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New India Assurance Co. Ltd. v. Shanti Bai (Smt) And Others
Case Summary
Factual and Procedural Background
The appellant, New India Assurance Company Ltd., had issued a comprehensive insurance policy for a passenger bus (Registration No. CIK-8108) owned by Respondent 4. On 3 January 1989 the bus, driven by Respondent 5, met with an accident in which Laxman Singh, who was seated on the rooftop with the driver’s permission, struck a tree and later died from his injuries.
Respondents 1-3 (legal heirs of the deceased) sought compensation of Rs 7,81,000 before the Motor Accident Claims Tribunal (MACT), Narsinghpur. By order dated 10 April 1991, the MACT awarded Rs 1,10,000 with 12% interest against the insurer (appellant) and the owner and driver (Respondents 4 and 5) jointly and severally.
The insurer’s appeal (Misc. Appeal No. 444 of 1991) was dismissed by the High Court of Madhya Pradesh on 11 February 1994. The present appeal by special leave challenges that dismissal before the Supreme Court.
Legal Issues Presented
- Whether, under the comprehensive insurance policy and Section 95(2)(b)(ii) of the Motor Vehicles Act, 1939, the insurer’s liability for the death of a passenger is limited to Rs 15,000 or extends to the full award of Rs 1,10,000 with interest.
Arguments of the Parties
Appellant (New India Assurance Company Ltd.)
- The premium of Rs 600 (Rs 12 per passenger for 50 passengers) was calculated solely to cover the statutory liability of Rs 15,000 per passenger under Section 95(2)(b)(ii).
- A comprehensive policy covering vehicle damage does not, by itself, enlarge third-party passenger liability; an express agreement with an additional premium is necessary for unlimited coverage.
Respondents 1-3 (Legal Heirs of the Deceased) & Respondents 4-5 (Owner and Driver)
- Payment of an additional premium for passengers indicated a special contract for unlimited liability toward passengers.
- The insurer therefore remained liable for the entire compensation awarded by the MACT.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| National Insurance Co. Ltd. v. Jugal Kishore (1988) 1 SCC 626 | A comprehensive policy does not automatically raise third-party liability beyond statutory limits; an express agreement with separate premium is required. | Relied upon to hold that, absent a specific agreement and higher premium, the insurer’s liability remains confined to Rs 15,000 per passenger. |
| M.K. Kunhimohammed v. P.A. Ahmedkutty (1987) 4 SCC 284 | Reaffirmed the need for an explicit contract and additional premium to extend passenger liability beyond the statutory ceiling. | Cited in support of limiting the insurer’s liability to the statutory amount. |
Court's Reasoning and Analysis
Section 95(1)(b)(ii) obliges insurers to cover passenger death or injury, while Section 95(2)(b)(ii) caps such liability at Rs 15,000 per passenger. The Court inspected the policy, which showed:
- An insured vehicle value of Rs 2,50,000 (relevant to own-damage coverage).
- A separate premium of Rs 600 for 50 passengers—calculated at Rs 12 per passenger, exactly matching the tariff rate for statutory liability of Rs 15,000.
The Tribunal and High Court erred in assuming a premium of 0.50 paise per passenger for unlimited liability; the actual tariff demonstrates that unlimited liability would have required Rs 50 per passenger. Because no higher premium was paid and no express agreement existed, the policy extended only to the statutory limit.
Applying the principles in Jugal Kishore and Kunhimohammed, the Court concluded that a comprehensive policy, without more, does not enlarge third-party passenger liability. Consequently, the insurer’s liability could not exceed Rs 15,000.
Holding and Implications
Appeal Allowed in Part. The insurer’s liability is restricted to Rs 15,000; the remaining award remains recoverable from the owner and driver (Respondents 4 and 5). No order as to costs.
Implications: The decision reiterates that, under the 1939 Act, comprehensive motor insurance does not automatically grant unlimited passenger coverage; explicit agreement and appropriate premium are prerequisites. The ruling imposes no new precedent but reinforces existing jurisprudence on statutory limits to insurer liability.
Sujata V. Manohar, J.— Leave granted.
2. This appeal by special leave arises from a judgment and order dated 11-2-1994 passed by the High Court of Madhya Pradesh in Miscellaneous Appeal No. 444 of 1991. The appellant before us is the New India Assurance Company Ltd. It had issued a comprehensive insurance policy in respect of a bus which was used for carrying passengers for hire and bearing Registration No. CIK-8108 owned by Respondent 4. This insurance policy was in force at the material time.
3. On 3-1-1989 this bus, while it was being driven by Respondent 5, met with an accident. The deceased, Laxman Singh, who was sitting on the roof top of the bus with the permission of the bus driver, Respondent 5, hit a tree on account of the alleged rash and negligent driving of the said bus by Respondent 5. He was admitted to hospital and died on 7-1-1989 on account of the injuries received in the accident. The legal heirs of Laxman Singh, who are Respondents 1 to 3 before us, filed a claim for compensation amounting to Rs 7,81,000 before the Motor Accident Claims Tribunal, Narsinghpur. The Motor Accident Claims Tribunal, by its order dated 10-4-1991, awarded to Respondents 1 to 3 compensation of Rs 1,10,000 together with interest at the rate of 12% per annum from the date of the presentation of the petition and directed the appellant and Respondents 4 and 5 to pay the same.
4. Being aggrieved by this order, the appellant filed Miscellaneous Appeal No. 444 of 1991 before the High Court of Madhya Pradesh. The High Court, by its order dated 11-2-1994, dismissed the appeal of the appellant and confirmed the findings of the Tribunal. The present appeal arises from this order of the Madhya Pradesh High Court.
