Holding

The insurer’s liability is limited to Rs 5,000 per passenger and Rs 75,000 in total as mandated by Section 95(2)(b)(ii) of the Motor Vehicles Act, 1939; the additional premium only satisfied the statutory limit and did not create unlimited coverage.

Summary

Road Transport Company owned a passenger bus that met with an accident due to the driver’s negligence, killing 35 passengers. Nine claims were filed; the Tribunal awarded compensation but limited the insurer’s contribution to Rs 5,000 per passenger and Rs 75,000 in total, as per Section 95(2)(b)(ii) of the Motor Vehicles Act, 1939. The company argued that its comprehensive policy and an additional premium of Rs 300 should make the insurer liable for the full compensation, contending the policy exceeded statutory limits. The High Court rejected this view, holding that the extra premium only covered the statutory liability for 50 passengers. On appeal, the Supreme Court affirmed that the insurer’s liability is confined to the statutory limits and that the additional premium was not intended to provide unlimited coverage. Consequently, the appeal was dismissed.

Issues considered

The extent of liability of an insurance company under a comprehensive policy when an additional premium is paid for passenger risk.
Whether the additional premium of Rs 300 was intended to cover liability beyond the limits prescribed in Section 95(2)(b)(ii) of the Motor Vehicles Act, 1939.
Whether Section 95(1)(b)(i) or Section 95(1)(b)(ii) governs the liability for passengers in a public service vehicle.

Legislation cited

Insurance Act, 1938
Motor Vehicles Act, 1939s. 95(1)(b)(i), s. 95(1)(b)(ii), s. 95(2)(b)(ii)

Subjects

Motor Vehicles Actinsurance liabilitycomprehensive policypassenger busstatutory limitsSection 95additional premiumcompensation

Judgment

ROAD TRANSPORT COMPANY A
"
"" v.
BHAN SINGH AND ANR.

JULY 22, 1998

[G.T. NANAVATI AND S.S.M. QUADRI, JJ.] B

~ Motor Vehicles Act, 1939 : Section 95 (2) (b) (ii)

Passenger bus-Insurance Policy-- 'Act onzy' policy-Basic premium
paid for comprehensive risk to cover loss or damage to the bus only- c
Additional premium of Rs. 300 paid to cover risk of passenger-Held :
Liability of insurance company limited to Rs. 5,000 per passenger and Rs.
75, 000 in all.

The appellant's passenger bus met with an accident because of rash
and negligent driving by its driver. 35 passengers travelling in that bus died. D
In all nine claim cases were filed before the Tribunal. Two cases were
.. dismissed and in the remaining seven cases the Tribunal awarded different
sums of money by way of compensation and ordered that in each case out of
the total amount payable to the claimants Rs. 5,000 shall be paid by the
insurance company and the rest shall be paid by the appellant.
E
The appellant feeling aggrieved by the amount of compensation and the
finding that the insurance company was liable to pay only Rs. 5.000 per
passenger and Rs. 75,000 in all preferred appeals before the High Court.
Two contentions were raised before the High Court. It was contended that the
""t.
insurance policy was comprehensive policy and, therefore, the insurance F
company was legally liable to pay the whole amount of compensation and
limiting its liability to Rs. 5,000 per passenger and Rs. 75000 in all was
contrary to Motor Vehicles Act, 1939. The second contention was that the
appellant had paid additional premium of Rs. 300 and therefore, limiting the
liability of the insurance company to Rs. 75000 in all was not justified. The
High Court rejected both these contentions. Being aggrieved by the High
G
Court's juogment the appellant prr,ferred the present appeal .
.A
Dismissing the appeal, this Court

HELD : 1.1. The liability of the insurance company will have to be H
873
874 SUPREME COURT REPORTS [1998) 3 S.C.R.

A determined in terms of Section 95(2) (b) (ii) of the Motor Vehicles Act, 1939. )>
,_
It is indisputable that at the relevant time Section 95(2) (b) (ii) limited the
liability of the insurance company to Rs. 5000 for each passenger and Rs.
75,000 in all, where the vehicle was registered to carry more than 30 but
not more then 60 passengers. (879-DI

