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“comprehensive/package policy” would cover the liability of the insurer for payment of compensation for the occupant in a car. There is no cavil that an “Act Policy” stands on a different footing from a “Comprehensive/Package Policy”. As the circulars have made the position very clear and the IRDA, which is presently the statutory authority, has commanded the insurance companies stating that a “Comprehensive/Package Policy” covers the liability, there cannot be any dispute in that regard. We may hasten to clarify that the earlier pronouncements were rendered in respect of the “Act Policy” which admittedly cannot cover a third party risk of an occupant in a car. But, if the policy is a “Comprehensive/Package Policy”, the liability would be covered.=whether in the case at hand, the policy is an “Act Policy” or “Comprehensive/Package Policy”. There has been no discussion either by the tribunal or the High Court in this regard. True it is, before us, Annexure P-1 has been filed which is a policy issued by the insurer. It only mentions the policy to be a “comprehensive policy” but we are inclined to think that there has to be a scanning of the terms of the entire policy to arrive at the conclusion whether it is really a “package policy” to cover the liability of an occupant in a car. 23. In view of the aforesaid analysis, we think it apposite to set aside the finding of the High Court and the tribunal as regards the liability of the insurer and remit the matter to the tribunal to scrutinize the policy in a proper perspective and, if necessary, by taking additional evidence and if the conclusion is arrived at that the policy in question is a “Comprehensive/Package Policy”, the liability would be fastened on the insurer. As far as other findings recorded by the tribunal and affirmed by the High Court are concerned, they remain undisturbed. 24. Consequently, the appeal is allowed to the extent indicated above and the matter is remitted to the tribunal for the purpose of adjudication as directed hereinabove. There shall be no order as to costs.

IN THE SUPREME COURT OF INDIA

A car crash on Jagtvej in Copenhagen, Denmark.

A car crash on Jagtvej in Copenhagen, Denmark. (Photo credit: Wikipedia)

CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 8163 OF 2012
(Arising out of S.L.P. (Civil) No. 1232 of 2012)

National Insurance Company Ltd. … Appellants

Versus
Balakrishnan & Another … Respondents
J U D G M E N T

Dipak Misra, J.

Leave granted.

2. The singular issue that arises for consideration in this appeal is
whether the first respondent, the Managing Director of the respondent No.
2, a company registered under the Companies Act, 1956, is entitled to
sustain a claim against the appellant-insurer for having sustained bodily
injuries.

Succinctly stated, the facts are that

  • the respondent No. 1 met

with an accident about 8.30 p.m. on 23.3.2001 while travelling in the
Lancer car bearing registration No. TN 49 K 2750 belonging to the
respondent No. 2, as it dashed against a bullock cart near Muthandipatti
Pirivu Road-I.

  • He knocked at the doors of the Motor Accident Claim

Tribunal (for short “the the tribunal”) in MACOP No. 357 of 2004 under
Sections 140, 147 and 166 of the Motor Vehicles Act, 1988 (for brevity “the
Act”) claiming compensation of Rs.20,00,000/- jointly and severally from
the appellant as well as the company on the foundation that the vehicle in
question was insured with the appellant-company.

Be it noted, the amount
was calculated on the basis of pecuniary and non-pecuniary damages.

3. The insurer resisted the claim on the grounds that

  • the claimant had

suppressed the fact that he was the Managing Director of the company and
hence, the application deserved to be thrown overboard; that even if the
petition was entertained the insurance company could not be held liable to
indemnify the respondent as the appellant was himself the owner being the
Managing Director and under no circumstances he could be treated as a third
party; that the policy taken by the company did not cover an occupant in
the vehicle but only covered the owner for a limited quantum and hence, the
claim was not allowable as sought for.

4. The tribunal, in its award dated 19.4.2007, addressed to the issues
of rash and negligent driving of the driver, injuries sustained by the
insured and the liability of the insurance company. On the basis of the
material brought on record,

  • it came to hold that the accident had occurred

due to rash and negligent driving of the driver of the 1st respondent; that
the claimant was injured in the accident; that regard being had to the
injuries sustained he was entitled to get Rs.8,63,200/- as compensation
with interest @ 7.5% per annum from the date of the petition till the date
of deposit; and that the insurance company was liable to indemnify as the
owner of the vehicle was the company, and the injured was travelling in the
car as a third party.

