JUDGMENT P.D. Desai, J.

1. The following question is referred to the Full Bench by the Division Bench consisting of N. H. Bhatt and S. L. Talati JJ. as the said Division Bench was of the view that it was necessary to resolve the conflict arising out of the two inconsistent Division Bench decisions, one in Gujarat State Road Transport Corporation v. Malubhai Menand [1980] 21 GLR 400, decided by B. K. Mehta J. and S. B. Majmudar J. and another in Bhoi Vanaji Dhulaji v. Patel Shivabhai Kashibhai, AIR 1980 Guj 154; [1983] 53 Comp Cas 475, decided by M. K. Shah and D. H. Shukla JJ.

"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, whether a passenger on payment will get the benefit of the statutory insurance ?"

2. In order to appreciate the controversy in its proper perspective, it requires to be mentioned that the occasion to make the reference arose in the course of proceedings in which the insurance company, which had insured a public carrier (Leyland Goods Truck), disclaimed its liability to satisfy the awards made in three different but connected motor accident claim cases, on the ground that the vehicle in question was, on the date of the contract of insurance, a vehicle not covered by a permit to carry passengers for hire or reward and that it was, at the time of the accident stated to have been actually used to carry three passengers for hire or reward and that, therefore, the insurance company was not liable to satisfy the awards made in favour of one of such passengers who was injured and the dependants of the other two of such passengers who met with their death in the course of the accident.

3. It would be convenient to refer to the relevant statutory provisions at the outset. Chapter VIII of the Motor Vehicles Act, 1939 (hereinafter referred to as "the Act"), which consists of ss. 93 to 111A, makes detailed provisions with regard to the insurance of motor vehicles against third party risks. Section 94, in so far as it is relevant for the present purposes, provides that no person shall use except as a passenger or cause or allow any other persons to use a motor vehicle in a public place, unless there is force in relation to the use of the vehicle by that person or that other person, as the case may be, a policy of insurance complying with the requirements of the said Chapter. Section 95 deals with the requirements of policies and limits of liability. In so far as it is relevant for the present purposes, the said section reads as under :

"95(1) In order to comply with the requirements of this Chapter, a policy of insurance must be a policy which - ...

(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 not be required -

(i) 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, 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 a 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 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 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 .....

(4) A policy shall be of no effect for the purposes of this Chapter unless and until there is issued by the insurer in favour of the person by whom the certificate of insurance in the prescribed form and containing the prescribed particulars of any condition subject to which the policy is issued and of any other prescribed matters; and different forms, particulars and matters may be prescribed in different cases, ...

(5) Notwithstanding anything elsewhere contained in any law, a person issuing a policy of insurance under this section shall be liable to indemnify the person or classes of person specified in the policy in respect of any liability which the policy purports to cover in the case of that person or those classes of persons."

4. Section 96 makes provision in regard to the duty of insurers to satisfy judgments against persons insured in respect of third party risks and, to the extent relevant, it is in the following terms :

"96(1) If, after a certificate of insurance has been issued under sub-section (4) of section 95 in favour of the person by whom a policy has been effected, judgment in respect of any such liability as is required to be covered by a policy under clause (b) of sub-section (1) of section 95 (being a liability covered by the terms of the policy) is obtained against any person insured by the policy, then, notwithstanding that the insurer may be entitled to avoid or cancel or may have avoided or cancelled the policy, the insurer shall, subject to the provisions of this section, pay to the person entitled to the benefit of the decree any sum not exceeding the sum assured payable thereunder, as if he were the judgment-debtor, in respect of the liability, together with any amount payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any enactment relating to interest on judgments.

(2) No sum shall be payable by an insurer under sub-section (1) in respect of any judgment unless before or after the commencement of the proceedings in which the judgment is given the insurer had notice through the court of the bringing of the proceedings, or in respect of any judgment so 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 :- ...

(b) 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 ...

(c) for a purpose not allowed by the permit under which the vehicle is used, where the vehicle is a transport vehicle, or ...

(3) Where a certificate of insurance has been issued under sub-section (4) of section 95 to the person by whom a policy has been effected, so much of policy as purports to restrict the insurance of the persons insured thereby by reference to any conditions other than those in clause (b) of sub-section (2) shall, as respects such liabilities as are required to be covered by a policy under clause (b) of sub-section (1) of section 95, be of no effect :

Provided that any sum paid by the insurer in or towards the discharge of any liability of any person which is covered by the policy by virtue only of this sub-section shall be recoverable by the insurer from that person.

(6) No insurer to whom the notice referred to in sub-section (2) or sub-section (2A) has been given shall be entitled to avoid his liability to any person entitled to the benefit of any such judgment as is referred to in sub-section (1) or sub-section (2A) otherwise than in the manner provided for in sub-section (2) or in the corresponding law of the reciprocating country, as the case may be."

5. Having set out the relevant provisions, it is necessary to gather their true purport and effect. Section 94 prohibits the use of a motor vehicle by any person (except as a passenger) in a public place unless there is in force a policy of insurance in relation to the use of the vehicle and unless such policy complies with the requirements of Chap. VIII. It is apparent that the policy of insurance contemplated by s. 94 must be a policy by which a particular motor vehicle is insured in relation to its use in a public place by a specified person or persons (see New Asiatic Insurance Co. Ltd. v. Pessumal Dhanamal Aswani [1964] 34 Comp Cas 693; AIR 1964 SC 1736.

