# MANAGER, NATIONAL INSURANCE CO. LTD v. SAJU P. PAUL AND ANOTHER

- **Citation:** [2013] 2 S.C.R. 1
- **Court:** Supreme Court of India
- **Decided:** 2013-01-03
- **Case number:** Civil Appeal No. 5 of 2013
- **Bench:** R.M. Lodha, Anil R. Dave
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/manager-national-insurance-co-ltd-v-saju-p-paul-and-another-28866
- **Pages:** 19

## Headnote

Motor Vehicles Act, 1988 - s. 147 - Motor accident of
goods vehicle - Injury to the claimant, who was travelling in
the vehicle and claiming to be a spare driver - Liability of the
insurance company - Held: Insurance company not liable to
pay compensation - Spare driver was not covered under the
policy - He was admittedly not driving the vehicle nor was
engaged for driving the said vehicle - Thus he was a gratuitous
passenger - In the facts of the case, Insurance Company
directed to pay the compensation and later to recover the
same from the owner-insured.
The question for consideration in the present appeal
was as to whether the insurance company was liable to
pay compensation for the bodily injury caused to the
claimant who was travelling in a goods vehicle as a spare
driver, though he was employed as a driver in another
vehicle owned by the vehicle owner-insured.
Allowing the appeal, the Court
HELD: 1.1 The impugned judgment is founded on
misconstruction of s. 147 of the Motor Vehicles Act, 1988.
The High Court was wrong in holding that the insurance
company was liable to indemnify the owner of the vehicle
and pay the compensation to the claimant [Para 18] [15-F]
1.2 The High Court committed grave error in holding
that s.147(1)(b)(i) takes within its fold any liability which
may be incurred by the insurer in respect of the death or
bodily injury to any person. The High Court erroneously
assumed that the claimant died in the course of
SUPREME COURT REPORTS [2013] 2 S.C.R.
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employment and overlooked the fact that the claimant
was not in any manner engaged on the vehicle that met
with an accident, but he was employed as a driver in
another vehicle. The insured (owner of the vehicle) got
insurance cover in respect of the subject goods vehicle
for driver and cleaner only and not for any other
employee. Therefore, second driver or for that purpose
'spare driver' was not covered under the policy. As a
matter of law, the claimant did not cease to be a
gratuitous passenger though he claimed that he was a
spare driver. [Para 16] [14-G-H; 15-A-C]
New India Assurance Co. Ltd. v. Asha Rani and Ors.
(2003) 2 SCC 223:2002 (4) Suppl. SCR 543; National
Insurance Co. Ltd. v. Cholleti Bharatamma and Ors. (2008)
1 SCC 423:2007 (11) SCR 531; Oriental Insurance Co. Ltd.
v. Devireddy Konda Reddy and Ors. (2003) 2 SCC 339:2003
(1) SCR 537 - relied on.
New India Assurance Company v. Satpal Singh and Ors.
(2000) 1 SCC 237:1999 (5) Suppl. SCR 149 - referred to.
1.3 The High Court misconstrued the proviso
following sub-section (1) of s. 147 of the Act. What is
contemplated by proviso to s.147 (1) is that the policy
shall not be required to cover liability in respect of death
or bodily injury sustained by an employee arising out of
and in the course of his employment other than a liability
arising under the Workmen's Compensation Act, 1923.
The claimant was admittedly not driving the vehicle nor
he was engaged in driving the said vehicle. Merely
because he was travelling in a cabin, would not make his
case different from any other gratuitous passenger. [Para
17] [15-D-E]
2. In the peculiar facts of the present case, a direction
is issued to the insurance company to first satisfy the
awarded amount in favour of the claimant and recover
the same from the owner of the vehicle. The insurance
company has already deposited the entire awarded
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MANAGER, NATIONAL INSURANCE CO. LTD. v.
SAJU P. PAUL AND ANOTHER
amount pursuant to the order of this Court passed on
01.08.2011 and the said amount has been invested in a
fixed deposit account. The claimant is allowed to
withdraw the amount deposited by the insurance
company before this Court, along-with accrued interest.
The insurance company thereafter may recover the
amount so paid, from the owner-respondent No. 2 by
following the procedure as laid down by this Court in the
case of *Challa Bharathamma case . [Paras 19 and 25]
[15-G; 19-E-F]
National Insurance Co. Ltd. v. Baljit

## Text

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[2013] 2 S.C.R. 1
MANAGER, NATIONAL INSURANCE CO. LTD.
v.
SAJU P. PAUL AND ANOTHER
(Civil Appeal No. 5 of 2013)
JANUARY 3, 2013
[R.M. LODHA AND ANIL R. DAVE, JJ.]
