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Motor Vehicles Act, 1988 – ss. 147 and 149 – Motor accident – Compensation – Liability of insurer – Insurance policy taken by the owner of the vehicle covering six passengers including the driver – Vehicle while driven by father of the owner, met with an accident – Passengers in excess of the number covered by the insurance policy, travelling in the vehicle at the time of accident – Death/injury to the passengers – Claim petitions – Liability of the insurer – Held: Is confined to the number of persons covered by the insurance policy only and liability to pay the other passengers is that of the owner of the vehicle – Persons travelling in the vehicle in excess of the permitted number of six passengers, though entitled to be compensated by the owner of the vehicle, would still be entitled to receive the compensation amount from the insurer, who could recover it from the insured owner of the vehicle – There can be no pick and choose method to identify the five passengers, excluding the driver, in respect of whom compensation would be payable by the Insurance Company – In the interest of justice, Insurance Company directed to deposit the total amount of compensation awarded to the claimants which would be disbursed to the claimants – Insurance Company would be entitled to recover the amounts paid by it, in excess of its liability, from the owner of the vehicle, by putting the decree into execution. Respondent No. 5-owner of the vehicle obtained an insurance policy insuring his jeep with a sitting capacity of six persons including the driver, for a certain period. During the said period, the father of respondent No. 5, drove the insured vehicle carrying fifteen passengers. The vehicle fell into the ditch resulting in the death of the respondent’s father and the death of the majority of the passengers while causing serious injuries to the remaining passengers. The legal representatives of the deceased filed a claim petition. The Tribunal awarded compensation in favour of the claimants holding that carrying a larger number of passengers than was permitted in terms of the Insurance policy, did not amount to breach of the terms and conditions of the Policy and the Insurance Company would still be liable since the vehicle was legally insured. The High Court upheld the order passed by the Tribunal, but enhanced the amount of compensation. Therefore, the appellants filed the instant appeals. =Disposing of the appeals, the Court HELD: 1.1 In order to fix the liability of the insurer, the provisions of Section 147 have to be read with Section 149 of the Motor Vehicles Act, 1988 which deals with the duty of the insurer to satisfy judgments and awards against persons insured in respect of third party risks. The third party risk in the instant case involves purported breach of the conditions contained in the insurance agreement executed by and between the insurer and the insured. [Paras 20 and 22] [1041-E-F; 1040-F] 1.2. The liability of the insurer is confined to the number of persons covered by the insurance policy and not beyond the same. In the instant case, since the insurance policy of the owner of the vehicle covered six occupants of the vehicle in question, including the driver, the liability of the insurer would be confined to six persons only, notwithstanding the larger number of persons carried in the vehicle. Such excess number of persons would have to be treated as third parties, but since no premium had been paid in the policy for them, the insurer would not be liable to make payment of the compensation amount as far as they are concerned. However, the liability of the Insurance Company to make payment even in respect of persons not covered by the insurance policy continues under the provisions of sub-section (1) of Section 149 of the Act, as it would be entitled to recover the same if it could prove that one of the conditions of the policy had been breached by the owner of the vehicle. In the instant case, any of the persons travelling in the vehicle in excess of the permitted number of six passengers, though entitled to be compensated by the owner of the vehicle, would still be entitled to receive the compensation amount from the insurer, who could then recover it from the insured owner of the vehicle. [Para 24] [1042-D-G] 1.3. In the instant case, the insurance policy taken out by the owner of the vehicle was in respect of six passengers, including the driver, travelling in the vehicle. The liability of the Insurance Company to pay compensation was limited to six persons travelling inside the vehicle only the liability for payment of the other passengers in excess of six passengers would be that of the owner of the vehicle who would be required to compensate the injured or the family of the deceased to the extent of compensation awarded by the Tribunal. [Paras 25 and 26] [1042-H; 1043-A-B] 1.4. The number of persons to be compensated being in excess of the number of persons who could validly be carried in the vehicle, the question which arises is one of apportionment of the amounts to be paid. Since there can be no pick and choose method to identify the five passengers, excluding the driver, in respect of whom compensation would be payable by the Insurance Company, to meet the ends of justice the procedure adopted in *Baljit Kaur’s case is applied. The Insurance Company is directed to deposit with the Tribunal, the total amount of compensation awarded to all the claimants within the stipulated period and the amounts so deposited be disbursed to the claimants in respect to their claims. The Insurance Company would be entitled to recover the amounts paid by it, in excess of its liability, from the owner of the vehicle, by putting the decree into execution. For the said purpose, the total amount of the six Awards which are the highest would be construed as the liability of the Insurance Company. After deducting the said amount from the total amount of all the Awards deposited in terms of this order, the Insurance Company would be entitled to recover the balance amount from the owner of the vehicle as if it is an amount decreed by the Tribunal in favour of the Insurance Company. The Insurance Company would not be required to file a separate suit in this regard in order to recover the amounts paid in excess of its liability from the owner of the vehicle. [Paras 26 and 27] [1043-D-H; 1044-A-C] *National Insurance Co. Ltd. vs. Baljit Kaur (2004) 2 SCC 1 – relied on. National Insurance Co. Ltd. vs. Anjana Shyam and Ors. (2007) 7 SCC 445; National Insurance Co. Ltd. vs. Challa Bharathamma and Ors. 2004 AIR SCW 5301; New India Assurance Co. Ltd. vs. Satpal Singh and Ors. (2000) 1 SCC 237; New India Assurance Co. Ltd. vs. Asha Rani and Ors. (2003) 2 SCC 223; National Insurance Company Ltd. vs. Nicolletta Rohtagi (2002) 7 SCC 456; Mallawwa and Ors. vs. Oriental Insurance Co. Ltd. and Ors. (1999) 1 SCC 403; National Insurance Co. Ltd. vs. Swaran Singh (2004) 3 SCC 297 – referred to. Case Law Reference: (2007) 7 SCC 445 Referred to Para 11 2004 AIR SCW 5301 Referred to Para 12 (2003) 2 SCC 223 Referred to Para 12, 16, 17 (2002) 7 SCC 456 Referred to Para 12 (2000) 1 SCC 237 Referred to Para 12, 14, 16, 17 (1999) 1 SCC 403 Referred to Para 16, 17 (2004) 3 SCC 297 Referred to Para 18 (2004) 2 SCC 1 Relied on Para 26 CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1928 of 2011. From the Judgment & Order dated 25.09.2007 of the High Court of Uttarkhand at Nainital, in A.O. No. 311 of 2006. With C.A. Nos. 1929, 1930, 1931, 1932, 1933, 1934 & 1935 of 2011. A.K. De, Keshab Upadhyay, Debasis Misra for the Appellant.

