A. Pasayat, J.
1. On a reference being made by a learned single Judge, these appeals have been placed before a Division Bench to clarify as to who is a 'third party' within the meaning of Section 95 of the Motor Vehicles Act, 1939 (hereinafter referred to as 'the Act').
2. The appeals before the learned single Judge are directed against the awards given by the Second Motor Accidents Claims Tribunal, Cuttack (in short 'the Tribunal'). Facts of the case as found by the Tribunal are as follows:
On 16.6.1980, a delivery van bearing registration No. OSC 8024 was moving towards Cuttack from Athgarh carrying goods and some passengers. On the way near Dihasahi Kadamba Bridge, the vehicle met with an accident while the driver was trying to overtake a bus bearing registration No. ORD 2957. It went off the road on the right side of the road, knocked down a pedestrian named Dhabaleswar Panda and capsized. The vehicle belonged to one Jibanananda Mohanty (hereinafter referred to as 'the insured') and was insured with the Oriental Fire & General Insurance Co. Ltd. (hereinafter referred to as 'the insurer'). The bus belonged to the Orissa State Road Trans. Corpn. (hereinafter referred to as 'the Corporation'). As a result of the accident several passengers and the pedestrian sustained injuries and were hospitalised at the S.C.B. Medical College Hospital, Cuttack for treatment. The pedestrian Dhabaleswar Panda succumbed on the date of accident, and the other passengers of the vehicle were discharged from hospital after long periods of treatment.
3. Several claim petitions were filed before the Tribunal. Disposing of five cases that were lodged before it, the Tribunal essentially came to hold that the driver of the delivery van was the tortfeasor and there was no contributory negligence from the side of the bus. Referring to Section 95(2)(a) of the Act, the Tribunal held that the liability of the insurance company is limited to Rs. 50,000/-. It observed that the insurance policy indicated that the same had been taken by treating the vehicle as a goods vehicle with the understanding that the vehicle was to be used only under a public carriage permit within the meaning of the Act. Rule 95 of the Orissa Motor Vehicles Rules, 1940 (in short 'the Rules') permits transportation of hirers, labourers and employees numbering six by a goods vehicle. It noticed that the liability of the insurer can be enforced only where the occupants were hirers and not simple passengers, since transporting passengers by a goods vehicle is prohibited under the said Rule. It dealt with case of each individual claimant separately in its common judgment. Accordingly, the claim petitions were disposed of. In both the appeals the insured has assailed the award on the ground that he had no liability whatsoever and therefore, the Tribunal was not justified in fastening part of the liability on it.
4. Though several contentions were raised before the learned single Judge, we are concerned with the question as a sequel to the reference made whether the insurer was bound to indemnify the insured, as according to the latter the injured persons were covered within the expression 'third party' and had also paid money for travelling in the delivery van, and therefore were not gratuitous passengers. Reliance was placed on several decisions of various High Courts including one of this court in Dhaniraj Agarwalla v. Manorama Bal 1989 ACJ 265 (Orissa). The insurer's stand is that the offending vehicle being a goods vehicle, the driver was not permitted under the Act to carry passengers on hire and the insurance policy did not cover them even though they might have sustained injuries. Reliance was placed on decisions of several High Courts, and one of the Apex Court in Pushpabai Purshottam Udeshi v. Ranjit Ginning & Pressing Co. Pvt. Ltd. 1977 ACJ 343 (SC).
5. For resolution of the dispute, it is necessary to refer to Section 95 of the Act so far as it is relevant. The same corresponds to Section 147 of the Motor Vehicles Act, 1988 (hereinafter referred to as 'the new Act').
