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S. Sanjiva Shetty, v. Anantha And Others,

Karnataka High Court
Jun 30, 1978
Judgment
Subsequent
References
CaseIQ
Case Information
CITATION CODES
citation codes
CASE NO.

Misc. First Appeals Nos. 179 and 211 of 1973*

Attorney(S)

For the Appellant: B.V. Acharya, Basavulingappa, K. Radhesh Prabhu, K. Suryanarayana Rao, Sriyuths P. Ganapathi Bhat, U.L. Narayan Rao, Advocates.

JUDGES

D.M Chandrashekhar, C.J

E.S Venkataramiah

M.K Srinivasa Iyengar, JJ.

ACTS

S. 110-A of the Motor Vehicles Act, 1939 (hereinafter referred to as the Act)

Amending Act 56 of 1969) to which S. 95 of the Motor Vehicles Act, 1939

S. 95(2) of the Motor Vehicles Act, Section 94 of that Act

Motor Vehicles (Amendment) Act, 1969 (Act No. 56 of 1969),

S. 95(2) of the Motor Vehicles Act.

S. 95 of the Motor Vehicles Act

Motor Vehicles Act, 1939.

Amending Act 56 of 1969

person.5. Section 96(4)

bus).4. Section 95(4)

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Summary of Opinion — Full Bench (Srinivasa Iyengar, J.)

Factual and Procedural Background

The Full Bench was asked to decide the following question (as referred by a Division Bench): where a motor vehicle insurance policy was issued prior to 2-3-1970 (i.e., before the amendment effected by the Motor Vehicles (Amendment) Act, 1969 (Act No. 56 of 1969) to S.95 of the Motor Vehicles Act, 1939), but the accident giving rise to the claim occurred after 2-3-1970, whether the pecuniary limit of the insurer's liability is to be determined by S.95 as it stood on the date the policy was issued or by the higher limit provided by S.95 as amended with effect from 2-3-1970.

Relevant facts expressly stated in the opinion:

  • The accident occurred on 18-4-1970.
  • The insurance policy was issued on 9-1-1970 by Indian Mercantile Insurance Company Ltd. in respect of the motor vehicle involved.
  • Before the amendment, the limit under S.95(2)(b) was Rs. 20,000/-. By Act 56 of 1969 the limit was raised to Rs. 50,000/-, the amendment coming into force on 2-3-1970.

Procedurally, the Division Bench referred the question to the Full Bench because earlier decisions of the Court were not uniform on the point.

Legal Issues Presented

  1. Where a motor vehicle insurance policy was issued before 2-3-1970 (prior to the amendment of S.95 by Act 56 of 1969), but the accident occurred after 2-3-1970 (after the amendment came into force), whether the extent of the pecuniary limit of liability of the insurer is to be determined by S.95 as it stood on the date of issue of the policy or by the higher limit provided by S.95 as amended.

Arguments of the Parties

This information was not available in the provided opinion.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Shelkupura Transport Co. v. N.L.T. Insurance Co. ((1971) 1 SCC 785 : AIR 1971 SC 1624) That the measure of the insurer's liability must be ascertained with reference to S.95(2) of the Motor Vehicles Act; S.94 requires insurance for passenger buses. The opinion cites the case for the proposition that the insurer's measure of liability is to be ascertained by reference to the statutory provisions governing third-party insurance (S.95(2)).
New Asiatic Insurance Co. v. Pessumal (AIR 1964 SC 1736) Chapter VIII ensures third parties can recover damages independent of the insured's financial condition; third parties' rights are not affected by conditions in the policy. The Court relied on this Supreme Court observation to support the view that third-party rights and statutorily imposed insurer liability should not be defeated by contractual conditions and that provisions must be construed to secure recovery by third parties.
H.I. Insurance Co. Ltd. v. A. Vijayalakshmi (AIR 1976 Andh Pra 39) Held that the material date for ascertaining liability is the date of accrual of liability (date of accident). The Bench noted this decision as supporting the proposition that the relevant statutory provision in force at the time the liability arises determines the extent of insurer liability.
Sabita Pati v. Rameshwar Singh (1973 ACC CJ 319) Expressed the view that the date of accrual of liability is the material date for determining insurer's liability. The opinion records this decision as aligning with the view that liability should be ascertained by reference to the law in force when the cause of action accrues.
Smt. Jayanthi S. Rao v. Mariamma (M.F.A. 525 of 1973) (unreported, decided 12-12-74) In an analogous context, held that liability of insurer is to be ascertained with reference to the date of the accident. Noted by the Court as an unreported decision reaching the same conclusion that the date of accident governs the applicable limit.
B.R. Kamath v. Devaki (M.F.A. 373/73; decided 2-7-1974) Applied the amended provision and enforced liability on the basis of the amended S.95 where the amendment had come into force prior to the accident. Referred to as a decision in which the amended S.95 limit was held applicable because the amendment was in force before the accident.
Premier Insurance v. Padma Srinivasan ((1976) 1 Kant LJ 168 : AIR 1976 Kant 187) Reasoned that the amendment did not have retrospective effect and that the insurer’s liability should be limited to the amount specified by the policy/certificate (i.e., Rs.20,000) where the policy was issued before the amendment. The Full Bench distinguished and rejected the approach in this decision, holding that applying the statute in force when the liability accrues does not give retrospective effect and that S.96(3) and (4) allow the insurer to recover any excess paid from the insured.
M. Vengamma v. K. Durvasulu (AIR 1978 Andh Pra 90) Held that the higher limit prescribed by S.95(2) as amended was attracted where facts were similar. The Court cited this Andhra Pradesh High Court decision as supporting the Full Bench's conclusion that the amended higher limit applied to accidents occurring after 2-3-1970.