B 1.2. A reading of the insurance policy discloses that the basic premium
of Rs. 626 though paid for comprehensive risk was not intended to cover all
the statutory liabilities but it was really intended to cover the entire loss or
...
damage to the vehicle. The insurance company had charged a premium of Rs.
300 towards passenger's risk. It works out at Rs. 6 per passenger. As per
the Indian Motor Tariff applicable on the date of accident by charging a
-
c premium of Rs. 6 per passenger the liability of the company per passen~er
was Rs. 5,000 only. The Indian Motor Tariff which regulates premium and
liability of insurance company is framed by the Tariff Advisory Committee,
a statutory body set up under the Insurance Act, 1938. The additional
premium of Rs. 300 was thus paid to cover the statutory liability for 50
passengers as the vehicle insured was a passenger bus having a registered
D capacity of carrying 50 passengers. The endorsement which was attached to
and formed part of the policy makes it clear that it was in consideration of
an additional premium of Rs. 300 that the insurance company had undertaken ,.
to indemnify the insured against his liability in respect of passengers to the
extent of Rs. 5,000 for each passenger and Rs. 75,000 in all. It is, therefore,
not possible to accept the contention raised on behalf of the appellant that
E
the additional premium of Rs. 300 was paid for covering higher than the
statutory liability. There was no special contract to cover unlimited liability
in respect of the passengers. (880-A, D-F]
National Insurance Co. Ltd. v. Jugal Kishore, (19881 1 SCC 626,
relied on.
F :yi
New India Assurance Co. Ltd. v. Shanti Bai, (199512 SCC 539, referred
to.
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 3421-27 of
1998.
G From the Judgment and Order dated 5.8.97 of the Patna High Court in
C.R. No. 4/97(R) with C.R. Nos. 5 to 10of1997.
Ranjit Kumar and Mrs. Nandini Gore for the Appellant. ,..._
Kishore Rawat, M.K. Dua and L.R. Singh for the Respondents.

H The: Judgment of the Court was delivered by
ROAD TRANSPORT COMPANY v. BHAN SINGH [NANA VAT!, J.] 875
. ... NANA VA Tl, J. Leave granted . A

All these appeals arise out of the judgment of the Patna High Court in
Civil Review Applications Nos. 4 to 10 of 1997 filed by the appellant. The
appellant wanted the High Court to review its judgment passed in the appeals
filed by it against the common judgment and separate awards given by the
Additional Claims Tribunal Hazaribagh (hereinafter referred to as the Tribunal) B
in the motor accident claims cases filed by the claimants-respondents.
~
-, On 12.10. 73, a passenger bus of the appellant met with an accident
because of rash and negligent driving by its driver. 35 passengers travelling
in that bus died. In all nine claim cases were filed before the Tribunal. Two
cases were dismissed and in the remaining seven cases the Tribunal awarded
c
different sums of money by way of compensation and ordered that in each
case Gut of the total amount payable to the claimants Rs.5,000 shall be paid
by the insurance company and the rest shall be paid by the appellant.

The appellant feeling aggrieved by the amount of compensation and the D
finding that the insurance company was liable to pay only Rs.5,000 per
"I passenger and Rs. 75,000 in all preferred appeals before the High Court. Two
contentions were raised before the High Court. It was contended that the
insurance policy was a comprehensive policy and, therefore, the insurance
company was legally liable to pay the whole amount of compensation and
E
limiting its liability to Rs.5,000 per passenger and Rs. 75,000 in all was contrary
to the Motor Vehicles Act. 1939. The second contention was that the appellant
had paid additional premium of Rs. 300 and, therefore, limiting liability of the
insurance company to Rs. 75,000 in all was not justified. The High Court
rejected both these contentions. Relying upon the decision of this Court in
~. National Insurance Co. ltd. v. Jugal Kishore, [1988] 1 SCC 626 the High F
Court held that even where the owner of a vehicle gets it comprehensively
insured such insurance entitles the owner to claim reimbursement of the entire
amount of loss or damage suffered up to the estimated value of the vehicle
calculated according to the rules and regulations framed in that behalf.
Comprehensive insurance of the vehicle and payment of higher premium on
this score, however, do not rrtean that the limit of the liability with regard to
G
third party risk or risk of any other nature becom~s unlimited or higher than
the statutory liability fixed under sub-section (2) of Section 95 of the Act. It
"'~
also held that the additional premium of Rs. 300 was paid as it was a passenger
bus having capacity of carrying 50 passengers. It held that there was no
special contract between the appellant-company and the insurance company H
876 SUPREME COURT REPORTS [1998] 3 S.C.R.

A to cover unlimited liability in respect of the passengers. In support of this
view it also relied upon the decision of this Court in New Indian Assurance
Company Limitedv. Shanti Bai, [1995] 2 SCC 539. Taking this view the High
Court dismissed all the appeals.

