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CASE NO.: Appeal (civil)  6476 of 1998

PETITIONER: National Insurance Co.

RESPONDENT: Prembai Patel and others

DATE OF JUDGMENT: 18/04/2005

BENCH: R.C. Lahoti, G.P. Mathur & A.K. Mathur

JUDGMENT: J U D G M E N T

G.P. MATHUR, J.

1.      The appellant insurance company has preferred this appeal, by  special leave, against the judgment and order dated 9.1.1998 of High  Court of Madhya Pradesh by which the appeal preferred by  respondent Nos. 3 to 6 (claimants) was allowed and the appellant  insurance company was directed to pay Rs.2,10,000/- along with  interest @ 12% per annum from the date of filing of the claim  petition, i.e., 21.4.1994 as compensation to them on account of death  of Sunder Singh in an accident. 2.      The respondent No. 2, Chiman Patel, was owner of truck No.  CIL 5248 and the same was got insured by him with the appellant  National Insurance Company Ltd. for the period 18.1.1993 to  17.1.1994.  The deceased Sunder Singh, aged about 35 years, was  employed by him as a driver of the truck on a salary of Rs,1,500/- per  month.  The truck, while carrying a heavy load of firewood  overturned on 9.11.1993, resulting in death of its driver Sunder Singh.   Respondent Nos. 3 to 6, who are parents, widow and son of the  deceased Sunder Singh, then filed a claim petition under Section 166  of the Motor Vehicles Act, 1988 (hereinafter referred to as "the Act"),  claiming Rs.5,40,000/- as compensation.  Their case was that the truck  was more than fifteen years old, had been poorly maintained and was  not in roadworthy condition.  While Sunder Singh was driving the  truck its arm bolt broke down and on account of heavy load it got  overturned in which Sunder Singh was crushed and he died  instantaneously.  The claim petition was contested by the owner of the  truck mainly on the ground that Sunder Singh was driving the truck  after consuming liquor and the accident took place on account of his  own fault.  It was denied that the truck was not properly maintained or  that it was not in roadworthy condition or that it was overloaded.  The  appellant insurance company also contested the claim petition taking  various pleas. 3.      The Motor Accident Claims Tribunal, Bilaspur, after  appreciating the evidence on record, held that the deceased Sunder  Singh was himself responsible for the accident and accordingly  dismissed the claim petition.  Feeling aggrieved, the claimants  preferred an appeal before the High Court under Section 173 of the  Act.  The High Court held that it was fully established that the  accident took place due to the fact that the arm bolt of the truck broke  down and not on account of any negligence on the part of the driver of  the truck.  Taking into consideration the age of the deceased and the  salary which he was drawing, an amount of Rs.2,10,000/- was  awarded as compensation.  The claimants were also held entitled to  interest on the aforesaid amount @ 12% per annum from the date of  filing of the claim petition.  It was further held that the insurance  company was liable to satisfy the whole award and consequently a