5. Being dissatisfied with the award passed by the tribunal, the insurer
preferred C.M.A. (M.D.) No. 1624 of 2008 before the Madurai Bench of Madras
High Court and

  • in appeal it was urged that the victim, the Managing

Director, who was running the hospital in the name of his deceased father,
was the legal owner of the car though the vehicle was insured in the name
of the company and, therefore, the liability was to the limited extent as
stipulated in the policy.

  • It was also canvassed, in any case, he was a non-

fare paying passenger in the car for which no extra premium was paid and
hence, the liability could not be fastened on the insurer.

The High Court
treated the company to be the owner of the vehicle and

repelled the stand
that the Managing Director was the owner, and

further held that as he was
only an occupant of the car the insurance company was liable to indemnify
the owner for the claim put forth by the victim.

  • It is worthy to note that

the High Court opined that if no premium is paid to cover the owner, the
insurer is not liable to make good the loss but if another person travels
with the owner and suffers injuries the insurer is liable to pay the
compensation.

  • Being of this view, the High Court dismissed the appeal.

Hence, the present appeal by the insurer.

6. We have heard the learned counsel for the parties and perused the
record. As has been indicated at the beginning, the seminal issue is
whether the appellant-company is liable to make good the compensation
determined by the tribunal to the victim in the accident. On a scrutiny of
the award passed by the tribunal which has been given the stamp of approval
by the High Court, it is manifest that the 1st respondent was the Managing
Director of the respondent No. 2 and the vehicle was registered in the name
of the company but the Managing Director had signed on behalf of the
company in the R. C. book of the car that was involved in the accident.
The High Court has returned a finding that the company and the Managing
Director are two different legal entities and hence, the Managing Director
cannot be equated with the owner. On that foundation, the claimant has
been treated as a passenger and, accordingly, liability has been fastened
on the insurer. The learned counsel appearing for the insurer would
contend that assuming he is the owner being a signatory in the R.C. book,
the liability of the company is limited upto Rs.2,00,000/- and under no
circumstances a non-fare paying passenger would be covered under the
policy. In oppugnation, the learned counsel for the respondent-claimant
has proponed that barring the insurer and the insured, all others are third
parties and, therefore, he is covered by the policy. It is also urged by
him that as he had travelled as an occupant in a private car he is a third
party vis-à-vis the insurer and hence, it is bound to indemnify the owner
as the risk of the third party is covered.

7. As per the command of Section 146 of the Act, the owner of a vehicle
is obliged to obtain an insurance for the vehicle to cover the third party
risk. Section 147 deals with the requirements of policies and limits of
liability. Section 147 (1) which is relevant for the present purpose is
reproduced below:-

147. Requirement 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

 

(b) insurers 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 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 ;

(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 (8 of 1923) in
respect of the death of, or bodily injury to, any such
employee –

(a) engaged in driving the vehicle, or

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

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

(ii) to cover any contractual liability.

Explanation. – For the removal of doubts, it is
hereby declared 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.”

 

On a scanning of the aforesaid provision, it is evident that the
policy of insurance must be a policy which complies with the conditions
enumerated under Section 147 (1) (a) & (b). It also provides where a
policy is not required and also stipulates to cover any contractual
liability.

8. In United India Insurance Co. Ltd., Shimla v. Tilak Singh and
Others[1], this Court referred to the concurring opinion rendered in a
three-Judge Bench decision in New India Assurance Co. Ltd. V. Asha Rani[2]
and ruled thus:-

“In our view, although the observations made in Asha Rani case were in
connection with carrying passengers in a goods vehicle, the same would
apply with equal force to gratuitous passengers in any other vehicle
also. Thus, we must uphold the contention of the appellant Insurance
Company that it owed no liability towards the injuries suffered by the
deceased Rajinder Singh who was a pillion rider, as the insurance
policy was a statutory policy, and hence it did not cover the risk of
death of or bodily injury to a gratuitous passenger.”

 

It is worthy to note that in the said case the controversy related to
gratuitous passenger carried in private vehicle.

