Oriental Insurance Company & Ors. vs Kaka Ram and Ors.

These 1st. Miscellaneous Appeals have been preferred u/s 173 of the Motor Vehicles Act, 1989 by the Insurance Co. and the driverRadhey

Sham appellant and are being disposed of by this common judgement being arising out of impugned order dated 27:4.1998 fastening the liability of

Rs 50,000/to be indemnified by the appellant Insurance Co. and rest of the amount to be paid by Dewan Singh owner and Radhey Sham, driver of

the vehicle jointly and severally.

Facts of the case are that Bus No. JKQ4641 while coming from Sudha Mahadev to Chennai on 10.6.1987 on its way, while giving pass to the

vehicle coming from opposite direction, rolled down be cause of supporting wall to the road gave way and as a consequence thereof the bus rolled

down into the nullah causing casualties and injuries to passengers. The claimants and the injured moved the claim petitions seeking compensation.

The Tribunal after appreciating the evidence led by the parties has awarded compensation holding Oriental Insurance Company (for short

hereinafter called as ""Co."") liable to the extent of Rs 15.000/ and rest of the amount, to be paid by the owner Dewan Singh and driver Radhey

Sham jointly and severally.

The award of the Tribunal has been assailed before this court by the Insurance Co. and the driver. The driver has challenged the award on the

ground that the accident is not caused because of his negligence. In order to make out, he is relying on the statements of Romesh Chander, Hans

Raj, Kundan Lal besides his own statement. Another ground of his challenge is that the liability to satisfy the award should have been fastened on

the company and the interest awarded by the Tribunal is excessive. The company has assailed the award on the ground that the interest granted is

excessive and the liability of the company was not Rs 50,000/ in view of mandate of section 95(2)(b)(ii) of Motor Vehicles Act, 1939.

Heard the learned counsel for the parties and perused the record.

Mr Shukla, learned counsel appearing on behalf of the claimants in Appeals No. 202/98 and 196/98 has opposed the plea of the driver and the

company. Mr Choudhary learned counsel appearing for the company has submitted that the Tri bunal was not justified in holding the company

liable to indemnify an amount of Rs 50,000/ as statutory liability of the company in terms of section 95(2) (b)(ii) was only limited to the extent of Rs

50,000/ for each individual passenger. His submission is that the accident took place before the promulgation of Motor Vehicles Act of 1989,

therefore, the liability of the company to indemnify is to be determined u/s 95(2) (b) (ii) of the old Act as section 217 re pealing and saving has not

in any manner made the application of the new Act retrospective. Section 95(2) (b) (ii) is reproduced for convenience and reads thus:

95 (2) Subject to the proviso to subsection (1), policy of insurance shall cover any liability incurred in respect of any one accident up to the

following limits, namely(a)....

(b) Where the vehicle is a vehicle in which passengers are carried for hire or reason of or in pursuance of a contract of employment,

(i)....

(ii) in respect of passengers,

(1) a limit of fifty thousand rupees in all where the vehicle is registered to carry not more than thirty passengers:

(2) a limit of seventyfive thousand rupees in all where the vehicle is registered to carry more than thirty but not more than sixty passengers.

(3) a limit of one lakh rupees in all where the vehicle is registered to carry more than sixty passengers; and

(4) subject to the limits aforesaid, ten thousand rupees for each individual passenger where the vehicle is a motor cab and five thou sand rupees for

each individual passenger in any other case.

This section according to Mr. Choudhary has been amended in 1982 and subclause (ii) of section 95(2) (b) after amendment reads as under:

95(2) (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 passengers, a limit of fifteen thousand rupees for each individual passenger"".

The Supreme Court after examining the provisions of section 95 referred to above and the judgements delivered in case National Insurance Co.

Vs. Jugal Kishore & Ors. (1988) I SCC 626 and in M.K. Kunhimohammed vs. P.A. Ahmedkutty & Ors. 1987 ACJ 872 has pronounced

holding that:

Having regard to the large number of motor vehicles accidents which are taking place on the roads and also to the fact that a large number of

public service vehicles carrying passengers are involved in them, we are of the view that the limit of Rs 15,000/ fixed in the case of each passenger

appears while enacting the Bill into law would take steps to increase the insurer's liability keeping in view the need for providing for adequate

compensation as a measure of social security"".

