Holding

The insurance contract is not void absent fraud; the insurer’s acceptance of premiums creates a binding contract, making it liable to pay the compensation.

Summary

The appellant, United India Insurance Co., had issued a motor vehicle insurance policy for a truck owned by the deceased Atma Ram Sharma, with renewals effected by the bank that held a hypothecation on the vehicle. After Sharma's death in 1991, the registration was not transferred and the policy continued in his name. In 1994 the truck met with an accident, killing the driver Chhater Singh, whose heirs claimed compensation under the Workmen's Compensation Act, 1923 against the insurer and the widow of the deceased owner. The insurer contended that the contract was void because it was made in favour of a dead person and that no valid policy existed at the time of the accident. The Supreme Court held that the insurer could not escape liability; the contract was not void absent proof of fraud, and the insurer’s acceptance of premiums year‑by‑year created a contract by implication (acceptance sub silentio). Consequently, the insurer was liable to pay the compensation awarded by the lower court. The appeal was dismissed.

Issues considered

Whether an insurance contract entered in the name of a deceased owner is void ab initio.
Whether the insurer can deny liability under Section 149(2) of the Motor Vehicles Act, 1988 on the ground of non‑disclosure or fraud.
Whether the doctrine of acceptance sub silentio applies when the insurer continues to accept premiums after the owner's death.
Whether the insurer is liable to pay compensation under the Workmen's Compensation Act, 1923 and the Motor Vehicles Act, 1988 to the driver’s heirs.

Legislation cited

Indian Contract Act, 1872
Motor Vehicles Act, 1988s. 145, s. 146, s. 147, s. 149, s. 155, s. 157
Workmen's Compensation Act, 1923s. 23, s. 4

Subjects

Motor Vehicles ActInsurance liabilityWorkmen's CompensationAcceptance sub silentioContract voidThird‑party riskHypothecationRenewal of policyDeceased owner

Judgment

[2008] 16 S.C.R. 944

.,
A UNITED INDIA INSURANCE CO. LTD. r-
v.
SANTRO DEVI & ORS.
(Civil Appeal No. 7009 of 2008)

DECEMBER 2, 2008
B
[S.B. · SINHA AND CYRIAC JOSEPH, JJ.]
+
,J'

Motor Vehicles Act, 1988 - Chapter XI - ss. 145, 146,
147 and 149 - Payment of compensation - Liability of insurer
c - Truck insured with appellant and hypothecated to a Bank -
Renewal of insurance done by Bank - Truck owner died - No ,,,..
step taken either by Bank or by heirs of deceased owner to
get registration of truck transferred in their names - Insurance
policy continued to be renewed in name of deceased owner
D - Three years later, truck met with accident in which the driver
died - His legal heirs claimed compensation under the
Workmen's Compensation Act against the widow of deceased t
owner as also appellant - Appellant denied its liability ~

contending that no contract could be made in favour of a dead
E person and on date of the accident, no legal insurance policy
was in force - Liability of to pay compensation - Held:
Appellant is liable - When a certificate of insurance is issued,
the insurer is bound to reimburse the owner- A valid contract
cannot be said to be void, unless it was shown that in obtaining
the contract, a fraud had been practised - On facts, no case
F
of fraud was made out - If despite knowledge of the fact that
the original owner had died, appellant had been accepting
"f
premium every year from his widow or from the Bank, a
contract by necessary implication, had come into being -
Doctrine of 'acceptance sub silentio' was applicable -
G Doctrines - Doctrine of 'acceptance sub silentio' - Workmen's
Compensation Act, 1923 - ss.4 and 23.
The truck in question was insured with appellant and
hypothecated to a Nationalized Bank. 'A' was owner of
H 944
UNITED INDIA INSURANCE CO. LTD. v. SANTRO DEVI 945
& ORS.

