IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 30.9.2011 CORAM : THE HONOURABLE MR.JUSTICE G.M. AKBAR ALI Civil Miscellaneous Appeal No.3213 of 2004 The Manager, New India Assurance Company Limited Arni ... Appellant/3rd Respondent vs 1. Tmt.R. Senthamarai ... Respondents 1 to 3/Claimants 1 to 3 2. Susmitha Linch Minor 3. Lachika Liti Minor 4. Rajendran 5. I. Dawood Sheriff 6. C. Veluswamy 7. The Manager, United India Insurance Co Ltd No.2, Dr. Sankaran Road, Namakkal .... Respondents Civil Miscellaneous Appeal filed u/s 173 of the M.V.Act against the judgment and decree dated 8.5.2003 made in MACTOP No.276 of 1998 on the file of the Motor Accidents Claims Tribunal (Addl District and Sessions Judge – Fast Track Court No.III), Coimbatore. For Appellant : Mr.P.P. Purushothaman for Mr.P.G. Padmanabhan For R.1 to R.3 : Mr.Nichholas For R.5 : Mr.R. Karthikeyan For R.7 : Mr.S. Ramalingam For R.4 and R.6 : Dismissed as per Court Order 21.7.2010 JUDGMENT Appeal filed against the judgment and decree dated 8.5.2003 made in MACTOP No.276 of 1998 on the file of the Motor Accidents Claims Tribunal (Addl District and Sessions Judge – Fast Track Court No.III), Coimbatore. 2. The Insurance Company is the appellant. The brief facts of the case are as follows: https://hcservices.ecourts.gov.in/hcservices/ The respondents 1 to 3 filed a claim petition before the Motor Accidents Claim Tribunal, Coimbatore claiming a total compensation of Rs.18,00,000/- for the death of one Rupan, husband of the 1st respondent and father of the respondents 2 and 3. According to the claimants, on 1.6.1997, the said Rupan was travelling in an Ambassador car bearing Registration NO.TNJ 7936 along with his relatives from Vellore to Gobichettipalayam. The vehicle was driven by the 4th respondent and it belonged to the 5th respondent. The vehicle is insured with the appellant. Around 6.30 a.m, when the car was nearing Mathanur, it hit against a parked lorry bearing Registration No.HR 29B5240, owned by the 6th respondent. The deceased was working as Assistant at the District Police office , Coimbatore and he was earning a sum of Rs.4850 and aged 42 years at the time of accident. 3. The appellant filed a counter inter-alia stating that the car was insured with them as a private vehicle and the Insurance Policy is an Act policy. The appellant contended that the deceased had travelled in the car as a passenger and the car was also used for a hire and reward and therefore, the insurance company is not liable. 4. However, the learned MACOP Tribunal, Coimbatore found that the accident had occurred due to rash and negligent act of the 4th respondent/driver. While considering the issue whether the appellant is liable, the Tribunal held that the deceased is a third party and therefore, the Insurance Company is liable to satisfy the claim. A sum of Rs.5,13,500/-was awarded and the appellant as well as the insured were directed to honour the claim with 9% interest. 5. Aggrieved by the fastening of the liability of the Insurance Company, the present appeal has been filed. Mr.P.G. Padmanabhan, the learned counsel for the appellant would contend that the finding of the Tribunal that the deceased was a third party was erroneous. The learned counsel pointed out that it is an admitted case that a private car was used for hire and the deceased was a passenger and there is no coverage for the passenger. 6. The learned counsel also pointed out that the Insurance policy is also a third party Act policy which will not cover even the passenger in a private car. The learned counsel relied on a decision reported in 2006 ACJ 1441 (United India Insurance Co Ltd vs Tilak Singh and others), wherein the Apex court has held as follows: “ In our view, although the observations made in Asha Rani's case, 2003 ACJ 1 (SC), were in connection with carrying passengers in a goods vehicle, the same would apply with equal force to gratuitous passengers in any other vehicle also. Thus, we must uphold the contention of the appellant insurance company https://hcservices.ecourts.gov.in/hcservices/ that it owed no liability towards the injuries suffered by the deceased 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”. 7. He also relied on a decision reported in 2009 2 MLJ 963 (Royal Sundaram Alliance Insurance Co Ltd Coimbatore vs A. Meenakshi and Others), wherein, the Division Bench of this Court laid down the following Rationes decidendi: “RATIONES DECIDENDI I. The liability of insurer to a gratuitous passenger will depend on the insurance policy that has been taken. A Comprehensive Policy covers the risk of a gratuitous passenger to the extent of the liability incurred. As such, when the Policy is a Package Comprehensive Policy covering the risk of death or injury of any occupant and when that is the contract to which the parties have bound themselves and when there is no limit imposed on the insurer's liability, the Insurance Company cannot evade its duty to pay the compensation and the relief cannot be denied to a third part occupant in a car covered by such Comprehensive Policy. II. The law governing the insurance policy ultimately is a law of contract and so both parties should understand exactly what are the terms of the contract and for exactly what extent and what type of coverage the policy holder is paying premium III. While deciding the claim petition, the Tribunal should examine the terms of the Policy produced by the insurer, and in the event of denial of liability, a finding should be rendered with regard to the nature of the Policy as to whether it was an Act