Challenge in this appeal by the New India Assurance Company Limited is to the award dated 15.03.2001 in M.V.O.P.No.559 of 1996 passed by the Motor Accident Claims Tribunal-cum-II Additional District Judge, East Godavari at Rajahmundry.

The fact of the matter which is not seriously disputed may be noticed. Garaga Adilakshmi, statedly aged about 60 years and was earning about Rs.600/- per month as a coolie, was victim of a hit and run accident occurred due to rash and negligent driving of the driver of a jeep bearing No.AP 5 T 2258 on the road between Peddapuram to Jaggampeta. Victim of the accident died on the spot. Her four childen instituted the O.P claiming Rs.90,000/- as compensation for her death. As generally happens, driver remained ex parte. Owner of the jeep, one Suri Babu, contested the O.P. He admitted that he is the owner of the jeep and that even if driver is negligent it is insurance company which has to pay the amount.

Insurance Company opposed the O.P denying negligence and also disputing the quantum of compensation claimed. Insurer further alleged that the jeep had no valid permit, that the driver had no valid licence and that the petitioners in the O.P are not legal heirs of deceased Adilakshmi.

Based on these pleadings, learned Tribunal framed two substantial issues, namely, i) Whether the accident occurred due to rash and negligent driving of the jeep by the driver? and ii) Whether the petitioners are entitled to any compensation. If so, to what amount and against whom?

During the enquiry, claimants examined two witnesses and marked four documents. Insurer examined three witnesses and marked Exs.B1 to B7. On considering the evidence, learned Tribunal came to the conclusion that accident occurred due to rash and negligent driving of the driver. Considering the age of the deceased, learned Tribunal applied the multiplier 0.97 and arrived at the loss of dependency at Rs.6,984/-, and awarded a sum of Rs.50,000/-under no fault liability. Further, a sum of Rs.2,000/- was also awarded towards funeral expenses.

The appeal is sought to be supported by the learned Counsel for the appellant urging as follows. Insurance policy -Ex.B1 was issued by the appellant in favour of Secretary and Correspondent of Adarsh Vidyalaya. Insured was not party to the proceedings, and therefore, the insurer cannot be made liable to pay the compensation. According to the learned Counsel, the question of payment of compensation by the insurer in discharge of its obligation to indemnify insured arises only when insured is held responsible vicariously for the negligence of the driver. He placed reliance on Oriental Insurance Company Limited v Sunita Rathi (1998 ACJ 121 = AIR 1998 SC 257).

Learned Counsel for respondent Nos.1 to 4 (claimants) relied on Section 157 of the Motor Vehicles Act, 1988 (the Act, for brevity), and submits that when jeep was transferred to Suri Babu along with the vehicle, policy of insurance shall be deemed to have been transferred, and therefore, even if the earlier owner of the jeep is not made party, the same does not enable the insurer to escape the liability.

In Sunita Rathi (supra) it was held that "liability of the insurer arises only when the liability of the insured has been upheld for the purpose of indemnifying the insured under the contract of insurance." Under Section 147(1)(b)(i) of the Act, a policy of insurance (act/statute policy) is required to insure the person specified in the policy against any liability which may be incurred by him in respect of death of or bodily injury of a third party. Therefore, ordinarily, unless and until it is held that insured is liable to pay the compensation, the insurance company, which indemnifies the insured by issuing policy, cannot be made liable. However, the question before this Court is little different.

There is no dispute that the jeep involved in the accident was originally owned by Adarsh Vidyalaya, and Ex.B1-policy was issued in the name o