New India Assurance Co. Ltd. vs Vidyutkumar Shantilal Shah and Another

D.C. Srivastava, J.—The New India Assurance Co. Ltd., appellant has filed this appeal against the award dated 28-3-1988 rendered by

the Motor Accident Claims Tribunal, Ahmedabad.

Brief facts are that the applicant respondent No. 1 was walking on foot on the road from Paldi to Kocharab Ashram on 10-12-1983. The

respondent No. 2 was driving his auto-rickshaw and was coming from behind. He was allegedly driving the auto-rickshaw rashly and in a negligent

manner. He knocked down respondent No. 1 from behind as a result of which, he sustained serious injuries. The injured was taken to the hospital

of Dr. Suman Shah. He filed the claim petition and claimed compensation of Rs. 3,50,000/-. The Tribunal, however, allowed the petition partly

and awarded compensation of Rs. 2,95,000/- with 12% per annum interest from the date of the application till payment with proportionate costs.

In this appeal, a short point is involved for determination. Shri Rajni H. Mehta, learned Counsel for the appellant has argued that the liability of

the Insurance Company while insuring the auto-rickshaw could not exceed Rs. 50,000/-. This fact was overlooked by the concerned tribunal and

the tribunal was in error in upholding unlimited liability of the insurance company. Learned Counsel Shri B. G. Patel and Shri M. D. Pandya were

heard. We have considered the provisions of Section 95(2) of the Motor Vehicles Act, 1939 and also the award of the tribunal as well as the

insurance policy and motor tariff.

Xerox copy of the insurance policy shows that the appellant insured Bajaj Auto Rickshaw CRT 2260 and the insurance policy was valid on the

date of accident. Premium paid is indicated in the insurance policy in the column of schedule of premium. It runs as under :

State law Where can the funds be invested Reference

M.P. Only outside the business Section 44(2) read

with instructions of the

Government

Withdrawal only after permission Government

and that too under certain specified instruction

circumstances only

Rajasthan (Unless permission is obtained), Rule 55(2)

there is prohibition against investing

reserve fund in the business

Once funds are separately Rule 55(3)

invested, cannot be withdrawn

without sanction of Registrar which

will be given only for certain

purposes

Maharashtra Reserve fund may be used : Section 66(2)

(l) in the business, or

(2) invested otherwise

Investment may be as per : Section 70 Rule 54

(1) Section 70 of the Act or,

(2) Rule 54(1) of the Rules

Total Rs. 370-00 is wrongly mentioned. It should be 330-50 ps. It appears that as provided in the premium motor tariff para 5, premium for riot

and strike was not included. According to Shri Rajni H. Mehta, this premium comes to Rs. 47-50 ps. according to the tariff and in this way, total

comes to Rs. 378-00. The calculation submitted by Shri Rajni H. Mehta seems to be correct. What transpires from the calculations submitted by

Shri Mehta and the schedule of premium is that it can be said that Rs. 378-00 only were charged and there is omission of premium for riot and

strike and the total of Rs. 378-00 was overtyped as Rs. 370-00. It is, however, further clear that no additional premium was charged for making

the Insurance Company liable to unlimited extent. The question is whether on this premium, the Insurance Company could be saddled with

unlimited liability and also whether in view of the limits to liability mentioned in the insurance policy, the appellant Insurance Company can be

saddled with unlimited liability?

On the bottom of the insurance policy, endorsement numbers are given, limits of liability are also disclosed and the typed portion runs as under :

Such amount as is necessary under Motor Vehicles Act, 1939. Limit of the amount of the company''s liability u/s ll-l(i) in respect of any one claim

or series of claims arising out of one accident is unlimited.

The question is whether these two recitals in the insurance policy are enough to saddle the insurance company with unlimited liability to pay

compensation to the third party who was injured in this case. For determining this question, Section 95(2)(b) of the old Act has to be recapitulated.

It provides that subject to the proviso to sub-section (1), a policy of insurance shall cover any liability incurred in respect of any one accident upto

the following limits, namely :-

(b) where the 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 such individual passengers.

Thus, the statutory liability of the insurer u/s 95(2)(b)(i) in case of injury caused to the third party namely person other than the passengers

carried for hire or reward will be limited to the extent of Rs. 50,000/- only in all. The words ""in all"" are material and indicate that nothing more

except Rs. 50,000/- are to be paid by the insurance company in one accident where person other than the passenger carried for hire or reward

received injuries.

In the case before us, the victim was obviously not a passenger in the auto-rickshaw but he was a person other than the passenger and was

walking on the road when he was knocked down by the offending auto-rickshaw. Thus, the statutory liability of the Insurance Company u/s 95(2)

(b)(i) will not exceed Rs. 50,000/-, in any case.

If this is so, then, the two clauses in the insurance policy showing limits of liability ""as is necessary under the Motor Vehicles Act, 1939"" will not

mean that the liability will be unlimited or that the vehicle can tie said to have been comprehensively insured.

Likewise, the word ""unlimited"" introduced in the insurance policy will not mean that there was an agreement between the insurer and the auto-

rickshaw owner that in the case of accident, the Insurance Company will be liable to unlimited extent to the third party.

