Narender Singh S/O Late Sh. ... vs Sudarshan Kumar (Deceased) ...
2004 Latest Caselaw 283 Del

JUDGMENT

Madan B. Lokur, J.

1. By this decision, I propose to dispose of three appeals being FAO No. 148/1997 (treated as the main appeal), FAO No. 149/1997 and FAO No. 263/1997.

2. On the night intervening 26th/27th June, 1981, a bus carrying some pilgrims to Ujjain fell in the Shipra River near the city. Several people died in the accident including Randhir Singh aged about 52 years, his wife Krishna Devi aged about 45 years and their son Devender Singh aged about 18 years. The bus was driven by Kaptan Singh and was owned by Sudershan Kumar, who has since expired (represented now by his LRs Respondents No.4 to 8). The Appellants, who are the sons and daughter of Randhir Singh, filed three claim petitions before the learned Motor Accident Claims Tribunal (for short the Tribunal) under the provisions of Section 110-A of the Motor Vehicles Act, 1939 (for short the Act) claiming compensation for the accidental deaths. Petition No. 307/85 relates to the death of Devender Singh and from the Award of the learned Tribunal dated 26th November, 1996 FAO No. 263/1997 has been filed. Petition No.308/85 relates to the death of Randhir Singh out of which FAO No.149/97 has arisen and Petition No. 309/85 relates to the death of Krishna Devi out of which FAO No.148/97 has arisen.

3. As per the claim petition Randhir Singh was a teacher in a school run by the Delhi Administration. He was drawing a salary of Rs.1,667/- per month and his age of superannuation was 60 years. In other words he still had about 8 years of service left before his superannuation.

Randhir Singh's widow Krishna Devi was a housewife, and was also cultivating some agricultural land belonging to the family. It was alleged that the entire family was earning about Rs.60,000/- per annum from agricultural land.

Devender Singh was a student at the time of his death.

4. The owner of the bus denied his liability to pay any amount on the ground that there was no negligence on the part of the driver. It was also stated that the bus had been rented out to M/s Ganesh Travels at their own risk and as such the owner of the bus was not liable to pay any compensation. The fact that Kaptan Singh drove the bus was not denied.

5. The insurance company (New India Assurance Co. Ltd. Respondent No.3) filed its written statement stating that the maximum liability of the insurance company for any passenger was limited to Rs.5,000/- and the over all liability was limited to Rs.75,000/-. Reliance was placed on the provisions of Section 95(2)(b)(ii)(2) and (4) of the Act.

6. On the pleadings, the following issues were framed:-

i) Whether deceased died due to rash and negligent driving of vehicle no. DEP 2181 by R-1?

ii) Whether petitioners are the LRs of deceased?

Iii) To what amount of compensation are the petitioners entitled and from whom?

iv) Relief.

7. With regard to issue No.1, the learned Tribunal held that the rash and negligent driving of Kaptan Singh caused the accidental death. On the second issue it was held that the Appellants are the legal representatives of the deceased and that they could maintain a petition for compensation.

8. As regards the compensation to be awarded, the learned Tribunal held that Randhir Singh was earning a salary of Rs.1,600/- (rounded off). While applying the principle laid down in Sarla Dixit vs. Balwant Yadav (incorrectly referred to as General Manager, Kerala State Transport Corporation vs. Susamma Thomas and Others ), the dependency of the family of Randhir Singh was taken as Rs. 1,600/- per month or Rs.19,200/- per annum. Applying a multiplier of 4, the learned Tribunal awarded a sum of Rs.76,800/- as compensation for the death of Randhir Singh with interest at 12% per annum.

9. As regards compensation for the death of Smt. Krishna Devi, the learned Tribunal held that no evidence was produced to show that the family was earning about Rs.60,000/- per annum from agricultural income. However, relying upon the oral evidence on record, which was to the effect that the loss of income on account of the death of Smt. Krishna Devi was about Rs.12,000/- a year, the learned Tribunal took her income at Rs.1,000/- per month from agricultural produce. The learned Tribunal took into account that all the claimants were married and considering that Smt. Krishna Devi was a housewife, a lump sum compensation of Rs.50,000/- was awarded to the claimants for her death.

10. As regards Devender Singh, it was alleged that he was earning Rs.3,000/- per month from agricultural produce, but no evidence was brought forth in this regard. Since Devender Singh was a student and his brothers and sister were all married, the learned Tribunal awarded a lump sum compensation of Rs.40,000/- for his death along with interest at 12% per annum.

11. As regards the liability of the insurance company to pay the amount, the learned Tribunal concluded that its liability was limited to Rs.5,000/- per passenger and to a maximum of Rs.75,000/-. Consequently, the insurance company was directed to pay Rs.5,000/- for the accidental death of each of the deceased along with proportionate interest subject to a maximum liability of Rs.75,000/-. It was directed that the rest of the compensation along with proportionate interest could be recovered from the owner of the bus.

