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National Insurance Co. Ltd. v. Faqir Chand And Others

Jammu and Kashmir High Court

Apr 25, 1994

Judgment

Subsequent
References

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Structured Summary of the Provided Opinion

Factual and Procedural Background

This opinion arises from an appeal in which the sole ground urged by Mr. Shekhar (the appellant's counsel) was that respondent No. 1, who was a passenger of the bus involved in the accident, could not be included within the statutory category of "third party" under Chapter XI of the Motor Vehicles Act, 1988. The contention was that the expression "third party" should exclude passengers travelling in the insured vehicle, and therefore the liability of the appellant (in relation to respondent No. 3) for an accident involving a passenger could not be invoked. No other point was urged. The court heard the argument and delivered the opinion dismissing the appeal.

Legal Issues Presented

Whether a passenger travelling in the insured vehicle (the bus involved in the accident) falls within the statutory concept of "third party" for the purposes of insurance under Chapter XI of the Motor Vehicles Act, 1988.

Arguments of the Parties

Appellant's Arguments

Mr. Shekhar argued that the term "third party" should exclude passengers travelling in a bus, and therefore the appellant's liability with respect to an accident involving a passenger could not be invoked.
The opinion records that no other point was urged by Mr. Shekhar.

The opinion does not set out detailed counter-arguments from the respondent within the provided text.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The court analysed the statutory framework in Chapter XI of the Motor Vehicles Act, 1988, focusing on the relevant provisions:

Section 145 (the definition section) was noted to omit any express definition of "third party" (though clause (g) states that "third party" includes the Government).
Section 146 was examined; it prescribes the necessity for insurance against third party risk and contains the phrase that no person shall use, except as a passenger, a motor vehicle in a public place unless a compliant policy of insurance is in force. However, the court observed that Section 146 does not describe the detailed requirements of Chapter XI or define "third party."
Attention was then directed to Section 147, which sets out that a policy complying with Chapter XI must insure the person specified against liability for death or bodily injury to any person or damage to property of a third party caused by the use of the vehicle. The court again noted that Section 147 does not define "third party."
The court adopted a contract-based interpretation: in a contract of insurance there are two contracting parties — the insurer and the insured — who may be thought of as the first and second parties. Anyone who is not a contracting party to the insurance policy is consequently a "third party" because that person is neither the insurer nor the insured.
Applying this analytical construction, the court reasoned that the phrase "third party" in Chapter XI must include every person who is not a party to the insurance contract. This category therefore encompasses persons walking on the road, occupants of other vehicles, and importantly, passengers in the insured vehicle itself.
The court emphasized the purpose of compulsory third party insurance: insureds procure policies to cover claims lodged against them by third parties and insurers undertake to indemnify insureds against such claims. Narrowing the definition of "third party" to exclude passengers would frustrate the purpose of obtaining such insurance and the object of the Motor Vehicles Act, which makes insurance against third party risks mandatory.

Holding and Implications

APPEAL DISMISSED.

Holding: The court rejected the appellant's contention and held that the expression "third party," as used in Chapter XI of the Motor Vehicles Act, 1988, includes persons who are not contracting parties to the insurance policy — which includes passengers travelling in the insured vehicle.

Implications: As a direct effect of this ruling, the appellant's argument that a passenger cannot be a "third party" under the Act failed, so liability in relation to claims by such a passenger falls within the scope of third party insurance under the statute. The opinion reasons that excluding passengers from the concept of "third party" would defeat the purpose of compulsory third party insurance. The provided text does not discuss any broader precedent-setting consequences beyond this direct effect.

Appeal dismissed.

Show all summary ...

1. The only ground urged by Mr. Shekhar today in the appeal is that respondent No. 1 who was the passenger of the bus in question could not be included in the category of “third party” and, therefore, the liability of the appellant qua respondent No. 3 in relation to an accident involving a passenger could not be invoked. According to Mr. Shekhar “third party” is an expression which should exclude the passengers travelling in a bus. No other point was urged.

2. Chapter XI of the Motor Vehicles Act, 1988 deals with the insurance of motor vehicles against the third party risk. Section 145 is the definition section, it does not define a third party, even though in clause (g), it has been stated that “third party” includes the Government. Section 146 relates to the necessity for insurance against a third party risk and lays down that no person shall use”, except as a passenger a motor vehicle in a public place unless there is in force in relation to such motor vehicle a policy of insurance complying with the requirements of Chapter XI of the Act. What are the requirements of this Chapter and how are these requirements to be complied with in a policy of insurance are not, however, mentioned in Section 146 of the Act. For these, one has to look at Section 147 which lays down that in order to comply with the requirements of Chapter XI, a policy of insurance must be a policy which, inter alia is issued by an insurer and insures the person specified in the insurance policy against any liability which may be incurred by him in respect of the death 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. As will be evident once again the expression “third party” has not been defined in Section 147. What is the true meaning of the expression “third party”? A contract of insurance has two parties to it, the insurer and the insured. These are the contracting parties of the contract of insurance and they, therefore, can be called as the first party and the second party. Any party, therefore, who is not a contracting party to the policy of insurance will automatically be referred to and called as a third party because he is neither the first party (the insurer) nor the second party (the insured) (or vice versa, if one pleases).

The use of the words “third party” therefore, in Chapter XI of the Motor Vehicles Act clearly refers to the intention of the Legislature to point out to a party who is neither the first party nor the second party to a contract of insurance.

3. Other than the contracting parties to the insurance policy, the expression “third party” therefore, should include everyone, be it a person travelling in another vehicle, one walking on the road or a passenger in the vehicle itself which is the subject matter of the insurance policy. Every insured takes out an insurance policy against a third party risk, and enters into a contract with insurer, only with the motive, intention and purpose of covering the risks which may arise in relation to claims lodged against him by a third party. By agreeing to issue the insurance policy, the insurer undertakes to insure the insured and indemnify him against all risks and in relation to all claims lodged against him by third parties. Narrowing the concept, scope and ambit of a third party, and therefore, excluding the passengers in the vehicle from the operation and purview would not only defeat the very purpose of taking out the insurance policy, but the very object of the Motor Vehicles Act which makes it a mandatory requirement of law that all vehicles/owners of vehicles must be compulsorily insured against third party risks.

The appeal has no merit and is dismissed.