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PETITIONER: NATIONAL INSURANCE COMPANY LTD.

       Vs.

RESPONDENT: BEHARI LAL & ORS.

DATE OF JUDGMENT:       28/08/2000

BENCH: S.S.M.Quadri, Y.K.Sabharwa

JUDGMENT:

     Syed Shah Mohammed Quadri, J.

     Leave is granted.

     This appeal is from the judgment and order of the High Court  of  Rajasthan at Jaipur dated May 29,  1997  allowing Civil  Misc.   Appeal No.682 of 1996 filed by respondents  1 and  2  herein.  The point that arises for consideration  is the  scope  and import of the proviso to sub-section (2)  of Section 147 of the Motor Vehicles Act, 1988 (for short, the New  Act).  The appellant (hereinafter referred to as, the Insurance  Company) issued a policy in favour of the  first respondent   (Behari   Lal),  owner  of  the   bus   bearing registration  No.R.J.P.   4719.   The policy  of  insurance, issued  under the provisions of the Motor Vehicles Act, 1939 (for  short,  the Old Act), was valid for one year -  from October  28, 1988 to October 27, 1989.  The said bus,  while being  driven by respondent No.2, met with an accident which resulted  in  the death of one passenger - Shiv Bhagwan  and injuries  to  the  other   passengers  travelling   therein. Respondent Nos.3 to 8, heirs of the said Shiv Bhagwan, filed a  petition  before the court of Additional District  Judge, Khetri,  Rajasthan - the Motor Accident Claims Tribunal (for short,   the   Tribunal),     claiming   compensation   of Rs.14,14,000/-  from respondent Nos.1 and 2 (being the owner and  the driver of the bus) and the Insurance Company as the insurer.   The Insurance Company contested the claim,  inter alia,  on  the ground that its liability under the terms  of the  policy  issued under the Old Act and the provisions  of the  New Act, was limited to only Rs.15,000/- per  passenger travelling  in the bus.  On June 1, 1996, the Tribunal  held that  respondent Nos.3 to 8 were entitled to compensation of Rs.1,50,000/-  from  respondent  Nos.1  &  2  and  that  the liability  of  the  Insurance Company was  limited  only  to Rs.15,000/-.   Respondent Nos.1 & 2 filed appeal before  the High  Court  challenging  that  part of  the  order  of  the Tribunal,  which  limited  the liability  of  the  Insurance Company.  On May 29, 1997 a learned Single Judge of the High Court  allowed the appeal holding that the liability of  the Insurance  Company  is co-extensive with that of  respondent Nos.1  &  2  herein  and  thus modified  the  Award  of  the Tribunal.   It  is  from that order of the High  Court,  the Insurance  Company  is  in appeal  before  us.   Mr.Jitendra Sharma,  learned senior counsel appearing for the  Insurance Company,   contended  that  in  view   of  the  proviso   to

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sub-section (2) of Section 147 of the New Act, the liability of  the Insurance Company is limited only to Rs.15,000/- per passenger  as  the existing policy was issued under  Section 95(2) of the Old Act, therefore, the High Court erred in law in  modifying the Award of the Tribunal.  Dr.Sushil Balwada, learned counsel appearing for the respondents, has submitted that  under  the  New  Act the liability  of  the  Insurance Company  is unlimited;  the existing policy which was issued under  the  Old Act and was valid beyond the period of  four months  from coming into force of the New Act was kept alive within  that period by the proviso but it did not limit  the liability  of the Insurance Company to the amount  mentioned in  the policy in accordance with the terms of Section 95(2) of  the Old Act.  In the light of the above contentions  and the relevant provisions of the New Act, we shall examine the scope  of  the proviso to sub-section (2) of Section 147  of the  New Act.  Insofar as the provisions of the Section  147 are  relevant  for purposes of the present discussion,  they are set out hereunder :

      CHAPTER XI

     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

     (a)  is  issued  by  a person  who  is  an  authorised insurer;  and

     (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 Workmens Compensation Act, 1923  (8  of 1923)  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 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

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     (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.

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

     (a)  save  as  provided in clause (b), the  amount  of liability incurred;

     (b)  in  respect of damage to any property of a  third party, a limit of rupees six thousand:

     Provided  that any policy of insurance issued with any limited  liability  and  in force,  immediately  before  the commencement of this Act, shall continue to be effective for a  period of four months after such commencement or till the date of expiry of such policy whichever is earlier.

