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PETITIONER: PADMA SRINIVASAN

       Vs.

RESPONDENT: PREMIER INSURANCE CO. LTD.

DATE OF JUDGMENT16/02/1982

BENCH: CHANDRACHUD, Y.V. ((CJ) BENCH: CHANDRACHUD, Y.V. ((CJ) FAZALALI, SYED MURTAZA DESAI, D.A.

CITATION:  1982 AIR  836            1982 SCR  (3) 244  1982 SCC  (1) 613        1982 SCALE  (1)107

ACT:      Motor Vehicles  Act 1939,  s. 95(2)(a)  as  amended  by Motor Vehicles (Amendment) Act 56 of 1969-Applicability of.      Accident claim-Liability  of insurer-Material  date for ascertainment  of   extent  of   liability-Whether  date  of accident or date of insurance policy.      Contract-Contract  in   accordance  with  a  particular statute law  but not identifying the provision of law-Breach of contract-Determination of quantum of damages-Law in force on date breach of contract committed or law in force on date contract made.

HEADNOTE:      Section 95  of the  Motor Vehicles  Act 1939 prescribes the requirements  of an  insurance policy and the "limits of liability" thereunder.  Section 95(2) (a) was amended by the Motor Vehicles  (Amendment) Act  56 of  1969 to provide that the insurer’s  liability under  a  policy  of  insurance  be increased from  the  existing  "twenty-thousand  rupees"  to "fifty-thousand rupees".  The amendment  came into  force on March 2,1970.      The appellant’s  husband, who was driving a scooter was knocked down  dead by a truck on April 5, 1970. The owner of the truck  had taken  a statutory  insurance policy with the respondent which was operative from June 30,1969 to June 29, 1970.      The appellant  filed an  application before  the  Motor Accident’s Claims  Tribunal under  section 110-A  of the Act seeking compensation for her husband’s death. The respondent denied its  liability  and  contested  the  application  The Tribunal passed  an award  holding that  the  appellant  was entitled to  recover compensation  in the  sum of Rs. 60,000 for self  and her children, but limited the liability of the respondent-insurer to a sum of Rs. 50,000.      The  respondent   in  its  appeal  to  the  High  Court contended that on the date on which the insurance policy was issued, its  statutory liability  was limited  to a  sum Rs. 20,000 only,  and therefore  the Tribunal  was in  error  in passing an  award against  it for  a sum of Rs. 50,000. This contention was accepted, and the appeal was allowed. 245

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    In the  claimant’s appeal to this Court on the question whether the  insurer’s liability for third party risks under the statutory  policy must  be held  to be  limited  to  Rs. 20,000 according  to the  relevant  legal  provision  as  it existed on  the date on which the policy came into force, or whether that  liability can  be extended  to Rs.  50,000  in accordance with  the legal provision as it stood on the date of the  accident, the  accident having  occurred during  the currency of the policy.      Allowing the appeal, ^      HELD: 1.  The material date for ascertaining the extent of liability  of the  insurer is  the date of the accrual of the cause  of action for a claim arising out of an accident, which in  general would  be the  date of  the  accident  and therefore,  the   insurer’s  liability  arising  out  of  an accident which  happens  after  March  2,  1970  has  to  be determined on the basis of the amended provisions of section 95(2) (a)  of the  Act, even  though the policy of insurance may have  been issued  prior to  the date  of the amendment, that is, prior to March 2, 1970. [249 G-H; 250A-B]      2. 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. [248 G]      3. The  application of  a law  to facts which came into existence after  that law  has  come  into  force  does  not involve giving  retrospective operation  to the  law, merely because the  facts to  which the  law is  being applied  are relatable to a contract or an instrument which had come into operation prior to the date on which the law itself had come into force. [249E-F]      4. If  the parties  to a  contract agree that one shall pay  to   the  other  damages  for  breach  of  contract  in accordance with  the law contained in any particular statute without identifying  the law  as the  provision which  is in force on  the date of the contract, the law which will apply for determining  the quantum  of damages is the one which is in force  on which the breach of contract is committed, that being the  date on which the cause of action arises, and not the law which was in force on the date on which the contract was made. [249 B-C]      In the  instant case,  the insurance  policy came  into force on  June 30, 1969 and covered the period from June 30, 1969 to  June 29, 1970. The amendment by which the statutory liability of  the insurer  was increased  from Rs. 20,000 to Rs. 50,000  came into  force on  March 2, 1970. The accident which gave  rise to  these proceedings  occurred on April 5, 1970. The  extent of  the insurer’s liability must therefore be determined  by the  application of  the law introduced by the Amendment  which had  come into force before the date of accident. [248C; 249E]      Sanjiva Shetty  S. v.  Anantha, [1978]  2 Karnataka Law Journal 227, approved.

