Kerala High Court
United India Insurance Co. Ltd. vs Bindu on 27 January, 2003
Equivalent citations: III(2003)ACC293, 2003ACJ1331, AIR2003KER225, 2003(2)KLT299
Author: J.B. Koshy
Bench: J.B. Koshy, R. Basant
JUDGMENT J.B. Koshy, J.
1. In all these appeals, the main question for consideration is whether passengers of private vehicles carried not for hire or reward (gratuitous passengers) are covered by insurance policies called 'Act policies' which are taken only to meet the minimum requirements of the provisions of the Motor Vehicles Act, 1939 (hereinafter referred to as 'the old Act'). Facts are not disputed. In all these appeals, the accidents took place during the period 17.1.1980 to 10.3.1988, that is, during the period when old Act was in force as the Motor Vehicles Act, 1988 (hereinafter referred to as 'the new Act') came into force only with effect from 1.7.1989. All these appeals except M.F.A. No. 1158 of 1994 were filed by the insurance companies as the Motor Accidents Claims Tribunals fastened the liability on the insurance company. In M.F.A. No. 1158 of 1994 arising out of O.P. (M.V.) No. 116 of 1991, the Tribunal held that under 'Act policy', the insurer is not liable to indemnify the owner of the vehicle for compensation payable on account of the injuries suffered to gratuitous passengers. Claimants are questioning the above finding. The quantum of compensation is also questioned in that appeal. In all these cases, victims of the accidents who were gratuitous passengers were travelling in private jeeps at the time of the accidents. Minimum requirement and risk compulsorily coverable under the insurance are mentioned in Section 95 of the old Act.
2. The relevant portion of Section 95 of the old Act reads as follows:
"95. Requirement of policies and limits of liability :-
(1) In order to comply with the requirement of this Chapter, a policy of insurance must be a policy which -
(a) is issued by a person who is an authorised insurer, (or by a co-operative society allowed under Section 108 to transact the business of an 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 use 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 a 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 employee 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), 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."
3. Section 95(1)(b)(i) provided that to meet the requirement of the Statute, insurance company must indemnify the insured against any liability which may be incurred by him in respect of the death of or bodily injury to any person caused by or arising out of the use of the vehicle in a public place. It also covers liability in respect of damage to any property of a third party. Section 95(1)(b)(ii) is a special provision dealing with the liability against the death of or bodily injury to any passenger of a public service vehicle. Passenger of a public service vehicle is also compulsorily insurable and public service vehicle is defined under Section 2(25) of the old Act as "any motor vehicle used or adapted to be used for the carriage of passengers for hire or reward" and it includes a motor cab, contract carriage and stage carriage. But, here, we are concerned with the coverage of passengers in private vehicles. The term "any person" contained in Section 95(1)(b)(i) is very wide and would take in even a passenger in a private vehicle. Clause (b)(i) refers to death of or bodily injury to any person arising out of the use of the vehicle in a public place. Proviso (i) makes special provision in respect of employees who are carried in the vehicle limiting the liability to that arising under the Workmen's Compensation Act, 1923 in respect of death of or bodily injury to such employee. Proviso (ii) limits the application of Clause (b)(i) to a vehicle in which passengers are carried for hire or reward or by reason of or in pursuance of a contract of employment. A plain reading of the proviso would show that it excludes the liability in respect of death of or bodily injury to passengers in vehicles unless they are carried for hire or reward or they are carried to cover contractual liability. The provisions were discussed in detail by the Supreme Court in Smt. Mallawwa and Ors. v. Oriental Insurance Co. Ltd. and Ors. (1999 (2) KLT SN 7 P 9 = AIR 1999 SC 589). In that case, the Apex Court was considering the question whether owner of the goods being carried in a goods vehicle is covered by an 'Act policy'. A three-member Bench of the Supreme Court after quoting Section 95 of the old Act as amended by Act No. 56 of 1969 held as follows:
"...............
What is important to be noted is that the Legislature, after providing generally in Clause (b) of Sub-section (1) in wide terms so as to include "any person" and every motor "vehicle" within its sweep, carved out a certain exception by adding a proviso to that clause. By proviso(ii), it restricted the generality of the main provision by confining the requirement to cases 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". In the absence of the proviso, the main provision would have included all classes of vehicles including goods vehicles and all passengers whether carried for hire or reward or by reason of or in pursuance of a contract of employment or otherwise. That is the reason why there is a reference to different classes of vehicles in proviso (i). It refers to "vehicle", "public service vehicle" and "goods vehicle". The words "any person" in the main provision would have included the employee of the person insured, and therefore, an exception was made by enacting proviso (i) so as to restrict liability of the insurer in respect of his employees. Both those exceptions were made as the Legislature did not want to widen the liability of the insurer and the insured by making it more than what it was under the English Act, upon which Section 95 was based................."