Court's Reasoning and Analysis

The Court's analysis proceeded by reference to the statutory scheme (Chapters VIII and relevant sections) and authoritative precedent:

  1. Statutory framework: The opinion summarises S.94 (requirement of insurance), S.95(1) and S.95(2) (requirements and limits of policies), S.95(4) (certificate of insurance), and S.96(1), S.96(3) and S.96(4) (insurer's obligation to satisfy judgments and rights of recovery by the insurer against the insured for sums paid in excess of policy limits).
  2. Nature of liability: The Court emphasises that the insurer's liability to a person entitled to compensation is imposed by statute and that "the measure of liability is to be ascertained from the relevant provision in force at the time the liability arises."
  3. Material date: The Court explains that the cause giving rise to a claim arises on the death or injury to a third party and the liability to compensate also arises on that event and becomes fastened to the insurer if the insured is held liable. Therefore, the material date is the date of accrual of liability (generally the date of the accident).
  4. Reliance on precedent: The Court relies on the Supreme Court decision in New Asiatic Insurance Co. v. Pessumal to underscore that Chapter VIII must be construed to ensure third parties can recover damages and that their rights are not affected by conditions in the policy. It reads this authority as supporting the proposition that statutory protection for third parties should not be negated by contractual limitations in insurance policies.
  5. Treatment of contrary authority: The Court expressly examined and rejected the reasoning in Premier Insurance v. Padma Srinivasan (AIR 1976 Kant 187), which had held that the amendment should not apply to policies issued prior to the amendment because doing so would retrospectively increase the insurer's contractual obligation. The Full Bench found that:
    • Applying the amended provision in force at the date the liability accrued does not amount to giving the amendment retrospective effect.
    • The concern that applying the amendment would adversely affect the insurer's contractual obligation is misplaced in view of S.96(3) and S.96(4), which permit the insurer to recover from the insured any amount paid that exceeds the policy limit.
  6. Supporting decisions: The Court noted decisions from the Andhra Pradesh and Orissa High Courts and other unreported decisions that held the material date to be the date of the accident and applied the amended higher limit where the accident occurred after 2-3-1970.
  7. Conclusion of analysis: On the basis of the statutory scheme and applicable precedent, the Court concluded that the relevant statutory provision in force at the time the liability accrued governs the insurer's maximum liability.

Holding and Implications

HOLDING: The Full Bench held that the material date for ascertaining the extent of the insurer's liability is the date of accrual of the cause of action (generally the date of the accident). Therefore, for claims arising out of accidents on or after 2-3-1970, the extent of the pecuniary limit of liability of the insurer is to be determined by S.95 as amended with effect from 2-3-1970 (i.e., the higher limit applicable from that date).

Implications (direct effects stated in the opinion):

  • In the present case (accident on 18-4-1970), the higher limit under the amended S.95 applies.
  • The insurer's enhanced liability under the amended statute does not amount to giving retrospective effect to the amendment; rather it applies because the liability accrued after the amendment came into force.
  • The opinion notes statutory safeguards in S.96(3) and S.96(4) that permit the insurer to recover from the insured any amount paid in excess of the policy limit, addressing the concern that the insurer's contractual obligations would be adversely affected.
  • No broader new legal principle beyond the application of the statutory scheme to the facts is articulated; the direct consequence is that liability in cases where the accident occurred after 2-3-1970 must be computed with reference to the amended S.95 in force on that date.

