Delhi High Court

Smt. Gurcharan Kaur And Anr. vs Sh. Raja Ram And Anr. on 11 July, 2011

Author: Reva Khetrapal

                                        REPORTED
*    IN THE HIGH COURT OF DELHI AT NEW DELHI


+                 FAO 131/1988


SMT. GURCHARAN KAUR AND ANR.            ..... Appellants
                 Through: Mr. Navneet Goyal, Advocate

                  versus

SH. RAJA RAM AND ANR.                           ..... Respondents
                  Through:            Mr. V.P. Chaudhary, Senior
                                      Advocate with Mr. Nitenjya
                                      Chaudhary, Advocate for the
                                      respondent No.2


%                          Date of Decision : July 11, 2011

CORAM:
HON'BLE MS. JUSTICE REVA KHETRAPAL
1. Whether reporters of local papers may be allowed
   to see the judgment?
2. To be referred to the Reporter or not?
3. Whether judgment should be reported in Digest?

                           JUDGMENT

: REVA KHETRAPAL, J.

1. This appeal seeks to assail the award dated 3rd September, 1987

passed by the Motor Accident Claims Tribunal, Delhi in Suit

No.186/80 instituted on 29.12.1980 on the ground that the award

amount is meagre and inadequate.

2. At the outset, it may be mentioned that this case has a

chequered history. Initially this appeal was dismissed in limine on

26.07.1988 by a learned Single Judge of this Court. A Letters Patent

Appeal, being LPA No.49 of 1988, was filed against the said

dismissal in limine, which was decided on 15.02.2001 by a Division

Bench of this Court, enhancing the award amount to ` 1,52,000/- with

interest thereon. A review application, being CM No.1147/2001, was

filed against this judgment on the ground that the counsel for the

Insurance Company was present in the Court and yet it was recorded

that none had come forward to represent the Insurance Company.

The review application was allowed by passing the following order:

"Respondent Insurance Company has filed this application seeking review of court order dated 15.2.2001 on the ground that company‟s counsel Ms. Saroj Bidawat was present in the court and yet it was recorded that nobody had come forward to represent Insurance Company to show that its liability was limited to ` 50,000/- only. She has subscribed an affidavit in support. Instead of holding any further inquiry to find out whether or not Insurance

Company‟s counsel was present, we find that the company had gone unheard in showing the extent of its liability. Therefore, interest of justice would demand that the company was heard in the matter afresh on merits.

Application is accordingly allowed in view of this and court order dated 15.2.2001 is set aside. LPA 49/1988 shall revive and be considered and disposed of afresh. The amount deposited by Insurance Company pursuant to the impugned court order shall remain intact till the disposal of LPA. Registry is directed to list LPA for disposal on 25th April, 2003."

3. Eventually, by its judgment dated 05.10.2009 the Division

Bench disposed of the LPA sending the matter back to the Single

Bench with the direction to the Single Judge that the same be

disposed of on merits by passing a speaking order. This is how the

appeal has come up for hearing before this Court.

4. It is apparent from a perusal of the Grounds of Appeal that the

appellants are aggrieved by the manner in which compensation was

assessed by the Motor Accident Claims Tribunal relating to the death

of late Baldev Singh, who died in a road accident on 17.06.1980. The

deceased Baldev Singh was unmarried and the appellants are his

parents, who had filed the claim petition under Section 110-A of the

Motor Vehicles Act, 1939, seeking compensation for his untimely

demise in the sum of ` 2,40,000/- with interest @ 12% per annum

with effect from the date of the filing of the claim petition till

payment. It is alleged by the appellants-claimants that Baldev Singh

was driving a two-wheeler scooter No.DLQ 9533 and was going from

the Shahdara side to Delhi when tempo No.DHL 8945, driven rashly

and negligently by the respondent No.1, came from the Delhi side and

after going on the wrong side of the road, hit the two-wheeler scooter

with its right front side, as a result of which Baldev Singh (hereinafter

referred to as "the deceased") fell down and sustained fatal injuries.

5. The Claims Tribunal on the basis of the evidence adduced by

the appellants including the evidence of the eye witness, held that the

deceased had received fatal injuries as a result of the rash and

negligent driving of the offending tempo by the respondent No.1.

After observing that the age of the deceased was 25 years 3 months,

as on 17.06.1980, as per his birth certificate, the Claims Tribunal

noted that according to PW-6 Jawandh Singh (the appellant No.2), the

deceased was employed by him at a salary of ` 750/- per month in his

business, which he was carrying on in the name and style of M/s.

Chawla Cycle Works, Railway Road, Shahdara. The Tribunal further

noted that in the claim petition, the salary of the deceased was stated

to be ` 700/- per month and there was a discrepancy in this regard. It

further noted that PW-6 Jawandh Singh in his statement had deposed

that his son was studying in B.Com in the evenings and was working

in his cycle shop in the mornings; and that in his cross-examination,

PW-6 had stated that he had three employees besides his son, and

those employees were getting ` 200/- to ` 150/- per month, but no

receipt was being taken by him for disbursement of salary to them.

He had denied the suggestion that his son was not studying in Shyam

Lal College, but volunteered to state that his name might have been

struck off due to his absence from college as he was working in the

shop. The Tribunal also noted that PW-7 Bodh Raj and PW-8 Desh

Raj, who were independent witnesses, being shopkeepers in the same

vicinity, had corroborated the fact that the deceased was doing the

work for Jawandh Singh in the shop, as also PW-9 Gurcharan Kaur,

the mother of the deceased and PW-10 Kishan Singh, the uncle of the

deceased.

