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Oriental Insurance Company Limited v. Rajni Devi And Others
Factual and Procedural Background
Janak Raj and Sukhdev Raj were travelling together on a motorcycle when it went out of control and met with an accident on 7-9-2004. Both sustained injuries; Sukhdev Raj died in the Civil Hospital, Dalhousie, and Janak Raj later succumbed to his injuries at subsequent hospitals. The ownership of the motorcycle was in Janak Raj’s name. His legal representatives (the respondents before the Supreme Court) filed a petition under Section 163-A of the Motor Vehicles Act, 1988, seeking compensation from the insurer.
The insurer (appellant) was served with notice and contested the claim. The Motor Accidents Claims Tribunal framed seven issues, principally addressing whether Janak Raj died in the accident, whether the claimants were his legal representatives, and whether the insurer was liable. Despite an unclear FIR that did not establish who actually drove the motorcycle, the Tribunal treated the policy as “comprehensive” and awarded compensation, holding the insurer liable.
The insurer appealed to the Supreme Court, challenging the Tribunal’s application of Section 163-A and the extent of liability under the policy.
Legal Issues Presented
- Whether a claim under Section 163-A of the Motor Vehicles Act is maintainable when the deceased was the owner of the motorcycle and potentially the tortfeasor.
- Whether, in such circumstances, the insurer’s liability is governed exclusively by the contractual limits of the policy and, if so, to what extent.
Arguments of the Parties
Appellant – Insurance Company
- The additional premium of Rs 50 paid by the owner covered only his personal insurance and did not extend to a pillion rider.
- The owner of the vehicle is not a “third party” within the meaning of Section 147 of the Act; therefore, Section 163-A cannot be invoked against the insurer for the owner’s death.
- Under the terms of the policy, the insurer’s liability, if any, was limited to Rs 1,00,000.
Respondent – Claimants
The opinion does not contain a detailed account of the respondents’ legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Oriental Insurance Co. Ltd. v. Jhuma Saha (2007) 9 SCC 263 | The insurer is not liable for death of the owner-driver; liability under Section 147 does not cover the owner himself. | Relied upon to hold that a claim under Section 163-A is not maintainable where the deceased was the owner/tortfeasor. |
| Dhanraj v. New India Assurance Co. Ltd. (2004) 8 SCC 553 | Section 147 does not mandate coverage for injury or death of the owner unless a separate personal accident cover is taken. | Used to reinforce that payment of premium under “Own Damage” does not extend to personal injury of the owner. |
| National Insurance Co. Ltd. v. Laxmi Narain Dhut (2007) 3 SCC 700 | Claims for “own damage” are not third-party claims and fall outside the Tribunal’s jurisdiction. | Cited to emphasise that no third-party liability arose in the present case. |
| Premkumari v. Prahlad Dev (2008) 3 SCC 193 | Reaffirmed that heirs of an owner-driver cannot invoke Section 163-A against the insurer without specific coverage. | Quoted as reiteration of the governing principle. |
| Oriental Insurance Co. Ltd. v. Prithvi Raj (2008) 2 SCC 338 | Further affirmation of limited insurer liability where the deceased was the owner-cum-driver. | Bolstered the Court’s conclusion on policy-limited liability. |
Court's Reasoning and Analysis
The Supreme Court began by distinguishing between third-party risks, where insurer liability is statutorily unlimited, and claims concerning the owner or occupants of the insured vehicle, which are governed strictly by the terms of the insurance contract. It held that Section 163-A, which allows compensation on a “no-fault” basis, places liability on the owner; a person cannot simultaneously be the claimant and the entity liable to pay.
Because Janak Raj was the owner of the motorcycle, his heirs could not maintain a Section 163-A claim against the insurer. The Court relied on a line of precedents concluding that insurer liability towards an owner-driver arises only if the policy expressly provides personal accident coverage. Examination of the policy revealed that the insurer had assumed risk for personal accident to the extent of Rs 1,00,000 only.
Accordingly, the Tribunal erred in treating the mere “use of the motor vehicle” as sufficient to impose unlimited liability. The Court limited the insurer’s liability strictly to the contractual ceiling of Rs 1,00,000.