12. Feeling aggrieved by the Award dated 26th November, 1996 passed by the learned Tribunal, the Appellants have come up in appeal seeking enhancement of compensation and also challenging the decision of the learned Tribunal holding that the liability of the insurance company is limited to Rs. 5,000/- per passenger.

13. Learned counsel for the claimants and the insurance company were heard on 16th, 17th, 23rd, 24th, 25th February and 3rd March, 2004 when orders were reserved.

The Insurance Policy

14. The nub of the controversy before me relates to the terms of the insurance policy. The first question that arises in this regard is whether in fact there was an insurance policy in existence and, if so, the terms thereof.

15. That there was an insurance policy in existence is not in dispute and that there was a comprehensive insurance policy in existence is also not in dispute. In fact, the insurance company admitted the existence of an insurance policy and it was stated that the policy was a comprehensive insurance policy. Since there is no disagreement about the existence of a comprehensive insurance policy, I will proceed on the basis that there was in fact a comprehensive insurance policy whereby the owner of the vehicle was insured against certain liabilities.

16. What were the contents of the insurance policy? The original policy, which should have been in possession of the owner of the vehicle, was not produced by him. The insurance company did not call upon the owner to produce the original policy in accordance with Order XII of the Code of Civil Procedure.

17. The insurance company, through its witness T.R. Sharma (RW-1) produced a document Exhibit RW-1/A that it said was a carbon copy of the insurance policy. Learned counsel for the Appellants took me through the cross-examination of this witness to contend that Exhibit RW-1/A was neither a carbon copy of the original insurance policy, nor was it an office copy or true copy thereof.

18. In fact, learned counsel for the Appellants submitted that the insurance company ought not to have been allowed to lead secondary evidence and placed reliance on Oriental Fire & General Insurance Co. Ltd. vs. Chandrawali, 1989 ACJ 419 and National Insurance Co. Ltd. vs. Naushad, 2001 ACJ 589. I do not think it necessary to go into this aspect of the matter because Exhibit RW-1/A does not contain all the terms and conditions of the insurance nor does it contain the relevant endorsements. The terms and conditions of the policy, both learned counsel agree, are in the India Motor Tariffs effective from 1st December, 1973.

19. Learned counsel for the insurance company contended that the Appellants cannot challenge the validity or the terms of the policy, which is a contract between the insurance company and the insured. He is right in his submission, but learned counsel for the Appellants is not challenging the validity of the insurance policy. All that he says is that there is an insurance policy and Exhibit RW-1/A does not give the terms and conditions of the policy. It is to this extent that he says that Exhibit RW-1/A is unreliable and irrelevant. Learned counsel for the Appellants follows this up by saying that the terms and conditions of the policy are contained in the India Motor Tariffs which, as already mentioned above, is not disputed by learned counsel for the insurance company.

20. Before adverting to the Tariff, it is necessary to mention another submission by learned counsel for the Appellants. He says that whatever be the worth of Exhibit RW-1/A, the insurance policy is a comprehensive policy. To this extent there is no disagreement between learned counsel. What is further contended by learned counsel for the Appellants is that if the policy is a comprehensive one then the liability of the insurance company is unlimited. Reliance was placed on two Division Bench decisions of this Court, namely, New India Assurance Co. Ltd. vs. Darshan Singh, 1992 ACJ 533 and United India Insurance Co. Ltd. vs. Kailash Rani, 1996 ACJ 564 and a decision of a learned Single Judge in Raj Rani vs. Banwari Lal, 1996 ACJ 175.

21. A perusal of Darshan Singh shows that in that case the insurance company had not taken up the plea that its liability was limited. The decision, therefore, does not help learned counsel. In Kailash Rani (as in the present case) the policy document was found to be unreliable. The Division Bench relied on the observations of the learned Single Judge to the effect that the policy was a comprehensive one and additional premium had been paid by the insured and, therefore, the liability of the insurance company was unlimited. So also in Raj Rani. This conclusion, as an abstract proposition of law, has not been accepted by the Constitution Bench of the Supreme Court in New India Assurance Co. Ltd. vs. C.M. Jaya, , which I will consider later. Consequently, Kailash Rani and Raj Rani must be deemed to have been overruled by necessary implication.

India Motor Tariffs

22. As mentioned above, both learned counsel agree that the terms, conditions and endorsements of the applicable insurance policy have been given in the Tariff. Consequently, it is imperative to understand the juridical basis for the Tariff and what is provides for.

23. Section 64-U of the Insurance Act, 1938 provides for the setting up of a Tariff Advisory Committee to regulate the rates, advantages, terms and conditions that may be offered by insurers in respect of the general insurance business. Section 64-U of the Insurance Act reads as follows:

"64-U. ESTABLISHMENT OF TARIFF ADVISORY COMMITTEE.

(1) With effect from the commencement of the Insurance (Amendment) Act, 1968, there shall be established a Committee, to be called the Tariff Advisory Committee (hereafter in this Part referred to as the Advisory Committee) to control and regulate the rates, advantages, terms and conditions that may be offered by insurers in respect of general insurance business.

