IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 04..03..2009 C O R A M The Honourable Mrs. Justice PRABHA SRIDEVAN and The Honourable Mr. Justice K.K. SASIDHARAN C.M.A. No.312 of 2009 Royal Sundaram Alliance Insurance Co. Ltd., 4A, 4th Floor, Thirumalai Towers, 723, Avanashi Road, Coimbatore-641 018. .. Appellant/II Respondent versus 1. A. Meenakshi 2. Minor C.A. Sanjay Vaithiyanathan 3. Minor C.A. Suganya Rajalakshmi 4. Rajalakshmi (Minors represented by mother and next friend A. Meenakshi) 5. Jayanthi Saravanan .. Respondents/Petitioners and 3rd Respondent Prayer : Civil Miscellaneous Appeal filed under section 173 of M.V.Act 1988 against the judgment and decree dated 13.3.2008 made in M.C.O.P. No.157 of 2005 on the file of the Motor Accidents Claims Tribunal, Fast Track Court No.2, Additional District-cum-Sessions Court, Coimbatore. For Appellant : Mr. N. Vijayaraghavan For Respondents-1 to 4 : Mrs. Mythili Suresh https://hcservices.ecourts.gov.in/hcservices/ J U D G M E N T Prabha Sridevan, J. The deceased was a passenger in the insured vehicle and on account of the negligence of the driver who was also the owner of the vehicle, an accident occurred on 30.7.2004. The accident resulted in the deaths of the driver and the three passengers. The driver and two persons died at the hospital, while one passenger died on the spot. The claimants are the legal heirs of the passenger who died on the spot. 2. The legal question that arises for consideration in this appeal is whether the insurance company is liable to pay compensation for the death of the passengers who travelled in the car and whether the insurance policy covers the liability to a gratuitous passenger. We also have to decide what is a just and reasonable compensation for the claimants. According to the claimants they are liable to be compensated in a sum of Rs.25,00,000/-. The insurer has taken the specific point that on payment of additional premium, the insurance policy in this case has been extended to cover personal accident to five unnamed persons for a capital sum insured of Rs.70,000/- each in terms of (India Motor Tariff) IMT.16 and therefore,even if the insurance company is liable its liability is restricted to Rs.70,000/- and nothing more. 3. The Motor Accidents Claims Tribunal was not inclined to accept the case of the insurance company that there was only a limited liability. It awarded a compensation of Rs.19,10,000/-. Against that, this appeal has been filed. We have heard the rival submissions, gone through the copies of the relevant documents. 4. Every case has to be decided according to the facts of the case. The following facts in this case are the basis for our decision : (a) The deceased was a gratuitous passenger in the insured vehicle. (b) The Policy is a Package/Comprehensive Policy. (c) The vehicle is a private car. In A.I.R. 2002 S.C. 834 [Haryana Financial Corporation vs. Jagdamba Oil Mills], the Supreme Court quoted the following words of Lord https://hcservices.ecourts.gov.in/hcservices/ Denning in the matter of applying precedents, which have become locus classicus : "Each 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 Cardozo) 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." Precedent 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." These words have subsequently been reiterated by various courts in a number of judgments. So, in a case like this, the decisions which involve an Act Policy, a goods vehicle or a public transport vehicle may be relevant, but they are not binding. 5. Section 95 of the Motor Vehicles Act, 1939 reads as follows : "95. 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 [or by a co-operative society allowed under Section 108 to transact the business of an 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 or damage to any property of a third party caused by or arising out of the use of the vehicle in a public place; ... (2) Subject to the proviso to sub-section (1), a policy of insurance shall cover any liability incurred in respect of any one accident up to the following limits, namely -- (a)where the vehicle is a goods vehicle, a limit of [one lakh and fifty thousand rupees] in all, including the liabilities, if any, arising under the Workmen's Compensation Act, 1923 (8 of 1923), in https://hcservices.ecourts.gov.in/hcservices/ respect of the death of, or bodily injury to, employees (other than the driver), not exceeding six in number, being carried in the vehicle;] (b) where the vehicle is a vehicle in which passengers are carried for hire or reward or by reason of or in pursuance of a contract of employment, -- (i) in respect of persons other than passengers carried for hire or reward, a limit of fifty thousand rupees in all; (ii) in respect of passengers, a limit of fifteen thousand rupees for each individual passenger;]; (c) save as provided in clause (d), where the vehicle is a vehicle of any other class, the amount of liability incurred; (d) irrespective of the class of the vehicle, a limit of rupees [six thousand] in all in respect of damage to any property of a third party]. ... (5) Notwithstanding anything elsewhere contained in any law, a person issuing a policy of insurance under this section shall be liable to indemnify the person or classes of person specified in the policy in respect of any liability which the policy purports to cover in the case of that person or those classes of person." The relevant section after the 1988 Act came into force is Section 147, and it reads as follows : "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 lliability 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; ... https://hcservices.ecourts.gov.in/hcservices/ (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 thirty 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. ..." 