http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 6  

PETITIONER: AMRIT LAL SOOD & ANR.

       Vs.

RESPONDENT: SMT. KAUSHALYA DEVI THAPAR & ORS.

DATE OF JUDGMENT:       17/03/1998

BENCH: K.T.THOMAS, M. SRINIVASAN

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T SRINIVASAN, J.      On August  25, 1970  the fiat  car owned  by the second appellant collided  with a  goods  carrier  on  Shimla-Kalka National Highway  near Kandaghat  Post office.  The car  was being driven by the first appellant, a brother of the Second appellant. The  car was  insured with  the fifth respondent. Kishan Sarup  Thapar, an  advocate  of  Chandigarh  who  was travelling in  the car  got injured and was hospitalised for some  time.   He  approached   the  Motor  Accidents  claims Tribunal, Solan  and Srimur  Districts claiming compensation of Rs.  1,25,000/-. The  owners  and  drivers  of  both  the vehicles as  well as the insurers were impleaded as parties. The  Tribunal  found  that  the  accident  occurred  due  to negligence of  the driver of the car and passed an award for Rs. 15,800/- against the appellants and the fifth respondent herein. The  claimant filed  an appeal  in  the  High  Court claiming  more   compensation   while   the   insurer   (5th respondent), filed  an appeal  disputing  its  liability  to satisfy the  claim. The  claimant’s appeal  was allowed by a learned judge  in part  and the compensation was enhanced to Rs. 20,800/-. The learned judge held that the claimant was a gratuitous passenger  travelling in  the car and the insurer was therefore not liable. 2.   That  judgment  was  assailed  in  two  Letters  Patent Appeals, one  by the  legal representatives  of the Claimant and another  by   the driver of the vehicle who is the first appellant  herein.  A  Division  Bench  of  the  High  Court dismissed the  appeal filed  by the 1st appellant confirming the view  of the single judge that the insurer is not liable as the  claimant was only a passenger in the vehicle. In the other appeal,  the Bench  enhanced the  compensation to  Rs. 56,600/-. The driver and the owner of the car have preferred these appeals on special leave. 3.   The question  to be  decided is whether the insurer, is liable to  satisfy the  claim for  compensation made  by the person travelling  gratuitously  in  the  car.  the  factual findings are not in dispute before us but for the contention of the appellants that the amount of compensation awarded by the Division  Bench is  excessive. We  have no difficulty in

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 6  

repelling that contention as we find the materials on record to be  sufficient  to  support  the  award  of  enhanced  by sufficient to support the award of enhanced compensation. 4.   The liability  of the  insurer in  this case depends on the terms  of the  contract  between  the  insured  and  the insurer as  evident from the policy. Section 94 of the Motor Vehicles Act,  1936 compels  the owner of a motor vehicle to insure the  vehicle in  compliance with  the requirements of Chapter Viii of the Act. Section 95 of the Act provides that a policy  of insurance  must be one which insures the person against any  liability which  may  be  incurred  by  him  in respect of death or bodily injury to any person or damage to any property  of third party caused by or arising out of the use of  the vehicle  in a public place. The section does not however require a policy to cover the risk to passengers who are not  carried for hire or reward. The statutory insurance does not  cover injury  suffered by occupants of the vehicle who are  not carried  for hire  or reward  and  the  insurer cannot be  held liable  under the  Act. But  that  does  not prevent  an   insurer  from  entering  into  a  contract  of insurance covering a risk wider than the minimum requirement of the  statute whereby  the risk  to gratuitous  passengers could also be covered. In such cases where the policy is not merely a  statutory policy,  the terms of the policy have to be considered to determine the liability of the insurer. 5. In  the present  case,  the  policy  is  admittedly  a  ’ comprehensive Policy’.  comprehensive  insurance’  has  been defined in  Black’s Law  Dictionary 5th edition as ’All risk insurance’ which in turn is defined as follows:-      " Type  of insurance  policy  which      ordinarily covers  every loss  that      may happen,  except  by  fraudulent      acts  of  the  insured.  Miller  v.      Boston Ins. Co. 218 A. 2d 275, 278,      420 Pa.  566. Type  of policy which      protects  against   all  risks  and      perils  except  those  specifically      enumerated." 6.   The relevant  clauses in the policy before us are found in ’SECTION - II LIABILITY TO THIRD PARTIES’. They are:-      "1. The  Company will indemnify the      Insured in  the event  of  accident      caused by or arising out of the use      of the  Motor Car  against all sums      including  claimant’s   costa   and      expenses which  the  Insured  shall      become legally  liable  to  pay  in      respect of      (a) death  of or  bodily injury  to      any person  but except so far as is      necessary to  meet the requirements      of Section 95 of the Motor Vehicles      Act, 1939, the Company shall not be      liable where  such death  or injury      arises out  of and in the course of      the employment  of such  person  by      the insured.      (b) damage  to property  other than      property belonging  to the  Insured      or held  in  trust  by  or  in  the      custody or control of the insured.      2.   The Company will pay all costs      and  expenses   incurred  with  its      written consent.      3.   In terms  of  and  subject  to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 6  