9. In Oriental Insurance Co. Ltd. v. Jhuma Saha (Smt) and Others[3], the
controversy related to fastening of liability on the insurer for the death
of the owner of a registered vehicle, Maruti van. The Court observed that
the accident did not involve any other motor vehicle than the one which he
was driving and as the liability of the insurer Company is to the extent of
indemnification of the insured against the respondent or an injured person,
a third person or in respect of damages of property, the insured cannot be
fastened with any liability under the provisions of the Motor Vehicles Act,
and, therefore, the question of the insurer being liable to indemnify the
insured does not arise. Thereafter, the Bench referred to the decision in
Dhanraj v. New India Assurance co. Ltd.[4] and ruled thus:-

“The additional premium was not paid in respect of the entire risk of
death or bodily injury of the owner of the vehicle. If that be so,
Section 147 (b) of the Motor Vehicles Act which in no uncertain terms
covers a risk of a third party only would be attracted in the present
case.”
10. In National Insurance Co. Ltd. v. Laxmi Narain Dhut[5], after
elaborately referring to the analysis made in Asha Rani (supra), the Bench
stated thus:-

“Section 149 is part of Chapter XI which is titled “Insurance of Motor
Vehicles against Third-Party Risks”. A significant factor which needs
to be noticed is that there is no contractual relation between the
insurance company and the third party. The liabilities and the
obligations relatable to third parties are created only by fiction of
Sections 147 and 149 of the Act.”
In the said case, it has been opined that although the statute is a
beneficial one qua the third party, yet that benefit cannot be extended to
the owner of the offending vehicle.

11. In Oriental Insurance Company Ltd. v. Meena Variyal and Others[6],
the facts were that a Regional Manager of the company, which was the owner
of the vehicle, was himself driving a vehicle of the company and met with
an accident and eventually succumbed to the injuries. It was contended by
the insurer before this Court that the policy did not cover the employee of
the owner who was driving the vehicle while attending the business of the
employer-company and the deceased was not a third party in terms of the
policy or in terms of the Act. It was also urged that the same would be
the position even if the deceased was only travelling in the car in his
capacity as a Regional Manger of the owner-company and the vehicle was
being driven by the driver. This Court observed that a contract of
insurance is ordinarily a contract of indemnity and when a car belonging to
an owner is insured with the insurance company and it is being driven by a
driver employed by the insured, when it meets with an accident, the primary
liability under law for payment of compensation is that of the driver.
Once the driver is liable, the owner of the vehicle becomes vicariously
liable for payment of compensation. It is this vicarious liability of the
owner that is indemnified by the insurer. Dealing with the said liability,
the Bench analysed the language employed under Section 147 (1) of the Act
and observed as follows:-

“The object of the insistence on insurance under Chapter XI of the Act
thus seems to be to compulsorily cover the liability relating to their
person or properties of third parties and in respect of employees of
the insured employer, the liability that may arise under the Workmen’s
Compensation Act, 1923 in respect of the driver, the conductor and the
one carried in a goods vehicle carrying goods. On this plain
understanding of Section 147, we find it difficult to hold that the
Insurance Company, in the case on hand, was liable to indemnify the
owner, the employer Company, the insured, in respect of the death of
one of its employees, who according to the claim, was not the driver.
Be it noted that the liability is not one arising under the Workmen’s
Compensation Act, 1923 and it is doubtful, on the case put forward by
the claimant, whether the deceased could be understood as a workman
coming within the Workmen’s Compensation Act, 1923. Therefore, on a
plain reading of Section 147 of the Act, it appears to be clear that
the Insurance Company is not liable to indemnify the insured in the
case on hand.”
12. After so stating, the Bench adverted to the decisions in National
Insurance Co. Ltd. v. Swaran Singh[7], Laxmi Narain Dhut (supra), Asha Rani
(supra) and Tilak Singh (supra) and opined that a policy in terms of
Section 147 of the Act does not cover persons other than third parties.
Eventually, it ruled thus:-

“The victim was the Regional Manager of the Company that owned the
car. He was using the car given to him by the Company for use. Whether
he is treated as the owner of the vehicle or as an employee, he is not
covered by the insurance policy taken in terms of the Act—without any
special contract—since there is no award under the Workmen’s
Compensation Act that is required to be satisfied by the insurer. In
these circumstances, we hold that the appellant Insurance Company is
not liable to indemnify the insured and is also not obliged to satisfy
the award of the Tribunal/Court and then have recourse to the insured,
the owner of the vehicle.”