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1


 REPORTABLE

 IN THE SUPREME COURT OF INDIA

 CIVIL APPELLATE JURISDICTION

 CIVIL APPEAL NO.1928 OF 2011

 (Arising out of SLP(C)No.24188 of 2008)

United India Insurance Co. Ltd. ... Appellants 

Vs.

?K.M. 

Poonam 

& Ors.

 ... 

Respondents

 WITH

 CIVIL APPEAL NOS. 1929, 1930, 1931 OF 2011

 (@ SLP(C)NOS.24212, 24210, 24211)

 CIVIL APPEAL NOS. 1932, 1933, 1934 & 1935 OF 2011

 (@ 24209, 24215, 24207 and 24213 OF 2008)

 2

 J U D G M E N T

ALTAMAS KABIR, J.

1. Despite service of notice, none of the respondents in 

these Special Leave Petitions have entered appearance or 

are represented today to contest the same. All these 

Special 

Leave 

Petitions involve a common question of law as to whether 

an Insurance Company can be held to be liable for payment 

of compensation to passengers travelling in a public 

transport in breach of the conditions of the permit 

granted to the owner of the vehicle for operating the 

same. They are, therefore, taken up for consideration 

together. Delay, if any, in filing the Special Leave 

 3

Petitions is condoned. 

2. Leave granted. 

3. Since the facts in all these appeals are the same, 

the facts in SLP(C)No.24188 of 2008, United Insurance 

Company Ltd. Vs. K.M. Poonam & Ors., are referred to in 

this judgment.

