Orissa High Court
An Appeal Under Section-173 Of The Motor ... vs Bindhyaben Sahoo And on 26 June, 2025
Author: Biraja Prasanna Satapathy
Bench: Biraja Prasanna Satapathy
IN THE HIGH COURT OF ORISSA AT CUTTACK
MACA No.576 of 2023
An appeal under Section-173 of the Motor Vehicle Act,
1988.
..................
The Divisional Manager,
United India Insurance Co.
Ltd., Cuttack .... Appellant
-versus-
Bindhyaben Sahoo and
Others .... Respondents
For Appellant : Mr. S. Satpathy, Advocate
For Respondents : Mr. D. Patnaik, Advocate
for Respondent Nos.1 to 4
Mr. P.K. Mishra, Advocate
for Respondent No.5
PRESENT:
THE HONBLE JUSTICE BIRAJA PRASANNA
SATAPATHY
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Date of Hearing:10.04.2025 & Date of Judgment: 26.06.2025
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Biraja Prasanna Satapathy, J.
1. Heard learned counsels appearing for the parties.
// 2 //
2. The present Appeal has been filed by the Appellant-Company inter alia challenging the impugned judgment dated 31.01.2023, so passed by the 3rd Addl. District Judge-cum-4th MACT, Cuttack in MAC Case No.138 of 2018. Vide the said judgment, the Tribunal while allowing the claim of the Claimants-Respondent Nos.1 to 4, held the appellant-company liable to pay compensation amount of Rs.45,11,466.25/- with interest payable @ 6% per annum payable from the date of application till its realization. The Tribunal also allowed default interest @ 12% per annum in case the compensation amount is not paid, within the period of 2 (two) months from the date of award.
3. While assailing the impugned judgment, learned counsel for the appellant-company vehemently contended that taking into account the nature of policy issued by the appellant and the fact that the accident occurred beyond the area covered Page 2 of 34 // 3 // under the Policy, the appellant is not liable to pay the compensation as awarded.
3.1. It is contended that the vehicle in question bearing Registration No.OR-04-P-3025 is a Heavy Motor Vehicle, to be more specific a Hywa Truck. It is the case of the claimants that while the deceased was looking after the road work, standing on the extreme left side of the road, the offending Truck bearing Registration No.OR-04-P-3025, came with a high speed in a rash and negligent manner, dashed the deceased and accordingly the deceased died on the spot. Claimants accordingly for such death of the deceased in a road accident caused by the offending vehicle, filed the claim application in MAC No.138 of 2018, claiming compensation amount of Rs.70 lakhs.
3.2. It is contended that the policy in question was issued by the appellant covering the period from 31.03.2017 to 30.03.2018. Even though the vehicle Page 3 of 34 // 4 // was a Heavy Motor Vehicle (Hywa Truck) but the owner of the offending vehicle took the policy in the name and style Contractors Plant and Machinery Insurance Policy (in short CPM Policy) vide Policy No.2603044416P118073112. It is also contended that the policy in question was so issued with the location code "Parjang Dhenkanal" in the State of Odisha.
3.3. It is contended that since the policy so issued in favour of the offending Truck is a CPM Policy and it's coverage covers the location Parjang in the district of Dhenkanal, the accident having taken place outside the location, the policy does not cover the liability, as the accident admittedly occurred beyond the location area coming under Mangalpur P.S. in the District of Jajpur.
3.4. A further submission was also made that the policy being the policy in the nature of CPM Policy, it does not cover the 3rd Party claim arising out of Page 4 of 34 // 5 // the motor accident in a public road. A further submission was also made that in respect of 3rd Party liability though the company accepted the premium of Rs.850/- but by fixing the outer limit of such 3rd Party liability at Rs.5 lakhs. But since the accident admittedly occurred beyond the location area, the policy being the policy in the nature of CPM Policy, the appellant is not at all liable to pay any compensation amount so awarded by the Tribunal vide the impugned judgment. A further submission was also made that in support of the nature of policy and its coverage, the policy was not only exhibited vide Ext-A but also the same was proved by the appellant with examination of its witness as P.W. 1.
3.5. It is also contended that the policy being the policy in the nature of a CPM Policy, is not a policy issued in favour of motor vehicle in terms of the provisions contained under Section 147 of the Motor Page 5 of 34 // 6 // Vehicle Act, which deals with Insurance of Motor Vehicle against 3rd Party risk.
3.6. In support of his aforesaid submission, reliance was placed to a decision of this Court passed on 27.02.2023 in MACA No.388 of 2019 and batch. This Court in Para-10 of the said judgment has held as follows:-
―It is true that a CPM Policy is not the same statutory policy according to the provisions contained in Section 147 of the M.V. Act.‖ 3.7. Reliance was also placed to a decision of this Court passed on 23.08.2022 in MACA No.815 of 2020.
This Court in Para-7, 8 and 9 of the said judgment has held as follows:-
―7. Admittedly, the policies issued under Exts.B & C are CMP policies. The question falls for decision is that, even if the policy is not a motor vehicular policy in terms of Chapter-XI of the M.V. Act, whether the same can be extended to be considered as a policy issued under Chapter-XI of the M.V. Act for the reason that it has accepted to cover the third party risk.