 

13. In Oriental Insurance Company Ltd. v. Sudhakaran K. V. and Others[8],
a two-Judge Bench, while dealing with the issue whether a pillion rider on
a scooter would be a third party within the meaning of Section 147 of the
Act, after referring to number of authorities, stated thus:-

“The contract of insurance did not cover the owner of the vehicle,
certainly not the pillion-rider. The deceased was travelling as a
passenger, stricto sensu may not be as a gratuitous passenger as in a
given case she may not (sic) be a member of the family, a friend or
other relative. In the sense of the term which is used in common
parlance, she might not be even a passenger. In view of the terms of
the contract of insurance, however, she would not be covered thereby.

xxx xxx xxx xxx xxx

The law which emerges from the said decisions, is: (i) the
liability of the insurance company in a case of this nature is not
extended to a pillion-rider of the motor vehicle unless the requisite
amount of premium is paid for covering his/her risk; (ii) the legal
obligation arising under Section 147 of the Act cannot be extended to
an injury or death of the owner of vehicle or the pillion-rider; (iii)
the pillion-rider in a two-wheeler was not to be treated as a third
party when the accident has taken place owing to rash and negligent
riding of the scooter and not on the part of the driver of another
vehicle.”
14. In New India Assurance Company Limited v. Sadanand Mukhi and
Others[9], the son of the owner of the insured while driving the motor
cycle met with an accident and died. The accident allegedly took place as
a stray dog came in front of the vehicle. The stand of the insurance
company was that in view of the relationship between the deceased and the
owner of the vehicle being father and son the deceased was not a third
party. The Bench relied on the decisions in Tilak Singh (supra), Jhuma
Saha (supra), Meena Variyal (supra), Laxmi Narain Dhut (supra) and United
India Insurance Co. Ltd. v. Davinder Singh[10] and came to hold that the
insurance company was not liable to indemnify the owner.

15. At this juncture, we may refer with profit to a two-Judge Bench
decision in Bhagyalakshmi and others v. United Insurance Company Limited
and another[11] wherein the learned Judges took note of the contention of
the learned senior counsel for the claimant-appellant which was to the
effect that after the deletion of the second proviso appended to Section
95(1)(b) of the Motor Vehicles Act, 1939 in the 1988 Act, the liability of
a passenger in a private vehicle must also be included in the policy in
terms of the provisions of the 1988 Act. The Bench reproduced the policy,
referred to Section 64-B of the Insurance Act, 1938, took note of the role
of the Tariff Advisory Committee and referred to the decisions in Amrit
Lal Sood and Another v. Kaushalya Devi Thapar and Others[12], Asha Rani
(supra), Tilak Singh (supra), Jhuma Saha (supra) and Sudhakaran K. V. and
Others (supra) and observed thus :-

“Before this Court, however, the nature of policies which came up for
consideration were Act policies. This Court did not deal with a
package policy. If the Tariff Advisory Committee seeks to enforce its
decision in regard to coverage of third-party risk which would include
all persons including occupants of the vehicle and the insurer having
entered into a contract of insurance in relation thereto, we are of
the opinion that the matter may require a deeper scrutiny.”

 

On a perusal of the aforesaid paragraph, it is clear as crystal that
the decisions that have been referred to in Bhagyalakshmi (supra) involved
only “Act Policies”. The Bench felt that the matter would be different if
the Tariff Advisory Committee seeks to enforce its decision in regard to
coverage of third party risk which would include an occupant in a vehicle.
It is worth noting that the Bench referred to certain decisions of Delhi
High Court and Madras High Court and thought it appropriate to refer the
matter to a larger Bench. Be it noted, in the said case, the Court was
dealing with comprehensive policy which is also called a package policy.
In that context, in the earlier part of the judgment, the Bench had stated
thus:-