6. Section 95, sub-ss. (1) and (2), prescribe the requirements which are to be complied with by the policy of insurance issued in relation to the use of a particular vehicle. They are :

(1) the policy must be issued by a person who is an authorised insurer or by a co-operative society allowed to transact the business of an insurer under section 108;

(2) such policy must specify the person or classes of persons who must be insured with respect to their following liabilities :

(a) any liability incurred in respect of the death of or bodily injury to any person or damage to any property of a third party, and

(b) any liability in respect of 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;

(3) such policy shall not be required, however, to cover liability in respect of the death of or bodily injury sustained by an employee of the insurer arising out of and in the course of his employment except a liability arising under the Workmen's Compensation Act, 1923, in regard to the death of or bodily injury to the following categories of such employees :

(a) an employee engaged in driving the vehicle, or

(b) if it is a public service vehicle, an employee engaged as a conductor of the vehicle or in examining tickets on the vehicle, or

(c) if it is a good vehicle, an employee being carried in the vehicle;

(4) such policy shall not also be required 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 arise, except where the vehicle is a vehicle is which passenger are carried for hire or reward or by reason of or in pursuance of a contract of employment;

(5) such policy shall not furthermore be required to cover any contractual liability; and (6) such policy must specify the extent of liability which must extend to the extent specified in sub-section (2).

7. The aforesaid analysis of the provisions of s. 95, sub-s. (1), would indicate, inter alia, that the statutory insurance must cover the liability incurred in respect of the death of or bodily injury to any passenger of a public service vehicle resulting from the use of the vehicle in a public place (see s. 95(1) (b) (ii). As we shall point out later on, such a vehicle is used or adapted to be used for the carriage of passengers for hire or reward and the passenger risk in respect of such vehicle is required to be covered to ensure that such passengers or their dependants would be able to recover damages in case of bodily injury or death and that recovery of damages will not be dependant on the financial condition of the driver and/or owner of the vehicle. The passenger risk even otherwise gets a limited coverage under the Act or statutory policy by virtue of the provisions contained in s. 95(1) (i), which requires coverage to be given in respect of any liability incurred in respect of the death of or bodily injury to "any person" caused by or arising out of the use of the vehicle in a public place. The words "any person" have a wide amplitude but the field of their operation is cut down by the proviso which carves out an exception in respect of the employee's risk and passengers' risk. The first clause of the proviso provides cover in respect of the employees' risk to a limited extent only by specifying the categories of employees and limiting the extent of liability to that arising under the Workmen's Compensation Act in respect of the death of or bodily injury to such employees, arising out of and in the course of employment. The second clause of the proviso provides cover in respect of the risk to passengers even if they are carried in a vehicle which is not a public service vehicle but to a limited extent and the limitation is that the passengers must have been carried for hire or reward or by reason of or in pursuance of a contract of employment. This position is now no longer open to doubt or debate.

8. In Pushpabai Parshottam Udeshi v. Ranjit Ginning and Pressing Co. P. Ltd., AIR 1977 SC 1735; [1977] ACJ 343, the claimants were the widow and children of a person who was a gratuitous passenger in a motor car which had met with an accident in the course of which the said person had lost his life. The contention of the insurance company was that the scope of the statutory insurance did not cover the insurer's liability arising out of the bodily injury to or the death of passenger and that the liability of the insurance company was confined only to the extent to which the risk to the passengers was specifically covered under the insurance policy. On behalf of the insured, the contention was that the insurance cover under the Act extended to the liability arising out of the bodily injury to or the death of a passenger also and that s. 95(1) (b) (i), which provides against any liability to the owner which may be incurred by him in respect of 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, clearly covered such liability. The Supreme Court held that the plea that the words "third party" were wide enough to cover all persons except the person insured and the insurer could not be accepted as the proviso to sub-s. (1) of s. 95 made it clear that the insurance cover is not available to the passengers except 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. The Supreme Court, in terms, observed (p. 1746) :

"Therefore, it is not required that a policy of insurance should cover risk to the passengers who are not carried for hire or reward. As, under section 95, the risk to a passenger in a vehicle who is not carried for hire or 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."

9. It cannot, therefore, be urged any longer that the liability arising out of the bodily injury to or death of a gratuitous passenger in a vehicle, which is covered only by a policy of insurance issued in compliance with the requirements of s. 95, is required to be indemnified by the insurance company. In other words, where the policy of insurance covers only the risk under s. 95 or where the policy is what is usually known as the Act or statutory policy, it will not cover the risk to the passengers who are not carried for hire or reward, or by reason of or in pursuance of a contract of employment, and the insurer will not be liable for the death of or bodily injury to such passengers. This view is now firmly established so far as this court is concerned in view of the decisions in Jam Shri Satji Digvijayasingji v. Daud Taiyab [1978] 19 GLR 404; AIR 1978 Guj 153, which is a Division Bench decision and Ambaben v. Usmanbhai Amirmiya Sheikh [1978] 19 GLR 913; AIR 1979 Guj 9, which is a Full Bench Decision, both of which were rendered after taking into consideration the decision in Pushpabai's case, AIR 1977 SC 1735.