The Bench answered the referred question accordingly.

Show all summary ...

Srinivasa Iyengar, J.:— The question referred to the Full Bench for a decision is:

“Where under a motor vehicle's insurance policy issued prior to 2-3-1970 (i.e before the Amendment of that provision by the Amending Act 56 of 1969) to which S. 95 of the Motor Vehicles Act, 1939 is attracted, a claim is made arising out of an accident occurring after 2-3-70 (the date on which the said section was amended by Act 56 of 1969) has the extent of the pecuniary limit of liability of insurer to be determined on the basis of the provisions of S. 95 as it stood at the date of the issue of the policy or is the higher limit provided by S. 95 as amended attracted.”

2. The relevant facts bearing on the question are: The accident giving rise to the claims under S. 110-A of the Motor Vehicles Act, 1939 (hereinafter referred to as the Act) occurred on 18-4-70. The Indian Mercantile Insurance Company Ltd., had issued a policy of Insurance dated 9-1-70 in respect of the motor vehicle owned by the Appellant against whom the claim was made and which was involved in the accident. Prior to the coming into force of the Amending Act 56 of 1969 the limit of the liability under S. 95(2)(b) of the Act was Rs. 20,000/-. By Act 56 of 1969 the limit of liability was increased to Rs. 50,000/-. The Amendment came into force with effect from 2-3-1970. Section 94(1) of the Act provides, “No person shall use except as a passenger or cause or allow any other person to use a motor vehicle in a public place, unless there is in 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 this Chapter,”

3. Section 95(1) of the Act provides that in order to comply with the requirements of this Chapter, a policy of insurance must (inter alia) be a policy which is issued by a person who is an authorised insurer and insures the person or classes of persons specified in the policy to the extent specified in sub-s. (2)(a) 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. In Shelkupura Transport Co. v. N.L.T Insurance Co. ((1971) 1 SCC 785 : AIR 1971 SC 1624) the Supreme Court observed in para 8 of its judgments.

“This takes us to the question as to the extent of the liability of the Insurance Company. The measure of liability of the Insurer has to be ascertained with reference to S. 95(2) of the Motor Vehicles Act, Section 94 of that Act requires that every passenger bus should be insured against third party risk. Section 95(1) prescribes the requirements of policies………” (In that case the vehicle involved was a passenger bus).

4. Section 95(4) provides for the necessity to issue a certificate of insurance in the prescribed form. Section 96(1) provides that the insurer shall satisfy judgments against persons insured in respect of third party risks. Section 96(3) provides “where a certificate of insurance has been issued under sub-s. (4) of S. 95 to the person by whom a policy has been effected, so much of the policy as purports to restrict the insurance of the persons insured thereby by reference to any conditions other than those in cl. (b) of sub-s. (2) shall as respects such liabilities as are required to be covered by a policy under cl. (b) of sub-s. (1) of S. 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 of only this sub-section shall be recoverable by the insurer from that person.”

5. Section 96(4) provides “If the amount which an insurer becomes liable under this section to pay in respect of a liability incurred by a person insured by a policy exceeds the amount for which the insurer would apart from the provisions of this section be liable under the policy in respect of that liability, the insurer shall be entitled to recover the excess from that person.”

6. It is seen from the above provisions that the liability of the insurer to the person entitled to compensation is imposed statutorily. The measure of liability is to be ascertained from the relevant provision in force at the time the liability arises.

7. The cause giving rise to a claim for compensation arises on the death or injury to a third party and the liability to compensate also arises on that event and gets fastened to the insurer if the insured is held liable to so compensate. Explaining the scheme of the provisions of Chap. VIII of the Act the Supreme Court observed in New Asiatic Insurance Co. v. Pessumal (AIR 1964 SC 1736) (at page 1739)—

“Chapter VIII of the Act, it appears from the heading, makes provision for Insurance of the vehicle against third-party risks, that is to say, its provisions ensure that third parties who suffer on account of the user of the motor vehicle would be able to get damages for injuries suffered and that their ability to get the damages will not be dependent on the financial condition of the driver of the vehicle whose user led to the causing of the injuries. The provisions have to be construed in such a manner as to ensure this object of the enactment.”

