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New India Assurance Co. Ltd. v. Nanak Chand Ben And Ors.
Summary of the Opinion
Factual and Procedural Background
This appeal under Section 110-D of the Motor Vehicles Act challenges the Award dated 18-8-1983 of the Motor Accidents Claims Tribunal, Jabalpur (Motor Vehicle Claims Case No. 58 of 80). The Tribunal had held the insurer (the appellant) jointly and severally liable to indemnify the insured (respondent No. 2) for the insured's liability arising from an accident on 22-4-1980 in which bus No. C.P.J. 6501 (owned by respondent No. 2 and driven by respondent No. 3) left the road, turned turtle and caused injuries to passengers including Nanak Chand and Ram Prasad Sahu. The claimants alleged rash and negligent driving and sought large sums (Rs. 48,000/- and Rs. 54,000/- respectively). The owner/driver denied negligence and relied on comprehensive insurance with the appellants. The insurer contended its liability was triggered only if the vehicle was driven by a licensed driver in the employment of the insured and, in any event, was limited to Rs. 5,000/- per passenger (Section 95(2)(ii) of the Act). The Tribunal found rash/negligent driving and that the insurance policy was comprehensive and covered the entire liability, and therefore made the insurer liable to indemnify the owner.
Legal Issues Presented
- Whether the insurer's liability in respect of a passenger on a passenger bus is statutorily limited to Rs. 5,000 per passenger (subject to aggregate limits) under Section 95(2)(ii) of the Motor Vehicles Act.
- Whether the statutory minimum liability (the limit in Section 95) can be altered or enlarged by agreement between the insurer and the insured as disclosed in the insurance policy (i.e., whether a "comprehensive" policy can create liability beyond the statutory minimum).
- Whether the Claims Tribunal correctly interpreted the particular insurance policy in question as imposing unlimited (or full-owner) liability on the appellant insurance company in respect of the accident.
Arguments of the Parties
Appellant (Insurance Company) - Arguments
- There is no such thing as a "comprehensive" policy in relation to a passenger bus for purposes of passenger injury: the insurer's liability is limited to the statutory amounts in Section 95(2)(ii) of the Motor Vehicles Act.
- The insurer's liability cannot arise unless it is proved that the vehicle was driven by a licensed driver in the employment of the insured.
- The premium and schedule entries (e.g., premium charged for legal liability to 45 passengers) should be construed as covering only the statutory liability prescribed by Section 95, not an unlimited owner liability.
Respondents (Owner / Claimants) - Arguments
- The liability under Section 95(2)(ii) is a statutory minimum and does not prevent the insurer and owner from entering into an insurance contract that covers higher liability.
- The specific position of the policy in the instant case is that it is a comprehensive policy and covers the insured's entire liability under the Motor Vehicles Act; therefore the insurer is bound by the broader coverage of that policy.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Sheikhupura Transport Co. v. Northern India Transporters Insurance Co. | One of the Supreme Court decisions relied upon to support the two broad propositions (statutory limit and ability to alter minimum by agreement). | The Court treated it as supporting the propositions that statutory limits exist but can be varied by agreement disclosed in the policy. |
| Pushpabai v. Ranjit Gunning and Pressing Co. | One of the Supreme Court decisions relied upon for the propositions regarding statutory liability and contractual expansion. | Taken as supporting the proposition that a policy may establish liability beyond the statutory minimum; relied upon in construing "third party" relationships. |
| M K. Kunhimohammed v. P.A. Ahmedkutty (M.K. Kunhi Mohd. v. P.A. Ahmedkutti and Ors.) | Supreme Court authority cited in support of the propositions concerning third-party coverage and policy liability. | Relied upon by this Court (and earlier courts) for the view that passengers can be third parties vis-à-vis the insurer and for policy interpretation principles. |
| National Insurance Co. Ltd. v. Jugal Kishore | Recent Supreme Court decision affirming the same principles (statutory minimum and that policy can incur greater liability). | Used to confirm that the two broad propositions are settled and need not be re-examined in detail. |
| Mangilal v. Parasram (1970 MPLJ 1) | Full Bench clarification of the object of Chapter VIII (third-party insurance) — to insure third parties who may suffer due to use of motor vehicles. | The Court relied on this decision to explain the statutory purpose of third-party insurance obligations and the duty on owners to keep vehicles insured. |
| Kishori v. Chairman, Tribal Service Co‑operative Society (1988 JLJ 222) | Construction of the words "third party" — held that a passenger in a vehicle whose owner is insured is a third party qua the insurer. | The Court adopted this view to reject the insurer's contention that passengers are not third parties and to support the broader interpretation of third-party coverage. |
