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CASE NO.: Appeal (civil)  5209 of 2007

PETITIONER: Oriental Insurance Co. Ltd

RESPONDENT: Smt. Raj Kumari & Ors

DATE OF JUDGMENT: 14/11/2007

BENCH: Dr. ARIJIT PASAYAT & LOKESHWAR SINGH PANTA

JUDGMENT: J U D G M E N T (Arising out of SLP (C) No. 2511/2006) Dr. ARIJIT PASAYAT, J.  1.      Leave granted. 2.      Challenge in this appeal is to the order passed by a  learned Single Judge of the Punjab and Haryana High Court.   By the impugned judgment, the High Court held that though  the liability of the appellant (hereinafter referred to as the  \021insurer\022) was limited to Rs.50,000/- yet it was to first pay the  amount awarded to the claimants and recover amount in  excess of Rs.50,000/- from the owner and driver of the  offending vehicle.     

2.      Factual position in a nutshell is as follows:

    One Karan Singh, conductor of the bus no.DEP-3514 lost  his life in an accident which took place on 14.7.1984.  The bus  belonged to M/s Mewat Transport Company Private Limited  (hereinafter referred to as the \021insured\022). The bus was driven by  deceased Karan Singh and it dashed in a tanker no.HRG- 2852.  The impact was so intense and severe that several  persons sitting in the bus died, while many others sustained  injuries.  The widow, minor children and parents of aforesaid  Karan Singh lodged claim petition claiming compensation of  Rs.1,40,000/-. The Tribunal took several claim petitions  together and in respect of the claim under consideration  awarded compensation of Rs.57,600/- along with 12% interest  p.a. from the date of institution of the claim petition.  It was,  however, held that liability of the insurer was limited to  Rs.50,000/-.  

3.      The claimants filed appeal before the Punjab and  Haryana High Court.  By the impugned order the High Court  enhanced claim of compensation to Rs.1,25,200/-. It was held,  as was done by the Tribunal, that the liability of the insurer  was limited to Rs.50,000/- in terms of the insurance policy.   However, it was held that the entire amount was to be paid by  the insurer to the claimants and it was entitled to recover the  amount in excess of Rs.50,000/- from the owner and the  driver of the vehicle.         4.      In support of the appeal, learned counsel for the  appellant submitted that having held that the liability of the  insurance company was limited to Rs.50,000/-, the High  Court was not justified in directing payment of the entire  amount by it and to recover the differential amount.   5.      There is no appearance on behalf of the respondents.      

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6.      It would be appropriate to take a note of what was held  by the Constitution Bench of this Court in New India  Assurance Co. Ltd. V. C.M. Jaya and Ors. (2002 (2) SCC 278).   In that case it was held, inter alia, as follows:      \023In the circumstances, we hold that the  liability of the appellant, insurance-company is  limited to Rs.50,000/-, as held by the  Tribunal. In the view we have taken, it is  unnecessary to go into the question relating to  either maintainability of cross-objections  before the High Court against the appellant  alone or as to the enhancement of  compensation when the owner and driver have  not filed appeal against the impugned  judgment.\024       7.      The questions that were considered by the Constitution  Bench are as follows: , "The question involved in these appeals is  whether in a case of insurance policy not taking  any higher liability by accepting a higher  premium, in case of payment of compensation  to a third party, the insurer would be liable to  the extent limited under Section 95(2) or the  insurer would be liable to pay the entire amount  and he may ultimately recover from the insured.  On this question, there appears to be some  apparent conflict in the two three-Judge Bench  decision of this Court - (1) New India Assurance  Co. Ltd. v. Shanti Bai (1995 (2)   SCC 539) and (2) Amrit Lal Sood v. Kaushalya  Devi Thapar (1998 (3) SCC 744) .   2. In the latter decision, unfortunately the  decision in New India Assurance case (supra)  has not been noticed though reference has  been made to the decision of this Court in  National Insurance Co. Ltd. v. Jugal Kishore  [(1998) 1 SCC 626], which was relied upon in  the earlier three-Judge Bench Judgment. In  view of the apparent conflict in these two  three-Judge Bench decisions, we think it  appropriate that the records of this case may  be placed before my Lord, the Chief Justice of  India to constitute a larger Bench for resolving  the conflict. We accordingly so direct. The  record may now be placed before the Hon’ble  the Chief Justice of India."       8.      It would be evident from the conclusions of this Court the  liability of the insurance company would in the instant case be  limited to quantum which was to be indemnified in terms of  the policy. The Tribunal and the High Court have held  accordingly.     9.      In   Oriental Insurance Co. Ltd.  vs. Shakuntala Garg and  Ors. (Civil Appeal No. 104 of 2000, disposed of on 10.1.2003),  it was held as follows:      \023Learned counsel for the appellant at this  stage expressed an apprehension that by  virtue of the terms of the Award, the appellant  may be required to pay the entire amount and  recover it from the owner.  In the light of the  modification of the impugned Award, such  question does not arise.\024