Again, the Court held as follows:
"8. Again turning back to proviso (ii), we find that it in clear terms restricted the scope of the main provision by confining its application to that vehicle which is "a vehicle in which passengers are carried for hire or reward or by reason of or in pursuance of a contract of employment". In the first instance, the vehicle had to be a vehicle of that class in which passengers were carried. If that was not the intention of the Legislature, it would not have used the phraseology "the vehicle is a vehicle in which passengers are carried" and would have simply provided that "except where passengers are carried for hire or reward .........". So also the compulsory coverage was not intended for all passengers and there, it was provided that "passengers are carried for hire or reward or by reason of or in pursuance of a contract of employment............."
4. The Supreme Court considered the principles laid down earlier in Pushpabai Purushottam Udeshi and Ors. v. Ranjit Ginning and Pressing Co. (P) Ltd. and Anr. ((1977) 2 SCC 745) as well as the provisions of the English Road Traffic Act while arriving at the above findings. The court held that in view of the above interpretation, gratuitous passengers or owners of goods travelling in goods vehicle are not entitled to be covered under the old Act. The interpretation would also show that only passengers in public transport vehicles are compulsorily coverable as per the provisions of the old Act, apart from the employees and persons who are travelling as per the contract of employment.
5. Arguments of the claimants were mainly based on the decision of the Supreme Court in Amrit Lal Sood and Anr. v. Kaushalya Devi Thaper and Ors. (AIR 1998 SC 1433). There, the Apex Court was considering the liability of the insurance company to cover the gratuitous passengers travelling in a private career which was covered by a comprehensive policy. The Supreme Court held that the insurance company is liable to indemnify the vehicle owner in respect of the injuries caused to the passenger of a private vehicle. In that case, the insurance company was directed to pay the amount of compensatio'n awarded for the injuries to the passenger travelling in a private car and the court was considering a case under the 1988 Act. A reading of the above judgment will show that the Supreme Court came to the above conclusion because of the specific provisions in the contract of insurance, after holding that but for the terms of contract of insurance, gratuitous passengers are not covered under the old Act. The Supreme Court in paragraph 4 of the above judgment held as follows:
"4. The liability of the insurer in this case depends on the terms of the contract between the insured and the insurer as evident from the policy. Section 94 of the Motor Vehicles Act, 1939 compels the owner of a motor vehicle to insure the vehicle in compliance with the requirements of Chapter VIII of the Act. Section 95 of the Act provides that a policy of insurance must be one which insures the person against any liability which may be incurred by him in respect of death or bodily injury to any person or damage to any property of third party caused by or arising out of the use of the vehicle in a public place. The section does not, however, require a policy to cover the risk to passengers who are not carried for hire or reward. The statutory insurance does not cover injury suffered by occupants of the vehicle who are not carried for hire or reward and the insurer cannot be held liable under the Act. But, that does not prevent an insurer from entering into a contract of insurance covering a risk wider than the minimum requirement of the statute whereby the risk to gratuitous passengers could also be covered. In such cases, where the policy is not merely a statutory policy, the terms of the policy have to be considered to determine the liability of the insurer." (Underlining by us to give emphasis.)
6. Therefore, this decision also did not help the claimants in getting compensation directly from the insurance company unless there is a specific term in the policy of insurance. The view taken in Smt. Mallawwa's case (supra) is not different from the view taken in Amrit Lal Sood's case (supra) and as per the above binding pronouncements of the Apex Court, gratuitous passengers in private cars are not covered under the 'Act policy' and the insurance company has no obligation to indemnify the vehicle owner in 'Act policies' taken to comply with the minimum requirements of the old Act. However, the vehicle owner is free to cover any of his risk not compulsorily coverable under the Act. Therefore, gratuitous passengers in a private car can also be covered under the insurance policy specifically in addition to the statutory requirements. It is open to the insurer to take policy covering higher risk.