Motor Vehicles Act, 1988 - s. 147 - Motor accident of
goods vehicle - Injury to the claimant, who was travelling in
the vehicle and claiming to be a spare driver - Liability of the
insurance company - Held: Insurance company not liable to
pay compensation - Spare driver was not covered under the
policy - He was admittedly not driving the vehicle nor was
engaged for driving the said vehicle - Thus he was a gratuitous
passenger - In the facts of the case, Insurance Company
directed to pay the compensation and later to recover the
same from the owner-insured.
The question for consideration in the present appeal
was as to whether the insurance company was liable to
pay compensation for the bodily injury caused to the
claimant who was travelling in a goods vehicle as a spare
driver, though he was employed as a driver in another
vehicle owned by the vehicle owner-insured.
Allowing the appeal, the Court
HELD: 1.1 The impugned judgment is founded on
misconstruction of s. 147 of the Motor Vehicles Act, 1988.
The High Court was wrong in holding that the insurance
company was liable to indemnify the owner of the vehicle
and pay the compensation to the claimant [Para 18] [15-F]
1.2 The High Court committed grave error in holding
that s.147(1)(b)(i) takes within its fold any liability which
may be incurred by the insurer in respect of the death or
bodily injury to any person. The High Court erroneously
assumed that the claimant died in the course of
SUPREME COURT REPORTS [2013] 2 S.C.R.
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employment and overlooked the fact that the claimant
was not in any manner engaged on the vehicle that met
with an accident, but he was employed as a driver in
another vehicle. The insured (owner of the vehicle) got
insurance cover in respect of the subject goods vehicle
for driver and cleaner only and not for any other
employee. Therefore, second driver or for that purpose
'spare driver' was not covered under the policy. As a
matter of law, the claimant did not cease to be a
gratuitous passenger though he claimed that he was a
spare driver. [Para 16] [14-G-H; 15-A-C]
New India Assurance Co. Ltd. v. Asha Rani and Ors.
(2003) 2 SCC 223:2002 (4) Suppl. SCR 543; National
Insurance Co. Ltd. v. Cholleti Bharatamma and Ors. (2008)
1 SCC 423:2007 (11) SCR 531; Oriental Insurance Co. Ltd.
v. Devireddy Konda Reddy and Ors. (2003) 2 SCC 339:2003
(1) SCR 537 - relied on.
New India Assurance Company v. Satpal Singh and Ors.
(2000) 1 SCC 237:1999 (5) Suppl. SCR 149 - referred to.
1.3 The High Court misconstrued the proviso
following sub-section (1) of s. 147 of the Act. What is
contemplated by proviso to s.147 (1) is that the policy
shall not be required to cover liability in respect of death
or bodily injury sustained by an employee arising out of
and in the course of his employment other than a liability
arising under the Workmen's Compensation Act, 1923.
The claimant was admittedly not driving the vehicle nor
he was engaged in driving the said vehicle. Merely
because he was travelling in a cabin, would not make his
case different from any other gratuitous passenger. [Para
17] [15-D-E]
2. In the peculiar facts of the present case, a direction
is issued to the insurance company to first satisfy the
awarded amount in favour of the claimant and recover
the same from the owner of the vehicle. The insurance
company has already deposited the entire awarded
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MANAGER, NATIONAL INSURANCE CO. LTD. v.
SAJU P. PAUL AND ANOTHER
amount pursuant to the order of this Court passed on
01.08.2011 and the said amount has been invested in a
fixed deposit account. The claimant is allowed to
withdraw the amount deposited by the insurance
company before this Court, along-with accrued interest.
The insurance company thereafter may recover the
amount so paid, from the owner-respondent No. 2 by
following the procedure as laid down by this Court in the
case of *Challa Bharathamma case . [Paras 19 and 25]
[15-G; 19-E-F]
National Insurance Co. Ltd. v. Baljit Kaur and Ors. (2004)
2 SCC 1:2004 (1) SCR 274 ; *National Insurance Co. Ltd. v.
Challa Bharathamma and Ors. (2004) 8 SCC 517: 2004 (4)
Suppl. SCR 587; National Insurance Company Limited v.
Kaushalaya Devi and Ors. (2008) 8 SCC 246: 2008 (8) SCR
500 - relied on.
Case Law Reference:
1999 (5) Suppl. SCR 149
referred to
Para 11
relied on
Para 12
2003 (1) SCR 537
relied on
Para 14.1
2007 (11 ) SCR 531
relied on
Para 15
2004 (1) SCR 274
relied on
Para 20
2004 (4) Suppl. SCR 587
relied on
Para 21
2008 (8) SCR 500
relied on
Para 22
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5
of 2013.