6. So the law relating to Requirements of Policies and Limits of Liability is set down in Section 147 of the Motor Vehicles Act, 1988. This corresponds to Section 95 of the Motor Vehicles Act, 1939. Section 147(1)(i) provides that in order to comply with the requirements of the said Chapter, an insurance policy would cover any liability incurred by the insured in respect of the death of or bodily injury to any person, including owner of the goods etc. The section is quite wide in its scope and meaning and the object of the legislature has to be given the widest, most effective and practical meaning so that the net of coverage is extended to as many classes of persons relating to as many types of vehicles without exception. Courts are obliged to ensure that as many classes of motor accident victims receive the benefit of compensation, unless it is specifically restricted by the Act or it is specifically restricted by the contract, without violating the provisions of the Act. The insurer can and may contract to cover risks and liabilities which he is not bound to under the Act. To put it in other words, he can expand his net of coverage far beyond the statute-imposed limits, but he can not restrict his net of coverage contrary to the statute. This is how we must advance the object of the Act. Then again we must understand who is a " third party". A third party is one who is neither the insurer nor the insured. He is simply a third party. By the same logic, third party coverage must include all third parties, unless by doing so we breach the covenants of the Policy, or include specific categories of "third parties" who are excluded by the Section. 7. In A.I.R. 1997 J & K 40 [New India Assurance Co. vs. Shakuntla Devi], a Division Bench of the Jammu and Kashmir High Court held that https://hcservices.ecourts.gov.in/hcservices/ Section 147 of the Act is quite comprehensive in scope and meaning. It has to be given wider, effective and practical meaning so that the object of the legislature which was faced with divergent views of various courts of the country giving different interpretation to the provisions of Section 95 of the 1939 Act, causing immense harm to many categories of persons by disentitling them from claiming compensation either from the insurer or the insured or both, in the facts and circumstances of the case, is given effect to. The learned Judges held that the legislature clearly intended that every policy of insurance is statutorily required to cover the risk of liability in respect of classes of persons relating to all types of vehicles without exception and with no defence to the insurance company disclaiming the liability with respect to particular class of persons or particular kind of vehicles. 8. Motor Insurance in India till date is Tariff driven. Section 64U of the Insurance Act provides for the establishment of the Tariff Advisory Committee to control and regulate the rates, advantages, terms and conditions that may be offered by insurers. Section 14 of the I.R.D.A. Act which deals with the duties, powers and functions of the Authority, provides in sub-section (2)(i) that the powers and functions include the control and regulation of (rates, advantages, terms and conditions), not so controlled by the Tariff Advisory Committee under Section 64U. General Regulation No.1 of IMT states that Motor insurance in India is transacted within the purview of the IMT. The Tariff Advisory Committee has laid down rules and regulations, rates, terms and conditions, advantages for transaction of insurance business in India in accordance with the provisions of Part-2B of the Insurance Act, 1938. It is stated in the IMT that the 2002 Tariff supersedes the provisions of the IMT in existence upto 30.6.2002 and that they are binding on all concerned and that there cannot be any breach of the tariff, especially a breach of the provisions of the Insurance Act, 1938. The insurance companies are also required to issue policies in accordance with the IMT provisions only. 9. The appellant-Insurance Company in the present case, which is a private insurance company, is no exception. Standard forms are prescribed for contracts of insurance which are set down in the insurance policy. Therefore, our decision in this case which involves the risk or liability to a gratuitous passenger travelling in a private car would apply to a pillion rider carried on a two wheeler gratuitously. According to the claimant, it is only cases involving Act Policies that the risk of such victims are not covered. In a Package Policy or a Comprehensive Policy, such gratuitous occupants are automatically covered and if additional premium is specifically paid, that is in addition to the compensation payable https://hcservices.ecourts.gov.in/hcservices/ under the Act. Whereas, according to the insurance company, the risks to such victims are not covered by Section 147 of the Act and even