4. The 

Respondent No.5, Shri Surdeep Gusain, obtained an 

insurance policy insuring his Jeep No. UP-06-6244 with a 

sitting capacity of six persons, including the driver, 

for the period covering 23rd July, 2004 to 22nd July, 2005. 

In other words, besides the driver, the vehicle was 

entitled to carry a maximum number of five passengers.

 4

5. On 18th August, 2004, the aforesaid vehicle carrying 

fifteen passengers from Village Nansu to Dharkot Thapli, 

while being driven by Bharat Singh Rawat, the father of 

the respondents herein, fell into a ditch resulting in 

his death and the death of the majority of the passengers 

while causing serious injuries to the remaining 

passengers. The Respondent Nos.1 to 4 as the legal 

representatives of the deceased filed an application for 

compensation before the Motor Accident Claims Tribunal, 

Pauri. On the basis of the pleadings filed by the 

parties, the following issues were framed :-

 1 Whether on 18.8.2004 the deceased Bharat Singh was 

 driving the vehicle No.UP.-06/6244 on Jakheti-Nansu 

 5

 Road and due to the mechanical fault in the vehicle 

 the jeep met an accident due to which Bharat Singh 

 died ?

 1 Whether the aforesaid accident occurred due to the 

 negligence of the deceased?

 1 Whether on the date of accident the alleged vehicle 

 was being plied according to the conditions of 

 insurance policy and permit?

 1 Whether the complainants are entitled for any 

 relief? If yes, how much and from whom? 

6. In order to support their claim, the claimants filed 

the First Information Report, which was lodged by the 

 6

owner of the jeep, Shri Surdeep Singh, on 19th August, 

2004, at Patti Patwari Kafolsue, wherein it was stated 

that he had given the vehicle to Bharat Singh and that it 

had met with an accident which killed seven persons on 

the spot and caused injuries to the others. The jeep was 

badly damaged, but the cause of the accident was not 

known. On the basis of the said report, a case was 

lodged 

against 

Bharat 

Singh 

under 

Sections 

279, 

304-A, 

337 and 

338 

Indian Penal Code. The witness of the Insurance Company, 

who was examined as OPW.1, deposed that fifteen persons 

were travelling in the jeep at the time of the accident, 

but there was no negligence on the part of the driver. 

7. The claimants also filed the driving licence of the 

deceased, Bharat Singh, which showed that the licence was 

 7

valid till 12.3.2007. The photocopy of the registration 

certificate of the vehicle was also filed by the owner of 

the vehicle which established the fact that it was valid 

on the date of the accident and that taxes had been paid 

upto date and the fitness of the vehicle was valid from 

13.8.2004 to 12.8.2005. In addition, a photocopy of the 

Insurance Cover Note was also filed to indicate that the 

vehicle 

was duly 

insured 

from 

23.7.2004 to 22.7.2005. Accordingly, on the date of the 

accident, all the papers of the vehicle were valid, the 

vehicle was legally insured and was being driven by 

Bharat Singh holding a valid and effective driving 

licence. However, on behalf of the Insurance Company, 

the Appellant herein, it was stated that on the date of 

the accident, passengers in excess of the number covered 

 8

by the insurance policy were being carried in the 

vehicle. 

8. On the basis of the aforesaid evidence, the Motor 

Accident Claims Tribunal held that even if a larger 

number of passengers than was permitted under the terms 

of the insurance policy were being carried in the 

vehicle, 

it could 

not be 

said 

that the 

Appellant Insurance Company would stand exonerated from 

its liability because the vehicle was insured for third 

party coverage for unlimited liability. The learned 

Tribunal, accordingly, answered Issue Nos.1 to 3 in 

favour of the claimants observing that carrying a larger 

number of passengers than was permitted in terms of the 

Insurance Policy, did not amount to breach of the terms 

 9

and conditions of the Policy and the Insurance Company 

would still be liable since the vehicle was legally 

insured. 

