Case: ORIENTAL INSURANCE CO Vs. IMLINEKEN AND OTHERS

7. A truck (No. MBA-4245) owned by the first respondent - South Eastern Coal fields Ltd. was on its way between Jai Singh Nagar and Khannodi. Near the river, the truck turtled as a result of head-on-collision with another vehicle, leaving five labourers dead on the spot and two injured. Among them were three passengers who were being carried for hire or reward.8. We shall refer to facts in Civil Appeal No. 4843 of 2000 (SLP No. 3763 of 1998) to appreciate the question which arises in these cases. Respondents 4 to 6 are the legal representatives of one late Bihari Kole, who was one of the passengers who died in the accident. They filed claim for damages before the Motor Accident Claims Tribunal. The Tribunal found that the passengers were permitted by the driver of the truck to travel on payment of some fare. The Tribunal awarded compensation of Rs. 63,000 to the said respondents. It was also held that the Insurance Company was not liable to pay compensation as the passengers were being carried in the truck in breach of the terms of the policy. The owner and the driver filed the appeal in the High Court which was disposed of by the impugned Judgment, holding the Insurance Company liable in the light of the judgment of this Court in B.V. Nagarju v. Oriental Insurance Co. Ltd. 1996 (4) SCC 617. Against the said judgment, the Insurance Company has filed these appeals before us.

Court's reasoning:
11. The accident in these cases occurred on December 3, 1985, which was long before coming into force of Motor Vehicles Act, 1988. The rights of the parties are, therefore, governed by the Act policy which is required to be taken u/s 95(2) of 1939 Act. An identical question arose for consideration of this Court in Mallawas case (supra). A three-Judge Bench of this Court laid down the law as follows:Person travelling in goods vehicles, whether owners of the goods or passengers, on payment of fare or gratuitous passengers who died in accident met with by such vehicle not covered by proviso (ii) to Section 95(1) of the 1939 Act.The points, therefore, squarely covered by the decision of this Court in Mallawas case (supra).12. In Nagarjus case, the claim for damages to the vehicle involved in the accident was under consideration of this Court. The pertinent question there was whether the unauthorized passenger contributed to the accident for applying exclusion clause. It was observed.The National Consumer Disputes Redressal Commission went for the strict construction of the exclusion clause. The reasoning that the extra passengers being carried in the goods vehicle could not have contributed, in any manner, to the occurring of the accident, was barely noticed and rejected sans any plausible account, even when the claim confining the damage to the vehicle only was limited in nature. We, thus, are of the view that in accord with the Skandia case, the aforesaid exclusion term of the insurance policy must be read down so as to serve the main purpose of the policy that is to indemnify the damage caused to the vehicle which we hereby do.13. Therefore, reliance of Nagarjus case is out of place.