# NEW ASIATIC INSURANCE CO. LTD v. PESSUMAL DHANAMAL ASWANI AND ORS

- **Citation:** [1964] 7 S.C.R. 867
- **Court:** Supreme Court of India
- **Decided:** 1964-04-24
- **Case number:** Civil Appeals Nos. 1043-1044 of 1963
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/new-asiatic-insurance-co-ltd-v-pessumal-dhanamal-aswani-and-ors-3134
- **Pages:** 12

## Headnote

' •
78.0.R.
SUPREME COURT REPORTS
867
NEW ASIATIC INSURANCE CO. LTD.
v.
PESSUMAL DHANAMAL ASWAN! AND ORS.
fK. SUBBA RAO, K. C. DAS GUPTA AND RAGHUBAR DAYAL,
JJ.J
Motor Vehicles Act-(4 of 1939), ss. 93 to 96-Scope of.
A had insured his car with the appellant under a comprehensive policy. A permitted B, (who had insured his own car with
another company) to drive his car and while B was driving
the car it met with an accident. As a result of the accident C
died and D sustained serious injuries. Both C and D were in
the car. The heirs of C and D filed suits for damages. Notices
under s. 96(2) of the Motor Vehicles Act, 1939 were issued to
the appellant who there~on took out a Chamber Summons
contending that the notice was bad in law. Alternatively it
was contended that the appellant be permitted to defend the
suit in the name of the defendant. The Court held that the
notices were bad. The plaintiffs filed Letters Patent appeals
with success and the Chamber Summons were dismissed and
the trial Judge was directed to hear the alternative prayer.
Against this Order the present appeal was filed with special
leave.
The contention of the appellant was that in view of paragraph 4 of B's own policy issued by the other company
which indemnified B against any liability incurred by him
whilst personally driving a private car not belonging to him
or hired by him under a Hire-Purchase agreement, B was not
included among persons indemnified in para. 3 of A's policy
which the appellant had issued on account of proviso (a) to
the said para. The respondent contended that this proviso is
not a limitation on the class of persons ·indemnified
under
para. 3 that class being the drivers driving A's car insured
under the policy but merely amounted to a condition affecting
the liability of the company vis a vis the driver who was entitled to be indemnified under any other policy.
Held: (i) From a consideration of ss. 93, 94, 95 and 96 of
the Motor Vehicles Act it follows that if under the terms of
the policy B can be said to be the person insured under Para 3
of the policy, the company would be liable to satisfy the decree
if any passed against B.
(ii) The appellant by agreeing with the person who effects
the policy, to insure him against liability to third parties, takes
upon itself the entire liability of the person effecting the insurance. It os open to the insurer not to extend the indemnity
to the insured to other persons but if it extends it to other persons, it cannot restrict it vis o, vis the right of the third party
entitled to damages to recover them from the insured, a right
which is not d;~ted. A proviso meant to e!Xempt certain
persons from the general classification will have to be related
to considerations affecting it and is not to be related to such
classified person's right to indemnity from any other insurer.
(iii) The cl. (4) of s. II of B's policy with the other company
does not make that policy to be a policy within the meaning of
LIP(D)lSCI-28(a)
1964
April 24
1964
I
868
SUPREME COURT REPORTS
[1964)
s. 94 of the Act in relation to A's car by whose user B incurred
N ... A.rialic
liabilities sought to be established in the two suits. Such a policy
1 ........... Co. Lld.
and any indemnity under it cannot be used for sul>-classifying
p.....:Z" Dhattamal drivers specified in the policy issued to A by the appellant.
A..,...miand Ollters
(iv) The High Court was correct in holding that the appellant had insured B. in view of para. 3 of s. II of that policy
and that it comes within the expression in&urer in s. '96 of the
Act..

## Text

' •
78.0.R.
SUPREME COURT REPORTS
867
NEW ASIATIC INSURANCE CO. LTD.
v.
PESSUMAL DHANAMAL ASWAN! AND ORS.
fK. SUBBA RAO, K. C. DAS GUPTA AND RAGHUBAR DAYAL,
JJ.J
Motor Vehicles Act-(4 of 1939), ss. 93 to 96-Scope of.