6. On the basis of the aforesaid evidence, the Claims Tribunal

concluded that the appellant No.2, who was the father and employer

of the deceased, was not dependent on the deceased at all, inasmuch

as he himself was paying salary to the deceased amounting to ` 700/-

per month for his expenses. Assuming the salary of the deceased to

be ` 700/- per month and further assuming that the deceased was

spending at least 50% of the amount on his personal expenses, the

Claims Tribunal concluded that the deceased might be contributing a

sum of ` 350/- per month to his mother. The Tribunal then proceeded

to observe that the mother of the deceased was also not dependent on

the deceased as her husband was running a "flourishing business", but

nevertheless held that, in its opinion, the multiplier of 20 could be

applied in this case by assessing the total loss to the family at ` 200/-

per month, as out of ` 350/- which the deceased might be paying to

his mother, he was getting meals and clothing from the joint family

and was also maintaining a scooter. Thus, applying the multiplier of

20 to the assessed dependency of ` 200/- per month, the Tribunal

calculated the compensation which should be awarded to the

appellants to be in the sum of ` 48,000/-, i.e., ` 200/- per month x 12

months x 20. It then observed that since the Insurance Company had

admitted its liability up to ` 50,000/-, the entire amount of ` 48,000/-

plus 12% interest thereon would be paid by the Insurance Company

to the appellants No.1 and 2 in equal shares.

7. From the aforesaid, it is apparent that since the Tribunal had

awarded compensation in the sum of ` 48,000/-, the Tribunal had not

decided on the issue of the policy being limited in liability up to `

50,000/-. The Division Bench in its order dated October 05, 2009

accordingly observed that should the Single Judge enhance the

compensation beyond ` 50,000/-, the issue of liability of the

Insurance Company in terms of the policy of insurance would be

decided by the Single Judge. Accordingly, it is proposed to first

embark upon the exercise of examining the grievance of the

appellants that the Tribunal has not made a proper assessment of the

compensation of the economic loss suffered by them on account of

the death of their son, before adverting to issue of limited liability.

8. Mr. Navneet Goyal, the learned counsel for the appellants has

taken the plea that the deceased was expected to live at least till the

age of 70 years, and the learned Tribunal ought, therefore, to have

capitalized the economic loss to the appellants at not less than ` 700/-

per month. He contended that the Claims Tribunal altogether failed

to appreciate that in due course of time, the earnings of the deceased

would have increased and his contribution to his parents would have

correspondingly increased. I find some substance in this contention

of the learned counsel for the appellants, though, in my opinion, the

Claims Tribunal rightly assessed the income of the deceased at the

time of his death to be ` 700/- per month. Adding 50% to the sum of

` 700/- per month towards the future prospects and earnings of the

deceased (keeping in view the fact that the deceased was a young man

of 25 years and his income was bound to increase with the passage of

time), the income of the deceased for the purpose of assessment of

loss of dependency of the appellants works out to be in the sum of `

1050/- per month, that is, ` 12,600/- per annum. Deducting one-half

therefrom for the personal expenses of the deceased, the loss of

dependency of the appellants comes to ` 6,300/- per annum. This

figure must be enhanced by the application of an appropriate

multiplier. The age of the mother of the deceased at the time of his

unfortunate demise was 47 years and thus the multiplier applicable in

accordance with the judgment of the Supreme Court in the case of

Smt. Sarla Verma and Ors. vs. Delhi Transport Corporation and

Anr. (2009) 6 SCC 121 would be the multiplier of 13. Thus

calculated, the loss of dependency of the appellants works out to `

6,300/- x 13 = ` 81,900/-, which may be rounded off to ` 82,000/-.

9. Since no non-pecuniary damages have been awarded and it is

the contention of Mr. Navneet Goyal that the award deserves to be

enhanced on this score also, a sum of ` 10,000/- towards the loss of

love and affection of the deceased, a sum of ` 5,000/- towards his

funeral expenses and a sum of ` 5,000/- towards the loss of estate of

the deceased, that is, in all a sum of ` 20,000/-, is also awarded to the

appellants. The total compensation payable to the appellants thus

works out to be in the sum of ` 1,02,000/-. Resultantly, the award, in

my opinion, deserves to be enhanced to the aforesaid extent.

10. Adverting now to the question of whether the liability of the

Insurance Company was a limited one, limited to the sum of `

50,000/- only, at the threshold a two-fold contention was put forth by

Mr. Navneet Goyal, the learned counsel for the appellants. The first

was that the plea of limited liability was not available to the Insurance

Company as no such plea was sought to be urged by the Insurance

Company in the trial court as was evident from the fact that no issue

was framed by the Claims Tribunal in respect thereof. Alternatively,

Mr. Goyal submitted that the insurance policy sought to be pressed

into service in support of the plea of limited liability was not

admissible in evidence. The learned counsel for the appellants took

me through the evidence of N.P. Sharma, Assistant Administrative

Officer, who proved on record the insurance policy as Ex.RW1/1, to

contend that Ex.RW1/1 was neither a carbon copy of the original

insurance policy nor an office copy, but a photostat copy which was

certified as true copy.

11. The first contention of the learned counsel for the appellants,

that the plea of limited liability not having been raised by the

Insurance Company before the trial court, the said plea could not be

pressed into service at the appellate stage, appears to me to be wholly

misconceived. The Insurance Company in paragraph 17 of the

written statement filed by it had raised a specific plea that the

liability, if any, of the Insurance Company is limited to the extent

formulated in Section 95 of the Motor Vehicles Act, 1939. It is no

doubt true that the Claims Tribunal did not frame any separate issue

with regard to the plea of limited liability nor it adjudicated upon the

aspect of limited liability in the award, but the Tribunal has made a

mention of the evidence adduced by the Insurance Company in this

regard by referring to the testimony of RW1 N.P. Sharma. This

witness in his testimony clearly stated that though the policy issued

by the Insurance Company was a comprehensive one, yet the liability

of the Insurance Company was limited to ` 50,000/- only. He also

proved on record the photostat copy of the office copy of the

insurance policy for the period 12.09.1979 to 11.09.1980 along with

the Schedule to the policy, which was marked as „A‟. The witness

further testified that notice was given to the insured to produce the

original insurance policy and proved on record the postal receipt, the

acknowledgment due card and the notice under Order XII Rule 8 of

the Code of Civil Procedure. The aforesaid documents were proved

and exhibited to show that the insured did not produce the original

insurance policy in his possession despite being called upon to

produce the same. Thus, it cannot be said that no plea with regard to

limited liability was raised by the Insurance Company before the

Claims Tribunal and the aforesaid plea is being raised for the first

time at the appellate stage. Even otherwise, a Division Bench of the

Bombay High Court in the case of Marine and Genl. Ins. Co. Ltd. vs.