8. In this regard, the definition as contemplated in Section 145 (b) postulates that ―certificate of insurance‖ means a certificate issued by Page 6 of 34 // 7 // an authorized insurer in pursuance of Sub-section (3) of Section 147. Section 147 (3) speaks that a policy shall be of no effect for the purpose of Chapter-XI unless and until it is issued by the insurer in favour of the person by whom the policy is effected containing the prescribed particulars of any condition subject to which the policy is issued and for any other prescribed matter. Section 147(1) prescribes that, in order to comply with the requirements of this Chapter, a policy of insurance must be issued by an authorized insurer insuring a person or class of persons to the extent specified in Sub-Section 2. Sub-section (2) read with subsection (1) of Section 147 says that a policy of insurance shall cover such liability incurred in respect of any accident to a third party caused by or arising out of the use of the motor vehicle in a public place up to such limits. Therefore a thorough examination of the provisions contained in Chapter-XI makes it clear that the policy of insurance and its limit shall be against such liability that may be incurred in respect of an accident arising out of use of a motor vehicle. Thus a thorough reading of all such provisions under Chapter-
XI of the M.V. Act does not imply such a conclusion that a policy issued for plants and machineries would be treated or extended in respect of a motor vehicle.
9. In the instant case the Tribunal has assigned the reason that, despite Exts.B & C are undisputedly CPM policy and the offending vehicle is a motor vehicle and place of accident is a public place, the same would cover the risk involved in the accident because under the said policy, the insured has paid premium of Rs.313/- for coverage of third party liability to the extent of Rs.1,25,000/-. As discussed in the above paragraph, this Court is unable to agree with such finding of the Tribunal in view of the clear provisions contained in Section 147 of the M.V. Act. The policy as in the present case is in respect of a machine cannot at any stretch be extended to use of a motor vehicle for which specific statutory provisions have been provided for issuance of valid insurance policy. Therefore the finding of the Tribunal to the extent that the CPM policy covers the risk of third party in respect of a motor vehicle to indemnify the liability is set aside.‖ Page 7 of 34 // 8 // 3.8. It is also contended that since policy taken by the owner of the offending vehicle is in the nature of a contract, the terms of the agreement have to be strictly followed to determine the liability of the insurer. Since in the present case on the face of the 3rd Party liability fixed at Rs.5 lakhs, the accident admittedly occurred beyond the location area, the appellant is not liable to pay the compensation even to the tune of Rs.5,00,000/-. 3.9. In support of the aforesaid submission, reliance was also placed to a decision of the Hon'ble Apex Court in the case of Shivram Chandra Jagarnath Cold Storage and others Vs. New India Assurnce Company Limited and Others, reported in 2022 4 SCC 539. Hon'ble Apex Court in Para-17 of the said judgment has held as follows:-
―17. This Court held thus : (Oriental Insurance case [Oriental Insurance Co. Ltd. v. Sony Cheriyan, (1999) 6 SCC 451] , SCC pp. 455-56, para 17) ―17. The insurance policy between the insurer and the insured represents a contract between the parties. Since the insurer undertakes to compensate the loss suffered by the insured on account of risks covered by the insurance policy, the terms of the agreement have to be strictly construed to determine Page 8 of 34 // 9 // the extent of liability of the insurer. The insured cannot claim anything more than what is covered by the insurance policy.‖ 3.10. It is contended that since the appellant by exhibiting the policy and proving the same through its witness has proved that the terms and conditions of the policy has been violated, the company is also not liable to pay the compensation to the tune of Rs.5,00,000/-. Reliance was also placed to a decision of the Hon'ble Apex Court in the case of New India Assurance Co. Ltd. and Others Vrs.
Rajeswar Sharma and Others, reported in 2019 (2) SCC 671. Hon'ble Apex Court in Para-14,15 of the said judgment has held as follows:-
―14. According to The Law Relating to Accidental Insurance [ A.W. Baker Welford, The Law Relating to Accidental Insurance (Butterworth & Company, 1923) at p. 126.] , insurers are exempt from any liability where the loss is attributable to an excepted cause which is inserted ex abundanti cautela to make it quite clear to the assured that the policy is not intended to cover such losses. The position is elucidated below:
―The object of the exceptions is to define with greater precision the scope of the policy by making clear what is intended to be excluded and contrasting it with what is intended to be included.
Since exceptions are inserted in the policy mainly for the purpose of exempting the insurers from liability for a Page 9 of 34 // 10 // loss which, but for the exception, would be covered by the policy, they are construed against the insurers with the utmost strictness and it is the duty of the insurers to except their liability in clear and unambiguous terms. The onus of proving that the loss falls within an exception lies upon the insurers, unless by proving the language of the exception the assured is expressly required to prove that, in the circumstances, the exception does not apply.‖
15. In 2016, the UK Supreme Court dealt with the interpretation of an exclusion clause in a solicitors' professional indemnity insurance policy in Impact Funding Solutions Ltd. v. Barrington Support Services Ltd. [Impact Funding Solutions Ltd. v. Barrington Support Services Ltd., Supreme Court as per Lord Toulson, JSC (with whom Lord Mance, Lord Sumption and Lord Hodge, JJSC agreed) 2017 AC 73 : 2016 UKSC 57] Dealing with the construction of insurance exclusions, Lord Toulson, JSC observed thus : (AC pp.