A had insured his car with the appellant under a comprehensive policy. A permitted B, (who had insured his own car with
another company) to drive his car and while B was driving
the car it met with an accident. As a result of the accident C
died and D sustained serious injuries. Both C and D were in
the car. The heirs of C and D filed suits for damages. Notices
under s. 96(2) of the Motor Vehicles Act, 1939 were issued to
the appellant who there~on took out a Chamber Summons
contending that the notice was bad in law. Alternatively it
was contended that the appellant be permitted to defend the
suit in the name of the defendant. The Court held that the
notices were bad. The plaintiffs filed Letters Patent appeals
with success and the Chamber Summons were dismissed and
the trial Judge was directed to hear the alternative prayer.
Against this Order the present appeal was filed with special
leave.
The contention of the appellant was that in view of paragraph 4 of B's own policy issued by the other company
which indemnified B against any liability incurred by him
whilst personally driving a private car not belonging to him
or hired by him under a Hire-Purchase agreement, B was not
included among persons indemnified in para. 3 of A's policy
which the appellant had issued on account of proviso (a) to
the said para. The respondent contended that this proviso is
not a limitation on the class of persons ·indemnified
under
para. 3 that class being the drivers driving A's car insured
under the policy but merely amounted to a condition affecting
the liability of the company vis a vis the driver who was entitled to be indemnified under any other policy.
Held: (i) From a consideration of ss. 93, 94, 95 and 96 of
the Motor Vehicles Act it follows that if under the terms of
the policy B can be said to be the person insured under Para 3
of the policy, the company would be liable to satisfy the decree
if any passed against B.
(ii) The appellant by agreeing with the person who effects
the policy, to insure him against liability to third parties, takes
upon itself the entire liability of the person effecting the insurance. It os open to the insurer not to extend the indemnity
to the insured to other persons but if it extends it to other persons, it cannot restrict it vis o, vis the right of the third party
entitled to damages to recover them from the insured, a right
which is not d;~ted. A proviso meant to e!Xempt certain
persons from the general classification will have to be related
to considerations affecting it and is not to be related to such
classified person's right to indemnity from any other insurer.
(iii) The cl. (4) of s. II of B's policy with the other company
does not make that policy to be a policy within the meaning of
LIP(D)lSCI-28(a)
1964
April 24
1964
I
868
SUPREME COURT REPORTS
[1964)
s. 94 of the Act in relation to A's car by whose user B incurred
N ... A.rialic
liabilities sought to be established in the two suits. Such a policy
1 ........... Co. Lld.
and any indemnity under it cannot be used for sul>-classifying
p.....:Z" Dhattamal drivers specified in the policy issued to A by the appellant.
A..,...miand Ollters
(iv) The High Court was correct in holding that the appellant had insured B. in view of para. 3 of s. II of that policy
and that it comes within the expression in&urer in s. '96 of the
Act..
CIVIL APPELLATE JURISDICTION: Civil
Appeals
Nos.
1043-1044 of 1963. Appeals by special leave from the judgment and decree dated April 8, 1963 of the Bombay High
Court in Appeals Nos. 10 and 11 of 1962.
S. T. Desai, V. N. Thakar, 1. B. Dadachanji, 0. C. Mathur
and Ravinder Narain, for the appellant (in both the appeals).
G. S. Pathak, 0. P. Malhotra and I. N. Shroff, for respondent No. 1 (in both the appeals).
V. J. Merchant, for respondents Nos. 2 and 4 to 7 (in
C.A. No. 1043/ 1963).
April 24, 1964. The Judgment of the Court was delivered
by
JlaflobarDayal,J.
R.AGHUBAR DAYAL, J.-These appeals, by special leave.
arise in the following circumstances:
S. N. Asnani owned Chevrolet Car bearing registered No.
AA 4431. He insured it with !lie New Asiatic Insurance Co.
Ltd., hereinafter referred to as the company, under a policy
dated November 26, 1957. Asnani permitted Pessumal Dhanamal Aswani, hereinafter called Pessumal, to drive that car.
When Pessumal was driving the car with Daooji Radhamohan
Meherotra and Murli Dholandas in the car, the car met with
an accident as a result of which Meherotra died and Murli
received injuries.
Pessumal himself owned a Pontiac car which had been
insured with the Indian Trade & General Insurance Co. Ltd.,
under policy No. Bombay P.C. 42733-2, dated November 18,
1957.
