FA/1161/2008 1/29 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD FIRST APPEAL No. 1161 of 2008 With CIVIL APPLICATION No. 3184 of 2008 With FIRST APPEAL No. 1162 of 2008 With CIVIL APPLICATION No. 3185 of 2008 With FIRST APPEAL No. 368 of 2008 With CIVIL APPLICATION No. 1199 of 2008 With FIRST APPEAL No. 195 of 2008 For Approval and Signature: HONOURABLE MR.JUSTICE D.H.WAGHELA Sd/- ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? 1 & 2 YES; 3 to 5 NO ========================================================= ICICI LOMBARD GENERAL INSURANCE CO LTD - Appellant(s) Versus ASHABEN GAUTAMBHAI VALA & 2 - Defendant(s) ========================================================= Appearance : MS MEGHA JANI for Appellant Insurance Company MR SUNIL B PARIKH and MR MEHUL M MEHTA for Respondents ========================================================= CORAM : HONOURABLE MR.JUSTICE D.H.WAGHELA Date : 14/05/2008 FA/1161/2008 2/29 JUDGMENT CAV JUDGMENT 1. All these appeals under section 173 of the Motor Vehicles Act, 1988 ("the Act" for short), having raised a common issue, they are heard and disposed by this common judgment. The appeals are preferred from the orders made by Motor Accident Claims Tribunals in applications all of which were filed under section 140 of the Act and were allowed. The appellant-insurer has raised the sole common issue and objection that the injured victim of the accident in each case was a pillion rider of the motorcycle involved in the accident and, therefore, the insurer was not legally liable to indemnify the insured and pay compensation. In each case, the accident had happened in the year 2006 or 2007 and, therefore, the new India Motor Tariff which superseded the India Motor Tariff in force upto 30.6.2002 was applicable. 2. Learned counsel for the appellant, relying upon recent judgment in Yallwwa & Ors. v. National Insurance Co. Ltd. [AIR 2007 617], submitted that the insurer was entitled to avail of the defences prescribed under section 147 of the Act, even in the applications made under section 140 of the Act. There being no FA/1161/2008 3/29 JUDGMENT controversy on that count and the issue of compulsory or contractual coverage of risk of pillion rider being a basic issue striking at the root of liability of the insurer and being a purely legal issue, it was permitted to be agitated and it is resolved as under. 3. There was no dispute about the facts that, in each case, the motorcycle involved in the accident was insured by "Two Wheelers Package Policy" and that the policies had to be issued only in the forms prescribed in the India Motor Tariff by the Tariff Advisory Committee ("TAC" for short) and that the Rules, Regulations, Rates, Advantages, Terms and Conditions as contained in the India Motor Tariff (IMT) were binding on all concerned as breach thereof would amount to breach of the provisions of the Insurance Act, 1938. It is prescribed in General Regulation 1 (GR.1) of IMT that motor insurance in India cannot be transacted outside the purview of IMT unless specifically authorized by the TAC; and policies insuring motor vehicles are to be issued only as per the Standard Forms given in Section 6 of IMT. It is further prescribed in GR.3 that there were two types of policies viz. (i) Liability Only Policy, covering thirty party liability for bodily injury and/or death and property damage in which personal accident cover FA/1161/2008 4/29 JUDGMENT for owner-driver is also included and (ii) Package Policy, which covers loss or damage to the vehicle insured in addition to the liability covered in the earlier clause. It is clarified in GR.3 as under: "GR.3. ...Restricting the scope of cover under section-I (loss of or damage to the vehicle insured) of the package policy without any reduction in Tariff rates is permitted. Excepting this, no alteration or extension of any of the covers, terms, conditions, exclusions, etc. of any of the policies/endorsements laid down in this tariff is permitted without prior approval of the TAC." Thus, the sole issue is as to whether "Two Wheeler Package Policy" prescribed under the IMT would cover the risk of pillion rider. 4. Section 3 of IMT entitled "TARIFF FOR MOTORISED TWO WHEELERS REGULATIONS" describes its scope in Clause 1 as under: "1. Scope: This tariff is applicable to motorized two wheelers (with or without side car) used for social, domestic and pleasure purposes and for professional purposes (excluding the carriage of goods other than samples) of the insured or used by the insured's employees for such purposes but excluding use for hire or reward, racing, pace making, reliability trial, speed testing and use for any purpose in connection with the Motor Trade." FA/1161/2008 5/29 JUDGMENT Clause 6 of Section-3 of IMT prescribes limits of liability for third party, as under: "6. Limits of liability for third party: (a) Under Section II-1(i) :As per requirements of the Package policy :of Motor Vehicle (Under section 1 (i) :Act, 1988. of the Liability Only : Policy) (b) Under Section II-1(ii) :Rs.1 lakh of the Package policy :or (Under Section 1 (ii) :Rs.6,000/-where the of the Liability Only :proposer/ Policy) :insured opts to limit the TPPD liability to the statutory limit of Rs.6,000/- Endorsement IMT-20 is to be used." Section 6 of IMT entitled "STANDARD WORDINGS IN RESPECT OF POLICY