the truck. Renewal of the contract of insurance, however, A
used to be done by the Bank. 'A' died in 1991. Despite
the death of 'A', no step was taken either by the Bank Ci>r
by the heirs of 'A' to get the registration of the vehicle
transferred in their names. The insurance policy
continued to be renewed in the name of 'A'. In 1994, the B
said vehicle met with accident while being driven by one
'C', in which he died.
The legal heirs and representatives of 'C' claimed
compensation under s.4 of the Workmen's
Compensation Act, 1923 against the widow of 'A' as also C
the appellant. Appellant denied its liability contending that
no contract could be made in favour of a dead persorJ
and on the date of the accident, no legal insurance policy
was in force.
D
The Commissioner, Workmen's Compensation held
that since the truck was insured with appellant, it was
liable to pay compensation. Appeal filed thereagainst was
dismissed by the High Court.
The question which al'ose for consideration in the E
present appeal is whether the contract of insurance
having been entered into in 1994 in the name of
deceased 'A', it was void ab initio and in that view of the

- matter, the appellant had no statutory or contractual
liability to pay compensation.
Dismissing the appeal, the Court
F

HELD: 1.1. The insurer could deny its liability on
limited grounds as envisaged under sub-section (2) of '
, s.149 of the Motor Vehicles Act, 1988. One of the grounds G
' which is available to the insurance company for denying
its statutory liability is that the policy is void having been
obtained by reason of~non-disclosure of a material fact
or by a representation of fact which was false in some
material particular. In the instant case, however, apart H
946 SUPREME COURT REPORTS [2008] 16 S.C.R. !-

A from raising a general and vague plea of fraud, no 1-
particulars thereof had been disclosed. The contract of
insurance was entered into by the Bank with the
appellant. The premium was paid by the bank . The
contract of insurance might have been drawn in the name
B of the deceased 'A' but no witness has been examined
on behalf of the appellant alleging that they were not
aware thereabout. [Paras 11 and 12]- [953-C-E] -+
'"'
1.2. If the appellant had been renewing the insurance
policy on year to year basis on receipt of a heavy amount
c of premium with the knowledge that the owner of the
vehicle has expired and the name of his legal heirs and .
/

representatives had not been transferred in the
registration book maintained by the authorities under the
Motor Vehicles Act, the appellant cannot be heard to say
D that it was not bound to satisfy the claim of a third party.
[Para 13] [953-G]
-t
-4
1.3. The provisions of compulsory insurance have
been framed to advance a social object. It is in a way part
E of the social justice doctrine.' When a certificate of
insurance is issued, in law, the insurance company is
bound to reimburse the owner. A contract of insurance
must fulfill the statutory requirements of formation of a
valid contract but in case of a third party risk, the question
4
F has to be considered from a different angle. [Para 14]
[953-H; 954-A-B] ·'f

1.4. There is no provision in the Motor Vehicles Act
that unless the name(s) of the heirs of the owner of a
vehicle is/are substituted on the certificate of insurance
G or in the certificate of registration in place of the original ·~

owner (since ·deceased), the motor vehicle cannot be 1-
allowed to be used in a public place. Thus, in a case
where the owner of a motor vehicle has expired, although
there does not exist any statutory interdict for the person
H in possession of the vehicle to ply the same on road; but
UNITED INDlA INSURANCE CO. LTD. v. SANTRO DEVI 947
& ORS. [S.B. SINHA, J.]

there being a statutory injunction that the same cannot A
be plied unless a policy of insurance is obtained, the
contract of insurance would be enforceable. It would be
so in.. a case of this nature as for the purpose of renewal
of insurance policy only the premium is to be paid. [Para
15] [954-C-E] B
1.5. In the present case, the vehicle was
t... hypothecated to a nationalized bank. The certificate of
registration, presumably, therefore, carried the name of
the bank also. The bank admittedly paid the premium. One
therefore fails to see any reason as to how the appellant C
could avoid its statutory liability. (Paras 16 and 17] [954-
F, G]
1.6. Only a competent officer informed in the matter
could have disclosed as to whether the widow of 'A' had D
signed any document or whether the fact that 'A' had
expired in the year 1991 came to be known to the officers
i of the appellant only after the accident had taken place.
~ If despite knowledge of the fact that 'A' had died in the
year 1991, the insurance company, with its eyes wide E
open, had been accepting the amount of premium every
year from the widow of the said 'A' or from the Bank, a
contract by necessary implication, had come into beihg.
Even in a case of this nature, the doctrine of 'acceptance
sub silentio' shall be applicable. [Para 19] [955-C-E] F

