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The New India Assurance Co. Ltd. v. N. Paramu And Others
Factual and Procedural Background
The appellant, an Insurance Company and the third respondent in OP(MV) No. 1218/85 before the Motor Accidents Claims Tribunal (M.A.C.T) Quilon, challenges the Tribunal's order which held it liable for the entire compensation awarded against the owner and driver of the vehicle involved in the accident. The compensation amount awarded was Rs. 71,000 with interest. The Insurance Company contends that its liability is limited to Rs. 15,000 as per the motor policy issued on 11-5-1983.
Legal Issues Presented
- Whether the liability of the appellant Insurance Company should be determined under Section 147 of the Motor Vehicles Act, 1988, thereby making it liable for the entire compensation amount awarded.
- Whether a policy of insurance issued with limited liability before the commencement of the 1988 Act continues to be effective as a policy under Section 147 after the commencement of the Act.
- Whether the appellant Insurance Company can rely on a copy of the insurance policy to limit its liability, given the procedural requirements under the Indian Evidence Act.
Arguments of the Parties
Appellant's Arguments
- The liability of the Insurance Company is limited to Rs. 15,000 as per the motor policy issued on 11-5-1983.
- The Tribunal erred in making the Insurance Company liable for the entire compensation amount of Rs. 71,000 plus interest.
Owner of the Vehicle's Arguments
- Despite the limited liability stated in the insurance policy, the Insurance Company must be held liable for the entire amount under Section 147 of the Motor Vehicles Act, 1988.
- The insurance policy after the commencement of the 1988 Act should be treated as one issued under Section 147, which imposes unlimited liability except in limited cases.
- The appellant Insurance Company failed to prove the policy of insurance in a manner known to law and thus should not be allowed to limit its liability.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Oriental Fire & Genl. Ins. Co. Ltd. v. Chandrawali (1989 ACJ 419) | Application of Sections 64, 65 and 66 of the Indian Evidence Act regarding proof of insurance policy by copy and procedural requirements for production of evidence. | The court distinguished this precedent, holding it inapplicable because the owner of the vehicle had custody of the original policy and could not oppose marking the copy of the insurance policy despite the insurer not following the procedural steps under Section 66 of the Evidence Act. |
Court's Reasoning and Analysis
The court examined the provisions of Sections 146 and 147 of Chapter XI of the Motor Vehicles Act, 1988, which mandate insurance of motor vehicles against third party risks and prescribe the requirements and limits of liability under such policies. Section 147 requires policies to comply with its provisions, generally imposing unlimited liability except for property damage capped at Rs. 6,000.
The court noted that policies issued with limited liability before the commencement of the 1988 Act continue to be effective only for a limited period—four months after commencement or until expiry of the policy, whichever is earlier—per the proviso to sub-section 2 of Section 147. The appellant's policy expired on 10-3-1984, before the 1988 Act came into force, and thus was not automatically converted into a policy under Section 147.
Accordingly, the Tribunal erred in holding the Insurance Company liable for the entire compensation amount under Section 147. The liability must be limited to the amount specified in the policy, Rs. 15,000.
Regarding the proof of the insurance policy, the court rejected the owner's contention that the insurer could not rely on a copy of the policy due to procedural lapses under the Evidence Act. Since the owner had custody of the original policy, he could not object to the copy being marked, and hence the insurer's reliance on the copy was permissible.
Holding and Implications
The appeal is allowed to the extent that the liability of the appellant Insurance Company is limited to Rs. 15,000 as specified in the insurance policy. The court clarified that no further payment is required from the appellant under the award since it has already deposited Rs. 20,000, which the claimant has withdrawn.
This decision directly affects the parties by modifying the quantum of the Insurance Company's liability but does not establish any new precedent beyond the interpretation and application of Sections 146 and 147 of the Motor Vehicles Act, 1988, and the procedural aspects of proving insurance policies under the Evidence Act.
Radhakrishna Menon, J.:— The Insurance Company, the third respondent in OP(MV) No. 1218/85 before the M.A.C.T Quilon is the appellant. The order of the Tribunal making the Insurance Company liable for the entire compensation awarded against the owner as also the driver of the vehicle involved in the accident is under challenge.
2. The learned consel for the appellant argues that the liability of the Insurance Company is limited to the extent of Rs. 15,000/- and that it is so can be seen from the ‘motor policy’ issued on 11-5-1983. The counsel in this onnection made specific reference to the endorsement in the policy under the head ‘limits of liability’ namely, limit of the amount of Company's liability under Section II-I(i) in respect of any one accident such amount as is necessary to meet the requirements of MV Act, 1939 and limit of the amount of the Company's liability under Section II-I(ii) in respect of any one claim or series, of claims arising out of one event Rs. 50,000/-.
3. The Tribunal below therefore the counsel submits, has gone wrong in making the appellant insurance company liable for the entire compensation amount of ‘Rs. 71,000/- with 6% interest from 27-2-1984 till 3 months after the date of award and 18% interest thereafter till realisation’.
4. The learned counsel representing the owner of the vehicle, the sixth respondent, on the other hand argues that though under the insurance policy the liability of the insurance company is limited, the insurance company must be deemed to be liable for the entire amount in view of the provisions contained in Section 147 of the Motor Vehicles Act, 1988, for short. The 1988 Act. It is all the more so, it is further contended, because the policy of insurance after the coming into force of the 1988 Act, must be treated as one issued under Section 147. If that be the position, it should be held that the Tribunal has rightly fastened the entire liability on the appellant insurance company, the counsel submits.