85-86, para 35)
35. The fact that a provision in a contract is expressed as an exception does not necessarily mean that it should be approached with a pre-disposition to construe it narrowly. Like any other provision in a contract, words of exception or exemption must be read in the context of the contract as a whole and with due regard for its purpose. As a matter of general principle, it is well established that if one party, otherwise liable, wishes to exclude or limit his liabilityto the other party, he must do so in clear words; and that the contract should be given the meaning it would convey to a reasonable person having all the background knowledge which is reasonably available to the person or class of persons to whom the document is addressed.... This applies not only where the words of exception remove a remedy for breach, but where they seek to prevent a liability from arising by removing, through a subsidiary provision, part of the benefit which it appears to have been the purpose of the contract to provide. The vice of a clause of that kind is that it can have a propensity to mislead, unless its language is sufficiently plain. All that said, words of exception may be simply a way of delineating the scope of the primary obligation.‖ Page 10 of 34 // 11 // 3.11. Reliance was also placed to a decision of the Hon'ble Apex Court in the case of National Insurance Co. Ltd. Vrs. Chief Electoral Officer and Others, reported in 2023 (6) SCC 441. Hon'ble Apex Court in Para-27, 28,29,30 and 31 has held as follows:-
―27. We would first like to elucidate the principles on which a claim under any insurance policy is examined. It is trite to say that the terms of the insurance policy are to be strictly construed.
28. The insurance contracts are in the nature of special class of contracts having distinctive features such as utmost good faith, insurable interest, indemnity subrogation, contribution and proximate cause which are common to all types of insurances.
Each class of insurance also has individual features of its own. The law governing insurance contracts is thus to be studied in three parts, namely, (1) general characteristics of insurance contracts, as contracts; (2) special characteristics of insurance contracts, as contracts of insurance, and (3) individual characteristics of each class of insurance.
29. Now turning to some of the judicial pronouncements, wherein it has been opined that the words used in a contract of insurance must be given paramount importance and it is not open for the court to add, delete or substitute any words [Suraj Mal Ram Niwas Oil Mills (P) Ltd. v. United India Insurance Co. Ltd. [Suraj Mal Ram Niwas Oil Mills (P) Ltd. v. United India Insurance Co. Ltd., (2010) 10 SCC 567 :
(2010) 4 SCC (Civ) 267] ]. Insurance contracts are in the nature where exceptions cannot be made on ground of equity and the courts ought not to interfere with the terms of an insurance agreement [Export Credit Guarantee Corpn. (India) Ltd. v. Garg Sons International [Export Credit Guarantee Corpn. (India) Page 11 of 34 // 12 // Ltd. v. Garg Sons International, (2014) 1 SCC 686 :
(2014) 1 SCC (Civ) 648] ].
30. This Court in Vikram Greentech (I) Ltd. v. New India Assurance Co. Ltd. [Vikram Greentech (I) Ltd. v. New India Assurance Co. Ltd., (2009) 5 SCC 599 :
(2009) 2 SCC (Civ) 590] reiterated that the insured cannot claim anything more than what is covered by the insurance policy. The terms of the contract have to be construed strictly, without altering the nature of the contract as the same may affect the interests of the parties adversely. The clauses of an insurance policy have to be read as they are. Consequently, the terms of the insurance policy, that fix the responsibility of the Insurance Company must also be read strictly.
31. In several other judgments [Oriental Insurance Co. Ltd. v. Sony Cheriyan, (1999) 6 SCC 451; Polymat India (P) Ltd. v. National Insurance Co. Ltd., (2005) 9 SCC 174; Sumitomo Heavy Industries Ltd. v. ONGC Ltd., (2010) 11 SCC 296 : (2010) 4 SCC (Civ) 459 and Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran, (2012) 5 SCC 306.] , this Court has held that the insurance contract must be read as a whole and every attempt should be made to harmonise the terms thereof, keeping in mind that the rule of contra proferentem does not apply in case of commercial contract, for the reason that a clause in a commercial contract is bilateral and has mutually been agreed upon.‖ 3.12. It is contended that in the aforesaid decision, Hon'ble Apex Court has held that the words used in Contract of Insurance must be given paramount importance and it is not open for the Court to act, delete or substitute any word. Placing reliance on the aforesaid decisions of this Court as well as Hon'ble Apex Court, it is finally contended that Page 12 of 34 // 13 // since the policy in the nature of a CPM Policy with location code at Parjang, Dhenkanal and the accident admittedly having taken place beyond the location area in the district of Jajpur, even though 3rd Party liability as per the policy covers the claim to the extent of Rs.5 lakhs, but in view of such violation of the policy condition, the appellant is not liable to pay any compensation lest Rs.5 lakhs towards 3rd Party Liability. It is accordingly contended that the impugned award needs interference of this Court.