under Package Policies, they are covered only and to the extent of the additional premium paid. 10. A copy of the insurance policy in question was produced before us. The insured is G. Saravanan who was driving the car on the fateful day. The policy is a "Carshield Private Car Package Policy". The limitations as to use and limits of liability read as follows :- "Limitations as to use : The Policy covers use of the vehicle for any purpose other than : (a) Hire or Reward, (b) Carriage of goods (other than samples or personal luggage), (c) Organised racing, (d) Pace making, (e) Speed testing, (f) Reliability Trials, (g) Any purpose in connection with Motor Trade. Limits of liability : Under Section II-1(i) of the Policy Death of or bodily injury Such amount as is necessary to meet the requirements of the Motor Vehicles Act, 1988. Under Section II-1(ii) of the Policy Damage to Third Party Property Rs.7,50,000/-. PA Cover for Owner Driver under section III CSI Rs.2,00,000/-". The package premium paid by the insured is "Own Damage + Liability". Under the head "Liability", it is stated "Basic premium including premium for TPPD (Third Party Property Damage)". In addition, they had also paid premium under Personal Accident Benefits (Section III). Section II of the Policy deals with liability to third parties and it reads as follows : "1. Subject to the limits of liability as laid down in the Schedule hereto, the Company will indemnify the insured in the event of an accident caused by or arising out of the use of the Private Car against all sums which the Insured shall become legally liable to pay in respect of :- (i) death of or bodily injury to any person including occupants carried in the Private Car (provided such occupants are not carried https://hcservices.ecourts.gov.in/hcservices/ for hire or reward) but except so far as it is necessary to meet the requirements of the Motor Vehicles Act, the Company shall not be liable where such death or injury arises out of and in the course of the employment of such person by the Insured. ..." In the Policy Schedule, we do not see any limits to the liability with regard to third party occupants". 11. To trace the history of risk of gratuitous passengers in a private car, 1977 A.C.J. 343 [Pushpabai Purshottam Udeshi vs. Ranjit Ginning and Pressing Co.] may be taken as a benchmark. In that case, a passenger who was travelling in a car died in the accident. The Supreme Court held that Section 95 of the Motor Vehicles Act, 1939 as amended by Act 56 of 1969 is based on the English Acts and they did not require the users of motor vehicles to be insured in respect of liability for death or injury to passengers except a vehicle in which passengers are carried for hire or reward. The English Law developed subsequently, but the Indian law existing on the date of this judgment had not changed. In the above case, the Supreme Court observed as follows : "20. Sections 95(a) and 95(b)(i) of the Motor Vehicles Act adopted the provisions of the English Road Traffic Act, 1960, and excluded the liability of the insurance company regarding the risk to the passengers. Section 95 provides that a policy of insurance must be a policy which insures the persons against any liability which may be incurred by him in respect of death 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. The plea that the words "third party" are wide enough to cover all persons except the person and the insurer is negatived as the insurance cover is not available to the passengers made clear by the proviso to Sub-section which provides that a policy shall not be required: (ii) except where the vehicle is a vehicle in which passengers are carried for hire or reward or by reason of or in pursuance of a contract of employment, to cover liability in respect of the death of or bodily injury to persons being carried in or upon or entering or mounting or alighting from the vehicle at the time of the occurrence of the event out of which a claim arises. Therefore it is not required that a policy of insurance should cover risk to the passengers who are not carried for hire or reward. As under Section 95 the risk to a passenger in a vehicle who is not carried for hire or reward is not required to be insured the plea of https://hcservices.ecourts.gov.in/hcservices/ the counsel for the insurance company will have to be accepted and the insurance company held not liable under the requirements of the Motor Vehicles Act. 21. The insurer can always take policies covering risks which are not covered by the requirements of Section 95. In this case the insurer had insured with the insurance company the risk to the passengers. By an endorsement to the policy the insurance company had insured the liability regarding the accidents to passengers in the following terms: In consideration of the payment of an additional premium it is hereby understood and agreed that the company undertakes to pay compensation on the scale provided below for bodily injury as hereinafter defined sustained by any passenger... The scale of compensation is fixed at Rs. 15.000. The insurance company is ready and willing to pay compensation to the extent of Rs. 15,000 according to this endorsement but the learned Counsel for the insured submitted that the liability of the insurance company is unlimited with regard to risk to the passengers. The counsel relied on Section II of the Policy which relates to liability to third parties. The clause relied on is extracted in full : Section II. Liability to Third Parties. 