10. In Sakinabibi v. Gordhanbhai Prabhudas Patel [1974] 15 GLR 428, the question of the coverage of the risk in respect of the owner or the hirer, or the bona fide employees of the owner or the hirer of the goods vehicle, carried on such vehicle free of charge, was considered. It was held that rule 118 of the Bombay Motor Vehicles Rules, 1959, permits the carriage of the owner or the hirer of a goods vehicle or his bona fide employees within the limits laid down by the said rule. The risk in relation to such owner or hirer or the bona fide employees of such owner or hirer carried on the goods vehicle free of charge would be covered under the second clause of the proviso to s. 95(1) because in the hire charges there is consideration or reward implicit for the free carriage of such passengers. In other words, the hire charges include the consideration for the travel of such persons by the goods vehicle and, therefore, those persons are passengers carried for hire or reward in a general sense. As pointed out in the subsequent decision in Jam Shri Satji's case [1978] 19 GLR 404; AIR 1978 Guj 153, the ultimate conclusion in Sakinabibi's case [1974] 15 GLR 428, in so far as it was rested on the footing that the risk of the owner or the hirer or the bona fide employees of the owner or the hirer carried within limits on the goods vehicle was covered by virtue of the second clause of the proviso to s. 95, sub-s. (1), still holds good even after the decision in Pushpabai's case, AIR 1977 SC 1735, although the ratio in Sakinabibi's case is affected in so far as the reasoning rests on the business test. Be it also noted in this connection that in the Full Bench decision in Ambaben's case [1978] 19 GLR 913; AIR 1979 Guj 9, in the context of employees of the owner or hirer, it was held, in the light of the decision in Pushpabai's case, that the policy contemplated by s. 95, sub-s. (1). clause (b), does not cover the risk to persons other than those who were carried for hire or reward and to passengers other than those who were bona fide employees of the owner or hirer of the vehicle not exceedings six in number carried in pursuance of or by reason of a contract of employment.

11. Section 95, sub-s. (4), provides for the policy becoming effective upon the issuance of a certificate of insurance in favour of the insured containing, inter alia, the prescribed particulars of the conditions of policy.

12. Section 95, sub-s. (5), which is an overriding provision, makes the insurer liable to indemnify the person or classes of persons specified in the policy in respect of any liability which the policy purports to cover in the case of that person or those classes of persons. The policy issued in compliance with the statutory provisions noticed above, therefore, makes the insurer liable to indemnify the person or classes of persons specified in the policy, to the extent specified therein, against any liability which may be incurred by them and which is required to be covered by such policy.

13. Section 96, sub-s. (1), in substance, provides that once a certificate of insurance has been issued, the insurer is bound to pay the sum assured to the person entitled to the benefit of a decree he obtains against any person insured by the policy in respect of any statutory liability covered by the terms of the policy, irrespective of the fact whether the insurer was entitled to avoid or cancel or might have avoided or cancelled the policy subject, however, to the provisions of the said section. This means that once the insurer has issued the certificate of insurance in accordance with s. 95, sub-s. (4), he has to satisfy any decree, which a person receiving injuries or the dependants of a person who has injured and died in the course of the accident obtains/obtain against any person insured by the policy in respect of such liability. The liability to satisfy the decree, however, arises only when the insurer has been served with a notice under s. 96, sub-s. (2) about the proceedings in which the judgment was delivered. In such proceedings, the insurer is entitled to be made a party to the action and to defend it. However, the right to defend the action is limited to one or more of the grounds enumerated in sub-s. (2) and no others. This is clear from the wordings of sub-section (2) which specifies the grounds of defence. Section 96, sub-s. (6), also points in the same direction by providing that no insurer to whom the notice of the action has been given shall be entitled to avoid his liability under sub-s. (1) "otherwise than in the manner provided for in sub-s. (2)". The law early provides, therefore, that an insurer made a defendant to the action is not entitled to take any defence which is not specified in sub-s. (2). Section 96, sub-s. (3), is also relevant in this connection. It provides that where a certificate of insurance has been issued under sub-s. (4) of s. 95, so much of the policy as purports to restrict the insurance of the person insured thereby by reference to any conditions other than those in clause (b) of sub-s. (2), shall be "of no effect" as regards all such liabilities as are required to be covered by the Act or statutory policy. Therefore, only such restrictive conditions can be incorporated in the policy as are referred to in s. 96, sub-s. (2), clause (b), and none other. If any of the liabilities required to be covered by the Act or statutory policy are sought to be avoided by the insurer by incorporating any other restrictive conditions in the policy, that part of the policy which contains such restrictive covenants will be inoperative so far as the right of the person obtaining a decree in respect of the liability required to be statutorily covered is concerned and such liability will not be affected by any such condition. This provision also clearly points in the direction that only those defences can be validly urged by an insurer as are provided in s. 96, sub-s. (2).

14. Now, one of the grounds on which the insurer can defend the action under s. 96(2) (b) (i) and upon establishment of such defence avoid the liability arising under s. 96(1) to satisfy the decree, is that there was a breach of one of the specified conditions of the policy, namely, a condition excluding the use of the vehicle, inter alia -

(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 a purpose not allowed by the permit under which the vehicle is used, where the vehicle is a transport vehicle.

