IMPORTANT POINT
In motor accident claim, where the victim claimant is not a third party within the meaning of the Act, the Insurance company cannot be made automatically liable merely by resorting to the Swaran Singh case (2004) 3 SCC 297.

Headnote:(i) Motor Vehicles Act, 1988—Sections 147, 166 and 163A—Motor Accident Claim—Liability of Insurance Company—Where a person is not a third party within the meaning of the Act—Insurance Company cannot be made automatically liable by resorting to the Swaran Singh case (2004) 3 SCC 297—A policy in terms of Section 147 of the Act is not intended to cover persons other than third parties.
       Held : Chapter XI of the Act bears a heading, “Insurance of Motor Vehicles against third party risks”. The definition of “third party” is an inclusive one since Section 145(g) only indicates that “third party” includes the Government. It is Section 146 that makes it obligatory for an insurance to be taken out before a motor vehicle could be used on the road. The heading of that Section itself is “Necessity for insurance against third party risk”. No doubt, the marginal heading may not be conclusive. It is Section 147 that sets out the requirement of policies and limits of liability. It is provided therein that in order to comply with the requirements of Chapter XI of the Act, a policy of insurance must be a policy which is issued by an authorised insurer; or 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 the owner in respect of the death of or bodily injury or damage to any property of a third party caused by or arising out of the use of the vehicle in a public place. With effect from 14.11.1994, injury to the owner of goods or his authorised representative carried in the vehicle was also added. The policy had to cover death of or bodily injury to any passenger of a public service vehicle caused by or arising out of the use of the vehicle in a public place. Then, as per the proviso, the policy shall not be required to cover liability in respect of the 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 Compensation Act, 1923 in respect of the death of, or bodily injury to, an employee engaged in driving the vehicle, or who is a conductor, if it is a public service vehicle or an employee being carried in a goods vehicle or to cover any contractual liability. Sub-section (2) only sets down the limits of the policy. As we understand Section 147 (1) of the Act, an insurance policy thereunder need not cover the liability in respect of death or injury arising out of and in the course of the employment of an employee of the person insured by the policy, unless it be a liability arising under the Workmen’s Compensation Act, 1923 in respect of a driver, also the conductor, in the case of a public service vehicle, and the one carried in the vehicle as owner of the goods or his representative, if it is a goods vehicle. It is provided that the policy also shall not be required to cover any contractual liability. Uninfluenced by authorities, we find no difficulty in understanding this provision as one providing that the policy must insure an owner against any liability to a third party caused by or arising out of the use of the vehicle in a public place, and against death or bodily injury to any passenger of a public service vehicle caused by or arising out of the use of vehicle in a public place. The proviso clarifies that the policy shall not be required to cover an employee of the insured in respect of bodily injury or death arising out of and in the course of his employment. Then, an exception is provided to the last forgoing to the effect that the policy must cover a liability arising under the Workmen’s Compensation Act, 1923 in respect of the death or bodily injury to an employee who is engaged in driving the vehicle or who serves as a conductor in a public service vehicle or an employee who travels in the vehicle of the employer carrying goods if it is a goods carriage. Section 149(1), which casts an obligation on an insurer to satisfy an award, also speaks only of award in respect of such liability as is required to be covered by a policy under clause (h) of sub-section (1) of Section 147, (being a liability covered by the terms of the policy). This provision cannot therefore be used to enlarge the liability if it does not exist in terms of Section 147 of the Act.(Para 10)
       (ii) Motor Vehicles Act, 1988—Sections 147 and 166—Accident Claim—Death of Regional Manager of a company while using car given to him by the company—He is not covered by the Insurance Policy taken in terms of the Act without any special contract when there is no award under the Workmens Compensation Act that is required to be satisfied by the insurer.
       Held : The object of the insistence on insurance under Chapter XI of the Act thus seems to be to compulsorily cover the liability relating to their person or properties of third parties and in respect of employees of the insured employer, the liability that may arise under the Workmen’s Compensation Act, 1923 in respect of the driver, the conductor and the one carried in a goods vehicle carrying goods. On this plain understanding of Section 147, we find it difficulty to hold that the insurance company, in the case on hand, was liable to indemnify the owner, the employer Company, the insured, in respect of the death of one of its employees, who according to the claim, was not the driver. Be it noted that the liability is not one arising under the Workmen’s Compensation Act, 1923 and it is doubtful, on the case put forward by the claimant, whether the deceased could be understood as a workman coming within the Workmen’s Compensation Act, 1923. Therefore, on a plain reading of Section 147 of the Act, it appears to be clear that the insurance company is not liable to indemnify the insured in the case on hand.(Para 11)
       On the facts of this case, there is no finding that Mahmood Hasan, another employee of the owner was driving the vehicle. Even if he was, there is no finding of his negligence. The victim was the Regional Manger of the Company that owned the car. He was using the car given to him by the Company for use. Whether he is treated as the owner of the vehicle or as an employee, he is not covered by the insurance policy taken in terms of the Act — without any special contract — since there is no award under the Workmen’s Compensation Act that is required to be satisfied by the insurer. In these circumstances, we hold that the appellant–Insurance Company is not liable to indemnify the insured and is also not obliged to satisfy the award of the Tribunal/Court and then have recourse to the insured, the owner of the vehicle. The High Court was in error in modifying the award of the Tribunal in that regard.(Para 26)
