New India Assurance Co. Ltd. vs Uttara Phukan and Ors.

This appeal has been take up on mention by Mr. S. Dutta, learned counsel appearing for the appellant.

Mr. S. Dutta, learned counsel appearing for the appellant submitted that this appeal is covered by the judgment and order dated 3.8.2012 as passed in MAC Appeal No. 204 of 2004 inasmuch as the claim has emerged out of the same accident and the grounds as resorted to in the appeals are identical.

This is an appeal by the New India Assurance Co. Ltd. under section 173 of the Motor Vehicles Act, 1988 against judgment and award dated 23.7.2004 as passed by the Motor Accident Claims Tribunal, Nagaon in MAC Case No. 13 of 1998.

Heard Mr. S. Dutta, learned counsel appearing for the appellant as well as Mr. S.K. Goswami, learned counsel for the respondent No.1. There is no representation from the other respondents despite due notice from this court.

The findings as returned by the Tribunal as regard the accident that occurred on 4.7.1997, involvement of the offending vehicle bearing registration No. AS01D 3813(Maruti Van) and its rash and negligent driving as well as death of one Ujjal Kumar Phukan, husband of the respondent No. 1 are not in dispute by either of the parties or in the appeal and as such those findings stand affirmed by this court. Hence, no further appraisal of those findings is required.

The question that has been projected in the appeal is that the appellant has no liability in paying the award as directed by the insurance company inasmuch as the offending vehicle was not at any point of time insured by the appellant. Mr. Dutta, learned counsel severely criticized the finding of the learned trial court wherein the Tribunal held that:

"15. The learned counsel for the O.P. has argued that he offending vehicle was covered by Act policy covering the risks of the third party only. The occupants of the vehicle were not covered by the Policy. The claimant''s case is that the vehicle was not taken on hire or for reward. The claimant has examined her father D.N. Borthakur, who arranged the vehicle. The witness Borthakur has stated that the owner of the vehicle is his friend and he requested him to provide the vehicle for carrying the claimant and her family to Jorhat.

The Insurance Company examined DW3, who is the owner of the Workshop, where the offending vehicle was repaired. He has stated that the vehicle belonged to one Abdul Hussain. The vehicle was repaired at his garage. However, he is not aware as to the arrangement of the vehicle. It is crystal clear that the occupants of the vehicle including the deceased were gratuitous passengers. The learned counsel has argued that the liability of the occupants of the Maruti Van were not covered under the Act policy. In this connection the learned counsel has referred to a decision of the hon''ble Supreme Court reported in 2001 ACJ 2059. The Apex Court has held that the third party policy does not cover liability to gratuitous passengers, who are not carried for hire or for reward. DW1, the Asstt. Administrative Officer of the O.P. Insurance Company, has stated that the policy is an Act policy. Ext. A is the said policy. He has further stated that the Act policy is a statutory policy. It covers only third party risks, except the occupants of the insured vehicle. The vehicle in question was a private car. The Policy does not cover the use of the vehicle for hire or for reward. Premium paid at Rs. 168 for third party risk. No extra premium was also paid by the insured. In view of the law laid down by the Hon''ble Supreme Court (supra), we come to the conclusion that a gratuitous passenger travelling in a private vehicle is not entitled to insurance coverage, if the policy is taken only to cover the risks compulsorily coverable under the Statute.

The accident had happened. The claimant lost her husband. The vehicle was not used for hire or for reward. The claimants or the deceased was a gratuitous passenger of the offending vehicle. The vehicle is covered by Act Policy only. The insurer is not liable to indemnify the insured, but the owner of the vehicle would be liable to compensate the injured.

In a very recent decision in M/s. National Insurance Co. Ltd. v. Baljit Kaur and Others, 2004 (1) TAG 366, the Hon''ble Supreme Court has observed :

"We, therefore, are of the opinion that the interest of justice will be subserved if the appellant herein is directed to satisfy the awarded amount in favour of the claimant, if not already satisfied, and recover the same from the owner of the vehicle."