Th~ hei~s of Meherotra instituted suit no.70 of 1959 against
Pessumal for the recovery of Rs. 2,50,000 /- by way of
damages with interest. Murli instituted suit no. 71 of 1959
against Pessumal to recover Rs. 1,50,000/- by way of
damages.
'
Notices under s. 96(2) of the Motor Vehicles Act, 1939 (Act
IV of 1939), hereinafter called the Act, were issued to the New
Asiatic Insurance Co, Ltd. The notice was given to the company as the defendant's liability to third parties had been
insured with it under its policy no. MV I 4564. The company
then took out Chamber Summons and it was contended that
notice under s. 96(2) of the Act was bad in law and shouid be
set aside and that the company was not liable to satisfy any
•.
'l S.C.R.
SUPREME COURT REPORTS
869
judgment which might be passed in the suit against the defen·
1964
dant. Alternatively, it was prayed that the company be added
Ne"' .A.aiatic
as a party defendant to the suit and I or be authorised to defend 1 ........ Co. IM.
the suit in the name of the defendant. Tarkunde J., held the P
~·Dh
al
notice issued to the company in the suits under s. 96(2) of A::.":.~ and O:A:....
the Act, to be bad in law and, accordingly, set them aside.
.
.
.
Ragl1vbar Dayal, J.
The plamtdfs then filed Letters Patent Appeals which
were allowed and the Chamber Summonses were dismissed.
It was directed that the. trial Judge would hear the alternative
prayers in the Chamber Summonses and make the necessary
orders. It is against this order in each of the appeals that the
company has preferred these appeals, after obtaining special
leave.
To appreciate the contentions of the parties in these appeals, reference may be made to certain provisions in the two
policies. The various provisions in the two policies are identi·
cal in matters affecting the question for determination before
us. We, therefore, set out the relevant provisions from the
policy issued by the company and would refer to differences,
if any, at the proper place.
The policy is described as 'Private Car (Comprehensive
Policy)'. The policy issued by the other company does not
so describe it, but it is also a Comprehensive Policy as the
premium charged is on that basis. The policy insures, under
Section I against IGss or damage, under Section II against lia·
bility to third parties and under Section III against liability
for medical expenses. Thereafter, follow the general exceptions and conditions.
Para I of Section II indemnifies the insured, i.e. Asnani
who effected the policy, in the event of accident caused by
or arising out of the use of the motor car, against all sums
which he may become legally liable to pay in respect of death
or of bodily injury to any person. Paras 3 and 4, generally
known as 'Other drivers' 'Extension Clause' and 'Other Vehicles Extension Clause' respectively, are material and are set
out in full:
"3. In terms of and subject to the limitations of the
indemnity which is granted by this section to the
Insured the Company will indemnify any driver
who is driving the Motor Car on the Insured 's
order or with his permission provided that such
Driver:-
(a) is not entitled to indemnity under any other
policy.
(b) shall as though he were the Insured observe, ful'
Iii and be subject to the terms, exceptions and
conditions of the policy in so far as they can
apply.
1964
J.Vtw AsiaJic
lns~irance Co. Ltd.
v.
Puaiimal Dhanamal
.datcani and Otliera
Baghubar Da1JUl, J.
870
SUPREME COURT REPORTS
(1964]
4. In terms of and subject to the limitations of the
indemnity which is granted by this Section in connection with the Motor Car the Company will
indemnity which is granted by this Section in conPrivate Motor Car (but not a Motor Cycle) not
belonging to him and not hired to him nnder a
Hire Purchase Agreement".
Under the heading 'Avoidance of certain terms and right
of recovery', the policy states: -
"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."
Condition 6 reads:
"6. If at the time any claim arises under this Policy
there is any other existing insurance covering the
same loss damage or liability the Company shall
not be liable to pay or contribute more than its
rateable proportion of any loss dam11ge compensation costs or expense. Provided ··always that
nothing in this Condition shall impose on the
Company any liability from which but for this
Condition it would have been relieved under
proviso (a) of Section 11-3 of this Policy".
The Schedule to the policy mentions the limitations as to use
and under heading 'Driver' notes: -
(a) Any person: -
(b) The insured may also drive a motor car not belonging to him and not hired to him under a Hire
Purchase Agreement.
Provided that the person driving holds a
licence to drive the Motor Car or has held and is
not disqualified for holding or obtaining such a
licence".