(2) The Advisory Committee shall be a body corporate having perpetual succession and a common seal, with power, subject to the provisions of this Act, to acquire, hold and dispose of property, both movable and immovable, and to contract, and may by the said name, sue and be sued."

24. The powers conferred on the Tariff Advisory Committee (TAC) are mentioned in Section 64-UC of the Act. These include the power to control and regulate the terms and conditions that may be offered by insurers in respect of any risk that may be incurred. Significantly, the terms and conditions are binding on all insurers. Section 64-UC(1) of the Insurance Act reads as follows:

"64-UC. POWER OF THE ADVISORY COMMITTEE TO REGULATE RATES, ADVANTAGES, ETC.

(1) The Advisory Committee may, from time to time and to the extent it deems expedient, control and regulate the rates, advantages, terms and conditions that may be offered by insurers in respect of any risk or of any class or category of risks the rates, advantages, terms and conditions of which, in its opinion, it is proper to control and regulate, and any such rate, advantages, terms and conditions shall be binding on all insurers:

Provided that ... ... (not relevant)."

25. In terms of Section 64-UC (3) and (4) of the Act, a decision taken by the TAC shall be valid after it is ratified by the Authority specified under the Insurance Act and the decision of the TAC shall be final. Section 64-UC (3) and (4) of the Insurance Act read as follows:

"(3) Every decision of the Advisory Committee shall be valid only after and to the extent it is ratified by the Authority, and every such decision shall take effect from the date on which it is so ratified by the Authority, or if the Authority, so orders in any case, from such earlier date as he may specify in the order.

(4) The decisions of the Advisory Committee in pursuance of the provisions of this section shall be final."

26. It is on the basis of the above provisions that the India Motor Tariffs was formulated by the TAC and made effective from 1st December 1973.

27. The first part of the Tariff sets out the territorial limits. There is no dispute that it is applicable all over India. The next part consists of General Regulations. For the purposes of the present appeals, Regulations 1 and 2 are important and they provide that no motor business is non-tariff unless specified and, more importantly, no insurance company is permitted to issues policies except in the Standard Forms provided in the Tariff. Regulations 1 and 2 read as follows:

"1. Business not provided for.

There is no Motor business which is non-Tariff unless specifically published as such and Insurers must, therefore, submit to the Miscellaneous Sub-Committee of the Region concerned any cases which do not seem to be provided for in the Tariffs.

2. Policy forms.

It is not permissible to issue policies except in the Standard Forms provided in the Tariffs. Insurers are, however, entitled, without obtaining permission from the Miscellaneous Sub-Committee concerned, to restrict the Cover under the Standard Comprehensive Policy Forms without reduction in premium or to increase the premium for the same or less cover. With this exception, no Company may alter or extend in the slightest degree the Standard Cover, Terms and Conditions of Policies otherwise than as laid down in the Tariff without first obtaining the written authority to do so from the Miscellaneous Sub-Committee of the Region concerned."

28. The Tariff then deals with private car tariff and motorcycle tariff. There is then a part relating to Commercial Vehicles Tariff. Regulation 1 of the part concerning Commercial Vehicles Tariff classifies various kinds of commercial vehicles and says:

"All vehicles not provided for under the Private Car or Motor Cycle Tariff excluding vehicles running on rails.

1. The Tariff is sub-divided as follows:-

1. The Tariff is sub-divided as follows:-

(a) Goods Carrying vehicles - } own goods - Class A (1) - }

(b) Goods Carrying vehicles - } General Cartage - Class A (2) } Commercial

(c) Trailers - Class A (3) }

(d) Public Passenger Service - } Vehicle Class B (1) }

(e) Passenger vehicles for Hire - } Form Class B (2) }

(f) Passenger vehicles which are not } to be used for hire - Class B (3) }

(g) Vehicles belonging to Air lines - } used Class "C" }

(h) Miscellaneous & Special Types } Vehicles - Class "D" }

(i) Motor Trade - Road Risk - } Motor Trade Class "E" } (Road Risk) Policy Form to be used.

(j) Motor Trade - Internal Risk - }Motor Trade Class "F" }(Internal Risk) Policy Form to be used.

(k) Contingent Liability Indemnities Class "G"

29. In these appeals, we are concerned with a Public Passenger Service Vehicle, which falls in Class B (1) above. Regulations 5 and 6 relating to Commercial Vehicles Tariff deal with Public Passenger Service Vehicles. We are not concerned with Regulation 5 since it deals with carriage of goods in addition to passengers. Regulation 6 deals with passenger risk and this reads as follows:

"6. Motor Vehicles Act - Passenger Risk.

Any policy issued in respect of a vehicle which is used for the carriage of passengers for hire or reward and in respect of which legal liability to passengers is required to be covered in terms of Section 95(2)(b) of the Motor Vehicles Act, 1939, is subject to additional premium for Liability to Passengers in accordance with Extra Benefit Item 2 on sheet 120 of the Commercial Vehicles Tariff."