1. The Company will indemnify the insured in the event of accident caused by or arising out of the use of the Motor Car against all sums including claimant's costs and expenses which the insured shall become legally liable to pay in respect of (a) death of or bodily injury to any person but except so far as is necessary to meet the requirements of Section 95 of the Motor Vehicles Act, 1939, the Company shall not be liable where such death or injury arises out of and in the course of the employment of such person by the insured. It was submitted that the wording of Clause 1 is wide enough to cover all risks including injuries to passengers. The clause provides that the Company will indemnify the insured against all sums including claimant's costs and expenses which the insured shall become legally liable. This according to the learned Counsel would include legal liability to pay for risk to passengers. The legal liability is restricted to Clause 1(a) which states that the indemnity is in relation to the legal liability to pay in respect of death of or bodily injury (to any person but except so far as is necessary to meet the requirements of Section 95 of the Motor https://hcservices.ecourts.gov.in/hcservices/ Vehicles Act, the Company shall not be liable where such death or injury arises out of and in the course of the employment of such person by the insured. Clauses 1 and 1(a) are not Very clearly worded but the words "except so far as is necessary to meet the requirements of Section 95 of the Motor Vehicles Act, 1939", would indicate that the liability is restricted to the liability arising out of the statutory requirements under Section 95. The second part of Clause 1 (a) refers to the non-liability for injuries arising in the course of employment of such person. The meaning of this Sub-clause becomes clear when we look to the other clauses of the insurance policy. The policy also provides for insurance of risks which are not covered under Section 95 of the Act by stipulating payment of extra premium These clauses would themselves indicate that what was intended to be covered under Clauses 1 and 1(a) is the risk required to be covered under Section 95 of the Motor Vehicles Act. 22. On a construction of the insurance policy we accept the plea of the insurance company that the policy had insured the owner only to the extent of Rs. 15,000 regarding the injury to the passenger. In the result we hold that the liability of the Insurance company is restricted to Rs. 15,000. There shall be a decree in favour of the claimants/appellants to the extent of Rs. 27,500 against the respondents out of which the liability of the insurance company will be restricted to Rs. 15,000. The appeal is allowed with the costs of the appellant which will be paid by the respondents in equal share." This judgment was delivered on 25.3.1977. We specifically note the words used by the Supreme Court that the insured can always take policies covering risks which are not covered by the requirements of Section 95 of the 1939 Act. 12. Soon thereafter, the Tariff Advisory Committee took a decision which is very important for deciding the present issue and which also totally altered the effect of the decision in Pushpabai's case (supra). This is explained in detail by the Gujarat High Court in 1981 A.C.J. 277 [Harshavardhatiya Rudraditya vs. Jyotindra Chimanlal Parikh]. There, the deceased was a gratuitous passenger. There, as in the present case, the insurance policy was a Comprehensive Policy. At that time, IMT.5 read as follows : "In consideration of the payment of an additional premium, it is hereby understood and agreed that the Company undertakes to pay compensation on the scale provided below for bodily injury as hereinafter defined sustained by any passenger other than the insured and/or his paid driver attendant or cleaner and/or a person in the employment of the insured coming within the scope of the Workmen's Compensation Act, 1923 and subsequent amendments of the said Act and engaged in and upon the service of the insured at the time such https://hcservices.ecourts.gov.in/hcservices/ injury is sustained whilst mounting into dismounting from or travelling in but not driving the motor car and caused by violent accidental external and visible means which independently of any other cause shall within three calendar months of the occurrence of such injury result in : Scale of compensation (1) Death ... Rs. 15,000.00 (2) ... ... ... ... ... ... " The counsel for the appellant produced before the Gujarat High Court a communication issued by the Tariff Advisory Committee to the insurers carrying on general insurance business in the Bombay Region, which is in the following terms : "TARIFF ADVISORY COMMITTEE BOMBAY REGIONAL COMMITTEE Circular M.V. No. 1 of 1978 Bombay, 17th March, 1978 Insurance company's liability in respect of gratuitous passengers conveyed in a private car - standard form for private car comprehensive policy - section ii - liability to third parties. I am directed to inform insurers that advices have been received from the Tariff Advisory Committee to the effect that since the industry had all these years been holding the view liability (sic)