In the instant case, there is no evidence as to violation of policy condition. The owner in his written statement has submitted that the driver had valid driving licence. The onus lies on the Insurance Company to prove that the driver had no valid licence at the relevant point of time. The Insurance Company has failed to discharge their burden. Relying upon the decision of the Apex Court, I am of the considered view that justice will be done if the Insurance Company is directed to satisfy the award and recover the same from the owner of the vehicle."

Mr. S. Dutta, learned counsel submits that in the written statement the insurance company has taken a categorical stand that:

"That the claim petition is not maintainable in law and in the present form inasmuch as the insured obtained as Act policy in respect of the Vehicle No. AS01D/3813 (Maruti Van) and under such circumstances death/injury which had occurred to the occupant of the aforesaid vehicle is not covered under the policy and consequently no liability can be fastened against the answering opposite party No. 2, i.e., New India Assurance Co. Ltd.

It is further stated in that section 147(1) does not render it necessary for an insurer under an "Act Policy" to undertake the liability to pay compensation in respect of the death of the insured person himself in an accident involving the vehicle insured.

In the present case the risk to the occupants of the van are not covered by the Insurance Policy and, as such, there is no question of the Insurance Company being liable to indemnify the owner.

That the opposite party No. 2 states that in assessing the liability of the insurer the terms of the policy have to be considered. It is further stated that an insurance contract may cover risks which are in excess of or beyond the statutory limit set by section 147 of the M.V. Act. The parties may agree to terms and conditions for a larger cover or to include more classes of persons including requirement. But in the instant case the insured took "Act policy" only and they did not go for larger coverage of policy, and, as such, the Insurance Company cannot be made liable for paying any compensation to the claimant. In the instant case policy obtained was "Act" policy covering third party risk. It is not a comprehensive policy covering third party risks."

By filing an additional written statement, the appellant further asserted that:

"The insured Md. Abul Hussain used the said vehicle No. AS01D/3013 (Maruti Van) for hire or reward and on the date of accident, i.e., 4.7.1997, it was taken by the deceased and his family members from Guwahti on way to Jorhat on hire or reward in complete violation of policy condition which prohibited the use of the said vehicle for hire or reward."

The vehicle was a private vehicle as known as in the common parlence and the deceased was a gratuitous passenger. As such the occupants of the vehicle were not covered by the said ''Act Policy''. From the written statement as filed by the owner it is apparent, Mr. Dutta learned counsel continued to submit that only for acquaintance the owner allowed the vehicle to be used by the injured for attending some ceremony by way of reward. There is no dispute that the policy is the ''Act Policy''. It only covers "third party risk" within the meaning of section 147 of the Motor Vehicles Act. As such the direction of the Tribunal is absolutely perverse and unsustainable. In support of his contention, Mr. Dutta, referred the decision of the Apex Court in Dr. T.V. Jose v. Chacko P.M. alias thankachan and Others, (2001) 8 SCC 748 where the Apex Court held in para 13 as under :

"13. Mr. Iyer relied upon the authority in the case ofAmrit lal Sood v. Kaushalya Devi Thapar whereunder it has been held that the term "any person" would include an occupant of the car who was gratuitously travelling in the car. However, at this stage, it must be noted that this Court has in para 4 of this judgment held as follows (SCCp.747):

"4.The liability of the insurer in this case depends on the terms of the contract between the insured and the insurer as evident from the policy. Section 94 of the Motor vehicles Act, 1939 compels the owner of a motor vehicle to insure the vehicle in compliance with the requirements of Chapter VIII of the Act. Section 95 of the Act provides that a policy of insurance must be one which insures the person against any liability which may be incurred by him in respect of death of bodily injury to any person or damage to any property of third party caused by or arising out of the use of the vehicle in a public place. The section does not however require a policy to cover the risk to passengers who are not carried for hire or reward. The statutory insurance does not cover injury suffered by occupants of the vehicle who are not carried for hire or reward and the insurer cannot be held liable under the Act. But that does not prevent an insurer from entering into a contract or insurance covering a risk wider than the minimum requirement of the statute whereby the risk to gratuitous passengers could also be covered. In such cases where the policy is not merely a statutory policy, the terms of the policy have to be considered to determine the liability of the insurer."