“The policy in question is a package policy. The contract of insurance
if given its face value covers the risk not only of a third party but
also of persons travelling in the car including the owner thereof. The
question is as to whether the policy in question is a comprehensive
policy or only an Act policy.”
16. Thus, it is quite vivid that the Bench had made a distinction between
the “Act policy” and “comprehensive policy/package policy”. We
respectfully concur with the said distinction. The crux of the matter is
what would be the liability of the insurer if the policy is a
“comprehensive/package policy”. We are absolutely conscious that the
matter has been referred to a larger Bench, but, as is evident, the Bench
has also observed that it would depend upon the view of the Tariff Advisory
Committee pertaining to enforcement of its decision to cover the liability
of an occupant in a vehicle in a “comprehensive/package policy” regard
being had to the contract of insurance.

17. At this stage, it is apposite to note that when the decision in
Bhagyalakshmi (supra) was rendered, a decision of High Court of Delhi
dealing with the view of the Tariff Advisory Committee in respect of
“comprehensive/package policy” had not come into the field. We think it
apt to refer to the same as it deals with certain factual position which
can be of assistance. The High Court of Delhi in Yashpal Luthra and Anr.
V. United India Insurance Co. Ltd. and Another[13], after recording the
evidence of the competent authority of Tariff Advisory Committee (TAC) and
Insurance Regulatory and Development Authority (IRDA), reproduced a
circular dated 16.11.2009 issued by IRDA to CEOs of all the Insurance
Companies restating the factual position relating to the liability of
Insurance companies in respect of a pillion rider on a two-wheeler and
occupants in a private car under the comprehensive/package policy. The
relevant portion of the circular which has been reproduced by the High
Court is as follows:-

“IRDA

Ref: IRDA/NL/CIR/F&U/073/11/2009
16.11.2009

To

CEOs of all general insurance companies

Re: Liability of insurance companies in respect of occupants of a
Private car and pillion rider on a two-wheeler under Standard Motor
Package Policy (also called Comprehensive Policy).

Insurers’ attention is drawn to wordings of Section (II) 1 (ii) of
Standard Motor Package Policy (also called Comprehensive Policy) for
private car and two-wheeler under the (erstwhile) India Motor Tariff.
For convenience the relevant provisions are reproduced hereunder:-
‘Section II – Liability to Third Parties

1. Subject to the limits of liabilities as laid down in the Schedule
hereto the company will indemnify the insured in the event of an
accident caused by or arising out of the use of the insured vehicle
against all sums which the insured shall become legally liable to pay
in respect of –

(i) death or bodily injury to any person including occupants carried
in the vehicle (provided such occupants are not carried for hire or
reward) but except so far as it is necessary to meet the requirements
of Motor Vehicles Act, the Company shall not be liable where such
death or injury arises out of and in the course of employment of such
person by the insured.’

It is further brought to the attention of insurers that the above
provisions are in line with the following circulars earlier issued by
the TAC on the subject:

(i) Circular M.V. No. l of 1978 – dated 18th March, 1978 (regarding
occupants carried in Private Car) effective from 25th March, 1977.

(ii) MOT/GEN/10 dated 2nd June, 1986 (regarding pillion riders in a
two-wheeler) effective from the date of the circular.

The above circulars make it clear that the insured liability in
respect of occupant(s) carried in a private car and pillion rider
carried on two-wheeler is covered under the Standard Motor Package
Policy. A copy each of the above circulars is enclosed for ready
reference.

The Authority vide circular No. 066/IRDA/F&U/Mar-08 dated March 26,
2008 issued under File & Use Guidelines has reiterated that pending
further orders the insurers shall not vary the coverage, terms and
conditions wording, warranties, clauses and endorsements in respect of
covers that were under the erstwhile tariffs. Further the Authority,
vide circular No. 019/IRDA/NL/F&U/Oct-08 dated November 6, 2008 has
mandated that insurers are not permitted to abridge the scope of
standard covers available under the erstwhile tariffs beyond the
options permitted in the erstwhile tariffs. All general insurers are
advised to adhere to the afore-mentioned circulars and any non-
compliance of the same would be viewed seriously by the Authority.
This is issued with the approval of competent authority.
Sd/-
(Prabodh Chander)
Executive Director”
[emphasis supplied]