Policy or a Package policy” 8. He also relied on a decision reported in 2009 1 CTC 1 (Branch Manager, United India Insurance Co Ltd, Branch Office, Nethaji Bye Pass Road, Dharmapuri Town vs Nagammal and 2 others), wherein, the Full Bench of this Court took up the issue whether the Insurer can be directed to pay compensation to the claimant in a case https://hcservices.ecourts.gov.in/hcservices/ where the deceased and/or the injured was travelling as a gratuitous passenger in a goods vehicle and recover the same thereafter from the owner of such goods vehicle and laid down as follows: “31. Thus from an analysis of the statutory provisions as explained by the Supreme Court in various decisions rendered from time to time, the following picture emerges: (i) The Insurance Policy is required to cover the liability envisaged under Section 147, but wider risk can always be undertaken. (ii) Section 149 envisages the defences which are open to the Insurance Company. Where the Insurance Company is not successful in its defence, obviously it is required to satisfy the decree and the award. Where it is successful in its defence, it may yet be required to pay the amount to the claimant and thereafter recover the same from the owner under such circumstance envisaged and enumerated in Section 149(4) and Section 149 (5). (iii) Under Section 147 the Insurance Company is not statutorily required to cover the liability in respect of a passenger in a goods vehicle unless such passenger is the owner or agent of the owner of the goods accompanying such goods in the concerned goods vehicle. (iv) Since there is no statutory requirement to cover the liability in respect of a passenger in a goods vehicle, the principle of “pay and recover”, as statutorily recognised in Section 149(4) and Section 149 (5), is not applicable ipso facto to such cases and, therefore, ordinarily the Court is not expected to issue such a direction to the Insurance Company to pay to the claimant and thereafter recover from the owner. (v) Where, by relying upon the decision of the Supreme Court in Satpal Singh's case, either expressly or even by implication, there has been a direction by the Trial Court to the Insurance Company to pay, the Appellate Court https://hcservices.ecourts.gov.in/hcservices/ is obviously required to consider as to whether such direction should be set aside in its entirely and the liability should be fastened only on the driver and the owner or whether the Insurance Company should be directed to comply with the direction regarding payment to the claimant and recover thereafter from the owner. (vi) No such direction can be issued by any Trial Court to the Insurance Company to pay and recover relating to liability in respect of a passenger travelling in a goods vehicle after the decision in Baljit Kaur's case merely because the date of accident was before such decision. The date of the accident is immaterial. Since the law has been specifically clarified, no trial court is expected to decide contrary to such decision. 1. Where, however, the matter has already been decided by the Trial court before the decision in Baljit Kaur's case, it would be in the discretion of the Appellate Court, depending upon the facts and circumstances of the case. Whether the doctrine of “pay and recover” should be applied or as to whether the claimant would be left to recover the amount from the person liable i.e., thedriver or the owner, as the case may be”. 9. On the contrary, Mr. Nicholas for claimants/respondents 1 to 3, would submit that the offending car was properly insured with the appellant and therefore, the Insurance Company must and should satisfy the claim first as the dispute is inter se between the insurer and the insured. The learned counsel pointed out that for the breach of policy conditions the claimant should not suffer. 10. Mr.R. Karthkeyan, counsel for 5th respondent/owner of the vehicle would submit that the deceased is a third party to the contract of policy and therefore, the Tribunal is right in holding the Insurance Company as liable. 11. The point that arises for consideration in the present appeal is whether the insurance company is liable to pay the compensation or not. https://hcservices.ecourts.gov.in/hcservices/ 12. It is well settled that the liability of the insurance company is both statutory and also based on the contract of the insurance. It is admitted that the car bearing Registration No.TNJ 7936 was insured with the appellant. Ex.R.1 is the copy of the insurance policy. As per the endorsement therein, it is a private car Act policy. Premium has been paid on three heads. Third party Rs.240/-, driver Rs.15/- UNTPPL (Unlimited Third party Property Liability) Rs.50/-. 13. According to the appellants the passenger is not covered and there is a limitation as to the use of the car and the policy does not cover the use of the vehicle for hire or reward. 14. The 1st respondent who was examined as PW1 would state that the deceased and some of the relatives were travelling in the car from Vellore to Gobichettipalayam at the time of the accident. In the cross examination, it was suggested by the appellant that the deceased and others hired the vehicle for travelling for which P.W.1 would plead ignorance. 