From the Judgment & Order dated 23.03.2011 of the High
Court of Kerala at Ernakulam in R.P. No. 106 of 2010 in
M.A.C.No. 713 of 2003.
M.K. Dua for the Appellant.
K. Radhakrishnan, Kiran Bhardwaj for the Respondents.
The Judgment of the Court was delivered by
R.M. LODHA, J. 1. Leave granted.
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2. The appellant, insurance company, is in appeal by
special leave against the judgment and order dated 23.03.2011
whereby the Division Bench of the Kerala High Court allowed
the review petition and reviewed its order dated 09.11.2010
and held that the insurance company was liable to pay
compensation in sum of Rs. 2,88,000/- with 9% interest
thereon to the claimant awarded by the Motor Accident Claims
Tribunal in its award dated 23.07.2002.
3. The question of law that arises in this appeal is as to
whether having regard to the provisions of the Motor Vehicles
Act, 1988 (for short, '1988 Act'), the insurance company is liable
to pay compensation for the bodily injury caused to the claimant
who was travelling in a goods vehicle as a spare driver though
he was employed as a driver in another vehicle owned by the
owner of the vehicle under the policy of insurance.
4. The above question arises in this way. Saju P. Paul,
claimant (Respondent No. 1), was a heavy vehicle driver. He
was employed with Respondent No. 2 as a driver in some other
vehicle. On 16.10.1993, he was travelling in a goods vehicle
bearing No. KL-2A/3411 in the cabin. The goods vehicle was
being driven by one Jayakumar. In that vehicle, many other
persons were also travelling. At Nilackal, due to rash and
negligent driving of the driver Jayakumar, the goods vehicle
capsized. As a result of which the claimant suffered fracture and
injuries. The claimant remained under treatment for quite some
time and the injuries that he sustained in the accident rendered
him permanently disabled. In the claim petition filed by him
before the Motor Accident Claims Tribunal, Pathanamthitta (for
short, 'the Tribunal'), he claimed compensation of Rs.
3,00,000/-. The owner and insurer were impleaded as
respondent no. 2 and respondent no. 3 respectively in the claim
petition.
5. The insurer filed its written statement and opposed the
claimant's claim insofar as it was concerned. The insurer set
up the plea that the vehicle was a goods vehicle and the risk
of the passengers travelling in the goods vehicle was not
covered under the policy of insurance. It was stated in the
written statement that nearly 50 unauthorised passengers were
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travelling at the time of accident; they were not traveling in the
vehicle in pursuance of the contract of employment, such as
loading and unloading nor they were travelling as the owner of
the goods or the representative of the owner of the goods and
hence the insurer could not be saddled with any liability.
6. The Tribunal, after recording the evidence and hearing
the parties, on 23.07.2002, passed an award in favour of the
claimant holding that he was entitled to a total compensation
of Rs. 3,00,000/-. The liability of the insurer was made joint and
several with the owner and driver.
7. Being not satisfied with the award of the Tribunal, the
insurer filed an appeal before the Kerala High Court. The
Division Bench of that Court by relying upon decisions of this
Court in New India Assurance Co. Ltd. v. Asha Rani and
Others 1 and National Insurance Co. Ltd. v. Cholleti
Bharatamma and Others2 allowed the appeal of the insurer
vide judgment and order dated 09.11.2010. The Division Bench
held that insurer was not liable as gratuitous passengers
travelling in a goods vehicle were not covered under the policy
and the claimant shall be entitled to recover the awarded
amount from the owner or driver of the vehicle.
8. The claimant sought review of the order dated
09.11.2010 and, as noted above, by the impugned order that
review application has been allowed. While allowing the review
application, the Division Bench held as under:
"It has already been noticed that the petitioner was
admittedly a spare driver of the vehicle. It may be true that
he was not driving the vehicle at the relevant point of time;
but he was directed to go to the worksite by his employer
as a spare driver in the vehicle. Therefore, by no stretch
of imagination, it can be said that the petitioner was not
travelling in the vehicle in the course of his employment and
as directed by his employer. Section 147(1)(b)(i) takes
within its fold any liability which may be incurred by the
insurer in respect of the death or bodily injury to any person.
MANAGER, NATIONAL INSURANCE CO. LTD. v.
SAJU P. PAUL AND ANOTHER [R.M. LODHA, J.]
1.
(2003) 2 SCC 223.
2.
(2008) 1 SCC 423
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Therefore, the argument of the insurance company that no
goods were being carried in the vehicle at the time of
accident and therefore, the petitioner was only a gratuitous
passenger cannot be countenanced at all. Even otherwise,
the first proviso to Section147(1) will cast a liability on the
insurer to indemnify the owner in respect of the injury
sustained by the employee of the insured arising out of
and in the course of his employment."