INCLUDING PREMIUM COMPUTATION TABLE, CERTIFICATE OF INSURANCE AND COVER NOTE" prescribes the clauses for liability to third parties, as under, in the "Standard Form for Liability Only Policy": "i) Liability to third parties 1. Subject to the limit of liability as laid down in the schedule hereto, the Company will indemnify the insured in the event of accident caused by or arising out of the use of the motor vehicle anywhere in India against all FA/1161/2008 6/29 JUDGMENT sums including claimant's costs and expenses which the insured shall become legally liable to pay in respect of, i. death of or bodily injury to any person so far as it is necessary to meet the requirements of the Motor Vehicles Act. ii. damage to property other than property belonging to the insured or held in trust or in the custody or control of the insured to the limit specified in the schedule. 2. .... 3. In terms of and subject to the limitations of the indemnity which is granted by this policy to the insured, the Company will indemnify any driver who is driving the motor vehicle on the insured's order or with insured's permission provided that such driver shall as though he/she were the insured observe fulfill and be subject to the terms, exceptions and conditions of this policy in so far as they apply. 4. ... 5. ... Avoidance of certain terms and right of recovery. Nothing in this Policy or any endorsement hereon shall affect the right of any person indemnified by this Policy or any other person to recover an amount under or by virtue of the provisions of the Motor Vehicles Act. But the insured shall repay to the Company all sums paid by the Company which the Company would not have been liable to pay FA/1161/2008 7/29 JUDGMENT but for the said provisions. Application of limits of indemnity In the event of any accident involving indemnity to more than one person any limitation by the terms of this Policy and/or of any Endorsement thereon of the amount of any indemnity shall apply to the aggregate amount of indemnity to all persons indemnified and such indemnity shall apply in priority to the insured. General exceptions 1. ... 2. ... 3. ... 4. Except so far as is necessary to meet the requirements of the Motor Vehicles Act, the Company shall not be liable in respect of death or bodily injury to any person (other than a passenger carried by reason of or in pursuance of a contract of employment) being carried in or upon or entering or mounting or alighting from the motor vehicle at the time of the occurrence of the event out of which any claim arises". (underlines added) 5. As against the above "Standard Form for Liability Only Policy", the "Standard Form for Two Wheeler Package Policy" prescribes "Liability to third parties", as under: (only relevant parts are reproduced) "Section 1: Loss of or damage to the vehicle insured The Company will indemnify the FA/1161/2008 8/29 JUDGMENT insured against loss or damage to the vehicle insured hereunder and/or its accessories whilst thereon (i) to (x) ........ Sum Insured ........ "Section II-Liability to third parties 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 insured vehicle against all sums which the insured shall become legally liable to pay in respect of i) death or bodily injury to any person including occupants carried in the insured vehicle (provided such occupants are not carried for hire or reward) but except so far as it is necessary to meet the requirements of Motor Vehicles Act, the Company shall not be liable where such death or injury arises out of and in the course of employment of such person by the insured. ii) damage to property other than property belonging to the insured or held in trust or in the custody or control of the insured. Provided .... 2. .... 3. .... 4. .... 5. .... Avoidance of certain terms and right of recovery .......(same as in Standard Form) FA/1161/2008 9/29 JUDGMENT Application of limits of indemnity .......(same as in Standard Form) Section III - Personal Accident Cover for Owner- Driver. ....... General Exceptions ....... (Note: General exception No.4 as found in the "Standard Form for Liability Only Policy" reproduced hereinabove is NOT found in this Form) Deductibles ....... Conditions This Policy and the Schedule shall be read together and any word or expression to which a specific meaning has been attached in any part of this Policy or of the Schedule shall bear the same meaning wherever it may appear. 1 to 9 ......." SCHEDULE Policy No. The Company The Insured Period of Insurance FA/1161/2008 10/29 JUDGMENT Geographical Area The Vehicle Limitations as to use Driver 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 - Rs......../-* * Insert Rs.6000/- Rs.1 lakh as the case may be. P.A. cover for owner - driver under section III (CSI) - Rs......... Deductible under section 1: Rs..... No Claim Bonus Premium Computation Table ......." (underlines added) 6. Section 7 of IMT prescribes "Endorsements", out of which the relevant endorsement, relied upon for the insurer, is reproduced hereunder for convenient reference. "IMT.18 Personal accident to unnamed hirer and unnamed pillion passengers. ((Applicable to motorized two wheelers with or without side car) In consideration of the payment of an additional FA/1161/2008 11/29 JUDGMENT premium, it is hereby understood and agreed that the insurer undertakes