Oriental Fire and General Insurance Co. Ltd. vs M. Bhanumathi and others

Amareswari, J.—The only question for consideration in all these appeals is where passengers are carried for hire or reward in a Lorry and

the contract of insurance does not provide for such carriage, is the liability covered by the Act policy in case of death or bodily injury to the

passengers and the insurer is liable to pay compensation?

The facts are not in dispute. Vehicles involved are Lorries and passengers are carried for hire. A lorry is indisputably a goods vehicle as per the

definition contained, in S. 2(8) which reads as under:--

Goods Vehicle'' means any motor vehicle constructed or adapted for use for the carriage of goods or any motor vehicle not so constructed or

adapted when used for the carriage of goods, solely or in addition to passengers.

Section 42 emphasizes the necessity for a permit for every transport vehicle. It says that no transport vehicle shall be used in any public place

except in accordance with a permit granted by the concerned transport authority. ""Transport Vehicle"" is defined as public service vehicle or a

goods vehicle. Thus it is seen that the lorry is a transport vehicle which requires a permit for use in a public place. The vehicle being a Lorry, the

permit authorises its use only for the carriage, of goods.

2A. Rule 277 of the A. P. Motor Vehicles Rules permits the carriage of 6 persons in all in addition to the driver in any goods vehicle. Rule 277(2)

says that ho person shall be carried upon the goods. Rule 277(3) which was introduced in 1983 provides that no person other than a person

connected with the conveyance of goods shall travel in a goods vehicle. Rule 277(5) specifies that no person shall be carried for hire or reward in

any goods vehicle unless the vehicle is covered by a permit authorising the use of the vehicle for such purpose, and in accordance with the

provisions of such permit. Thus it is plain that no passenger shall be carried for hire or reward in a goods vehicle. Rule 277(1) no doubt authorises

the carriage of 6 persons; but they must be connected with the conveyance of goods. This position is made clear by Rule 277(3). Even prior to the

introduction of this sub-rule, the position was the same. Sub-rule (3) of Rule 277 had only made the position clear.

In this back ground, let us examine the provisions relating to insurance of vehicles.

Section 94(1) directs that no person shall use except as a passenger or allow any other person to use a motor vehicle in public place unless

there is in force in relation to the use of the vehicle a policy of insurance. Section 95 deals with the requirement of policies and the limits of

liabilities. Section 95 reads as follows :--

Requirements of policies and limits of liability:-- (1) In order to comply with the requirements of this chapter, a policy of insurance may be a

policy which-

(a) is issued by a person who is an authorised insurer...and

(b) insures the person or classes of persons specified in the policy to the extent specified in sub-section (2)-

(i) against any liability which may be incurred by him in respect of the death of or bodily injury to any person or damage to any property of a third

party caused by or arising out of the vehicle in a public place;

(ii) against the death of or bodily injury to any passenger of a public service vehicle caused by or arising out of, the use of the vehicle in public

place.

Provided that a policy shall not be required-

(i) to cover liability in respect of the death, arising out of and in the course of his employment, of the employees of a person insured by the policy or

in respect of bodily injury sustained by such an employee arising out of and in the course of his employment, (other than a liability arising under the

Workmen''s Compensation Act, 1923) (8 of 1923), in respect of the death of, or bodily injury to, any such employee-

(a) engaged in driving the vehicle; or

(b) if it is a public service vehicle, engaged as a conductor of the vehicle, or in examining tickets on the vehicle; or

(c) if it is a goods vehicle, being carried in the vehicle, or

(ii) except 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, to cover liability in respect of the death of or bodily injury to persons being carried in or upon or entering or mounting or alighting

from the vehicle at the time of the occurrence of the event out of which a claim arises, or

(iii) to cover any contractual liability.

Section 96 deals with the duty of insurers to satisfy judgments against persons insured in respect of third party risks. Sub-section (2), Sec. 96

provides for the defences open to the Insurance Company against payment of the sums in respect of any judgment. It is as follows:--

96(2)(a) :-- that the policy was cancelled by mutual consent, or-

(b) that there has been a breach of a specified condition of the policy, being one of the following conditions, namely-

(i) a condition excluding the use of the vehicle-

(a) for hire or reward, where the vehicle is on the date of the contract of insurance, a vehicle not covered by a permit to ply for hire or reward, or

(b) for organised racing and speed testing, or

(c) for a purpose not allowed by the permit under which the vehicle is used, where the vehicle is a transport vehicle, or....