Holding and Implications
Appeal Allowed to the extent of capping the insurer’s liability at Rs 1,00,000; no order as to costs.
The decision reduces the compensation payable by the insurer to the policy limit, reaffirming that Section 163-A cannot be invoked for the death of an owner-driver in the absence of explicit personal accident coverage. The judgment follows existing precedent and sets no new principle beyond reinforcing the contractual nature of insurer liability in such circumstances.
S.B Sinha, J.— Leave granted.
2. The respondent filed an application under Section 163-A of the Motor Vehicles Act, 1988 (the Act) claiming compensation for death of one Janak Raj (the deceased). He was riding on a motorcycle along with one Sukhdev Raj. Who was actually on the driver's seat is not known. The motorcycle is said to have gone out of control resulting in the accident.
3. The appellant herein, having been issued notice, resisted the claim, inter alia, contending that although the owner of the vehicle deposited an extra amount of Rs 50 covering his personal insurance, the same would not cover the case of the pillion rider and in any event, the owner of the vehicle is not a third party within the meaning of Section 147 of the Act.
4. The Motor Accidents Claims Tribunal, having regard to the pleadings of the parties, framed the following issues:
“1. Whether on 7-9-2004 at 4.05 p.m Janak Raj had died in a road accident? OPP
2. Whether the claimants are LRs and were dependent upon the deceased? OPP
3. Whether the claimants are entitled to compensation? If so, how much and from which of the respondents? OPP
4. Whether the motorcycle was being driven in contravention of terms and conditions of the insurance policy? OPR
5. Whether the driver of the motorcycle was not holding a valid and effective driving licence? OPR
6. Whether the claim petition is bad for non-joinder of necessary parties? OPR
7. Relief.”
5. The Tribunal noticed that the first information report (FIR) lodged at the police station in relation to the said accident was not clear to establish as to who was driving the motorcycle but despite the same proceeded to determine the question as to whether Janak Raj being himself the tortfeasor, any application under Section 163-A of the Motor Vehicles Act was maintainable. The premise on which the Tribunal proceeded to determine the said issue was that a comprehensive insurance policy having been taken, the only question which arose for its consideration was as to whether the accident took place by reason of use of the motor vehicle irrespective of the fact as to whether the deceased or the said Sukhdev Raj was driving the motorcycle or not. It, however, held that if the deceased was the tortfeasor, the question of reimbursement of any amount of compensation by the insurer would not arise, opining:
“If we presume that the deceased had no comprehensive policy even then, the claimants are entitled to compensation because evidence is silent as to who was driving the offending vehicle.”
6. On Issues 4, 5 and 6, the Tribunal held:
“Onus to prove all the issues was upon the Insurance Company. As discussed in the preceding issues, offending vehicle was insured but no evidence was on the file as to who was driving the motorcycle. That is whether Janak Raj was driving the motorcycle or Sukhdev Raj was driving the motorcycle. Janak Raj and Sukhdev Raj were on the motorcycle. Both received injuries in the accident. Sukhdev Raj had succumbed to his injuries in Civil Hospital, Dalhousie. Janak Raj was shifted to different hospitals. Ultimately, Janak Raj had also succumbed to his injuries. Motorcycle was owned by Janak Raj. Counsel for the Company failed to convince how the petition is bad for non-joinder of necessary parties and what is the effect of non-production of driving licence when evidence is not clear as to who was driving the offending vehicle. So, all the issues are decided against the Insurance Company.”
7. It is now a well-settled principle of law that in a case where third party is involved, the liability of the insurance company would be unlimited. Where, however, compensation is claimed for the death of the owner or another passenger of the vehicle, the contract of insurance being governed by the contract qua contract, the claim of the insurance company would depend upon the terms thereof. The Tribunal, in our opinion, therefore, was not correct in taking the view that while determining the amount of compensation, the only factor which would be relevant would be merely the use of the motor vehicle.