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direction was issued to the appellant to pay the entire amount of  compensation awarded to the claimants. 4.      The judgment of the High Court has been challenged by the  appellant insurance company only on one ground, namely, that having  regard to the insurance policy taken by the owner of the vehicle and  provisions of Sections 147 and 149 of the Act, its liability is restricted  to that, which is provided under The Workmen’s Compensation Act,  1923 (hereinafter referred to as "the Workmen’s Act") and it is not  liable to satisfy the entire award made in favour of the claimants.   Learned counsel for the appellant has submitted that the owner, while  getting his vehicle insured, had paid only that much amount of  premium as was required to cover the liability under the Workmen’s  Act.  He had not paid such premium so as to cover the entire amount  of liability qua an employee and, therefore, the liability of the  appellant would be a restricted one and it would not be to satisfy the  entire award made in favour of the claimants. 5.      Learned counsel for the respondents has, on the other hand,  submitted that the truck was comprehensively insured and, therefore,  the insurance company is liable to satisfy the entire award made in  favour of the claimants and the view taken by the High Court is  perfectly correct. 6.      A person, who has sustained injury or where death has resulted  from an accident all or any of the legal representatives of the deceased  can claim compensation by moving an application under Section 166  of the Act by filing a claim petition before the Motor Accident Claims  Tribunal.  Section 3 of the Workmen’s Compensation Act lays down  that if personal injury is caused to a workman by accident arising out  of and in the course of his employment, his employer shall be liable to  pay compensation in accordance with the provisions of Chapter II of  the said Act.  Section 167 of the Motor Vehicles Act, 1988 lays down  that notwithstanding anything contained in the Workmen’s  Compensation Act, 1923 where the death of, or bodily injury to, any  person gives rise to a claim for compensation under the Act and also  under the Workmen’s Act, the person entitled to compensation may  without prejudice to the provisions of Chapter X claim such  compensation under either of those Acts but not under both.  The  claim petition had been filed by respondents 3 to 6 claiming  compensation for the death of Sunder Singh, who was an employee of  respondent No. 2, in an accident arising out of and in the course of his  employment.  Therefore, they could claim compensation under either  of the Acts.  But they chose the forum provided under the Motor  Vehicles Act.  In a petition under the Workmen’s Act the injured or  the legal heirs of the deceased workmen have not to establish  negligence as a pre-condition for award of compensation.  But the  claim petition before the Motor Accident Claim Tribunal is an action  in tort and the injured or the legal representatives of the deceased have  to establish by preponderance of evidence that there was no  negligence on the part of the injured or deceased and they were not  responsible for the accident.  The exception to this general rule is  given in Section 140 of the Act where the legislature has specifically  made provisions for payment of compensation on the principle of no  fault liability.  7.      The High Court, after a careful analysis of the evidence on  record, has held that the deceased Sunder Singh was not responsible  for the accident.  The accident occurred on account of breaking of the  arm bolt of the truck and the owner of the vehicle had not taken  adequate care in maintaining the vehicle and in keeping the same in  roadworthy condition.  This finding has not been assailed before us,  nor is there any reason to take a contrary view. 8.      The main question which requires consideration in this appeal  is, whether the appellant insurance company is liable to pay the entire  amount of compensation awarded to the claimants or its liability is  restricted to that which is prescribed under the Workmen’s Act.  In  this connection learned counsel for the appellant has drawn our  attention to the insurance policy, which had been taken by the owner

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for the concerned vehicle, and, especially to the following  endorsements made therein: - 1.      Policy No.320801/31/ \026               A POLICY FOR ACT  92-93/21/01753                  LIABILITY 2.      PREMIUM (Act Liability)         Rs.1245/- 3.      Limitation as to use :          For Act only Cover At the end of the policy the following is written: -

"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 Vehicle Act, 1988 is recoverable from the  insured.  See the clause headed AVOIDANCE OF  CERTAIN TERMS AND RIGHT OF RECOVERY in  the policy. NOTE: - This Schedule, the attached Policy and the  Endorsements mentioned here above shall be read  together and any word or expression to which a specific  meaning has been attached in any part of this Policy or  the Schedule shall bear the same meaning wherever it  may appear."

9.      The learned counsel for the appellant has submitted that the  owner of the truck had got his vehicle insured by paying only that  much amount of premium which, so far as his employees were  concerned, covered the liability to the extent it is provided under the  Workmen’s Act.  It has been submitted that the words "a policy for  Act Liability" or "Act Liability" clearly indicate that the liability of  the insurance company was not an unlimited one but that which was  mandatorily required under the Act so as to cover the liability under  the Workmen’s Act and no further.  Learned counsel has further  submitted that in order to cover unlimited liability the owner has to  pay higher amount of premium and in such a case the words "a policy  for Act Liability" or "Act Liability" are not written.  The insurance  policy being in the nature of a contract, the parties are bound by it  and, therefore, the appellant cannot be saddled with any extra liability  to pay the entire amount of compensation, which has been awarded to  the claimants. 10.     The learned counsel for the respondents has, on the other hand,  submitted that having regard to the provisions of Sections 147 and  149 of the Act, the owner having got his vehicle insured, the insurance  company is liable to satisfy the entire award made in favour of the  claimants and there is no provision in law under which its liability  may be restricted or curtailed. 11.     The contentions raised turn on the interpretation of sub- Sections (1) of Sections 147 and 149 of the Act and the same are  being reproduced below: - "147. Requirements of policies and limits of liability. \026  (1) In order to comply with the requirements of this  Chapter, a policy of insurance must be a policy which \026 (a)     is issued by a person who is an authorized insurer;  and (b)     insures the person or classes of persons specified  in the policy to the extent specified in sub-section  (2) \026 (i)     against any liability which may be incurred  by him in respect of the death of or bodily  injury to any person or damage to any  property of a third party caused by or arising  out of the use of the vehicle in a public  place; (ii)    against the death of or bodily injury to any  passenger of a public service vehicle caused

