IN THE HIGH COURT OF GUJARAT AT AHMEDABAD FIRST APPEAL No.1343 of 1988 With FIRST APPEAL No.1006 of 1987 With FIRST APPEAL No.1007 of 1987 With FIRST APPEAL No.750 of 1993 For Approval and Signature:
HONOURABLE MR.JUSTICE JAYANT PATEL HONOURABLE MR.JUSTICE AKIL KURESHI HONOURABLE MR.JUSTICE R.M.CHHAYA =========================================================
========================================================= SHANTABEN WIDOW OF DECEASED KANTIBHAI PUNJABHAI VANKAR & 5 Appellant(s) Versus YAKUBBHAI IBRAHIMBHAI PATEL & 2 Defendant(s) ========================================================= Appearance :
MR MC BHATT for Appellant(s) : 1 6. NOTICE SERVED for Defendant(s) : 1 2. MR RAJNI H MEHTA for Defendant(s) : 3, ========================================================= CORAM : HONOURABLE MR.JUSTICE JAYANT PATEL and HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE R.M.CHHAYA Date :23/03/2012 CAV JUDGMENT (Per : HONOURABLE MR.JUSTICE R.M.CHHAYA)
(1) The present group of appeals arise out of judgments and awards passed by different Motor Accident Claims Tribunals described hereinafter whereby the Tribunals on interpretation of Section 95 of the Motor Vehicles Act, 1939 (the Act) restricted the liability of the insurance company limited to the statutory liability as envisaged under the Act.
(2) Out of the present group of appeals, First Appeal No.1343 of 1988 was heard by Division Bench of this Court comprising of (Hon'ble M.S.Shah & K.M.Mehta,J.J.) (as they then were) and by order dated 28.12.2006 (reported in 2007(4) GLR 3639) referred the said First Appeal in its entirety to the Larger Bench of this Court and had observed in Paragraph No.17 as under:
“17. Why we are referring this entire matter to the larger Bench:
17A In this case the accident took place on 19.9.1982. The claimant filed claim petition in 1983. The trial Court decided the matter on 28.8.1985. The appeal was filed in 1986. Thereafter, the appeal memo was amended in 1988. We are hearing the appeal in 2006. In view of this chequered history we are of the view that instead of referring certain question of law, we may refer the entire matter to the larger Bench.
17B In view of the aforesaid discussion and in view of the conflict of the views of the two Division Benches and in view of Rule 5 of the Gujarat High Court Rules, this Division Bench desires to refer the entire matter on the questions which are raised to the larger Bench. The office is directed to place this matter before the Hon'ble the Acting Chief Justice who may consider to constitute a special Bench or larger Bench to hear this appeal.
17C Ordinarily, we would not have given reasons but in view of the important questions of law arise in this appeal, we have given the reasons for referring the matter to the larger Bench.”
(3) Similarly, while concurring with the view taken by Hon'ble Mr.
Justice K.M.Mehta in concluding paragraph of the said judgment Hon'ble Mr. Justice M.S.Shah had observed thus:
“ In view of the fact that apart from the judgments of the two Division Benches of this Court in Oriental Insurance Co. Ltd. vs. Firdos Pervez Mysorewala 2003(2) GLR 1684 and in New India Assurance Co. Ltd. vs. Rajabhai Vasangbhai Bharwad, 2006(1) GLR 668, relied upon by the learned counsel for the appellantclaimant, there are three other Division Bench judgments of this Court in United India Insurance Co. Ltd. vs. Chandulal Gokaldas Mehta, 2003(3) GLR 2386, United India Insurance Co. Ltd. vs. Shobhanaben Girishbhai, 2000 ACJ 193, and Jaipur Golden Transport Company Pvt. Ltd. vs. Shri Kehaval Maganlal in First Appeal No.159 of 1968 decided on 3.11.1971 relied upon by the learned counsel for the Insurance Company and also subsequent Supreme Court decisions in National Insurance Co. Ltd. vs. Baljit Kaur (2004) 2 SCC 1, National Insurance Co. Ltd. vs. Puja Roller Flour Mills (P) Ltd., (2005) 11 SCC 386, National Insurance Co. Ltd. vs. Keshav Bahadur, 2004 ACJ 648 as well as in National Insurance Co. Ltd. vs. Prembai Patel, (2005) 6 SCC 172, the question of law raised in this appeal needs to be decided by a Larger Bench. I, therefore, agree with the conclusion of learned brother Hon'ble Mr.Justice K.M.Mehta, that this appeal may be placed before a Larger Bench.”