9. As far as the fourth issue is concerned, the first 

Respondent, Kumari Poonam, stated on oath that both her 

parents had died in the same accident and that her father 

as 

driver 

was 

earning 

Rs.4,000/- per month. Although, the claimants did not 

file the income certificate of the deceased, the Tribunal 

initially assessed his annual income at Rs.25,000/- and 

applying the multiplier of 16 arrived at a figure of 

Rs.4,03,200/- payable as compensation. After deductions, 

the total amount of compensation was assessed as 

Rs.1,86,200/-, along with interest @9% per annum. On the 

 10

claimants' cross-appeal being allowed, the Tribunal 

assessed his income to be Rs.36,000/- per annum and since 

the age of the deceased was taken as 43 years at the time 

of the accident, applying the multiplier of 15 indicated 

in the Table of Section 163A of the Motor Vehicles Act, 

1980, the total compensation was re-assessed as 

Rs.5,40,000/-. After deducting one-third of the amount 

on 

account 

of 

personal 

expenses 

of the 

deceased 

from the 

amount 

of the 

compensation, a balance amount of Rs.3,60,000/- was 

arrived at, from which a further one-third was deducted 

so that the amount of compensation to which the claimants 

were entitled was finally settled at Rs.2,40,000/-. 

Certain other claims were also included so that the total 

amount of compensation was assessed as Rs.2,47,000/-. In 

 11

keeping with its decision on the first three issues, the 

Tribunal held that since the vehicle was insured with the 

Appellant Insurance Company, it was liable to make 

payment of the said compensation. The Tribunal directed 

the Appellant Insurance Company to pay the aforesaid 

amount to the claimants within two months, failing which 

they would also be entitled to interest at the rate of 9% 

per 

annum 

from the 

date of 

the 

claim 

petition. 

10. The Insurance Company preferred different appeals 

against the aforesaid judgment and awards dated 28.1.2006 

of the Motor Accident Claims Tribunal, Pauri, which were 

taken up for consideration together and were dismissed by 

the High Court by a common judgment and order dated 25th 

 12

September, 2007. Endorsing the views expressed by the 

Motor Accident Claims Tribunal, the High Court chose not 

to interfere with the impugned judgment and awards and 

confirmed the same. However, while doing so, the High 

Court held that the claimants would be entitled to a sum 

of Rs.2,75,800/- towards compensation in place of 

Rs.1,86,200/- and the rate of interest was reduced from 

9% per 

annum to 

7.5% per 

annum. 

The 

other 

parts of 

the 

impugned 

judgment 

and award were confirmed by the High Court. Aggrieved 

thereby, the Insurance Company has filed these several 

appeals. 

11. Learned counsel appearing for the appellant submitted 

that having regard to the provisions of Section 149 of 

the Motor Vehicles Act, 1988, the liability, if any, of 

 13

the Insurance Company for payment of compensation would 

have to be limited to the number of passengers validly 

permitted to be carried in the vehicle covered by the 

insurance policy and did not extend to the number of 

passengers carried in excess of the permitted number. 

Learned counsel submitted that the said question had been 

considered by a two-Judge Bench of this Court in National 

Insurance Co. Ltd. Vs. Anjana Shyam & Ors. [(2007) 7 SCC 

445] decided on 20th August, 2007. While considering the 

provisions of Section 147(1)(b)(ii) and (2) and Section 

149(1)(2) and (5) of the 1988 Act in relation to an 

insurer's liability, their Lordships came to the 

conclusion that the insurer's liability was limited by 

the insurance taken out for the number of permitted 

 14

passengers and did not extend to paying amounts decreed 

in respect of other passengers. Taking recourse to a 

harmonious construction of the relevant provisions, their 

Lordships held that the total amount of compensation 

payable should be deposited by the Insurance Company 

which could be proportionately distributed to all the 

claimants, who could recover the balance of the 

compensation amounts awarded to them from the owner of 

the vehicle. 

12. Reliance was also placed on another two-Judge Bench 

decision of this Court in National Insurance Co. Ltd. Vs. 

Challa Bharathamma & Ors., 2004 AIR SCW 5301, in which, 

while taking note of the earlier decisions rendered by a 

 15

two-Judge Bench of this Court in New India Assurance 

Company Vs. Satpal Singh & Ors. [(2000) 1 SCC 237] and a 

three-Judge Bench in New India Assurance Co. Ltd. Vs. 