At the end of the Schedule is an important notice which
reads:
"The insured is not indemnified if the Vehicle is used
or driven otherwise than in accordance with this
Schedule. Any payment made by the Company
by reason of wider terms appearing in the Certificate in order to comply with Motor Vehicles Act
1939 is recoverable from the Insured. See the
clause headed 'Avoidance of certain terms and
right of recovery'."
•
•
_,
7 S.C.R.
SUPREME COURT REPORTS
871
The contention for the appellant is that in view of para
1964
4 of Pessumal's policy issued by the other company, Pessumal
New Asiatic
was indemnified against any liability incurred by him whilst 1 .. urane,· Co. Ltd.
personally driving a private motor car not belonging to himp,.,.ni:i'm.anamal
and not hired to him under a Hire Purchase Agreement, and A .. ·ani and Other.
~at, t~erefore, he was not ~ncl~ded a~ong the person~ indem- Raaha,,,;;D,,yal, J.
mfied-m para 3 of the policy 1t had JSsued to Asnam on account of proviso (a) to para 3 which reads:
"provided that such driver is not entitled to indemnity
under any other policy".
This contention is met by the respondent on the ground
that this [>roviso is not a limitation on the class of persons
indemnified under para 3, that class being the drivers driving
the Chevrolet car insured under the policy, but merely amounted to a condition affecting the liability of the company vis a
vis the driver who was entitled to indemnity under any other
policy. The question thus reduces itself to the determination
of whether Pessumal comes within the persons indemnified in
para 3 of the policy issued by the company.
We may now set out the relevant provisions of the Act
which have a bearing on the contention between the parties.
Chapter VIII of the Act provides for insurance of motor
vehicles against third party risks. Section 93 defines the ex·
pressions 'authorised i.tJsureil'; 'certifidate of in$ltlance' andi
reciprocating country'. The relevant portions of the various
sections are :
"94. (1). No person shall use except as a passenger or
cause or allow any other person to use a motor
vehicle in a public place, unless there is in force in
relation to the use of the vehicle by that person
or that other person, as the case may be. a policy
of insurance complying with the requirements of
this Chapter.
Explanation-A person driving a motor vehicle merely
as a paid employee, while there is in force in relation to the
use of the vehicle no such policy as is required by this subsection, shall not be deemed to act in contravention of the
sub-se~tion unless he knows or has reason to believe that
there is no such policy in force.
(2) Sub-section (l) shall not apply to any vehicle owned
by the Central Government or a State Government
and used for Government purposes uncpnnecte<l
with any commercial enterprise.
(3) The appropriate Government may. by order,
exempt from the operation of sub-section (!) any
196l
New A.giatic
l1i,~1iranr-e Co. Ltd,.
Y.
Pe$,mmnl Dkat1amal
Aawani an!l Olht.ra
Raghubar Dayal, J.
872
SUPREME COURT REPORTS
[1964]
vehicle owned by any of the following authorities.
namely:-
•
•
•
•
•
Provided that no such order shall be made in relation
to any such authority unless a fund has been established and is maintained by that authority in
accordance with the rules made in that behalf
under this Act for meeting any liability arising
out of the use of any vehicle of that authority
which thiit authority or any person in its employment may incur to third parties.
•
•
•
•
•
95. (I) 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 authorised insurer
or by a co-operative society allowed under section
108 to transact the business of an insurer, and
(b) insures the person or classes of person specified
in the policy to the extent specified in sub-section
i2) against any liability which may be incurred
by him or them in respect of the death of or bodily injury to any person caused by or arising out
of tbe use of the vehicle in a public pla.ce:
•
•
•
•
•
(4) 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
parjiculars of any conditions 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 .
•
•
•
•
•
(5) Notwithstanding
anything elsewhere contained
in any law, a person issuing a policy of insurance
under this section shall be liable to indemnify the
·~
person or classes of person 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 person.
96. (!). If, after a certificate of insurance has been
issued under sub-section (4) of section 95 in
favour of the person by whom a policy has been
effected, judgment in respect of any such liability
1.