30. Sheet 120 of the Commercial Vehicles Tariff provides for the additional premium payable and the corresponding liability for accidents to passengers (any one passenger). The additional premium is Rs.6/- and the corresponding liability is Rs.5000/-. As the additional premium increases, the corresponding liability of the insurance company also increases. Thereafter there is a note of the effect that "The Insurer may grant cover for unlimited indemnity by charging a premium of Rs.15/- per seat." It is on the basis of this that the insurance company says that its liability in these appeals is Rs.5000/- per passenger since the additional premium paid was Rs.6/-.

Standard Form for Commercial Vehicles Comprehensive Policy

31. Towards the end of the part relating to Commercial Vehicles Tariff, the Standard Form for Commercial Vehicles Comprehensive Policy is prescribed. This is on sheets 138 to 144.

32. Section I of the Standard Form deals with loss or damage. Section II deals with liability to third parties. Clause 1 thereof provides that subject to the limits of liability, the insurance company will indemnify the insured against all sums including claimant's costs and expenses. This clause (without the proviso which is not very necessary for our purposes) reads as follows:

"1. Subject to the Limits of Liability the Company will indemnify the Insured against all sums including claimant's cost and expenses which the Insured shall become legally liable to pay in respect of

(i) death of or bodily injury to any person caused by or arising out of the use (including the loading and/or unloading) of the Motor Vehicle

(ii) damage to property caused by the use (including the loading and/or unloading) of the Motor Vehicle"

33. Section III of the Standard Form contains an avoidance clause of certain terms and the right of recovery. This is extremely important for our purposes. It provides that any person indemnified by the policy or any other person can recover an amount referable to Section 96 of the Act. It further provides that the insurance company may recover from the insured any amount, which it would not have been liable to pay, but for the said provisions. The avoidance clause reads as follows:

"AVOIDANCE OF CERTAIN TERMS AND RIGHT OF RECOVERY

Nothing in this policy or any endorsement hereon shall affect the right of any person indemnified by this Policy or any other person to recover an amount under or by virtue of the provisions of the Motor Vehicles Act 1939 Section 96

BUT the Insured shall repay to the Company all sums paid by the Company which the Company would not have been liable to pay but for the said provisions."

34. Then there are certain general exceptions with which we are not concerned. Finally, there is a schedule attached to the Standard Form. This contains an Important Notice, which refers to the avoidance clause and reads as follows:

"IMPORTANT NOTICE

The Insured is not indemnified if the Vehicle is used or driven otherwise than in accordance with this Schedule. Any payment made by the Company by reason of wider terms appearing in the certificate in order to comply with the Motor Vehicles Act 1939 is recoverable from the Insured. See the Clause headed "AVOIDANCE OF CERTAIN TERMS AND RIGHT OF RECOVERY."

35. On a consideration of the submissions of learned counsel for the parties and a perusal of the India Motor Tariffs, the following facts emerge: --

* The vehicle was insured against third-party risks.

* The insurance was a comprehensive insurance.

* The terms of the insurance policy cannot be found in the records of this case.

* In view of the provisions of the Insurance Act, the terms of the insurance policy have to be obtained from the India Motor Tariffs.

* Undoubtedly, the liability of the insurance company vis-à-vis the insured is limited under the insurance policy.

* In view of the terms of the insurance policy as obtained from the India Motor Tariffs particularly the avoidance clause and Important Notice read with Section 96 of the Act, the insurance company may recover from the insured any amount paid in excess of the sum assured.

Question of liability - statutory liability

36. On the basis of the Tariff and the amount of additional premium paid, learned counsel for the insurance company contended that the liability of the insurance company was limited to Rs.5000/- per passenger subject to an overall limit of Rs.75,000/-. Learned counsel for the insurance company placed reliance on the Constitution Bench decision in C.M. Jaya.

37. The question that arose for consideration of the Supreme Court in C.M. Jaya was as follows:

" The question involved in these appeals is whether in a case of insurance policy not taking any higher liability by accepting a higher premium, in case of payment of compensation to a third party, the insurer would be liable to the extent limited under Section 95(2) [of the Motor Vehicles Act, 1939] or the insurer would be liable to pay the entire amount and he may ultimately recover from the insured. On this question, there appears to be some apparent conflict in the two three-Judge Bench decisions of this Court- (1) New India Assurance Co. Ltd. v. Shanti Bai and (2) Amrit Lal Sood V. Kaushalya Devi Thapar ."

38. To answer the question, the Supreme Court analyzed three of its earlier decisions namely Shanti Bai, Amrit Lal Sood and National Insurance Co. Ltd. vs. Jugal Kishore . After a comprehensive analysis of these three judgments, the Supreme Court concluded in paragraph 8 of the Report:

"Thus, a careful reading of these decisions clearly shows that the liability of the insurer is limited, as indicated in Section 95 of the Act, but it is open to the insured to make payment of additional higher premium and get higher risk covered in respect of third party also. But in the absence of any such clause in the insurance policy the liability of the insurer cannot be unlimited in respect of third party and it is limited only to the statutory liability."