9. It is appropriate to quote Section 147 of the 1988 Act
as was obtaining on the date of accident, i.e., 16.10.1993,
which reads as follows :
 "147. Requirements of policies and limits of liability.-
(1) In order to comply with the requirements of this
Chapter, a policy of insurance must be a policy which-
(a) is issued by a person who is an authorized 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 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:
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 employee of
a person insured by 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 arising
under the Workmen's Compensation Act, 1923 (8 of
1923), in respect of the death of, or bodily injury to, any
such employee-
(a) engaged in driving the vehicle, or
(b) if it is a public service vehicle engaged as a conductor
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of the vehicle or in examining tickets on the vehicle, or
(c) if it is a goods carriage, being carried in the vehicle,
or
(ii) to cover any contractual liability.
Explanation.-For the removal of doubts, it is hereby
declared that the death of or bodily injury to any person or
damage to any property of a third party shall be deemed
to have been caused by or to have arisen out of, the use
of a vehicle in a public place notwithstanding that the
person who is dead or injured or the property which is
damaged was not in a public place at the time of the
accident, if the act or omission which led to the accident
occurred in a public place.
(2) Subject to the proviso to sub-section (1), a policy of
insurance referred to in sub-section (1), shall cover any
liability incurred in respect of any accident, up to the
following limits, namely-
(a) save as provided in clause (b), the amount of liability
incurred;
(b) 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 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.
(3) A policy shall be of no effect for the purposes of this
Chapter unless and until there is issued by the insurer in
favour of the person by whom the policy is effected a
certificate of insurance in the prescribed form and
containing the prescribed particulars of any condition
subject to which the policy is issued and of any other
prescribed matters; and different forms, particulars and
matters may be prescribed in different cases.
(4) Where a cover note issued by the insurer under the
provisions of this Chapter or the rules made thereunder is
MANAGER, NATIONAL INSURANCE CO. LTD. v.
SAJU P. PAUL AND ANOTHER [R.M. LODHA, J.]
SUPREME COURT REPORTS [2013] 2 S.C.R.
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not followed by a policy of insurance within the prescribed
time, the insurer shall, within seven days of the expiry of
the period of the validity of the cover note, notify the fact
to the registering authority in whose records the vehicle to
which the cover note relates has been registered or to such
other authority as the State Government may prescribe.
(5) Notwithstanding anything contained in any law for the
time being in force, an insurer issuing a policy of insurance
under this section shall be liable to indemnify the person
or classes of persons specified in the policy in respect of
any liability which the policy purports to cover in the case
of that person or those classes of persons."
10. By the Motor Vehicles (Amendment) Act, 1994 (for
short, '1994 Amendment Act'), Section 147 came to be
amended. The expression "including owner of the goods or his
authorised representative carried in the vehicle" was added in
Section 147. The amended Section 147 has been considered
by this Court in various decisions, some of which we intend to
refer a little later.
11. In New India Assurance Company v. Satpal Singh
and Others3, this Court with reference to the provisions in the
Motor Vehicles Act, 1939 and the provisions in 1988 Act,
particularly Section 147, held that under the 1988 Act an
insurance policy covering third party risk was not required to
exclude gratuitous passengers in a vehicle no matter that the
vehicle is of any type or class. It was also held that the earlier
decisions of this Court rendered under the 1939 Act vis-à-vis
gratuitous passengers were of no avail while considering the
liability of the insurance company in respect of any accident
which occurred or would occur after the 1988 Act came into
force.
12. The correctness of the judgment in Satpal Singh3 was
doubted, inter alia, in Asha Rani1 . It was felt that Satpal Singh3
needed re-look insofar as cases covered under the 1988 Act
prior to its amendment in 1994 were concerned. A three-Judge
Bench in Asha Rani1 noticed Section 147 of the 1988 Act prior
3.
(2000) 1 SCC 237.
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MANAGER, NATIONAL INSURANCE CO. LTD. v.
SAJU P. PAUL AND ANOTHER [R.M. LODHA, J.]
to its amendment in 1994 and after its amendment in 1994 and
held in paragraph 9 of the Report (Pgs. 231-232) as follows :
"In Satpal case [(2000) 1 SCC 237] the Court assumed
that the provisions of Section 95(1) of the Motor Vehicles
Act, 1939 are identical with Section 147(1) of the Motor
Vehicles Act, 1988, as it stood prior to its amendment. But
a careful scrutiny of the provisions would make it clear that
prior to the amendment of 1994 it was not necessary for
the insurer to insure against the owner of the goods or his
authorised representative being carried in a goods vehicle.