15. P.W.2 is a relative cum eyewitness. She would state that they were travelling in a hired car. Ex.P.1 is the first information report. P.W.2 is the informant. She would state that they travelled in a taxi. 16. It is not the case of the claimants that the deceased hired the vehicle and was travelling as gratuitous passenger. But the fact remains that the vehicle was a private car and covered by an act policy , but the deceased was a passenger. In Amritlal's case reported in AIR 1998 SC 1433 (Amritlal Sood vs Kaushalya Devi Thapar) , it is held as follows: “the injured was a gratuitous passener travelling in a private car. The High Court held that the insured was not liable since the claimant was only passenger. The insurance policy was extracted by the Supreme Court and we find that it is almost identical to the policy in the case before us. The Supreme Court held in Amritlal Sood vs Kaushalya Devi Thapar (supra) as follows at pp 46 & 47 of MLJ. “3. The question to be decided is whether the insurer is liable to satisfy the claim for compensation made by a person travelling gratuitously in the car. The factual findings are not in dispute before us but for the contention of the appellants https://hcservices.ecourts.gov.in/hcservices/ that the amount of compensation awarded by the Division Bench is excessive. We have no difficulty in repelling that contention as we find the materials on record to be sufficient to support the award of enhanced compensation. 4. The liability of the insurer in this case depends on the terms of the contract between the insured and the insurer as evident from the policy. Section 94 of the Motor Vehicles Act, 1939 compels the owner of a motor vehicle to insure the vehicle in compliance with the requirements of Chapter VII of the Act. Section 95 of the Act provides that a policy of insurance must be one which insures the person 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 third party caused by or arising out of the use of the vehicle in a public place. The Section does not however require a policy to cover the risk to passengers who are not carried for hire or reward. The statutory insurance does not cover injury suffered by occupants of the vehicle who are not carried for hire or reward and the insurer cannot be held liable under the Act, But that does not prevent an insurer from entering into a contract of insurance covering a risk wider than the minimum requirement of the statute whereby the risk to gratuitous passengers could also be covered. In such cases where the policy is not merely a statutory policy, the terms of the policy have to be considered to determine the liability of the insurer. 5. In the present case the policy is admittedly a “comprehensive policy” “Comprehensive insurance” has been defined in BLACK'S LAW DICTIONARY, 5th Edn. As All- risk insurance” which in turn is defined as follows: “Type of insurance policy which ordinarily covers every loss that may happen, except by fraudulent acts of the insured. Miller v Boston Ins.Co., 218-A 2d275, 278:420 Pa566) https://hcservices.ecourts.gov.in/hcservices/ Type of Policy which protects against all risks and perils except those specifically enumerated: 6. The relevant clauses in the policy before us are found in “Section II – Liability to Third parties”. They are: “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. (b) damage to property other than property belonging to the insured or held in trust by or in the custody or control of; the insured. 2. The Company will pay all costs and expenses incurred with its written consent. 3. In terms of and subject to the limitations of the indemnity which is granted by this Section to the insured the company will indemnify any driver who is driving the motor car on the insured's order or with his permission provided that such driver (a) is not entitled to indemnity under any other policy. (b) shall as though he were the insured observe, fulfil and be subject to the terms, exceptions, conditions and limitations of this policy in sofar as they can apply”. 7. under the heading General Exceptions, the company's liability is excluded inter alia in respect of any accident occurred whilst the car is being used otherwise than https://hcservices.ecourts.gov.in/hcservices/ in accordance with the limitations as to use or being driven by any person other than a driver. The limitations as to use set out in the policy are not relevant in this case as it is not the case of the insurer that there is a violation thereof. The term “driver” is expressly defined in the policy as any of the following: “(a) Any person, (b) The insured may also drive a motor car belonging to him and not hired to him under a Hire-Purchase Agreement. Provided that the person driving holds a licence to drive the motor car or has held and is not disqualified for holding or obtaining such a licence”. 8. Thus under Section II(1)(a) of the policy the insurer has agreed to indemnify the insured against all claims which the insured shall become legally liable to pay in respect of death of or bodily injury to “any person”. The expression “any person” would undoubtedly include an occupant of the car who is gratuitously travelling in the car. The remaining part of clause (a) relates to cases of death or injury arising out of and in the course of employment of such person by the insured. In such cases the liability of the insurer is only to the extent necessary to meet the requirements of Section 95 of the Act. Insofar 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. We are unable to agree with the view expressed by the High Court in this case as the terms of the policy are unambiguous. 