Charging a higher premium does not necessarily extend the insurance company's liability to third-party risk beyond the statutory liability fixed by the Motor Vehicles Act, 1939. The terms of the insurance policy and the limits of liability undertaken by the insurance company are crucial in determining the extent of its liability.

Rajesh Balia, J.-Heard learned counsel for the parties. This appeal is by the insurance company to limit its liability towards third party to indemnify the insured within the precincts of the statutory liability fixed under the Motor Vehicles Act, 1939 (in short ‘the Act of 1939’), which was in force at the time the accident in question had taken place.

2. This is the second time in this case the insurance company is before this court.

3. The accident in question took place on 20.9.1984 resulting in the death of one Prabhu Ram whose legal representatives are respondent Nos. 1 to 9. The respondent No. 10 is driver and the respondent No. 11 is owner of the vehicle.

4. TheMotor Accidents Claims Case No. 119 of 1984 was lodged by the claimants and by award dated 27.4.1988, a sum of Rs. 1,04,000 was determined as compensation payable to the claimants which the owner of the vehicle was liable to pay to the dependants/legal representatives of the deceased, Prabhu Ram. That part of the award is not in dispute, that is to say, legal liability of the owner towards claimants arising from the accident is not in issue in this appeal.

5. The vehicle in question was insured with the present appellant, insurance company and it was held liable to indemnify the owner for the entire sum under the policy.

6. Aggrieved with the aforesaid award dated 27.4.1988 passed by M.A.C.T., the insurance company appealed before this court for limiting its liability to Rs. 50,000, the statutory liability fixed under the Act of 1939. The insurance company did not succeed before this court; either before the learned single Judge or before the Division Bench in Special Appeal. The matter was taken to Supreme Court.

7. The Supreme Court vide its order dated 17.4.2003 noticed that in the written statement filed by the insurance company, it was alleged that its liability is limited only to the extent of Rs. 50,000. Despite that allegation, no issue was framed in that respect. It appears that the insurance policy had not been filed before the Motor Accidents Claims Tribunal later on. During the pendency of appeal, the insurer has filed an attested copy of the policy issued to the insured and on the strength of said document, it was urged on behalf of appellant insurance company that since liability of the insurer is limited only to the extent of Rs. 50,000, the view taken by High Court is erroneous. Considering these pleas, it was opined that:

“It is true that in case the liability of the insurer is limited, it could not be saddled with the unlimited liability. Since the question whether the appellant has limited liability is a question of fact and Tribunal has not dealt with the said question, it would be appropriate if the matter is sent back to the Tribunal to decide the said question.”

8. Consequently, the Judgment and order under challenge of this court was set aside and the matter was remanded to the Tribunal with direction that the Tribunal shall hold an inquiry as regards the liability of the insurance company. It was left open for the parties to file fresh documents and lead other evidence as they may be advised, within three months from the date of aforesaid order.

9. Pursuant thereto, the Motor Accidents Claims Tribunal framed a fresh issue “whether non-applicant No. 3, National Insurance Co. Ltd. is liable only to the extent of Rs. 50,000 or its liability is unlimited”. After considering the material, which was brought on record by the parties during the proceedings after remand from the Supreme Court, it was found by the Tribunal that a premium for the ‘Act only policy’ was Rs. 200, the premium charged from the owner of the vehicle in the present case is Rs. 240, which was captioned under ‘liability to public risk Act only’, which under the insurance jargon considered as ‘third party risk policy’ by charging higher than the ‘Act only policy’ and on that premise, it came to the conclusion that the insurance company has charged additional premium