The finding that the term "any person" would include an occupant who is gratuitously travelling in the car is clearly in respect of a comprehensive policy and not in respect of a third party policy." (emphasis added).

He also relied on National Insurance Co. Ltd. v. Bommithi Subbhayarnma and Others, (2005) 12 SCC 243 where the Apex court held that :

"11. In view of the aforementioned authoritative pronouncements of this court, the impugned judgment of the High Court cannot be sustained which is set aside, accordingly. This appeal is allowed. We, however, make it clear that the claimant respondents will be entitled to recover the amount of compensation granted in their favour by the Motor Vehicles Accidents Claims Tribunal from the owner of the vehicle."

In another decision, National Insurance Company Ltd. v. Prema Devi and Others, (2008) 5 SCC 403 the Apex Court held that :

"8. Above being the position, the impugned order of the High Court is not sustainable and is set aside. It is open to the claimant to recover the amount awarded from the owners of the offending vehicles."

In that case also the High Court directed to make payment of the compensation for a gratuitous passenger in a goods carriage holding that the insurer had the liability to satisfy the award by operation of the act only policy.

Mr. Dutta also relied on a decision of this court in National Insurance Co. Ltd. v. Mintu Debnath and Ors., 2007 (2) GLT 490, (2007) 2 GLR 775 where it has been held that :

"on survey of the relevant decisions on the point involved, as disclosed above, go to show that the law as it stands today is that the Insurance Company is not liable to indemnify an Award passed in favour of a gratuitous passenger travelling in a goods vehicle, if he is not the owner or representative of the goods carried in the vehicle." The same principle would be applied also in case of the private vehicle and the gratuitous passenger carried thereby. Unless the occupants are covered by payment of the special premium by way of a contract arrangement, the act only policy will not cover any risk of such gratuitous occupants of the private vehicle. Moreover, Mr. S. Dutta, learned counsel with sufficient vehemence submitted that when there is no contract by way of payment of the special premium the appellant cannot be asked by the Tribunal to satisfy the award even for a temporary period.

On the other hand, Mr. S.K. Goswami, learned counsel appearing for the respondent No. 1 submitted that this court may not take any decision in the appeal in view of the reference as made by the Supreme Court to a larger bench on the issue of liability of the Insurance Company on the gratuitous passenger. Mr. Goswami has made a reference to a decision of Bhagyalakshmi and Others v. United Insurance Company Ltd. and Another, (2009) 7 SCC 148. In that case the policy was a package policy. The contract of insurance if given its face value covers the risk not only of a third party but also of the persons travelling in the car including the owner thereof. In the said decision the Apex Court held that a passenger would not be a third party within the meaning of the provisions of the 1988 Act. In the earlier decisions however, the nature of the policies which came up for consideration were Act Policies. The court did not deal with a package policy. If the Tariff Advisory Committee seeks to enforce its decision in regard to coverage of the third party risk which would include all persons including the occupants of the vehicle and the insurer having entered into a contract of insurance in relation thereto, the matter may require a deeper scrutiny. In the Bhagyalakshmi and Others(supra) the Apex Court held as under:

"27. The question as to whether gratuitous passengers travelling in a private car or pillion riders carried on twowheelers are automatically covered under a package policy/comprehensive policy came up also before the Madras High Court recently in Royal Sundaram Insurance Co. Ltd. v. V.A. Meenakshi (CMA No. 312 of 2009). The Division Bench of the court, after observing the judgment of this court and various High Courts on the subject, dismissing the appeal filed by the Insurance Company and affirming the order of the Tribunal awarding compensation of Rs. 19.10 lakhs to the legal representatives of the deceased passenger of the insured vehicle, held that:

"29. Therefore it is clear from the Act itself, the words of the policy and the decision in Amrit lal Sood case that a comprehensive policy covers the risk of a gratuitous passenger to the extent of the liability incurred. We may imagine what will happen in a case where the owner is driving his car covered by a comprehensive policy. He is accompanied by his wife and children. There is an accident as in this case. The wife and children are permanently disabled by the injuries. If we agree with the appellant Insurance Company, those pathetic claimants will not get any compensation. The law never intended this to happen. That is why the TAG explicitly came out with the clarificatory circular in 1978. We cannot forget that the words used are ''third party'' and ''comprehensive'', so we cannot deny this relief to the thirdparty occupant in a car covered by a comprehensive policy."