The liability of the appellant and re spondents No. 4 and 5 to pay the amount of award was joint and severe.

He has also relied upon the judgement pronounced in New India Assurance Co. vs. Krishan Pal Singh by the Supreme Court reported in 2000

ACJ 522 wherein the Tribunal awarded compensation of Rs 44,000/ together with interest. The Tribunal held that the liability of the Insurance Co.

only to the extent of Rs 5000/ as the policy taken by the owner of the vehicle was 'Act Policy' under section 95 (2) (b) of the Motor Vehicles Act,

1939. The balance of the award amount was directed to be paid by the owner of the vehicle. The High Court in appeal held the liability of the

Insurance Co to the extent of Rs 50,000/. The question before the Supreme Court was whether the High Court was right in reversing the award of

Motor Accident Claims Tribunal, which restricted the liability of the Insurance Co. to the extent of Rs 5000/ with interest. The Supreme Court held

as under:

In this case, we are concerned with accident to the motor vehicle which was insured covering, interalia, the risk for capacity up to 65

passengers. The policy was 'Act Policy' is common ground. That being the position, the relevant provision at the time to be looked into is section

95(2) (b) (ii) (3) read with (4). A plain reading of the said provisions extracted above will present no difficulty in holding that the insurer's liability is

limited to Rs 5,000/ in respect of each passenger subject to the limit fixed in section 95(2) (b) (ii) (3). Accordingly, the view taken by the High

Court without noticing section 95(2) (b) (ii) (4) of the Act, cannot be sustained and it is, therefore, set aside. The award of the Tribunal, making the

insurance company liable only up to a sum of Rs 5,000/ is restored"".

It is made out that the liability of the company is to be determined on the date of the accident and the benefit of the provision of new Act to this

extent shall not be available for awarding compensation and the liability of the company to indemnify shall be to the extent of Rs 15,000/ per

passenger.

Mr Basotra appearing for the appellantdriver has submitted that there being an avoidance clause in the policy, therefore, the company is liable

to satisfy the award beyond its liability under the policy because of provisions of section 96 of the Motor Vehicle Act, 1939. To support his plea

he has relied upon the judgement of the Supreme Court delivered in Oriental Insurance Co. Ltd. vs. Cheruvakkara Nafeessu & Ors. (2001)2

SCC 491). In the said case claim petition was filed by the legal representatives of the deceased who died in road accident caused by an Auto

rickshaw insured with the company on 6.7.1998. The claimants claimed Rs 2 lacs as compensation. The company filed reply stating specifically

therein that the liability of the company is limited to Rs 50,000 under the policy of insurance. The Claim Tribunal passed the award of Rs 1,94,150

and fastened the entire liability on the appellantcompany. The appeal filed against the award was dismissed by the High Court. The Supreme Court

considering the judgement delivered in New Asiatic Insurance Co. Ltd vs. Pessumal Dhanamal Aswani & Ors. (AIR 1964 SC 1736) in Oriental

Insurance Co. Ltd. vs. Cheruvakkara Nafeessu & Ors. (2001)2 SCC 491) held as under:

Relying upon the aforesaid judgement and referring to the avoidance clause, a threejudge Bench of this court in Amrit LaL Sood vs. Kaushalya

Devi Thapar (1998)3 SCC 744 held:

In the policy in the present case also, there is a clause under the heading; 'AVOIDANCE OF CERTAIN TERMS AND RIGHT OF

RECOVERY' which reads thus:

Nothing in this policy or any endorsement herein shall affect the right of any person indemnified by this policy or any other person to recover an

amount under or by virtue of the provisions of the Motor Vehicles Act, 1939, section 96. But the insured shall repay to the company all sums paid

by the company which the company would not have been liable to pay but for the said provisions.'