In all these cases, the vehicles involved were Lorries and they were involved in accidents due to the negligence of the Drivers and the Tribunal

awarded compensation depending upon the circumstances of each case. The finding regarding rash and negligent driving by the Drivers is not

challenged. The quantum of compensation is also not challenged. The only question is whether the insurer is liable for payment of the amount as the

vehicles were carrying passengers for hire or reward.

Section 95(1)(b) speaks of compulsory insurance in two cases, (1) against any liabilily which may be incurred by him in respect of the death or

bodily injury to any person or damage to any property of a third party and (2) against the death of or bodily injury to any passenger of a public

service vehicle. Sub-clause (ii) of S. 95(1)(b) has no application as it speaks of a passenger of a public service vehicle and a public service vehicle

is defined as a vehicle used or adapted to be used for the carriage of passengers for hire or reward, and includes a motor cab, contract carriage,

and stage carriage. Since the Lorry is a goods vehicle, it does not come under the category of public service vehicle. Sub-clause (i) of S. 95(1)(b)

refers to death or bodily injury to any person or damage to any property of a third party. Sub-clause (i) refers to third parties i.e., Pedestrians,

passers by etc., or damage to the property of a third party. ""Any person"" used in sub-clause (i) does not include a person carried in the vehicle. If

that be so, sub-clause (ii) of S.95(1)(b) which refers to passengers in a public service vehicle would be superfluous. No specific mention need be

made of passengers carried in the vehicle. The liability contemplated under sub-cl. (i) and sub-cl. (ii) of S. 95(1)(b), in our opinion, has no relation

to persons carried in a non-public service vehicle such as a Lorry.

The learned Counsel placed reliance upon the proviso to S. 95(1)(b) which refers to certain exceptions. He relies upon Clause (it) of the

proviso which is an exception to exception and contended that where the vehicle is a vehicle in which passengers are carried for hire or reward, the

liability of the insurance company arises. It is argued that the expression used is ""vehicle"" which includes every vehicle and when passengers are

carried for hire or reward, it implies that the insurance policy must cover persons who are carried for hire or reward. We are unable to accept this

contention. Section 95 lays down the requirements of policies of the insurance and the limits of the liability of the insurer then a proviso is added

which excepts certain liabilities. The proviso is intended to take out of sub-sec. (1) those vehicles which are lawfully used for carrying passengers

for hire or reward. The words ''passengers are carried for hire or reward'' apply to vehicles which are permitted to carry passengers for hire or

reward and not to a lorry which is a goods vehicle, which is permitted to carry only goods. A goods vehicle is a vehicle which, carries goods in

addition to some persons expressly authorised by the permit. Rule 277 prohibits carrying of passengers for hire or reward. The maximum number

of persons permitted to be carried in a goods vehicle are six in addition to the driver. Obviously, they are the persons who are connected with the

goods. In fact, sub-rule (3) of Rule 277 makes the position clear. A goods vehicle must be treated as distinct from a public service vehicle, a motor

cab, a contract carriage and a stage carriage which are essentially vehicles used or adapted for carrying of passengers for hire or reward. The

liability included in S.95(1) is only in respect of the death and bodily injury to passengers, who may be lawfully carried in passenger vehicles. The

words ""except where the vehicle is a vehicle in which passengers are carried for hire or reward"" occurring in Cl. (ii) of the proviso to S. 95(1)(b)

do not apply to goods vehicles. We cannot attribute such intention to the framers of the Act to cover the liability of the persons who are carried in

the vehicle in contravention of the provisions of the Act and the permit. The words ""passengers carried for hire or reward"" mean persons who are

lawfully carried.

In this connection, we may also refer to S.96(2)(b)(1)(c) of the Act. Section 96(1) makes the insurer liable to pay the amount due under

decrees. Exceptions to such liability are provided under sub-sec. (2) of S.96 which lays down the defences available to the insurer. Under S. 96(2)

(c) it is open to the insurer to take a defence that the vehicle was used contrary to the conditions of a permit or for a purpose not allowed by the

permit. In the case of a goods vehicle, what is permitted is only the carriage of goods and there is a specific provision in sub-rule (5) of Rule 277

against carriage of passengers for hire or reward.

Now we will refer to the decisions cited at the Bar.

In Pushpabai Purshottam Udeshi and Others Vs. Ranjit Ginning and Pressing Co. (P) Ltd. and Another, , it was held that the Motor Vehicles

Act does not require that a policy of insurance should cover risk to passengers, who are not carried for hire or reward. From these observations, it

is contended that the policy covers the risk of passengers, who are carried for hire or reward. We are afraid, we cannot accede to this submission.

