IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL A.O. No. 1212 of 2001 (Old No. 228/1989) H.C. Agrawal …Appellant Versus Smt. Jasuli Devi …Respondent With A.O. No. 512 of 2001 (Old No. 229/1989) H.C. Agrawal …Appellant Versus Smt. Deoki Devi …Respondent Hon’ble Tarun Agarwala, J. An accident took place on 2nd January, 1987 on Kashipur-Ranikhet Road. Sri Bhola Dutt Bhatt and Sri Moti Ram Tiwari were walking on the extreme left side of the road. The offending truck was driven rashly and negligently swerved to its right and crushed Sri Bhola Dutt Bhatt and Sri Moti Ram Tiwari. As a result of this accident, Sri Moti Ram Tiwari died on the spot and Sri Bhola Dutt Bhatt died in the hospital on the same day. The heirs of the deceased subsequently filed a claim application under Section 110-A of the Motor Vehicles Act, 1939. The Tribunal, on the basis of the evidence led by the parties, gave an award dated 26th November, 1988. The Tribunal held that the accident occurred on account of the negligence in driving the truck and that the victims did not contribute to any negligence and were not responsible for the accident. The Tribunal found that the vehicle was insured but had a limited liability and accordingly, directed compensation amounting to Rs.1,80,000/- along with interest at the rate of 10% per annum to be paid to the claimants of Sri Bhola Dutt Bhatt and also awarded a sum of 2 Rs.2,00,000/- along with interest at the rate of 10% per annum to the claimants of Sri Moti Ram Tiwari. The Tribunal held that the insurance company would pay a sum of Rs.1,50,000/- and the owner will pay the balance amount of Rs.30,000/- to the claimants of deceased Sri Bhatt. The Tribunal further held that the insurance company will pay a sum of Rs.1,50,000/- and the owner will pay the balance amount of Rs.50,000/- to the claimants of the deceased Sri Tiwari. This bifurcation of the compensation was made on account of the fact that the Tribunal held that the liability of the insurance company on the basis of the policy was limited to Rs.1.50 lacs in view of Section II-1 (i) of the Policy which is necessary to meet the requirements of the Motor Vehicles Act is Section 95(2)(b) of the Act. The insurance company accepted the award and paid the compensation and did not prefer any appeal. The owner also paid the entire amount of his share to the claimants under protest and has preferred two separate appeals, which are being decided together. Heard Sri Bindesh Kumar Gupta, the learned counsel for the appellant and Sri T.A. Khan, the learned counsel for respondent-Insurance Company. The only issue argued before this Court is whether the insurance policy issued in favour of the appellant limited the liability of the insurance company or not. According to the appellant, a higher premium was paid by the appellant and therefore, the liability of the insurance company was unlimited. On the other hand, the insurance company contends that in view of Section 95(2)(b) of the Act, no award in 3 excess of Rs.1.50 lacs could be awarded against the insurance company. In order to appreciate the contentions of the rival parties, it would be essential to peruse a few provisions of the Act. Chapter VIII of the Act relates to the insurance of motor vehicle against third party risk. The object of the provisions contained in Chapter VIII is to ensure that third parties who suffer due to user of the motor vehicle should be able to get damages for injuries suffered and that the recoverability of the damages should not depend on the financial condition of the driver of the vehicle who caused the injuries. Section 94 of the Act casts a duty upon the owner of the motor vehicle to keep it insured and, upon failure to do so, the owner can be prosecuted under Section 125 of the Act. The combined effect of the provisions of Sections 94, 95 and 96 of the Act is, that the insurance company pursuant to ‘Act Policy’ is bound to cover certain risk on fulfillment of certain conditions. Further, the insurance company may choose to cover other risks by negotiations though the insurance company is not bound to cover under the statute. The right of a third party to get indemnified can be exercised only against the insurer of the vehicle involved in an accident. For facility, Section 95(2)(a) and (b), which is relevant to the issue, is extracted hereunder: “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 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, in respect 4 