Asha Rani & Ors., [(2003) 2 SCC 223], and also the 

decision of another two-Judge Bench of this Court in 

National Insurance Company Ltd. Vs. Nicolletta Rohtagi, 

[(2002) 7 SCC 456], Their Lordships held that when an 

insurer 

proved 

not to 

be 

liable 

to pay 

compensation in terms of Section 149(2) of the 1988 Act, 

it could not be made liable for payment of the 

compensation awarded. However, their Lordships also 

observed that having regard to the beneficial object of 

the Act, it would be proper for the insurer to satisfy 

the award and to recover the amount from the owner, 

without taking recourse to a separate suit, from the 

 16

Executing Court itself. 

13. Learned counsel for the Insurance Company submitted 

that having regard to the aforesaid decisions of this 

Court, the liability of making payment of compensation 

would be to the extent of six passengers only, though it 

could be directed to pay the balance amount of the total 

compensation awarded, with liberty to recover the balance 

amount from the owner of the vehicle. 

14. The law relating to the insurer's liability for 

payment of compensation to gratuitous passengers in a 

vehicle after the enactment of the Motor Vehicles Act, 

1988, which replaced the Motor Vehicles Act, 1939, 

 17

initially came up for consideration in Satpal Singh's 

case (supra) wherein this Court was called upon to 

consider the change in the provisions relating to third 

party risk, as was contained in Section 95 of the 1939 

Act as against the provisions of Section 147 of the 1988 

Act. Their Lordships held that as per the proviso to 

Section 95(1) when read with its Clause (ii), it would be 

clear 

that the 

policy 

of 

insurance was not required to cover the liability in 

respect of the death of or bodily injury to persons who 

were gratuitous passengers of that vehicle. In contrast, 

under Section 147 of the 1988 Act, the insurance policy 

was required to insure the person or classes of persons 

specified in the policy to the extent specified in Sub-

section (2) against any liability which may be incurred 

 18

by him in respect of the death of or bodily injury to any 

person, including owner of the goods or his authorized 

representative carried in the vehicle or damage to any 

property of a third party caused by or arising out of the 

use of the vehicle in a public place and also 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. 

15. On 

an 

interpretation of the aforesaid provisions of Section 147 

of the 1988 Act, it was held that under Sub-section (2) 

there is no upper limit for the insurer regarding the 

amount of compensation awarded in respect of death or 

bodily injury of a victim of the accident. It was, 

therefore, apparent that the limit contained in the old 

Act having been removed the policy should insure the 

 19

liability incurred and cover injury to any person, 

including the owner of the goods or his authorized 

representative, carried in the vehicle. Their Lordships 

concluded that as a result of the provisions of the new 

Act, the earlier decisions rendered under the 1939 Act 

were no longer relevant and an insurance policy covering 

third party risk was not required to exclude gratuitous 

passengers in a vehicle, no matter that the vehicle was 

of any type or class. 

16. The said view which had followed an earlier three-

Judge Bench decision of this Court in Mallawwa & Ors. Vs. 

Oriental Insurance Co. Ltd. & Ors. [(1999) 1 SCC 403], 

came up for consideration once again in a batch of 

 20

appeals filed by different insurance companies, including 

the present Appellant Company, in the decision of this 

Court reported in [(2001) 6 SCC 724] under the lead case 

of New India Assurance Co. Ltd. Vs. Asha Rani & Ors. 

Upon considering the various decisions which had preceded 

the judgment in Satpal Singh's case (supra) the two-Judge 

Bench was of the view that some of the striking features 

of the 

new Act 

had not 

been 

brought 

to the 

notice 

of the 

Court 

which 

could have a bearing on the conclusion arrived at in 

Satpal Singh's case, i.e., that on account of the 

definition of "goods vehicle" and "goods carriage" under 

the new Act, goods carriages were no longer used to carry 

any passenger. Their Lordships were also of the view 

that the defence available to the Insurance Company under 

 21

Section 149(2) of the 1988 Act would stand obliterated on 

account of the law as declared in Satpal Singh's case. 