to pay compensation to any unnamed hirer/driver/any unnamed pillion/side car passenger* on the scale provided below for bodily injury caused by violent, accidental, external and visible means whilst mounting into/onto and/or dismounting from or traveling in/on the vehicle insured which independently of any other cause shall within three calendar months of the occurrence of such injury results in:- Details of Injury Scale of Compensation i) Death 100% ii) Loss of two limbs or sight of two eyes or 100% one limb and sight of one eye iii)Loss of one limb or sight of one eye 50% iv) Permanent Total Disablement from injuries other than named above 100% Provided always that: (1) compensation shall be payable under only one of the items (i) to (iv) above in respect of any such person arising out of any one occurrence and total liability of the insurer shall not in the aggregate exceed the sum of Rs.....** during any one period of insurance in respect of any such person. (2) (3) (4) ... ... Subject otherwise to the terms exceptions, conditions and limitations of this policy. * Delete if P.A. cover for unnamed FA/1161/2008 12/29 JUDGMENT pillion/side care passenger is not taken. ** The Capital Sum Insured (CSI) per passenger is to be inserted. ..... ...." 7. Against the backdrop of above statutorily prescribed form and language of the insurance policy, it was argued for the appellant-insurer that a conjoint reading of Section II-1 (i) entitled "Liability to Third Parties" can lead to only one conclusion that insurer is liable to pay compensation in respect of death of or bodily injury to any person, including occupants carried in a vehicle, provided it is so stated in the Schedule. And the Schedule mentions that the limits of liability of insurance company under Section II-1 (i) to the Policy is: "Such amount as is necessary to meet the requirements of the Motor Vehicles Act, 1988". The provisions of Section 147 of the Act do not require covering the risk of an occupant carried in a scooter as per decision of the Supreme Court in United India Insurance Co. Ltd. v. Tilak Singh and Ors. [2006 ACJ 1441] and, therefore, the risk of pillion rider is not covered even under the Package Policy, according to the submission. It was further submitted that, FA/1161/2008 13/29 JUDGMENT while taking insurance cover, the insured was required, according to the "Motor Package Policy Proposal Form", to exercise his option and state as to whether he desired to include personal accident cover for unnamed persons/hirer/pillion passenger and pay extra premium, if such extra cover were proposed to be provided. In support of that argument, emphasis was laid upon GR.36 of Section I of IMT which reads as under: "GR.36 Personal Accident (PA) Cover under Motor Policy (not applicable..... Commercial Vehicles) A. Compulsory Personal Accident Cover for Owner-Driver. Compulsory Personal Accident Cover shall be applicable under both Liability Only and Package policies. The owner of insured vehicle holding an "effective" driving license is termed as Owner-Driver for the purposes of this section. Cover is provided to the Owner-Driver whilst driving the vehicle including mounting into/ dismounting from or traveling in the insured vehicle as a co-driver. NB. .....(not applicable) The scope of the cover, Capital Sum Insured (CSI) and the annual premium payable under this section are as under: ... ... FA/1161/2008 14/29 JUDGMENT B. Optional Personal Accident Cover for persons other than Owner-Driver. The cover under this section is limited to maximum Capital Sum Insured (CSI) of Rs.2 lacs per person. Cover is available only in respect of the following persons: 1. Private cars including three wheelers rated as private cars and motorized two wheelers with or without side car (not for hire or reward): For insured or any named person other than the paid driver and cleaner. Endorsement IMT-15 is to be used. 2. Private cars, three wheelers rated as private cars and motorized two wheelers (not used for hire or reward) with or without side car: For unnamed passengers limited to the registered carrying capacity of the vehicle other than the insured, his paid driver and cleaner. Endorsement IMT-16 is to be used. 3. In respect of all classes of vehicles: For paid drivers, cleaners and conductors. Endorsement IMT-17 is to be used. 4. Motorized two wheelers with or without side car (used for hire or reward): For unnamed hirer/driver. Endorsement IMT-18 is to be used. FA/1161/2008 15/29 JUDGMENT The scope of the cover, Capital Sum Insured and the annual premium payable under this section would be as under: ... ... IMT 16. Personal Accident to Unnamed Passengers other than Insured and the Paid Driver and Cleaner. [For vehicles rated as private cars and motorized two wheelers (not for hire or reward) with or without side car] In consideration of the payment of an additional premium, it is hereby understood and agreed that the insurer undertakes to pay compensation on the scale provided below for bodily injuries hereinafter defined sustained by any passenger other than the insured and/or the paid driver, attendant or cleaner and/or a person in the employ 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 injury is sustained whilst mounting into, dismounting from or traveling in but not driving the insured 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: Details of injury Scale of Compensation i) .... ii) .... iii) .... iv) .... 