[See also the decisions of the High Court of Karnataka in National Insurance Co. Ltd. v. Pattabhi Ramaiah (MFAs Nos. 5921 and 7045 of 2006 [MV] and the Delhi High Court in United India Insurance Co. Ltd. V. Alka Mangla.]

We, therefore, are of the opinion that the matter requires consideration by a larger Bench. We order accordingly. Let the papers be placed before the learned Chief Justice for appropriate orders."

It is, therefore, clear that the reference as made by the Apex Court to the larger bench relates to the package policy/comprehensive policy, not to the Act Policy, therefore, submission of Mr. Goswami, learned counsel for the respondent No. 1 does not carry any substance at all.

From a scrutiny of the impugned judgment and order it would appear that in a tearing off mode, the following part of the judgment as rendered by the Apex Court in National Insurance Co. Ltd. v. Baljit Kaur and Others, (2004) 2 SCC I has been placated out of the context :

"We, therefore, are of the opinion that the interest of justice will be subserved if the appellant herein is directed to satisfy the awarded amount in favour of the claimant, if not already satisfied, and recover the same from the owner of the vehicle."

The said direction was given by the Apex Court under article 142 of the Constitution of India for doing the complete justice but the said power is neither available to the Tribunal nor to this court and as such the exercise of the special power by the tribunal was without jurisdiction and authority and, accordingly, the said direction is set aside.

On considering the decisions as cited by Mr. S. Dutta, this court has also looked into the decision as rendered by the Apex Court in National Insurance Company Ltd. v. Parvathneni and another, (2009) 8 SCC 785 where the Apex Court held as under:

"2. In this case, the allegation of the petitioner. Insurance Company is that there was no valid insurance coverage on the date of the accident, i.e., 30.11.2003. The cheque towards premium for renewal of the policy was issued on 29.11.2003 but the same was dishonoured. Hence, the contention of the Insurance Company is that it has no liability to pay any compensation amount to the claimants since there was no insurance coverage on the date of the accident. Despite this, the High Court has directed the Insurance Company to pay the compensation amount to the claimants with liberty to the Insurance Company to recover the same from the owner of the vehicle.

Prima facie, we are of the opinion if the Insurance Company proves that it has no liability to pay compensation to the claimants, the Insurance Company cannot be compelled to make payment and later on recover it from the owner of the vehicle.

No doubt, there are some decisions which have taken the view that even if the insurance company has no liability, yet it must pay and later on recover it from the owner of the vehicle See for example National Insurance Co. Ltd. v. Yellamma, Samundra Devi v. NarendraKaur (vide SCC p. 104. Para 16), Oriental Insurance Co. Ltd. v. Brij Mohan (vide SCC p. 64. Para 13) and New India Insurance Co. v. Darshana Devi (vide SCC p. 424, para 21), etc. We have some reservations about the correctness of the aforesaid decisions of this court.

If the Insurance Company has no liability to pay at all, then, in our opinion, it cannot be compelled by order of the court in exercise of its jurisdiction under article 142 of the Constitution of India to pay the compensation amount and later on recover it from the owner of the vehicle. In our view, article 142 of the Constitution of India does not cover such type of cases." (emphasis supplied)

It transpires from a collective appreciation of these decisions as cited, the appellant had no liability to cover the risk of the gratuitous occupants of a private vehicle which was under coverage of the act only policy. The alternative for the injured or the dependant of the deceased is to recover the damages from the owner of the vehicle, if they so desire.

For the reasons as aforesaid, the appeal stands allowed. The direction that the appellant shall satisfy the award and recover the same from the owner of the vehicle stands set aside and quashed. The respondent No. 1 would be at liberty to recover the awarded compensation from the owner of the vehicle, the respondent No. 2. The respondent No. 2 is directed to deposit the awarded sum within a period of two months from today in the Tribunal.

There shall be no order as to costs. Send down the LCRs forthwith.