Dr. Balkrishna Ramachandra Nayan, 1976 ACJ 288 (Bombay) has

held, and I think rightly, that even where the contention that the

liability of the Insurance Company is limited under Section 95(2) is

not raised before the Tribunal, in fairness, an opportunity should be

given to the Insurance Company to raise such a point if it was open to

it at law to do so. This judgment was subsequently followed in the

case of New India Assurance Co. Ltd. vs. Shashikalabai and Others,

2006 ACJ 194 by a Single Judge of the same High Court. In instant

case, however, as noticed above, the insurance company in its written

statement had clearly stated, while admitting its liability, that it was

limited to the extent provided in Section 95 of the Motor Vehicles Act

of 1939.

12. Adverting to the second contention of the learned counsel for

the appellants that the Insurance Company ought not to have been

allowed by the Claims Tribunal to lead secondary evidence in respect

of the insurance policy, the matter is no longer res integra. Reference

may usefully be made in this regard to the judgment in the case of

National Insurance Co. Ltd. vs. Jugal Kishore and Others, 1988

ACJ 270, wherein the Supreme Court has laid down that where the

owner of the vehicle for reasons known to him does not choose to

produce the policy or a copy thereof, it would be open to the

Insurance Company concerned, if it wishes to take a defence in a

claim petition that its liability is not in excess of the statutory liability,

to file a copy of the insurance policy along with its defence. Filing of

a copy of the policy, it was held, not only cuts short avoidable

litigation but also helps the Court in doing justice between the parties.

13. A Full Bench of the Punjab and Haryana High Court in the case

of United India Insurance Co. Ltd. vs. Kamla Rani and Others,

1997 ACJ 1081, following the judgment of the Supreme Court in

Jugal Kishore's case (supra), laid down that a certificate of

insurance/policy issued by the Insurance Company being a public

document within the meaning of Section 74 of the Indian Evidence

Act, the same can be proved by production of a certified copy under

Section 77 of the said Act. It further held:

"If the insured, i.e. the owner of the vehicle disputes the correctness of the said certified copy, it is for him to produce the original which will be in his custody only. We are, therefore, of the opinion that certified copy of insurance policy is admissible in evidence under Section 74 read with Section 77 of the Indian Evidence Act without any formal proof."

14. In Oriental Fire & Genl. Ins. Co. Ltd. vs. Veena Pruthi and

Others, 1989 ACJ 1163, a Single Judge of this Court, after noting

that the owner of the offending vehicle did not produce the original

policy and the Insurance Company thereupon produced the office

copy of the policy albeit without the terms and conditions appended

thereto, observed:

"Usually, in the file pertaining to the insurer, only the last page of the policy is annexed as the rest of the terms are the standard terms. The Tribunal held that the sheet produced by the insurance company without the terms and conditions cannot be accepted in evidence. The approach of the Tribunal was wholly erroneous. The Tribunal ought to have weighed the circumstances and evidence before it. When the owner had not produced the original copy, it was erroneous on the part of the Tribunal to hold the insurance company also jointly and severally liable for the entire amount. As stated above, the normal practice of insurance companies is to keep the relevant page or pages on the file of each insured showing how much of the premium is paid and risk of what amount is covered. The Tribunal also overlooked the fact that it is supposed, to make a summary enquiry where it cannot insist upon the technical rules of evidence. I have, therefore, no hesitation to accept the office copy of the policy produced by the insurance company."

15. Referring to the dicta laid down in the above case and

endorsing the same, this Court in National Insurance Co. Ltd. vs.

Smt. Kamla Devi & Others, 1997 I AD (Delhi) 368 held as under:

"8. We are in complete agreement with the above decision and approach adopted.

9. The proceedings before the MACT are in the nature of an enquiry to determine just compensation and the provisions/rules of Indian Evidence Act are not applicable in their rigour. The MACT is not bound to strictly enforce provisions of Indian Evidence Act. The owner/insured had contended before the MACT that the Insurance policy had not been received and was not available. Accordingly, even under the proviso to Section 66 of the Indian Evidence Act, the appellant was entitled to lead secondary evidence, without service of any notice. The appellant had accordingly tendered in evidence the copies of the documents as available with it to prove factum of insurance and payment of premium. The mandate of the statute is to determine the just compensation."

16. In New India Assurance Co. Ltd. vs. Devula Ramulu and

Others, 1997 ACJ 1267 (Andhra Pradesh) where a copy of the

insurance policy was produced by the Insurance Company in support

of its plea of limited liability, the Court observed as follows:

"It is also the common rule of evidence that if either of the parties fail to produce evidence and in such a case one of the persons who would fail in the case, the burden would rest upon him to establish a fact. Admittedly the vehicle was insured with the appellant. The respondent No. 2 is the owner of the vehicle in whose favour the policy was issued. It is not the case that he was not issued an insurance policy. He was the custodian of the insurance policy.

He was bound to produce the insurance policy to establish contrary to the contents of Exh. A- 5, the copy of the insurance policy, which was produced to show that the limit of liability of the insurance company was something different from the contents of the policy Exh. A-5 or something more than Rs.15,000/- being the limit of the statutory liability. Even assuming that the appellant proved to have been resiled from the document, when a statute fixes the limit of liability, unless it is established that the parties to the insurance policy being the contract of insurance have agreed to be followed by another contract, the statute remains unaffected. In M.K. Kunhimohammed v. P.A. Ahmedkutty, 1987 ACJ 872 (SC), the Supreme Court has positively declared the law that the limit of liability under Section 95 sub- section (2) is maximum. At the same time it has been held in National Insurance Co. Ltd. v. Jugal Kishore, 1988 ACJ 270 (SC), that it is open to the parties to enter into a contract to fix higher liability on payment of higher premium. In other words, the variation from the statutory liability can be a question which requires proof, in the absence of the same, the limit of statutory liability remains unaffected. This is one such case."

17. From the aforesaid, it may safely be concluded that the

contention of Mr. Goyal that the insurance policy in the present case

is inadmissible in evidence cannot be upheld.

