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New India Assurance Company vs Smt. Veena Upadhya And Ors. on 20 November, 2003

Karnataka High Court
New India Assurance Company vs Smt. Veena Upadhya And Ors. on 20 November, 2003
Equivalent citations: 2005 ACJ 183, ILR 2004 KAR 2036
Author: T S Thakur
Bench: T S Thakur, S A Nazeer


JUDGMENT

Tirath S. Thakur, J.

1. This appeal arises out of the Judgment and award made by the Additional Civil Judge (Senior Division) and Motor Accident Claims Tribunal, Udupi, whereby M.V.C. No. 579/88 has been allowed in part and a sum of Rs. 9,55,340/- with interest at the rate of 12% per annum awarded as compensation for the death of Sri. Narayan Upadhya in a road accident. The appellant-Insurance Company who has been held liable to pay the said amount in full has appealed to this Court for reduction of its liability on the ground that the said liability is in terms of the Policy issued in favour of the owner of the offending vehicle limited to Rs. 1,50,000/- only.

2. Deceased Narayan Upadhya was working as an Assistant Manager of the Syndicate Bank and was posted at Uthara Hobli Branch of the said Bank. On 28th of April 1988, he was traveling on a two wheeler, with his wife and their minor child on the pillion. When the deceased reached a place near Kumargodu Village, a Van bearing registration No. CNG 9564 being driven at a high speed in a rash and negligent manner came from behind and dashed against the Scooter. As a result of the impact, the Scooter as also the riders fell down causing grievous injuries to the deceased Narayan Upadhya who succumbed to the same on the spot. The minor child, who too was injured, was removed to the Hospital for treatment. In due course two claim petitions came to be filed for payment of compensation. In M.V.C. No. 579/1988 filed by the widow and the minor daughter of the deceased, compensation was claimed for the death of Sri. Upadhya while in M.V.C. No. 581/1988, the mother of the injured minor-Sripad claimed compensation for the injuries sustained by the minor. The case of the claimants in both the claim petitions was that the accident had occurred due entirely to the rash and negligent driving of the van by its driver entitling the claimants to the payment of compensation. These claims were opposed by the Insurance Company with whom the Van was injured. The insured of the Vehicle, however, remained exparte.

3. On the basis of the pleadings before it, the tribunal framed five issues and answered the same in favour of the claimants. It recorded a finding that the accident in question had indeed taken place due to the rash and negligent driving of the driver of the offending Van. On the question of quantum of compensation payable to the claimants, the Tribunal came to the conclusion that the claimants in M.V.C. No. 579/ 1988 were entitled to a sum of Rs. 9,55,340/- towards compensation with interest at the rate of 12% per annum on the said amount. In the connected M.V.C. No. 581/1988, however, the Tribunal awarded a sum of Rs. 5,000/- only as compensation with interest at a similar rate. The Tribunal also came to the conclusion that the entire amount awarded by it is recoverable from the Insurance Company with whom the offending vehicle was insured. It repelled the contention urged on behalf of the Insurance Company that its liability was in terms of the Policy issued to the insured and the provisions of Section 95(2) of the Motor Vehicles Act, 1939, limited to a sum of Rs. 1,50,000/-. The Tribunal held that since the Insurance Company had failed to produce a copy of the Insurance Policy, the Insurance Company was liable to pay the entire amount of compensation to the claimants. The Insurance Company is aggrieved of the said finding of the Tribunal and has assailed the same in the present appeal to the limited extent the Tribunal has shifted the entire liability to it.

4. Appearing for the appellant Mr. R. Jaiprakash submitted that the Tribunal had fallen in error in holding that the liability of the Insurance Company was unlimited and in fastening the entire liability upon it. He drew our attention to the terms of the Insurance Policy, produced in the course of these proceedings to argue that the limit of the liability of the Insurance Company under the same was confined to such amount as was necessary to meet the requirements of Motor Vehicles Act, 1939, in so far as the third party risks concerned. He submitted that the Policy did not indicate payment of any additional premium for an increase in the limit of the company’s liability towards third parties. In the absence of any such larger cover in favour of the owner of the offending vehicle, the liability of the Insurance Company was, according to Mr. Jaiprakash, limited to what was essential under Section 95 (2) (a) of the Motor Vehicles Act, 1939. In support, Mr. Jaiprakash placed reliance upon the decision of the Supreme Court in NATIONAL INSURANCE COMPANY LTD., v. JUGAL KISHORE AND ORS., 1988 ACJ 270; NEW INDIA ASSURANCE CO., LTD., v. SHANTHI BAI, ; AMRITLAL SOOD v. KAUSHALYA DEVI THAPAR, and Constitution Bench decision of the Supreme Court in NEW INDIA ASSURANCE COMPANY LTD., v. C.M. JAYA AND ORS., He also drew our attention to a Division Bench decision of the Delhi High Court in A.C. GUPTA AND ANR. v. NEW INDIA ASSURANCE CO. LTD., AND ORS.,