7 S.C.R.
SUPREME COURT REPORTS
873
as is required to be covered by a policy ,under
'
1964
clause (b) of sub-section (1) of section 95 (being
New Asia!lc
a liability covered by the terms of the policy) is ln•urance Oo. Lid.
obtained al!ainst a~y person insur~ by the policy, Puaumal ".Dhawa...;l
then, notw1thstandmg that the msurer ma.y. be Aswani and Other•
entitled to avoid or cancel or may have avoided
or cancelled the policy, the insurer shall, subject Raghu/mr Dayal,J.
to the provisions of this section. pay to the person
entitled to the benefit of the decree any sum not
exceeding the sum assured payable thereunder,
as if he were the judgment debtor, in respect of
the liability, together with any amount payable in
respect of costs and any sum payable in respect of
interest on that sum by virtue of any enactment
relating to interest on judgments.
(2) No sum shall be payable by an insurer under subsection (1) in respect of any judgment unless
before or after the commencement of the proceedings in which the judgment is given the insurer
had notice through the Court of the bringing of
the proceedings, or in respect of any judgment so
long as execution is stayed thereon pending an
appeal; and an insurer to whom notice of the
bringing of any such proceedings is so given
shall be entitled to be made a party thereto and
to defend the action on any of the following
grounds, namely:-
•
•
•
•
•
(3) Where a certificate of insurance has been issued·
under sub-section (4) of 11ection 95 to the person
by whom a policy has been effected, so much of
the policy as purports to restrict the insurance of
the persons insured thereby by reference to any
conditions other than those in clause (b) of subsection (2) shall, as respects such liabilities as are
required to be covered by a policy under clause
(b) of sub-section (1) of section 95, be of no
effect:
Provided that any sum paid by the insurer in or towards the discharge of any liability of any person
which is covered by the policy by virtue only of
this sub-section shall be recoverable by the ininsurer from that person.
(4) If the amount which an insurer becomes IJable
~mder this section to pay in respect of a liability
rncurred by a person insured by a policy exceeds
the amount for which the insurer would apart
from the provisions of this section be liable under
1964
:rew Asiaek
In.~urroit!e Co. LW..
v.
874
SUPREME COURT REPORTS
[1964]
the policy in respect of that lia.bility, the insurer
shall be entitled to recover the excess from that
person.
•
•
•
•
•
Pessunwl Dlutn'lmol
Aswani and Others
(6) No insurer to whom the notice referred to in subsection (2) or sub-section (2A) has been given shall
be entitled to avoid his liability to any person entitled to the benefit of any such judgment as is
referred to in sub-section (I) or sub-section (2A)
otherwise than in the manner provided for in
sub-section (2), or in the corresponding law of
the State of J ammu and Kashmir or of the r~
ciprocating country, as the case may be".
Chapter VII! of the Act, it appears from the heading.
makes provision for insurance of the vehicle against third·
party risks, that is to say, its provisions ensure that thirdparties who suffer on account of the user of the motor vehick
would be also to get damages for injuries suffered and that
their ability to get the damages will not be dependent on the
financial condition of the driver of the vehicle whose user led
to the causing of the injuries. The provisions have to be construed in such a manner as to ensure this object of the enactment.
Section 94 prohibits, as a matter of necessity, for insurance against third-party risk, the use of a motor vehicle by
any person unless there exists a policy of insurance in felation
lo the use of the vehicle by that particular person and the
policy of insurance complies with the requirements of Chapter
VIII. The policy must therefore provide insurance against any
liability to third party incurred by that person when using
that vehicle. The policy should therefore be with respect ta
that particular vehicle. It may, however, mention the perso11
specifically or generally by specifying the class to which that
person may belong, as it may not be possible to name specifically all the persons who may have to use the vehicle with
the permission of the person owning the vehicle and effecting
the policy of insurance. The policy of insurance contemplated
by s. 94 therefore must be a policy by which a particular car
is insured.
Section 95 lays down the requirements which are to be
complied with by the policy of insurance issued in relation
to the use of a particular vehicle. They are: (1) the policy
must specify the person or classes of person who are insured
with respect to their liability to third-parties; (2) the policy
must specify the extent of liability which must extend to the
extent specified in sub-s. (2); and (3) the liability which be
1
incurred by the specified person or classes of person in respect
of death or bodily injury to any person caused by or arising
out of the use of the vehicle insured in a public place.
'
r
'
7 s.c.R.
SUPREl\lE COURT· REPORTS
873
Sub-section (4) of s. 95 requires the issue of a certificate of
1961
msnrance, in the prescribed form, to the person who effects
Neu· hiaJi'
the policy. The form of the certificate prescribed by th~ Motor lnsuran" Cn. Lid,
Vehicles Third Party Insurance Rules, 1946, . requires _the p,88,.,,,,.;•j,1"'""'"'l
specification of persons _or classes of ~rs_ons entitle~ to dnve. Aswani and Otl.eTB
The authorised insurer 1s also to certify m the certificate that
-- , ,
.