The appellant thereafter filed review petitions before the High Court on
B the ground that the insurance policy was misread or misinterpreted by the
High Court as it failed to appreciate that extra premium of Rs. 300 was paid
over and above the basic premium of Rs.6 J5 which covered the Act liability.
The High Court did not agree with this contention raised by the appellant and
dismissed the review petitions.
c Only point raised in these appeals is whether the High Court was right
in holding that, under the insurance policy, the insurance company was liable
to indemnify the insured only to the extent of Rs. 5,000 per passenger and
Rs. 75,000 in all. Jt was submitted by the learned counsel that the appellant
had paid additional premium of Rs. 300 and, therefore, the extent of liability
D of the insurance company was unlimited and should not have been restricted
to Rs.5,000 in respect of any one person and Rs. 75,000 in all. The learned
counsel for the insurance company disputed that any additional premium was
paid with a view to cover higher than the 'Act liability'. It was contented on
its behalf that the insurance policy was comprehensive with respect to the
E vehicle only and additional payment of Rs. 300 was really made because the
vehicle was a passenger bus having registered capacity to carry 50 passengers.
The said additional premium of Rs.300 was not for the purpose of covering
unlimited or higher liability in respect of death of or bodily injury to any
passenger.

F As the vehicle involved in this case was a passenger bus in which
passengers were carried for hire or reward the provisions contained in Section
95(1)(b)(ii) read with Section 95(2)(b)(ii) became applicable. At the relevant
time Section 95(2) was as under :

"95(2) Subject to the proviso to sub-section (i), a policy of insurance
G shall cover any liability incurred in respect of any one accident up to the
following limits, namely-

(a) ............... ..

(b) where the vehicle is a vehicle in which passengers are carried for
H hire or reward or by reason of or in pursuance of a contract of
ROAD TRANSPORT CQMPANYv. BHAN SINGH [NANA VAT!, J.] 877

... employment,- A
(i) in respect of persons other than passengers carried for hire or
reward, a limit of fifty thousand rupees in all;

(ii) in respect of passengers, (I) a limit of fifty thousand rupees in
all where the vehicle is registered to carry nor more than fifty B
passengers;

(2) a limit of seventy-five thousand rupees in all where the vehicle
is registered to carry more than thirty but not more than sixty
passengers;

(3) a limit of one lakh rupees in all where the vehicle is registered
c
to carry more than sixty passengers; and

(4) subject to the limits aforesaid, ten thousand rupees for each
individual passenger where the vehicle is a motor car, and five
thousand rupees for each individual passenger in any other D
case."

The renewed policy for the relevant period was filed before the Tribunal
by the appellant and also by the insurance company. The relevant part of that
policy read as under:
E
"In consideration of the payment of the Renewal Premium amount of
Rs.721.20. (Rupees Seven hundred twenty one and paise twenty only.) as per
details below, the within mentioned policy is hereby renewed for a further
period of 12 months from 4.10.1973 to 3.10.1974 subject to the tenns, conditions
warranties as per Original Policy and endorsements thereon.
F
SCHEDULE
PARTICULARS OF MOTOR VEHICLE

Regist- Make Type Cubic Year Licenced Carrying Capacity insured's
ration of Capa- of Goods in Passenger estimate G
Mark & body city Make Tons excluding of value
Number Driver including
accesso-
ries
there-on
Rupees H
878 SUPREME COURT REPORTS [1998] 3 S.C.R.

A EBRW-8040 T.HV Bus 1970 50 Rs. 40,000
COMPREHENSIVE RISKS. & R. RISK, FIFTY PASSENGERS' RISK &
L.L. TO PAID DRIVER, CLEANER & CONDUCTOR UNDER W.C. ACT
ONLY COVERED.

STAGE CARRIAGE
B Premium : basic Rs.626.00
Less 100/o N.V.R Rs. 11.10
Rs. 614.90
S. & R. risk Rs. 100.00
50 passengers' risk Rs. 300.00
c L.L. to drvr. clnr. condtr. Rs. 15.00
Rs.1029.29
Less 30% N.C.B Rs. 308.70
Rs. 721.20.
Dhanbad
8th Oct. 1973
D sci/-
BRANCH MANAGER"
Endorsement No.13 which also formed a part of the policy was as under:

"Endorsement No.13 attaching to and forming part of Policy No. N DHVI
E 27465
Legal Liability to passengers excluding liability to Accidents for
employees of the Insured arising out of and in the course of their employment.

In consideration of an additional premium of Rs. 300 and notwithstanding
F anything to the contrary contained in section. II I(c) but subject otherwise
to the terms exceptions conditions and limitations of this Policy the company
will indemnify the insured against liability at law for compensation (including
law cost of any claimant) for death of or bodily injury to any person ether
than a person excluded under section 11-I(b) being carried in or upon or
G entering or mounting or alighting from the Motor Vehicle but such indemnity
is limited to the sum of Rs. 5,000 in respect of any one person and subject
to the aforesaid limit in respect of any one person to Rs. 75,000 in respect of
any number of claims in connection with the Motor Vehicle arising out of one
cause."