Their Lordships felt that under the new Act, it would be 

a breach of condition in case the vehicle was used for a 

purpose other than for which permit had been issued. 

Apart from the above, the effect of the deletion of 

Clause (ii) to the Proviso to Section 95(1)(b) in the new 

Act also 

required 

reconsideration. The matter was, therefore, referred to 

the Hon'ble Chief Justice to have the various issues 

reconsidered by a larger Bench. 

17. The aforesaid questions were, thereafter, gone into 

by a Bench of three-Judges, where the issues decided in 

Satpal Singh's case were revisited. In the decision 

 22

reported in New India Assurance Co. Ltd. Vs. Asha Rani & 

Ors. [(2003) 2 SCC 223] the three-Judge Bench considered 

the provisions of Section 95 of the 1939 Act and Section 

147 of the 1988 Act in detail and also the amendments 

effected to Section 147(1)(b)(i) by the Amendment Act 54 

of 1994 and came to the conclusion that in Satpal Singh's 

case (supra), this Court had proceeded on the assumption 

that the 

provisions of Section 95(1) of the Motor Vehicles Act, 

1939, were identical to the provisions of Section 147(1) 

of the Motor Vehicles Act, 1988 as it stood before its 

amendment. It was held that Section 147 of the new Act 

deals with the requirements of the policy and limits of 

liability incurred to third party risks, but the Proviso 

thereto makes an exception to the main provision, which 

 23

reads as follows :

"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 (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 

conductor of the vehicle or in examining tickets on the 

vehicle, or

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

vehicle, or

(ii) to cover any contractual liability."

 It was also noticed that as far as employees of the 

owner of the motor vehicle were concerned, an insurance 

 24

policy was not required to be taken in relation to their 

liability, other than arising in terms of the provisions 

of the Workmen's Compensation Act, 1923. On the other 

hand, Proviso (ii), included under Section 95 of the 1939 

Act, imposed a liability upon the owner of the vehicle to 

take out an insurance policy to cover the liability in 

respect of a person who was travelling in a vehicle 

pursuant 

to a 

contract 

of 

employment. The same was consciously omitted from the 

provisions of the 1988 Act. It was further held that the 

applicability of the decision in Mallawwa's case (supra) 

to the facts of the case before Their Lordships would 

have to be considered keeping that aspect of the matter 

in view. Proceeding further, their Lordships observed 

that Section 2(35) of the 1988 Act does not include 

 25

passengers in goods carriages whereas Section 2(25) of 

the 1939 Act did, since even passengers could be carried 

in a goods vehicle. Noting the difference in the 

definitions of "goods vehicle" in the 1939 Act and "goods 

carriage" in the 1988 Act, Their Lordships held that 

carrying of passengers in a goods carriage was not 

contemplated under the 1988 Act. On the basis of the 

aforesaid findings, the three-Judge Bench over-ruled the 

decision of this Court in Satpal Singh's case, holding 

that the law had not been laid down correctly therein. 

18. The aforesaid issue once again surfaced in the case 

of National Insurance Co. Ltd. Vs. Swaran Singh [(2004) 3 

SCC 297], where the provisions of Section 149 and also 

 26

Section 147 fell for consideration. While considering 

the liability cast upon an insurer under Section 149(1) 

and the limited grounds of liability in the insurance 

contract and third party claims as envisaged in the 

Proviso to Section 149(4), this Court also had occasion 

to refer to Section 147 relating to the statutory 

liability and any contractual liability under the 

insurance contract and whether the contractual exclusion 

of liability in respect of third party claim was 

permissible. The three-Judge Bench held that such a 

condition in the insurance policy, whereby the right of 

the third party is taken away would be void and that 

except under the situation provided for by Section 

149(2)(b), the insurer would not be entitled to avoid its 

 27

statutory liability, since its rights of recovery were 

preserved against the insured under the Proviso to 

Section 149(4) of the 1988 Act. 