18. It may also be mentioned at this juncture that in the present

case, the record of the Claims Tribunal in the present case stood

destroyed in the year 2004 and the appeal paper-book, therefore, does

not contain all the terms and conditions of the insurance. It is,

however, not in dispute that the terms and conditions of the policy are

as contained in the India Motor Tariff effective from 01.12.1973.

Both the learned counsel are in agreement on this aspect and reliance

has been placed by both of them upon the India Motor Tariff

formulated by the Tariff Advisory Committee (TAC) set up under

Section 64-U of the Insurance Act, 1938. It is also not in dispute that

the terms and conditions contained therein are binding on all the

insurers effective from 01.12.1973.

19. A look at the India Motor Tariff shows that the first part of the

Tariff sets out the territorial limits and makes the provisions of the

Tariff applicable all over India. The next part consists of General

Regulations, which, inter alia, provide that no Insurance Company is

permitted to issue policies except in the Standard Forms provided in

the Tariff. The Tariff then deals with private car tariff and motor

cycle tariff. There is then a part relating to commercial vehicles

tariff. Regulation 1 of the part concerning commercial vehicles tariff

classifies the various kinds of commercial vehicles and runs thus:

"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:-

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

       (b) Goods Carrying vehicles -            Class A(2)   Commercial
           General Cartage -                                 Vehicle
       (c) Trailers -                           Class A(3)   Form to be
       (d) Public Passenger Service vehicle     Class B(1)   used
           -
       (e) Passenger vehicles for hire -        Class B(2)
       (f) Passenger vehicles which are not     Class B(3)
           used for hire -
       (g) Vehicles belonging to Air Lines -    Class "C"
       (h) Miscellaneous & Special Types        Class "D"
           vehicles -
       (i) Motor Trade - Road Risk -            Class "E"    Motor
                                                             Trade
                                                             (Road Risk)
                                                             Policy
                                                             Form to be
                                                             used.
       (j)     Motor Trade - Internal Risk -    Class "F"    Motor
                                                             Trade
                                                             (Internal
                                                             Risk) Policy
                                                             Form to be
                                                             used.
       (k) Contingent Liability Indemnities     Class "G"

20. The learned counsel for both the parties do not dispute that the

insured vehicle in the instant case was a Goods Carrying Vehicle of

the category of Class A(2) referred to above with a licensed carrying

capacity of two tons.

21. Regulation 8 relating to „Commercial Vehicles Tariff‟ is

relevant for the purpose of the present appeal, which is titled "Guide

to completion of the Policy Schedules". The relevant part of

Regulation 8 which figures at Sheets 68-69 reads as follows:

"Limits of Liability (Liability to the Public only).

(i) Limits of the amount of the Company‟s liability under Section II-1 (i). All types of vehicles where Commercial Vehicle Policies are issued.

                     (a)    Goods       Carrying ` 50,000/-
                     Vehicles      carrying      a
                     maximum of six employees
                     (other than the driver)
                     (b)    Vehicles other than Such amount as is
                     described in (a) above         necessary to meet
                                                    the requirements
                                                    of the Motor
                                                    Vehicles        Act,
                                                    1939.
                     Where             additional The amount in
                     premium has been paid question                  as
                     for vehicles under (a) or provided          under
                     (b) above                      the Extra Benefit
                                                    Item 1 on Sheet
                                                    120 of the Tariff.

(ii) Limit of Liability under Section II-1 (ii).

(a) Goods or Passenger ` 50,000/-

carrying vehicles

(b) Vehicles other than ` 1,50,000/-

                       described in (a) above        N.B. - Where
                                                     additional
                                                     premium has been
                                                     paid for increased
                                                     limits, insert the
                                                     increased amount
                                                     in question."

22. At Sheet 77, the tariff rates relating to "Goods Carrying

Vehicles - General Cartage" of the category of Class A(2) are set out,

which reads as under:

"CLASS "A(2)" - GOODS CARRYING VEHICLES- GENERAL CARTAGE.

Vehicles used for the carriage of goods for hire or reward. Endorsement No.26 must be used -see Regulation 4.

Licensed Carrying ComprehensiveLiability to the "Act Only"

Capacity of                            Public Risks                   Liability
the Vehicle           Town      Mof.  Town       Mof.               Town Mof.
Not exceeding    `261 + ½% `286 + ½% `78/-     `87/-                `65/-
508 kgs.         on I.E.V. on I.E.V.
Not              `336 + ½% `496 + ½% `78/-     `87/-                `65/-
exceeding        on I.E.V. on I.E.V.
2032 kgs.
Not exceeding    `411 + ½%         `611 + ½% `78/-         `87/-    `65/-
3048 kgs.        on I.E.V.         on I.E.V.
Not exceeding    `761 + ½%         `911 + ½% `87/-         `106/-   `74/-
5080 kgs.        on I.E.V.         on I.E.V.
Exceeding        Above      rate   Above      rate `97/-   `125/-   `84/-
5080 kgs.        plus `150/-       plus `150/-
                 for       each    for       each




                 additional    additional
                1016 kgs. or 1016 kgs. or
                part thereof. part thereof.

23. The next relevant sheet of the Commercial Vehicles Tariff is

Sheet 120 which provides for additional premium payable under the

head "Extra Benefits". The additional premium for Class A(2)

vehicles is ` 39/- where the provision is for unlimited personal injury

and upto ` 1,50,000/- property damage. The relevant portion of Sheet

120 is reproduced hereunder:

"1. Liability to the Public Risks.

The indemnity granted to the insured may be increased in respect of the undernoted vehicles by payment of an additional premium on the following scale. In cases where the limits of indemnity provided under the standard policy exceed `50,000/- such limits may be increased in accordance with the scale at an additional premium equivalent to the difference between the scale rates for such standard policy limits and those for the required increased limits.

(a) All Commercial Vehicles except those rateable under Class A (2) and Class "E"

                                           Vehicles               Trailers


      Unlimited personal injury        Additional premium ` 4/-     ` 2/-
      ` 1,50,000/- property damage




       Unlimited personal injury    Additional premium ` 12/-          ` 5/-
      ` 3,00,000/- property damage

Note:- The property damage limit in respect of vehicles rated under Class "E" may be increased in accordance with the above scale by charging 50 per cent of above rates.