39. Thereafter, the Supreme Court culled out what was held in Shanti Bai (which followed Jugal Kishore). The threefold conclusions arrived at have been mentioned in paragraph 9 of the Report, and these are as follows:

"In Shanti Bai case a Bench of three learned Judges of this Court, following the case of Jugal Kishore has held that:

(i) a comprehensive policy which has been issued on the basis of the estimated value of the vehicle does not automatically result in covering the liability with regard to third-party risk for an amount higher than the statutory limit,

(ii) that even though it is not permissible to use a vehicle unless it is covered at least under an "Act only" policy, it is not obligatory for the owner of a vehicle to get it comprehensively insured, and

(iii) that the limit of liability with regard to third-party risk does not become unlimited or higher than the statutory liability in the absence of specific agreement to make the insurer's liability unlimited or higher than the statutory liability."

40. The Supreme Court then stated the conclusions arrived at in Amrit Lal Sood. This is given in paragraph 10 of the Report in the following words:

"On a careful reading and analysis of the decision in Amrit Lal Sood it is clear that the view taken by the Court is no different. In this decision also, the case of Jugal Kishore is referred to. It is held:

(i) that the liability of the insurer depends on the terms of the contract between the insured and the insurer contained in the policy;

(ii) there is no prohibition for an insured from entering into a contract of insurance covering a risk wider than the minimum requirement of the statute whereby risk to the gratuitous passenger could also be covered; and

(iii) in such cases where the policy is not merely statutory policy, the terms of the policy have to be considered to determine the liability of the insurer."

41. In the light of the above conclusions, the Supreme Court found no conflict between the decisions rendered in Shanti Bai and Amrit Lal Sood. On the contrary, the Supreme Court found "consistency on the point that in the case of an insurance policy not taking any higher liability by accepting a higher premium, the liability of the Insurance Company is neither unlimited nor higher than the statutory liability fixed under Section 95(2) of the Act." (Paragraph 11 of the Report). Consequently, the Supreme Court answered the question referred to the Constitution Bench (in paragraph 14 of the Report) in the following terms:

"In the case of the Insurance Company not taking any higher liability by accepting a higher premium for payment of compensation to a third party, the insurer would be liable to the extent limited under Section 95(2) of the Act and would not be liable to pay the entire amount."

42. The Supreme Court made a vital distinction between a statutory liability and a contractual liability. This distinction, which is important so far as the present appeals are concerned, has been made in paragraph 10 of the Report. The sum and substance of the distinction made by the Supreme Court is that under the statute the liability is limited to what is provided in the statute, but that does not prohibit the contracting parties from creating an unlimited or higher liability and to this I may add, creating a wider liability so long as it is not contrary to the provisions of the Act. This is what the Supreme Court had to say:

"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 the case 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."

43. This was reiterated by the Supreme Court in paragraph 16 of the Report to the effect that in the absence of a specific agreement and payment of a separate premium, Shanti Bai did not provide for a higher coverage. On the other hand, Amrit Lal Sood provided for a wider coverage to meet a higher liability. This is what the Supreme Court said:

"In Shanti Bai case this Court has clearly expressed the opinion that a comprehensive policy issued on the basis of the estimated value of the vehicle does not automatically result in covering the liability with regard to the third-party risk for an amount higher than the statutory limit in the absence of specific agreement and payment of separate premium to cover third-party risk for an amount higher than the statutory limit. This position is accepted in Amrit Lal Sood case as well though no reference is made to this case. As already stated above, in Amrit Lal Sood case the Court found an express term in the policy for covering wider risk and to meet the higher liability unlike in the case of Shanti Bai. Therefore, the High Court was not right in holding that the liability of the appellant-Insurance Company was unlimited merely on the ground that the vehicle in question i.e. the truck, was covered by a comprehensive insurance policy."

44. The decisions discussed by the Supreme Court, namely, Shanti Bai, Amrit Lal Sood and Jugal Kishore followed a common path up to a point. That was in relation to a liability higher than the statutory liability of the insurance company. At this point, Amrit Lal Sood took a side step in its discussion, unlike Shanti Bai and Jugal Kishore. The side-step taken by the Supreme Court in Amrit Lal Sood was in discussing a wider contractual liability arising out of the terms of the insurance policy, and it is while discussing this wider contractual liability that the Supreme Court held the insurance company liable to satisfy an award passed in favor of the claimant therein. Whether the insurance company could recover the amount paid in excess of the sum assured was left open since that was not the question before the Supreme Court. In Shanti Bai or Jugal Kishore or even C.M. Jaya the issue about a wider contractual liability of the insurance company did not arise. This is where the distinction lies between Amrit Lal Sood and the other three cases.

45. In a recent decision of the Supreme Court in National Insurance Co. Ltd. vs. Keshav Bahadur and Others the distinction between a statutory liability and a contractual liability has again been reiterated in paragraphs 6 and 7 of the report. This reads as follows:-

"The liability of the insurer is limited as indicated in Section 95 of the Act. But it is open to the insured to make payment of additional higher premium and for the insurer to accept higher risk covered in respect of third party also. But in the absence of any such clause in the insurance policy, and proof of payment of additional premium, the liability of the insurer cannot be unlimited in respect of third party and it is limited only to the statutory liability.