H Section 95(I)(bXi) provides for compulsory insurance against any liability
ROAD TRANSPORT COMPANY v. BHAN SINGH [NANAVATI, J.] 879

.. .. which may be incurred by the insured in respect of the death of or bodily A
injury to any person. Section 95( I )(b)(ii) provides for compulsory insurance
against the death 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. Section
95(1 )(b )(ii) being a specific provision made in respect of passengers of a
public service vehicle, obviously that provision becomes applicable and not
the general provision contained in Section 95( I )(b)(i), when the insured incurs B
liability in respect of the passengers travelling in his public service vehicle.
t Before the Tribunal and the High Court also the appellant had claimed the
-, protection of Section 95(1)(b)(ii). Therefore, Mr. Ranjit Kumar, learned counsel
for the appellant, cannot now be permitted to bring the appellant's case under
Section 95(1(b)(i) on the ground that it is wide enough to include a passenger c
as the word used therein is 'any person'. Even otherwise also this contention
has no substance. Therefore, the liability of the insurance company will have
to be determined in terms of Section 95(2)(b)(ii). It is not in dispute that at
the relevant time Section 95(2)(b)(ii) limited the liability of the insurance
company to Rs.5,000 each passenger and Rs.75,000 in all, where the vehicle
was registered to carry more than 30 but not more than 60 passengers. D

.. The next submission was that the appellant had paid additional premium
of Rs.300 to cover liability higher than the limited liability fixed by Section
95(2). It was submitted by Mr. Ranjit Kumar that the policy being a
comprehensive policy it covered all the statutory liabilities and the additional
premium of Rs.300 was paid for covering liability higher than the statutory
E
liability in respect of passengers. The insurance policy, relevant part of which
has been set out above, shows that it covered the following risks: ( 1)
comprehensive risk, (2) S&R risk, (3) passenger risk and (4) legal liability in
respect of paid driver, cleaner and conductot. under Workmen's Compensation
~ Act. For the comprehensive risk the appellant had paid Rs.626 as basic F
premium. Ordinarily the insurance policy does not cover strike. and riot risk
and, therefore, to cover that risk also the insured had paid additional premium
of Rs.!00. To cover 50 passengers' risk the insured had paid Rs. 300 as
premium and for vocering the risk in respect of driver etc. he had paid
Rs. 721.20 as additional premium. If the comprehensive risk covered all other
risks as contended by the appellant then the policy would not have mentioned
G
separately the S&R risk and passenger risk. Not only that they have been
....._. separately mentioned but separate amounts were paid by way of premium for
covering those risks. Thus the basic premium of Rs.626 paid for the
comprehensive risk was obviously in respect of the bus and not in respect
of other risks as contended by the learned counsel for the respondent insurance H
880 SUPREME COURT rrnPORTS (1998] 3 S.C.R.

A company. A fair reading of the insurance policy discloses that the basic
premium of Rs.626 though paid for comprehensive risk was not intended to
••
cover all the statutoy liabilities but it was really intended to cover the entire
loss or damage to the vehicle. As observed by this Court in Jugal Kishore's
case "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
B vehicle to get it comprehensively insured. In case, however, it is not
comprehensively insured a higher premium than for an 'Act only' policy 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 up to the estimated value of the vehicle calculated according
C to the rules and regulations framed in this behalf."

The insurance company had charged a premium of Rs.300 towards
passengers' risk. It works out at Rs.6 per passenger. As per the Indian Motor
Tariff applicable on the date of accident by charging a premium of Rs.6 per
passenger the liability of the company per passenger was Rs.5,000 only. The
D Indian Motor Tariff which regulates a premium and liability of insurance
company is framed by the Tariff Advisory Committee, a statutory body set
up under the Insurance Act. The additional Premium of Rs.300 was thus paid
to cover the statutory liability for 50 passengers as the vehicle insured was
a passenger bus having registered capacity of carrying 50 passengers.
E Endorsement No.13 which was attached to and formed part of the policy and
which we have set out above also makes it clear that it was in consideration
of an additional premium of Rs.300 that the insurance company had undertaken
to idemnity the insured against his liability in respect of passengers to the
extent of Rs.5,000 for each passenger and Rs.75,000 in all. It is, therefore, not
possible to accept the contention raised on behalf of the appellant that the
F additional premium of Rs.300 was paid for covering higher than the statutory
liability. There was no special contract to cover unlimited liability in respect
of the passengers.

As we do not find any substance in any of the two contentions tised
on behalf of the appellant these appeals are dismissed. However, in view of
G the facts and circumstances of the case there shall be no order as to costs.

v.s.s. Appeals dismissed.