4. Mr. D. Patnaik, learned counsel appearing for the Claimants-Respondent Nos.1 to 4 on the other hand while supporting the award, contended that since the deceased admittedly died because of a road accident caused by the offending vehicle on 21.12.2017, the appellant is liable to pay the compensation and if as alleged the policy condition Page 13 of 34 // 14 // has been violated, the appellant may recover the same from the owner-Respondent No.5. 4.1. It is contended that because of the fault committed by the Appellant as well as the Owner- Respondent No.5, the claimants could not be made to suffer.
5. Mr. P.K. Mishra, learned counsel appearing for the Respondent No.5-Owner on the other hand made his submission in support of the award. It is contended that though it is not disputed that the policy is a CPM Policy, but since the appellant while issuing the policy accepted the premium to the tune of Rs.850/- towards 3rd Party liability, outer limit fixed in the policy by putting the limit towards 3rd Party liability at Rs.5 lakhs is not sustainable in the eye of law. Once the insurer takes the premium towards 3rd Party liability, no limit can be fixed in that regard.
Page 14 of 34
// 15 // 5.1. It is accordingly contended that on the face of the acceptance of the premium towards 3rd Party liability, liability fixed in the policy at Rs.5 lakhs, is illegal and the Tribunal has erred in permitting the appellant to recover the 3rd Party liability to the tune of Rs.5,00,000/- from the Owner-Respondent. It is contended that as provided under Section 146 of the Motor Vehicle Act, 1988, covering 3rd Party risk is mandatory for a Motor Vehicle to ply in a public road. Section 146 of the Act reads as follows:-
―146. Necessity for insurance against third party risk. - (1) No person shall use, except as a passenger, or cause or allow any other person to use, a motor vehicle in a public place, unless there is in force, in relation to the use of the vehicle by that person or that other person, as the case may be, a policy of insurance complying with the requirements of this Chapter:
Provided that in the case of a vehicle carrying, or meant to carry, dangerous or hazardous goods, there shall also be a policy of insurance under the Public Liability Insurance Act, 1991.
Explanation. - For the purposes of this sub- section, a person driving a motor vehicle merely as a paid employee, while there is in relation to the use of the vehicle no such policy in force as is required by this sub-section, shall not be deemed to act in contravention of the sub-section unless he knows or has reason to believe that there is no such policy in force.Page 15 of 34
// 16 // (2)The provisions of sub-section (1) shall not apply to any vehicle owned by the Central Government or a State Government and used for purposes not connected with any commercial enterprise.
(3)The appropriate Government may, by order, exempt from the operation of sub-section (1), any vehicle owned by any of the following authorities, namely: -
(a)the Central Government or a State Government, if the vehicle is used for purposes connected with any commercial enterprise;
(b)any local authority;
(c)any State Transport Undertaking:
Provided that no such order shall be made in relation to any such authority unless a fund has been established and is maintained by that authority in such manner as may be prescribed by appropriate Government.‖ 5.2. It is contended that once the insurer has accepted the 3rd Party liability by taking a premium of Rs.850/-, by fixing the liability of the insurer at Rs.5 lakhs is not permissible in view of the provisions contained under Section 147 of the Act.
Section 147 of the Act reads as follows:-
―147. Requirements of policies and limits of liability. - (1) In order to comply with the requirements of this Chapter, a policy of insurance must be a policy which -
(a)is issued by a person who is an authorised insurer; and Page 16 of 34 // 17 //
(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 including owner of the goods or his authorised representative carried in the motor vehicle or damage to any property of a third party caused by or arising out of the use of the motor vehicle in a public place;
(ii)against the death of or bodily injury to any passenger of a transport vehicle, except gratuitous passengers of a goods vehicle, caused by or arising out of the use of the motor vehicle in a public place.
Explanation. - For the removal of doubts, it is hereby clarified that the death of or bodily injury to any person or damage to any property of a third party shall be deemed to have been caused by or to have arisen out of, the use of a vehicle in a public place, notwithstanding that the person who is dead or injured or the property which is damaged was not in a public place at the time of the accident, if the act or omission which led to the accident occurred in a public place. (2)Notwithstanding anything contained under any other law for the time being in force, for the purposes of third party insurance related to either death of a person or grievous hurt to a person, the Central Government shall prescribe a base premium and the liability of an insurer in relation to such premium for an insurance policy under sub-section (1) in consultation with the Insurance Regulatory and Development Authority.
(3)A policy shall be of no effect for the purposes of this Chapter unless and until there is issued by the insurer in favour of the person by whom the policy is effected, a certificate of insurance in the prescribed form and containing the prescribed particulars of any condition subject to which the policy is issued and of any other prescribed matters; and different forms, particulars and matters may be prescribed in different cases.
Page 17 of 34
// 18 // (4)Notwithstanding anything contained in this Act, a policy of Insurance issued before the commencement of the Motor Vehicles (Amendment) Act, 2019 shall be continued on the existing terms under the contract and the provisions of this Act shall apply as if this Act had not been amended by the said Act.
(5)Where a cover note issued by the insurer under the provisions of this Chapter or the rules or regulations made thereunder is not followed by a policy of insurance within the specified time, the insurer shall, within seven days of the expiry of the period of the validity of the cover note, notify the fact to the registering authority or to such other authority as the State Government may prescribe.