19. While the aforesaid judgment was delivered on 5th 

January, 2004, on the very next day, another three-Judge 

Bench of this Court rendered a decision in National 

Insurance Co. Ltd. Vs. Baljit Kaur [(2004) 2 SCC 1], in 

the context of the provisions of Section 147(1)(b) of the 

1988 Act after its amendment in 1994. While referring to 

the earlier decision in the reference decided in Asha 

Rani's case (supra), their Lordships held that inspite of 

the amendment effected to Section 147(1)(b) in 1994, the 

position remained the same in respect of persons other 

 28

than the owner of the goods and his authorized 

representative being carried in the goods vehicle. It 

was held that it was not the intention of the legislature 

to provide for the liability of the insurer with respect 

to passengers, especially gratuitous passengers who were 

neither contemplated at the time the contract of 

insurance was entered into, nor was any premium paid to 

the 

extent 

of the 

benefit 

of 

insurance to such category of people. It was, therefore, 

felt that the interest of justice would be subserved if 

the Insurance Company satisfied the awarded amount and 

recovered the same from the owner of the vehicle and for 

the said purpose it would not be necessary for the 

Insurance Company to file a separate suit, but to 

initiate a proceeding before the executing Court as if 

 29

the dispute between insurer and the owner was the subject 

matter of the determination before the Tribunal which had 

decided in favour of the insurer and against the owner of 

the vehicle. 

20. The law as regards the liability of insurers towards 

third parties killed or injured in accidents involving 

different types of motor vehicles, has been crystallized 

in the several decisions of this court referred to 

hereinabove. The kind of third party risk that we are 

concerned with in this case involves purported breach of 

the conditions contained in the insurance agreement 

executed by and between the insurer and the insured. 

 30

21. From the decision in Baljit Kaur's case (supra), 

which was later also articulated in Anjana Shyam's case 

(supra) what emerges is that a policy of insurance, in 

order to be valid, would have to comply with the 

requirements of Chapter XI of the Motor Vehicles Act, 

1988, which deals with insurance of motor vehicles 

against third party risks. Section 146 of the Act 

stipulates that 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 a valid 

policy of insurance in relation to the use of the vehicle 

complying with the requirements of the said Chapter. 

Section 147 of the Act is an extension of the provisions 

of Section 146 and sets out the requirements of policies 

 31

and the limit of their liability. Section 147(1)(a) 

provides that a policy of insurance must be issued by a 

person who is an authorized insurer. Section 147(1)(b) 

provides that a policy of insurance must be a policy 

which insures the person or class of persons specified in 

the policy to the extent specified in sub-section (2). 

Sub-section (2) of Section 147 indicates that subject to 

the 

proviso 

to sub-

section 

(1) 

which 

excludes 

the 

liability of the insurer in certain specific cases, a 

policy of insurance referred to therein must cover any 

liability incurred in respect of any accident, inter 

alia, for the amount of liability incurred. 

22. However, in order to fix the liability of the 

insurer, the provisions of Section 147 have to be read 

 32

with Section 149 of the Act which deals with the duty of 

the insurer to satisfy judgments and awards against 

persons insured in respect of third party risks. 

Although, on behalf of the Insurance Company it has been 

sought to be contended that no third party risks were 

involved in the accident and that the persons travelling 

in the ill-fated vehicle were gratuitous passengers, the 

Insurance Company cannot get away from the fact that the 

vehicle was insured for carrying six persons and the 

liability of the Insurance Company was to pay 

compensation to the extent of at least six of the 

occupants of the vehicle, including the driver. 

23. Sub-section (1) of Section 149 of the Motor Vehicles 

 33

Act, 1988, makes it amply clear that once a certificate 

of insurance is issued under sub-section (3) of Section 

147, then notwithstanding that the insurer may be 

entitled to avoid or cancel the policy, it shall pay to 

the person entitled to the benefit of the decree any sum 

not exceeding the sum assured, payable thereunder, as if 

he was the judgment debtor, in respect of the liability, 

together 

with any 

amount 

payable 

in 

respect 

of costs 

and any 

sum 

payable 

in respect of interest on that sum by virtue of any 

enactment relating to interest on judgments. Sub-section 

(2), however, places a fetter on the payment of any sum 

by the insurer under sub-section (1) in respect of any 

judgment or award unless, the insurer had notice of the 

proceedings in which the said judgment or award is given 

 34

and an insurer to whom such notice is given shall be 

entitled to be made a party thereto and to defend the 

action on the grounds enumerated therein involving a 

breach of a specified condition of the policy.