7. The view in Mallawwa's case (supra) was accepted in subsequent cases decided by the Supreme Court as can be seen from Ramesh Kumar v. National Insurance Co. Ltd. (AIR 2000 SC 3363) with respect to accidents occurred during the operation of the old Act. A Full Bench of our court in Oriental Insurance Company Limited v. Ajayakumar (1999 (2) KLT 886 FB) held that a gratuitous passenger in a private vehicle is covered under the new Act. While holding so, Court also observed that under the old Act they are not covered and there is clear difference between the wordings in Section 95 of the old Act and corresponding provisions in Section 147 of the new Act. The Full Bench held that proviso (i) limits the liability cast under Section 95(1)(b)(i) of the old Act. In New India Assurance Company v. Satpal Singh and Ors. (2000 (1) KLT 95 (SC) = 2000 (1) SCC 237), the Apex Court held that under the new Act, gratuitous passengers are entitled to be covered under the Act policies. Apex Court held as follows:
"11. The result is that under the new Act an insurance policy covering third-party risk is not required to exclude gratuitous passengers in a vehicle, no matter that the vehicle is of any type or class. Hence the decisions rendered under the old Act vis-a-vis gratuitous passengers are of no avail while considering the liability of the insurance company in respect of any accident which occurred or would occur after the new Act came into force."
The above decision also shows that under the old Act, gratuitous passengers are not entitled to be covered by Act policies and Clause (ii) of the proviso in Section 95(1) of the old Act is totally non-existent in Section 147 of the new Act. In New India Assurance Co. Ltd, v. Asha Rani and Ors. (2001 (3) KLT 235 = (2001) 6 SCC 724), the Apex Court doubted its earlier decision in Satpal Singh's case (supra) with regard to accidents that occurred after the new Act came into force (1.7.1989) till the amended Act 54 of 1994 came into force (till 14.11.1994). Now, Satpal Singh's decision with regard to that point was overruled in New India Assurance Co. Ltd. v. Asha Rani and Ors. (2003 (1) KLT 156 = 2002 AIR SCW 5259).
8. In New India Insurance Co. Ltd. v. CM. Jaya (2002 (1) KLT 596 (SC) =. AIR 2002 SC 651), a Constitution Bench of the Apex Court also explained that in Amritlal Sood's case (supra), the court only held that "the liability of the insurer in the case depends on the terms of the contract between the insured and the insurer as evident from the policy. Section 94 of the Motor Vehicles Act, 1939 compels the owner of a motor vehicle to insure the vehicle in compliance with the requirements of Chapter VIII of the Act. Section 95 of the Act provides that a policy of insurance must be one which insures the person against any liability which may be incurred by him in respect of death or bodily injury to any person or damage to any property of third party caused by or arising out of the use of the vehicle in a public place. The section does not, however, require a policy to cover the risk to passengers who are not carried for hire or reward. The statutory insurance does not cover injury suffered by occupants of the vehicle who are not carried for hire or reward and the insurer cannot be held liable under the Act. But that does not present an insurer from entering into a contract of insurance covering a risk wider than the minimum requirement of the statute whereby the risk to gratuitous passengers could also be covered." (See: Para 4). The five-member Bench also held as follows:
"..................... Thus, it is clear that the specific clause in the policy being wider, covering higher risk, made all the difference in Amrit Lal Sood's case as to unlimited or higher liability. The Court decided that case in the light of the specific clause contained in the policy. The said decision cannot be read as laying down that even though the liability of the insurance company is limited to the statutory requirement, an unlimited or higher liability can be imposed on it. The liability could be statutory or contractual. A statutory liability cannot be more than what is required under the statute itself. However, there is nothing in Section 95 of the Act prohibiting the parties from contracting to create unlimited or higher liability to cover wider risk. In such an event, the insurer is bound by the terms of the contract as specified in the policy in regard to unlimited or higher liability as thecase may be. In the absence of such a term or clause in the policy, pursuant to the contract of insurance, a limited statutory liability cannot be expanded to make it unlimited or higher. If it is so done, it amounts to rewriting the statute or the contract of insurance which is not permissible." (See: para.7) Therefore, it is clear that under the old Act, a gratuitous passenger is not entitled to insurance coverage if the policy is only a statutory policy.