| Mjs. Oriental Fire and General Insurance Co. v. Ganapathi Ramlingam | Held by Madras High Court that where a vehicle is comprehensively insured, the limitation in Section 95(2) does not apply. | This authority was used to support the proposition that a comprehensive policy can remove the statutory limitation imposed on insurer liability under Section 95(2). |
| Sundaram Finance Co. Ltd. v. D.G. Nanjappa (1980 ACJ 377) | Interpreted Section II-1(i) of a policy to provide unlimited insurance coverage to the owner, subject to any endorsements that might limit liability. | This Court applied the reasoning: in Sundaram Finance the policy wording created unlimited coverage but an endorsement then limited it; in the present case there is no limiting endorsement, so no reduction of liability can be inferred. |
Court's Reasoning and Analysis
The Court framed the dispute around two "broad legal propositions": (1) that insurer liability in relation to a passenger is statutorily limited (Rs. 5,000 per passenger subject to aggregate limits), and (2) that the statutory minimum is capable of being altered by agreement in the insurance policy. Because these propositions were not contested by the parties and are supported by Supreme Court authority (and recently affirmed in National Insurance Co. Ltd. v. Jugal Kishore), the Court accepted them and proceeded to the principal question: whether the Claims Tribunal was justified in interpreting the particular insurance policy as imposing unlimited liability on the appellant insurer.
The Court examined the policy (Ex. N.A.1) and observed it was described as "comprehensive." It focused on Section II-1(i) of the policy, which the schedule described as covering "such amount as is necessary to meet the requirement of M.V. Act, 1939." The Court read Section II-1(i) (liability to third parties for death or bodily injury arising out of use of the motor vehicle) together with that schedule entry and concluded the wording is wide enough to cover the insured's entire liability under the Motor Vehicles Act, not merely the statutory limits found in Section 95.
The Court reasoned that the phrase "requirements of the M.V. Act, 1939" cannot be construed as meaning only the requirements of Section 95, because Section 95 itself does not specify the insured's requirements but rather limits the insurer's liability. Thus, the Court refused to read Section 95 into the policy clause. The Court relied on prior decisions (including Sundaram Finance and Oriental Fire) to support the proposition that a comprehensive policy, by its terms, can provide coverage beyond the statutory minimum and that any limitation on such coverage must appear as an endorsement or express term in the policy.
The Court also rejected the appellant's argument that the premium components (for legal liability to 45 passengers) should be interpreted as indicating coverage only of Section 95 statutory liability. The Court held there was no warrant for converting the phrase "legal liability" into "statutory minimum liability" when the policy language itself was broadly worded and there was no express endorsement limiting coverage. Given the absence of any endorsement like IMT-13 specifying a limit, the Court concluded no limitation could be inferred.
Holding and Implications
Holding: The appeal is dismissed. The Court held that because the insurance policy is comprehensive and its terms (Section II-1(i) together with the schedule) undertake to indemnify "such amount as is necessary to meet the requirement of the M.V. Act, 1939," the insurer's liability was not limited to Rs. 5,000 per passenger. Instead, the comprehensive policy covered the entire liability of the owner arising out of the accident. The order dismisses the appeal with costs and directs counsel's fee as per rules.
Implications:
- Direct effect on the parties: the Tribunal's award holding the insurer liable to indemnify the owner for the full liability (as found by the Tribunal) is sustained; the insurer must meet the owner's liability arising from the accident, and the appeal is dismissed with costs.
- The decision rests on interpretation of the specific policy language and earlier authorities; the Court emphasized that any limitation on the insurer's liability should be expressly stated in an endorsement. In this case no such endorsement was present, so the insurer could not rely on an implied statutory-only limitation.
- The opinion does not purport to set a new general precedent beyond applying and following existing authorities (the Court explicitly accepted prior Supreme Court decisions and recent affirmation in National Insurance Co. Ltd. v. Jugal Kishore), and it did not announce any novel legal principle beyond its application to the facts and policy wording before the Court.
1. This order shall also govern the disposal of Misc. Appeal No. 406 of 83 The New India Assurance Co. Ltd. AP-1987-027 Ram Prasad Sahu and Ors. which arises out of the same impugned award and involves similar questions of fact and law for consideration.