(6)Notwithstanding anything contained in any other law for the time being in force, an insurer issuing a policy of insurance under this section shall be liable to indemnify the person or classes of persons specified in the policy in respect of any liability which the policy purports to cover in the case of that person or those classes of persons.‖ 5.3. It is contended that while dealing with similar issue, this Court in its judgment dated 24.08.2023 in MACA No.92 of 2022, did not accept the plea taken by the insurer on the face of the view taken by this Court in MACA No.815 of 2020.
5.4. It is accordingly contended that since it is not disputed that the appellant accepted the premium towards 3rd Party liability, in view of the provisions contained under Section 146 and Section 147 of the Page 18 of 34 // 19 // Motor Vehicle Act, it is the appellant who is liable to pay the entire compensation as awarded and such a direction has been rightly issued by the Tribunal which needs no interference.
5.5. Not only that, permission given by the Tribunal to recover a sum of Rs.5 lakhs from the Owner- Respondent No.5 is not sustainable, as in view of the provisions contained under Section 147 of the Act, no outer limit can be fixed once the insurer accepts the premium towards 3rd Party liability and the vehicle being a Motor Vehicle in terms of the provisions contained under Section 146 of the Act.
6. To the submission made by the learned counsel appearing for the Respondent No.5-owner, learned counsel for the appellant made further submission and contended that this Court in MACA No.92 of 2022 was not inclined to interfere with the award as on the face of the policy being a CPM policy, the accident however had taken place in the premises of Page 19 of 34 // 20 // the work shade. View expressed by this Court in Para-7 of the said judgment reads as follows:-
―7. Mr. Khan relies on the decision of this Court dated 23rd August 2022 rendered in MACA No.815 of 2020 to contend that the risk coverage in respect of CPM policy cannot be extended to cover the risk provided under the MV Act in respect of a third party. It needs to be mentioned here that in said case cited by Mr.Khan, the third party premium due was in respect of damages up to the extent of Rs.1,25,000/- and the accident took place in the premises of the worksite. Therefore, said earlier decision of this Court is found distinguishable on the facts of the present case.‖ 6.1. It is accordingly contended that judgment passed in MACA No.92 of 2022 is not applicable to the facts of the present case as the accident admittedly has not taken place within the location area so indicated in the policy. It is accordingly contended that the appellant is not liable to pay the compensation as directed by the tribunal.
7. This Court taking into account the pleadings made and the decisions relied on, is inclined to decide first as to whether the policy taken by the offending vehicle is a lawful contract in terms of the provisions contained under the Contract Act.Page 20 of 34
// 21 // 7.1. It is not disputed that the offending vehicle is a Heavy Motor Vehicle (Hywa Truck). On the face of such status of the vehicle, it is the view of this Court that no policy could have been issued in favour of the offending vehicle by issuing a CPM Policy. Since the offending vehicle is a motor vehicle within the definition of Section 146 of the Motor Vehicle Act, such policy in the nature of CPM Policy could not have been issued in favour of the offending vehicle and the said contract is not a lawful contract. Hon'ble Apex Court in Para-98, 99, 100 and 102 of the decision in the case of G.T. Girish Vrs. Y. Subba Raju, reported in 2022 (12) SCC 321 with regard to lawful contract has opined as follows:-
―98. Section 10 of the Contract Act declares as to what agreements are contracts and all agreements are declared contracts, if they are made by the free consent of parties competent to contract with a lawful consideration and with the lawful object and not expressly declared to be void under the Contract Act. Section 23 must be read with Section 10. Without the illustrations, Section 23, reads as follows:
―23. What consideration and objects are lawful, and what not. --The consideration or object of an Page 21 of 34 // 22 // agreement is lawful, unless-- -- The consideration or object of an agreement is lawful, unless--" it is forbidden by law; or is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent; or involves or implies, injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy. In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void.‖
99. The very first head under which an agreement become unlawful is, when the consideration or object of agreement is forbidden by law. In regard to the same, we may notice the view of a Bench of three learned Judges in Gherulal Parakh v. Mahadeodas Maiya and others19. Therein, quoting from Pollock and Mullah from their work Indian Contract Act, this Court has stated as follows:
―8. xxx xxx xxx An act or undertaking is equally forbidden by law whether it violates a prohibitory enactment of the Legislature or a principle of unwritten law. But in India, where the criminal law is codified, acts forbidden by law seem practically to consist of acts punishable under the Penal Code and of acts prohibited by special legislation, or by regulations or orders made under authority derived from the Legislature.‖ (Emphasis supplied)
100. In regard to the Commentary by the very same Author, under the Second Head of ―illegal object or consideration‖ in Section 23 of the Contract Act, viz., if the consideration or object is of such a nature that if permitted, it would defeat the provisions of any law, it is that, this Court took the view that law for the purpose of Section 23 would be, law made by the Legislature. Quite apart from the fact that what is involved in the said case was only a letter, the Judgment of this Court in Gherulal Parakh (supra) and the Commentary from the very same Author, was not noticed by this Court. Therefore, it becomes all the more reason as to why we need not refer the matter to a larger Bench. We may also notice that ‗law', for the purposes of Clauses (1) and (2) cannot be different. It is very clear that Regulations or Orders made under the Authority derived from the Legislature referred to by this Court, are species of Page 22 of 34 // 23 // subordinate legislation. Statutory Rules would also, therefore, clearly be law.
xxxx xxxx xxxx xxxx
102. A contract may expressly or impliedly, be prohibited by provisions of a law. The intentions of the parties do not salvage such a contract. [See AIR 1968 SCC 1328 (supra)]. What is involved in this case, may not be a mere case of a conditional decree for specific performance being granted as was the case in the line of decisions commencing with Motilal (supra) and ending with Ferrodous Estates (supra).