15. We are in the present case concerned with condition (a) set out above as is evident from the terms of the question referred to the Full Bench. We shall revert to the consideration of the said question and the scope of the said condition after first referring to a couple of other provisions of the Act.

16. Section 42 which finds place in Chapter IV which is entitled "Control of Transport Vehicles" deals with the necessity for permits. Sub-s. (1) thereof reads as under :

"42(1). No owner of a transport vehicle shall use or permit the use of the vehicle in any public place (whether or not such vehicle is actually carrying any passenger or goods) save in accordance with the conditions of a permit granted or countersigned by a Regional or State Transport Authority or the Commission authorising the use of the vehicle in that place in the manner in which the vehicle is being used :

Provided that a stage carriage permit shall, subject to any conditions that may specified in the permit, authorise the use of the vehicle as a contract carriage :

Provided further that a stage carrier's permit may, subject to any conditions that may be specified in the permit, authorise the use of the vehicle as a goods vehicle either when carrying passengers or not :

Provided further that a public carriage permit shall, subject to any conditions that may be specified in the permit, authorise the holder to use the vehicle for the carriage of goods for or in connection with a trade or business carried on by him."

17. Sub-s. (2) enacts a fiction for determining whether a transport vehicle is or is not used for the carriage of goods for hire or reward for the purposes of Chapter IV. Sub-s. (3) provides that sub-s. (1) shall not apply to the transport vehicles therein specified. Sub-s. (4) provides that subject to the provisions of sub-s. (3), sub-s. (1) shall, if the State Government so prescribes by rules, apply to any motor vehicle adapted to carry more than nine persons excluding the driver.

18. Section 42, sub-s. (1), prohibits the owner of a "transport vehicle" form using or permitting the use of such vehicle in any public place except in accordance with the conditions of a permit. The definition of "permit" in s. 2(20) also emphasises this aspect. The word "permit" is there defined to mean the document issued by the Inter-State Transport Commission or a State or Regional Transport Authority authorising the use of a transport vehicle "as a contract carriage, or stage carriage or authorising the owner as a private carrier or public carrier to use such vehicle". The necessity for permit, therefore, is in respect of a transport vehicle.

19. What is a transport vehicle is defined in s. 2(33) and accordingly it is "a public service vehicle or a goods vehicle". Let us see which vehicles answer this description.

20. "Public service vehicle", according to s. 2(25), means" any motor vehicle used or adapted to be used for the carriage of passengers for hire or reward, and includes a motor cab, contract carriage, and stage carriage". The words "motor cab", "contract carriage" and "stage carriage" are defined in ss. 2(15), 2(3) and 2(29) respectively. The essential condition which these three vehicles must, even according to the respective definition, satisfy is that they must carry and/or be constructed or adapted to carry passengers for hire or reward.

21. Section 2(7) contains an inclusive definition of the word "goods" and it provides that goods include livestock and anything (other than equipment ordinarily used with the vehicle) carried by a vehicle except living persons, but does not include luggage or personal effects carried in a motor car or in a trailer attached to a motor car or the personal luggage of passengers travelling in the vehicle. The expression "goods vehicle" is defined in s. 2(8) to mean 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. It will be seen that the definition of "goods vehicle" takes in both, namely, a vehicle constructed or adapted for being used for carrying goods and a vehicle which is not so constructed or adapted but is actually used for carrying goods solely or in addition to passengers.

22. rule 118 of the Bombay Motor Vehicles Rules, 1959, which has been referred to earlier and which is relevant in this context, deals with the carriage of persons in goods vehicles. Sub-rule (1) thereof creates a bar against the carriage of persons in a goods vehicle other than the owner or the hirer or a bona fide employee of the owner or the hirer of the vehicle carried free of charge, or a police officer in uniform travelling on duty. The maximum number of persons of all such categories to be so carried in the goods vehicle is also prescribed in Sub-rule (1) by reference to the type of the goods vehicle. Sub-rule (2) enables a Regional Transport Authority to permit, by an order in writing, a larger number of persons to be carried in the goods vehicle on conditions that no goods at all are carried in addition to such persons and such persons are carried free of charge in connection with the work for which the vehicle is used and that such other conditions as may be mentioned are observed and, where the vehicle is required to be covered by a permit, that the conditions of the permission granted under the said sub-rule are also made conditions of the permit. The power conferred upon the Regional Transport Authority under sub-r. (2) is, however, subject to the provisions of sub-rules (4) and (5). Sub-rule (3) enables a still further concession being made, subject to the provisions of sub-rr. (4) and (5), in respect of the use of a goods vehicle for the carriage of persons. Accordingly, (a) for the purpose of celebrations in connection with the Republic Day or Independence Day, (b) for the purpose of enabling a co-operative society or class of co-operative societies owning or hiring a goods vehicle to carry its members under its authority in such goods vehicle when used for the purpose of carrying goods of the society in the ordinary course of its business, and (c) where it is considered expedient in public interest in respect of vehicles owned or hired by the State Government and in respect of other vehicles on such inescapable grounds of urgent nature to be specified in the order, the Regional Transport Officer, the Secretary of the State Transport Authority and the State Government, respectively, are authorised, by general or special order, to permit goods vehicles to be used for the carriage of persons for the aforesaid purposes and subject to such conditions as may be specified in the order. Sub-rule (4) prohibits the carriage of persons in a good vehicle unless certain conditions are fulfilled. Sub-rule (5) makes the rule inapplicable to vehicles registered under s. 39. Sub-rule (6) makes provisions regarding the carriage of an attendant/attendants and other persons on a trailer which is a goods vehicle.

