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GAUHATI HIGH COURT
B. L. HANSARIA, S. HAQUE, S. N. PHUKAN, J. SANGMA AND S. K. HOMCHAUDHURI, JJ.
New India Assurance Co.Ltd -Appellant
Versus
Satyanath Hazarika and others -Respondent
M. A. (F) Nos. 59 of 1976 and 63 to 69 of 1979
Decided On : 08-03-1989
MOTOR VEHICLES ACT - INSURANCE - LIABILITY OF INSURER - GRATUITOUS PASSENGERS - SECTION 95 - INTERPRETATION - SCOPE OF COVERAGE - RETROSPECTIVE EFFECT OF TARIFF ADVISORY COMMITTEE INSTRUCTION.
Fact of the Case:
The case involved a reference to a 5-Judge Bench to reconsider observations made by a 3-Judge Bench in Hira Devi v. Bhaba Kanti, AIR 1977 Gauhati 31, in light of the Supreme Court's pronouncement in Pushpabai v. Ranjit Ginning and Pressing Co., AIR 1977 SC 1735. The central issue was whether an insurer can be asked to indemnify an insured who has been made liable to pay compensation in respect of death or bodily injury to a gratuitous passenger.
Finding of the Court:
The Court held that under an "act only" policy, the insurer is not liable to indemnify the insured for the compensation payable by the latter in case of death or bodily injury to a passenger who is not carried for hire or reward. However, the Court recognized that an insurer can take policies covering risks beyond what is required by the Act and that such policies may cover cases of gratuitous passengers.
Issues: 1. Whether an insurer is liable to indemnify an insured who has been made liable to pay compensation in respect of death or bodily injury to a gratuitous passenger? 2. What is the scope of coverage under an "act only" policy? 3. Can an insurer take policies covering risks beyond what is required by the Act? 4. What is the effect of the Tariff Advisory Committee's instruction issued on 13-3-1978 requiring insurance companies to mandatorily incorporate a clause covering death or bodily injury to any person including occupants carried in the motor car? 5. Whether the Tariff Advisory Committee's instruction has retrospective effect?
Ratio Decidendi: 1. The Court interpreted section 95 of the Motor Vehicles Act, 1939, and held that an insurer is not liable to indemnify the insured for compensation payable to a gratuitous passenger unless the policy specifically covers such a risk. 2. The Court recognized that insurers can take policies covering risks beyond what is required by the Act, including coverage for gratuitous passengers, by paying additional premium. 3. The Court held that the Tariff Advisory Committee's instruction issued on 13-3-1978, requiring insurance companies to mandatorily incorporate a clause covering death or bodily injury to any person including occupants carried in the motor car, applies to all proceedings pending before any adjudicatory forum since 25th March, 1977, even if the accident occurred before that date and the policy did not include such a risk. 4. The Court reasoned that the instruction was issued to modify the rigor of the Supreme Court's decision in Pushpabai v. Ranjit Ginning and Pressing Co., AIR 1977 SC 1735, and that it has the effect of engrafting a statutory provision upon existing contracts.
Final Decision: The Court answered the question referred to it by stating that an insurer would be liable to indemnify the insured in respect of compensation awarded against him for the death or bodily injury to a gratuitous passenger in all those cases which are pending before the Claims Tribunal or appellate authorities since 25th March, 1977. In other cases, the insurer would be liable if the particular policy covered the risk.
HANSARIA, J.:- This 5-Judge Bench has been constituted to consider whether certain observations made by a 3-Judge Bench of this Court in Hira Devi v. Bhaba Kanti, AIR 1977 Gauhati 31 need reconsideration in view of the later pronouncement of the Supreme Court in Pushpabai v. Ranjit Ginning and Pressing Co., AIR 1977 SC 1735. It may be stated that the case of Hira Devi had to be placed before a Full Bench of 3 Judges because of a reference by a Division Bench which was of the view that there is a difference of opinion expressed in Assam Corporation v. Binu Rani, AIR 1975 Gauhati 3 and Asha Rani v. The Commonwealth Assurance Company Ltd. (MA (F) 41/69 disposed of on 21-2-1974) on the question as to whether an insurer is liable to pay compensation in case of dealth or bodily injury to a gratuitous passenger. What is required to be determined by this Bench is whether an insurer can be asked to indemnify an insured who has been made liable to pay compensation in respect of death or bodily injury to gratuitous passenger.
2. To answer the above question, we shall have to apply our mind mainly to the provisions contained in section 95 of the Motor Vehicles Act, 1939, hereinafter referred to as the Act. This section finds place in Chapter VIII of the Act dealing with insurance of motor vehicles against third party risk. The provisions in this Chapter follow closely the recommendations of Motor Vehicles Insurance Committee and have been adopted from English Law. As accidents have been frequent and as in large number of cases injured persons or the dependents of those killed found it difficult to realise damages or compensation from the owner or driver who had no means to satisfy their claims, necessity for insurance against third party risk was keenly felt. This Chapter, therefore, makes provision for insurance of the vehicle against third party risk, that is to say, its provisions insure that a third party who suffers on account of the user of the motor vehicles would be able to get damages for injuries suffered and that their liability to get the damages will not be dependent on the financial condition of the owner or driver of the vehicle whose user led to the causing of the injury. It was, therefore stated in New Asiatic Insurance Co. v. Pessumal, AIR 1964 SC 1736 that the provisions of this Chapter have to be construed in such a manner as to ensure the aforesaid object of the enactment.
3. As we would be primarily concerned in answering the aforesaid question with section 95 of the Act, we may note the relevant provisions of this section at the outset.
"Section 95. Requirement of Policies and limits of Liability: (1) In order to comply with the requirements of this Chapter a policy of insurance must be a policy which -
(a) ...........................
(b) insures a person or classes of persons specified in the policy to the extent specified in sub-section (2) -
(i) against any liability which may be incurred by him in respect of the death of or bodily injury to any person or damage to any property to a third party caused by or arising out use of the vehicle in a public place;
(ii) against death of or bodily injury to any passenger of a public service vehicle caused by or arising out of the use of a vehicle in a public place;
Provided that a policy shall not be required-
(i) ..........................
(ii) except where the vehicle in which passengers are carried for hire or reward or by reason of or in pursuance of a contract of employment, to cover liability in respect of the death of or bodily injuries to persons being carried in or upon entring or mounting or alighting from the vehicle at the time of the occurrence out of which a claim arises".
4. From a plain reading of the aforesaid provisions, it is clear that under "act only" policy, the insurer is liable to indemnify the insured against the death 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.
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