(b) Class A(2) Vehicles. Vehicles Trailers

Unlimited personal injury Additional premium ` 39/- ` 14/- ` 1,50,000/- property damage

Unlimited personal injury Additional premium ` 64/- ` 24/- ` 3,00,000/- property damage

N.B. - Where unlimited personal injury is required to be covered under an "Act Only" Policy in respect of vehicles rated under Regulation 2 of the Commercial Vehicles Tariff and registered as such, this may be granted by charging 50% of the rates shown in the third Item of the Schedules appearing under (a) or (b) above as appropriate."

24. Towards the end of the Part relating to „Commercial Vehicles

Tariff‟, the Standard Form for „Commercial Vehicles Comprehensive

Policy‟ is set out (Sheet 138). Section I of the Standard Form deals

with "Loss or damage". Section II deals with "Liability to Third

Parties". Clause 1 thereof (without the proviso which is not relevant

for this case) provides that subject to the limits of liability the

company will indemnify the insured against all sums including

claimant‟s costs and expenses. This clause reads thus:

"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. ....................................................."

25. Section III of the Standard Form contains an avoidance clause

captioned "AVOIDANCE OF CERTAIN TERMS AND RIGHT OF

RECOVERY". This avoidance clause, which provides that any

person indemnified by the policy or any other person can recover an

amount under or by virtue of the provisions of Section 96 of the

Motor Vehicles Act, is significant and 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."

26. The aforesaid clause which is indisputably contained in the

insurance policy in the instant case is heavily relied upon by the

learned counsel for the appellants and will be presently adverted to

and dealt with at length. The aforesaid avoidance clause is followed

by certain „General Exceptions‟ and „Conditions‟, including an

arbitration clause. At the end is the „Schedule‟ attached to the

„Standard Form‟. It may be mentioned at this stage that the Schedule

to the insurance policy in the present case (Mark A) is issued in the

same format as the „Schedule‟ to the „Standard Form‟, which is set

out at Sheet 143 of the Tariff.

27. The aforesaid Schedule as contained in the India Motor Tariff

when placed in juxtaposition with the Schedule to the policy in the

present case conclusively shows that it is the identical, except for the

amounts which have been filled in the Schedule to the policy in

question. The relevant portion of the Schedule with regard to the

limits of liability alongwith the corresponding part of the Schedule to

the policy in the present case are being reproduced hereunder to

illustrate the point:

STANDARD FORM Schedule in present case (Mark 'A')

Limits of Liability: Limits of Liability:

Limit of the amount of the Limit of the amount of the Company‟s Liability under Company‟s Liability under Section II-1(i) in respect of any Section II-1(i) in respect of any one accident. one accident:

Such amount as is necessary to meet the requirements of the Motor Vehicles Act, 1939.

Limit of the amount of the Limit of the amount of the Company‟s liability under Company‟s liability under Section II-1(ii) in respect of any Section II-1(ii) in respect of any one claim or series of claims one claim or series of claims arising out of one event.... arising out of one event Rs.50,000.

28. The Schedule in the Standard Form 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."

29. The Schedule in the present case (Mark „A‟) contains an

identical "Important Notice".

30. The contention of Mr. V.P. Chaudhary, the learned senior

counsel for the Insurance Company is that a bare glance at the

„Schedule‟ to the insurance policy (Mark „A‟) would suffice to show

that the liability of the Insurance Company under the insurance policy

is a limited one. Mr. Chaudhary submitted that the alleged offending

tempo was a goods carrying vehicle, which was insured with the

respondent No.2-Insurance Company under a Commercial Vehicles

Policy (Comprehensive). Its licensed carrying capacity was two tons.

The insured estimated value of the vehicle was ` 72,000/-. The basic

premium charged as reflected in the Schedule was ` 496/- and in

addition thereto, as per the tariff, half percent of the insured estimated

value, i.e., ` 360/- was also charged. A sum of ` 180/- was charged

for covering the liability towards strike and riot and ` 40/- was

charged for legal liability of driver and cleaner. A ten percent special

discount was given and the net premium paid by the insured thus

worked out to ` 968/-. No additional premium was charged to cover

extra benefits or wider liability than the liability provided in the

Motor Vehicles Act. The learned senior counsel for the respondent

No.2 submitted that in order to make the liability of the Insurance

Company unlimited for personal injury to a third party, an additional

premium was required to be paid by the insured, which, as per the

India Motor Tariff, was at least ` 39/-. Since such additional amount

was not paid, the liability of the Insurance Company was statutory in

nature and as circumscribed by Section 95 of the Motor Vehicles Act,

1939, limited to ` 50,000/- only.

31. The learned senior counsel for the Insurance Company relied

upon a large number of decisions in support of his contention that in

order to fasten on the Insurance Company unlimited liability, it must

be shown that extra premium was charged by the Insurance Company

to cover a liability wider than that prescribed under the Motor

Vehicles Act, 1939.

32. The first and foremost decision relied upon by the learned

counsel for the Insurance Company is the judgment of the Supreme

Court in the case of Jugal Kishore (supra), paras 6 and 7 whereof are

apposite and read as under:

"6. We have accordingly perused the photostat copy of the policy to ascertain whether risk for any amount higher than the amount of Rs. 20,000/-contemplated by clause

(b) aforesaid was covered. Our attention was invited by learned counsel for the respondents to the circumstance that at the right hand corner on the top of page 1 of the policy the words "COMMERCIAL VEHICLE COMPREHENSIVE" were printed. On this basis and on the basis that the premium paid was higher than the premium of an "Act Only" policy it was urged by the learned counsel for the respondents that the liability of the appellant was unlimited and not confined to Rs. 20,000/- only. We find it difficult to accept this submission. 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. In case, however, it is got comprehensively insured a higher premium than for an "Act Only" policy is payable depending on the estimated value of the vehicle. Such insurance entitles the owner to claim reimbursement of the entire amount of loss or damage suffered up to the estimated value of the vehicle calculated according to the rules

and regulations framed in this behalf. Comprehensive insurance of the vehicle and payment of higher premium on this score, however, do not mean that the limit of the liability with regard to third party risk becomes unlimited or higher than the statutory liability fixed under sub-section (2) of section 95 of the Act. For this purpose a specific agreement has to be arrived at between the owner and the insurance company and separate premium has to be paid on the amount of liability undertaken by the insurance company in this behalf. Likewise, if risk of any other nature for instance, with regard to the driver or passengers etc. in excess of statutory liability, if any, is sought to be covered it has to be clearly specified in the policy and separate premium paid therefor. This is the requirement of the tariff Regulations framed for the purpose. Coming to the photostat copy of the policy in the instant case it would be seen that Section II thereof deals with liability to third parties. Sub- section (1) minus the proviso thereto reads as hereunder:

"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 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."