       (iii) Motor Vehicles Act, 1988—Sections 147, 166 and 163A—Accident claim—Liability of Insurance Company —Deceased, employed as a Regional Manager with a company—He was provided with a car by the employer car was insured with appellant company—There was no special contract—Deceased was using the car along with his companion `M, also an employee of the company when the car collided with a tree resulting in death of Regional Manager—No finding as to who was driving the car—Widow and daughter of deceased filed a claim petition under Section 166 of the Act—According to claimants, deceased was occupant of car and it was being driven by ‘M, another employee of the company—Unsupported version of widow of deceased that income of deceased was Rs. 9,000/- p.m.—Tribunal held that claimants were entitled to receive an amount of Rs. 7,20,000/- from the owner of vehicle—Insurer was held not liable holding that vehicle was being driven by the deceased himself—Insurance company pointed out that deceased was not a third party covered by the insurance policy, he being an employee of owner of vehicle, not covered by the policy—However, High Court simply directed the Insurance company to pay the amount as ordered by the Tribunal and recover it from the insured in accordance with the directions of Supreme Court in Swaran Singh case (2004) 3 SCC 297—Whether High Court was justified in making the Insurance company liable to indemnify the insured—(No).
       Held : Based on the ratio in Swaran Singh (supra), the insurance company cannot be made liable in the case on hand to pay the compensation first and to recover it from the insured, the owner of the vehicle. The deceased being an employee not covered by the Workmen’s Compensation Act, of the insured, the owner of the vehicle, has not to be covered compulsorily under the Act and only by entering into of a special contract by the insured with the insurer could such a person be brought under coverage. There is no case that there is any special contract in that behalf in this case.(Para 20)
       (iv) Motor Vehicles Act, 1988—Section 166—Accident Claim—Driver of vehicle to be impleaded before an adjudication is claimed u/s 166 of the Act.
       Held : It may be true that the Motor Vehicles Act, insofar as it relates to claims for compensation arising out of accidents, is a beneficent piece of legislation. It may also be true that subject to the rules made in that behalf, the Tribunal may follow a summary procedure in dealing with a claim. That does not mean that a Tribunal approached with a claim for compensation under the Act should ignore all basic principles of law in determining the claim for compensation. Ordinarily, a contract of insurance is a contract of indemnity. When a car belonging to an owner is insured with the insurance company and it is being driven by a driver employed by the insured, when it meets with an accident, the primary liability under law for payment of compensation is that of the driver. Once the driver is liable, the owner of the vehicle becomes vicariously liable for payment of compensation. It is this vicarious liability of the owner that is indemnified by the insurance company. A third party for whose benefit the insurance is taken, is therefore entitled to show, when he moves under Section 166 of the Motor Vehicles Act, that the driver was negligent in driving the vehicle resulting in the accident; that the owner was vicariously liable and that the insurance company was bound to indemnify the owner and consequently, satisfy the award made. Therefore, under general principles, one would expect the driver to be impleaded before an adjudication is claimed under Section 166 of the Act as to whether a claimant before the Tribunal is entitled to compensation for an accident that has occurred due to alleged negligence of the driver. Why should not a Tribunal insist on the driver of the vehicle being impleaded when a claim is being filed? As we have noticed, the relevant provisions of the Act are not intended to jettison all principles of law relating to a claim for compensation which is still based on a tortious liability. The Tribunal ought to have, in the case on hand, directed the claimant to implead Mahmood Hasan who was allegedly driving the vehicle at the time of the accident. Here, there was also controversy whether it was Mahmood Hasan who was driving the vehicle or it was the deceased himself. Surely, such a question could have been decided only in the presence of Mahmood Hasan who would have been principally liable for any compensation that might be decreed in case he was driving the vehicle.(Para 9)
       (v) Motor Vehicles Act, 1988—Section 166—Accident Claim—Deceased employed in a limited company—Claimants to establish what was the monthly income of deceased—Oral evidence of widow of deceased not enough when.
       Held : It was necessary for the claimants to establish what was the monthly income and what was the dependency on the basis of which the compensation could be adjudged as payable. Should not any Tribunal trained in law ask the claimants to produce evidence in support of the monthly salary or income earned by the deceased from his employer Company? Is there anything in the Motor Vehicles Act which stands in the way of the Tribunal asking for the best evidence, acceptable evidence? We think not. Here again, the position that the Motor Vehicles Act vis-a-vis claim for compensation arising out of an accident is a beneficent piece of legislation, cannot lead a Tribunal trained in law to forget all basic principles of establishing liability and establishing the quantum of compensation payable. The Tribunal, in this case, has chosen to merely go by the oral evidence of the widow when without any difficulty the claimants could have got the employer – company to produce the relevant documents to show the income that was being derived by the deceased from his employment. Of course, in this case, the above two aspects become relevant only if we find the insurance company liable. If we find that only the owner of the vehicle, the employer of the deceased was liable, there will be no occasion to further consider these aspects since the owner has acquiesced in the award passed by the Tribunal against it.(Para 9)