23. The definition of "goods vehicle" and the provisions of rule 118 would indicate that even a goods vehicle can be lawfully used for carrying persons either solely under certain circumstances or in addition to goods under varying circumstances. In other words, a goods vehicle is also a vehicle which can lawfully carry passengers under the circumstances and to the extent specified above. Similar view is taken in Channappa Chanavirappa Katti v. Laxman Bhimappa Bajantri reported in, AIR 1979 Kar 93. In this connection it would be pertinent to point out, however, that ss. 52 to 56 makes provision in respect of private carrier's permit and public carrier's permit and that they authorise the Regional Transport Authority to impose or attach to the permit certain conditions referred to in s. 53(2) and s. 56(2) respectively. Section 53(2), inter alia, provides that the Regional Transport Authority may, in granting a private carrier's permit, impose conditions relating to matters specifically mentioned in the said sub-section or any other matter which may be prescribed. Section 56(2), inter alia, provides that the Regional Transport Authority may, subject to any rules that may be made under the Act, attach to the public carrier's permit any owner or more of the conditions specified in the said sub-section and that he may also attach any other conditions which may be prescribed. Besides, s. 59(3) lays down general conditions which are to be attached to all permits. Rule 81 of the Bombay Motor Vehicles Rules, 1959, deals with forms of permit and it provides that a private carrier's permit shall be in Form P. Pr. C. and a public carrier's permit shall be in Form P. Pu. C. When one turns to those forms, one finds that its contains a column which is meant for prescribing conditions in addition to the conditions laid down in sub-s. (3) of s. 59. It would thus appear that a permit covering a goods vehicle may, to the extent permitted by law, conceivably regulate the carriage of passengers under certain circumstances.

24. Before proceeding further, two more definitions are required to be noted. Section 2(23) defines "public carrier" to mean an owner of a transport vehicle who transports or undertakes to transport goods, or any class of goods, for another person at any time and in any public place for hire or reward, whether in pursuance of the terms of a contract or agreement or otherwise and includes any person, body, association or company engaged in the business of carrying the goods or persons associated with that person, body, association or company for the purpose of having their goods transported. "Private carrier", according to s. 2(22), means an owner of a transport vehicle other than a public carrier who uses that vehicle solely for the carriage of goods which are his property or the carriage of which is necessary for the purposes of his business not being a business of providing transport, or who uses the vehicle for any of the purposes specified in sub-s. (2) of s. 42. These two definitions read with the definition of "goods vehicle" highlight the aspect that a transport vehicle, which is a good vehicle, may be used by its owner for the carriage of goods of another person for hire or reward or it may be used by him solely for the carriage of goods which are his property or the carriage of which is necessary for the purposes of his business or for the purposes specified in s. 42, sub-s. (2). Unlike a public service vehicle, a goods vehicle need not, therefore, be used only for hire or reward.

25. In State Of Mysore v. Syed Ibrahim., AIR 1967 SC 1424, the facts were that the owner of a motor car had carried eight passengers in the car and collected Rs. 5 from each of them and he was prosecuted for having used his car as a "transport vehicle" without the requisite permit under s. 42(1) read with s. 123 of the Act. The trial resulted in an acquittal on the ground that the vehicle having been registered as a "motor car" as defined by s. 2(16), it was not a "transport vehicle" and that, therefore, no prosecution could lie for the breach of s. 42(1). The Supreme Court considered the definitions of the words "motor vehicle", "motor car", "public service vehicle" and "transport vehicle" and the provisions of s. 42. sub-s. (1) and held that although s. 42, sub-s. (1), prohibited the owner of a "transport vehicle" from using or permitting the use of such vehicle in any public place, save in accordance with the conditions of a permit, the said sub-section was not limited in its application only to cases where the motor vehicle in question is registered as a transport vehicle. In order to effectuate the object underlying the enactment of s. 42, namely the control of transport vehicles, sub-s. (1) was required to be so construed as to mean (p. 1425) :

"... that if a person owns a motor vehicle and uses it or permits its use as a transport vehicles, he can do so provided he takes out the requisite permit thereof. If he does not take out the permit and uses it or permits it use as a `transport vehicle' he commits and infringement of the sub-section ... It must follow that even if a motor vehicle is occasionally used for carrying passenger for hire or reward, it must be regarded when so used as a public service vehicle and, therefore, a transport vehicle, and if it is so used without the necessary permit, such use would be in breach of s. 42(1) and the owner who uses it or permits it to be so used would be liable to be punished under s. 42(1) read with s. 123."