In case of appellant insurer not taking any higher liability by accepting higher premium, the liability is neither unlimited nor higher than the statutory liability fixed under Section 95(2) of the Act. Even if a vehicle is the subject-matter of comprehensive insurance and a higher premium is paid on that score, limits of the liability with regard to third-party risk do not become unlimited or higher beyond the statutory liability fixed. For this purpose, a specific agreement has to be arrived at between the insured and the insurer and separate premium has to be paid in respect of additional amount of liability undertaken by the insurer in that regard."

Question of liability - wider contractual liability

46. Apart from Amrit Lal Sood, the question of a wider contractual liability arose in New Asiatic Insurance Co. Ltd. vs. Pessumal Dhannamal Aswani Oriental Insurance Co. Ltd. vs. Cheruvakkara Nafeesu (2001) 2 SCC 491. It is, therefore, necessary to discuss all three decisions, in the context of the wider contractual liability.

47. In Aswani, a car driven by Pesumal met with an accident. This car was insured with the appellant New Asiatic Insurance Co. Pesumal himself owned a car, which was insured with another company. On a claim having been made for compensation against Pesumal, the appellant relied upon proviso (a) to Clause 3 in the insurance policy to the effect that it is not liable to indemnify the insured if the driver of the vehicle (Pesumal) is entitled to indemnity under any other policy.

48. While dealing with the terms of the insurance policy given by the appellant, the Supreme Court referred to some clauses such as avoidance of certain terms and right of recovery and an important notice in the Schedule to the policy. These clauses are similar to those found in the present case and read as follows:-

"Under the heading 'Avoidance of certain terms and right of recovery', the policy states:

"Nothing in this policy or any endorsement hereon shall affect the right of any person indemnified by this policy or any other person to recover an amount under or by virtue of the provisions of the Motor Vehicles Act 1939, Section 96.

But the Insured shall repay to the Company all sums paid by the Company which the Company would not have been liable to pay but for the said provisions."

49. At the end of the Schedule to the policy is an important notice that reads:-

"The insured is not indemnified if the Vehicle is used or driven otherwise than in accordance with this Schedule. Any payment made by the Company by reason of wider terms appearing in the Certificate in order to comply with the Motor Vehicles Act 1939 is recoverable from the Insured. See the clause headed 'Avoidance of certain terms and right of recovery'."

50. The Supreme Court considered the effect of these wide terms appearing in the insurance policy and held that the provisions of the Act do not affect the right of a third party to recover any amount if the contract between the insurance company and the assured provides for the insurance company undertaking a liability to third parties. A clause such as the avoidance clause is effective only between the insured and the insurance company; it is ineffective when considering the liability of the insurance company to a third party. This is what the Supreme Court said in paragraphs 21 and 22 of the Report:

" The Act contemplates the possibility of the policy of insurance undertaking liability to third parties providing such a contract between the insurer and the insured, that is, the person who effected the policy, as would make the company entitled to recover the whole or part of the amount it has paid to the third party from the insured. The insurer thus acts as security for the third party with respect to its Realizing damages for the injuries suffered, but vis-à-vis the insured, the company does not undertake that liability or undertakes it to a limited extent. It is in view of such a possibility that various conditions are laid down in the policy. Such conditions, however, are effective only between the insured and the company, and have to be ignored when considering the liability of the company to third parties. This is mentioned prominently in the policy itself and is mentioned under the heading 'Avoidance of certain terms and rights of recovery', as well as in the form of 'an important notice' in the Schedule to policy. The avoidance clause says that nothing in the policy or any endorsement thereon shall affect the right of any person indemnified by the policy or any other person to recover an amount under or by virtue of the provisions of the Act. It also provides that the insured will repay to the company all sums paid by it which the company would not have been liable to pay but for the said provisions of the Act. The 'Important Notice' mentions that any payment made by the company by reason of wider terms appearing in the certificate in order to comply with the Act is recoverable from the insured, and refers to the avoidance clause.

Thus the contract between the insured and the company may not provide for all the liabilities which the company has to undertake vis-à-vis the third parties, in view of the provisions of the Act. We are of opinion that once the company had undertaken liability to third parties incurred by the person specified in the policy, the third parties' right to recover any amount under or by virtue of the provisions of the Act is not affected by any condition in the policy. Considering this aspect of the terms of the policy, it is reasonable to conclude that proviso (a) of para 3 of Section II is a mere condition affecting the rights of the insured who effected the policy and the persons to whom the cover of the policy was extended by the company, and does not come in the way of third parties' claim against the company on account of its claim against a person specified in para 3 as one to whom cover of the policy was extended."

51. The question in Amrit Lal Sood was whether an insurance company is liable to satisfy a claim for compensation made by a person traveling gratuitously in a car that had an accident. The Supreme Court answered the question in the affirmative after referring to the terms of the policy and holding that "any person" includes a gratuitous passenger.