8. In para 22 of the judgment it was observed:

“……We are of opinion that once the company had undertaken liability to third parties incurred by the persons specified in the policy, the third parties' right to recover any amount under or by virtue of the provisions of the Act is not affected by any condition in the policy……”

9. The material date is the date of accrual of the liability though the liability arises by virtue of the insurance policy and it being in force as at the date of accrual of the liability. This is also the view taken by the High Court of Andhra Pradesh in H.I Insurance Co. Ltd. v. A. Vijayalakshmi (AIR 1976 Andh Pra 39) and the Orissa High Court in Sabita Pati v. Rameshwar Singh (1973 ACC CJ 319). The Division Bench has referred the question to the Full Bench noticing that the decisions of this Court were not uniform. In an unreported judgment in Smt. Jayanthi S. Rao v. Mariamma (M.F.A 525 of 1973 decided on 12-12-74) in which an analogous provision in S. 95(2)(a) raising the limit of liability was for consideration it was held that the liability of the insurer is to be ascertained with reference to the date of accident. In M.F.A 373/73, (B.R Kamath v. Devaki) decided on 2-7-1974 the liability on the basis of the amended provision was enforced. The relevant portion of the judgment is:

“It is contended for the appellants that in view of the amendment of S. 95 of the Motor Vehicles Act effected by the Motor Vehicles (Amendment) Act, 1969 (Act No. 56 of 1969), the limit of liability of the insurer has been raised to Rs. 50,000/- and therefore the direction of the Tribunal below has to be modified fixing the liability for payment of the entire sum of Rs. 28,500/- on the insurer in view of the amended law in force. It is not denied that the said amendment of S. 95 had come into force prior to the date of the accident, on 2-3-1970 itself. That the true legal position arising from the amendment of S. 95 by the aforesaid Act is, as contended for the appellants, not denied on behalf of the 6th respondent insurer i.e the Concord of India Insurance Co. Ltd. We are also satisfied that the contention is well founded in law.”

10. The accident had occurred subsequent to the amendment by Act 56 of 1969 coming into force though the policy had been issued earlier. However, in Premier Insurance v. Padma Srinivasan reported in (1976) 1 Kant LJ 168 : (AIR 1976 Kant 187) another Bench expressed itself thus (at page 189 of AIR):

“The liability of the insurer is that under the insurance policy issued by him. But in the present case, the liability is determined by the terms of Ex. P-9 the Certificate of Insurance. It states that the liability is limited to that under Chapter VIII of the Motor Vehicles Act, 1939. It means that the liability was limited to Rs. 20,000/- according to S. 95(2) as it then stood. If retrospective effect is given to the amendment Act, it will have the effect of enhancing the liability of the insurer to Rs. 50,000/-. In other words it affects adversely the existing obligation of the insurer under the terms of the contract entered into by the insurer with the insured. There are no express words giving retrospective effect to the amendment of S. 95(2) of the Motor Vehicles Act. In the amendment Act, there are no other indications to show that it was the intention of the Legislature to give a retrospective effect to this amendment. Hence the amendment must be held to apply only to policies of insurance or liabilities of the insurer created after the date the amendment came into effect viz., 2-3-1970.”

11. In our opinion, the observations in this judgment in regard to the nature of the liability of the insurer to third parties would not be correct in the light of the observations of the Supreme Court quoted above and the scope of the provisions of the Act noticed. By applying the amended provision which was in force at the date the liability accrued no retrospective effect is given. The reasoning assuming the contrary cannot be supported. The other reason given that by giving effect to the amendment the existing obligation of the insurer under the contract entered into by it with the insured is adversely affected would also not be correct in the light of the provisions in S. 96(3) and (4) which entitle the insurer to recover from the insured any amount paid by the former to discharge its liability in excess of the amount covered by the policy. Under the circumstances similar to those in the instant case the Andhra Pradesh High Court has held that the higher limit prescribed by S. 95(2) as amended was attracted. (AIR 1978 Andh Pra 90, M. Vengamma v. K. Durvasulu).

12. Dissenting from the view expressed in (1976) 1 Kant LJ 168 : (AIR 1976 Kant 187), we hold that the material date for ascertaining the extent of liability of the insurer is the date of the accrual of the cause of action for a claim arising out of an accident, which in general would be the date of the accident and so in respect of a claim arising out of an accident on or after 2-3-70 the extent of the pecuniary limit of liability of the insurer is to be determined on the basis of the provisions of S. 95 as at that date and in the instant case the higher limit provided by S. 95 as amended with effect from 2-3-70 is attracted. The question is answered accordingly.

13. Answered accordingly.

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