5. On behalf of the respondents-claimants, Mr. S.G. Bhagavan on the other hand contended that the finding recorded by the Tribunal touching upon the extent of the liability could not be faulted on the reasons given by the Tribunal. He contended that the Insurance Company having failed to produce the Insurance Policy before the Tribunal, or to lead any evidence to prove the same in accordance with law, it was not open to it to question its liability or contend that the same was limited to sum of Rs. 1,50,000/- only. He urged that the policy now produced by the Insurance Company was a commercial vehicle’s comprehensive policy, which must necessarily imply that the Insurance Company’s liability was unlimited as the coverage of such liability and risk was comprehensive. He in particular laid emphasis on the words “company will indemnify the insured against all sums including claims, costs” appearing under Section II of the Policy. He urged that the expression “all sums” must necessarily mean that the liability of the Insurance Company extended to all the sums awarded by the Tribunal. He also drew our attention to the expression “comprehensive premium (A+B)” appearing in the Schedule of premium on the printed Policy produced before us and argued that the liability of the Insurance Company was in the light of the nature of the policy and the expressions used therein unlimited as held by the Tribunal.

6. The genesis of the accident or the quantum of compensation determined by the Tribunal is not under challenge before us. We are not, therefore, called upon to address ourselves to those aspects in the present appeal. The only question that was raised and that falls for consideration is whether the liability of the Insurance Company is in the light of the nature of the Policy and the provisions of the Motor Vehicles Act, 1939 unlimited so as to justify the recovery of the awarded amount from the company in its entirety. It is true that before the Tribunal, the Insurance Company had not either produced the Policy covering the offending vehicle or adduced any other evidence in that regard. The non-production of the Policy cover was, therefore, made a basis by the Tribunal for holding that the liability of the Insurance Company was unlimited. We do not have proceed on the basis of any inference arising from the non-production of the Policy. That is because the Insurance Company has during the pendency of this appeal produced before us the Original Insurance Policy pursuant to an order passed on 31.07.2003 granting permission to it to do so. The genuineness of the Policy document produced pursuant to the said order is not challenged by the respondents. In the circumstances, therefore, we have the advantage of determining the question of liability of Insurance Company by reference to the contents of the said document, which opportunity the Tribunal did not unfortunately have.

7. A reference to the policy of Insurance would show that it specifically stipulates the limits of the liability of the Company in the following words:

“Limits of liability:

(a) Limit of the amount of the Company’s liability under Section II-(1) (i) in respect of any one accident.

Such amount as is necessary to meet the requirements of the Motor Vehicles Act, 1939, limits of the amount of the Company’s liability under Section II-(1) (ii) in respect of any one claim or series of claims arising out of one event: Rs. 1,50,000/-.”

8. Section II (1) (i) and (ii) of the Policy read as under:

“SECTION II – LIABILITY TO THIRD PARTIES.

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.”

9. A conjoint reading of stipulations extracted above, would leave no more of doubt that in so far as liability arising out of death or bodily injury to any person caused by or arising out of the use of the Motor Vehicle is concerned, the same is limited to such amount as is necessary to meet the requirements of the Motor Vehicles Act, 1939. In the case of liability arising out of damage to property caused to any of the motor vehicle concerned, the limit is to Rs. 1,50,000/- only.

10. Section 95(2) (a) of the Motor Vehicles Act, 1939, as amended by Act 1947 of 1982, with effect from 01.10.1982, read as follows:

“95. (1) x x x

(2) Subject to the proviso to Sub-section (1), a policy of insurance shall cover any liability incurred in respect of any one accident up to the following limits, namely:-

(a) Where the vehicle is a goods vehicle, a limit of one lakh fifty thousand rupees in all, including the liabilities, if any, arising under the workmen’s Compensation Act, 1923, in respect of the death of, or bodily injury to employees (other than the driver), not exceeding six in number, being carried in the vehicle;

(b) x x x”