We have given our thoughtful consideration to the words ""such amount as is necessary under the Motor Vehicles Act, 1939"". It will mean only

the amount which is indicated in Section 95(2)(b)(i) in the instant case. Likewise, the word ""unlimited"" would not mean that the Insurance

Company is liable to pay compensation to unlimited extent.

This matter came up for consideration before the Apex Court in National Insurance Co. Ltd., New Delhi Vs. Jugal Kishore and Others, .

According to the Apex Court, even though it is not permissible to use the 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 than

for an ""act only"" policy 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 upto the estimated value of the vehicle calculated according to the rules and regulations framed in this

behalf. Comprehensive insurance of the vehicle and payment of higher premium on this score, however, do 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. Likewise, if risk of any other nature for instance, with regard to ''the driver

or passengers etc. in excess of statutory liability, if any, is sought to be covered, it has to be clearly specified in the policy and separate premium

paid therefore. This is the requirement of the tariff regulations framed for the purpose. The Apex Court relied upon earlier decision in Pushpabai

Purshottam Udeshi and Others Vs. Ranjit Ginning and Pressing Co. (P) Ltd. and Another, . Interpreting the provisions of Section 95(2)(b) of the

Motor Vehicles Act, the Apex Court in National Insurance Co. v. Jugal Kishore (supra) held that the liability under the policy in that case was the

same as the statutory liability contemplated by clause (b) of sub-section (2) of Section 95 of the Act namely Rs. 20,000/- and the award against

the insurance company in excess of the statutory liability was, therefore, not maintainable and was quashed. In the case before us, the statutory

liability of the insurance company as against the third party u/s 95(2)(b)(i) of the Motor Vehicles Act, 1939 will be confined to Rs. 50,000/- only in

all and not beyond that.

In the case of Pushpa v. Ranjit Ginning and Pressing Company Pvt. Ltd. (supra), the same view was taken by the Apex Court and at that time,

the liability of the insurance company was Rs. 50,000/- only. The award in excess of this amount was modified.

Thus, from the above two decisions of the Apex Court, it flows as under :

(1) The motor vehicle will not be used by the owner unless it is covered at least ""act only"" class policy.

(2) It is not obligatory for the owner of the vehicle to get it comprehensively insured.

(3) If the owner chooses to get the vehicle comprehensively insured, higher premium than that for ""act only"" is payable which depends upon the

estimated value of the vehicle.

(4) In case of comprehensive insurance, owner of the vehicle can claim reimbursement of the entire amount of the loss or damage suffered to the

vehicle upto the estimated value of the vehicle as calculated according to the rules and regulations framed in that behalf.

(5) The comprehensive insurance of the vehicle and payment of higher amount on this score do 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.

(6) If any other risk is intended to be covered with regard to the driver or passengers in excess of the statutory liability, it has to be clearly specified

in the policy and separate premium is required to be paid therefore.

In the case before us, what transpires from the schedule of premium as corrected by Shri Rajni H. Mehta, learned Counsel for the appellant is

that no additional premium or higher premium was charged by the insurance company. The contention to the contrary raised on behalf of the

respondents is incorrect and cannot be accepted. It was incorrectly contended that the tribunal has observed that additional premium was paid in

the instant case. Our attention was drawn to paragraph 22 of the judgment of the tribunal but this observation is nothing but quotation from the

case decided by the Delhi High Court in Smt. Usha Sahgal & Ors. v. Shri Chhote & Ors. 1985 (1) ACJ 377. When the insurance policy before us

indicates that only premium according to tariff for ""act only"" class was charged and no additional premium was charged for undertaking unlimited

liability, it would be incorrect to say that the insurance company is liable to unlimited extent. In this background, mere typing of the word

''unlimited'' will not render the policy comprehensive nor the liability unlimited. No agreement between the owner and the insurance company was

alleged or proved before the tribunal under which it can be said that the insurance company, the appellant undertook unlimited liability to pay

compensation to the third party who would be involved in the accident. The payment of premium at ordinary rate will not entitle the third party to

claim unlimited compensation from the insurance company, the appellant. The words ""such amount as is necessary under the Motor Vehicles Act,

1939"" incorporated in the policy have direct reference to the provisions of Section 95(2)(b)(i) of the Motor Vehicles Act, 1939. In our opinion, it

was an ""act policy only"" and not that the vehicle was comprehensively insured. Obviously, no higher premium was paid by the owner of the vehicle.

As such, the liability of the appellant cannot exceed Rs. 50,000/-. The award in excess of Rs. 50,000/- against the appellant insurance company, is

therefore, bad in law. The award has, therefore, to be modified. 17. The appeal in the aforesaid circumstances succeeds and is hereby allowed.

The claimants shall get a sum of Rs. 50,000/- together with 12% per annum interest from the date of application till payment and proportionate

cost from the appellant - New India Assurance Company Ltd. who was the opponent No. 2 before the tribunal. Since the appeal has been finally

disposed of, modified amount of Award shall be payable to the claimant respondent No. 1 immediately. If the amount has not been deposited so

far, it shall be paid to the respondent No. 1 immediately after the deposit is made. In that event, deposit be made within three weeks.

Appeal partly allowed.