     (3) to (5) *** *** ***

     A  plain reading of sub-section (1) of Section 147  of the  New  Act shows that to comply with the requirements  of Chapter  XI, it enjoins that a policy of insurance must be a policy  which is issued by an authorised insurer and insures the  person or classes of persons specified in the policy to the extent specified in sub-section (2), referred to in this judgment  as a statutory policy.  A statutory policy  covers any  liability which the insured person may incur 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 and also 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. The proviso thereto enumerates the liabilities which are not required  to be covered by a statutory policy.  It is  quite clear  that  sub-section (2) of Section 147 of the  New  Act directs  that  subject  to  proviso to  sub-section  (1),  a statutory  policy  shall  cover   the  amount  of  liability incurred  except  in respect of damage to any property of  a third  party  for  which a limit of rupees six  thousand  is specified.   A careful reading of the proviso to sub-section (2)  discloses that any policy of insurance, issued with any limited  liability  and  in  force  immediately  before  the commencement  of the New Act, shall continue to be effective for  a period of four months after such commencement or till the  date  of  expiry of such policy whichever  is  earlier. Now,  a  policy of insurance may be a contract policy  or  a statutory  policy.  The proviso does not deal with unlimited liability  which  an insurer may undertake under a  contract policy.   It  deals  with a statutory  policy  with  limited liability.   The question, which, arises here is :  what  is the import of the phrase, with any limited liability and in

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force?   To  understand  the  meaning of  this  phrase,  it becomes  necessary  to  refer to Section 95 of the  Old  Act which  deals  with  requirements of policies and  limits  of liability.   Under sub-section (2) of Section 95 a policy of insurance  (a  statutory policy) was required to  cover  any liability  incurred  in respect of any one accident, in  the case  of a vehicle in which passengers are carried for  hire or  reward or by reason of or in pursuance of a contract  of employment  :   (1)  in  respect   of  persons  other   than passengers  carried for hire or reward, a limit of one  lakh and  fifty  thousand rupees in all;  and (2) in  respect  of passengers  a  limit  of fifteen thousand  rupees  for  each individual  passenger.   Therefore,  the   phrase  means   a statutory policy under the Old Act with the limit prescribed therein  which was valid immediately before the commencement of  the  New Act.  The words are not employed to  limit  the liability of an insurance company to the amount specified in the  policy by virtue of the provisions of Section 95(2)  of the  Old  Act  either for a period of four months or  for  a lesser  period  during  which the policy is  valid.   It  is argued by Mr.Sharma that by the proviso the liability of the Insurance  Company is limited to the amount mentioned in the existing  statutory policy issued under the Old Act.  We are afraid,  we  cannot  accede to this contention  and  he  can derive no benefit by relying on the following observation of this  Court in New India Assurance Company Vs.  Satpal Singh &  Ors.   [2000  (1) SCC 237] :  The legislature  has  also taken  care of even the policies which were in force on  the date  of  commencement of the Act by specifically  providing that  any policy of insurance containing any limit regarding the insurers liability shall continue to be effective for a period  of four months from commencement of the Act or  till the  date  of expiry of such policy, whichever  is  earlier. This  means,  after  the said period of four months,  a  new insurance  policy consistent with the new Act is required to be obtained.

     There  the question before this Court was with  regard to  liability of the Insurance Company in case of death of a gratuitous passenger in the truck which met with an accident resulting  in  his death.  We cannot read  the  observation, quoted  above,  as  laying  down the  law  that  the  amount specified  in  the  policy  in  force on  the  date  of  the commencement  of the New Act will be payable for a period of four  months  after  such commencement or till the  date  of expiry  of such policy, whichever is earlier.  In our  view, the  proviso  cannot  be so interpreted as  to  subject  the insurance  companies to different maximum liabilities  under statutory  policies in respect of accidents occurring during the  same  period.  We do not think that this could  be  the intention  of  the  Parliament.   Having fixed  a  date  for enforcement  of the New Act incorporating the requirement of a  statutory policy under Section 147(1) thereof, the effect of  the  provision could not have been whittled down  during the  period  which  may  vary from one day  to  four  months depending  upon when the existing policy expires within  the said period of four months.  It merely indicates the span of validity  of  existing  policy.  Here, it  is  pertinent  to notice the provisions of Section 217(2) of the New Act which deal with the effect of repeal of the Old Act (under which a statutory  policy was taken) on coming into force of the New Act.   Sub-section  (1) of Section 217 repeals, inter  alia, the  Old  Act.   Clause  (c) of sub-section  (2),  which  is relevant,  provides  that notwithstanding the  repeal  under sub-section  (1)  of the Old Act any document, referring  to