In view of the above observations, this group of appeals are placed before us.
(4) The facts arising in each appeal can be summarized as under:
(5) First Appeal No.1343 of 1988:
The appellantsoriginal 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 autorickshaw bearing RTO registration No.GRL94, 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 appellantsoriginal 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 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) subclause (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:
DeceasedPrahaladbhai Shamalbhai Patel was driving his motorcycle bearing RTO registration No.RRY1154 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.
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 crossappeal 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 been pressed.
(8) First Appeal No.750 of 1993:
Deceased Mahendrasinh Ranjitsinh Padhiyar was traveling on his motorcycle bearing RTO registration No.GAA3800 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.GRQ4587, 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 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 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.
(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 court is affirming that direction in view of the principles laid down by a threeJudge 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 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 rewriting 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 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 insurancecompany 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 appellantinsurance 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, 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.
(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 subsection (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 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 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 :
“1. The question involved in these appeals is whether in a 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 be some apparent conflict in the two threeJudge Bench decisions of this Court (1) New India Assurance Co. Ltd. v. Shanti Bai, ((1995) 2 SCC 539) and (2) Amrit Lal Sood v.
Kaushalya Devi Thapar ((1998) 3 SCC 744).
2. In the latter decision, unfortunately the decision in New India Assurance case (supra) has not been noticed though reference has been made to the decision of this Court in National Insurance Co. Ltd. v. Jugal Kishore, ((1988) 1 SCC 626), which was relied upon in the earlier threeJudge Bench judgment. In view of the apparent conflict in these two three Judge Bench decisions, we think it appropriate that the records of this case may be placed before my Lord, the Chief Justice of India to constitute a larger Bench for resolving the conflict. We accordingly so direct. The record may now be placed before the Hon'ble the Chief Justice of India."
(34) The Apex Court drew a distinction between two sets of cases, one represented by Jugal Kishore and Shanti Bai and another by Amrit Lal Sood. The Apex Court observed as under:
“9. In Shanti Bai's case (supra), a Bench of three learned Judges of this Court, following the case of Jugal Kishore, has held that (i) a comprehensive policy which has been 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, (ii) that even though it is not permissible to use a vehicle unless it is covered at least under an "Act only" policy, it is not obligatory for the owner of a vehicle to get it comprehensively insured, and (iii) that the limit of liability with regard to third party risk does not become unlimited or higher than the statutory liability in the absence of specific agreement to make the insurer's liability unlimited or higher than the statutory liability.