    the limitations  of  the  indemnity      which is  granted by this Section b      to the  insured  the  Company  will      indemnify and Driver who is driving      the Motor  Car on the insured order      or  with  his  permission  provided      that such Driver      (a) is not entitled indemnity under      any other Policy      (b) shall  as though  he  were  the      Insured  observe   fulfil  and   be      subject  to  the  terms  exceptions      conditions and  limitations of this      policy  in   so  far  as  they  can      apply." 7.   Under the  heading  General  Exceptions  the  company’s liability is  excluded inter alia in respect of any accident occurred whilst  the car  is being  used otherwise  than  in accordance with the limitations as to use or bring driven by any person  other than  a Driver.  The Limitations as to use set out in the policy are not relevant in this case as it is not the  case of  the insurer  that  there  is  a  violation thereof. The  term ’Driver’  is  expressly  defined  in  the policy as any of the following:      " (a) Any person,      (b) The  insured may  also drive  a      Motor car belonging to him  and not      hired to  him under a Hire Purchase      Agreement. Provided that the person      driving hold  is a licence to drive      the Motor  car or  has held  and is      not  disqualified  for  holding  or      obtaining such a licence". 8.   Thus under  Section 11  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 traveling in the car. The remaining par of  clause (a)  relates to  cases  of  death  or  injury arising out  of and  in the  course of  employment  of  such person by  the insured.  In such  cases the liability of the insurer  is  only  to  the  extent  necessary  to  meet  the requirements of  Section  95  of  the  Act.  In  so  far  as gratuitous passengers  are concerned  there is no limitation in the  policy as such. Hence under the terms of the policy, the insurer  is liable to satisfy the award passed in favour of the  claimant. We  are unable  to  agree  with  the  view expressed by the High Court in this case as the terms of the policy are unambiguous. 9.   Learned  counsel   of  the  appellants  has  drawn  our attention  to  the  following  judgments  in  which  similar clauses in  insurance policy  have  been  considered  and  a similar view has been expressed: (i) Madras  Motor and  General  Insurance  Co.  Ltd.  Versus Katanreddi Subbareddy and others 1975 A.C.J. 95, (ii) The  premier  Insurance  Co.  Ltd.  and  others  Versus Gambhirsing Galabsing and others AIR 1975 Gujarat 133, (iii) Prabhudayal  Agarwal versus  Saraswati Bai and another 1975 A.C.J.  355, We  approve of  the reasoning in the above judgments. 10.  The High  Court has  placed reliance on the judgment of this court in Pushpabai Purshottam Udeshi & Ors. Versus M/S. Ranjit Ginning  & Pressing  Co. (p)  Ltd. &  Anr.  (1977)  2 S.C.C. 745. That judgment was based upon the relevant clause

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 6  

in the  insurance policy  in that  case which restricted the legal liability  of the insurer to the statutory requirement under Section  95 of  Motor vehicles Act. That decision will have no  bearing in the present case in as much as the terms of the  policy here  are wide  enough to  cover a gratuitous occupant of the vehicle. 11.  Our attention  has also  been drawn  to the judgment of this court in National Insurance. Co. Ltd., New Delhi Versus Jugal Kishore  and others  AIR 1988  S.C. 719. It is held in that case that 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,  but it  is open  to the insurer to take a policy covering a higher risk. 12.  Learned counsel  for the appellants has placed reliance on the  Judgment in  New Asiatic  Insurance Co.  Ltd. Versus Pessumal Dhanamal  Aswani and  Ors. 1964  (7) S.C.R.  867 in support of  the claim  of the first appellant. In that case, the insurer  permitted another  person to  drive his car and while the  said person  was driving  the car, it met with an accident. The driver of the car faced an action for damages. The question  was whether  the insurance policy would enable the said  driver  to  claim  indemnity  from  the  insurance company. On  a consideration of the terms of the policy, the court held  that the  company would  be liable  to indemnify him. In the course of the judgment, the court said:      "   The    Act   contemplates   the      possibility  of   the   policy   of      insurance undertaking  liability to      third  parties   providing  such  a      contract between  the  insurer  and      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      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      recover’, 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      there an  shall affect the right of      any  person   indemnified  by   the      policy   or    any   other   person      indemnified by  the policy  or  any      other person  to recover  an amount

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 6  

    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  by   reason  of   wider  terms      appearing  in  the  certificate  in      order to  comply with  the  Act  is      recoverable from  the insured,  and      refers to t he avoidance clause.      Thus  the   contract  between   the      insured and  t he  company may  not      provide for  all  take  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  it 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". 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 effect      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  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 he  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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 6  

vehicle did  not file  an appeal  against t  he 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. 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 in  so  far  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 t he extent indicated above.  The parties  will  bear  their  respective costs.