24. The liability of the insurer, therefore, is confined 

to the number of persons covered by the insurance policy 

and not 

beyond 

the 

same. 

In other 

words, 

as in 

the 

present 

case, since the insurance policy of the owner of the 

vehicle covered six occupants of the vehicle in question, 

including the driver, the liability of the insurer would 

be confined to six persons only, notwithstanding the 

larger number of persons carried in the vehicle. Such 

excess number of persons would have to be treated as 

third parties, but since no premium had been paid in the 

 35

policy for them, the insurer would not be liable to make 

payment of the compensation amount as far as they are 

concerned. However, the liability of the Insurance 

Company to make payment even in respect of persons not 

covered by the insurance policy continues under the 

provisions of sub-section (1) of Section 149 of the Act, 

as it would be entitled to recover the same if it could 

prove 

that one 

of the 

conditions of the policy had been breached by the owner 

of the vehicle. In the instant case, any of the persons 

travelling in the vehicle in excess of the permitted 

number of six passengers, though entitled to be 

compensated by the owner of the vehicle, would still be 

entitled to receive the compensation amount from the 

insurer, who could then recover it from the insured owner 

 36

of the vehicle. 

25. As mentioned hereinbefore, in the instant case, the 

insurance policy taken out by the owner of the vehicle 

was in respect of six passengers, including the driver, 

travelling in the vehicle in question. The liability for 

payment of the other passengers in excess of six 

passengers would be that of the owner of the vehicle who 

would be required to compensate the injured or the family 

of the deceased to the extent of compensation awarded by 

the Tribunal. 

26. Having arrived at the conclusion that the liability 

of the Insurance Company to pay compensation was limited 

 37

to six persons travelling inside the vehicle only and 

that the liability to pay the others was that of the 

owner, we, in this case, are faced with the same problem 

as had surfaced in Anjana Shyam's case (supra). The 

number of persons to be compensated being in excess of 

the number of persons who could validly be carried in the 

vehicle, the question which arises is one of 

apportionment of the amounts to be paid. Since there can 

be no pick and choose method to identify the five 

passengers, excluding the driver, in respect of whom 

compensation would be payable by the Insurance Company, 

to meet the ends of justice we may apply the procedure 

adopted in Baljit Kaur's case (supra) and direct that the 

Insurance Company should deposit the total amount of 

 38

compensation awarded to all the claimants and the amounts 

so deposited be disbursed to the claimants in respect to 

their claims, with liberty to the Insurance Company to 

recover the amounts paid by it over and above the 

compensation amounts payable in respect of the persons 

covered by the Insurance Policy from the owner of the 

vehicle, as was directed in Baljit Kaur's case. 

27. In 

other 

words, 

the 

Appellant Insurance Company shall deposit with the 

Tribunal the total amount of the amounts awarded in 

favour of the awardees within two months from the date of 

this order and the same is to be utilized to satisfy the 

claims of those claimants not covered by the Insurance 

Policy along with the persons so covered. The Insurance 

Company will be entitled to recover the amounts paid by 

 39

it, in excess of its liability, from the owner of the 

vehicle, by putting the decree into execution. For the 

aforesaid purpose, the total amount of the six Awards 

which are the highest shall be construed as the liability 

of the Insurance Company. After deducting the said 

amount from the total amount of all the Awards deposited 

in terms of this order, the Insurance Company will be 

entitled 

to 

recover 

the 

balance 

amount 

from the 

owner of 

the 

vehicle 

as if it is an amount decreed by the Tribunal in favour 

of the Insurance Company. The Insurance Company will not 

be required to file a separate suit in this regard in 

order to recover the amounts paid in excess of its 

liability from the owner of the vehicle. 

28. The Appeals are, accordingly, disposed of. Having 

 40

regard to the nature of the case, the parties shall bear 

their own costs. 

 ................................................J.

 (ALTAMAS KABIR)

 ................................................J.

 (CYRIAC 

 JOSEPH)

New 

Delhi

Dated: 18.2.2011 

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