Judgement Key Points

The legal ground in this case revolves around the interpretation of the scope of insurance coverage under the Motor Vehicles Act, specifically whether an occupant of a vehicle, who is not a third party within the meaning of the Act, can be considered covered under the insurance policy. The Supreme Court's approach emphasizes that the primary purpose of the insurance policy, as mandated by the Act, is to cover third-party risks, which include liabilities arising from injuries or damages caused to third parties by the use of the vehicle in a public place.

The Court clarified that the definition of "third party" is inclusive but primarily pertains to persons other than the insured, the owner, or an employee in the context of employment-related liabilities, unless there is a specific contractual agreement extending coverage. It was held that persons who are employees of the insured and are involved in the use of the vehicle do not automatically fall under the category of third parties unless their injury or liability arises in a manner that the policy is designed to cover, such as liabilities arising under the Workmen’s Compensation Act.

In dealing with the issue of an occupant who is also an employee or the driver, the Court underscored that unless the policy explicitly covers such individuals or their liabilities are covered under statutory provisions like the Workmen’s Compensation Act, the insurance company cannot be automatically held liable for their injuries or death. The Court reiterated that the coverage is intended for third-party risks and not for liabilities arising from the employment relationship unless specifically included through a special contract.

Therefore, the Court’s stance is that an occupant who is not a third party, and whose injury or death does not fall within the scope of third-party liability or statutory employment-related coverage, cannot be deemed covered under the insurance policy. This interpretation limits the insurer’s liability to the scope of the policy and the statutory provisions, excluding coverage for injuries to employees or occupants who are not third parties or covered under a specific contractual agreement.

