Holding

Under the Motor Vehicles Act, 1988, an insurance policy covering third‑party risk is not required to exclude gratuitous passengers, making the insurer liable for compensation.

Summary

A ten‑year‑old girl died in a truck accident on 11 March 1990 while travelling as a gratuitous passenger. Her father, brother and sister claimed compensation under the Motor Vehicles Act, 1988, and the Motor Accident Claims Tribunal awarded Rs. 25,000, directing New India Assurance Company, the insurer of the vehicle, to pay the amount with interest. The insurer appealed, contending that under the Act it was not liable for a gratuitous passenger, relying on the earlier decision in Mallawwa v. Oriental Insurance which was based on Section 95 of the pre‑1988 Motor Vehicles Act. The Supreme Court examined the provisions of the new Act, particularly Section 147, and held that the rider excluding gratuitous passengers present in the old Act is absent in the new legislation. Consequently, an insurance policy covering third‑party risk must indemnify liability for death of any passenger, including gratuitous ones, and the insurer cannot escape liability. The Court dismissed the insurer’s appeals and upheld the lower court’s order, effectively doubling the compensation awarded.

Issues considered

Whether Section 147 of the Motor Vehicles Act, 1988 obliges an insurer to cover liability for the death of a gratuitous passenger.
Whether the ratio of the earlier decision based on Section 95 of the Motor Vehicles Act, 1939 is applicable to accidents occurring after the commencement of the 1988 Act.

Legislation cited

Motor Vehicles Act, 1939s. 95
Motor Vehicles Act, 1988s. 147

Subjects

Motor Vehicles Actinsurance liabilitygratuitous passengerthird party riskcompensationSection 147Section 95motor accident claims

Judgment

NEW INDIA ASSURANCE COMPANY A
v.
SHRI SATPAL SINGH AND ORS.

DECEMBER 2, I 999

[K.T. THOMAS AND M.B. SHAH, JJ.] B

Motor Vehicles Act 1988-Section 147-Compensation for death-
Victim a gratuitous passenger-Claim under new Act-Whether Insurance
Company liable-Held, Yes-third party risk includes gratuitious passenger- C
Decision rendered under old Act not applicable-Motor Vehicles Act, 1939-
s.95.

Respondents made a joint claim before the Motor Accident Claims
Tribunal claiming compensation for the accidental death of a girl child of 10
years while travelling in a truck, under the Motor Vehicles Act, 1988. The D
Tribunal passed an award for Rs. 25,000 and directed the Appellant to pay
the amount with interest as the vehicle was covered under their Policy.

Appellant filed an appeal before the High Court disputing their liability
to pay the compensation since the deceased was a gratuitous passenger. The
Respondents appealed for enhancement of compensation. The High Court E
dismissed the appeal by the appellant company and allowed the Respondent's
appeal by doubling the compensation amount

In appeal to this Court, the appellant Company relying on the Judgment
in Ma//awwa and Ors. v. Oriental Insurance Co. Ltd. & Ors.* disputed its
liability to pay compensation on the premise that the victim was a gratuitous F
passenger in the vehicle.

Dismissing the appeals, the Court

HELD : 1. The decision in Mal/awwa & Ors. was rendered under Section
95 of the Old Motor Vehicles Act, 1939. The aforesaid provision contained a G
rider in clause (ii) of the proviso to sub-section (i) which is absent in the
corresponding provision in the new Act Under the new Act an insurance policy
covering third party risk is not required to exclude gratuitous passengers in

*(19911 1 sec 403. H
149

/
150 SUPREME COURT REPORTS [1999] SUPP. 5 S.C.R.

A a vehicle, no matter that the vehicle is of any type or class. Hence the decisions
rendered under the old act vis-a-vis gratuitous passengers are of no avail while
considering the liability of the insurance company in respect of any accident
which occurred or would occur after the new Act came into force.
(151-C; 154-D-E]

B Pushpabai Parshottam Udeshi & Ors. v. Mis Ranjit Ginning & Pressing
Co. Pvt. Ltd. and Anr., AIR (1977) SC 1735 = (1977] 2 SCC 745 and
Mallawwa and Ors. v. Oriental Ins. Co. Ltd. & Ors., (1999] 1 SCC 403,
distinguished.

C CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 6926-27 of
1999.

From the Judgment and Order dated 12.7.99 of the Himachal Pradesh
High Court in F.A.0. No. 11 and 44of:1992.

S.N. Gupta, J.S. Attari and Alok Kr. Sharma for the Appellant.
D
The Judgment of the Court was delivered by

THOMAS, J. Leave granted.

A 10 year old girl met with her death in a truck accident. Her name was
E Dupinder Kaur. The accident occurred while she was travelling in the truck
on 11.3.1990. She died on the spot. Her father, brother artd sister made a joint
claim for compensation under the Motor Vehicles Act, 1988 (for short the
'new Act'). The Motor Accident Claims Tribunal before which the claim was
made passed an award in a sum of Rs. 25,000 to the claimants. The owner of
F the truck was found liable to pay the compensation amount. Mis. New India
Assurance Company, the insurer had been directed to make the amount good
with interest, as the vehicle was then covered by an insurance policy issued
by that company.

The claimants as well as the Insurance Company challenged the said
G award. The former was dissatisfied with the quantum of compensation awarded.
The Insurance Company was aggrieved as the liability was imposed on them.
The Insurance Company put forward a contention that the deceased Dupinder
Kaur was a gratuitous passenger in the truck and hence no liability can be
fastened with the insurer, but that contention was repelled.

H A Division Bench of the High Court dismissed the appeal filed by the
NEW INDIA ASSURANCE COMPANY v. SATPAL SINGH rrnoMAS, J .] 151
Insurance Company but allowed the other appeal by doubling the A
compensation amount. Hence this appeal by special leave at the instance of
the Insurance Company. After hearing learned counsel for the appellant we
felt that it is not necessary to send notice to the respondents to contest the
appeal as there is no scope for absolving the Insurance Company from
liability.
B
Learned counsel for the appellant banked on the decision of a three
Judge Bench this Court in Mallawwa and Ors. v. Oriental Insurance Co. Ltd
and Ors., [ 1999] I SCC 403 to disclaim liability on the premise that the victim
of the accident was gratuitous passenger in the vehicle covered by the
insurance policy. But the said decision was rendered under Section 95 of the C
Motor Vehicles Act, 1939 (which can be referred to as 'the old Act'). The
aforesaid provision contained a rider in clause (ii) of the proviso to sub-
section (I) which is absent in the corresponding provision in the New Act.
To pinpoint the said distinction we extract Section 95(1) of the old Act as
under:
D
··95 Requirements of policies and limits of liability.-{ I) In order to
comply with the requirements of this Chapter, a policy of insurance
may be a policy which-
(a) is issued by a person who is an authorised insurer or by a co-
operative society allowed under section 108 to transact the E
business of an insurer, and
(b) insures the 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 F
property of a third party caused by a or arising out of the use of
the vehicle in a public place;

(ii) against the death of 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; G
Provided that a policy shall not be required-

(i) to cover liability in respect of the death, arising out of and in
the course of his employment, of the employees of a person
insured by the policy or in respect of bodily injury sustained by H
152 SUPREME COURT REPORTS [1999) SUPP. 5 S.C.R.

A such an employee arising out of and in the course of his
employment other than a liability arising under the Workmen's
Compensation Act, 1923, in respect of the death of, or bodily
injury to, any such employee-

(a) engaged in driving the vehicle, or
B (
(b) it is a public service vehicle, engaged as a conductor of the
vehicle or in examining tickets on the vehicle, or
\
(c) if it is a goods vehicle, being carried in the vehicle; or

(ii) except where the vehicle is a vehicle in which passengers are
c carried for hire or reward or by reason of or in pursuance of
contract of employment, to cover liability in respect of the death
of or bodily injury to persons being carried in or upon or entering
or mounting or alighting from the vehicle at the time of the
occurrence of the event out of which a claim arises, or
D (iii) to cover any contractual liability."