......................................................

7. A perusal of the policy, therefore, indicates that the liability undertaken with regard to the death or bodily injury to any person caused by or arising out of the use (including the loading and or unloading) of the motor vehicle falling under section II(1)(i) has been confined to "such amount as is necessary to meet the requirements of the Motor Vehicles Act, 1939." This liability, as is apparent from clause (b) of sub-section (2) of section 95 of the Act, was at the relevant time Rs. 20,000/- only. The details of the premium also indicate that no additional premium with regard to a case falling under section II(1)(i) was paid by the owner of the vehicle to the insurance company. It is only the vehicle which was comprehensively insured, the insured's estimate of value including accessories (l.E.V.) thereof having been shown as Rs. 40,000/-. In this view of the matter the submission made by learned Counsel for the respondents that the appellant had in the instant case undertaken an unlimited liability does not obviously have any substance. The liability under the policy in the instant case was the same as the statutory liability contemplated by clause (b) of sub-section (2) of Section 95 of the Act, namely, Rs. 20,000/-. An award against the appellant could not, therefore, have been made in excess of the said statutory liability."

33. The learned counsel for the Insurance Company also placed

reliance on the Constitution Bench decision in New India Assurance

Co. Ltd. vs. C.M. Jaya and Others, 2002 ACJ 271 (SC). The

question which arose for consideration in C.M. Jaya's case (supra)

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) 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, 1995 ACJ 470 (SC) and (2) Amrit Lal Sood v. Kaushalya Devi Thapar, 1998 ACJ 531 (SC)."

34. Analyzing the aforesaid decisions as well as several other

decisions, the Supreme Court held as follows:

"5. 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. This view

has been consistently taken in the other decisions of this Court.

6. In Shanti Bai's case, 1995 ACJ 470 (SC), a Bench of three learned Judges of this court, following the case of Jugal Kishore, 1988 ACJ 270 (SC), 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 the 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.

7. On a careful reading and analysis of the decision in Amrit Lal Sood, 1998 ACJ 531 (SC), it is clear that the view taken by the Court is no different. In this decision also, the case of Jugal Kishore, 1988 ACJ 270 (SC), 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. Hence, the Court after noticing the relevant clauses in the policy, on facts found that under section II (1)(a) of the policy, the insurer has agreed to indemnify the insured against all sums which the insured shall become legally liable to pay in respect of death of or bodily injury to „any person‟. The expression „any person‟ would undoubtedly include an occupant of the car who is gratuitously travelling in it. Further, referring to the case of Pushpabai Purshottam Udeshi, 1977 ACJ 343 (SC), it was observed that the said decision was based upon the relevant clause in the insurance policy in that case which restricted the legal liability of the insurer to the statutory requirement under section 95 of the Act. As such, that decision had no bearing on Amrit Lal Sood's case (supra) as the terms of the policy were wide enough to cover a gratuitous occupant of the vehicle. Thus, it is clear that the specific clause in the policy being wider, covering higher risk, made all the difference in Amrit Lal Sood's case as to unlimited or higher liability. The Court decided that case in the light of the specific clause contained in the policy. The said decision cannot be read as laying down that even though the liability of the insurance company is limited to the statutory requirement, an unlimited or higher liability can be imposed on it. The liability could be statutory or contractual. A statutory liability cannot be more than what is required under the statute itself. However, there is nothing in section 95 of the Act prohibiting the parties from contracting to create unlimited

or higher liability to cover wider risk. In such an event, the insurer is bound by the terms of the contract as specified in the policy in regard to unlimited or higher liability as 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.

8. In the light of what is stated above, we do not find any conflict on the question raised in the order of reference between the decisions of two benches of three learned Judges in Shanti Bai, 1995 ACJ 470 (SC) and Amrit Lal Sood, 1998 ACJ 531 (SC) aforementioned and, on the other hand, there is consistency on the point that in 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. In Amrit Lal Sood's case, the decision in Shanti Bai is not noticed. However, both these decisions refer to the case of Jugal Kishore and no contrary view is expressed.

9. In New India Assurance Co. Ltd. v. Ram Lal, 1988 ACJ 754 (SC), looking to the insurance policy that the appellant had undertaken to indemnify the insured to the extent of Rs. 50,000/- only, it was held that the High Court was in error in holding that the appellant was liable to pay the entire amount of compensation which was more than Rs.

50,000/- and that the liability of the appellant was limited to Rs. 50,000/-.

10. In a recent judgment in National Insurance Co. Ltd. v. Nathilal, 1999 ACJ 657 (SC), this Court, following the case of Jugal Kishore, 1988 ACJ 270 (SC), aforementioned, held that in view of the fact that no extra premium was paid towards unlimited liability as could be seen from the policy produced, the liability of the insurance company was limited to Rs. 15,000/-. The court set aside the award of the Tribunal and affirmed by the High Court.

11. In the premise, we hold that the view expressed by the bench of three learned Judges in the case of Shanti Bai, 1995 ACJ 470 (SC), is correct and answer the question set out in the order of reference in the beginning as under:-

In the case of 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."