1.7. In this case, the statute itself takes care of vali~ity
of the contract. It is mandatory. Once a valid contract is
entered into, only because of a mistake or otherwise, the
name of the original owner has been mentioned !n the
certificate of registration and/or the documents of G
hypothecation of the vehicle with the bank had still been
continuing in his name, it cannot be said that the contract
itself is void unless it was shown that in obtaining the
said contract a fraud had been practised. Not only the
particulars of fraud had not been pleaded, but even no H
948 SUPREME COURT REPORTS [2008] 16 S.C.R.

A witness was examined on behalf of the appellant. It
cannot, thus, be said that a case of fraud in the matter of
entering into the contract of insurance had been made
out by the appellant. [Para 22] [959-G-H; 960-A-B]

Rikhi Ram & Anr. v. Sukhrania (Smt.) & Ors. (2003) 3
8
SCC 97; National Insurance Co. Ltd. v. Laxmi Narain Dhut
(2007) 3 SCC 700; Oriental Insurance Company Ltd. v.
Meena Variya/ & Ors. (2007) 5 SCC 428 and Deddappa &
1
Ors. v. Branch Manager, National Insurance Co. Ltd. (2008)
2 sec 595, relied on.
c
Case Law Reference:
(2003) 3 sec 97 relied on Para 7
(2001) 3 sec 100 relied on Para 21
D.
(2001) 5 sec 428 relied on Para 21
(2oos) 2 sec 595 relied on Para 22
i-
CIVIL APPELLATE JURISDICTION : Civil Appeal No. ~
E 7009 of 2008.

From the Judgment and final Order dated 27.5.2005 of the
High Court of Himachal Pradesh, Shimla in F.A.O. No. 112 of
1999.

F Vishnu Mehra/and B.K. Satija for the Appellant.

J.S. Attri and Anshu Attri for the Respondents.

The Judgment of the Court was delivered by

G S.B. SINHA, J. 1. Leave granted.
2. One Atma Ram Sharma was the owner of a truck
bearing registration No.HIN-4737. It was hypothecated to a
Bank. Atma Ram Sharma died sometime in 1991. The said
H vehicle was insured with the appellant. Renewal of the contract
UNITED INDIA INSURANCE CO. LTD. v. SANTRO DEVI 949
& ORS. [S.B. SINHA, J.]

of insurance, however, used to be done by the Bank. Despite A
the death of the said Atma Ram Sharma, no step was taken
either by the Bank or by his heirs and legal representatives to
get the registration of the vehicle transferred in their names. The
insurance policy also continued to be renewed in the name of
Atma Ram Sharma. B

3. The said vehicle met with an accident while being driven,
1... by Shri Chhater Singh on 15.9.1994 in which he died. The legal
heirs and representatives of the said Chhater Singh filed an
application for grant of compensation under Section 4 of the
Workmen's Compensation Act, 1923 against the widow of the C
deceased Atma Rarn Sharma as also the appellant-Insurance
Company claiming a sum of Rs.1,22,400/-.