18. The High Court has also reproduced a circular issued by IRD dated
3.12.2009. It is instructive to quote the same:-
“IRDA
IRDA/NL/CIR/F&U/078/12/2009
3.12.2009.
To

All CEOs of All general insurance companies (except ECGC, AIC, Staff
Health, Apollo)
Re: Liability of insurance companies in respect of occupant of a
private car and pillion rider in a two-wheeler under Standard Motor
Package Policy (also called Comprehensive Policy).
Pursuant to the Order of the Delhi High Court dated 23.11.2009 in MAC
APP No. 176/2009 in the case of Yashpal Luthra v. United India and
Ors., the Authority convened a meeting on November 26, 2009 of the
CEOs of all the general insurance companies doing motor insurance
business in the presence of the counsel appearing on behalf of the
Authority and the leaned amicus curie.

Based on the unanimous decision taken in the meeting by the
representatives of the general insurance companies to comply with the
IRDA circular dated 16th November, 2009 restating the position
relating to the liability of all the general insurance companies doing
motor insurance business in respect of the occupants in a private car
and pillion rider on a two wheeler under the comprehensive/package
policies which was communicated to the court on the same day i.e.
November 26, 2009 and the court was pleased to pass the order (dt.
26.11.2009) received from the Court Master, Delhi High Court, is
enclosed for your ready reference and adherence. In terms of the said
order and the admitted liability of all the general insurance
companies doing motor insurance business in respect of the occupants
in a private car and pillion rider on a two-wheeler under the
comprehensive/package policies, you are advised to confirm to the
Authority, strict compliance of the circular dated 16th November, 2009
and orders dt. 26.11.2009 of the High Court. Such compliance on your
part would also involve:
i) withdrawing the plea against such a contest wherever taken in
the cases pending before the MACT, and issue appropriate
instructions to their respective lawyers and the operating
officers within 7 days;
ii) with respect to all appeals pending before the High Courts on
this point, issuing instructions within 7 days to the respective
operating officers and the counsel to withdraw the contest on
this ground which would require identification of the number of
appeals pending before the High Courts (whether filed by the
claimants or the insurers) on this issue within a period of 2
weeks and the contest on this ground being withdrawn within a
period of four weeks thereafter;
iii) With respect to the appeals pending before the Hon’ble Apex
Court, informing, within a period of 7 days, their respective
advocates on record about the IRDA Circulars, for appropriate
advice and action. Your attention is also drawn to the
discussions in the CEOs meeting on 26.11.2009, when it was
reiterated that insurers must take immediate steps to collect
statistics about accident claims on the above subject through a
central point of reference decided by them as the same has to be
communicated in due course to the Honourable High Court. You are
therefore advised to take up the exercise of collecting and
collating the information within a period of two months to
ensure necessary & effective compliance of the order of the
Court. The information may be centralized with the Secretariat
of the General Insurance Council and also furnished to us.
IRDA requires a written confirmation from you on the action taken by
you in this regard.
This has the approval of the Competent Authority.
Sd/-
(Prabodh Chander)
Executive Director”
[emphasis added]
19. It is extremely important to note here that till 31st December, 2006
the Tariff Advisory Committee and, thereafter, from 1st January, 2007, IRDA
functioned as the statutory regulatory authorities and they are entitled to
fix the tariff as well as the terms and conditions of the policies by all
insurance companies. The High Court had issued notice to the Tariff
Advisory Committee and the IRDA to explain the factual position as regards
the liability of the insurance companies in respect of an occupant in a
private car under the “comprehensive/ package policy”. Before the High
Court, the Competent Authority of IRDA had stated that on 2nd June, 1986,
the Tariff Advisory Committee had issued instructions to all the insurance
companies to cover the pillion rider of a scooter/motorcycle under the
“comprehensive policy” and the said position continues to be in vogue till
date. It had also admitted that the “comprehensive policy” is presently
called a “package policy”. It is the admitted position, as the decision
would show, the earlier circulars dated 18th March, 1978 and 2nd June, 1986
continue to be valid and effective and all insurance companies are bound to
pay the compensation in respect of the liability towards an occupant in a
car under the “comprehensive/package policy” irrespective of the terms and
conditions contained in the policy. The competent authority of the IRDA
was also examined before the High Court who stated that the circulars dated
18th March, 1978 and 2nd June, 1986 of the Tariff Advisory Committee were
incorporated in the Indian Motor Tariff effective from 1st July, 2002 and
they continue to be operative and binding on the insurance companies.
Because of the aforesaid factual position, the circulars dated 16th
November 2009 and 3rd December, 2009, that have been reproduced
hereinabove, were issued.