10. On a careful reading and analysis of the decision in Amrit Lal Sood (supra), it is clear that the view taken by the Court is no different. In this decision also, the case of Jugal Kishore is referred to. It is held (i) that the liability of the insurer depends on the terms of the contract between the insured and the insurer contained in the policy; (ii) there is no prohibition for an insured from entering into a contract of insurance covering a risk wider than the minimum requirement of the statute whereby risk to the gratuitous passenger could also be covered; and (iii) in such cases where the policy is not merely statutory policy, the terms of the policy have to be considered to determine the liability of the insurer. Hence the Court aftrer noticing the relevant clauses in the policy, on facts found that under Section II1(a) of the policy, the insurer has agreed 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 expression "any person" would undoubtedly include an occupant of the car who is gratuitously travelling in it. Further, referring to the case of Pushpabai Purshottam Udeshi (supra), it was observed that the said decision was based upon the relevant clause in the insurance policy in that case which restricted the legal liability of the insurer to the statutory requirement under Section 95 of the Act. As such, that decision had no bearing on Amrit Lal Sood's case as the terms of the policy were wide enough to cover a gratuitous occupant of the vehicle. Thus, it is clear that the specific clause in the policy being wider, covering higher risk, made all the difference in Amrit Lal Sood's case as to unlimited or higher liability. The Court decided that case in the light of the specific clause contained in the policy. The said decision cannot be read as laying down that even though the liability of the insurance company is limited to the statutory requirement, an unlimited or higher liability can be imposed on it. The liability could be statutory or contractual. A statutory liability cannot be more than what is required under the statute itself. However, there is nothing in Section 95 of the Act prohibiting the parties from contracting to create unlimited or higher liability to cover wider risk. In such an event, the insurer is bound by the terms of the contract as specified in the policy in regard to unlimited or higher liability as the case may be. In the absence of such a term or clause in the policy, pursuant to the contract of insurance, a limited statutory liability cannot be expanded to make it unlimited or higher. If it is so done, it amounts to rewriting the statute or the contract of insurance which is not permissible.
11. In the light of what is stated above, we do not find any conflict on the question raised in the order of reference between the decisions of two Benches of three learned Judges in Shanti Bai and Amrit Lal Sood aforementioned and, on the other hand, there is consistency on the point that in case of an insurance policy not taking any higher liability by accepting a higher premium, the liability of the insurance company is neither unlimited nor higher than the statutory liability fixed under Section 95(2) of the Act. In Amrit Lal Sood's case, the decision in Shanti Bai is not noticed. However, both these decisions refer to the case of Jugal Kishore and no contrary view is expressed.”
(35) From the above noted portion of the decision in the case of C.M.Jaya (supra), it can be seen that the Apex Court did not find that in the decisions in the cases of Shanti Bai and Amrit Lal Sood any contrary views are expressed. It was observed that the case of Amrit Lal Sood was decided in light of the specific clause contained in the policy.
(36) These decisions in the case of Amrit Lal Sood, C.M.Jaya were considered by a Division Bench of this Court in the case of Firdoz Pervez Mysorewala (supra) in light of the avoidance clause contained in the insurance policy. The plea of the Insurance Company that the decision in the case of Amrit Lal Sood has been overruled by five Judges Constitution Bench of the Supreme Court in the case of C.M.Jaya (supra) was negatived. It was observed as under :
“The above paragraphs quoted from the decision of the Constitution Bench would indicate that the judgment in Amrit Lal Sood (supra) is not overruled at all. Further, five Judge Constitution Bench had no occasion to consider the avoidance clause in the insurance policy which is considered in Amrit Lal Sood (supra) and Oriental Insurance Co.Ltd. (supra). Applying the principles laid down in the above referred to two decisions of the Supreme Court to the facts of the present case and more particularly to the terms and conditions stipulated in the insurance policy Exh.51, this Court is of the opinion that though the liability of the Insurance Company is limited to the extent of Rs.50,000/ (Rupees Fifty Thousand) only, the Insurance Company is liable to pay the entire award amount to the claimant and upon making such payment, the Insurance Company can recover the excess amount from the insured by executing the award against the insured to the extent of such excess amount as per Section 96(4) of the Motor Vehicles Act, 1939.”
(37) Our task of culling the ratio in the case of Amrit Lal Sood (supra) and the effect of the subsequent decisions in the case of C.M.Jaya (supra) however, has been considerably simplified by a later decision in the case of New India Assurance Co. Ltd. v. Vimal Devi, 2010 ACJ 2878. It was a case wherein the Insurance Company had appealed to the Supreme Court. The High Court had accepted the limited liability of the Insurance Company to the extent of Rs.50,000/, but still directed it to pay the entire amount along with interest to claimants and then to recover the amount beyond the liability of Rs.50,000/ from the owner of the vehicle involved in the accident. The policy under consideration in the said case also contained an avoidance clause which read as under:
“ Avoidance of certain terms and right of recovery.
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.”