In this case, the deceased is travelling in a motor car which met with an accident.

Considering the liability of the Insurance Company in that context, it was held that since he was not a passenger for hire or reward, the risk is not

covered by the insurance policy. But the Supreme Court did not lay down that irrespective of the nature of the vehicle, if persons are carried for

hire or reward, the liability in the case of death or bodily injury is covered by the insurance policy. The Supreme Court was not considering a case

of passengers carried in a goods vehicle contrary to the permit and its conditions.

In New India Assurance Co. Ltd. v. Surjit Kaur, 1985 ACJ 726, a Division Bench of the Allahabad High Court held that in view of the

provisions of S. 95(2)(a) of the Motor Vehicles Act the insurer is not liable for the death of a passenger travelling in a goods vehicle either on hire

or gratuitously.

In Oriental Fire and General Insurance Co. Vs. Hirabai Vithal Nikam and Others, a Full Bench of the Bombay High Court construed the

provisions of Cl. (ii) of Proviso to S. 95(1) (and?) held that the words ""except where the vehicle is a vehicle in which passengers are carried for

hire or reward"" do not apply to a goods vehicle and where passengers are carried for hire or reward contrary to the permit, the insurer is not liable

for the death or bodily injury to such a person. In reaching this conclusion, the Bombay High Court relied upon its earlier decision in United India

Insurance Co. Ltd. v. Abdul Munaf Majur Hussain Momin, (1984) 2 TAC 265 and distinguished the earlier decision of the Bombay High Court in

Nasibdar Suba Fakir Vs. Adhia and Company and Others, . The Bombay High Court held that where a goods vehicle is used for carriage of

passengers for hire or reward, it is used for a purpose not allowed by the permit and consequently by virtue of S. 96(2)(b)(i)(c) of the Motor

Vehicles Act, the Insurance Company is not liable for the tortious act of the owner of the vehicle. Distinguishing Nasibdar''s case, the Court

observed that ""the owner of the goods to be transported has to travel in the vehicle, the consideration paid by the hirer of the vehicle being

composite included consideration for the incidental transport of the hirer; who accompanied the goods and hence in Nasibdar''s case it was held

that the tortious liability of the owner of the goods towards him must be covered by the insurance policy.

In Sardar Mohan Singh Bedi Vs. Manu Maya Thappa and Others, it was held that it is not mandatory upon the insurer to indemnify persons

who are being carried in vehicles other than those which carry for hire or reward, and if it is open to the insurance company to cover the risk of

such persons by virtue of an agreement. But in the absence of any clause in the policy covering the risk of persons travelling in the goods vehicle,

the insurer is not liable to indemnify the risk of such persons.

In C. Narayanan Vs. Madras State Palm Gur Sammelan and Another, a Division Bench of the Madras High Court consisting of Kaila-sam

and Maharajan, JJ., held that if a person is not employed and is travelling without any authorisation, he is not protected by the Act policy. It is

further held that a passenger carried by a lorry will not be covered by the insurance policy unless he is proved to be a passenger travelling by

reason of or in pursuance of a contract of employment.

The learned Counsel for the respondents placed strong reliance upon two decisions of this Court in The Premier Insurance Co. Ltd.,

Vijayawada Vs. Vaddeswarapu Siromanamma and Others, and Oriental Fire and General Insurance Co. v. M. Chandra Rao, 1986(2) ALT 606.

We will first refer to the Division Bench case in Premier Insurance Co. Ltd., Vijayawada v. Siromanamma. In this case, the facts were that

some passengers were taken on free lift in a Lorry which met with an accident. The contention was that the compulsory insurance policy does not

cover the passengers taken gratis and the policy does not contemplate policy in respect of unauthorised passengers. The Court accepted the

contention and held that the liability for passengers who were travelling gratuitously cannot be fastened on the insurance company on the basis of

the Act policy or compulsory insurance envisaged under S. 95 of the Act. The question whether passengers who are carried for hire or reward

contrary to the conditions of the permit and contrary to the policy are covered by the Act policy did not directly arise in this case. The scope of Cl.

(ii) of the Proviso to S. 95(1)(b) did not fall for consideration for the simple reason that as the said Section speaks of passengers carried for hire or

reward. In the case decided by the Division Bench passengers were carried gratuitously. They are neither connected with the goods nor were they

carried for hire or reward. In these circumstances, it was held that Cl. (ii) of Proviso to S. 95(1)(b) has no application. Hence this decision is

distinguishable.