9. According to the counsel for the claimants, in view of the Tariff Advisory Committee's circular dated 13.2.1978 (Marked as Ext.X2 in O.P. (M.V.) No. 796 of 1981) liability towards gratuitous passengers are also to be indemnified by the insurance company with effect from 25.3.1977 and directions of the Tariff Advisory Committee are binding on the insurance companies. In Chacko v. Rosamma (1991 (1) KLT 711), a Division Bench of this Court held that gratuitous passengers in a private car is not covered under an 'Act policy'. In that case also, similar contention was taken that Tariff Advisory Committee decided to amend Clause 1 of S.II of Private Car Comprehensive Policies by incorporating certain wording after the words 'death of or bodily injury to any person' by their circular issued in 1988. The words to be specifically introduced are "including occupants carried in the motor car provided that such occupants are not carried for hire or reward". The circular mentions that this amendment should be deemed to have come into force from 25th March, 1977. Therefore, in the above case, the Division Bench held that Tariff Advisory Committee's decision is applicable only in comprehensive policies and not in 'Act policies'. But, a different view was taken by another Division Bench of this Court in Oriental Insurance Company Ltd. v. Daniel (2000 (1) KLT 526). In that case, it was held as follows:
"7. The Tariff Advisory Committee, a statutory body, on 13.3.1978 issued instruction requiring the insurance companies to mandatorily incorporate a clause in the insurance contract reading "death of or bodily injury to any person including occupants carried in the motor car provided that such occupants are not carried for hire or reward." The above instructions were brought into force with effect from 25.3.1977, the date on which the Supreme Court pronounced judgment in Pushpabai's case (supra) (AIR 1977 SC 1735). In this context, it has to be observed that the Tariff Advisory Committee had stated that "all existing policies should be deemed to incorporate this amendment automatically". That means the instructions of the Committee would apply to all existing policies whether it may be an 'act policy' or a 'comprehensive policy'.
10. The judgment of the Division Bench of this Court in Chacko v. Rosamma (1991 (1) KLT 711) was not cited before the Division Bench, while deciding the case in Oriental Insurance Co. Ltd. v. Daniel (2000 (1) KLT 526). Noticing the conflicting views, this matter was referred to the Full Bench now. After the reference in this case, the judgment reported in Chacko v. Rosamma (1991 (1) KLT 711) was confirmed by the Supreme Court in Dr. T.V. Jose v. Chacko P.K. @ Thankachan (AIR 2001 SC 3939 = 2001 (3) KLT 633 SC). The Supreme Court in the above case also held that Tariff Advisory Committee referred to is applicable only to comprehensive policies and not 'Act policies'. The Supreme Court held as follows:
"20. Faced with this situation, Mr. Iyer relied upon Jugal Kishore's case (supra) and submitted that it was the duty of the insurance company to have produced the terms and conditions of the original policy. He submits that they should even now be called upon to produce the terms and conditions governing this policy. We are unable to accept this submission. Ithas not been the appellant's case, either beforeM.A.C.T. orbefore the High Court, that the policy contained any term which covered liability to passengers. Before M. A.C.T. the case was that the appellant was not the owner and was, therefore, not liable. Before the High Court, the case was that because of the circular issued, by the tariff advisory committee the insurance company was liable. The High Court held that that circular only dealt with comprehensive policy. That circular has not been produced before us. Therefore, the finding of then High Court that that circular only covered comprehensive policies cannot be challenged. Now, a new case cannot be allowed to be made out. Section 11(1)(a) relied upon is a term which is incorporated pursuant to that circular. If the circular only applies to comprehensive policies then this term also applies to comprehensive policies only. In our view, it is now too late in the day to call upon the 8th respondent to produce the original terms and conditions."
In that case, a private car met with an accident on 9.4.1987 and the claim related to a gratuitous passenger of that car and the Supreme Court affirmed the Division Bench decision of this Court and held that gratuitous a passenger travelling in a private career is not entitled to insurance coverage under the old Act if the policy is only an 'Act policy'. This is a direct decision on the point and we respectfully follow the same ratio and we overrule the decision reported in Oriental Insurance Co. Ltd. v. Daniel (2000(1) KLT 526).
11. The next question to be considered is whether terms of the insurance policies in these cases justify a different finding. It is not disputed that in all the appeals, the policies are 'Act policies' with payment of basic premia only. For example, in M.F.A. No. 935 of 1990 filed from O.P. (M.V.) No. 796 of 1981 on the file of the Motor Accidents' Claims Tribunal, Ernakulam, an amount of Rs. 36/- was paid to cover the statutory liability as can be seen from Ext.B 1. In Clauses 3 and 4 of Ext.B 1, it is stated as follows:
"3. Except so far as is necessary to meet the requirements of Section 95 of the Motor Vehicles Act, 1939 the Company shall not be liable in respect of death arising out of and in the course of his employment of a person in the employment of the insured or in the employment of any person who is indemnified under this policy or bodily sustained by such person arising out of and in the course of such employment.