8. Section 163-A of the Motor Vehicles Act reads thus:
“163-A. Special provisions as to payment of compensation on structured formula basis.—(1) Notwithstanding anything contained in this Act or in any other law for the time being in force or instrument having the force of law, the owner of the motor vehicle of the authorised insurer shall be liable to pay in the case of death or permanent disablement due to accident arising out of the use of motor vehicle, compensation, as indicated in the Second Schedule, to the legal heirs or the victim, as the case may be.
Explanation.—For the purposes of this sub-section, ‘permanent disability’ shall have the same meaning and extent as in the Workmen's Compensation Act, 1923 (8 of 1923).
(2) In any claim for compensation under sub-section (1), the claimant shall not be required to plead or establish that the death or permanent disablement in respect of which the claim has been made was due to any wrongful act or neglect or default of the owner of the vehicle or vehicles concerned or of any other person.
(3) The Central Government may, keeping in view the cost of living by notification in the Official Gazette, from time to time amend the Second Schedule.”
The said provision cannot be said to have any application in regard to an accident wherein the owner of the motor vehicle himself is involved. The question is no longer res integra.
9. In Oriental Insurance Co. Ltd. v. Jhuma Saha (2007) 9 SCC 263, AIR 2007 SC 1054 it was held:
“10. The deceased was the owner of the vehicle. For the reasons stated in the claim petition or otherwise, he himself was to be blamed for the accident. The accident did not involve motor vehicle other than the one which he was driving. The question which arises for consideration is that the deceased himself being negligent, the claim petition under Section 166 of the Motor Vehicles Act, 1988 would be maintainable.
11. Liability of the insurer Company is to the extent of indemnification of the insured against the respondent or an injured person, a third person or in respect of damages of property. Thus, if the insured cannot be fastened with any liability under the provisions of the Motor Vehicles Act, the question of the insurer being liable to indemnify the insured, therefore, does not arise.
12. In Dhanraj v. New India Assurance Co. Ltd. (2004) 8 SCC 553 it is stated as follows:
‘8. Thus, an insurance policy covers the liability incurred by the insured in respect of death of or bodily injury to any person (including an owner of the goods or his authorised representative) carried in the vehicle or damage to any property of a third party caused by or arising out of the use of the vehicle. Section 147 does not require an insurance company to assume risk for death or bodily injury to the owner of the vehicle.
10. In this case, it has not been shown that the policy covered any risk for injury to the owner himself. We are unable to accept the contention that the premium of Rs 4989 paid under the heading “Own damage” is for covering liability towards personal injury. Under the heading “Own damage”, the words “premium on vehicle and non-electrical accessories” appear. It is thus clear that this premium is towards damage to the vehicle and not for injury to the person of the owner. An owner of a vehicle can only claim provided a personal accident insurance has been taken out. In this case there is no such insurance.’ ”
10. In National Insurance Co. Ltd. v. Laxmi Narain Dhut (2007) 3 SCC 700 it has been held:
“21. Where the claim relates to own damage claims, it cannot be adjudicated by the insurance company. But it has to be decided by another forum i.e forum created under the Consumer Protection Act, 1985 (in short ‘the CP Act’). Before the Tribunal, there were essentially three parties i.e the insurer, insured and the claimants. On the contrary, before the Consumer Forums there were two parties i.e owner of the vehicle and the insurer. The claimant does not come into the picture. Therefore, these are cases where there is no third party involved.”
The said principle has been reiterated recently in Premkumari v. Prahlad Dev (2008) 3 SCC 193, (2008) 1 Scale 531 and Oriental Insurance Co. Ltd. v. Prithvi Raj (2008) 2 SCC 338, (2008) 1 Scale 727.
11. The liability under Section 163-A of the Act is on the owner of the vehicle as a person cannot be both, a claimant as also a recipient. The heirs of Janak Raj could not have maintained a claim in terms of Section 163-A of the Act. For the said purpose only the terms of the contract of insurance could be taken recourse to.
12. According to the terms of contract of insurance, the liability of the Insurance Company was confined to Rs 1,00,000 (Rupees one lakh only). It was liable to the said extent and not any sum exceeding the said amount.
13. To the aforementioned extent, the appeal is allowed. No costs.
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