REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELALTE JURISDICTION

CIVIL APPEAL NO.  7402     OF 2008 ( Arising out of SLP (C) No. 23953 of 2007 )

New India Assurance Company Ltd. …. Appellant

Versus

Sadanand Mukhi and others …. Respondents

J U D G M E N T

S.B. SINHA, J.  

1. Leave granted.

2. This  appeal  is  directed  against  a  judgment  and  order  dated  18th

January, 2007 passed by a Division Bench of the High Court of Jharkhand

at  Ranchi  whereby and whereunder  an  appeal  preferred  by the  appellant

herein under Section 173 of the Motor Vehicles Act, 1988 (for short ‘the

Act’)  from a judgment and award dated  26th March,  2004 passed  by the

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District  Judge-cum-Motor  Vehicle  Accident  Claim Tribunal  at  Seraikella

was dismissed.  

3. The admitted fact of the mater is as under :-

First respondent was owner of a motor cycle.  He got the said vehicle

insured with the appellant company; the policy being valid for the period

9.9.1999 and 8.9.2000.  On 8th September,  2000 Tasu Mukhi,  son of the

insured, while driving the motor cycle met with an accident and died.  The

accident allegedly took place as a stray dog came in front of the vehicle.  A

First Information Report was also lodged.  Respondents herein filed a claim

petition.  Amongst them, first respondent, who is the owner of the insured

vehicle, was the applicant.  

4. Appellant herein raised a specific contention that keeping in view the

relationship between the deceased and the owner of the motor vehicle i.e.

father and son, he was not a third party, stating  :-

“5. That  section  165  M.V.  Act  clearly postulates  that  the  insurer  is  liable  to  indemnify the  risk  of  the  Third  party.   During  the  motor vehicle accident and the policy also speaks that in the case of rash and negligent driving the insurer is liable to indemnify the owner.  Here in this case

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the driver of the vehicle is admittedly not a third party and as such the Tribunal has no jurisdiction to pass any order under the Motor Vehicle Act.

6. That so far the negligence of the driver of the Motor cycle is  concerned the claimants must establish affirmatively and unless it is proved the Claim  Tribunal  cannot  pass  any  order  of compensation under the Motor Vehicle Act, 1988.

7. That  it  is  further  submitted  that  the claimants had failed to plead in their claim petition about the negligence which resulted the accident. On the other hand, the circumstances speak that it was  the  deceased  himself  who  was  driving  the motor vehicle in uncontrollable speed and in rash and negligent  manner  which cause accident  as  a result of which he and the pillion rider fell down and  deceased  died.   Therefore,  in  absence  of negligence on the part of the owner of the vehicle the  Claimants  cannot  seek  compensation  on  the basis of the provisions of the Act.

8. That the act suggests that the deceased not being a third party himself caused the accident and out of such act the loss allegedly occurred to him is not supposed to be a person coming within the scope, ambit and provisions of either section 165 (1)  of  section  (1)  of  the  Motor  Vehicles  Act, 1988.”  

5. In view of the aforementioned pleadings of the parties, issues were

framed in the following terms :-

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“1. Whether  the  claimants  have  any  cause  of action  or  right  to  sue  and  the  case  is maintainable  and the deceased was a third party?

2. Whether the accident took place due to rash and negligent driving of the vehicle Yamaha Motor  Cycle  No.BR-16B-6002  by  the driver?

3. Whether  the deceased was  himself  rash  & negligent  in  driving  the  vehicle  and  was responsible for the accident and whether the deceased  died  due  to  motor  vehicle accident?

4. Whether the owner have violated the terms and conditions of the vehicle for which the vehicle has been insured under the Insurer, The New India Assurance Co. Ltd. ?

5. Whether the claimants are entitled to receive the  compensation  amount  and  if  so  what should be the quantum of compensation?

6. Whether the insurer of the vehicle is liable to  indemnify  the  insured  owner  of  the vehicle?

7. Whether  the  claimants  are  entitled  to  get any relief or reliefs as claimed by them?”

6. The Tribunal did not enter into the question involved herein.   

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However, while determining issue Nos.2 and 3 it was held :-

“So  the  evidence  led  on  behalf  of  claimant  is practically ex-parte in nature and it goes to show that  the  deceased  died  in  connection  with  a vehicular accident.  In other words, he died out of the use of a vehicle.  Both the issues are decided in this way in favour of the claimants.   