On an erroneous impression this Court came to the
conclusion that the insurer would be liable to pay
compensation in respect of the death or bodily injury
caused to either the owner of the goods or his authorised
representative when being carried in a goods vehicle the
accident occurred. If the Motor Vehicles Amendment Act
of 1994 is examined, particularly Section 46, by which the
expression "injury to any person" in the original Act stood
substituted by the expression "injury to any person including
owner of the goods or his authorised representative
carried in the vehicle", the conclusion is irresistible that
prior to the aforesaid Amendment Act of 1994, even if the
widest interpretation is given to the expression "to any
person" it will not cover either the owner of the goods or
his authorised representative being carried in the vehicle.
The objects and reasons of clause 46 also state that it
seeks to amend Section 147 to include owner of the goods
or his authorised representative carried in the vehicle for
the purposes of liability under the insurance policy. It is no
doubt true that sometimes the legislature amends the law
by way of amplification and clarification of an inherent
position which is there in the statute, but a plain meaning
being given to the words used in the statute, as it stood
prior to its amendment of 1994, and as it stands
subsequent to its amendment in 1994 and bearing in mind
the objects and reasons engrafted in the amended
provisions referred to earlier, it is difficult for us to construe
that the expression "including owner of the goods or his
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authorised representative carried in the vehicle" which was
added to the pre-existing expression "injury to any person"
is either clarificatory or amplification of the pre-existing
statute. On the other hand it clearly demonstrates that the
legislature wanted to bring within the sweep of Section 147
and making it compulsory for the insurer to insure even in
case of a goods vehicle, the owner of the goods or his
authorised representative being carried in a goods vehicle
when that vehicle met with an accident and the owner of
the goods or his representative either dies or suffers bodily
injury. The judgment of this Court in Satpal case therefore
must be held to have not been correctly decided and the
impugned judgment of the Tribunal as well as that of the
High Court accordingly are set aside and these appeals
are allowed. It is held that the insurer will not be liable for
paying compensation to the owner of the goods or his
authorised representative on being carried in a goods
vehicle when that vehicle meets with an accident and the
owner of the goods or his representative dies or suffers
any bodily injury."
13. S.B. Sinha, J. in his supplementary judgment in Asha
Rani1, while concurring with the above, observed as follows (Pg.
235):
"26. In view of the changes in the relevant provisions in the
1988 Act vis-à-vis the 1939 Act, we are of the opinion that
the meaning of the words "any person" must also be
attributed having regard to the context in which they have
been used i.e. "a third party". Keeping in view the
provisions of the 1988 Act, we are of the opinion that as
the provisions thereof do not enjoin any statutory liability
on the owner of a vehicle to get his vehicle insured for any
passenger travelling in a goods vehicle, the insurers would
not be liable therefor.
27. Furthermore, sub-clause (i) of clause (b) of sub-section
(1) of Section 147 speaks of liability which may be incurred
by the owner of a vehicle in respect of death of or bodily
injury to any person or damage to any property of a third
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MANAGER, NATIONAL INSURANCE CO. LTD. v.
SAJU P. PAUL AND ANOTHER [R.M. LODHA, J.]
party caused by or arising out of the use of the vehicle in
a public place, whereas sub-clause (ii) thereof deals with
liability which may be incurred by the owner of a vehicle
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.
28. An owner of a passenger-carrying vehicle must pay
premium for covering the risks of the passengers. If a
liability other than the limited liability provided for under the
Act is to be enhanced under an insurance policy, additional
premium is required to be paid. But if the ratio of this
Court's decision in New India Assurance Co. v. Satpal
Singh [(2000) 1 SCC 237] is taken to its logical conclusion,
although for such passengers, the owner of a goods
carriage need not take out an insurance policy, they would
be deemed to have been covered under the policy
wherefor even no premium is required to be paid.
14. Asha Rani1 has been relied upon in Oriental Insurance
Co. Ltd. v. Devireddy Konda Reddy and Others4 wherein it
was held as under (Pgs. 342-343):
"....The difference in the language of "goods vehicle" as
appearing in the old Act and "goods carriage" in the Act
is of significance. A bare reading of the provisions makes
it clear that the legislative intent was to prohibit goods
vehicle from carrying any passenger. This is clear from the
expression "in addition to passengers" as contained in the
definition of "goods vehicle" in the old Act. The position
becomes further clear because the expression used is
"goods carriage" is solely for the carriage of "goods".
Carrying of passengers in a goods carriage is not
contemplated in the Act. There is no provision similar to
clause (ii) of the proviso appended to Section 95 of the
old Act prescribing requirement of insurance policy. Even
Section 147 of the Act mandates compulsory coverage
against death of or bodily injury to any passenger of "public
service vehicle". The proviso makes it further clear that
4.
(2003) 2 SCC 339.