8. As against the above arguments for the appellant, it was submitted on behalf of the FA/1161/2008 16/29 JUDGMENT original claimants that a "Comprehensive Policy" or "Motorcycle/Scooter Policy (B) Comprehensive" or a "Two Wheeler Package Policy" was essentially different from an "Act Only or Statutory Policy" or "Liability Only Policy". Although it is true that additional cover can be provided by paying extra premium for different IMT endorsements, absence of any IMT endorsement on the policy cannot derogate from the liability to third parties as couched in Section II of the standard form for "Two Wheeler Package Policy". When that section of the policy clearly and expressly provides for indemnifying the insured against all sums payable by him "to any person including occupants carried in the insured vehicle", the insurer cannot contend that any particular endorsement was required for covering that liability. Even as the words "any person" would take its colour from the context in which they are used, they were given the widest meaning in Section II of the Policy to include third parties as well as occupants carried in the insured vehicle, according to the submission. Even in Tilak Singh (supra), it is clarified by the Supreme Court in para 21 as follows: "21. ....Thus, we must uphold the contention of the appellant insurance company that it owned no liability towards the injuries suffered by the deceased FA/1161/2008 17/29 JUDGMENT Rajinder Singh who was a pillion rider, as the insurance policy was a statutory policy and hence it did not cover the risk of death of or bodily injury to gratuitous passenger." It was, on that basis, submitted that the present batch of cases being based on package policy, they were clearly distinguishable from the case of Tilak Singh (supra) and the arguments based on that case must fail. 9. However, learned counsel for the appellant insisted that "Section II-Liability to Third Parties" in the policy was expressly subject to limits of liability as laid down in the Schedule and the Schedule limited the liability to such amount as was necessary to meet the requirements of the Motor Vehicles Act, 1988 and as the Act did not require compulsory insurance for a pillion rider as a third party, the insurance company should not be held to be liable to indemnify the insured against the risk of occupants carried in the insured vehicle. Following observations in various judgments were discussed at the bar in that context: (a) In Pushpabai Purshottam Udeshi and Ors. v. M/s.Ranjit Ginning and Pressing Co. and Anr. [1977 ACJ 343], it was observed as under: FA/1161/2008 18/29 JUDGMENT "22. 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 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. 23. 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...." 24. 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... 26. On a construction of the insurance policy, we accept the plea of FA/1161/2008 19/29 JUDGMENT the insurance company that the policy had insured the owner only to the extent of Rs.15,000 regarding the injury to the passengers....." (b) In Amrit Lal Sood and Anr. v. Kaushalya Devi Thapar and Ors. [1998 ACJ 531], the question before Three Judge Bench of the Supreme Court was: "whether the insurer is liable to satisfy the claim for compensation made by a person traveling gratuitously in the car". After holding that Sections 94 and 95 of the Motor Vehicles Act, 1939 did not require a policy to cover the risk to passengers who were not carried for hire or reward and statutory insurance did not cover injury suffered by occupants of the vehicle who were not carried for hire or reward, the Supreme Court noticed that, in facts of that case, the policy was admittedly a "comprehensive policy". After adverting to the relevant clause in the policy in "Section II - Liability to Third parties", the Supreme Court held in para 8 as under: "8. Thus, under section II-1 (a) of the policy, the insurer has agreed to indemnify the insured against all sums which the insured shall become legally liable to pay in respect of death of or FA/1161/2008 20/29 JUDGMENT bodily injury to 'any person'. The expression 'any person' would undoubtedly include an occupant of the car who is gratuitously traveling in the car........In so far as gratuitous passengers are concerned, there is no limitation in the policy as such. Hence, under the terms of the policy, the insurer is liable to satisfy the award passed in favour of the claimant....." (c) In Constitution Bench judgment of the Supreme Court in New India Assurance Co. Ltd. v. C.M.Jaya and Ors. [2002 ACJ 271], the issue was whether in a case of insurance company 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 whether the insurer would be liable to pay the entire amount which he may recover from the insured. After reference to the earlier decisions in National Insurance Co. Ltd. v. Jugal Kishore [1988 ACJ 270] and in Amrit Lal Sood v. Kaushalya Devi Thapar [1998 ACJ 531], the Constitution Bench observed as under: "5. 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 FA/1161/2008 21/29 JUDGMENT 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 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