By the Court.—The main question involved in this appeal is,

‘When an insurance company of is liable to compensate the heirs of the deceased driver of a two wheeler?’

THE FACTS

2. Scooter No. U.P.-55/5026 (the Scooter) was owned by Smt. Uma Devi (the Widow). She was wife of Ugrasen Singh (the Deceased).

3. The Deceased was going on the Scooter on 26.5.1990 from Sahjanwa to Mahuli. He was driving the same. While saving a child, the Scooter slipped into a ditch adjoining the road and collided with a tree. The Deceased received injuries and died on the spot.

4. The Widow alognwith her three daughters and the son (the Claimants) filed Motor Accident Claim Petition No. 75 of 1990 before the Motor Accident Claim Tribunal, (District Judge) Basti (the Tribunal). In this claim petition, the New India Insurance Company Limited (the Company), the insurer of the Scooter, was the only opposite party.

5. The claim petition was partly allowed by the (Tribunal) on 22.1.1992 for Rs. 2,00,000/- alongwith 12% per annum interest from 10.7.1979. The compensation was awarded under the following heads:

Rs. 10,000/- for damage to the Scooter;

Rs. 1,80,000/- towards family dependency. This was after deducing ¼th namely Rs. 60,000 from the total dependency of ‘2,40,000/-.

Rs. 5,000/- for loss of consortium;

Rs. 5000/- for funeral expenses.

Hence the present appeal by the Company.

POINTS FOR DETERMINATION

6. We have heard Shri Kartikeya Saran, counsel for the Company and Shri SK Singh holding brief of Shri A.K. Srivastava, counsel for the Claimants. The following points arise for determination in the case.

(i) Whether the insurance for the driver or the vehicle is mandatory under the Motor Vehicle Act, 1988 (the MV Act);

(ii) Whether the Company is liable to pay for the damage to the Scooter;

(iii) Whether the Insurance Company is liable to pay compensation on the death of the Deceased.

1st POINT: INSURANCE VEHICLE AND DRIVER NOT MANDATORY—UNLESS DRIVER IS An EMPLOYEE

7. The insurance is only a contractual obligation. Nevertheless, the MV Act mandates insurance for specified purposes.

8. Chapter XI of the MV Act is titled ‘INSURANCE OF MOTOR VEHCILES AGAINST THIRD PARTY RISKS’. Section 146 of this Chapter is titled ‘Necessity for insurance against third party risk’. It provides that no motor vehicle can be used in the public place unless it is insured as required by this Chapter.

9. Section 147 is titled ‘Requirement of policies and limits of liability’. It mandates insurance against the liability,

To owner of goods or his authorised representative carried in the vehicle;

To damage to any property of third party;

Towards passengers of a public service vehicle;

Under the Employees’ Compensation Act 1923 (the EC Act) of the driver (who is an employee) and conductor (examining tickets) of public service utility vehicle.

10. A driver of the vehicle, is not a third party. In case he is an employee of the owner then he is covered under the EC Act and insurance is mandatory, otherwise, it is not necessary to insure against any risk to the driver.

11. Nevertheless, the MV Act does not debar an insurance company from agreeing to indemnify any person or undertake to pay any other liability. This is clear from section 147(5) of the MV Act. This was also so held in New India Assurance Company Limited v. Sadanand Mukhi and others, 2009 (2) SCC 417 (the Sadanand cases).

12. In the Sadanand case, the Supreme Court observed (paragraph 11):

‘The provisions of the Act, therefore, provide for two types of insurance— one statutory in nature and the other contractual in nature’.

13. In our opinion,

(i) The MV Act requires insurance against;

Third party risk;

Passengers of the public service vehicle;

Driver (employee) or conductor of the public service vehicle to extent of the employee’s liability under the EC Act.

(ii) The MV Act does not require insurance;

Against damage to the vehicle; or

For the risk to the driver (other than an under the E.C. Act) or the owner of