26. Proceeding further, the following pertinent observations were made at page 1426 :

"The combined effect of s. 42(1) and the definitions of a 'motor vehicle', a 'public service vehicle' and a 'transport vehicle' is that if a motor vehicle is used as a transport vehicle, the owner who so uses it or permits it to be so used is required to obtain the necessary permit. It is the use of the motor vehicle for carrying passengers for hire or reward which determines the application of s. 42(1). Therefore, whenever it is so used without the permit, there is an infringement of the sub-section. If the construction that sub-section by the Higher Court of Mysore were correct, it would mean that whereas an owner of a transport vehicle is required to have the permit, the owner of a motor vehicle not constructed or adapted as a transport vehicle can carry with impunity passengers for hire or reward without any permit thereof. Section 42(1) has been enacted for the purpose of controlling vehicles carrying passenger, the object of such control being obviously to ensure safety of passenger. The construction accepted by the Mysore High Court would defeat the object for which the Legislature provided such control in the interest of and for the safety of passengers."

27. In view of this decision, which has dealt with the question of permit in the context of penal liability, it is clear that if a person owns a motor vehicle and uses if or permits its user for carrying passengers for hire or reward even occasionally, the motor vehicle must be regarded, when so used, as a public service vehicle and, therefore, a transport vehicle and when the owner so uses it or permits it to be so used, he is required to obtain a permit under s. 42, sub-s. (1). Be it noted that in taking this view, the Supreme Court effectuated the object underlying s. 42, sub-s. (1), which, according to it, was enacted in the interest of passengers to control vehicles carrying them with a view to ensuring their safety.

28. We may now turn to the consideration of the question referred to the Full Bench. It is apparent that the question is framed bearing in mind the provisions of s. 96(2) (b) (i) (a). The assumed or admitted fact-situation on the basis of which the question is required to be answered is that :

1. the claim of statutory coverage was advanced in respect of a passenger who was carried on the vehicle on payment of charges when the accident giving rise to the claim occurred; and

2. the said vehicle was, on the date of the contract of insurance, not covered by a permit to ply for hire or reward.

29. Now, we have seen earlier :

1. that under s. 95(1) (b) (ii), the statutory insurance must cover the passenger risk in respect of the passengers carried in or upon a public service vehicle;

2. that under s. 95(1) (b) (i) read with the second clause of the proviso, the statutory insurance must also cover the passenger risk in respect of passengers carried for hire or reward or in pursuance of a contract of employment in a vehicle other than a public service vehicle such as a goods vehicle which can lawfully carry passengers under certain circumstances and to the specified extent;

3. that only such restrictive conditions incorporated in the statutory policy will be effective qua the Act liability as are referred to in s. 96(2) (b) and that upon the issuance of the certificate of insurance any other restrictive conditions in such policy will be inoperative qua the rights of third parties;

4. that the statutory insurance makes the insurer liable to indemnify the person or classes of persons specified in the policy to the extent specified in s. 95(2) against any liability incurred by them which is required to be covered under such insurance;

5. that once the insurer has issued the certificate of insurance, he has to satisfy any decree which a person receiving injuries or the dependants of a person who was injured or who died in the course of the accident obtain/obtains against any person covered by the statutory policy in respect of such liability;

6. that the liability to satisfy the decree is, however, subject to the right of the insurer to defend the action after being made a party thereto on any one or more of the grounds specified in s. 96(2);

7. that if the insurer successfully raises any of the defences therein mentioned, he can validly avoid the liability to satisfy the decree; and

8. that one of the grounds on which the insurer can defend the action under s. 96(2) (b) (i) is that there was a breach of a specified condition of the policy, namely, a condition excluding the use of the vehicle, for hire or reward, where the vehicle was, on the date of the contract of insurance, a vehicle not covered by a permit to ply for hire or reward.

30. We have also seen earlier :

1. that the necessity for a permit is only in respect of a transport vehicle (a public service vehicle or a goods vehicle) and

2. that the permit is necessary not only in respect of a motor vehicle which is actually used or constructed or adapted to be used as a public service vehicle and which is registered as such, but also when the owner of any motor vehicle uses or permits the use of such vehicle for carrying passengers for hire or reward, even if such user is occasional.

31. Let us now analyse and ascertain the true purport and effect of s. 96(2) (b) (i) (a) which has been quoted earlier. The insurer is thereby enabled to defend an action on the ground that the policy contains an exclusionary condition with regard to the use of the insured vehicle for hire or reward. This provision, it must be remembered, is a part of a well-conceived scheme regarding insurance against third party risk. It cannot, therefore, be read in isolation. It must be read in conjunction with the connected provisions which have been considered earlier. We have noticed earlier that the concept of the use of the insured vehicle for hire or reward is relevant in the context of the statutory coverage provided by s. 95(1) (b) (i) read with the first part of the second clause of the proviso as well as by s. 95(1) (b) (ii). It is in those cases that the coverage is extended to the liability in respect of a person or passenger carried for hire or reward. The defence under s. 96(2) (b) (i) (a) must, therefore, be confined to an action instituted by such person or passenger or by his dependants.