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compulsory coverage in respect of drivers and conductors
of public service vehicle and employees carried in goods
vehicle would be limited to liability under the Workmen's
Compensation Act, 1923 (in short "the WC Act"). There is
no reference to any passenger in "goods carriage".
14.1. Then in paragraphs 10 and 11 of the Report (Pg.
343), this Court held in Devireddy Konda Reddy4 as under :
"10. The inevitable conclusion, therefore, is that provisions
of the Act do not enjoin any statutory liability on the owner
of a vehicle to get his vehicle insured for any passenger
travelling in a goods carriage and the insurer would have
no liability therefor.
11. Our view gets support from a recent decision of a
three-Judge Bench of this Court in New India Assurance
Co. Ltd. v. Asha Rani [(2003) 2 SCC 223] in which it has
been held that Satpal Singh case [(2000) 1 SCC 237]
was not correctly decided. That being the position, the
Tribunal and the High Court were not justified in holding
that the insurer had the liability to satisfy the award."
15. In Cholleti Bharatamma2, this Court was concerned
with the question about the liability of the insurance company
to indemnify the owner of the vehicle in respect of death of
passengers travelling in goods vehicle. The Court considered
the applicability of Section 147 as it originally stood under 1988
Act and after its amendment in 1994. In relation to the accident
that occurred on 16.12.1993 i.e., prior to the 1994 amendment
in SLP(C) 7237-39/2003, this Court set aside the judgment of
the High Court and allowed the appeal of the insurance
company by observing as follows (Pg. 430):
"14. The date of accident being 16-12-1993, the
amendment carried out in the year 1994 in Section 147
of the Motor Vehicles Act would not be applicable.
15. The Motor Accidents Claims Tribunal, Nalgonda, by a
judgment and award dated 13-11-1997 awarded various
sums overruling the defence of the appellant herein that
they were unauthorised passengers. The High Court,
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MANAGER, NATIONAL INSURANCE CO. LTD. v.
SAJU P. PAUL AND ANOTHER [R.M. LODHA, J.]
however, by reason of the impugned judgment, relying on
or on the basis of a decision of this Court in Satpal Singh
[(2000) 1 SCC 237] directed as under:
"The learned counsel for the Insurance Company
submitted that the issue involved in these appeals
is squarely covered by the decision of the Supreme
Court in New India Assurance Co. Ltd. v. Satpal
Singh [(2000) 1 SCC 237], wherein Their Lordships
held that under the Motor Vehicles Act, 1988 all
insurance policies covering third-party risks are not
required to exclude gratuitous passengers in the
vehicle though vehicle is of any type or class.
In view of the proposition of law laid down by the
Supreme Court in the decision stated supra, these
appeals are dismissed. No costs."
16. Following the aforementioned principles, the impugned
judgment cannot be sustained which is set aside. The
appeals are allowed accordingly."
15.1. With reference to the accident that took place on
24.12.1993 (prior to 1994 amendment) in SLP(C) Nos. 724143/2003, this Court in Cholleti Bharatamma2 in paragraphs
17,18,19,20 and 21 (Pgs. 430-431) held as under :
"17. In the aforementioned case, accident took place on
24-12-1993. The respondents herein filed a claim petition
claiming compensation for the death of one Kota
Venkatarao who had allegedly paid a sum of Rs 20 for
travelling in the lorry. The Tribunal held:
"In the absence of rebuttal evidence from the
deceased and some others who travelled in the
said vehicle in the capacity of owner of the luggage
which was carried by them at the time of accident,
it cannot be said that it is a violation of the policy,
since it is not fundamental breach so as to afford
to the insurer to eschew the liability altogether as
per the decision in B.V. Nagaraju v. Oriental
Insurance Co. Ltd. [(1996) 4 SCC 647 : AIR 1996
SC 2054]"
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18. The High Court, however, relying upon Satpal Singh
[(2000) 1 SCC 237] opined:
"This issue raised in this appeal is covered by the
decision of the Supreme Court in New India
Assurance Co. Ltd. v. Satpal Singh wherein Their
Lordships held that under the Motor Vehicles Act,
1988 all insurance policies covering third-party risks
are not required to exclude gratuitous passengers
in the vehicles though the vehicle is of any type or
class. Following the same, the appeal is dismissed.
No order as to costs."
19. It is now well settled that the owner of the goods means
only the person who travels in the cabin of the vehicle.
20. In this case, the High Court had proceeded on the
basis that they were gratuitous passengers. The admitted
plea of the respondents themselves was that the deceased
had boarded the lorry and paid an amount of Rs 20 as
transport charges. It has not been proved that the
deceased was travelling in the lorry along with the driver
or the cleaner as the owner of the goods. Travelling with
the goods itself does not entitle anyone to protection under
Section 147 of the Motor Vehicles Act.
