SHANTABEN WIDOW OF DECEASED KANTIBHAI PUNJABHAI VANKAR v. YAKUBBHAI IBRAHIMBHAI PATEL

: First Appeal No.1343 of 1988 The appellants-original claimants are the legal heirs of deceased- Kantibhai Punjabhai Vankar. The deceased was aged about 30 years at the time of the accident. The deceased was resident of Village Kanknol Tal. Himmatnagar, Dist. Sabarkantha, who was standing near S.T. Bus Station at Idar at about 10:40 a.m. On

19.09.1982, at that moment an auto-rickshaw bearing RTO registration No.GRL-94, driven in a rash and negligent manner by respondent No.1 herein, belonging to respondent No.2, knocked down the deceased from behind, because of which the deceased received serious injuries and ultimately the deceased succumbed to injuries. The present appellants, being the legal heirs of the deceased, filed a claim petition before the Motor Accident Claims Tribunal, Sabarkantha @ Himmatnagar, which was registered as MACP No.30 of 1983 and claimed compensation of Rs.3 lacs. It was the case of the appellants-original claimants that the deceased was a graduate and was working as clerk in the S.T. Corporation and was earning Rs.877.50 p.m. as salary and was also earning Rs.5,000/- p.a. by way of agricultural activity. The Tribunal, after considering the evidence adduced by both sides, by FA/1343/1988 the impugned judgment dated 28.08.1985 partly allowed the claim petition and awarded Rs.1,36,000/- along with interest @ 6% p.a. However, considering the fact that the deceased was a pedestrian/third party, restricted the liability of the insurance company only to Rs.50,000/- interpreting the particular clause of the insurance policy as well as Section 95(1) sub-clause (b)(2) of the Act. Being aggrieved by the impugned judgment and award the present appeal is preferred by the original claimants for enhancement of compensation and also for challenging the finding rendered by the Tribunal, restricting the liability of the insurance company to the tune of Rs.50,000/- under Section 95(2)(a),(b) and (c) of the Act. It may be noted that by an amendment in the memo of appeal the appellants also challenged constitutional validity of the provisions of Section 95(2)(a) and (b) of the Act. However, the same has not been pressed. (6) : First Appeal No.1006 of 1987 Deceased-Prahaladbhai Shamalbhai Patel was driving his motorcycle bearing RTO registration No.RRY-1154 from Himmatnagar, towards Talod on 31.03.1984 at about 8 p.m. and while he was passing by village Gadhoda, jeep car belonging to respondent No.7, driven by respondent No.6 in a rash and negligent manner, dashed with the deceased, due to the said accident the deceased received serious injuries on vital part of his body and even though treatment was given at the Civil Hospital, Himmatnagar ultimately the deceased succumbed to injuries. FA/1343/1988 The deceased was 30 years old at the time of accident and was working as Junior Engineer in the Gujarat Electricity Board at Talod and had gross salary of Rs.1,850/- p.m. The original claimants, being wife (who expired pending the appeal), minor children (who have now become major), mother (who expired pending the appeal) and father filed a claim petition being MACP No.194 of 1984 for compensation of Rs.2,55,000/- against the driver and owner of the vehicle and the insurance company before the Motor Accident Claims Tribunal, Sabarkantha at Himmatnagar. The Tribunal, after considering the evidence on record adduced before it, partly allowed the claim petition and passed award of Rs.2,53,500/- holding the driver, owner as well as the insurance company jointly and severally liable subject to limited liability with interest 9% p.m. Being aggrieved by the same, the insurance company has filed the present appeal and has specifically claimed that the insurance company is liable only to Rs.50,000/-. (7) : First Appeal No.1007 of 1987 The original claimants of aforesaid MACP No.194 of 1984 has preferred a separate cross-appeal challenging the very judgment and award passed by the Tribunal for enhancement of the award as well as the limited liability of the insurance company. It may be noted that by an amendment in the memo of appeal, the appellants challenged constitutional validity of the provisions of Section 95(2)(a) and (b) of the Act, however, the same has not FA/1343/1988 been pressed. (8) : First Appeal No.750 of 1993 Deceased Mahendrasinh Ranjitsinh Padhiyar was traveling on his motorcycle bearing RTO registration No.GAA-3800 on 13.06.1986 at about 10:30 p.m. from Padra to Akalbara. When he reached village Dabhasa one three wheelers tempo