The Rules contemplate a definite scheme. Land, which is acquired by the Public Authority, is meant to be utilised for the particular purpose. The object of the law is to invite applications from eligible persons, who are to be selected by a Committee and the sites are allotted to those eligible persons, so that the chosen ones are enabled to put up structures, which are meant to be residential houses.‖ 7.2. Hon'ble Apex Court in the case of Union of India and Others Vrs. A.K. Pandey reported in 2009 (10) SCC 552 in Para-14 on similar issue has held as follows:-
―14. In Mannalal Khetan v. Kedar Nath Khetan [(1977) 2 SCC 424] while dealing with Section 108 of the Companies Act, 1956 a three-Judge Bench of this Court held: (SCC pp. 429-31, paras 17-23) ―17. In Raza Buland Sugar Co. Ltd. v. Municipal Board, Rampur [AIR 1965 SC 895 : (1965) 1 SCR 970] this Court referred to various tests for finding out when a provision is mandatory or directory.
The purpose for which the provision has been made, its nature, the intention of the legislature in making the provision, the general inconvenience or injustice which may result to the person from reading the provision one way or the other, the relation of the particular provision to other Page 23 of 34 // 24 // provisions dealing with the same subject and the language of the provision are all to be considered. Prohibition and negative words can rarely be directory. It has been aptly stated that there is one way to obey the command and that is completely to refrain from doing the forbidden act. Therefore, negative, prohibitory and exclusive words are indicative of the legislative intent when the statute is mandatory. (See Maxwell on Interpretation of Statutes, 11th Edn., pp. 362 et seq.; Crawford:
Statutory Construction, Interpretation of Laws, p. 523 and Bhikraj Jaipuria v. Union of India [AIR 1962 SC 113 : (1962) 2 SCR 880] .)
18. The High Court said that the provisions contained in Section 108 of the Act are directory because non-compliance with Section 108 of the Act is not declared an offence. The reason given by the High Court is that when the law does not prescribe the consequences or does not lay down penalty for non-compliance with the provision contained in Section 108 of the Act the provision is to be considered as directory. The High Court failed to consider the provision contained in Section 629(a) of the Act. Section 629(a) of the Act prescribes the penalty where no specific penalty is provided elsewhere in the Act. It is a question of construction in each case whether the legislature intended to prohibit the doing of the act altogether, or merely to make the person who did it liable to pay the penalty.
19. Where a contract, express or implied, is expressly or by implication forbidden by statute, no court will lend its assistance to give it effect.
(See Melliss v. Shirley Local Board [(1885) 16 QBD 446] .) A contract is void if prohibited by a statute under a penalty, even without express declaration that the contract is void, because such a penalty implies a prohibition. The penalty may be imposed with intent merely to deter persons from entering into the contract or for the purposes of revenue or that the contract shall not be entered into so as to be valid at law. A distinction is sometimes made between contracts entered into with the object of committing an illegal act and contracts expressly or impliedly prohibited by statute. The distinction is that in the former class one has only to look and see what acts the statute prohibits; it does not Page 24 of 34 // 25 // matter whether or not it prohibits a contract: if a contract is made to do a prohibited act, that contract will be unenforceable. In the latter class, one has to consider not what act the statute prohibits, but what contracts it prohibits. One is not concerned at all with the intent of the parties, if the parties enter into a prohibited contract, that contract is unenforceable. (See St. John Shipping Corpn. v. Joseph Rank Ltd. [(1957) 1 QB 267 :
(1956) 3 WLR 870 : (1956) 3 All ER 683] ) (See also Halsbury's Laws of England, 3rd Edn., Vol. 8, p. 141.)
20. It is well established that a contract which involves in its fulfilment the doing of an act prohibited by statute is void. The legal maxim a pactis privatorum publico juri non derogatur means that private agreements cannot alter the general law. Where a contract, express or implied, is expressly or by implication forbidden by statute, no court can lend its assistance to give it effect.
(See Melliss v. Shirley Local Board [(1885) 16 QBD 446] .) What is done in contravention of the provisions of an Act of the legislature cannot be made the subject of an action.
21. If anything is against law though it is not prohibited in the statute but only a penalty is annexed the agreement is void. In every case where a statute inflicts a penalty for doing an act, though the act be not prohibited, yet the thing is unlawful, because it is not intended that a statute would inflict a penalty for a lawful act.