On issue Nos. 1 and 7 it was opined :-

“Issue  Nos.  1  and  7  :  On  the  basis  of  the discussions  made  above,  it  follows  that  the claimants  application  is  maintainable  and  the applicants  are  entitled  to  receive  compensation from the O.P. No.1 as indicated above.  Both the issues  are  accordingly  decided  in  favour  of  the applicants.”

Evidently, therefore, no decision was rendered on the said issue.   

7. Before  the  High  Court  appellant  raised  specific  contentions  in  its

Memorandum of Appeal, which are as under:-

“C. For  that  the learned Court  below ought  to have considered that as in the present case the deceased was  not  third party  rather  he was  the  son  of  the  insured  at  the  relevant time  of  accident  who  was  driving  the vehicle  rashly and negligently,  the insured

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cannot claim compensation until and unless negligence  on  the  part  of  the  insured  is established and proved.

D. For  that  the  learned  Court  ought  to  have considered that Motor Vehicle Act provides provisions for compensation for the death of the third party from the insured vis-à-vis the insurance company but there is no provision in  the  Act  wherein  an  insured  may claim himself compensation from himself”  

8. The High Court has also not expressed its opinion on the said issue.

9. Mr. Pradeep Kumar Bakshi, learned counsel appearing on behalf of

the appellant would submit that having regard to the provisions contained in

Sections 146, 147 and 149 (2) of the Act, for the death of the son of the

insured, it could not have been held to be liable  

10. Mr.  Arup  Banerjee,  learned  counsel  appearing  on  behalf  of  the

respondents,  on the other hand, would contend that  the legislative policy

underlining compulsory insurance of a motor vehicle was thought of in view

of the fact that life being uncertain, the same was required to be covered.

Learned counsel would contend that it  cannot be held to exclude a rider,

although son of the owner, and, thus, he would be a third party in relation to

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the  insurance  company.   According  to  the  learned  counsel,  it  would  be

wholly unfair to exclude a driver using the vehicle as on his death his family

suffers.  

Mr. Banerjee would contend that, indisputably, use of a motor vehicle

is hazardous in nature and thus there cannot be any reason whatsoever to

hold that the provisions containing compulsory insurance would be held to

have excluded the driver.  According to learned counsel the matter might

have been different if the accident had occurred due to rash and negligent

driving on the part  of  the  driver  and in  a case  of  this  nature,  where  the

accident  had  occurred,  which  was  beyond  anybody’s   control,  the  High

Court judgment should not be interfered with.  

11. Provisions relating to grant of compensation occurring in Chapter XI

and XII of the Act have been enacted by the Parliament in order to achieve

the purpose and object stated therein.  

12. Section  146  of  the  Act  lays  down  the  requirements  for  insurance

against third party risk.  Where a third party risk is involved, an insurance

policy is required to be mandatorily taken out.   

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The requirements of policies and the limits of liability, however, have

been stated in Section 147 of the Act.   Section 147(1)(b) of the Act, reads

as under:

“147.  Requirements  of  policies  and  limits  of liability.—(1)  In  order  to  comply  with  the requirements of this Chapter, a policy of insurance must be a policy which—

* * * (b)  insures  the  person  or  classes  of  persons specified in the policy to the extent specified in sub-section (2)—

(i)  against  any  liability  which  may  be incurred by him in respect  of the  death of  or bodily injury to any person, including owner of the  goods  or  his  authorised  representative carried  in  the  vehicle  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  by  or  arising  out  of  the  use  of  the vehicle in a public place:

Provided that a policy shall not be required— (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),

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in respect of the death of, or bodily injury to, any such employee—

(a) engaged 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.—For the removal of doubts, it is hereby declared that the death of or bodily injury to any person or damage to any property of a third party shall be deemed to have been caused by or to have arisen out of, the use of a vehicle in a public place notwithstanding that the person who is dead or injured or the property which is damaged was not in a public place at the time of the accident, if the  act  or  omission  which  led  to  the  accident occurred in a public place.”

13. The  provisions  of  the  Act,  therefore,  provide  for  two  types  of

insurance  –  one  statutory  in  nature  and  the  other  contractual  in  nature.

Whereas the insurance company is bound to compensate the owner or the

driver of the motor vehicle in case any person dies or suffers injury as a

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result of an accident; in case involving owner of the vehicle or others are

proposed to be covered, an additional premium is required to be paid for

covering their life and property.  