52. In the insurance policy in Amrit Lal Sood, there was a clause under the heading "AVOIDANCE OF CERTAIN TERMS AND RIGHT OF RECOVERY." This clause reads as follows:

"Nothing in this policy or any endorsement hereon shall affect the right of any person indemnified by this policy or any other person to recover an amount under or by virtue of the provisions of the Motor Vehicles Act, 1939, Section 96. BUT the insured shall repay to the Company all sums paid by the Company which the Company would not have been liable to pay but for the said provisions."

53. After quoting the above two paragraphs from Aswani, the Supreme Court held that the avoidance clause is effective only between the insured and the insurance company, and not a third party. In paragraph 14 of the Report it was stated thus:

"The above clause does not enable the insurance company to resist or avoid the claim made by the claimant. The clause will arise for consideration only in a dispute between the insurer and the insured. The question whether under the said clause the insurer can claim repayment from the insured is left open. The circumstance that the owner of the vehicle did not file an appeal against the judgment of the Single Judge of the High Court under the letters patent may also be relevant in the event of a claim by the insurance company against the insured for repayment of the amount. We are not concerned with that question here."

54. Finally, in Cheruvakkara Nafeessu the question before the Supreme Court was the extent of liability of an insurance company towards a third party as per Section 95(1)(b) of the Act and its rights in case of payment of an amount in excess of the limits of liability under the insurance policy vis-à-vis the insured.

55. The avoidance clause in the policy in that case read as follows:-

"Nothing in this policy or the endorsement hereon, shall affect the right of any person indemnified by this policy or any other person to recover an amount under or by virtue of the provisions of the Motor Vehicles Act, 1939, Section 96.

But the insured shall repay to the Company all sums paid by the Company which the Company would not have been liable to pay but for the said provisions."

56. Upon a consideration of the terms of the policy including the avoidance clause, the Supreme Court held:-

"A conjoint reading of all the terms of the policy of insurance executed in this case indicate that the total extent of liability of the insurance policy is Rs. 50,000 but the Company is liable to indemnify the insured against all sums including claimant's costs and expenses which the insured becomes liable to pay and nothing in the policy affects the right of any person indemnified by the policy or any other person to recover an amount under or by virtue of the provisions of Section 96 of the Act. However, the insured is liable to repay to the Company all sums paid by the Company which the Company would not have been liable to pay but for the condition of liability relating to third party."

57. A reference was made to Aswani and Amrit Lal Sood, and then emphasis was laid on the terms of the contract of insurance. It was held that on the basis of the contract, the insurance company was obliged to pay the entire amount to the claimant and the insurance company could recover from the insured any payment made over and above the limited liability. The conclusion arrived at was stated as follows:-

"In the facts and circumstances of this case we find that despite holding the liability under the policy limited to the extent of Rs.50,000, the Claims Tribunal and the High Court were not unjustified in directing the appellant Company to pay the whole of the awarded amount to the claimants on the basis of the contractual obligations contained in clauses relating to the liability of the third parties and avoidance clause. However, the Claims Tribunal and the High Court were not justified in rejecting the right of the appellant Company to recover from the insured the excess amount paid in execution and discharge of the award of the Tribunal."

58. On the basis of all the decisions mentioned above, it is quite clear that the Act provides a limit to the liability of the insurance company vis-à-vis the insured. But, the insurance company and the insured can, through a contract, increase the liability by enhancing the amount of premium and even provide for a wider coverage in respect of third party risks. The Act does not prohibit such variations and, in fact, the India Motor Tariffs even provides for it.

59. In the present case, all the terms of the contract of insurance were not brought on record by the insurance company or the owner of the vehicle. Under these circumstances, it has become necessary to refer to the India Motor Tariffs to know the standard terms of contract. A perusal of the standard terms so derived shows that they are in substance similar to the terms of insurance contracts dealt with by the Supreme Court in the decisions mentioned above. Consequently, the only available conclusion is that even though the monetary liability of the insurance company is limited as claimed by it, that limited liability is only vis-à-vis the insured. The liability vis-à-vis "any person" or a third party like the Appellants is not limited. The insurance company has contracted with the insured to indemnify a third party to recover an amount under or by virtue of the provisions of the Act. This is, however, subject to the right of the insurance company to recover from the assured any amount paid in excess of its liability but for the Act. This is the sum and substance of the wider coverage provided by the insurance policy in the cases decided by the Supreme Court and the present case.

60. Consequently, in so far as the Appellants are concerned, it must be held that in accordance with the terms of the insurance policy, they are entitled to recover from the insurance company the amount awarded by the learned Tribunal (or this Court as the case may be). The insurance company is, however, entitled to recover from the insured the amount paid by it in excess of its limited liability.

61. Learned counsel for the Appellants sought to rely on British India General Insurance Co. Ltd. vs. Captain Itbar Singh, to contend that the insurance company is liable to pay the compensation awarded by the learned Tribunal and recover it from the assured. Frankly, I am unable to read any such omnibus conclusion in the judgment. All that the Supreme Court held in that case was that if an insurance company reserves a right in the policy to defend an action against an assured, then it can urge all defenses open to an assured. If the insurance company is then required to pay an amount in excess of the sum assured by the policy, it can recover the excess from the insured as per the proviso to Section 95(3) and Section 95(4) of the Act. The submission of the insurance company in this context was that the assured might be a man of straw and the insurance company may not be able to recover anything from him. The simple answer given by the Supreme Court to this submission was that it is the insurer's bad luck! British India General Insurance does not help learned counsel for the Appellants.