21. For the reasons aforementioned, this appeal is
allowed."
16. In the present case, Section 147 as originally existed
in 1988 Act is applicable and, accordingly, the judgment of this
Court in Asha Rani1 is fully attracted. The High Court was clearly
in error in reviewing its judgment and order delivered on
09.11.2010 in review petition filed by the claimant by applying
Section 147(1)(b)(i). The High Court committed grave error in
holding that Section 147(1)(b)(i) takes within its fold any liability
which may be incurred by the insurer in respect of the death or
bodily injury to any person. The High Court also erred in holding
that the claimant was travelling in the vehicle in the course of
his employment since he was a spare driver in the vehicle
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MANAGER, NATIONAL INSURANCE CO. LTD. v.
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although he was not driving the vehicle at the relevant time but
he was directed to go to the worksite by his employer. The High
Court erroneously assumed that the claimant died in the course
of employment and overlooked the fact that the claimant was
not in any manner engaged on the vehicle that met with an
accident but he was employed as a driver in another vehicle
owned by M/s. P.L. Construction Company. The insured (owner
of the vehicle) got insurance cover in respect of the subject
goods vehicle for driver and cleaner only and not for any other
employee. There is no insurance cover for the spare driver in
the policy. As a matter of law, the claimant did not cease to be
a gratuitous passenger though he claimed that he was a spare
driver. The insured had paid premium for one driver and one
cleaner and, therefore, second driver or for that purpose 'spare
driver' was not covered under the policy.
17. The High Court misconstrued the proviso following subsection (1) of Section 147 of the 1988 Act. What is
contemplated by proviso to Section 147 (1) is that the policy
shall not be required to cover liability in respect of death or
bodily injury sustained by an employee arising out of and in the
course of his employment other than a liability arising under the
Workmen's Compensation Act, 1923. The claimant was
admittedly not driving the vehicle nor he was engaged in driving
the said vehicle. Merely because he was travelling in a cabin
would not make his case different from any other gratuitous
passenger.
18. The impugned judgment is founded on misconstruction
of Section 147. The High Court was wrong in holding that the
insurance company shall be liable to indemnify the owner of the
vehicle and pay the compensation to the claimant as directed
in the award by the Tribunal.
19. The next question that arises for consideration is
whether in the peculiar facts of this case a direction could be
issued to the insurance company to first satisfy the awarded
amount in favour of the claimant and recover the same from the
owner of the vehicle (respondent no. 2 herein).
20. In National Insurance Co. Ltd. v. Baljit Kaur and
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Others5, this Court was confronted with a similar situation. A
three-Judge Bench of this Court in paragraph 21 of the Report
(Pg. 8) held as under :
"21. The upshot of the aforementioned discussions is that
instead and in place of the insurer the owner of the vehicle
shall be liable to satisfy the decree. The question, however,
would be as to whether keeping in view the fact that the
law was not clear so long such a direction would be fair
and equitable. We do not think so. We, therefore, clarify
the legal position which shall have prospective effect. The
Tribunal as also the High Court had proceeded in terms
of the decision of this Court in Satpal Singh. The said
decision has been overruled only in Asha Rani. We,
therefore, are of the opinion that the interest of justice will
be subserved if the appellant herein is directed to satisfy
the awarded amount in favour of the claimant, if not already
satisfied, and recover the same from the owner of the
vehicle. For the purpose of such recovery, it would not be
necessary for the insurer to file a separate suit but it may
initiate a proceeding before the executing court as if the
dispute between the insurer and the owner was the
subject-matter of determination before the Tribunal and the
issue is decided against the owner and in favour of the
insurer. We have issued the aforementioned directions
having regard to the scope and purport of Section 168 of
the Motor Vehicles Act, 1988, in terms whereof, it is not
only entitled to determine the amount of claim as put forth
by the claimant for recovery thereof from the insurer, owner
or driver of the vehicle jointly or severally but also the
dispute between the insurer on the one hand and the
owner or driver of the vehicle involved in the accident
inasmuch as can be resolved by the Tribunal in such a
proceeding."
21. The above position has been followed by this Court in
National Insurance Co. Ltd. v. Challa Bharathamma & Ors.6,
5.
(2004) 2 SCC 1.
6.
(2004) 8 SCC 517.
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MANAGER, NATIONAL INSURANCE CO. LTD. v.