(38) The Apex Court relying on the decision in the case of Amrit Lal Sood (supra) held that in view of avoidance clause, the Insurance Company would be liable to meet the claim of the claimant and satisfy the award passed by the Tribunal. The decision in the case of C.M.Jaya (supra) was noticed by the Apex Court in the said decision and it was observed as under:
“6. Mr.Calla further submitted that in C.M.Jaya, 2002 ACJ 271 (SC), a Constitution Bench of this court indeed held that in a policy for limited liability it was not open to the court to direct the insurance company to make any payment beyond the amount of the limited liability but it took note of the decision in Amrit Lal Sood, 1998 ACJ 531 (SC) with approval. He referred to paras 8 and 12 of the judgment in C.M.Jaya (supra) where the decision in Amrit Lal Sood (supra) is noticed with approval.
7. The avoidance clause in the policy in this case makes all the difference and the direction of the High Court to the appellant insurance company to make payment of the full amount of compensation to the claimants and to recover its due from the owner of the vehicle is directly in accordance with that clause. In our view, the submission of Mr.Calla is well founded. The appellant in this case can derive no benefit from the decision in C.M.Jaya, 2002 ACJ 271 (SC).”
(39) In view of the above pronouncement of the Apex Court, we have no hesitation in holding that in face of avoidance clause contained in the insurance policy, the Insurance Company despite its limited liability must in so far as third party is concerned, satisfy the entire award of the Claims Tribunal. The Insurance Company, of course, would be entitled to recover the amount in excess of Rs.50,000/ which is the statutory limit of liability, from the owner of the vehicle insured which was involved in the accident.
(40) Counsel for the Insurance Companies, however, vehemently contended that this will amount to rewriting the terms of the policy which was frowned upon by the Apex Court in the case of C.M.Jaya (supra). They contended that the decision in the case of Amrit Lal Sood would no longer apply in view of the subsequent decision of the Larger Bench in the case of C.M.Jaya (supra). They submitted that any such direction would amount to making the policy covering unlimited risk. We are unable to uphold such contentions for variety of reasons. Firstly, as already noted, the decision in the case of Amrit Lal Sood (supra) came up for consideration before a Larger Bench of the Apex Court in the case of C.M.Jaya (supra) wherein pointed reference was made whether there was any conflict between the decisions in the cases of Shanti Bai (supra) and Amrit Lal Sood (supra) and the Apex Court concluded that there was no conflict since the policies under consideration in both the cases were different. Further, a Division Bench of this Court also in the case of Firdos Pervez Mysorewala (supra) negatived the contention of the Insurance Company that the decision in the case of Amrit Lal Sood (supra) came to be overruled by the Apex Court in the case of C.M.Jaya (supra). Thirdly, by applying the avoidance clause, we are not converting the insurance policy with limited liability into one with unlimited risk coverage. The avoidance clause is applied and activated so as to require the Insurance Company to satisfy the claim of the third party while still permitting the Insurance Company to recover the excess payment from the owner of the motor vehicle, i.e. the insured. In so far as the Insurance Company is and the insured are concerned, the policy still remains a limited policy. If as suggested by the counsel for the Insurance Companies, the policy was construed as covering unlimited risk policy, further direction or the permission to the Insurance Company to recover the excess amount from the insured would not be available. It is precisely because the policy is viewed as a statutory policy and therefore covering limited liability that the Insurance Company can be permitted to recover the excess amount paid from the insured. By virtue of the avoidance clause, insofar as the third party is concerned, the Insurance Company is being made to satisfy the entire award while insofar as the insurer and the insured are concerned, the policy still continues to be one of limited liability. This is vitally, different from “pay and recover” directions some times issued by courts and vehemently opposed by Insurance Company. In such cases, unlike the present one, direction for payment is not based on avoidance clause contained in the insurance policy. Lastly, the entire issue under very similar factual background was considered by the Apex Court in a recent decision in the case of Vimal Devi (supra). Under very similar circumstances, even while the insurance policy envisaged limited liability of the Insurance Company to the extent of Rs.50,000/, the Apex Court, in view of the avoidance clause contained in the insurance policy, referring to the decision in the case of Amrit Lal Sood (supra) held that the Insurance Company was rightly directed by the High Court to make payment of the full amount of compensation and to recover the excess amount from the owner of the motor vehicle. The Apex Court also considered the effect of the decision in the case of C.M.Jaya (supra).