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by or arising out of the use of the vehicle in  a public place; Provided that a policy shall not be required \026 (i)     to cover liability in respect of the death,  arising out of and in the course of his employment,  of the employee of a person insured by the policy  or in respect of bodily injury sustained by such an  employee arising out of and in the course of his  employment other than a liability arising under the  Workmen’s Compensation Act, 1923 (8 of 1923),  in respect of the death of, or bodily injury to, any  such employee \026 (a)     engage in driving the vehicle, or (b)     if it is a public service vehicle engaged as a  conductor of the vehicle or in examining  tickets on the vehicle, or (c)     if it is a goods carriage, being carried in the  vehicle, or (ii) to cover any contractual liability. Explanation \026 ................. (omitted as not relevant) 149.    Duty of insurers to satisfy judgments and  awards against persons insured in respect of third  party risks. \026 (1) If, after a certificate of insurance has  been issued under sub-section (3) of Section 147 in  favour of the person by whom a policy has been effected,  judgment or award in respect of any such liability as is  required to be covered by a policy under clause (b) of  sub-section (1) of section 147 (being a liability covered  by the terms of the policy) is obtained against any person  insured by the policy then, notwithstanding that the  insurer may be entitled to avoid or cancel or may have  avoided or cancelled the policy, the insurer shall, subject  to the provisions of this section, pay to the person entitled  to the benefit of the decree any sum not exceeding the  sum assured payable thereunder, as if he were the  judgment debtor, in respect of the liability, together with  any amount payable in respect of costs and any sum  payable in respect of interest on that sum by virtue of any  enactment relating to interest on judgments."

12.     The heading of Chapter XI of the Act is Insurance Of Motor  Vehicles Against Third Party Risks and it contains Sections 145 to  164. Section 146(1) of the Act provides that no person shall use,  except as a passenger, or cause or allow any other person to use, a  motor vehicle in a public place, unless there is in force in relation to  the use of the vehicle by that person or that other person, as the case  may be, a policy of insurance complying with the requirements of  Chapter XI.  Clause (b) of sub-section (1) of Section 147 provides that  a policy of insurance must be a policy which insures the person or  classes of persons specified in the policy to the extent specified in  sub-section (2) against any liability which may be incurred by him in  respect of death of or bodily injury to any person or passenger or  damage to any property of a third party caused by or arising out of the  use of the vehicle in public place.  Sub-clauses (i) and (ii) of clause  (b) are comprehensive in the sense that they cover both ’any person’  or ’passenger’.  An employee of owner of the vehicle like a driver or a  conductor may also come within the purview of the words ’any  person’ occurring in sub-clause (i).  However, the proviso (i) to clause  (b) of sub-Section (1) of Section 147 says that a policy shall not be  required to cover liability in respect of death, arising out of and in the  course of his employment, of the employee of a person insured by the  policy or in respect of bodily injury sustained by such an employee  arising out of and in the course of his employment other than a  liability arising under the Workmen’s Act if the employee is such as  described in sub-clauses (a) or (b) or (c).  The effect of this proviso is