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil Appeal No. 1282 of 1976. 246      From the  Judgment and  Decree dated  the 8th  and  9th January 1976  of the  Karnataka High  Court in  Misc.  First Appeal No. 19 of 1973.

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    K.N. Bhatt for the Appellant.      K.C. Dua for the Respondent.      The Judgment of the Court was delivered by      CHANDRACHUD, C.J. This appeal by certificate of fitness arises out of the judgment of the Karnataka High Court dated January 9, 1976 in Misc. First Appeal No. 19 of 1973.      On April 5, 1970, the appellant’s husband was driving a scooter, MYL  8574, on  the Kasturba Road, Bangalore, when a goods truck,  MYT 3298,  knocked him  dead. The owner of the truck had  taken  a  statutory  insurance  policy  with  the respondent. The  Premier Insurance  Co.  Ltd.,  Gandhinagar, Bangalore, which  was operative  from June  30, 1969 to June 29, 1970.  The appellant  filed an  application  before  the Motor Accidents  Claims Tribunal,  Bangalore, under  section 110-A of  the Motor Vehicles Act, 1939, seeking compensation for her husband’s death. The respondent denied its liability on the  ground, amongst  others, that  its  record  did  not disclose that  it had issued any insurance policy in respect of the  particular truck.  On a  consideration of the entire evidence, the Tribunal passed an award on November 20, 1972, holding  that   the  appellant   was  entitled   to  recover compensation in  the sum  of Rs.  60,000 for herself and her children.  The   Tribunal  limited   the  liability  of  the respondent-insurer to a sum of Rs. 50,000.      The respondent  filed  an  appeal  in  the  High  Court contending that  on the  date on  which the insurance policy was alleged  to  have  been  issued  by  it,  its  statutory liability was  limited to  a sum  of Rs.  20,000  only  and, therefore, the  Tribunal was  in error  in passing  an award against it  in the  sum of  Rs. 50,000.  This contention was accepted by  the High  Court and  hence this  appeal by  the claimant.      Chapter VIII of the Motor Vehicles Act, 1939 (The Act), bears the heading "Insurance of motor vehicles against third party risks".  By section  94 (1)  of the Act, no person can use a motor 247 vehicle in  a public  place, except  as a  passenger, unless there is  in force  in relation  to the use of the vehicle a policy of  insurance complying  with the requirements of the chapter. Section  95  prescribes  the  requirements  of  the insurance policy  and the  "limits of liability" thereunder. Broadly, by  sub-section (1)  of section  95,  a  policy  of insurance must  insure 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 or  them in  respect of the death of or bodily injury to any person  caused by  or arising  out of  the  use  of  the vehicle in  a public  place. Section  95 (2) (a) of the Act, with which  alone we  are  concerned  in  this  appeal,  was originally cast thus:      "95 (2)--  Subject to the proviso to sub-section (1), a                policy of insurance shall cover any liability                incurred in  respect of any one accident upto                the following limits, namely-                (a)   where the  vehicle is a vehicle used or                     adapted to  be used  for the carriage of                     goods,  a   limit  of   twenty  thousand                     rupees."      This section  was amended  by Amendment Act 100 of 1956 which, inter  alia, introduced  therein the  words "in  all" after  the  words  "twenty  thousand  rupees".  We  are  not concerned with that amendment. What we are concerned with is the amendment  made to  clause (a)  of section 95 (2) by the Motor Vehicles (Amendment) Act 56 of 1969, which substituted

