Insurers can be directed to pay compensation for gratuitous passengers if additional premiums are paid, despite an Act only policy limiting liability.

JUDGMENT :

The question arising for consideration in this appeal is whether the direction of the Tribunal to pay and recover the compensation awarded warrants interference, the insurance policy of the offending vehicle being an Act only Policy and the injured/deceased, a gratuitous passenger. The essential facts are as under;

The claim petition was filed by the husband, son and daughter of Pathukkutty, who died on 23.07.2014 after falling from the scooter ridden by her son in a rash and negligent manner. As against a claim for Rs.15,00,000/-, the Tribunal awarded Rs.7,84,000/- as compensation and directed the insurer/ appellant to effect payment and recover the amount from the owner of the scooter.

2. Learned Counsel for the appellant drew attention to the decisions in New India Assurance Co. Ltd. v. Asha Rani and Others , [ (2003) 2 SCC 223 ] onwards, to contend that Section 147 of the MOTOR VEHICLES ACT , 1988 speaks of only the liability which may be incurred by the owner of a vehicle in respect of death or bodily injury to any person or damage to any property of a ‘third party’ caused by or arising out of the use of the vehicle in a public place. Reliance is placed on the Single Bench judgment of this Court in New India Assurance Co. Ltd. v. Daisy Paul [ 2021 (2) KLT OnLine 1063 ] to point out that, once the insurer is found not liable to indemnify the insured, there cannot be a direction to pay and recover. It is fairly submitted that an additional amount of Rs.70 was collected towards premium to cover the liability towards unnamed hirer/pillion passengers up to Rs. 2,00,000/-. Therefore, if at all, the liability of the insurer is limited to the fixed sum of Rs. 2,00,000/-.

3. Learned Counsel for the respondents submitted that the question whether there can be a direction to pay and recover, even in cases where the insurer is not liable to indemnify, is referred to the larger bench of the Supreme Court and is yet to be answered. It is contended that in Manager, National Insurance Co.Ltd. V. Saju P.Paul and Another [ 2013) 2 SCC 41 ], Manuara Khatun and Others v. Rajesh Kumar Singh , [ (2017) 4 SCC 796 ] and plethora of other decisions, the Supreme Court has directed the insurance company to pay and recover, de hors the injured being a gratuitous passenger and the policy, an Act only policy.

4. The legal position that an Act only policy does not cover gratuitous passengers including pillion riders and hence compensation cannot be claimed from the insurance company needs no reiteration in the light of the decisions in United India Insurance Co. Ltd., Shimla v. Tilak Singh and Others , [ (2006) 4 SCC 404 ], General Manager, United Insurance Co. Ltd. v. M. Laxmi and Others , [ (2009) 17 SCC 301 ] etc. Therefore, what remains for consideration is only whether the direction requiring the appellant to pay the compensation and recover that amount from the owner needs interference. Of course, in Daisy Paul (supra), this Court held that, the policy therein being an Act only policy and the claimant a gratuitous passenger, the direction to the insurance company to pay the compensation and recover that amount from the owner is illegal. At the same time, it is to be noted that, therein no additional premium was paid to cover the owner, as revealed from the discussion in paragraph 17 of the judgment extracted below;-

“17. On an overall re-appreciation of the facts, Sections 147 and 149 of the Act and the aforecited precedents, I am of the definite opinion that the law laid by the three Judge Bench in Asha Rani and Tilak Singh, that a 'Statutory Policy' o