4. Appellant, having been given notice by the
Commissioner of Workmen Compensation, in its reply, raised D
the following purported primary objections :

t 1. That the para No.1 of the petition as stated is wrong
•· hence denied. In fact Shri Atma Ram died in the year 1991
and on the date of alleged accident no legal insurance E
policy was in force. It is pertinent to say that alleged
offending vehicle No.HIN-4737 was fraudulently got insured
vide policy No.111302/31/16/21/0065/94 on 12.5.1994 by
concealing the true facts. Even according to law the
contract cannot be made in favour of dead person. So
F·
under the Indian Contract Act, 1872 the alleged contract
of Insurance is not liable to pay any amount of
compensation. The respondent No.1 was not insured, so
as per the terms and conditions of the insurance policy,
the company is not bound to indemnify the claim."
G
5. The Commissioner, Workmen's Compensation, having
regard to the pleadings of the parties, framed several issues,
issue No.5 whereof reads as under :

"5. Whether the contract of insurance of the truck in H
950 SUPREME COURT REPORTS [2008] 16 S.C.R.

A question between Atma Ram & Co. is void and not
enforceable as alleged .... OPP.II"

6. From the order of the Commissioner, Workmen
Compensation,' it does not appear that any witness was
ex·amined on behalf of the appellant. The learned
8
Commissioner, Workmen Compensation, determined issue
No.5 in favour of the respondent, stating :
-+.,
r
;
"Whether the contract of insurance of the truck in question
between Atma Ram and Co. is void? RW1 Rati Ram has
C deposed in his statement that Shri Atam Ram was the
owner of the truck and after his death his wife is owner of
the said truck. He is general power of attorney of Gumani
Devi. He further deposed that the truck was insured with
· United India Insurance Company and copy of Insurance
D Cover is Ex.RW1/8. The driver of ill-fated truck was Chattar
Singh who died in truck accident near Ronhat in year 1994
who was given Rs.2000/- per day (sic). In cross-
examination he admitted that Atma Ram died in 1991 and
the truck was insured with SBI Kafetta. He denied that
..t L '

E Chattar Singh was gratuitous passenger in the ill fated
truck. Since the truck was insured with the respondent
No.2, therefore, it is the liability of the Insurance Co. to pay
the amount of compensation. Therefore, this issue is
decided in favour of the petitioners and against the
F respondents."

7. A sum of Rs.1,42,465/- was directed to be paid by way
of compensation. An appeal preferred thereagainst by the
appellant herein under Section 30 of the Workmen
Compensation Act has been dismissed by the High Court
G relying on or on the basis of the decision of this Court in Rikhi
Ram & Anr. v.. Sukhrania (Smt.) & Ors. [(2003) 3 SCC 97],
stating:
1-
"It is thus clear that whether intimation is given or not given •
H to the Insurance Company with regard to the transfer of a
UNITED INDIA INSURANCE CO. LTD. v. SANTRO DEVI 951
& ORS. [S.B. SINHA, J.]

vehicle. The Insurance Company under the provisions of A
~
the Motor Vehicles Act, 1988 is liable to pay compensation.
The Insurance Company at the time when it renewed the
policy of insurance and accepted the premium should have
verified whether Atma Ram was alive or not. In the present
case the premium appears to have been paid by the bank B
with which the vehicle was hypothecated."

__,
J... 8. Mr. Vishnu Mehra, learned counsel appearing on behalf
' of the appellant, would submit that the contract of insurance
having been entered into on or about 13.5.1994 in the name
of the deceased Atma Ram Sharma, it was void ab initio and
c
in that view of the matter, the appellant had no statutory or
contractual liability to reimburse the owner of the vehicle in
relation thereto.

9. Mr. Attri, learned counsel appearing on behalf of the D
respondent, on the other hand, would contend that a certificate
of insurance having been issued by the Insurance Company, it
-t
~
could not have repudiated the claim having already accepted
the amount of premium.
E
10. The Motor Vehicles Act, 1988 was enacted to
consolidate and amend the law relating to motor vehicles.
Chapter XI of the Motor Vehicles Act provides for insurance of
motor vehicles against third party risks.