.
.fi
I te
II
th c r RH9liulwr Daya •••
the pohcy to which the ~ert1 ca_te re a s. as we. as
e e:
tificate of insurance, are issued m accordance with the provisions of Chapter VIII of the Act.
Sub-secticn (5) of s. 95 makes the insurer liable to indemnify the person or classes of person 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 person. If the
policy covers the insured for his liability to third parties, tbe
insurer is bound to indemnify the person or classes of person
specified in the policy The same is the effect of sub-s. (!) of
s. 96 which provides that the insurer is bound to pay to the--
person entitled to the benefit of a decree he obtains in respect
of any liability covered by the terms of the policy against any
person insured by the policy irrespective of the fact whether
the insurer was entitled to avoid or cancel or might have
avoided or ·cancelled the policy. This means that once the
insurer has issued a certificate of insurance in accordance
.vith sub-s. (4) of s. 95 he has to satisfy any decree which a
oerson receiving injuries from the use of the vehicle insured
obtains against any person insured by the policy. He is however liable to satisfy the decree only when he has been served
with a notice under sub-s. (2) of s. 96 about the proceedings
in which the judgment was delivered. It is for this reason that
a notice under sub-s. (2) of s. 96 was issued to the company
and it is on account of the consequential liability ill case the
plaintiffs' claim is decreed against Pessumal that the appellant
challenged the correctness of the allegation that Pessumal was
a person insured under the policy issued by it in respect or
the Chevrolet car. It follows from a consideration of these
various provisions of the Act-and this is not really disputed
for the appellant-that if under the terms of the policy Pessumal can be said to he the person insured under para 3, the
·company would he liable to satisfy the decree if any passed
against Pessumal.
The whole question then is whether Pesumal comes within the terms of para 3 of Section II of the policy.
Under this paragraph.
the
company indemnifies any
person who is driving the motor-car on the insured's order
or with his permission. Pessumal was driving the car with the
permission of Asnani who had effected the policy and therefore the company undertook to indemnify Pessumal in accordance with this provision of para 3. The appellant, however.
'
876
SUPREME COURT REPORTS
[1964)
1964
contends that this provision should not be read as defining
N•w A•iatic
by it~elf the class of persons insured under it, in vi~w of the
lnMance Co. Lid. further classification of this class of drivers by proviso (a). It
n
_,v.
is contended that only such drivers were indemnified as were
~'""""" D/&anamal
•
•
•
d
h
l"
d th
A•IDani and Otkera not entitled to mdemmty un er any ot er po icy an
. us
-. -
drivers who were entitled to indemnity under any other poltcy
RafAMbar Deya!, J. were taken out of the general class of drivers driving the car
on the insured's order or with his permission. We do not
.....
agree with this contention.
The proviso is not really a classification of dri~ers but
1s a restriction on the right of the driver to recover any dam·
ages he had to pay, from the company. The driver who can
get indemnity from any other company under any other policy
is, under this contractual term, not to get indemnity from the
company. The proviso thus, affects ·the question of indemnity
between a particular driver and the company and has noth·
ing to do with the liability which the driver has incurred to
the third party for the injuries caused to it and against which
liability was provided by s. 94 of the Act and was affected
by the policy issued by the company. The company, by agree·
ing with the person who affects the policy, to insure him against .
liability to third parties, takes upon itself the entire liabilit]'
of the person effecting the insurance. it is open to the insurer
not to extend this idemnity to the insured to other persons
but if it extends it to other persons, it cannot restrict it vis a
vis the right of the third party entitled to damages, to recover
them from the insured, a right which is not disputed. A proviso meant to exempt certain persons from the general classi·
fication will have to be related to considerations affecting it
and is not to be related to such classified persons right to
indemnity from any other insurer. In this connection reference
may be made to proviso (b) which cannot in any case be a
proviso relating to the classification of persons to be indemni·
fied. It provides that the person indemnified under para 3 will
observe, fulfil and be subject to the terms. exceptions and conditions of the policy in so far as they can apply to him.