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;]” A perusal of the aforesaid provision makes it clear that the liability of the vehicle as on the date of the accident could not exceed Rs.1.50 lacs. It was, however, contended by the appellant that it was open to the insured to take a policy covering a higher risk than contemplated under Section 95 (2)(b) and consequently, the said clause had to be read subject to the terms and conditions of the policy. Before proceeding further, a basic question arises as to what kind of insurance policy applies to Section 95(2)(b) of the Act. The Guide Book for Motor Insurance Underwriting indicates three basic types of insurance policy, namely, Comprehensive Insurance Policy, Liability to the Public Risk and Act Liability Insurance Policy. The Comprehensive Insurance Policy covers loss or damage to the insured’s vehicle by accidental external means or malicious acts, fire, external explosion, lightning, self-ignition, burglary, house-breaking or theft, riot, strike, flood, inundation typhoon, hurricane, cyclone, hailstorm, earthquake (fire and damage). Also whilst in transit by road, rail, inland, waterway, lift elevator or air subject to the limitations mentioned in the policy. The policy also covers the Insured’s liability at law to the Public for 5 loss of life or damage to their property caused by the vehicle insured. The Liability to the Public Risk Policy, which is a kind of a third party risk policy, provides indemnity to the Insured’s liability at law to the Public for loss of life or damage to their property caused by the vehicle insured. The Act Liability Insurance Policy provides indemnity to the Insured against legal liability for claims by the Public in respect of accidental personal injury and/or damage to any property of Third Party caused by the insured vehicle in a public place, as is necessary to meet the requirements of Section 95 of the Motor Vehicles Act, 1939. A perusal of the aforesaid Policies indicates that the Comprehensive Insurance Policy also covers third party liability insurance policy, that is to say, the policy also covers the Insured’s liability at law to the Public for loss of life or damage to their property caused by the vehicle insured. A perusal of the aforesaid policy also indicates that in order to meet the mandatory requirement of Section 95 of the Motor Vehicles Act, the Act Liability Insurance Policy is sufficient to cover the said requirement of the Act. Consequently, an Act Liability Insurance policy by itself covers the requirement of Section 95 of the Motor Vehicles Act. It is, however, open to an insured to take a policy covering a higher risk, such as, Liability to Public Risk or Comprehensive Insurance Policy, which contemplates payment of a higher premium. At this stage, the insurance premium as per the India Motor Tariffs needs to be looked into. At the 6 time of the accident, a premium for the Act Liability Insurance Policy was Rs.200/-. For the Liability to the Public Risk Policy, the premium was Rs.240/- and for the Comprehensive Insurance Policy, it was still higher. For an Act Liability Policy, where a premium of Rs.200/- was paid, the liability of the insurance company was limited to Rs.1.50 lacs. Consequently, for an insurance of Liability to Public Risk where premium of Rs.240/- is paid, it is apparently clear that the liability cannot be limited to Rs.1.50 lacs. It has to be more than Rs.1.50 lacs, otherwise, it would be absurd that a different policy is taken which has a higher premium, but the liability of the insurance company is still limited to Rs.1.50 lacs. Section 95(2)(b) of the Act makes it apparently clear that for the purpose of the Act and in order to meet the requirements of the said provision of Section 95(2)(b), every motor vehicle is required to be mandatorily insured and, for that, at the relevant moment of time, the insurance premium was Rs.200/- and the liability of the insurance company was fixed to a maximum of Rs.1.50 lacs, but it was open to an insurer to take a policy covering a higher risk and pay a higher premium. Consequently, where a higher premium is paid, the liability of the insurance company exceeds Rs.1.50 lacs or it becomes unlimited. In the case in hand, the appellant had taken a comprehensive policy. The said policy is on record. The relevant provision of the policy, which is Section II (1)(i) and (ii), is extracted hereunder: “Liability to Third Parties (1)- Subject to the Limits of Liability the Company