As per the provi~o when read with its clause (ii) it is clear that the
policy of insurance shall not be required to cover liability in respect of the
death of or bodily injury to persons who were gratuitous passengers of that
E vehicle. This Court has held in Pushpabai Parshottam Udeshi and others v.
Mis. Ranjit Ginning & Pressing Co. Pvt. Ltd. and Anr., AIR (1977) SC 1735
= [1977] 2 sec 745 as under:

"Sections 95(a) and 95(b) (i) of the Motor Vehicles Act adopted the
provisions of the English Road Traffic Act, 1960, and excluded the
F liability of the insurance company regarding the risk to the passengers.
Section 95 provides that a policy of insurance must be a policy. Which
insures the persons against any liability which may be incurred by him
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. The plea that the words 'third party' are wide
G enough to cover all persons except the person and the insurer is
negatived as the insurance cover is not available to the passengers
made clear by the proviso to sub-section which provides that a policy
shall not be required .......... Therefore it is not required that a policy of
insurance should cover risk to the passengers who are not carried for
H hire or reward. As under Section 95 the risk to a passenger in a vehicle
NEWINDIAASSURANCECOMPANYv. SATPALSINGH[THOMAS,J.] 153
who is not carried for hire or reward is not required to be insured the A
plea of the counsel for the insurance company will have to be accepted
and the insurance company held not liable under the requirements of
the Motor Vehicles Act."

In fact the said ratio has been approved by the three Judge Bench in
Ma/lava v. Oriental Insurance Co. Ltd. (supra). At the same time learned B
Judges pointed out that the old Act is now repealed by the new Act and
Section 147 of the new Act corresponding to Section 95 of the old Act has
been substantially altered and hence the above interpretation of Section 95
of the old Act will govern the cases which have arisen under the old Act.

Proviso to Section 14 7 (I) of the new Act shows that it is a recast C
provision by placing the earstwhile clause (iii) as the present clause (ii). In
other words, clause (ii) of the proviso in Section 95(1) of the old Act is totally
non-existent in the proviso to Section 147(1) of the new Act.

Under Section 147 of the new Act, the policy must be a policy which
insures the person or classes of persons specified in the policy to the extent D
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, including owner of the goods
or his authorised representative carried in the vehicle) or damage to E
any property of a third party - caused by or arising out of the use of
the vehicle in a public place;

(ii) against the death of 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.
F
The proviso to the said sub-section is not relevant here as it pertains
to death or bodily injury to the employee mentioned therein. Sub-section (2)
provides that a policy of insurance shall cover any liability incurred in respect
of any accident, up to the following limits, namely :-

(i) save as provided in .clause (b) the amount of liability incurred; G
(ii) in respect of damage to any property of a third party, a limit of
rupees six thousand:

Provided that any policy of insurance issued with any limited liability
and in force, immediately before the commencement of this Act, shall H
154 SUPREME COURT REPORTS [1999] SUPP. 5 S.C.R.

A continue to be effective for a period of four months after such
commencement or till the date of expiry of such policy whichever is
earlier.

Hence, under sub-section (2), "there is no upper limitation for the insurer
regarding the amount of compensation awarded in respect of death or bodily
B injury of a victim of the accident. It is, therefore, apparent that the limit
contained in the old Act has been removed and the policy should insure the
liability incurred and cover injury to any person including owner of the goods
or his authorised representative carried in the vehicle. The Legislature has
also taken care even the policies which were in force on the date of
C commencement of the Act by specifically providing that any policy of
insurance containing any limit regarding insurer's liability shall continue to be
effective for a period of four months from commencement of the Act or till
the date of expiry of such policy, whichever is earlier. This means, after the
said period of four months a new insurance policy consistent with the new
Act. is required to be obtained.
D
The result is that under the new Act an insurance policy covering third
party risk is not required to exclude gratuitous passengers in a vehicle, no
matter that the vehicle is of any type or class. Hence the decisions rendered
under the old Act vis-a-vis gratuitous passengers are of no avail while
considering the liability of the insurance company in respect of any accident
E which occurred or would occur after the new Act came into force.

The Division Bench of the High Court has rightly repelled the contention
of the appellant - insurance company on the aforesaid score. We therefore,
dismiss these appeals.

VM Appeals dismissed.