(41) To our mind, the entire issue is thus squarely covered by the decision of the Apex Court in the case of Vimal Devi (supra). The attempt on the part of the Insurance Companies to read the decision in the case of C.M.Jaya (supra) differently would not succeed. The Apex Court in the case of Vimal Devi (supra) noticed both the decisions, that is, in the case of Amrit Lal Sood as well as in the case of C.M.Jaya and upheld the decision of the High Court directing the Insurance Company to make full payment of compensation awarded. It may be noted that the avoidance clause considered by the Apex Court is similar to the one presented before us.
(42) Our answer to the question farmed is that wherever the insurance policy contains an avoidance clause providing that nothing in the policy shall affect the right of any person indemnified by the policy or any other person by recovering amount under or by virtue of provisions of Motor Vehicle Act, but further requires insured to repay to the Insurance Company all such sums paid by the company which the company would not have been liable to pay, but for this provision, the Insurance Company cannot press in service the statutory limit of liability under the Motor Vehicles Act insofar as the claimants are concerned. But the insured would have to repay to the company all the sums paid by the company which is in excess of its liability under the policy of insurance.
(43) Before concluding, we may also notice that the decision in the case of Vimla Devi was also referred to and relied upon by a Division Bench of this Court in First Appeal No.528 of 2002 in its judgment dated 8.7.2011. It was also a case wherein the insurance policy provided for limited liability of the Insurance Company to the extent of Rs.50,000/. However, the Division Bench relying on the similarly worded avoidance clause in the policy and the decision of the Apex Court in the case of Vimal Devi (supra) and Amrit Lal Sood (supra) observed as under:
“6. We have seen that in the instant case, almost identical is the avoidance clause in the insurance policy. As held by the Hon'ble the Apex Court in para 7 in Vmial Devi's case (supra) that the avoidance clause in the policy in this case makes all the difference. Under such circumstances, in the facts and circumstances of the instant case, the direction issued by the Tribunal directing the appellant insurance company top ay the entire compensation amount along with interest and costs to the claimants and then to recover the excess amount from the insured, is directly in accordance with the avoidance clause contained in the insurance policy. Therefore, the submission that such direction issued by the Tribunal is perverse or erroneous cannot be accepted.”
(44) In the result, the appeals of the claimants are partly allowed. While not disturbing the quantum of compensation awarded by the Claims Tribunal in each of the appeals, we modify the respective orders of the Claims Tribunal insofar as the liability of the Insurance Company is concerned. While still upholding the limited liability of the Insurance Company of Rs.50,000/, the Insurance Companies concerned are directed to satisfy the entire award of the Claims Tribunal in respective claim petitions. However, it will be open for the Insurance Companies to recover the compensation deposited by it before the Claims Tribunal in excess of Rs.50,000/ from the owners of the motor vehicles involved in the accidents. Insurance Companies shall deposit such amount with the respective Claims Tribunal within a period of eight weeks from today. Upon such receipt, the Claims Tribunal shall deposit with any Nationalized Bank, 75 per cent of the additional amount so deposited by the Insurance Company under this order with proportionate costs and interest for a period of five years with usual terms and conditions. Remaining 25% of the amount with proportionate cost and interest shall be released in favour of the claimants through account payee cheque after due verification.
(45) First Appeal No.1006 of 1987 and First Appeal No.750 of 1993 filed by the different insurance companies are also disposed of accordingly. The insurance companies are directed to deposit the amount awarded within a period of 08 (eight) weeks from today. All awards stand modified accordingly.
(46) Registry to place a copy of this order in connected matters.
[JAYANT PATEL,J] [AKIL KURESHI, J] [R.M.CHHAYA, J ] Bhavesh/vijayan/raghu*