bearing RTO registration No.GRQ-4587, driven by respondent No.6 belonging to respondent No.7, came from the other side and dashed with the motorcycle of the deceased suddenly and because of the said accident, the deceased sustained injuries on vital parts of his body and the deceased was admitted at Padra Hospital where ultimately the deceased succumbed to injuries. The Motor Accident Claims Tribunal (Aux.), Baroda, after considering the evidence adduced by both sides, by the impugned judgment and award dated 21.10.1982 partly allowed the claim petition and awarded Rs.8,62,000/- along with interest @ 15% p.m. holding the opponents jointly and severally liable. Being aggrieved by the same, the insurance company has preferred the present appeal predominantly contending that as per Section 95(2)(a),(b) and (c) of the Act the insurance company would be liable only Rs.50,000/-. (9) From the above recording of facts, as also from the referral orders, it becomes clear that the appellants are not seriously contesting the computation of compensation made by the Motor Accidents Claims Tribunal. Before us also, no serious arguments were advanced for enhancement of the compensation awarded FA/1343/1988 by the Claims Tribunal. The issue which was emphatically pressed by both the parties was with respect to that portion of the judgment of the Tribunal by which the Tribunal limited the liability of the Insurance company only to the extent of Rs.50,000/- or otherwise and whether the Tribunal can apply the principles of pay and recover under such circumstances. (10) Main contention of the claimants was that the insurance policies in all cases contained avoidance clause and provided that nothing in the policy shall affect the right of any person indemnified by the policy or any other person to recover an amount under or by virtue of the provisions of the Motor Vehicles Act. Said clause further provided that however, the insured shall repay to the company all sums paid by the company which the company would not have been liable to pay but for the said provisions. Their contention is that in view of such clauses in the insurance policy, the Insurance Company is principally liable to satisfy the award irrespective of statutory limits. We therefore, formulate questions of law to be answered through this reference. “Whether in a case where the insurance policy provides for avoidance clause to the effect that nothing in the policy shall affect the right of any person indemnified by this policy or any other person to recover an amount under or by virtue of the provisions of the Motor Vehicles Act, Insurance Company can press in service limit of statutory liability under the Act and avoid satisfying the award insofar as the claimants are concerned? (11) Learned counsel Shri M.C.Bhatt for the appellant referred to sections 95 and 96 of the Motor Vehicles Act, 1939 (Act of 1939 FA/1343/1988 for short) to contend that though statutory insurance was restricted to Rs.50,000/- in case of third party injury, the Act of 1939 did not prohibit insurance agreements covering higher or unlimited liability. He submitted that in the present case, insurance policy despite sufficient opportunity being given was not produced before the Claims Tribunal and the same was produced before this Court. The insurance policy itself envisages unlimited liability of the Insurance Company. (12) On behalf of the appellants, it was alternatively contended that even if the policy in question is interpreted as limiting the liability of the Insurance Company to the extent of Rs.50,000/-, insofar as the third party is concerned, the Insurance company is bound to discharge full liability in view of clause for avoidance of certain terms and right of recovery contained in the policy itself. It was further contented that the Apex Court has been recognizing the principle of “pay and recover” in similar cases even when the insurance policy covered only limited liability. (13) Counsel for the appellants relied on a decision in the case of Amrit Lal Sood v. Kaushalya Devi Thapar, (1998) 3 SCC 744 wherein it was observed that the terms of contract of insurance can be wider than that prescribed by the statute and under the policy insurer agreeing to indemnify the insured against all sums which the insured shall become legally liable to pay in respect of death of or bodily injury to any person. The term 'any person' would include even a gratuitous passenger. It was pointed out that the in the said decision, the Apex Court placed reliance on the avoidance clause contained in the insurance policy. FA/1343/1988 (14) Reliance was also placed on the decision of this Court in the case of Oriental Fire and General Insurance Co. v. Firoz Perverz Mysorewala, 2003 (2) GLR 1684 wherein a Division Bench even while upholding that the liability of the Insurance Company was limited to Rs.50,000/-, in view of the avoidance clause in the policy, held that the claimant would be entitled to recover the whole amount of compensation from the Insurance Company and upon making such payment, the Insurance Company would be entitled to recover the amount in excess of Rs.50,000/- from the insured. (15) Reliance was also placed on the decision in the case of New India Assurance Co. Ltd. v. Rajabahai Varsangbhai Bharwad & ors. 2006 (1) GLR 668. In the said case, the deceased was found to be travelling as a gratuitous passenger. Contention of the Insurance Company was that it had no liability to pay the compensation to the heirs of the deceased. The Tribunal while upholding the contention directed the Insurance Company to pay the compensation to the heirs of the deceased and permitted it to recover from the owner of the vehicle. Division Bench of this Court upheld the decision of the Tribunal. (16) Reliance was also placed on the decision of this Court in the case of Kusum Lata v. Satbir, 2011 ACJ 926, wherein the Apex Court applied the principle of 'pay and recover' making following observations : “In respect o the dispute about licence, the Tribunal has held and, in our view rightly, that the insurance Company has to pay and then may recover it from the owner of vehicle. This FA/1343/1988 court is affirming that direction in view of the principles laid down by a three-Judge Bench of this court in the case of National Insurance Co. Ld. v. Swaran Singh, 2004 ACJ 1 (SC).” (17) Reliance was also placed on the decision in the case of United India Insurance Co. Ltd. v. K.M.Poonam, 2011 ACJ 917, wherein also, the Apex Court while upholding the limited liability of the Insurance Company to six persons traveling in the vehicle applied the 'pay and recover' principle directing the Insurance Company to deposit with the Tribunal the total amount of compensation awarded and permitted it to recover the amount in excess of its liability from the owner of the vehicle. (18) On behalf of the Insurance Companies, learned counsel Shri Rajni Mehta and Mr.Nair opposed the appeals. It was vehemently contended that the insurance polices in question were “Act policies” and the liability of the Insurance Company was thus limited to Rs.50,000/-, a statutory limit prevailing at the relevant time. It was contended that on the face of it, it can be gathered that the policies were not unlimited liability policies, the limit of liability of the Insurance Company therefore must be restricted to Rs.50,000/- only. The Tribunal, therefore, correctly restricted the liability of the Insurance Companies to the said limit. (19) It was submitted that it would not be open for this Court to expand such liability. Heavy reliance was placed on the provisions contained in section 95 of the Act of 1939. It was pointed out that no extra premium was paid to cover unlimited liability. In that view of the matter, under no circumstances, liability of the Insurance Company can be enlarged beyond the statutory limit FA/1343/1988 prevailing at the relevant time. (20) It was further contended that the avoidance clause contained in the insurance policy cannot be pressed in service so as to lift the limit of liability of the Insurance Company. It was contended that if the Insurance Company is required or directed to pay any compensation in excess of Rs.50,000/-, the same would amount to re-writing the terms of the policy by making a policy covering unlimited liability which was not the intention of the parties. (21) It was submitted that when the liability of the Insurance Company is found to be limited, no direction can be issued requiring the Insurance Company to satisfy the claim and thereafter recover the excess amount from the owner of the motor vehicle. It was submitted that such direction if at all have been issued by the Supreme Court in exercise of special powers under Article 142 of the Constitution of India. Counsel pointed out that even this issue whether such direction can be issued or not is referred to a Larger Bench in the case of National Insurance Co. Ltd. v. Parvathneni, (2009) 8 SCC 785. (22) Heavy reliance was placed on the decision of the Apex Court in the case of New India Assurance Co. Ltd. v. C.M.Jaya, (2002) SCC 278. It was contended that the decision in the case of Amrut Lal Sood (supra) was considered by the Apex Court in this decision. The counsel pointed out para 16 and 17 of the decision wherein the Apex Court observed as under: “It is also not the case that any additional or higher premium was paid to cover unlimited or higher liability than the statutory liability fixed as found in the term of the policy extracted above. In the light of the law stated above, it FA/1343/1988 necessarily follows that the liability of the appellant is limited to Rs. 50,000/-, as was rightly held by the Tribunal. The High Court committed an error in taking the contrary view that the liability of the appellant was unlimited merely on the ground that the insured had taken a comprehensive policy. In Shanti Bai's case, this Court has clearly expressed the opinion that a comprehensive policy issued on the basis of the estimated value of the vehicle does not automatically result in covering the liability with regard to third party risk for an amount higher than the statutory limit in the absence of specific agreement and payment of separate premium to cover third party risk for an amount higher than the statutory limit. This position is accepted in Amrit Lal Sood's case as well though no reference is made to this case. As already stated above, in Amrit Lal Sood's case, the Court found an express term in the policy for covering wider risk and to meet the higher liability unlike in the case of Shanti Bai. Therefore, the High Court was not right in holding that the liability of the appellant insurance-company was unlimited merely on the ground that the vehicle in question, i.e., the truck, was covered by a comprehensive insurance policy.

17. In the circumstances, we hold that the liability of the appellant-insurance company is limited to Rs. 50,000/-, as held by the Tribunal. In the view we have taken, it is unnecessary to go into the question relating to either maintainability of cross- objections before the High Court against the appellant alone or as to the enhancement of compensation when the owner and driver have not filed appeal against the impugned judgment.” (23) Reliance was also placed on the decision in the case of New India Assurance Co. Ltd. v. Shanti Bai, (1995) 2 SCC 539 wherein it was observed that in absence of any special contract between the insured and the insurance company to cover unlimited liability in respect of an accident to a passenger, the policy covers only the statutory liability. The mere fact that the insurance policy is a comprehensive policy would not be of any help, since as held by the Apex Court in the case of National Insurance Company Ltd. v. Jugal Kishore (1988) 1 SCC 626, FA/1343/1988 comprehensive policy only entitles the owner to claim reimbursement of the amount of loss or damage suffered upto the estimated value of the vehicle. It does not mean that the limit of liability with regard to third party risk becomes unlimited or higher than the statutory liability. (24) Reliance was placed on the decision in the case of National Insurance Co. Ltd. v. Jugal Kishore, (1988) 1 SCC 626 to contend that in terms of section 95(2)(b), liability of the Insurance Company would be limited. (25) Reliance was also placed on the decision in the case of New Asiatic Insurance Co. Ltd. v. Pessumal Dhanamal Aswani, AIR 1964 SC 1736 to contend that even in face of avoidance clause, liability of the Insurance Company which was otherwise limited does not become unlimited. (26) Having thus heard the learned counsel for the parties, short question that calls for consideration is whether the Insurance Company can be directed to discharge the entire liability of compensation fixed by the Claims Tribunal or whether the liability of the Insurance Company would be restricted to the statutory liability of Rs.50,000/- prevailing at the relevant time. (27) Insofar as these appeals are concerned, we have perused the insurance policies. Since in all material aspects, the insurance policies are similar, we may refer to the insurance policy between the New India Insurance Company Ltd and Shri Fakirmohmad Noormohmad Memon, owner of vehicle who is respondent No.2 in First Appeal No.1343/88. FA/1343/1988 (28) Apart from other terms and conditions of the policy, the policy clearly provided the limit of liability. It further provided that the limit of the amount of the Insurance Company's liability in respect of one accident would be such amount as is necessary under the Motor Vehicles Act, 1939. The policy further provided that the limit of amount of the insurance company's liability under section II in respect of claim arising