14. It is not a case where even Section 163-A of the Act was resorted to.

Respondents filed an application under Section 166 of the Act.  Only an act

policy was taken in respect of the motor vehicle.  Submission of the learned

counsel that being a two wheelers, the vehicle was more prone to accident

and, therefore, whosoever becomes victim of an accident arising out of the

use  thereof  would  come  within  the  purview  of  the  term  “a  person”  as

provided for in Section 147 of the Act, in our opinion, is not correct.  

15. Contract  of  insurance  of  a  motor  vehicle  is  governed  by  the

provisions  of  the  Insurance  Act.   The  terms  of  the  policy  as  also  the

quantum  of  the  premium  payable  for  insuring  the  vehicle  in  question

depends not only upon the carrying capacity of the vehicle but also on the

purpose  for  which  the  same was  being  used  and  the  extent  of  the  risk

covered thereby.  By taking an ‘act policy’, the owner of a vehicle fulfils his

statutory obligation as contained in Section 147 of the Act.  The liability of

the insurer is either statutory or contractual.  If it is contractual its liability

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extends to the risk covered by the policy of insurance.  If additional risks are

sought to be covered, additional premium has to be paid.  If the contention

of  the  learned  counsel  is  to  be  accepted,  then  to  a  large  extent,  the

provisions  of  the  Insurance  Act  become  otiose.   By  reason  of  such  an

interpretation the insurer would be liable to cover risk of not only a third

party but  also  others  who would not  otherwise come within the purview

thereof.   It  is  one thing to  say that  the life  is  uncertain  and the same is

required to be covered, but it is another thing to say that we must read a

statute so as to grant relief to a person not contemplated by the Act.  It is not

for the court, unless a statute is found to be unconstitutional, to consider the

rationality thereof.  Even otherwise the provisions of the Act read with the

provisions of the Insurance Act appear to be wholly rational.   

16. Only  because  driving  of  a  motor  vehicle  may  cause  accident

involving loss of life and property not  only of a third party but  also the

owner of the vehicle and the insured vehicle itself, different provisions have

been made in the Insurance Act as also the Act laying down different types

of insurance policies.  The amount of premium required to be paid for each

of  the  policy  is  governed  by the  Insurance  Act.   A statutory  regulatory

authority fixes the norms and the guidelines.   

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17. Keeping  in  view  the  aforementioned  Parliamentary  object,  let  us

consider  the fact  of  the present  case so as to  consider  as  to  whether  the

insurer  is  liable  to  pay  the  amount  of  compensation  in  relation  to  the

accident occurred by use of the vehicle which was being driven by the son

of the insured.   

18. We  may,  for  the  said  purpose,  notice  certain  decisions  covering

different categories of the claims.   

In  United India Insurance Co. Ltd. v.  Tilak Singh, [ (2006) 4 SCC

404 ] this Court considered the provisions of the Motor Vehicles Act, 1939

as also 1988 Act  and inter alia opined that the insurance company would

have no liability towards the injuries suffered by the deceased who was a

pillion rider, as the insurance policy was a statutory policy which did not

cover the gratuitous passenger.

In Oriental Insurance Co. Ltd. v.  Jhuma Saha, [ (2007) 9 SCC 263 ], it

was held :-  

“10. The deceased was the owner of the vehicle. For  the  reasons  stated  in  the  claim  petition  or otherwise,  he  himself  was  to  be  blamed  for  the accident.  The  accident  did  not  involve  motor

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vehicle other than the one which he was driving. The question which arises for consideration is that the  deceased  himself  being  negligent,  the  claim petition under Section 166 of the Motor Vehicles Act, 1988 would be maintainable. 11. Liability  of  the  insurer  Company  is  to  the extent  of  indemnification  of  the  insured  against the respondent or an injured person, a third person or in respect of damages of property. Thus, if the insured cannot be fastened with any liability under the  provisions  of  the  Motor  Vehicles  Act,  the question of the insurer  being liable to indemnify the insured, therefore, does not arise.”

It was furthermore held :-

“13. The  additional  premium  was  not  paid  in respect of the entire risk of death or bodily injury of the owner of the vehicle. If that be so, Section 147(b)  of  the  Motor  Vehicles  Act  which  in  no uncertain terms covers a risk of a third party only would be attracted in the present case.”

The matter came up for consideration yet again in Oriental Insurance Co.