22. Penalties are imposed by statute for two distinct purposes:
(1) for the protection of the public against fraud, or for some other object of public policy;
(2) for the purpose of securing certain sources of revenue either to the State or to certain public bodies. If it is clear that a penalty is imposed by statute for the purpose of preventing something from being done on some ground of public policy, the thing prohibited, if done, will be treated as void, even though the penalty if imposed is not enforceable.Page 25 of 34
// 26 //
23. The provisions contained in Section 108 of the Act are for the reasons indicated earlier mandatory. The High Court erred in holding that the provisions are directory.‖ 7.3. Similarly, Hon'ble Apex Court in Para-45 of the decision in the case of Asha John Divianathan Vrs. Vikram Malhotra and Others, reported in (2021) 19 SCC 629 has held as follows:-
―45. Even a Division Bench of the Madras High 24 1986 SCC OnLine Bom 234 : 1986 Mah LJ 1031 25 (2001) 1 Mad LJ 188 : 2000 SCC OnLine Mad 737 26 (2018) 1 KLJ 525 : 2017 SCC OnLine Ker 25269 Court in Mrs. Shoba Viswanatha v. D.P. Kingsley27, while considering the purport of Section 31 of the 1973 Act, vide its erudite judgment considered the scope of Section 23 of the Contract Act and the principles delineated in that regard in Pollock and Mulla Indian Contract Act, VII Edition, page 158 including the decisions in Joaquim Mascarenhas Fiuza (supra), Beharilal Maudgi v. The Secretary to Govt. of A.P. Home Department, Hyderabad & Ors.28 and the considerations governing public policy as delineated in Gherulal Parakh v. Mahadeodas Maiya & Ors.29, Rattan Chand Hira Chand v. Askar Nawaz (Dead) by L.Rs. & Ors. 30 and other treaties, to eventually conclude that the position of law is clear that when the enforcement of the contract is against any provision of law, that will amount to enforcement of an illegal contract. The contract per se may not be illegal.
But its enforcement requires compliance of statutory conditions, failure of which will amount to statutory violation. A court which is expected to enforce the law, cannot be a party to such a decree. The view so taken in this judgment commends to us. As a matter of fact, this judgment has become 27 1996 (I) CTC 620 : 1996 SCC Online Mad 319 28 1986 (2) ALT 241 29 AIR 1959 SC 781 30 1991 (3) SCC 67 final in view of dismissal of SLP (Civil) No.15024 of 1996 by this Court vide order dated 14.08.1996.‖ Page 26 of 34 // 27 // 7.4. Placing reliance on the decision of the Hon'ble Apex Court in the case of G.T. Girish, A.K. Pandey and Asha John Divianthan, it is the view of this Court that since the offending vehicle which is not disputed is a Motor Vehicle, no such policy either could have been taken by the owner-Respondent No.5 as CPM Policy, nor such a policy could have been issued by the appellant/insurer. 7.5. Since knowing fully well that such a policy is not issuable, no such policy could have been issued in favour of the offending vehicle. Neither the appellant nor the owner-Respondent No.5 can take undue advantage for their own fault. View expressed by the Hon'ble Apex Court on the aforesaid issue in Para-14 to 16 in the case of Kusheshwar Prasad Singh Vrs. State of Bihar and Others, reported in (2007) 11 SCC 447 on the aforesaid issue reads as follows:-
Page 27 of 34
// 28 // ―14. In this connection, our attention has been invited by the learned counsel for the appellant to a decision of this Court in Mrutunjay Pani & Another v. Narmada Bala Sasmal & Another, AIR 1961 SC 1353, wherein it was held by this Court that where an obligation is cast on a party and he commits a breach of such obligation, he cannot be permitted to take advantage of such situation. This is based on the Latin maxim 'Commodum ex injuria sua nemo habere debet' (No party can take undue advantage of his own wrong).
15. In Union of India & Ors. v. Major General Madan Lal Yadav (Retd.), (1996) 4 SCC 127, the accused-army personnel himself was responsible for delay as he escaped from detention. Then he raised an objection against initiation of proceedings on the ground that such proceedings ought to have been initiated within six months under the Army Act, 1950.
Referring to the above maxim, this Court held that the accused could not take undue advantage of his own wrong. Considering the relevant provisions of the Act, the Court held that presence of the accused was an essential condition for the commencement of trial and when the accused did not make himself available, he could not be allowed to raise a contention that proceedings were time-barred. This Court referred to Broom's Legal Maxims (10th Edn.) p. 191 wherein it was stated;
"it is a maxim of law, recognised and established, that no man shall take advantage of his own wrong; and this maxim, which is based on elementary principles, is fully recognised in Courts of law and of equity, and, indeed, admits of illustration from every branch of legal procedure".
16. It is settled principle of law that a man cannot be permitted to take undue and unfair advantage of his own wrong to gain favourable interpretation of law. It is sound principle that he who prevents a thing from being done shall not avail himself of the non-performance he has occasioned. To put it differently, "a wrong doer ought not to be permitted to make a profit out of his own wrong".‖ Page 28 of 34 // 29 // 7.6. Similar view has also been made by the Hon'ble Apex Court in the case of Municipal Committee Katra and Others Vrs. Ashwani Kumar (Civil Appeal No.14970-71 of 2017 decided on 09.05.2024). Hon'ble Apex Court in Para-18 and 19 of the judgment has held as follows:-
―18. The situation at hand is squarely covered by the latin maxim 'nullus commodum capere potest de injuria sua propria', which means that no man can take advantage of his own wrong. This principle was applied by this Court in the case of Union of India v. Maj. Gen. Madan Lal Yadav 1 observing as below:-
"28. In this behalf, the maxim nullus commodum capere potest de injuria sua propria
- meaning no man can take advantage of his own wrong - squarely stands in the way of avoidance by the respondent and he is estopped to plead bar of limitation contained in Section 123(2).