JUDGMENT

P.K. Balasubramanyan, J.—One Suresh Chandra Variyal was employed as a Regional Manager in M/s Apace Savings and Mutual Benefits (India) Ltd., the owner of a motor vehicle, respondent No.3 herein. Variyal was provided with a car by the employer. The vehicle was insured with the appellant company in terms of the Motor Vehicles Act, 1988. There was no special contract. On 14.6.1999, the vehicle met with an accident. Suresh Chandra Variyal, died. The widow and daughter of Suresh Chandra Variyal, filed a claim petition under Section 166 of the Motor Vehicles Act, 1988, before the Motor Accidents Claims Tribunal, Nainital. Therein, they claimed compensation to the tune of Rs.15 lakhs. According to the claim, the deceased was driving along with his ‘companion’ Mahmood Hasan after completing his work for the employer. At about 11.30 p.m. the car collided with a tree due to the rash and negligent driving of the driver. The car was being driven by Mahmood Hasan at the time of the accident. The deceased was an occupant of the car. The car was being used for the business and for the benefit of the employer of the deceased at the time of the accident. The deceased was earning Rs. 9,000/- per month. He had a bright career ahead. Mahmood Hasan had lodged a first information report the same day (reiterated in the counter affidavit filed in this Court) giving wrong facts to escape from any prosecution. It was not specified in the application as to what was the wrong fact or what were the wrong facts mentioned in the complaint filed by Mahmood Hasan. The claimants as dependants were entitled to compensation as claimed.

2. The claim was filed against the employer, the owner of the motor vehicle and against the insurance company. Mahmood Hasan, who was allegedly driving the car and that too negligently, at the time of the accident, was not impleaded. No reason was given in the claim for his not being impleaded. The owner of the car, the company that employed the deceased, did not appear and did not file any written statement. The insurance company filed a written statement. It pleaded that the driver and the owner of the vehicle have colluded and the alleged driver of the car had not been impleaded. As a matter of fact, the deceased himself was driving the vehicle. Hence he was not entitled to claim any compensation since the accident occurred on account of his own negligence. The insurance company had no liability. The compensation claimed was exorbitant and the claim was liable to be dismissed.

3. In support of the claim, the wife of Variyal was examined as P.W.1 and another person, who was allegedly travelling in the car when it met with the accident, was examined as P.W. 2. P.W. 1 asserted that the vehicle was being driven at the time of the accident by Mahmood Hasan and her husband was travelling in the car. This was sought to be supported by P.W. 2 who claimed that he was also travelling in the same car at the time of the accident. He gave evidence that Variyal was employed as a Regional Manager with the owner of the car, M/s Apace Savings and Mutual Benefits (India) Ltd. P.W. 2 also gave evidence that sometimes Variyal himself used to drive the vehicle but Mahmood Hasan usually drove the car. Mahmood Hasan had lodged a First Information Report at 4.40 p.m. on the day of the accident. Therein, Mahmood Hasan had stated that Variyal was driving the car at the time of the accident.

4. No independent evidence was adduced to show what exactly was the salary that was being earned by Variyal from his employer. The employer was a limited liability company and in the normal course, should have been maintaining the relevant records showing the salary paid to a Regional Manager like Variyal. No attempt was made to get them produced. The widow contented herself by asserting in her oral evidence that Variyal was earning a salary of Rs. 9,000/- per month. The Motor Accident Claims Tribunal held that the evidence disclosed that Variyal was drivin

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2007 Supreme(SC) 138

IMPORTANT POINT In motor accident claim, where the victim claimant is not a third party within the meaning of the Act, the Insurance company cannot be made automatically liable merely by resorting to the Swaran Singh case (2004) 3 SCC 297.

Cases Referred (10)

IMPORTANT POINT
In motor accident claim, where the victim claimant is not a third party within the meaning of the Act, the Insurance company cannot be made automatically liable merely by resorting to the Swaran Singh case (2004) 3 SCC 297.