Ltd. v. Meena Variyal [(2007) 5 SCC 428] wherein it was observed :-

“13. As we understand Section 147(1) of the Act, an insurance policy thereunder need not cover the liability in respect of death or injury arising out of and  in  the  course  of  the  employment  of  an employee  of  the  person  insured  by  the  policy, unless  it  be  a  liability  arising  under  the Workmen’s Compensation Act, 1923 in respect of

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a driver, also the conductor, in the case of a public service vehicle, and the one carried in the vehicle as owner of the goods or his representative, if it is a goods vehicle. It is provided that the policy also shall  not  be  required  to  cover  any  contractual liability. Uninfluenced by authorities, we find no difficulty  in  understanding  this  provision  as  one providing  that  the  policy  must  insure  an  owner against any liability to a third party caused by or arising out  of  the  use  of  the vehicle  in  a  public place,  and  against  death  or  bodily  injury to  any passenger of a public service vehicle caused by or arising out of the use of vehicle in a public place. The proviso clarifies  that  the policy shall  not  be required  to  cover  an employee of  the insured  in respect of bodily injury or death arising out of and in  the  course  of  his  employment.  Then,  an exception is provided to the last foregoing to the effect that the policy must cover a liability arising under the Workmen’s Compensation Act, 1923 in respect  of  the  death  or  bodily  injury  to  an employee who is engaged in driving the vehicle or who  serves  as  a  conductor  in  a  public  service vehicle or an employee who travels in the vehicle of  the  employer  carrying  goods  if  it  is  a  goods carriage. Section 149(1), which casts an obligation on an insurer to satisfy an award, also speaks only of award in respect of 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). This provision cannot therefore be used to enlarge the liability if it does not exist in terms of Section 147 of the Act.

14. The object of the insistence on insurance under Chapter  XI  of  the  Act  thus  seems  to  be  to compulsorily  cover  the  liability  relating  to  their person or properties of third parties and in respect of employees of the insured employer, the liability that  may  arise  under  the  Workmen’s

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Compensation Act, 1923 in respect of the driver, the  conductor  and  the  one  carried  in  a  goods vehicle  carrying  goods.  On  this  plain understanding of Section 147, we find it difficult to hold that the Insurance Company, in the case on hand,  was  liable  to  indemnify  the  owner,  the employer Company, the insured, in respect of the death of one of its  employees, who according to the claim, was not the driver. Be it noted that the liability  is  not  one arising under the Workmen’s Compensation Act, 1923 and it is doubtful, on the case  put  forward  by  the  claimant,  whether  the deceased  could  be  understood  as  a  workman coming within the Workmen’s Compensation Act, 1923. Therefore, on a plain reading of Section 147 of the Act, it appears to be clear that the Insurance Company is not liable to indemnify the insured in the case on hand.”

The said principle was reiterated in United India Insurance Co. Ltd. v.

Davinder Singh, [ (2007) 8 SCC 698 ] holding :-

 “10. It  is,  thus,  axiomatic  that  whereas  an insurance  company  may be  held  to  be  liable  to indemnify the owner  for  the purpose of  meeting the  object  and  purport  of  the  provisions  of  the Motor  Vehicles  Act,  the  same  may  not  be necessary in a case where an insurance company may refuse to compensate the owner of the vehicle towards his own loss. A distinction must be borne in  mind  as  regards  the  statutory  liability  of  the insurer vis-à-vis the purport and object sought to be  achieved  by a  beneficent  legislation  before  a forum constituted  under  the Motor  Vehicles  Act and enforcement of a contract qua contract before a Consumer Forum.”

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19. Learned counsel  for the respondents  would contend that  the object

and purport of the Act being to cover the risk to life of any person, the said

decision should be applied in this case also.  We do not think that it would

be a correct reading of the said judgment as therein National Insurance Co.

Ltd.  v.  Laxmi Narain Dhut, [ (2007) 3 SCC 700 ] has been followed. In

Laxmi Narain Dhut (supra) a distinction between a statutory policy and a

contractual policy has clearly been made out.  

These decisions, clearly, are applicable to the fact of the present case.

20. In view of the aforementioned authoritative pronouncements, we have

no  hesitation  of  hold  that  the  insurance  company  was  not  liable.   The

impugned  judgment,  therefore,  cannot  be  sustained.   It  is  set  aside

accordingly.  The appeal is allowed.  No costs.

………………………J.

   [ S.B. Sinha ]

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………………………J.

   [ Cyriac Joseph ]

New Delhi December 18, 2008

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