We are further of opinion that clause (4) of Section II of
Pessumal's policy with the other company does not make that
policy to be a policy within the meaning of s. 94 of the Act in
relation to the Chevrolet car by whose user Pessumal incurred
liabilities sought to be established in the two suits. The para·
gr~~h indemnifi_es the insured, i.e., Pessumal, wp.iist pe!50nally
dnvmg any pnvate motor car. It does not indemnify him
against the liability incurred when driving any particular car
and therefore, in view of what we have said earlier, Pessumal's
policy cannot be a policy of insurance in relation to the Chevro-
•
let car as required by s. 94 of the Act Such a policy and any
W
indemnity under it cannot be used for sub-classifying driven
specified in the policy of the company.
7S.C.R.
SUPREME COURT REPORTS
877
The Act contemplates the possibility of the policy of in1961
surance undertaking liability to third parties providing such a
New Asiatic
contract between the insurer and the insured, that is, the person 1...,.,.a ... Oo. Lid.
who effected the policy, as would make the ~mpan>'. entitled p.,.., ... i"iJ,,_1
to recover the whole or part of the amount 1t has paid to the ;1 .... 3 ; and ou.er,
third party from the insured. The insurer thus acts as security
-
for the third party with respect to its realising damages for the Raghtlbu.r Dayqj, J
injuries suffered, but vis a vis the insured, the company does
not undertake that liability or undertakes it to a limited extent. It is in view of such a possibility that various conditions
are laid down in the policy. Such conditions, however, are
effective only between the insured and the company, and have
to be ignored when considering the liability of the company to
third parties. This is mentioned prominently in the policy itself and is mentioned under the heading 'Avoidance of certain
terms and rights of recovery', as well as in the form of 'An
Important Notice' in the Schedule to the policy. The avoidance clause says that nothing in the policy or any endorsement
thereon 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 Act. It also provides that the
insured will repay to the company all sums paid by it which
the company would not have been liable to pay but for the
said provisions of the Act. The 'Important Notice' mentions
that any payment made by the company by reason of wider
terms appearing in the certificate in order to comply with the
Act is recoverable from the insured, and refers to the avoidance clause.
Thus the contract between the insured and the company ·
may not provide for all the liabilities which the company has
to undertake vis a vis the third parties, in view of the provisions of the Act. We are of opinion that once the company
had undertaken liability to third parties incurred by the per
sons specified in the policy, the third parties' right to recover
any amount under or by virtue of the provisions of the Act is
not affected by any condition in the policy. Considering this
aspect of the terms of the policy, it is reasonable to conclude
that proviso (a) of para 3 of Section II is a mere condition
affecting the rights of the insured who effected the policy and
the persons to whom the cover of the policy was extended
by the company, and does not come in the way of third
parties: claim against the company on account of its claim
against a person specified in para 3 as one to whom cover of
the policy was extended.
It has been contended for the appellant that it was not
incumbent on the owner of a car to take out a poli_cy of insurance indemnifying himself or any person permitted to drive
the car and that if he does not insure the car and uses it he .
runs the risk of prosecution under s. 125 of the Act. This is
878
SUPREl\IE COURT REPORTS
[1964}
1961
true, but has no relevant effect on the question for decision
N"v A,;,,,;c
before us. Asnani did insure his car with respect to liability
Jn.,.mnrc On. Lid. against third persons. We have to see whether the company.
p,,,,.,,,,,111,.,.,,,,,,,1 on account of .undertaking that liability can be said to have
Amani and Ot/""' insured Pessumal on account of his driving the car with the
R 1 d -
1
permission of Asnani. The same may be said about the other
"ii" ""Daya' J. contention for the appellant that there is nothing in the Act
which makes it compulsory for an insurer to insist that the
owner of the car takes out a policy in the widest terms possible covering any person who qrives the car with his permission. The company did agree under the policy to indemnify
drivers who drove the car with the insured's permission. The
question is whether that undertaking covers PessumaL
Lastly, we may mention that the question about the proper stage at which the question raised by the company in the
Chamber notice is to be decided, came up for consideration at
the hearing. We however do not propose to express any opinion on that point in this case.
We are of opinion that the High Court rightly held that
the company had insured Pessumal in view of para 3 of Section II of the policy and that it comes within the expression
'insurer' in s. 96 of the Act. We therefore dismiss the appeals
with costs of hearing one set.
Appeals dismissed.