62. Learned counsel for the insurance company relied on British India General Insurance Co. Ltd. vs. Smt. Maya Banerjee, that was a case of a statutory liability and is not relevant for the purposes of the present discussion.

63. There is one important fact, which I think needs mention. It is that in all the above decisions of the Supreme Court, the terms of the insurance policy were not in dispute because the insurance policy was on record. In the present case, the very terms of the insurance policy are in dispute, since they are not on record, leaving all of us with no option but to fall back upon the India Motor Tariffs and the standard form contained therein.

Assessment of compensation

64. The learned Tribunal has awarded compensation to the Appellants for the death of Randhir Singh at Rs. 76,800/- being the loss of dependency of Rs.19,200/- per annum with a multiplier of 4; for the death of their mother Krishna Devi, a lump sum amount of Rs.50,000/- and for the death of their brother, a lump sum amount of Rs.40,000/-.

65. The admitted position is that all the Appellants are married and have their own families to take care of.

66. The amount of compensation to be awarded depends on a lot of factors. In Susamma Thomas (paragraph 13) it was said that the age of the deceased or that of the claimants determines the choice of the multiplier, whichever is higher. This is reiterated in H.S. Ahammed Hussain vs. Irfan Ahammed, paragraph 6. In M.S. Grewal vs. Deep Chand Sood , the Supreme Court referred to placement in society and financial status as a factor (paragraph 12). In Lata Wadhwa and others vs. State of Bihar and others, the Supreme Court said in paragraph 8 of the Report:

"Damages are awarded on the basis of financial loss and the financial loss is assessed in the same way as prospective loss of earnings. The basic figure, instead of being the net earnings, is the net contribution to the support of the dependants, which would have been derived from the future income of the deceased. When the basic figure is fixed, then an estimate has to be made of the probable length of time for which the earnings or contribution would have continued and then a suitable multiple has to be determined (a number of years' purchase), which will reduce the total loss to its present value, taking into account the proved risks of rise or fall in the income."

67. In Jyoti Kaul and others vs. State of M.P. and another, (2002) 6 SCC 306, it was said that the choice of multiplier depends on various circumstances such as the age of the deceased, the age of the dependents, the existing salary of the deceased, any additional sums payable to him because of the nature of his job, his chances of promotion, the life expectancy etc. (paragraph 5).

68. The Supreme Court in United India Insurance Co. Ltd. vs. Patricia Jean Mahajan & Ors. gave the purpose of awarding compensation to the dependents of victims. It was said that they should not be suddenly deprived of their source of maintenance. This is what was held in paragraph 21 of the Report:-

"The purpose to compensate the dependants of the victims is that they may not be suddenly deprived of the source of their maintenance and as far as possible they may be provided with the means as were available to them before the accident took place. It will be a just and fair compensation. But in cases where the amount of compensation may go much higher than the amount providing the same amenities, comforts and facilities and also the way of life, in such circumstances also it may be a case where, while applying the multiplier system, the lesser multiplier may be applied. In such cases, the amount of multiplicand becomes relevant. The intention is not to overcompensate.

69. Taking all these factors into consideration, can it be said that the Appellants have suffered any monetary or financial loss due to the death of their parents and brother. I am afraid, the answer is in the negative. For sure, they have suffered the loss of love and affection, parental guidance and encouragement, trauma and perhaps a host of other sudden discomforts - but certainly not any financial loss because they were not financially dependent on their parents and brother. Applying the law laid down by the Supreme Court, there is no loss of dependency that requires to be compensated - but there is loss of love and affection. The total compensation awarded to the Appellants by the learned Tribunal works out to about Rs.1,66,000/- with 12% interest. I think it would be just and fair if the amount awarded as compensation to the Appellants is maintained, though under the head of loss of love and affection and trauma caused by the sudden deaths of three members of their family, rather than under the head of dependency.

70. In addition to the above, the Appellants are entitled to funeral expenses which I quantify at Rs.5,000/- for each of the deceased. The total compensation due to the Appellants would, therefore, work out to Rs.1,81,800/-. On the additional amount of Rs.15,000/- awarded towards funeral expenses, the Appellants would be entitled to interest at 9% per annum from the date of the claim petition.

Conclusion

71. It is, therefore, held that the compensation awarded to the Appellants by the learned Tribunal is adequate, but the Appellants are entitled to an additional amount of Rs.15,000/- towards funeral expenses. The insurance company is liable to pay the entire amount to the Appellants and is entitled to recover it from the owner and driver of the vehicle in accordance with law, except to the extent of its admitted liability under the insurance policy.

72. The appeal is partly allowed and so, there is no order as to costs.