2. The present appeal, Under Section 110-D of the Motor Vehicles Act is directed against the Award, dated 18-8-1983, passed by Motor Accidents Claims Tribunal, Jabalpur in Motor Vehicle Claims Case No. 58 of 80, making the Insurance Company liable to indemnify the insured i.e. respondent No. 2 to the extent of his entire liability of Rs. 13,200/- in this appeal and Rs. 22,000/- in the connected appeal. There is no dispute now that on 22-4-1980 bus No. C.P.J. 6501 belonging to respondent No. 2 and driven by respondent No. 3, met with an accident while on its way from Jabalpur to Tendukhera. The bus suddenly left the road and entered into a field on the right side and turned turtle, causing injury to the passengers including respondent Nanak Chand and Ram Prasad Sahu. They filed their claim on the allegation that the bus was driven in a rash and negligent manner and therefore, they claimed Rs. 48,000/- and Rs. 54,000/- respectively for the injury and consequential loss. The owner and driver of the bus denied allegations of rash and negligent driving and submitted that the bus was insured comprehensively with the appellants. Appellant's defence was that its liability cannot arise unless it is proved that the vehicle was driven by licensed driver in the employment of the respondent. They further submitted that in any case, their liability was limited to Rs. 5,000/- only in view of Section 95(2)(ii) of the Act. Learned Tribunal; on appreciation of evidence adduced by the parties held that the bus was being driven in a rash and negligent manner and therefore, the claimants were entitled to compensation. Learned Tribunal further held that the Insurance policy taken by the owner of the vehicle was comprehensive and covered the entire liability. In this view of the matter, the learned Tribunal made the appellants jointly and severally liable to pay the amount.
3. Submission of the learned Counsel for the appellants is that there is nothing like a comprehensive policy in so far as a passenger bus is concerned and the only liability in respect of injury to a passenger travelling in the bus is the liability covered by Section 92(2)(ii) of the Act and nothing more. Reliance has been placed on the decisions of the Supreme Court in Sheikhupura Transport Co. v. Northern India Transporters Insurance Co. ; Pushpabai v. Ranjit Gunning and Pressing Co. and M K. Kunhimohammed v. P.A. Ahmedkutty . Learned Counsel for the respondents, however, submitted that the liability of the Insurance Company Under Section 95(2)(ii) of the Act is statutory liability and is the minimum. It does not prevent the Insurance Company and the owner of the vehicle to enter into an agreement of Insurance covering the higher liability than prescribed by the decision. It is the specific defence that the policy in the instant case covers the entire liability of the owner under the Motor Vehicles Act. Since such a contract is permissible, it is submitted that the appeal has no force and deserves to be dismissed.
4. From the aforesaid submissions of the parties two broad legal propositions clearly emerge. The first that the liability of the Insurance Company in relation to a passenger in the bus is limited statutorily to Rs. 5,000/- per passenger subject to maximum of Rs. 50,000/- and second that the statutory minimum is liable to be changed by agreement between the parties disclosed in the Insurance policy. The above mentioned Supreme Court cases fully support the aforesaid propositions and that appears to be the reason why the learned Counsel did not challenge these propositions but relied upon them. The claims tribunal has also followed these principles and has therefore, relied upon the Insurance policy to impose the higher liability on the appellant Insurance Company. The Supreme Court in National Insurance Co. Ltd. v. Jugal Kishore has very recently affirmed these principles. Since the aforesaid two broad legal propositions are not disputed, it is not considered necessary to examine them in any greater detail. This Court would, therefore assume that in the absence of any thing in the policy showing the higher liability of the appellant Insurance Company, the liability would be limited to Rs. 5,000/- only in each of the two cases. The question requiring consideration of this Court, therefore is whether the Claims Tribunal was justified in interpreting the policy as imposing unlimited liability on the appellant Insurance Company?