35. On the facts of the case before the Supreme Court and from the

admitted copy of the insurance policy produced before it, the

Supreme Court concluded:

"It is also not the case that any additional or higher premium was paid to cover unlimited or higher liability than the statutory liability fixed as found in the term of the policy extracted

above. In the light of the law stated above, it necessarily follows that the liability of the appellant is limited to Rs. 50,000/-, as was rightly held by the Tribunal. The High Court committed an error in taking the contrary view that the liability of the appellant was unlimited merely on the ground that the insured had taken a comprehensive policy. In Shanti Bai's case, 1995 ACJ 470 (SC), 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 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's case, 1998 ACJ 531 (SC), as well though no reference is made to this case. As already stated above, in Amrit Lal Sood's 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.

13. In the circumstances, we hold that the liability of the appellant insurance company is limited to Rs. 50,000/-, as held by the Tribunal."

36. It deserves to be mentioned at this juncture that a Division

Bench of the Delhi High Court in the case of A.C. Gupta and

Another vs. New India Assurance Co. ltd. and Others, 2000 VII AD

(Delhi) 85, prior to the decision in C.M. Jaya's case, and, relying

upon the decisions of the Supreme Court in Pushpabai Purushottam

Udeshi and Others vs. M/s. Ranjit Ginning and Pressing Co. (P)

Ltd. and Another, (1977) 2 SCC 745, Amrit Lal Sood and Other vs.

Kaushalya Devi Thakur and Other, IV (1998) SLT 522 and

National Insurance Co. Ltd. vs. Nathilal and Others, (1999) SCC

552, held that where no extra or special premium was paid creating

unlimited third party liability of the insurer, the statutory provisions

of the Act limiting the liability of the insurer to the amount indicated

in the statutory provision will prevail.

37. In Veena Pruthi and Others vs. Oriental Fire & Genl.

Insurance Co. Ltd., LPA No.30/1989 decided on 25th November,

2009, a Division Bench of this Court, affirming the judgment of the

learned Single Judge, held that where the premium paid is the basic

premium, the conclusion must follow that the liability of the

Insurance Company has to be restricted to the statutory liability of `

50,000/-, unless additional premium as per the table set out in the

tariff is paid.

38. From the above, I have no hesitation in arriving at the

conclusion that in order to fasten on the Insurance Company

unlimited liability it must be shown that extra premium was charged

by the Insurance Company to cover a liability wider than that

prescribed by the Motor Vehicles Act, 1939. This, the insured, in the

present case, has singularly failed to establish. The inevitable

conclusion, therefore, is that the liability of the Insurance Company

must be held to be a limited one in terms of Section 95 of the Act of

1939.

39. The ancillary question which arises for consideration is the

question as to whether or not the Insurance Company, where the

liability of the Insurance Company is limited under the policy, is

liable to pay as compensation anything more than the amount of its

restricted liability. The learned senior counsel for the Insurance

Company in this context took me through a large number of

judgments, including the following:

(i) Pushpabai Purushottam Udeshi and Others vs. M/s.

Ranjit Ginning and Pressing Co. (P) Ltd. and Another,

AIR 1977 SC 1735.

(ii) British India General Insurance Company Limited vs.

Maya Banerjee and Others, 1986 ACJ 946.

(iii) National Insurance Company Limited vs. Jugal

Kishore and Others, 1988 ACJ 270.

(iv) New India Assurance Company Limited vs. Shanti Bai

and Others, 1995 ACJ 470.

(v) National Insurance Company Limited vs. Nathi Lal

and Others, 1999 ACJ 657.

(vi) New India Assurance Company Ltd. vs. C.M. Jaya and

Others, 2002 ACJ 271.

(vii) The Oriental Insurance Company Limited vs.

Shakuntla Garg and Others, Civil Appeal No.104/2003

(arising out of SLP(C) No.691/2002) decided by a Bench

of 2 Judges of the Hon‟ble Supreme Court on

10.01.2003.

(viii) Oriental Insurance Co. Ltd. vs. Kunhirama Poduval

and Others, 2002 ACJ 1492.

(ix) National Insurance Co. Ltd. vs. Maya Rani Roy and

Others, 2003 ACJ 1028.

(x) National Insurance Co. Ltd. vs. Keshav Bahadur and

Others, 2004 ACJ 648.

(xi) New India Assurance Co. Ltd. vs. Shashikalabai and

Others, 2006 ACJ 194.

(xii) Oriental Insurance Co. Ltd. vs. Raj Kumari & Ors.,

2007 (13) SCALE 113.

40. The contention of the learned counsel for the Insurance

Company was that the common thread running through all the

aforesaid decisions is that the insurer cannot be held liable to pay the

entire amount of compensation where its liability under the policy is a

statutory one referable to Section 95 of the Motor Vehicles Act, 1939.

He argued that where there is no special contract between the

Insurance Company and the insured to cover unlimited liability vis-a-

vis injury to third parties, the mere fact that the insurance policy is a

comprehensive policy (or for that matter a public risk policy) will not

help the claimants in any manner. The limit of liability with regard to

third party risk does not automatically become unlimited or higher

than the statutory liability and the insurance company cannot be

called upon to pay the entire compensation.

41. The learned counsel for the appellants, on the other hand,

heavily relied upon Section 96 of the Motor Vehicles Act read with

the avoidance clause contained in the insurance policy as well as the

„Important Notice‟ at the end of the Schedule to the policy, to

contend that even assuming the liability of the Insurance Company

was a limited one, it was nevertheless called upon to pay the entire

amount of compensation to the appellants, which it may subsequently

recover from the insured. Reliance was placed by the learned counsel

for the appellants upon the judgments of the Supreme Court in the

following cases:

(i) New Asiatic Insurance Co. Ltd. vs. Pessumal

Dhanamal Aswani and Others, 1958-65 ACJ 559 (SC).

(ii) Amrit Lal Sood v. Kaushalya Devi Thapar, 1998 ACJ

531 (SC).

(iii) Oriental Insurance Co. Ltd. vs. Cheruvakkara

Nafeessu and Others, 2001 ACJ 1 (SC).

(iv) New India Assurance Co. Ltd. vs. Vimal Devi and Ors.,

Civil Appeal No.1578-79 of 2004 decided on

05.10.2010.

42. In the case of New Asiatic Insurance Co. Ltd. (supra), the

Supreme Court, after referring to the avoidance clause and the

„Important Notice‟ in the Schedule to the policy, which were both in

identical terms as in the present case, 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 insured provides for

the Insurance Company undertaking such a liability to third parties.