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wherein this Court in paragraph 13 (Pg. 523) observed as
under:
"13. The residual question is what would be the
appropriate direction. Considering the beneficial object of
the Act, it would be proper for the insurer to satisfy the
award, though in law it has no liability. In some cases the
insurer has been given the option and liberty to recover the
amount from the insured. For the purpose of recovering the
amount paid from the owner, the insurer shall not be
required to file a suit. It may initiate a proceeding before
the executing court concerned as if the dispute between
the insurer and the owner was the subject-matter of
determination before the Tribunal and the issue is decided
against the owner and in favour of the insurer. Before
release of the amount to the claimants, owner of the
offending vehicle shall furnish security for the entire amount
which the insurer will pay to the claimants. The offending
vehicle shall be attached, as a part of the security. If
necessity arises the executing court shall take assistance
of the Regional Transport Authority concerned. The
executing court shall pass appropriate orders in
accordance with law as to the manner in which the owner
of the vehicle shall make payment to the insurer. In case
there is any default it shall be open to the executing court
to direct realisation by disposal of the securities to be
furnished or from any other property or properties of the
owner of the vehicle i.e. the insured. In the instant case,
considering the quantum involved, we leave it to the
discretion of the insurer to decide whether it would take
steps for recovery of the amount from the insured."
22. In National Insurance Company Limited v.
Kaushalaya Devi and Others7. In paragraph 15 of the Report
(pg. 250), the Court observed as follows:
"15. For the reasons aforementioned, civil appeal arising
out of SLP (C) No. 10694 is allowed and civil appeal
arising out of SLP (C) No. 9910 of 2006 is dismissed. If
7.
(2008) 8 SCC 246.
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the amount deposited by the Insurance Company has
since been withdrawn by the first respondent, it would be
open to the Insurance Company to recover the same in the
manner specified by the High Court. But if the same has
not been withdrawn the deposited amount may be refunded
to the Insurance Company and the proceedings for
realisation of the amount may be initiated against the
owner of the vehicle. In the facts and circumstances of the
case, however, there shall be no order as to costs."
23. We are informed that by an order dated 19.01.2007
in National Insurance Co. v. Roshan Lal and Another [SLP
(C) No. 5699/2006] in light of the argument raised before a twoJudge Bench that the direction ought not to be issued to the
insurance company to discharge the liability under the award
first and then recover the same from the owner, the matter has
been referred to the larger Bench by the following order:
"Having regard to the submissions urged before us, we are
of the view that this petition may be placed for
consideration before a larger Bench. We notice that in
some of the decisions such a direction was made in cases
where the compensation had already been paid by the
insurer, but there are observations therein which support
the view that such a direction can be made in all cases
where the owner has insured his vehicle against third party
risks. In Baljit Kaur's case (supra) which is a judgment
rendered by three Hon'ble Judges, such a direction was
made in the special circumstances noticed by the Court
in paragraph 21 of the report. There are observations in
Oriental Insurance Co. Ltd. Vs. Ranjit Saikia and Ors.
(2002) 9 SCC 390 which may support the contention of
the petitioners before us."
24. In National Insurance Company Ltd. v. Parvathneni
& Another [SLP(C)....CC No. 10993 of 2009], the following two
questions have been referred to the larger Bench for
consideration:
(1) If an Insurance Company can prove that it does not
have any liability to pay any amount in law to the claimants
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MANAGER, NATIONAL INSURANCE CO. LTD. v.
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under the Motor Vehicles Act or any other enactment, can
the Court yet compel it to pay the amount in question giving
it liberty to later on recover the same from the owner of the
vehicle.
(2) Can such a direction be given under Article 142 of the
Constitution, and what is the scope of Article 142? Does
Article 142 permit the Court to create a liability where there
is none?"
25. The pendency of consideration of the above questions
by a larger Bench does not mean that the course that was
followed in Baljit Kaur5 and Challa Bharathamma6 should not
be followed, more so in a peculiar fact situation of this case. In
the present case, the accident occurred in 1993. At that time,
claimant was 28 years' old. He is now about 48 years. The
claimant was a driver on heavy vehicle and due to the accident
he has been rendered permanently disabled. He has not been
able to get compensation so far due to stay order passed by
this Court. He cannot be compelled to struggle further for
recovery of the amount. The insurance company has already
deposited the entire awarded amount pursuant to the order of
this Court passed on 01.08.2011 and the said amount has
been invested in a fixed deposit account. Having regard to these
peculiar facts of the case in hand, we are satisfied that the
claimant (Respondent No. 1) may be allowed to withdraw the
amount deposited by the insurance company before this Court
along-with accrued interest. The insurance company (appellant)
thereafter may recover the amount so paid from the owner
(Respondent No. 2 herein). The recovery of the amount by the
insurance company from the owner shall be made by following
the procedure as laid down by this Court in the case of Challa
Bharathamma6.
26. Appeal is allowed and disposed of as above with no
order as to costs.
K.K.T.
Appeal allowed.