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that if an insurance policy covers the liability under the Workmen’s  Act in respect of death of or bodily injury to any such employee as is  described in sub-clauses (a) or (b) or (c) of proviso (i) to Section  147(1)(b), it will be a valid policy and would comply with the  requirements of Chapter XI of the Act.  Section 149 of the Act  imposes a duty upon the insurer (insurance company) to satisfy  judgments and awards against persons insured in respect of third party  risks.  The expression \026 "such liability as is required to be covered by  a policy under clause (b) of sub-section (1) of section 147 (being a  liability covered by the terms of the policy)" \026 occurring in sub- section (1) of Section 149 is important.  It clearly shows that any such  liability, which is mandatorily required to be covered by a policy  under clause (b) of Section 147(1), has to be satisfied by the insurance  company.  The effect of this provision is that an insurance policy,  which covers only the liability arising under the Workmen’s Act in  respect of death of or bodily injury to any such employee as described  in sub-clauses (a) or (b) or (c) to proviso (i) to Section 147(1)(b) of  the Act is perfectly valid and permissible under the Act.  Therefore,  where any such policy has been taken by the owner of the vehicle, the  liability of the insurance company will be confined to that arising  under the Workmen’s Act.   13.     The insurance policy being in the nature of a contract, it is  permissible for an owner to take such a policy whereunder the entire  liability in respect of the death of or bodily injury to any such  employee as is described in sub-clauses (a) or (b) or (c) of proviso (i)  to Section 147(1)(b) may be fastened upon the insurance company and  insurance company may become liable to satisfy the entire award.   However, for this purpose the owner must take a policy of that  particular kind for which he may be required to pay additional  premium and the policy must clearly show that the liability of the  insurance company in case of death of or bodily injury to the aforesaid  kind of employees is not restricted to that provided under the  Workmen’s Act and is either more or unlimited depending upon the  quantum of premium paid and the terms of the policy. 14.     The aforesaid interpretation of the relevant provisions  applicable to the case in hand is in consonance with the view  expressed by a Constitution Bench in New India Assurance Co. Ltd.  vs. C.M. Jaya and others (2002) 2 SCC 278, where, while interpreting  the provisions of Section 95(2) of Motor Vehicles Act, 1939, the  Court held as under in para 10 of the report: - "............................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."

The Bench also referred to earlier decisions rendered in New India  Assurance Co. Ltd. vs. Shanti Bai (1995) 2 SCC 539 and Amrit Lal  Sood vs. Kaushalya Devi Thapar (1998) 3 SCC 744, and observed  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 Motor Vehicles Act, 1939.  It was further  observed that 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

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and it is limited only to the statutory liability. 15.     Though the aforesaid decision has been rendered on Section  95(2) of the Motor Vehicles Act, 1939 but the principle underlying  therein will be fully applicable here also.  It is thus clear that in case  the owner of the vehicle wants the liability of the insurance company  in respect of death of or bodily injury to any such employee as is  described in clauses (a) or (b) or (c) of proviso (i) to Section 147(1)(b)  should not be restricted to that under the Workmen’s Act  but should  be more or unlimited, he must take such a policy by making payment  of extra premium and the policy should also contain a clause to that  effect.  However, where the policy mentions "a policy for Act  Liability" or "Act Liability", the liability of the insurance company  qua the employees as aforesaid would not be unlimited but would be  limited to that arising under the Workmen’s Act. 16.     The High Court, in the impugned judgment, has held that if the  legal representatives of the deceased employee approach the Motor  Accident Claims Tribunal for payment of compensation to them by  moving a petition under Section 166 of the Act, the liability of the  insurance company is not limited to the extent provided under the  Workmen’s Act and on its basis directed the appellant insurance  company to pay the entire amount of compensation to the claimants.   As shown above, the insurance policy taken by the owner contained a  clause that it was a policy for "Act Liability" only.  This being the  nature of policy the liability of the appellant would be restricted to  that arising under the Workmen’s Act.  The judgment of the High  Court, therefore, needs to be modified accordingly. 17.     The judgment of the High Court insofar as it relates to quantum  of compensation and interest, which is to be paid to the claimants  (respondent Nos. 3 to 6 herein) is affirmed.  The liability of the  appellant insurance company to satisfy the award would be restricted  to that arising under the Workmen’s Act.  The respondent Nos. 1 and  2 (owners of the vehicle) would be liable to satisfy the remaining  portion of the award. 18.     The record shows that no stay order was passed in favour of the  appellant.  In case the appellant insurance company has deposited the  entire amount awarded by the High Court with the Motor Accident  Claims Tribunal or has paid the said amount to the claimants, it will  be open to it to recover the amount, which exceeds its liability under  the Workmen’s Act, from the owner of the vehicle in accordance with  law. 19.     The appeal is disposed of with the aforesaid modifications.  No  costs.