Section 145 is the definition section, clause (b) whereof F
~
defines 'certificate of insurance' to mean a certificate issued
by an authorized insurer in pursuance of sub-section (3) of
Section 14 7 and incll;Jdes a cover note complying with such
requirements as may be prescribed, and where more than one
certificate has been issued in connection with a policy, or where G
a copy of a certificate has been issued, all those certificates
-..\ or that copy, as the case may be. Clause (d) of Section 145
defines 'policy of insurance' which include a certificate of
insurance.
H
952 SUPREME COURT REPORTS [2008) 16 S.C.R.

A Section ·146 mandates that no person, except as a
-
passenger, shall use or cause or allow any other person to use, L-
;---
a motor vehicle in a public place, unless there is in fo'rce in
'relation to the use .of the vehicle by· that person or that other
<person·;. as the case may. be, a policy of insurance complying
I-
B :with the requirements of the.said Chapter. Section 147provides
for the requirements of policies and limits of liability in the
following terms :
+
~·
I
"(a) is issued by a person who is an authorised insurer; }=-
or
c
(b) insurer the person or classes of persons specified in
~
I'-
0
the policy to the extent specified in sub- section (2)- i-
I-
(i) against any liability which may be incurred by him in ...
\

·D respect of the death of or bodily injury to any person,
.including owner of the goods or his authorised
representative c.arried in the vehicle] or damage to any
.property of a third party caused by or arising out of the use t
of the vehicle in a public place; •
E (ii) _against the death of or bodily injury to any passenger
.. of a pLjblic service vehicle caused by or arising out of the
._.·use of the vehicle in a public place."
..
The proviso appended thereto reads as under :
F
"Provided that a policy shall not be required-
-+- \

t
)

.(i) to cover liability in respect of the death, arising out of
,_
.. and in the ·course of his employment, of the employee of l
~f person insured by the· policy or in respect of bodily injury l
1..
G sustained by such an employee arising out of and in the I

course of his employment other than a liability arising '
under the Workmen's Compensation Act, 1923 (8 of 1923) f.. I

· in respect of the death of, or bodily injury to, any such l
employee- f:=
H ~

,.
~

·~
't
.,
UNITED INDIA INSURANCE CO. LTD. v. SANTRO DEVI 953
& ORS. [S.S. SINHA, J.]
I -~ (a) engaged in drivin9 the vehicle, or IA

(b) if it is a public.service vehicle engaged as
conductor
of the vehicle or in examining tickets on the vehicle, or

(c) if it is a goods carriage, being carried in the vehicle,
B
or
~
. (ii) to cover any contractual liability."
11. The insurer could deny its liability on limited grounds
as envisaged under sub-section (2) of Section 149 of the Act.
One of the grounds which is available to the insurance company
c
for denying its statutory liability is that the policy is void havi~g
been obtained by reason of non-disclosure of a material fact
or by a representation of fact which was false in some material
particular.
D
12. Indisputably, apart from raising a general and vague
i plea of fraud, no particulars thereof had been disclosed. The
. contract of insurance was entered into by the Bank with the
appellant. The premium was paid by the bank. The contract of
insurance might have been drawn in the name of the deceased E
Atma Ram Sharma but no witness has been examined on
behalf of the appellant alleging that they were not aware
thereabout.
13. When questioned, Mr. Mehra, very fairly stated that the
insurance policy was an old one and it was being renewed from F
~ year to year. If the appellant had been renewing the insurance
policy on year to year basis on receipt of a heavy amount of
premium with the knowledge that the owner of the vehicle has
expired and the name of his legal heirs and representatives had
not been transferred in the registration book maintained by the G
aurhorities under the Motor Vehicles Act, in our opinion, the
~ appellant cannot be heard to say that it was not bound to satisfy
the claim of a third party.
14. The provisions of compulsory insurance have been
H
954 S~PREME COURT REPORTS [2008] rn s.c..R-.