10. The High Court has placed reliance on the judgment of this Court in Pushpabai Purahottam Udeshi v Ranjit Ginning and Pressing Co (P) Ltd (1977) 2 SCC 745. That Judgment was based upon the relevant clause in the insurance policy in that case which restricted the legal liability of the https://hcservices.ecourts.gov.in/hcservices/ insurer to the statutory requirement under Section 95 of the Motor Vehicles Act. That decision will have no bearing in the present case inasmuch as the terms of the policy here are wide enough to cover a gratuitous occupant of the vehicle”. 17. In a similar issue, a Division Bench Judgment of this Court reported in 2009 2 MLJ 963(Royal Sundaram Alliance Insurance Co Ltd Coimabtore vs A.Meenakshi and Others) has discussed in detail and has held as follows: “28. The judgments of the Supreme Court where the insurer was held not liable were cases where either the policy was an Act Policy or the gratuitous passengers were travelling in a goods vehicle or a public transport vehicle. In none of those cases, the policy was a Comprehensive Policy, nor were the passengers travelling in a private cr, except in Amritlal Sood v Kaushalya Devi Thaper (supra) which was approved in New India Assurance Co Ltd v C.M. Jaya (supra) by a five Judge Bench. The Supreme Court clearly held that it will depend on the insurance policy that has been taken. When Section II of the Policy as extracted in paragraph 11 above covers the risk of death of any occupant and when that is the contract to which the parties have bound themselves, we do not see how the insurance company can evade their duty to pay the compensation. In fact, as already pointed out, even in General Manager, United Insurance Co Ltd v M. Laxmi (supra) the observations of the Supreme Court clearly indicate that the risk of a pillion rider would be covered if it is a Comprehensive Policy. We have already extracted the relevant clauses of the Policy and we find that there is no limit imposed on the insurer's liability. By virtue of the wording of Section 147 and also Section II of the Policy, the death or injury of a gratuitous passenger is covered. Over and above the premium paid by the insured who has taken a comprehensive Policy, if the insured pays additional premium, then the insurer's liability arises to the extent agreed https://hcservices.ecourts.gov.in/hcservices/ upon. In this case, the extent is Rs.70,000/-. This is in addition to, and not the maximum extent of, the third party liability already agreed upon in Section II of the policy. In the context of renewal of Mediclaim Policy, the Supreme Court has held that, “(T)he insurance companies cannot either in the prospectus or in the terms of the policy lay down any condition that would be derogatory to the terms and conditions approved by the Regulatory Authority”, and that “Regulations guidelines and circulars are binding on the insurance companies” vide United Indian Insurance Co Ltd v Manubhai Dharmasinhbhai Gajera (2008) 10 SCC 404” 18. Therefore, in all the above decisions it is settled that if it is a comprehensive policy, the risk of even the gratuitous passenger in a private car is covered. 19. In the above judgment, the circular of the tariff advisory committee was also extracted which reads as follows: “Tariff Advisory Committee Bombay Regional Committee Circular M.V.No.1 of 1978 Bombay, 17.3.1978 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) the same practice should continue. In order to make this intention clear, insurers are requested to amend clause I (a) of Section II of the Standard Private Car Policy by Incorporating the following words after the words “death of or appearing therein” https://hcservices.ecourts.gov.in/hcservices/ “Including occupants carried in the motor car provided that such occupants are not carried for hire or reward.” I am accordingly to request insurers to make the necessary amendment on sheet 38 of the Indian Motor Tariff pending reprinting of the relevant sheet. All existing policies may be deemed to incorporate the above amendment automatically as the above decision is being brought into force with effect from 25.3.1977. Sd Regional Secretary” 20. This Circular relates to a comprehensive policy. Therefore, if it is a comprehensive policy, a gratuitous passenger in a private car is covered and if it is an act policy, it does not cover. The key term in the policy is “Including occupants carried in the motor car provided that such occupants are not carried for hire or reward.” In the case on hand the policy is an Act policy and the deceased was a gratuitous passenger and therefore the appellants is not liable. 21. Now the question is whether the Insurance company can be directed to pay and recover the same from the insured. The Full Bench of this court has considered the principle of pay and recovery in 2009 1 CTC 1 (Branch Manager, United India Insurance Co Ltd, Branch Office, Nethaji Bye Pass Road, Dharmapuri Town vs Nagammal and 2 others) (cited supra). However the gratuitous passenger in a private car was not considered. The general principle is if there is breach of policy condition the insurer can be directed to pay and later recover from the insured. This principle is based on the judicial discretion that the claimants should not suffer as the liability is an inter se dispute between the insurer and the insured. Though it is not a comprehensive policy to cover the risk of a passenger in a private car, the insured had permitted a gratuitous passenger to travel in his car against the policy conditions. Therefore, there is a breach of policy condition. In that case, the principle of pay and recovery can be applied. 22. In the result, the appeal is allowed. The liability of the Insurance company to satisfy the compensation of a sum of Rs.5,13,500/- is set aside. However, there