specified in the policy to the extent specified in sub-section (2) against any liability which may be incurred by the owner in respect of the death of or bodily injury or damage to any property of a third party caused by or arising out of the use of the vehicle in a public place. With effect from 14.11.1994, injury to the owner of goods or his authorised representative carried in the vehicle was also added. The policy had to cover 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. Then, as per the proviso, the policy shall not be required 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 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, an employee engaged in driving the vehicle, or who is a conductor, if it is a public service vehicle or an employee being carried in a goods vehicle or to cover any contractual liability. Sub-section (2) only sets down the limits of the policy. As we understand Section 147 (1) of the Act, an insurance policy thereunder need not cover the liability in respect of death or injury arising out of and in the course of the employment of an employee of the person insured by the policy, unless it be a liability arising under the Workmen's Compensation Act, 1923 in respect of a driver, also the conductor, in the case of a public service vehicle, and the one carried in the vehicle as owner of the goods or his representative, if it is a goods vehicle. It is provided that the policy also shall not be required to cover any contractual liability. Uninfluenced by authorities, we find no difficulty in understanding this provision as one providing that the policy must insure an owner against any liability to a third party caused by or arising out of the use of the vehicle in a public place, and against death or bodily injury to any passenger of a public service vehicle caused by or arising out of the use of vehicle in a public place. The proviso clarifies that the policy shall not be required to cover an employee of the insured in respect of bodily injury or death arising out of and in the course of his employment. Then, an exception is provided to the last forgoing to the effect that the policy must cover a liability arising under the Workmen's Compensation Act, 1923 in respect of the death or bodily injury to an employee who is engaged in driving the vehicle or who serves as a conductor in a public service vehicle or an employee who travels in the vehicle of the employer carrying goods if it is a goods carriage. Section 149(1), which casts an obligation on an insurer to satisfy an award, also speaks only of award in respect of such liability as is required to be covered by a policy under clause (h) of sub-section (1) of Section 147, (being a liability covered by the terms of the policy). This provision cannot therefore be used to enlarge the liability if it does not exist in terms of Section 147 of the Act.

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."

In case of United India Insurance Com[any Limited, Shimla Versus Tilak Singh And Others, reported in (2006) 4 SCC 404, in para 18 and 21 of the judgment, the Hon'ble Apex Court held as under:

"18. Thus even under the 1939 Act the established legal position was that unless there was a specific coverage of the risk pertaining to a gratutious passengers in the policy, the insurer was not liable. We find that clause (ii) of the proviso to Section 95(1) has been eliminated while drafting section 147 of the 1988 Act. Under sub-section (1)(b) under the 1988 Act, compulsory policy of insurance required under the statute must now provide against any liability which may be incurred by the owner of the vehicle "in respect of the death of or bodily injury to any person including owner of the goods or 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 vehicles in a public place."

In our view, although the observation made in Asha Rani's case (supra) 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 toward 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 gratuitous passenger."

In another case of Oriental Insurance Company Limited Versus Sudhakaran K. V. and Others, reported in (2008) 7 SCC 428, in para 12, 13, 14 and 25 of the judgment, the the Hon'ble Apex Court held as under:

"12. The relevant clauses of the said contract of insurance are as under:

"1. Subject to the Limit of liability as laid down in the Motor Vehicles Act the Company will indemnify the insured in the event of accident caused by or arising out of the use of Motor Vehicle any where in India against all sums including claimant's costs and expenses which the insured shall become legally liable to pay in respect of death or bodily injury to any person and/or damage to any property of Third Party.

Exception Except so far as necessary to meet the requirements of the Motor Vehicles Act the Company shall not be liable in respect of death arising out of and in the course of employment of person in the employment of the insured or in the employment of any person who is indemnified under this Policy or bodily injury sustained by such person arising out of and in the course of such employment."

In terms of Section 147 of the Act only in regard to reimbursement of the claim to a third party, a contract of insurance must be taken by the owners of the vehicle. It is imperative in nature. When, however, an owner of a vehicle intends to cover himself from other risks; it is permissible to enter into a contract of insurance in which event the insurer would be bound to reimburse the owner of the vehicle strictly in terms thereof.

The liability of the insurer to reimburse the owner in respect of a claim made by the third party, thus, is statutory whereas other claims are not.

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 vehicle."

In case of National Insurance Company Limited Versus Balakrishnan and Another,reported in (2013) 1 SCC 731, in para 26 of the judgment, the Hon'ble Apex Court held as under:

"26. 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 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."

Learned advocate for the respondents/claimants have relied upon the decision in case of Fahim Ahmad and Others Versus United India Insurance Company Limited and Others reported in (2014) 14 SCC 148, whereby the Hon'ble Apex Court was not justified in transferring burden of paying an amount of compensation from Insurance company to the appellant, the impugned judgment was set aside in so far as right to recover amount awarded from the owner of the tractor. In the instance case also, liability of the Insurance company cannot be extended to passenger of the motor vehicle unless requisite amount of premium is paid for covering risk. Legal obligations under Section 147 of the Act, cannot be extended to a injury or death of the owner of the vehicle or deceased passenger. The passenger, in motor vehicle involved in the accident was not to be treated as third party when the accident has taken place in rash and negligent driving of the ambassador car. Learned advocate for the appellant has submitted that certain amount deposited by the appellant was withdrawn by the original claimants from the tribunal and remaining amount be paid to the appellant as there is no liability of the appellant to pay the compensation to the claimants. This Court is not aware whether an amount deposited by the appellant was withdrawn or any amount is unpaid to the claimants. Under the circumstances, the liability of paying compensation by the present appellant would be quashed and set aside as held by the tribunal. However, Insurance company may recover the amount deposited by it from the owner of the motor vehicle with simple interest at the rate of 7.5% from the date of deposit till the same is received by the appellant. For such purpose, the appellant need not to institute fresh proceedings.

Considering the submissions of learned advocate for the respective parties and for the reasons stated as above, the appeal is partly allowed. The judgment and award passed by the tribunal in MACP No.983 of 1996 dated 30.11.2010 holding liability of the present appellant- original opponent No.3 to pay compensation to the petitioner shall be quashed and set aside. The appeal is partly allowed with the observations as passed by this Court.