A framed to advance a social object. It is hi a Way part of me
social justice doctrine. When a certificate of insurahe~ ls' issued,
in law,. the insurance ·company is bo1,.1iJd to reimburse the owner.
There :cannot be .. any doubt wha.tsoever that a contract of
insurance must fulftll the statutory requirements of formation of
fH a!vaiid contract but in case' of a third party risk, the question
has to be considered from a different angle.

15. Section 146 provides for statutory insurance. An -+
#
insuran~e is mandatorily required to be obtained by the person
in charge ;Of. or in possession of the vehicle. There is no
C provision in. the Motor Vehicles Act that unless the natne(s) of
the heirs. of the owner of a vehiGle is/are substituted on the
certificate of insurance or in the certificate of registration in
place of the original owner (since deceased), the motor vehicle
cannot be allowed to be. used in a public place. Thus, in a case
· D where the owner of a motor vehicle has expired, although there
does nof exist any :statutory interdict for the person in
possession 6f the vehicle to ply the sanie on road; bl.it there
being·aisfatutory injunction that the same cannot be plied unless
+
a policy·of insurance is obtained, we are of the opinion that the
E contrad ofinsurance would be enforceable. It would be so in a
case of fhis nature, as for the purpose of renewal of insuranee
policy only the premium is to be paid. It ls not in dispute· that
quantum of premium paid for renewal of the policy is in terms
of the .provisions .~f t~e lnsuranc~ Act, 1938.
F . '•· •.'· ' ' I•' I ' ,.), ' : ' ' ;, . '

·· 16, The vehicle was hypothecated toa nationalized bank.
the certificate of ,registration,. presurii~bly, therefore, carried the
'na~e of.the tiaok also. ttie'bank admittedly paid the premium .
."·' ~ ·'"' ~ ... I . " ' ' '.J I.\ ', './. " '. · ' • . ,, ,l . ' ,

17. ·we, therefore, fail~to•see any reason as to how the
G appellant'dould· avoid its statutory liability. Our attention has
been drawn to .. Section 155 of the Motor Vehicles Act by Mr.
Mehra fo; contend that' the statutory liability of the· insurance
company arises only when the originah~ontract of insurance
wa$ entered into.by and b~twe,en t?e .owner and the insurer and
H
UNITED INDIA INSURANCE Cci. LTD. v. SANTRO DEVI 955
& ORS. [S.S. SINHA, J.]
-4 not in a case of this nature. A

18. Section 155 of the Act, in our opinion, cannot be said
to have any application in a situation of this nature. We may
notice the provisions of Section 157 of the Act in terms whereof
in a case of transfer of a motor vehicle, the certificate of
B
insurance and the policy shall be deemed to have been
-1· transferred in favour of the person to whom the motor vehicle
.. is transferred wi~h effect from the date of its transfer.

19. We have noticed hereinbefore that no witness was
examined on behalf of the appellant Only a competent officer c
informed in the matter could have disclosed as to whether the
widow of late Atma. Ram Sharma had signed any document or 1

wh.eth~r the fact that Atma Ram Sharma had expired in the year ;
1991 eame to be known to the officers of the appellant only after ·
the accident had taken place. If despite knowledge of the fact D

., that Atma Ram Sharma had died in the year 1991, the
insurance company, with its eyes wide open, had been
.. accepting the amount of premium every year from the widow
of the said late Atma Ram Sharma or from the Bank, in our .
opinion, a contract by necessary implication, had come into E
being. Even in a case of this nature, the doctrine of 'acceptance
sub silentio' shall be applicable.

20. This Court furthermore in some of its decisions noticed
the distinction between a ~tatutory contract of insurance and a
F
contract of insurance simplicitor. It is in that view of the matter,
this Court in Rikhi Ram (supra), held :

"4. A perusal of Sections 94 and 95 would. further show
that the said provisions do not make compulsory insurance
to the vehicle or to the owners. Thus, it is man!fest that G
compulsory insurance is for the benefit of third parties. The
scheme of the Act shows that an insurance policy can cover
three k.inds of risks i.e. owner of tne vehicle, property
(vehicle) and third party. The liability of the owner to have
compulsory insurance is only in regard to the third party H
956 SUPREME COURT REPORTS [2008] 16 S.C.R.