out of one event would be Rs.50,000/-. It can thus be seen that the insurance policy clearly provided that the liability of the Insurance Company would be limited to the extent provided under the statute and it is specifically provided that such limit to be Rs.50,000/- in case of a single accident. Section 95(2)(b) of the Act clearly provided that subject to the proviso to sub-section (1), a policy of insurance shall cover any liability incurred in respect of any one accident upto Rs.50,000/- where the vehicle in which passengers are carried for hire or reward or by reason of or in pursuance of a contract of employment. It is not in dispute that the present case falls under section 95(2)(b) of the Act of 1939. In absence of any other terms of the agreement and in absence of any additional premium being paid for covering unlimited liability of the Insurance Company, we are unable to agree with the contention of the learned counsel for the appellants that in the present case, the insurance policy was covering unlimited liability of the Insurance Company. (29) For the purpose of these appeals, we are also not required to go into the question whether the principle of 'pay and recover' should be applied. We are conscious that in certain decisions of this Court as well as the Apex Court, even while upholding that FA/1343/1988 the liability of the Insurance Company was restricted, directed the Insurance Company to deposit the entire compensation awarded and thereafter permitted the Insurance Company to recover the same from the owner of the vehicle. We are also conscious that this methodology or principle is doubted in certain subsequent decisions. For the purpose of these appeals, however, we are not required to go into the intricacies of this issue since the entire issue can be resolved independently. (30) From the perusal of the insurance policy, we notice that there was an avoidance clause in the policy in following terms: “ AVOIDANCE OF CERTAIN TERMS AND RIGHT OF REOCVERY. Nothing in this policy or any endorsement hereon shall affect the right of any person indemnified by this Policy or any other person to recover an amount under or by virtue of the provisions of the Motor Vehicles Act, 1939, Section 96. But the insured shall repay to the Company all sums paid by the Company which the Company would not have been liable to pay but for the said provisions.” The question, therefore, is in view of such avoidance clause, can the Insurance Company avoid the indemnification of a third party to the full extent and claim their restricted liability in terms of the insurance policy under the statutory provisions. (31) As noted above, the Apex Court in the decisions in the case of Jugal Kishore (supra) and Shanti Bai (supra) dealt with the cases where the liability of the Insurance Company as per the insurance policy was limited. It was in this background, held that the FA/1343/1988 Insurance Company cannot be directed to discharge full liability. Particularly in case of Shanti Bai (supra), it was observed that merely because the policy is comprehensive policy in so far as the limit of liability of Insurance Company qua the third party damage is concerned, same was still restricted to the statutory limit. (32) In the case of Amrut Lal Sood (supra), the Apex Court came to the conclusion that the policy was a comprehensive policy, that the Insurance Company was required to cover the risk of any person and the term 'any person' would also include a third party. In this background, the Apex Court, also referred to the avoidance clause contained in the insurance policy. Such avoidance clause was worded similarly as in the present case. It was held that the above clause does not enable the insurance company to resist or avoid the claim made by the claimant. The clause will arise for consideration only in a dispute between the insurer and the insured. (33) The decisions in the cases of Amrit Lal Sood (supra), Jugal Kishore (supra) and Shanti Bai (supra) all came up for consideration before the Apex Court in the case of C.M.Jaya (supra). The appeals were placed before the Larger Bench of five Judges referring following questions : The question involved in these appeals is whether in a “1. case of insurance policy not taking any higher liability by accepting a higher premium, in case of payment of compensation to a third party, the insurer would be liable to the extent limited under Section 95 (2) or the insurer would be liable to pay the entire amount and he may ultimately recover from the insured. On this question, there appears to FA/1343/1988