The liability of the insurer is limited to the extent specified under S.95(2) of the Motor Vehicles Act and is not unlimited or higher than the statutory liability. Specific agreement and separate premium payment are necessary to cover higher risk, and in the absence of such clauses in the insurance policy, the liability of the insurer cannot be expanded beyond the statutory requirement.

1. These appeals are placed before us pursuant to the order of reference made in New India Assurance Co. v. C.M. Jaya and Ors. ((1999) 2 SCC 47), which reads:

"The question involved in these appeals is whether in a case of insurance policy not taking any higher liability by accepting a higher premium, in case of payment of compensation to a third party, the insurer would be liable to the extent limited under S.95(2)or the insurer would be liable to pay the entire amount and he may ultimately recover from the insured. On this question, there appears to be some apparent conflict in the two three-Judge Bench decisions of this Court- (1) New India Assurance Co. Ltd. v. Shanti Bai (JT 1995 (2) SC 95 = (1995) 2 SCC 539) and (2) Amrit Lal Sood v. Kaushalya Devi Thapar UT 1998 (2) SC 484 = (1998) 3 SCC 744).

2. In the latter decision, unfortunately the decision in New India Assurance case (supra) has not been noticed though reference has been made to the decision of this court in National Insurance Co. Ltd. v. Jugal Kishore (JT 1988 (1) SC 265 = (1998) 1 SCC 626) which was relied upon in the earlier three-Judge Bench judgment. In view of the apparent conflict in these two three Judge Bench decisions, we think it appropriate that the records of this case may be placed before my Lord, the Chief Justice of India to constitute a large Bench for resolving the conflict. We accordingly so direct. The record may now be placed before the Hon'ble the Chief Justice of India."

2. In the first place, we think it appropriate to have a closer look at the three decisions referred to in the above order.

3. In New India Assurance Co. Ltd. v. Shanti Bai and Ors. (JT 1995 (2) SC 95) = (1995) 2 SCC 539, the facts were that on 3.1.1989 the deceased Laxman Singh, who was sitting on the top of the bus with the permission of the bus driver, respondent 5, who hit a tree by his rash and negligent driving. The legal heirs of Laxman Singh filed claim for compensation amounting to Rs. 7,81,000/- before the Motor Accident Claims Tribunal. The Tribunal, by its order, awarded compensation of Rs. 1,10,000/- together with interest and directed the insurance company (the appellant before this Court) and the respondent Nos. 4 and 5, being the owner and driver of the bus, to pay the same. The appeal filed by the appellant before the High Court was dismissed. The short question that came up for consideration before this Court was whether the appellant was liable to pay compensation to the tune of Rs. 1,10,000/- together with interest thereon in the light of the contention of the appellant that its liability was limited to Rs. 15,000/

4. The owner of the bus had taken a comprehensive insurance policy on the estimated value of the vehicle at Rs. 2,50,000/-. In the schedule of premium an additional payment of Rs. 600/- in respect of 50 passengers was shown. The appellant-company contended that this additional payment @ Rs.12/- per passenger was to cover its limited liability of 50 passengers under S.95 of the Motor Vehicles Act, 1939 (for short 'the Act').

5. Following the case of National Insurance Co. Ltd., New Delhi v. Jugal Kishore and Ors. (JT 1988 (1) SC 265 = (1988) 1 SCC 626) and referring to the provisions of S.95 of the Act, the Court stated thus:

"These provisions were interpreted by this Court in the case of National Insurance Co. Ltd. v. Jugal Kishore. This Court observed that even though it is not permissible to use a vehicle unless it is covered at least under an "Act only" policy, it is not obligatory for the owner of a vehicle to get it comprehensively insured. In case, however, it is got comprehensively insured, a higher premium is payable depending on the estimated value of the vehicle. Such insurance entitles the owner to claim reimbursement of the entire amount of loss or damage suffered upto the estimated value of the vehicle calculated according to the rules and regulations framed in this behalf. It was further observed as under:

"Comprehensive