Case: M/s. Road Transport Company Vs. Bhan Singh

2. On 12.10.73, a passenger bus of the appellant met with an accident because of rash and negligent driving by its driver. 35 passengers travelling in that bus died. In all nine claim cases were filed before the Tribunal. Two cases were dismissed and in the remaining seven cases the Tribunal awarded different sums of money by way of compensation and ordered that in each case out of the total amount payable to the claimants Rs. 5,000/- shall be paid by the insurance company and the rest shall be paid by the appellant.3. The appellant feeling aggrieved by the amount of compensation and the finding that the insurance company was liable to pay only Rs. 5,000/- per passenger and Rs. 75,000/- in all preferred appeals before the High Court. Two contentions were raised before the High Court. It was contended that the insurance policy was a comprehensive policy and, therefore, the insurance company was legally liable to pay the whole amount of compensation and limiting its liability to Rs. 5,000/- per passenger and Rs. 75,000/- in all was contrary tothe Motor Vehicles Act, 1939. The second contention was that the appellant had paid additional premium of Rs. 300/- and, therefore, limiting liability of the insurance company to Rs. 75,000/- in all was not justified. The High Court rejected both these contentions. Relying upon the decision of this Court in National Insurance Co. Ltd. v. Jugal Kishore, (1988) 1 SCC 626  the High Court held that even where the owner of a vehicle gets it comprehensively insured such insurance entitles the owner to claim reimbursement of the entire amount of loss or damage suffered up to the estimated value of the vehicle calculated according to the rules and regulations framed in that behalf. 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 or risk of any other nature becomes unlimited or higher than the statutory liability fixed under sub- section (2) of Section 95 of the Act. It also held that the additional premium of Rs. 300/- was paid as it was a passenger bus having capacity of carrying 50 passengers. It held that there was no special contract between the appellant-company and the insurance company to cover unlimited liability in respect of the passengers. In support of this view it also relied upon the decision of this Court in New India Assurance Company Limited v. Shanti Bai, (1995) 2 SCC 539.  Taking this view the High Court dismissed all the appeals.4. The appellant thereafter filed review petitions before the High Court on the ground that the insurance policy was misread or misinterpreted by the High Court as it failed to appreciate that extra premium of Rs. 300/- was paid over and above the basic premium of Rs. 615/- which covered the Act liability. The High Court did not agree with this contention raised by the appellant and dismissed the review petitions.

Court's reasoning:
Thus the basic premium of Rs. 626 paid for the comprehensive risk was obviously in respect of the bus and not in respect of other risks as contended by the learned counsel for the respondent insurance company. A fair reading of the insurance policy discloses that the basic premium of Rs. 626/- though paid for comprehensive risk was not intended to cover all the statutory liabilities but it was really intended to cover the entire loss or damage to the vehicle. As observed by this Court in Jugal Kishores case "even though it not permissible to use a vehicle unless it is covered at least under an `Act only policy it is not obligatory for the owner of a vehicle to get it comprehensively insured. In case, however, it is not comprehensively insured a higher premium that for an `Act only policy is payable depending on the estimated value of the vehicle. Such insurance entitles the owner to claim reimbursement of the entire amount of loss or damage suffered upto the estimated value of the vehicle calculated according to the rules and regulations framed in this behalf."7. The insurance company had charged a premium of Rs. 300/- towards passengers risk. It works out at Rs. 6/- per passenger. As per the Indian Motor Tariff applicable on the date of accident by charging a premium of Rs. 6/- per passenger the liability of the company per passenger was Rs. 5,000/- only. The Indian Motor Tariff which regulates a premium and liability of insurance company is framed by the Tariff Advisory Committee, a statutory body set up under the Insurance Act. The additional premium of Rs. 300/- was thus paid to cover the statutory liability for 50 passengers as the vehicle insured was a passenger bus having registered capacity of carrying 50 passengers. Endorsement No. 13 which was attached to and formed part of the policy and which we have set out above also makes it clear that it was in consideration of an additional premium of Rs. 300/- that the insurance company had undertaken to idemnify the insured against his liability in respect of passengers to the extent of Rs. 5,000/- for each passenger and Rs. 75,000/- in all. It is, therefore, not possible to accept the contention raised on behalf of the appellant that the additional premium of Rs. 300/- was paid for covering higher than the statutory liability. There was no special contract to cover unlimited liability in respect of the passengers.