5. The Insurance policy has been filed on record. It is termed as "comprehensive". There had been a good debate at the Bar as to the type of Insurance policies and the extent of liabilities covered thereby. Learned Counsel for the appellant Insurance Company insists that the policy even though comprehensive in other respects, is not comprehensive in respect of passengers and therefore covers nothing more than what is provided Under Section 95 of the Act. According to the learned Counsel, there is no distinction, at least in the case of a passenger motor vehicle between the statutory liability of the Insurance Company and the liability covered by a comprehensive Insurance policy. The debate was really interesting and this Court thinks that it was not irrelevant to the matter in issue. It needs therefore some attention. The distinction between the third party insurance policy required to be taken under Chapter VIII of the Act and a comprehensive policy is too well known and hence any long debate about it would be unnecessary. The statute requires coverage of "third party risk" only as it is clear from Section 94 of the Act. The object of this provision and other provisions of Chapter VIII is to insure the third party who may suffer due to user of the Motor Vehicle, and enable them to be able to get damages for injuries suffered. This is also clarified by a Full Bench judgment of this Court in Mangilal v. Parasram 1970 MPLJ 1. This provision also costs a duty upon the owner of a Motor Vehicle to keep the vehicle insured and failure to do so renders him liable to prosecution under Section 125 of the Act. This provision, however imposes unlimited liability to pay compensation to a third party. The words "third party" appearing in this clause has been recently construed by this Court in Kishori v. Chairman, Tribal Service Co-operative Society 1988 JLJ 222. This Court relied upon Pushpabai's case and held that the first party is insurer, and the second party is insured. According to the Court, the use of the words "2nd party" in chapter VIII is in relation to insurer and insured person. In this view of the matter the Court felt that "the passenger in a vehicle whose owner is insured is also a third party qua the Insurer." The Court has rejected the submission of the Insurance Company that the passenger in a vehicle of the insured does not fall in the category of third party. The Court also relied upon the Supreme Court decision in M.K. Kunhi Mohd. v. P.A. Ahmedkutti and Ors. 1987 (2) ACC 346. Similarly the meaning and import of "comprehensive policy" was considered by a Division Bench of Madras High Court in Mjs. Oriental Fire and General Insurance Co. v. Ganapathi Ramlingam wherein it was held that where the vehicle is comprehensively insured, the limitation contained in Section 95(2) of the Act does not apply. Inspite of it, it is clear that outer limit of the liability of the Insurance Company even where the vehicle is comprehensively insured will depend on the term of the policy. In view of the aforesaid, it is difficult to accept the submission of the learned Counsel and that inspite of the comprehensive insurance policy, the liability of the Insurance Company remains limited to the statutory limit prescribed Under Section 95 of the Act.
6. A perusal of the Insurance policy (Ex. N.A. 1) indicates that it is comprehensive and covers legal liability to 45 passengers as extra premium of Rs. 270/- has been paid. Last but one column of the schedule to the policy indicates the limits of liability of the Insurance policy under Section II-1(i) as "such amount as is necessary to meet the requirement of M.V. Act, 1939." Section II-1(i) reads as under:
Section II-Liability to Third Parties (1) Subject to the limits of liability the company will indemnify the insured against all sums including claimant's costs and expenses which the insured shall become legally liable to pay in respect of
(i) death of or bodily injury to any person caused by or arising out of the use (including the loading and/or unloading) of the motor vehicle.
Reading of these clauses of the policy would indicate that the Insurance Company had undertaken to indemnify the insured to the extent of "such amount" as is necessary to meet the requirement of the M.V. Act, 1939. Apparently this clause is widely worded and covers the entire liability of the owners. Limits to this extensive liability are provided in the proviso to the aforesaid section and do not include a case like a present one. Under the circumstances, this provision would indicate that the Insurance Company under this policy has undertaken to indemnify, the insured of his total liability under the M.V. Act. The words "requirements of the M.V. Act, 1939" cannot be read as requirements of Section 95 only. Then it cannot be overlooked that Section 95 does not deal with the requirement of insured or the owner of vehicle; it only limits the liability of the Insurance Company. For this reason, Section 95 of the Act cannot be read into this clause of the policy. This is how a comprehensive policy has been interpreted by a Division Bench of Karnataka High Court in Sundaram Finance Co. Ltd. v. D.G. Nanjappa 1980 ACJ 377. In the aforesaid case Section II-i of the policy was interpreted to provide an unlimited insurance coverage to the owner of the vehicle. In the said policy, however, there was a further endorsement limiting the liability to Rs. 5000/- per passenger or Rs. 75,000/- in aggregate and therefore, the Court enforced the liability to that extent. In the instant case no endorsement limits the liability, as aforesaid. Endorsement No. I.M.T-13 does not mention any limit. Under the circumstances, it is not possible to infer any limitation on this policy. Learned Counsel for the appellant has, however, referred to the various components of premium charged and submitted that "premium charged for legal liability to 45 passengers" should be construed as covering the liability of the Insurance Company Under Section 95 of the Act only. This Court is unable to accept the submission. The policy has been taken by the owner and given by the appellant Insurance Company. If the liability was limited by the limits Under Section 95 of the Act, it could have been easily mentioned by the parties. There is no warrant for reading the words "legal liability" as "statutory minimum liability" Under Section 95 of the Act.
7. In this view of the matter, this Court is unable to hold that the liability of the appellant Insurance Company was limited to Rs. 5,000/-only. On the contrary this Court is of the opinion that because of the comprehensive policy, the liability of the Insurance Company covers the entire liability of the owner of the vehicle in respect of the accident.
8. In view of the discussion aforesaid, the appeal fails and is dismissed with costs. Counsel's fee as per rules.
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