11. Placed in Juxta position, the liability of the Insurance Company under an Act Policy was at the relevant time limited to a sum of Rs. 1,50,000/- only. That does not, however, mean that the insured – owner of the vehicle could not have taken a larger cover by payment of an additional premium so as to extend the liability of the Insurance beyond the amount fixed under the statute. The decision of the Supreme Court in PUSHPABAI PARSHOTTAM UDESHI AND ORS. v. RANJIT GINNING AND PRESSING CO. PVT. LTD., declares that the insured can take a cover larger than what is prescribed by the Act to be the bare minimum. To the same effect is the latest decision of the Supreme Court in AMRITLAL SOOD v. KAUSHALYA DEVI THAPAR. The real question, therefore, is whether the insured had in the instant case taken a cover larger than what was stipulated by Section 95(2) (a) of the Motor Vehicles Act as the bare minimum. The answer to that question would depend upon the terms of the policy and the payment of any additional premium for extension of the Cover beyond the statutory minimum. A perusal of the policy would, however, show that although the schedule of premium provides for payment of additional premium for the increased third party limits, no such additional premium was paid in the instant case. The insured had paid a net amount of Rs. 1,302/- out of which Rs. 1,114/- was paid in regard to the liability arising out of, damage to property while a sum of Rs. 256/ – was paid as premium for third party/public risk and for the risk of a cleaner in terms of endorsement IMT-16. No payment towards an extend coverage of liability for third party risks has been made, nor any additional endorsement issued in that regard. In that view, therefore, it is reasonable to hold that the liability of the Insurance Company was limited to the one arising under Section 95(2) (a) of the Motor Vehicles Act, 1939, alone, no matter the Policy was a comprehensive one. Considerable support for that view is available from the decision of the Supreme Court in NATIONAL INSURANCE COMPANY v. JUGAL KISHORE. That was also a case where the vehicle involved in the accident was covered by comprehensive Insurance policy. The question that arose for consideration was whether the comprehensive insurance of the vehicle extended that liability of the company arising from third party risk beyond what was statutorily provided under Section 95(2)(a) of the Motor Vehicles Act, 1939. Answering the question in the negative, the Court held that the comprehensive insurance of the vehicle and payment of a higher premium on that score did not mean that liability of the Insurance Company in respect of third party risks became unlimited or higher than the statutory liability fixed under Section 95(2) (a) of the Motor Vehicles Act, 1939. The Court further held that specific agreement 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. The Court observed:

“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 the 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…”

(Emphasis supplied by me.)

12. The decision of the Supreme Court in NEW INDIA ASSURANCE COMPANY LTD., v. SHANTHI BAI AND ORS., is also to the same effect. In that case also, the Court clearly held that a comprehensive Policy issued on the basis of the earlier value of the vehicle does not automatically result in covering the liability with regard third party risks for an amount higher than the statutory liability. The decision of the Supreme Court in AMRITLAL SOOD v. KAUSHALYA DEVI THAPAR lays down a similar proposition. As a matter of fact, the decisions in Shanthi Bai and Amritlal were perceived by the Supreme Court to be in conflict with each other at one stage. The matter was, therefore, referred to a Constitution Bench comprising five Judges of the Court in NEW INDIA ASSURANCE COMPANY LTD., v. C.M. JAVA AND ORS. The Court, eventually came to the conclusion that there was no conflict between the two decisions particularly when support for the view taken therein was borrowed from the earlier decision of the Supreme Court in NATIONAL INSURANCE COMPANY v. JUGAL KISHOR’s cited supra. The existence of a comprehensive policy was in the circumstances held to be insufficient by the Constitution Bench to extend the limit of the liability of the Company without the payment of an additional premium and the issue of a specific endorsement extending such liability.

13. The Division Bench decision of the Delhi High Court in A.C. GUPTA AND ANR. v. NEW INDIA ASSURANCE CO. LTD., AND ORS. also dealt with a similar situation. In that case also, the policy that fell for consideration was a comprehensive policy. The question was whether the liability of the Insurance Company stood extended beyond the statutory limit fixed under Section 95(2) (a) of the Motor Vehicles Act, 1939. Answering the question in the negative, the Court held that the words “such amount as is necessary to meet the requirements of the Motor Vehicles Act, 1939” appearing in the Policy showed that the extent of liability of the Insurance Company was limited to the one indicated in the statutory provision which at the relevant time was Rs. 1,50,000/-

14. The legal position is, therefore, fairly well-settled in as much as in the absence of any evidence to show that a wider cover had been obtained by the owner of the offending vehicle the liability of the Insurance Company arising from an Act Policy would remain restricted to the bare minimum prescribed by Section 95(2) (a) of the Motor Vehicles Act, 1939. The fact that the Policy purports to be a comprehensive Policy is inconsequential for the higher premium paid on any such policy depending upon the value of the vehicle does not extend the liability of the insurance Company beyond the statutory limit stipulated under Section 95(2) (a) of the Motor Vehicles Act, 1939. The crucial question in any such situation always is whether the insured had taken a larger cover. If the answer is in the affirmative, the Policy will go beyond the minimum prescribed by the state. If the answer be in negative, the Policy will be confined to the amount stipulated in the provision.

15. In the instant case, as noticed earlier, the answer to the question whether any additional premium was paid for a wider cover of the liability is in the negative. There is no payment for increased third party limits made under the Policy. The result, therefore, is that the liability of the Insurance Company is limited to Rs. 1,50,000/- stipulated under Section 95(2) (a) of the Motor Vehicles Act, 1939, consequently the Tribunal holding the liability to be unlimited and directing the Insurance Company to pay the entire amount awarded in favour of the claimants is erroneous and has to be corrected.

16. This appeal accordingly succeeds and is allowed. The award made by the Motor Accident Claims Tribunal is modified to the extent that out of the amount held payable to the claimants in M.V.C. No. 579/88, the Insurance Company shall be liable to pay a sum of Rs. 1,50,000/- only. The balance of the amount shall be recoverable by the claimants from respondent No. 3 owner of the vehicle. Parties are to bear their own costs.

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