2005 Supreme(SC) 666

2005(3) Supreme 587
Supreme Court of India
(From Madhya Pradesh High Court)
R.C. Lahoti, CJI, G.P. Mathur & A.K. Mathur, JJ.
National Insurance Co. Ltd. —Appellant
versus
Prembai Patel and Ors. —Respondents
Civil Appeal No. 6476 of 1998
Decided on 18-4-2005
Counsel for the Parties :
For the Appellant : Jitendra Sharma, Sr. Advocate, Jamshed Bey, P.N. Jha and Parmanand Gaur, Advocates.
For the Respondents : T.N. Singh, S.N. Singh and V.K. Singh, Advocates.

Important point
When policy covers the risk “Act liabi­lity” then in case of death of driver or cleaner of vehicle, liability of Insurance Co. would be restricted to that under Workmen’s Compensation Act unless by paying extra premium he got it enlarged.

Headnote:Motor Vehicles Act, 1988—Sections 147 and 149—Insurer’s liability—Deceased victim was driver on truck employed by owner/insured of vehicle—Truck had overturned when being driver by deceased—Claim petition filed by widow and other legal heirs was contested by owner on ground that deceased was driving truck after consuming liquor and accident took place on account of his own fault—Tribunal held deceased driver himself responsible for accident and dismissed claim petition—High Court found that accident took place due to the arm bolt of truck broke and there was no proper maintenance of vehicle and awarded compensation of Rs. 2,10,000/- with 12% interest p.a. and further held Insurance Co. ­liable to satisfy the whole award—­Appeal by Insurance Co. and plea that its liability was restricted to that as provided under Workmen’s Compensation Act—Policy covered the risk “Act Liabi­lity”—Liability of Insurance Company will be confined to that arising under the Workmen’s Act unless insured got it enlarged by paying extra premium—Impugned judgment was liable to be modified to restrict liability of Insurance Co. to one arising under Workmen’s Compensation Act and rest of liability to be satisfied by owner.

       Held : Clause (b) of sub-section (1) of Section 147 provides that a policy of insurance must be a policy which insures the person or classes of persons specified in the policy to the extent specified in sub-section (2) against any liability which may be incurred by him in respect of death of or bodily injury to any person or passenger or damage to any property of a third party caused by or arising out of the use of the vehicle in public place. Sub-clauses (i) and (ii) of clause (b) are comprehensive in the sense that they cover both ‘any person’ or ‘passenger’. An employee of owner of the vehicle like a driver or a conductor may also come within the purview of the words ‘any person’ occurring in sub-clause (i). However, the proviso (i) to clause (b) of sub-section (1) of Section 147 says that a policy shall not be required to cover liability in respect of death, arising out of and in the course of his employment, of the employee of a person insured by the policy or in respect of bodily injury sustained by such an employee arising out of and in the course of his employment other than a liability arising under the Workmen’s Act if the employee is such as described in sub-clauses (a) or (b) or (c). The effect of this proviso is that if an insurance policy covers the liability under the Workmen’s Act in respect of death of or bodily injury to any such employee as is described in sub-clauses (a) or (b) or (c) of proviso (i) to Section 147(1)(b), it will be a valid policy and would comply with the requirements of Chapter XI of the Act. Section 149 of the Act imposes a duty upon the insurer (insurance company) to satisfy judgments and awards against persons insured in respect of third party risks. The expression - “such liability as is required to be covered by a policy under clause (b) of sub-section (1) of section 147 (being a liability covered by the terms of the policy)” - occurring in sub-section (1) of Section 149 is important. It clearly shows that any such liability, which is mandatorily required to be covered by a policy under clause (b) of Section 147(1), has to be satisfied by the insurance company. The effect of this provision is that an insurance policy, which covers only the liability arising under the Workmen’s Act in respect of death of or bodily injury to any such employee as described in sub-clauses (a) or (b) or (c) to proviso (i) to Section 147(1)(b) of the Act is perfectly valid and permissible under the Act. Therefore, where any such policy has been taken by the owner of the vehicle, the liability of the insurance company will be confined to that arising under the Workmen’s Act. (Para 12)

       It is thus clear that in case the owner of the vehicle wants the liability of the insurance company in respect of death of or bodily injury to any such employee as is described in clauses (a) or (b) or (c) of proviso (i) to Section 147(1)(b) should not be restricted to that under the Workmen’s Act but should be more or unlimited, he must take such a policy by making payment of extra premium and the policy should also contain a clause to that effect. However, where the policy mentions “a policy for Act Liability” or “Act Liability”, the liability of the insurance company qua the employees as aforesaid would not be unlimited but would be limited to that arising under the Workmen’s Act. (Para 15)