The clause such as the avoidance clause is effective only between the

insured and the Insurance Company. The relevant portion of the

judgment of the Supreme Court is as follows: (ACJ, P.565, paras 21

and 22)

"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 realising damages for the injuries suffered, but vis-a-vis the insured, the company does not undertake that liability or undertake 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 the 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-a-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 persons 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."

43. In Amrit Lal Sood's case (supra), the Supreme Court, placing

reliance upon the case of New Asiatic Insurance Co. Ltd. (supra),

reiterated 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 observed thus:

"14. 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 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 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."

44. In Cheruvakkara Nafeessu's case (supra), again the question

before the Supreme Court was:

"What is the extent of liability of an insurance company towards the third party as per section 95(2)(b) of Motor Vehicles Act, 1939 (hereinafter called „the Act‟), and what are its rights in case of payment of an amount in excess of the limits of the liability under the insurance policy vis-a-vis the insured?"

45. On a consideration of the avoidance clause of the policy and

Section II of the policy dealing with "Liability to Third Party", the

Supreme Court observed: (ACJ, P.3)

"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 company is Rs.50,000/- but the company is liable to indemnify the insured against all sums including claimant‟s costs and expenses which 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."

46. In a recent decision of the Supreme Court in New India

Assurance Co. Ltd. vs. Vimal Devi and Ors. (supra), where the

Insurance Company filed an appeal before the Supreme Court

aggrieved by the High Court order directing the Insurance Company

to pay the entire compensation amount of ` 4,90,000/- along with

interest to the claimants and then to recover the amount beyond its

liability of ` 50,000/- from the owner of the vehicle involved in the

case, the Supreme Court dealt with the matter as follows:

"3. Mr. K.L. Nandwani, learned Counsel appearing for the insurance company, submitted that the liability of the Appellant being limited to Rs. 50,000/-, the High Court was in error in making such a direction.

In respect of the submission, he relied upon a Constitution Bench decision of this Court in New India Assurance Co. Ltd. v. C.M. Jaya and Ors. MANU/SC/0031/2002 : (2002) 2 SCC 278.

4. Mr. M.R. Calla, learned senior counsel appearing for the Respondent, in his reply submitted that the reliance placed on the Constitution Bench decision was misplaced and the Appellant overlooked the finer point of distinction made in the decision in C.M. Jaya. He submitted that in the case in hand, the High Court had noticed the Avoidance Clause in the policy which was in the following terms:

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 Vehicle 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 the said provisions.

5. The Avoidance Clause came up for consideration before a three Judges Bench of this Court in Amrit Lal Sood and Anr. v. Kaushalya Devi Thapar and Ors. (1998) 3 SCC 744. In its decision in that case this Court observed:

13. In the policy in the present case also, there is a clause under the heading:

AVOIDANCE OF CERTAIN TERMS AND RIGHT OF RECOVERY" which reads thus:

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.

14. 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.

15. In the result, we hold that the insurance company is also liable to meet the claim of the claimant and satisfy the award passed by the tribunal and modified by the High Court. The judgment of the High Court insofar as it exonerates the insurance company (5th Respondent herein) from the liability, is set aside. The award passed by the Division Bench of the High Court can be enforced against the 5th Respondent also. The appeal is allowed to the extent indicated above. The parties will bear their respective costs.

6. Mr. Calla further submitted that in C.M. Jaya and Ors. a Constitution Bench of this Court indeed held

that in a policy for limited liability it was not open to the Court to direct the insurance company to make any payment beyond the amount of the limited liability but it took note of the decision in Amrit Lal Sood with approval. He referred to paragraphs 10 and 16 of the judgment in C.M. Jaya where the decision in Amrit Lal Sood is noticed with approval.

7. The Avoidance Clause in the policy in this case makes all the difference and the direction of the High Court to the Appellant, insurance company to make payment of the full amount of compensation to the claimants and to recover its dues from the owner of the vehicle is directly in accordance with that Clause. In our view, the submission of Mr. Calla is well founded. The Appellant in this case can derive no benefit from the decision in C.M. Jaya.

8. We find no merit in these appeals. These are dismissed."

47. To counter the contention of the learned counsel for the

appellants with regard to the avoidance clause in the policy, the

learned senior counsel for the Insurance Company, relied upon the

decision of the Supreme Court in the case of Oriental Insurance Co.

Ltd. vs. Raj Kumari & Ors., 2007 (13) SCALE 113, wherein it was

held by the Supreme Court that the liability of the Insurance

Company would be limited to the quantum which was to be

indemnified in terms of the policy. The Supreme Court in the said

case then referred to the following observations made in Oriental

Insurance Company Limited vs. Shakuntla Garg and Others, Civil

Appeal No.104/2003 disposed of on 10.01.2003:

"Learned counsel for the appellant at this stage expressed an apprehension that by virtue of the terms of the Award, the appellant may be required to pay the entire amount and recover it from the owner. In the light of the modification of the impugned Award, such question does not arise."

It then went on to observe as under:

"It is true that in certain cases this Court has, after looking into the fact situation, directed the insurance company to make payment with liberty to recover the amount in excess of the liability from the insured. Those decisions were given on the facts situation of the cases concerned."

48. Strong reliance was placed by the learned senior counsel for the

Insurance Company on the aforesaid observations in the

aforementioned case to urge that decisions relied upon by the

appellants‟ counsel were peculiar to the fact-situations of the cases in

which the said decisions were rendered.

49. There is one other submission of the learned senior counsel for

the Insurance Company which needs to be mentioned. It is his

contention that in order that any provision of Section 96 may be

invoked by the insurer for his benefit, the sine qua non is that it

relates to the liability which is created by Section 95 of the Act. I am

afraid it is not possible for me to agree with this interpretation sought

to be placed upon the provisions of Section 96 of the Act, which is

directly contrary to the law laid down by the Supreme Court in the

case of Vimla Devi (supra).

50. On a conspectus of the law laid down by the Supreme Court

and on perusal of the Schedule to the insurance policy (Mark „A‟) and

the Standard terms of the India Motor Tariff relied upon by both the