Case: Oriental Insurance Co. Ltd Vs. Cheruvakkara Nafeessu

3. In this case the claim petition was filed by the legal heirs of C. Abdul Shukkoor, who died in a road accident on 6.7.1988. The accident was caused by an auto-rickshaw bearing Registration No. KRN 1859 which was insured with the appellant-company. The respondents claimed No. 2 lakhs as compensation. The appellant-company filed their reply specifically stating therein that their liability was limited to Rs. 50,000/- under the policy of insurance. The Claims Tribunal passed an award of Rs. 1,94,150/- and fastened the entire liability on the appellant-company. The appeal filed against the order of the Claims Tribunal was dismissed vide the judgment impugned in this appeal.

Reasoning: Admittedly, the insurance policy in this case is of a date prior to the coming into force of the new Motor Vehicles Act on 1.7.1989. The liability of the insurance company to satisfy judgments against persons insured in respect of the third party risk is covered under Section 96 of the Act, sub-sectionSection II of the policy deals with "liability of third party" and provides that the company will indemnify the insured against all sums including claimants costs and expenses which insured become legally liable to pay in respect of the death of or bodily injury to any person caused by or arising out of the use of the motor vehicle or damage to the property caused by such use. A conjoint reading of all the terms of the policy of insurance executed in this case indicate that the total extent of liability of the insurance policy is Rs. 50,000/- but the company is liable to indemnify the insured against all sums including claimants costs and expenses which insured becomes liable to pay and nothing in the policy affects the right of any person indemnified by the policy or any other person to recover an amount under or by virtue of the provisions of Section96 of the Act. However, the insured is liable to repay to the company all sums paid by the company which the company would not have been liable to pay but for the condition of liability relating to third party.In the facts and circumstances of this case we find that despite holding the liability under the policy limited to the extent of Rs. 50,000/-, the Claims Tribunal and the High Court were not unjustified in directing the appellant-company to pay the whole of the awarded amount to the claimants on the basis of the contractual obligations contained on the basis of the contractual obligations contained in clauses relating to the liability of the third parties and avoidance clause. However, the Claims Tribunal and the High Court were not justified in rejecting the right of the appellant-company to recover from the insured the excess amount paid in execution and discharge of the award of the Tribunal.