4. Except so far as necessary to meet the requirements of Section 95 of the Motor Vehicles Act, 1939 the Company shall not be liable in respect of death of or bodily injury to any person (other than a passenger carried by reason of or in pursuance of a contract of employment) being carried in or upon or entering or mounting or alighting from the Motor Vehicle at the time of the occurrence of the event out of which any claim arises."
In fact, the above clauses will make it clear that specific exemption was made in the policy itself and insurance company made it clear that the company shall not be liable to indemnify any person except to meet the minimum statutory requirement provided under Section 95 of the old Act. Similar clauses are mentioned in the policies produced in other appeals also. Therefore, terms in the respective polices are also in favour of the contentions of the insurance company. In the above circumstances, we allow the appeals filed by the insurance companies.
12. In M.F.A. No. 1158 of 1994, the Tribunal has rightly held that the insurance company is not liable to pay compensation to the gratuitous passengers under the old Act as the policy was only an 'Act policy' covering only the risks compulsorily liable to be covered under the provisions of the old Act, Enhancement of compensation amount is also sought by the appellants. In this case, the accident occurred on 28.12.1986 while the claimant was travelling in a jeep. According to the claimant, he was an agricultural labourer and was getting Rs. 25/- per day whenever there was work. As per the medical certificate produced by him, he had pelvic fracture. Doctor was not examined in this case. But, after considering Ext.A3 medical certificate and personally seeing the claimant, the Tribunal came to the conclusion that he can continue to do the work of agricultural labour or the work of a tapper even though as per the medical certificate, he cannot do very heavy manual work and yet Rs. 15,000/- was allowed as compensation for continuing permanent disability and a total compensation of Rs. 21,575/- was granted by the Tribunal. The claimant was 40 years of age at the time of the accident. No disability certificate was produced to show the percentage of permanent disability (if there is any?). Considering the totality of evidence, the Tribunal has assessed the compensation. Since the Tribunal has awarded reasonable and fair compensation considering the age of the claimant, nature of injuries, the work he was doing, the income he was getting and other relevant matters, we see no ground to interfere with the quantum of compensation granted.
From the above discussions, we come to the following conclusions:
1. Under the Motor Vehicles Act, 1939, a gratuitous passenger in a goods vehicle is not entitled to insurance coverage if the policy is taken only to cover the risk compulsorily coverable under the Statute ('Act policy') - Smt. Mallawwa v. Oriental Insurance Co. Ltd. and Ors. (1999 (2) KLT SN 7 P 9 = AIR 1999 SC 589);
2. A gratuitous passenger travelling in a private vehicle is also not entitled to insurance coverage under the Motor Vehicles Act, 1939 if the policy is taken only to cover the risk compulsorily coverable under the Statute. In other words, a statutory insurance does not cover injuries suffered by the occupants of the vehicle who are not carried for hire or reward and the insurer cannot be held liable under the Act - Dr. T.V. Jose v. Chacko P.M. (AIR 2001 SC 3939 = 2001 (3) KLT 633 (SC)).
3. Insurance being a contract, insurance companies are free to cover all risks other than risk compulsorily coverable under the Statute. In such cases, like any other contract, parties to the insurance policy are bound by the terms of the contract, that is, conditions in the insurance policy and courts have to consider the terms of the policy to determine the liability of the insurer -Amrit Lal Sood and Anr. v. Kaushalya Devi Thaper and Ors. (AIR 1998 SC 1433);
4. Private vehicles covered only by statutory policy under the old Act, without taking a policy for covering risk of passengers, if unauthorisedly carry passengers for hire or reward, insurance company cannot be mulcted with the liability. In case of an insurance policy, not taking any liability for passengers by accepting higher premium, the liability of the insurance company is limited as provided under the Motor Vehicles Act, 1939 and terms of the policy -New India Insurance Co. Ltd. v. CM. Jaya (2002 (1) KLT 596 (SC) = AIR 2002 SC 651).
In the result, M.F.A. Nos. 935/90, 228/91, 309 and 316/93, and 1033, 1106 and 1109/99 filed by the insurance company are allowed and M.F.A. No. 1158/94 filed by the claimant is dismissed.
In the circumstances of the case, there will be no order as to costs.