will indemnify the Insured against all sums including the claimants cost and expenses which the 7 Insured shall become legally liable to pay in respect of (i) death or bodily injury to any person caused by or arising out of the use (including the loading and/or unloading) of the Motor Vehicle. (ii) damage to property caused by the use (including the loading and/or unloading) of the Motor Vehicle.” The schedule of the policy indicates the limits of liability and the amount of premium paid. For facility, the said schedule is extracted hereunder: “Limits of Liability- (a) Limit of the amount of the Company’s liability under Section 11-1(i) in respect of any one accident. Such amount as is necessary to meet the requirements of the Motor Vehicles Act, 1939. (b) Limits of the amount of the Company’s liability under Section II-1 (ii) in respect of any one claim or series of claims arising out of one event : Rs. 1,50,000 Insured’s estimated value of Vehicle Non- Electrical Accessories Electrical & Electronic Accessories Total I.E.V. Policy No. 22382/302/00128/86/30/00035 Rs.50,000 Rs.---- Rs.---- Rs.50,000 SCHEDULE OF PREMIUM A : OWN DAMAGE BASIC as per ENDT IMT 23 Add: 3.40% on Extra Electrical and Electronics fittings as per ENDT. IMT 71 Add : 1% on the I.E.V. Add : Own Damage : Premium for Trailer Add : ………% on I.E.V. of Trailor Less : Exclusion of Riots & Strike (0.15% on total IEV including trailer) Delete ENDT. IMT-21 Less : Exclusion of Earthquake etc. (0.10% on total IEV including trailer) Delete ENDT. IMT-22 Less : Exclusion of Flood etc. (0.15% on total IEV including trailer) Delete ENDT. IMT-22 Less :…………% for voluntary excess of Rs……………….(Max. Rs…………) as per ENDT. IMT 1 Add:…………………… Less : 30% No Claim Bonus Less : 10% Special Discount Absolute Net Premium ‘A’ Rs.1850 Rs. Rs.500 Rs. Rs. Rs. Rs. Rs. Rs.705 Rs. Rs. Rs.1645 B: LIABILTIY TO PUBLIC RISK T.P. Premium for Trailer Add for L.L. to paid driver and/or Cleaner as per ENDT. IMT. 16 Add for increased T.P. Limts under Section II 1 (i) Unlimited Section II-1 (ii) Rs……………. Add : 5 passenger @ 30 Rs. P.H. Add : ……………………… Less : 10% Special Discount Absolute Net Premium ‘B’ Absolute Net Premium ‘A’ Total Net Premium A + B Net Premium Due (Round Off) Rs.240 Rs. Rs.16 Rs. Rs. Rs.150 Rs. Rs. Rs.406 Rs.1645 Rs.2051 Rs.2051 8 A perusal of the policy, as indicated aforesaid, would indicate that the liability undertaken with regard to the death or bodily injury to any person caused by or arising out of the use including loading and/or unloading of the motor vehicle falling under Section II (1)(i) has been confined to such amount as is necessary to meet the requirements of the Motor Vehicles Act. This liability is as per the provision of Section 95(2)(b) of the Act, which, at the relevant time, was Rs.1.50 lacs. However, the details of the premium indicate that an additional premium was paid, namely, Rs.240/- instead of statutory premium of Rs.200/- and therefore, an additional premium was paid by the owner of the vehicle. Consequently, an irresistible conclusion is drawn that the appellant, in the instant case, had taken a comprehensive policy with an unlimited liability in addition to the statutory liability contemplated under Section 95(2)(b) of the Act. In National Insurance Co. Ltd. New Delhi vs. Jugal Kishore and others, (1988) 1 SCC 626, the Supreme Court held that merely because a comprehensive policy was taken and a higher premium was paid does not make the liability of the insurance company unlimited. The Supreme Court held: “6..……….Comprehensive insurance of the vehicle and payment of higher premium on this score, however, do not mean that the limit of the liability with regard to third party risk becomes unlimited or higher than the statutory liability fixed under sub-section (2) of Section 95 of the Act. For this purpose a specific agreement has to be arrived at between the owner and the insurance company and separate premium has 9 to be paid on the amount of liability undertaken by the insurance company in this behalf.” In New India Assurance Co. Ltd. vs. C.M. Jaya and others, (2002) 2 SCC 278, a Constitution Bench of the Supreme Court approved the decision in Jugal Kishore’s case (supra). The Supreme Court held that the mere fact that the insurance policy was a comprehensive policy would only entitle the owner to claim reimbursement of the entire amount of loss or damages suffered up to the estimated value of the vehicle and that comprehensive policy would not mean that