Next we come to Oriental Fire and General Insurance Co. v. M. Chandra Rao, 1986 (2) ALT 606. In a batch of appeals which were decided

by the learned single Judge, one of the questions was whether passengers carried in a goods vehicle the or injured due to the accident are liable to

be compensated by the Insurance Company under S.95 of the Motor Vehicles Act. The learned single Judge, after a very elaborate consideration

of Ss. 95 and 96 of the Act held that they are covered by the Act policy and the Insurance Company is liable and that a condition in the policy that

the Insurance Company will not cover the liability of persons carried in the vehicle for hire or reward contrary to the conditions of the permit would

not be valid. With great respect, we are unable to agree with this decision. The learned Judge mainly relied upon the decision in The Premier

Insurance Co. Ltd., Vijayawada Vs. Vaddeswarapu Siromanamma and Others, where the Bench was considering the question of gratuitous

passengers. The decision mainly turned upon the word ''vehicle'' used in Cl. (ii) of the Proviso to S. 95(1)(b) which was interpreted as any vehicle.

But the scheme and ambit of S. 95 does not accord with this interpretation. Even the learned Judge observed in Para 32 that in the case of

passengers travelling gratuitously taking a free lift are not covered by the Act policy. If passengers travelling in a goods vehicle without payment of

any fare taking a free lift are not covered by the compulsory insurance or the Act policy as we may call it, there is no reason why persons, who

travel by paying fare should be covered by the Act policy. Surely the framers of the Act would not have intended that the liability in respect of

persons who are carried in breach of the conditions of the permit should be borne by the Insurance Company. If gratuitous passengers are not

covered by Cl. (ii) of the proviso to S. 95(1)(b) afortiorari passengers who are carried on payment of hire or reward are not covered by the Act

policy. In fact, under S. 96(2) it is open to the Insurance Company to disclaim any liability on the ground that there is a condition in the policy that

it will not cover the risk of persons travelling contrary to the conditions of the permit. The learned single Judge held that such a condition would be

void. It is true that no condition can be imposed contrary to the Statute. But Cl.(ii) of the proviso to Section 95(1)(b) does not contemplate any

such liability and hence a condition to that effect cannot be said to be void.

In New India Assurance Company Ltd. Vs. Shaik Jaffar and Others, the facts are identical. Passengers were carried in the lorry on payment

of charges. Construing Ss. 95 and 96 of the Motor Vehicles Act, Jeevan Reddy, J., held that as persons were travelling contrary to the specific

condition in the policy and also the permit, the Insurance Company would not be liable to pay compensations.

Reference was made to a case in M. Suryanarayana v. G. Satyavati, 1979 (1) APLJ 401. The facts were, the owner of the goods was

travelling in the Lorry when it met with an accident. The question was whether the Act policy covers liability in respect of such person and the

Division Bench consisting of one of us (Amareswari, J.) held that the Insurance Company was liable on two grounds, that the owner of the goods

was travelling in the lorry pursuant to the contract of employment and he is a person connected with the goods which is permitted under the Rules.

This case is far distant from the facts arising in the present case where passengers, who have nothing to do with the goods were carried on

payment of charges.

The following are our conclusions:--

The deceased were carried in the vehicle on payment of charges and hence they were carried for hire or reward. The vehicle was not covered

by a permit to carry passengers for hire or reward. The Rules prohibit carriage of persons for hire or reward in a Lorry. The Vehicles were

therefore, used for a purpose not allowed by the permit under which it was used. Consequently the insurer is not liable for the tortious act of the

owner of the vehicle by virtue of S. 96(2)(b)(1)(c) of the Motor Vehicles Act. We are in agreement with the view taken by the Full Bench of the

Bombay High Court in Oriental Fire and General Insurance Co. Vs. Hirabai Vithal Nikam and Others, and the decision of the learned single Judge

in New India Assurance Company Ltd. Vs. Shaik Jaffar and Others, .

We are therefore, of the view that where passengers are carried for hire or reward in a lorry which is a goods vehicle, the insurer is not liable

for death or bodily injury to such a passenger. Accordingly we allow the Letters Patent Appeals and set aside the impugned orders as against the

Insurance Company. No costs.

A.A.O. Nos. 203, 204, 205 and 206 of 1985:--

These four appeals are by the owners of the vehicles granting compensation to the claimants, who are dependents of the deceased. The finding that

there was rash and negligence on the part of the Driver is based on appreciation of evidence on record. The Tribunal gave good reasons in support

of its order and nothing has been established that the findings are erroneous. The Tribunal was also right in fastening the liability to the owner and

the Driver and exonerating the Insurance Company. Hence these appeals are dismissed. No costs.

Order accordingly.