32. Since s. 96(2) (b) permits such a plea in defence, it is apparent that a condition excluding such use of the insured vehicle for hire or reward can be validly incorporated in the statutory policy, if the insured vehicle was, on the date of the contract of insurance, not covered by a permit to ply for hire or reward. In other words, such a condition in a statutory policy will be effective qua the third parties only under two circumstances; first, where the insured vehicle, not being a transport vehicle, was not required to be covered and was, in fact, not covered by any permit on the date of the contract of insurance, and secondly, even if the insured vehicle, being a transport vehicle, was in fact covered by a permit on the date of the contract of insurance, the permit did not cover its use for the carriage of passengers for hire or reward. If the insured vehicle on the date of the contract of insurance was a transport vehicle covered by a permit to carry passenger for hire or reward, a condition excluding its use for hire or reward, even if incorporated in the policy, would not be operative qua the rights of persons obtaining the decree and it would be wholly ineffective qua such persons. In this connection it might be clarified that the coverage may be express or implicit, that is to say, the permit may specifically authorise the carriage of passengers for hire or reward or such authority may be spelt out from the nature of the vehicle and the statutory provisions governing its user and the absence in the permit of any validly imposed regulatory or restrictive conditions as to its user for such purpose.

33. Now, in an action in which the claim of statutory coverage is advanced in respect of a passenger, who was carried on the insured vehicle when the accident giving rise to the claim occurred, the claimant will have to show that the statutory insurance coverage was available. In other words, he will have to show that the passenger risk was covered either by virtue of the provisions contained in s. 95(1) (b) (i) read with the first part of the second clause of the proviso or by reason of the provisions of s. 95(1) (b) (ii). The insurer, if he wants to disclaim the liability to satisfy the decree that may be passed in favour of the claimant in such an action, will have to establish :

1. that on the date of the contract of insurance, the insured vehicle was expressly or implicitly not covered by a permit to ply for hire or reward, that is, by a permit to carry any passenger for hire or reward;

2. that there was a specified condition in the policy which excluded the use of the insured vehicle for the carriage of passengers for hire or reward, and

3. that the vehicle was, in fact, used in breach of such specified condition on the occasion giving rise to the claim.

34. If all these facts are established by the insurer, then by virtue of s. 96(2) (b) (i) (a), he may succeed in avoiding the liability to satisfy the decree that may come to be passed in the action. In such a case, the coverage of the insured vehicle by a permit to ply for hire or reward, which does not authorise the carriage of passengers for hire or reward, on the date of the contract of insurance, would be a matter of no consequence. Besides, it is a matter of no consideration that the insured vehicle was used of carrying passengers for hire or reward only on the occasion in question or occasionally and not regularly. The motor vehicle must be regarded, when used to carry passengers for hire or reward, whether on a single or few occasions, as a transport vehicle and, therefore, required to be covered by a permit for the carriage of passengers for hire or reward.

35. It might be clarified that clauses (a) and (c) of s. 96(2) (b) (i), though they appear to cover situations which seem to overlap, provide for distinct defences which do not necessarily converge. Whereas clause (a) covers every vehicle, clause (c) is attracted only in the case of a transport vehicle. Besides, clause (c) may get attracted even where a defence based on clause (a) is not available. For example, when a vehicle which was, on the date of the contract of insurance, covered by a permit authorising its use as a contract carriage is used as a stage carriage, clause (c) will get attracted and not clause (a).

36. Having considered the question in the light of the statutory language, let us next consider whether there is any conflict in the two decisions of this court in Malubai's case [1980] 21 GLR 400 and Vanaji's case [1983] 53 Comp Cas 475. In Malubai's case, the claimants were the dependants of two passengers who travelled in a motor truck and died in the course of an accident which resulted from the collision of the said motor truck with a State Transport Bus. It was found that the deceased persons had each paid to the driver of the truck Rs. 1.25 for their carriage in addition to 25p. per each can of milk carried by them. It was, therefore, held that both the deceased persons were passengers who were carried in the truck for hire or reward and that the insurance company was liable to satisfy the award made in favour of the concerned claimants. In reaching this conclusion, the court relied upon the Full Bench decision in Ambaben's case [1979] ACJ 292; AIR 1979 Guj 9. Be it noted that, in that case, no plea in defence based on the provisions of s. 96(2) (b) (i) (a) was advanced on behalf of the insurance company and that the court was, therefore, not called upon to examine whether the insurance company was not liable to satisfy the award because of such plea in defence having been established.

37. In Vanaji's case [1983] 53 Comp Cas 475 (Guj), the claimants were the parents of a person who, while travelling in a trailer attached to a tractor, met with his death as the tractor, along with the trailer, turned turtle on account of rash and negligent act on the part of the driver of the tractor. It appears that the deceased was carried in the trailer for hire or reward and that at the time when the accident occurred, the competent authority had permitted goods-carrying vehicles to carry such passengers in view of the railway strike. It was not in dispute, however, that on the date of the contract of insurance, the vehicle was not covered by a permit to ply for hire or reward. The defence of the insurer of the tractor was that the owner had allowed the tractor and the trailer to be used for a purpose other than the one provided in the contract of insurance and that thereby he had committed breach of conditions embodied in the policy of insurance and that the insurer was, therefore, not liable to indemnify the insured and to satisfy the decree. The policy of insurance in that case had specifically provided in the schedule against the column "limitations as to use" that the tractor was to be used "for agricultural and forestry purposes" and that the policy did not cover "use for the carriage of passengers for hire or reward". There was also a notice in bold letters incorporated in the insurance policy to the following effect : "The insured is not indemnified if the vehicle is used or driven otherwise than in accordance with this schedule". In the light of the above conditions of the policy, the court held that there was a specific condition embodied in the policy which, apart from stating that the use of the vehicle shall be limited for agricultural and forestry purposes, also categorically stated that the policy did not cover the use for carriage of passengers for hire or reward and that the insured was not to be indemnified if the vehicle was used or driven otherwise than in accordance with the schedule. The court, therefore, held that the case fell squarely within the ambit of s. 96(2) (i) (a) and that the insurer was, therefore, not liable for the award passed in favour of the claimants and against the driver and the insured. The court made the following observations while considering the liability of the insurer (p. 481) :