20. It is also worthy to note that the High Court, after referring to
individual circulars issued by various insurance companies, eventually
stated thus:-

“In view of the aforesaid, it is clear that the comprehensive/package
policy of a two wheeler covers a pillion rider and
comprehensive/package policy of a private car covers the occupants and
where the vehicle is covered under a comprehensive/package policy,
there is no need for Motor Accident Claims Tribunal to go into the
question whether the Insurance Company is liable to compensate for the
death or injury of a pillion rider on a two-wheeler or the occupants
in a private car. In fact, in view of the TAC’s directives and those
of the IRDA, such a plea was not permissible and ought not to have
been raised as, for instance, it was done in the present case.”
21. In view of the aforesaid factual position, there is no scintilla of
doubt that a “comprehensive/package policy” would cover the liability of
the insurer for payment of compensation for the occupant in a car. There
is no cavil that an “Act Policy” stands on a different footing from a
“Comprehensive/Package Policy”. As the circulars have made the position
very clear and the IRDA, which is presently the statutory authority, has
commanded the insurance companies stating that a “Comprehensive/Package
Policy” covers the liability, there cannot be any dispute in that regard.
We may hasten to clarify that the earlier pronouncements were rendered in
respect of the “Act Policy” which admittedly cannot cover a third party
risk of an occupant in a car. But, if the policy is a
“Comprehensive/Package Policy”, the liability would be covered. These
aspects were not noticed in the case of Bhagyalakshmi (supra) and,
therefore, the matter was referred to a larger Bench. We are disposed to
think that there is no necessity to refer the present matter to a larger
Bench as the IRDA, which is presently the statutory authority, has
clarified the position by issuing circulars which have been reproduced in
the judgment by the Delhi High Court and we have also reproduced the same.

22. In view of the aforesaid legal position, the question that emerges
for consideration is whether in the case at hand, the policy is an “Act
Policy” or “Comprehensive/Package Policy”. There has been no discussion
either by the tribunal or the High Court in this regard. True it is,
before us, Annexure P-1 has been filed which is a policy issued by the
insurer. It only mentions the policy to be a “comprehensive policy” but we
are inclined to think that there has to be a scanning of the terms of the
entire policy to arrive at the conclusion whether it is really a “package
policy” to cover the liability of an occupant in a car.

23. In view of the aforesaid analysis, we think it apposite to set aside
the finding of the High Court and the tribunal as regards the liability of
the insurer and remit the matter to the tribunal to scrutinize the policy
in a proper perspective and, if necessary, by taking additional evidence
and if the conclusion is arrived at that the policy in question is a
“Comprehensive/Package Policy”, the liability would be fastened on the
insurer. As far as other findings recorded by the tribunal and affirmed by
the High Court are concerned, they remain undisturbed.

24. Consequently, the appeal is allowed to the extent indicated above and
the matter is remitted to the tribunal for the purpose of adjudication as
directed hereinabove. There shall be no order as to costs.
……………………………….J.
[K. S. Radhakrishnan]

 

……………………………….J.
[Dipak Misra]
New Delhi;
November 20, 2012.

 

———————–
[1] (2006) 4 SCC 404
[2] (2003) 2 SCC 223
[3] (2007) 9 SCC 263
[4] (2004) 8 SCC 553
[5] (2007) 3 SCC 700

[6] (2007) 5 SCC 428
[7] (2004) 3 SCC 297
[8] (2008) 7 SCC 428
[9] (2009) 2 SCC 417
[10] (2007) 8 SCC 698
[11] (2009) 7 SCC 148
[12] (1998) 3 SCC 744
[13] 2011 ACJ 1415

 

———————–
23

 

 

 

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