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therein the  word "fifty"  for the word "twenty". Section 95 (2) (a) so amended reads thus:      "95 (2)--  Subject to the proviso to sub-section (1), a                policy of insurance shall cover any liability                incurred in  respect of any one accident upto                the following limits, namely:-                (a)   where the vehicle is a goods vehicle, a                     limit of  fifty thousand rupees in all..                     ..." Thus, the insurer’s liability under the statutory policy was increased by  this amendment  from twenty thousand rupees to fifty thousand  rupees. The  amendment came  into  force  on March 2, 1970. 248      The question  which arises for consideration is whether the insurer’s  liability for  third party  risks  under  the statutory policy  must be  held to  be limited to Rs. 20,000 according to  the relevant  legal provision as it existed on the date  on which  the policy  came into force or, whether, that liability  can be  extended to Rs, 50,000 in accordance with the  legal provision  as it  stood on  the date  of the accident, the  accident having  occurred during the currency of the  policy. The relevant dates which have to be borne in mind in  this behalf  are these:  The insurance  policy came into force on June 30, 1969 and covered the period from June 30, 1969  to June  29, 1970;  the  amendment  by  which  the statutory liability  of the  insurer was  increased from Rs. 20,000 to  Rs. 50,000  came into force on March 2, 1970, and the accident  which gave  rise to these proceedings occurred on April 5, 1970.      The High  Court, in  its judgment,  has referred to the principles governing  retrospective of statutes and has held by the  application of  those principles  that the amendment introduced by  Amending Act  56 of  1969 is  prospective  in nature and  cannot be  given any  retrospective  effect.  We consider that  the High  Court, with  respect, has failed to appreciate the  true nature  of the  issue  before  it.  The certificate of  insurance, Exhibit  p.9, which was issued by the respondent’s  agent on  May 31, 1969 for the period June 30, 1969  to June 29, 1970 shows that the respondent-insurer had undertaken  "liability as  the one under Chapter VIII of the Motor  Vehicles Act,  1939". That must mean liability as determinable under  Chapter VIII  at the relevant time, that is to  say, at the time when the liability arises. 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 insurer’s  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.  The contracting parties  did not  incorporate the  provisions of Chapter VIII  of the  Act in their contract. That is to say, they did not identify the liability of the promisor on 249 the basis of the provisions of Chapter VIII as they stood on the date when the contract was made. They merely referred to the provisions  of Chapter VIII, which means "the provisions of Chapter  VIII in force at any given time", the given time

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being the  date on  which  the  right  to  sue  accrues  or, correspondingly, the  liability arises.  If the parties to a contract agree  that one  shall pay to the other damages for breach of  contract in  accordance with the law contained in any particular  statute, without  identifying the law as the provision which is in force on the date of the contract, the law which  will apply for determining the quantum of damages is the one which is in force on the date on which the breach of contract  is committed,  that being the date on which the cause of  action arises,  and not the law which was in force on the date on which the contract was made.      Thus, there  is no  question here,  as the  High  Court thought, of  giving retrospective operation to the amendment introduced  by  Amending  Act  56  of  1969,  by  which  the statutory liability of the insurer was increased from twenty thousand rupees  to fifty  thousand rupees  with effect from March 2,  1970. That  question  would  have  arisen  if  the accident had  happened prior  to  that  date.  The  accident having happened  on April  5, 1970,  the question  as to the extent of  the insurer’s liability must be determined by the application of the law introduced by the Amendment which had come into  force  before  the  date  of  the  accident.  The application of  a law  to facts  which come  into  existence after that  law has  come into force does not involve giving retrospective operation to the law, merely because the facts to which  the law  is  being  applied  are  relatable  to  a contract or  an instrument  which had  come  into  operation prior to  the date  on which  the law  itself had  come into force.      We endorse  the view  taken by  the Full  Bench of  the Karnataka High Court in Sanjiva Shetty S. v. Anantha.(1) The Full Bench  overruled the  judgment which is under appeal in the instant  case  and  held  that  the  material  date  for ascertaining the  extent of  liability of the insurer is the date of  the accrual  of the  cause of  action for  a  claim arising out  of an  accident, which  in general would be the date of  the accident and therefore, the insurer’s liability arising out  of an  accident which  happens after  March  2, 1970, has to be 250 determined on the basis of the amended provisions of section 95 (2)  (a) of  the Act, even though the policy of insurance may have  been issued  prior to  the date  of the amendment, that is, prior to March 2, 1970.      For these  reasons, we  set aside  the judgment  of the High Court, restore the award of the Tribunal dated November 20, 1972 and allow the appeal with costs throughout. N.V.K.                                       Appeal allowed. 251