A and not to the p~operty. Section 95(5) of the Act runs as {
follows:

"95. (5) Notwithstanding anything elsewhere
contained in any law, a person issuing a policy of
insurance under this section shall be lia.ble to
B
indemnify the person or classes of person specified
in the policy in respect of any lial)flity which the
policy purports to cover in the case of that person +
~

or those classes of person."

c 5. The aforesaid provision shows that it was intended to
cover two legal objectives. Firstly, that no one who was not
a party to a contract would bring an action on a contract;
and secondly, thc:it a person who has no interest in the
subject-matter of an insurance can claim the benefit of an
D insurance. Thus, once the vehicle is insured, the owner as
well as any other person can use the vehicle with the
consent of the owner. Section 94 does not provide thpt any
person who will use the vehicle shall insure the vehicle in
•
r
respect of his separate use."
E
21. We may, furthermore, notice that recently this Court in
National Insurance Co.. Ltd. v. Laxmi Narain Dhut [(2007) 3
sec 700] held as under :
"17. Section 149 is partof Chapter XI which is titled
F "Insurance of Motor Vehicles against Third-Party Risks".
· A significant factor which needs to be noticed is that there
is .no contractual relation between the insurance company
and the. third party. The liabilities and the obligations
relatable to third parties are created only by fiction of
G Sections 147 and 149 of the Act.

xxx xxx xxx ~.

23. As noted above, there is no contractual relation
between the third party and the insurer. Because of the
H.
UNITED INDIA INSURANCE CO. LTD. v. SANTRO DEVI 957
& ORS. [S.B. SINHA, J.]

'~ statutory intervention in terms of Section 149, the same A
becomes operative in essence and Section 149 provides
complete insulation.

24. In the background of the statutory provisions, one thing
is crystal clear i.e. the statute is beneficial one qua the third B
party. But that benefit cannot be extended to the owner of
the offending vehicle. The logic of fake licence has to be
-f
" considered differently in respect of the third party and in
respect of own damage claims."

Yet again, another Bench of this Court in Oriental ~
Insurance Company Ltd. v. Meena. Variya/ & Ors. [(2007) 5
sec 428], opined :
"12. Chapter XI of the Act bears a heading, "Insurance of
Motor Vehicles against third-party risks". The 'definition of p
"third party" is an inclusive one since Section 145(g) only
indicates that "third party" includes the Government. It is
t,. Section 146 that makes it obligatory for an insurance to
be taken out before a motor vehicle could be used on the
road. The heading of that section itself is "Necessity for
insurance against third-party risk". No doubt, the marginal
F
heading may not be conclusive. It is Section 147 that sets
out the requirement of policies and limits of liability. It is
provided therein that in order to comply with the
requirements of Chapter XI of the Act, a policy of insurance
must be a policy which is issued by an authorised insurer;
f
or which insures the person or classes of persons
specified in the policy to the extent specified in sub-section
(2) against any liability which may be incurred by the owner
in respect of the death of or bodily injury or damage to any
property of a third party caused by or arising out of the use
cp
..): of the vehicle in a public place. With effect from 14-11-
1994, injury to the owner of g,oods or his authorised
representative carried in the vehicle was also added. The
policy had to cover death of or bodily injury to any
H
958 SUPREME COURT REPORTS [2008] 16 S.C.R.