the limit of liability with regard to third party risk becomes unlimited or higher than the statutory liability. In order to increase the statutory liability, a specific agreement was required to be executed between the insured and the insurer. The Supreme Court further held that it was open to the insured to pay an additional higher premium and get a higher risk covered in respect of a third party. The Supreme Court held as under: “8. Thus, a careful reading of these decisions clearly shows that the liability of the insurer is limited, as indicated in Section 95 of the Act, but it is open to the insured to make payment of additional higher premium and get higher risk covered in respect of third party also. But in the absence of any such clause in the insurance policy the liability of the insurer cannot be unlimited in respect of third party and it is limited only to the statutory liability. This view has been consistently taken in the other decisions of this Court.” 10 The Supreme Court further held: “10.………..A statutory liability cannot be more than what is required under the statute itself. However, there is nothing in Section 95 of the Act prohibiting the parties from contracting to create unlimited or higher liability to cover wider risk. In such an event, the insurer is bound by the terms of the contract as specified in the policy in regard to unlimited or higher liability as the case may be. In the absence of such a term or clause in the policy, pursuant to the contract of insurance, a limited statutory liability cannot be expanded to make it unlimited or higher. If it is so done, it amounts to re- writing the statute or the contract of insurance which is not permissible.” In National Insurance Co. Ltd. vs. Keshav Bahadur and others, (2004) 2 SCC 370, the Supreme Court reiterated and held: “7. In case of insurer-appellant not taking any higher liability by accepting higher premium, the liability is neither unlimited nor higher than the statutory liability fixed under Section 95(2) of the Act. Even if a vehicle is the subject matter of comprehensive insurance and a higher premium is paid on that score, limits of the liability with regard to third party risk does not become unlimited or higher beyond the statutory liability fixed. For this purpose, a specific agreement has to be arrived at between the insured and the insurer and separate premium has to be paid in respect of additional amount of liability undertaken by the insurer in that regard. This position was highlighted by this Court in National Insurance Co. Ltd. v. Jugal Kishore. In New India Assurance Co. Ltd. v. C.M. Jaya and others a Constitution Bench approved the view taken in Shanti Bai and Jugal Kishore. It was held that in case of insurer not taking any higher liability by accepting higher premium for payment of compensation to third party, the insurer would be liable to the extent limited under Section 95(2) of the Act and would not be liable to pay the entire amount of compensation awarded.” 11 In view of the position settled by the Supreme Court, it is clear from a perusal of the insurance policy in the instant case that a higher premium of Rs.240/- was charged for “Liability to the Public Rsk” as against a lower premium of Rs.200/- for “Act Liability Insurance Policy” under the relevant schedule of the India Motor Tariffs applicable at the relevant moment of time and thus, the liability of the insurance company was unlimited. The Court is of the opinion that the Tribunal committed an error in holding that the liability of the insurance company was limited to Rs.1.50 lacs. In the opinion of the Court, the policy taken by the appellant specifically undertook unlimited liability to indemnify the insured towards the third party. In the light of the aforesaid, the Court finds that the award of the Tribunal limiting the liability of the insurance company to Rs.1.50 lacs is patently erroneous. As is clear from the policy, a higher premium was paid and consequently, the liability of the insurance company becomes unlimited. The Court, consequently, holds that the insurance company was liable to pay the entire amount to the claimants of the deceased pursuant to the award made by the Tribunal. Since the appellant has paid his share of the amount pursuant to the award to the claimants, the appellant is entitled for a refund from the insurance company. The award of the Tribunal is modified accordingly. The appeals are allowed. (Tarun Agarwala, J.) 28-12-2011 Salim/