"The provisions contained in sub-s. (2) including the grounds on which the insurance company can defend the action are to be read in the context of the earlier provisions contained in sub-s. (1) of the said section. Sub-section (1) makes it obligatory on the insurer to satisfy judgments against persons insured in respect of third party risks. But by sub-s. (2), it is provided that that the condition precedent to this liability being incurred by the insurer is that a notice through court of the bringing of proceedings, or in respect of any judgment as long as execution is stayed thereon pending an appeal, is served on the insurer and it is then provided that the insurer to whom notice of the bringing of any such proceedings, etc., is so given shall be entitled to be made a party thereto and to defend the action on any of the three grounds mentioned in cls. (a), (b) and (c) following thereafter. In the instant case, we are concerned with the grounds which are mentioned in clause (b) which provide that a breach has been committed of the specified condition embodied in the policy relating to the category of the condition as is set out therein. The first one is condition excluding the use of the vehicle, inter alia, 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. It would be thus manifest that, but for the insertion of sub-s. (2) following sub-s. (1), the liability of the insurance company, to satisfy an award against the insured in respect of third party risks, would be absolute. It is, therefore, that sub-s. (2) is engrafted providing the contingencies in which the insurance company is absolved from this liability. The requirement provided is in the nature of a condition precedent requiring that a notice with regard to the proceedings, etc., has to be served on the insurance company. A further right is conferred on the insurance company to the effect that on service of such a notice, it has a right to be made a party to the proceedings and to defend the action on the grounds mentioned in cls. (a), (b) and (c). These provisions are vis-a-vis the liability of the insurer to satisfy an award against the insured concerning third party risks, and it would, therefore, be against the very spirit of the provisions of sub-s. (2) to contend that, so far as third party risk is concerned, the insurance company is bound to satisfy the award, irrespective of any condition embodied in the policy since it would be a matter, inter se, between the insured and the insurance company. Such an approach may be justifiable in respect of breaches of conditions contained in the policy provided the conditions are not covered by the categories of conditions specified in sub-s. (2) of s. 96. But once it is demonstrated that the breach is in respect of a specific condition contained in the policy and that the infringed condition is the one falling within the ambit of the conditions set out in the said sub-section, such an approach would be futile."

38. It would appear from what has been stated above that there is really not conflict between the decision in Malubai's case [1980] 21 GLR 400 and Vanaji's case [1983] 53 Comp Cas 475 (Guj). In Malubai's case, the insurer was held liable to satisfy the award because the defence permissible under s. 96(2) (b) (i) (a) was not pleaded and established and there was, therefore, no occasion to consider the case from that angle. In Vanaji's case, such defence was not only pleaded but it was also established and court in that light gave effect to the statutory provisions by holding that the insurer was not liable to satisfy the decree.

39. In the light of the foregoing discussion, we answer the question referred to us as follows :

The liability in respect of the death of or bodily injury to a passenger carried for hire or reward on the insured vehicle when the accident giving rise to the claim occurred, including the liability in respect of the owner or hirer of the insured vehicle or his bona fide employees within the permissible limit, will be covered by the statutory insurance either by virtue of s. 95(1) (b) (i) read with the second clause of the proviso or by reason of s. 95(1) (b) (ii) of the Act. In such a case, the insurer will have to pay to the person entitled to the benefit of the award, the sum assured, which shall not be less than the sum specified in s. 95(2), subject, however, to the right of the insurer to disclaim the liability, inter alia, under s. 96(2)(b) (i) (a). The insurer, in order to successfully disclaim his liability on that ground, will have to establish :

1. that on the date of the contract of insurance, the insured vehicle was expressly or implicitly not covered by a permit to carry any passenger for hire or reward;

2. that there was a specified condition in the policy which excluded the use of the insured vehicle for the carriage of any passenger for hire or reward, and

3. that the vehicle was, in fact, used in breach of such specified condition on the occasion giving rise to the claim by reason of the carriage of the passenger therein for hire or reward.

40. If all these facts are established by the insurer, the benefit of statutory insurance will not be available in respect of such passenger. In other words, the claimant in such a case, be he the passenger himself or his dependant, will not be able to recover from the insurer, the amount, if any, awarded in his favour to the extent specified in s. 95(2) and the insurer will not be liable to satisfy such award.

41. We wish to make it clear that nothing that we have stated in the course of this judgment should be considered as affecting the liability of the insurer in respect of persons other than passengers who are carried for hire or reward in the insured vehicle at the time of the occurrence of the event which gives rise to the claim against the insurer and that even in respect of such passengers, the observations made herein are to be understood as confined to a case where the plea under s. 96(2) (b) (i) (a) is successfully raised.

42. The matter will now go back before the Division Bench for disposal of the first appeals in the light of what we have stated hereinabove.