A passenger of a public service vehicle caused by or arising ~ ...
out of the use of the vehicle in a public place. Then, as per
the proviso, the policy shall not be required to cover liability
in respect of the death, arising out of and in the course of
his employment, of the employee of a person insured by
B the policy or in respect of bodily injury sustained by such
an employee arising out of and in the course of his
employment, other than a liability ~rising under the +,,
Workmen's Compensation Act, 1923 in respect of the l·
death of, or bodily injury to, an employee enga9eg .if!
c driving the vehicle, or who is a conductor, if it is a publi~
service vehicle or an employee being carried in .a. g9ocl?
vehicle or to cover any contractual liability. Sub~section (2)
only sets down the limits of the policy.

13. As we understand Section 147(1) of the Act, an
D insurance policy thereunder need not cover the liability in
respect of death or injury arising out of and in the course
of the employment of an employee of the person insured t
·~
by the policy, unless it be a liability arising under the
Workmen's Compensation Act, 1923 in respect of a driver,
E also the conductor, in the case of a public service vehicle,
and the one carried in the vehicle as owner of the goods
or his representative, if it is a goods vehicle. It is provided
that the pol.icy also shall not be required .to cover any
contractual liability. Uninfluenced by authorities, we find no
F difficulty in understanding this provision as one providing
that the policy must insure an owner against any liability
to a third party caused by or arising out of the use of the
vehicle in a public place, and against death or bodily injury
to any passenger of a public service vehicle caused by or
G arising out of the use of vehicle in· a public place. The
proviso clarifies that the policy shall not be required to
1'.
, cover an employee of the insured in respect of bodily injury
or death arising out of and in the course of his employment.
Then, an exception is provided to the last foregoing to the
H effect that the policy must cover a liability arising under the
UNITED INDIA INSURANCE CO. LTD. v. SANTRO DEVI 959
& ORS. [S.B. SINHA, J.]

Workmen's Compensation Act, 1923 in respect of the A
'~
death or bodily injury to an employee who js engaged in
driving the vehicle or who serves as a cqndl!ctor in a public
service vehicle or an employee who travels in the vehicle
of the employer carrying goods if it is a goods carriage.
Section 149(1), which casts an obligation on an insurer tp B
satisfy an award, also speaks only of award in rnspect of
such liability as is required to be covered by a policy under
j clause (b) of sub-section ( 1) of Section 14 7 (being a
liability covered by the terms of the policy). This provision
cannot therefore be used to enlarge the liability if it does c
not exist in terms of Section 147 of the Act.

14. The object of the insistence on insurance under
~hapter XI of the Act thus seems to be to compulsorily
cov~r the liability relating to their person or properties of
third parties and in respect of employees of the insureCJI D
employ.~r, th~ liability that may arise under the Workmen's
i Compensation Act, 1923 in respect of the driver, the
; conductor and the one ~arried in a goods vehicle carrying
goods."
E
22. We are not oblivious of a decision of this Court in
Deddappa & Ors. V. Branch Manager, National Insurance Co. 1

Ltd. [(2008) 2 SCC 595], wherein this Court, having regard to
the fact situation obtaining therein, opined :
F
"20. A contract is based on reciprocal promise. Reciprocal
promises by the parties are condition precedents for a
valid contract. A contract furthermore must be for
consideration."

In this case, the statute itself takes care of validity of the G
contract. It is mandatory. Once a valid contract is entered into,
only because of a mistake or otherwise, the name of the original
owner has been mentioned in the certificate of registration and/
or the documents of hypothecation of the vehicle with the bank
had still been continuing in his name, it cannot be said that the H
960 SUPREME COURT REPORTS [2008] 16 S.C.R.

A contract itself is void unless it was shown that in obtaining the ,~,.,..
said contract a fraud had been practised. Not only the
particulars of fraud had not been pleaded, but even no witness
was examined on behalf.of the appellant. It cannot, thus, be said
that a case of fraud in the matter of entering into the contract
B of insurance had been made out by the appellant.

23. For the reasons aforementioned, there is no infirmity t
in the impugned judgment. The appeal is dismissed
accordingly with costs. Counsel's fee assessed at Rs.25,000/
c -.
8.8.B. Appeal dismissed.

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