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any  of  the repealed enactments or the provisions  thereof, shall  be  construed  as  referring to the New  Act  or  the corresponding  provisions thereof.  In this context, it will be  useful  to refer to the decision of this Court in  Padma Srinivasan  Vs.   Premier Insurance Company Ltd.  [1982  (1) SCC 613 = 1982 ACJ 191 (SC)].  In that case after the policy was  taken  under  Section 95(2)(a) of the Old Act,  it  was amended  in  1969  so as to increase the  liability  of  the insurer from Rs.15,000/- to Rs.50,000/-.  The accident which gave rise to the appeal occurred after the amended provision came   into  force.   Chandrachud,   C.J.   speaking  for  a three-Judge  Bench  observed :  Since the liability of  the insurer  to pay a claim under a motor accident policy arises on  the  occurrence of the accident and not until then,  one must  necessarily  have  regard  to the  state  of  the  law obtaining  at  the time of the accident for determining  the extent  of the insurers liability under a statutory policy. In  this  behalf, the governing factor for  determining  the application  of the appropriate law is not the date on which the  policy  of  insurance came into force but the  date  on which  the  cause of action accrued for enforcing  liability arising  under the terms of the policy.  That we consider to be  a reasonable manner in which to understand and interpret the  contract  of insurance entered into by the insured  and the insurer in this case.

     We  are not persuaded to accept the contention of  Mr. Sharma  that  the  proviso in question  is  incorporated  to nullify  the  effect  of  that  judgment.   The  proviso  to sub-section  (2) of Section 147 cannot be read as a  proviso to Section 217(2)(c) of the New Act and it does not, in case of  the  existing policy being in force on the date  of  the occurrence  of  the  accident, limit the  liability  of  the Insurance  Company to the amount mentioned in Section  95(2) of  the Old Act.  From the above discussion, it follows that the proviso to sub-section (2) of Section 147 does not limit the   liability  of  Insurance   Companies  to  payment   of compensation  to  the  extent  specified in  the  policy  of insurance  in terms of Section 95(2) of the Old Act which is in force before the commencement of the New Act for a period of four months after commencement of the New Act or till the date  of expiry of such a policy, whichever is earlier.   In this  view  of the matter, we endorse the view taken by  the Division  Bench of the High Court of Gujarat in  Kacharabhai L.   Limbachia Vs.  Ratansinh J.Rathod-Patelia & Ors.  [1998 (1)  A.C.J.  326] and by the Division Bench of the Punjab  & Haryana  High Court in National Insurance Company Ltd.   Vs. Puja  Roller  Flour  Mills (Pvt.) Ltd.  &  Ors.   [1997  (2) Vol.116  P.L.R.   199].   It is, however, submitted  that  a Division Bench of the Kerala High Court took a contrary view in  New  India  Assurance Co.  Ltd.  Vs.  Paramu  [1990  (2) K.L.T.   645].   Inasmuch as in that case the  policy  under which  the Insurance Company was held liable, was issued  on May 11, 1983 and was noted to have expired on March 10, 1984 long  prior  to  coming into force of the New  Act  and  the question with which we are concerned here, neither arose nor was  it dealt with in that case, so it has no bearing on the issue.   In  the  instant  case, the policy  was  issued  on October  28,  1988 and it was valid up to October 27,  1989. The New Act came into force on July 1, 1989 and the accident occurred  on September 4, 1989, after the New Act came  into force  but  before  the expiry of the policy in  force.   On these  facts the liability of the Insurance Company will  be governed  by  sub-section (2)(a) of Section 147 of  the  New Act,  namely, the amount of liability incurred but not under

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Section 95(2) of the Old Act.  The High Court is, therefore, right in allowing the appeal of the respondents claiming the whole  amount  of compensation awarded by the Tribunal  from the  Insurance  Company.  We find no merits in this  appeal. It is, accordingly, dismissed with costs.