5. The short question that we have to consider is whether the appellant is liable to pay compensation to the tune of Rs 1,10,000 together with interest thereon at the rate of 12% from the date of the presentation of the petition to Respondents 1 to 3. The appellant contends that its liability in this regard is limited to Rs 15,000.
6. The insurance policy taken out by the owner of the said bus i.e Respondent 4 herein, and which was in force at the relevant time, was a comprehensive policy. This policy has been produced before us. It shows that the insured estimated value of the vehicle is Rs 2,50,000. In the Schedule of Premium, there is an additional payment of Rs 600 in respect of 50 passengers. The claim against this amount states: “for LL to passengers as per Ednt. No. I.M.T 12”. The appellant-Company has contended that it had charged premium at the rate of Rs 12 per passenger in respect of 50 passengers to cover its limited liability under Section 95 of the Motor Vehicles Act, 1939 which was then in force.
7. Section 95 forms part of Chapter VIII of the Motor Vehicles Act, 1939 which deals with insurance of motor vehicles against third party risks. Under Section 95, in order to comply with the requirements of this Chapter, a policy of insurance must be a policy which, inter alia, insures the person or classes of persons specified in the policy to the extent specified in sub-section (2). Under Section 95(1)(b)(ii), the insurance policy must cover the death 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. Sub-section (2)(b) provides as follows:
“95. (1)***
(2) Subject to the proviso to sub-section (1), a policy of insurance shall cover any liability incurred in respect of any one accident up to the following limits, namely—
(b) 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,
(i) in respect of persons other than passengers carried for hire or reward, a limit of fifty thousand rupees in all;
(ii) in respect of passengers, a limit of fifteen thousand rupees for each individual passenger;”
These were the provisions at the relevant time. These provisions were interpreted by this Court in the case of National Insurance Co. Ltd. v. Jugal Kishore (1988) 1 SCC 626. This Court observed that even though it is not permissible to use a vehicle unless it is covered at least under an “act only” policy, it is not obligatory for the owner of a vehicle to get it comprehensively insured. In case, however, it is got comprehensively insured, a higher premium is payable depending on the estimated value of the vehicle. Such insurance entitles the owner to claim reimbursement of the entire amount of loss or damage suffered up to the estimated value of the vehicle calculated according to the rules and regulations framed in this behalf. It has further observed as under:
“Comprehensive insurance of the vehicle and payment of higher premium on this score, however, does not mean that the limit of the liability with regard to third party risk becomes unlimited or higher than the statutory liability fixed under sub-section (2) of Section 95 of the Act. For this purpose a specific agreement has to be arrived at between the owner and the insurance company and separate premium has to be paid on the amount of liability undertaken by the insurance company in this behalf.”
In the present case, therefore, a comprehensive policy which has been issued on the basis of the estimated value of the vehicle of Rs 2,50,000 does not automatically result in covering the liability with regard to third party risk for an amount higher than the statutory limit.
8. It was contended before the High Court that a separate premium has been paid for the passengers. This shows that there was a special contract to cover unlimited liability in respect of passengers between the appellant-Company and Respondent 4. The Tribunal as well as the High Court seem to have proceeded on the basis that the appellant-Company had charged an extra premium of 0.50 paise per passenger to cover the risk of unlimited liability towards passengers. This seems to be an error. The premium of Rs 600 has been paid in respect of 50 passengers. The policy clearly shows this. It is not 0.50 paise per passenger. It is pointed out by the appellant-Company with reference to its tariff in respect of “Legal Liability for Accidents to Passengers” that if the limit of liability for any one passenger is fifteen thousand rupees, the rate of annual premium per passenger is Rs 12. If the limit is twenty thousand rupees, the rate of premium per passenger is Rs 23 per annum and so on. In respect of unlimited liability, the premium payable per passenger is Rs 50.
9. In the present case, the premium which has been paid is at the rate of Rs 12 per passenger and is clearly referable to the statutory liability of fifteen thousand rupees per passenger under Section 95(2)(b)(ii) of the Motor Vehicles Act, 1939. In the present case, there is no special contract between the appellant-Company and Respondent 4 to cover unlimited liability in respect of an accident to a passenger. In the absence of such an express agreement, the policy covers only the statutory liability. The mere fact that the insurance policy is a comprehensive policy will not help the respondents in any manner. As pointed out by this Court in the case of National Insurance Co. Ltd. v. Jugal Kishore (1988) 1 SCC 626 comprehensive policy only entitles the owner to claim reimbursement of the entire amount of loss or damage suffered up to the estimated value of the vehicle. It does not mean that the limit of liability with regard to third party risk becomes unlimited or higher than the statutory liability. For this purpose, a specific agreement is necessary which is absent in the present case. Reference in this connection may also be made to the case of M.K Kunhimohammed v. P.A Ahmedkutty (1987) 4 SCC 284, (1987) 3 SCR 1149. The appellant-Company is, therefore, entitled to succeed to the extent that it has been directed to pay to Respondents 1 to 3 any amount in excess of Rs 15,000.
10. The appeal is, therefore, allowed to this extent. The liability of the appellant and Respondents 4 and 5 to pay the amount of the award was joint and several. We make it clear that the fact that the appeal is allowed and the liability of the appellant is limited to Rs 15,000 does not affect in any manner the liability of Respondents 4 and 5 to pay the amount of the award. There will be no order as to costs.
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