5. The question thus arising for consideration is: On the facts and circumstances of the case, could it be said that the liability of the appellant insurance company requires to be determined under Section 147?
6. To find an answer to the question we have to consider the scheme of Sections 146 and 147 of Chapter XI of the 1988 Act, which has as its caption's Insurance of Motor Vehicles Against Third Party Risks’. Section 146 says that no person shall use, except as passenger, or cause or allow any other person to use, a motor vehicle in a public place unless he has taken a policy of inscurance complying with the requirements of Chapter XI. Section 147 prescribes ‘the requirements of policies and limits of liability’. It is thus clear from these sections that no person, except as a passenger, shall use or cause or allow any other person to use a motor vehicle in a public place unless it be is in custody of a current policy of insurance complying with the requirements of Chapter XI of the 1988 Act. To put it differently after the commencement of the 1988 Act no person, except as a passenger, can use or allow another 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 the other person, as the case may be, a policy of insurance complying with the requirements of Chapter XI. It should in this connection be noted that the liability of the insurer under the policy of insurance issued under Section 147 is the actual amount of liability incurred i.e the liability is unlimited except in respect of damage to any property of a third party, a limit of rupees six thousand. That means the contract evidenced by policy of insurance, with limited liability and in force on the commencement of the 1988 Act, in the absence of a saving clause, would get automatically terminated. So we have to see whether the 1988 Act contains any such saving clause. A reference in this connection to the proviso to sub-section 2 of Section 147 is profitable. We shall now read this proviso:
“Provided that any policy of insurance issued with any limited liability and in force, immediately before the commencement of this Act, shall continue to be effective for a period of four months after such commencement or till the date of expiry of such policy whichever is earlier”.
7. This proviso thus gives life to such insurance policies which were in force on the commencement of the 1988 Act for a limited period. In view of this proviso a policy of insurance issued with any limited liablity and in force on the commencement of the 1988 Act will continue to be effective for a period of four months after such commencement or till the date of expiry of such policy whichever is earlier.
8. Having understood the law thus, let us see whether the Tribunal was right in making the appellant liable for the entire compensation amount awarded against the owner of the vehicle placing the claim under Section 147? Our answer is No: because, there is no provision in the 1988 Act treating a policy of insurance issued with any limited liability and in force before its commencement as one issued under Section 147. On the other hand the 1988 Act recognises the effectiveness of such policies for a specified period even after its commencement. The argument of the counsel that the appellant insurance company has rightly been made liable for the entire compensation amount therefore is liable to be rejected. In fact this question does not arise for consideration because, even according to the owner of the vehicle the policy of insurance expired on 10-3-1984, much prior to the coming into force of the 1988 Act. The question aforesaid therefore is answered in favour of the appellant. The liability of the appellant accordingly is limited to the extent specified in the policy of insurance namely Rs. 15,000/-.
9. The counsel for the owner of the vehicle then argued that inasmuch as the appellant failed to prove the policy of insurance issued with limited liability in a manner known to law, the appellant shall not be permitted to rely on the same to substantiate its case that it cannot be made liable for the entire compensation amount awarded against the owner. In support of this argument the counsel referred us to the decision in Oriental Fire & Genl. Ins. Co. Ltd. v. Chandrawali (1989 ACJ 419). A Division Bench of the Punjab and Haryana High Court considered the scope of Sections 64, 65 and 66 of the Evidence Act and held thus:
“The insurer was required Under Section 66 of the Act to have previously given a notice to the owner to produce the original policy of insurance and on his failure to do so it could have produced its copy under clause (a) of section 65 ibid. None of the steps as contemplated by the Code or the Act was, however, taken by the insurer. It could not, therefore, at a late stage of the proceedings simply shove in a copy of the policy of insurance and mark it as an exhibit through the statement of its counsel. Question No. (1) “whether the policy of insurance could be proved by production of its copy Ext. R-1 unless a case was made out for production of secondary evidence within the meaning of section 65 of the Indian Evidence Act, 1872 is, therefore, answered in the negative”.
10. On going through the facts stated in the case it can be seen that the insurer there was relying on copy of the policy of insurance to substantiate its case as against the claimant. The High Court was of the view that failure on the part of the insurer to take the steps contemplated under Section 65 of the Evidence Act for the production of the policy of insurance disentitles it to get the copy of the policy marked in the proceedings. This decision, in our view has no application here. The ownor of the vehicle who admittedly is in custody of the original policy of insurance, however cannot oppose the marking of the copy of the insurance policy on the ground that the insurer failed to take the steps contemplated under Section 66 of the Evidence Act. If that be the positson, the above contention of the councel is also liable to be rejected.
11. No other question arises for consideration. The award under the circumstances requires to be modified fixing the liability of the insurance company at Rs. 15,000/- only. The insurance company has already deposited a sum of Rs. 20,000/- as directed by this court. The counsel for the appellant submits that the claimant has already withdrawn that amount. Under the circumstances we make it clear that there is no need for the appellant insurance company to pay any more amount to the claimants under the award in dispute.
12. The appeal is allowed to the extent indicated above.
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