In Broom's Legal Maxim (10th Edn.) at p. 191 it is stated:
"it is a maxim of law, recognised and established, that no man shall take advantage of his own wrong; and this maxim, which is based on elementary principles, is fully recognised in courts of law and of equity, and, indeed, admits of illustration from every branch of legal procedure."
The reasonableness of the rule being manifest, we proceed at once to show its application by reference to decided cases. It was noted therein Page 29 of 34 // 30 // that a man shall not take advantage of his own wrong to gain the favourable interpretation of the law. In support thereof, the author has placed reliance on another maxim frustra legis auxilium invocat quaerit qui in legem committit. He relies on Perry v. Fitzhowe [(1846) 8 QB 757 : 15 LJ QB 239] . At p. 192, it is stated that if a man be bound to appear on a certain day, and before that day the obligee puts him in prison, the bond is void. At p. 193, it is stated that "it is moreover a sound principle that he who prevents a thing from being done shall not avail himself of the non-performance he has occasioned". At p. 195, it is further stated that "a wrong doer ought not to be permitted to make a profit out of his own wrong". At p. 199 it is observed that "the rule applies to the extent of undoing the advantage gained where that can be done and not to the extent of taking away a right previously possessed".
19. It is beyond cavil of doubt that no one can be permitted to take undue and unfair advantage of his own wrong to gain favourable interpretation of law. It is a sound principle that he who prevents a thing from being done shall not avail himself of the non-performance he has occasioned. To put it differently, 'a wrong doer ought not to be permitted to make profit out of his own wrong'. The conduct of the respondent- writ petitioner is fully covered by the aforesaid proposition."
8. Having heard learned counsel for the parties and considering the submissions made and the issue decided hereinabove, point of consideration to be decided by this Court is as to whether on the face of the policy issued by the appellant, the appellant Page 30 of 34 // 31 // is liable to pay the compensation as awarded. It is not disputed that the offending vehicle is a Heavy Motor Vehicle (Hywa Truck) bearing Registration No.OR-04-P-3025. In the certificate of Registration issued in favour of the offending vehicle, description of the vehicle has been indicated as a Transport vehicle with class Heavy Goods Vehicle. 8.1. Since the offending vehicle is a Transport vehicle more in the nature of a Heavy Goods Vehicle, in view of the provisions contained under Section 146 of the Motor Vehicle Act, the policy in the name and style, CPM Policy could not have been issued by the appellant, nor such a policy could have been taken by the Owner-Respondent No.5. Placing reliance on the decision in the case of Asha John Divianathan, A.K. Pandey and G.T. Girish as cited (supra), it is the view of this Court that such a policy with the nature of Contract could not have Page 31 of 34 // 32 // been issued as the policy is not a contract in the eye of law.
8.2. Similarly, since knowing fully well that the offending vehicle is a Heavy Goods Vehicle and such a policy could not have been issued, the appellant by taking the premium issued the policy in the name and style CPM Policy and Owner-Respondent No.5 on the face of nature of vehicle took the said policy by paying the premium, it is the view of this Court that both the parties cannot take advantage of their own wrong.
8.3. In view of the decisions of the Hon'ble Apex Court in the case of Kusheshwar Prasad Singh and Municipal Committed Katra as cited (supra), it is the view of this Court that the policy so issued by the appellant-company and taken by the Owner-Respondent No.5 being an illegal contract and knowing its repercussion, such a policy was issued as well as taken, both the appellant and Respondent No.5 are equally and Page 32 of 34 // 33 // severally liable to pay the compensation. For the latches on the part of the appellant and Respondent No.5, Claimants/Respondent Nos.1 to 4 cannot be deprived to get the benefit of the compensation. 8.4. Therefore, this Court while is not inclined to interfere with the impugned award, held the appellant and owner-Respondent No.5 liable to pay the awarded compensation amount along with interest equally. While holding so, this Court directs the Appellant and Respondent No.5 to deposit their respective share to the extent of 50% before the Tribunal within a period of 8(eight) weeks from the date of receipt of this order. On such deposit of the amount, the compensation amount be disbursed in favour of the claimants-Respondents proportionately in terms of the judgment dated 31.01.2023. 8.5. Statutory deposit be refunded to the appellant after satisfaction of its share of the award as Page 33 of 34 // 34 // directed along with accrued interest if any, on proper identification.
9. The Appeal accordingly stands dismissed.
(Biraja Prasanna Satapathy) Judge Orissa High Court, Cuttack Dated the 26th of June, 2025/Basudev Signature Not Verified Digitally Signed Signed by: BASUDEV SWAIN Reason: Authentication Location: High Court of Orissa, Cuttack Date: 26-Jun-2025 18:59:46 Page 34 of 34