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     10.     It is true that in certain cases this Court has, after  looking into the fact situation, directed the insurance company  to make payment with liberty to recover the amount in excess  of the liability from the insured. Those decisions were given on  the facts situation of the cases concerned.                       11.     Reliance on the decision without looking into the factual  background of the case before it is clearly impermissible. A  decision is a precedent on its own facts. Each case presents its  own features. It is not everything said by a Judge while giving  a  judgment that constitutes a precedent. The only thing in a  Judge\022s decision binding a party is the principle upon which  the case is decided and for this reason it is important to  analyse a decision and isolate from it the ratio decidendi.   According to the well-settled theory of precedents, every  decision contains three basic postulates \026 (i) findings of  material facts, direct and inferential. An inferential finding of  facts is the inference which the Judge draws from the direct,  or perceptible facts; (ii) statements of the principles of law  applicable to the legal problems disclosed by the facts; and (iii)  judgment based on the combined effect of the above. A  decision is an authority for what it actually decides.  What is  of the essence in a decision is its ratio and not every  observation found therein nor what logically flows from the  various observations made in the judgment.  The enunciation  of the reason or principle on which a question before a Court  has been decided is alone binding as a precedent.  (See: State  of Orissa v. Sudhansu Sekhar Misra and Ors. (AIR 1968 SC  647) and Union of India and Ors. v. Dhanwanti Devi and Ors.  (1996 (6) SCC 44).  A case is a precedent and binding for what  it explicitly decides and no more.  The words used by Judges  in their judgments are not to be read as if they are words in  Act of Parliament. In Quinn v. Leathem (1901) AC 495 (H.L.),  Earl of Halsbury LC observed that every judgment must be  read as applicable to the particular facts proved or assumed to  be proved, since the generality of the expressions which are  found there are not intended to be exposition of the whole law  but governed and qualified by the particular facts of the case  in which such expressions are found and a case is only an  authority for what it actually decides.

12.     Courts should not place reliance on decisions without  discussing as to how the factual situation fits in with the fact  situation of the decision on which reliance is placed.  Observations of Courts are neither to be read as Euclid\022s  theorems nor as provisions of the statute and that too taken  out of their context. These observations must be read in the  context in which they appear to have been stated. Judgments  of Courts are not to be construed as statutes. To interpret  words, phrases and provisions of a statute, it may become  necessary for judges to embark into lengthy discussions but  the discussion is meant to explain and not to define. Judges  interpret statutes, they do not interpret judgments. They  interpret words of statutes; their words are not to be  interpreted as statutes. In London Graving Dock Co. Ltd. V.  Horton (1951 AC 737 at p.761), Lord Mac Dermot observed:

       \023The matter cannot, of course, be  settled merely by treating the ipsissima  vertra of Willes, J as though they were  part of an Act of Parliament and applying  the rules of interpretation appropriate  thereto. This is not to detract from the  great weight to be given to the language

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actually used by that most distinguished  judge.\024

13.     In Home Office v. Dorset Yacht Co. (1970 (2) All ER 294)  Lord Reid said, \023Lord Atkin\022s speech.....is not to be treated as  if it was a statute definition. It will require qualification in new  circumstances.\024 Megarry, J in (1971) 1 WLR 1062 observed:  \023One must not, of course, construe even a reserved judgment  of  Russell L.J. as if it were an Act of Parliament.\024 And, in  Herrington v. British Railways Board (1972 (2) WLR 537) Lord  Morris said:

       \023There is always peril in treating the  words of a speech or judgment as though  they are words in a legislative  enactment, and it is to be remembered  that judicial utterances made in the  setting of the facts of a particular case.\024

14.     Circumstantial flexibility, one additional or different fact  may make a world of difference between conclusions in two  cases. Disposal of cases by blindly placing reliance on a  decision is not proper.  

15.     The following words of Lord Denning in the matter of  applying precedents have become locus classicus:

       \023Each case depends on its own  facts and a close similarity between one  case and another is not enough because  even a single significant detail may alter  the entire aspect, in deciding such  cases, one should avoid the temptation  to decide cases (as said by Cordozo) by  matching the colour of one case against  the colour of another. To decide  therefore, on which side of the line a  case falls, the broad resemblance to  another case is not at all decisive.\024

                               ***             ***             ***         \023Precedent should be followed only  so far as it marks the path of justice, but  you must cut the dead wood and trim off  the side branches else you will find  yourself lost in thickets and branches.  My plea is to keep the path to justice  clear of obstructions which could impede  it.\024         16.     In the instant case the insurer was a private limited  company doing transport business. There was no material  placed before the High Court to show that the claimants would  have any difficulty in recovering the awarded amount from it.   That being so, the High Court\022s order is modified to the extent  that the insurer shall pay an amount of Rs.50,000/- with  interest awarded to claimants.  The balance has to be paid by  the insured.       17.     Another point urged before this Court in support of the  appeal was that the rate of interest is high. The liability of the  insurance company is limited to Rs.50,000/- with interest @  9% p.a. from the date of the application. The rate is being fixed  considering the date of accident. The insured shall forthwith

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make payment of the balance amount with interest to the  claimants and in any event not later than 3 months from the  date of this order.       18.     The appeal is allowed to the aforesaid extent with no  order as to costs.