14.The above clause does not enable the insurance company to resist or avoid the claim made by the claimant. The clause will arise for

consideration only in a dispute between the insurer and the insured. The question whether under the said clause the insurer can claim repayment

from the insured is left open. The circumstance that the owner of the vehicle did not file an appeal against the judgement of the single judge of the

High Court under the letters patent may also be relevant in the event of a claim by the insurance company against the insured for repayment of the

amount. We are not concerned with that question here."" 9.The reliance of the learned counsel for the appellant on New India Assurance Co. Ltd.

vs. Shanti Bai (1995)2 SCC 539) and National Insurance Co. Ltd. vs. Jugal Kishore (1988)1 SCC 626) is of no help to him in as much as in

those cases the effect of judgement in Amrit Lal Sood case has not been considered. In Shanti Bai case the court was dealing with the effect of a

comprehensive policy visavis the liability of the insurer in respect of thirdparty risk on the basis of the estimated value of the vehicle and found that

the limit of liability with regard to thirdparty risk does not become unlimited or higher than the statutory liability only on account of entering into a

comprehensive policy. It was pointed out that the comprehensive policy only entitles the owner to claim estimated value of the vehicle which did

not mean the limit of liability with regard to thirdparty risk becoming unlimited or higher than the statutory liability. In the case of National Insurance

Co. Ltd. vs. Jugal Kishore this court observed that the liability underthe policy could not exceed the statutory liability under section 95 of the Act

only on the ground that the insured had undertaken comprehensive insurance of the vehicle. The payment of higher premium on that score,

however, did not mean that the limit of liability with regard to thirdparty risk became unlimited or higher than the statutory liability fixed under

subsection (2) of section 95 of the Act. 10.In the facts and circumstances of this case we find that despite holding the liability under the policy

limited to the extent of Rs 50,000, the Claims Tribunal and the High Court were not unjustified in directing the appellant company to pay the whole

of the awarded amount to the claimants on the basis of the contractual obligations contained in clauses relating to the liability of the third parties and

avoidance clause. However, the Claims Tribunal and the High Court were not justified in rejecting the right of the appellant company to recover

from the insured the excess amount paid in execution and discharge of the award of the Tribunal.

11.The appeal is accordingly allowed holding that the appellant company is liable to pay the entire amount to the claimants. Upon making such

payment the appellant can recover the excess amount from the insured by executing this award against the insured to the extent of such excess as

per section 174 of the Motor Vehicles Act, 1988.

There is substance in the plea of Mr. Basotra and the company therefore, can be directed and also cannot escape to satisfy the discharge of

the award and is at liberty to recover the same from the insured.

So far plea of Gagan Basotra, relying upon the statements of the witnesses referred to above, evidence on record is not sufficient to record a

finding that the accident caused is not an act of negligence on the part of driver. The Tribunal has rightly appreciated the evidence with regard to

the negligence of the respondentdriver. Keeping in view the width of the road i.e. 22' and the Tared blanket only of 81/2' the driver should have

taken due care while giving pass to the vehicle coming from the opposite direction. Therefore, the negligence of the appellant cannot be ruled out.

So far plea of award of excessive rate of interest is concerned, the learned counsel has submitted that the rate of interest of 12% is excessive.

To make out, he has relied upon the judgement of the Supreme Court delivered in S. Kaushnuma Begum vs. The New India Assurance Co. Ltd.

(AIR 2001 SC 485) wherein interest was granted at the rate of Rs 12% and has been reduced to 9% holding that:

Now, we have to fix up the rate of interest. Section 171 of the MV Act empowers the Tribunal to direct that ""in addition to the amount of

compensation simple interest shall also be paid at such rate and from such date nor earlier than the date of making the claim as may be specified in

this behalf."" Earlier, 12% was found to be the reasonable rate of simple interest. With a change in economy and the policy of the Reserve Bank of

India the interest rate has been lowered. The nationalised banks are now granting interest at the rate of 9% per annum from the date of the claim

made by the appellants.

Following the observations of the Supreme Court, rate of interest awarded by the Tribunal also deserves to be modified.

For the aforesaid reasons the appeals are disposed of and the impugned judgement of the Tribunal is modified to the following extent:

i) that the liability of the company to indemnify is to the extent of Rs 15000/ for each passenger; ii) The company will satisfy the discharge of the

award and shall be at liberty to recover it from the insured. Rate of interest is modified to be payable @ 9% per annum from the date of the

institution of the claim petitions. No order as to costs.