95. 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) xxx xxx xxx
(b) insures the person or classes of persons specified in the policy to the extent specified in Sub-section (1)-
(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) xxx xxx xxx
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) xxx xxx xxx
(c) if it is a goods vehicle, being carried in the vehicle, or
(ii) except where the vehicle is a vehicle in which passengers are carried for hire or reward or by reason of or in pursuance of a contract of employment, to cover liability in respect of the death of or bodily injury to persons being carried in or upon or entering or mounting or alighting from the vehicle at the time of the occurrence of the event out of which a claim arises, or
(iii) 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 shall cover any liability incurred in respect of any one accident up to the following limits, namely-
(a) where the vehicle is a goods vehicle, a limit of fifty thousand rupees in all, including the liabilities, if any, arising under the Workmen's Compensation Act, 1923 (8 of 1923), in respect of the death of, or bodily injury to, employees (other than the driver), not exceeding six in number, being carried in the vehicle;
(b) where the vehicle is a vehicle in which passengers are carried for hire or reward or by reason of, or in pursuance of, a contract of employment,-
(i) in respect of persons other than passengers, carried for hire or reward, a limit of fifty thousand rupees in all;
(ii) in respect of passengers,-
(1) a limit of fifty thousand rupees in all, where the vehicle is registered to carry not more than thirty passengers;
(2) xxx xxx xxx
(3) xxx xxx xxx
(4) subject to the limits aforesaid, ten thousand rupees for each individual passenger, where the vehicle is a motor cab and five thousand rupees for each individual passenger, in any other case;
(c) save as provided in Clause (d), where the vehicle is a vehicle of any other class, the amount of liability incurred;
(d) irrespective of the class of the vehicle, a limit of rupees two thousand in all in respect of damage to any property of a third party.
6. All persons whose risk on account of the use of vehicle is required to be covered are 'third party' in the sense that they are in addition to the two parties to the insurance agreement, namely, insurer and insured. The use of the words 'third party' in Chapter VIII obviously means that the parties to the insurance agreement are the insurer and the insured. Section 95(1)(b) (i) requires the insurer to cover in its policy of insurance risk of liability of the insured in respect of the death of or bodily injury to person or damage to property of a 'third. party' but the proviso to that section makes certain exceptions to the requirement of coverage by policy.
7. As rightly observed by the learned referring Judge 'third party' has not been defined in the Act or in the Rules. in Stroud's Judicial Dictionary the meaning of the words 'third party risk' has been given as below:
Third party risks' Road Traffic Act, 1930 (20 and 20 Geo. 5-4C.5.C.43-S, 35) connotes that the insurer is one party to the contract, that the policy-holder is another party, and that claims made by others in respect of the negligent use of the car, may be naturally described as claims by third parties.
The Privy Council in Digby v. General Accidents Fire Assurance Corporation, (1943) AC 121, has also interpreted the words 'third party risk' in the line interpreted in the Stroud's Judicial Dictionary. In the definitions given in Section 93 of the Act corresponding to Section 145 of the new Act, 'third party' is defined to include the Government. A third party risk policy covers liabilities for death or injury caused to a third person or damage caused to a property of a third party arising out of the use of a motor vehicle. Third party policy is, therefore, wider than the Act policy; it covers liabilities arising from injury to person or property of a third party or from death of a third party arising out of the use of a motor vehicle insured. Act policy means an insurance policy which is issued by an insurer and obtained by the assured under a mandatory provision of the Act. From the heading of Chapter VIII it is clear that it relates to the provision for insurance of the vehicle against third party risks. Its provisions ensure that third parties who suffer on account of the user of the motor vehicle would be able 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 injuries. [See New Asiatic Insurance Co. Ltd. v. Pessumal Dhanamal Aswani 1958-65 ACJ 559 (SC).] Chapter VIII of the enactment is intended to safeguard the rights of persons who may be involved in motor vehicle accidents. The provisions of Section 94, particularly Sub-section (1), are intended to prevent any vehicle being driven on the road without insurance of such persons.
8. This court in Clive Insurance Co. Ltd. v. Jogendra Singh 1972 ACJ 295 (Orissa), observed that in the case of a gratuitous passenger travelling in a private vehicle, it is essential to be determined before liability is fastened on the insurer that there is a judgment against the insured, the same is in respect of a liability which is required to be covered by a policy under Section 95(1)(b) and that the liability was in fact covered by the terms of the policy. It was held that insurer is not liable for death or injury to any gratuitous passenger in a private car or vehicle.
9. In the instant case, the accepted position being that the vehicle was a goods vehicle, the question is whether a passenger thereon unauthorisedly carried would make the insured and consequentially the insurer vicariously liable. The scope and ambit of liability fastened under Section 95 of the Act came up for consideration before the Supreme Court in Pushpabai's case, 1977 ACJ 343 (SC). It was observed as follows (at p. 354):
Sections 95(a) and 95(b)(i) of the Motor Vehicles Act adopted the provisions of the English Road Traffic Act, 1960, and excluded the liability of the insurance company regarding the risk to the passengers. Section 95 provides that a policy of insurance must be a policy which insures the persons against any liability which may be incurred by him in respect of death 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. The plea that the words 'third party' are wide enough to cover all persons except the person and the insurer is negatived as the insurance cover is not available to the passengers is made clear by the proviso to sub-section which provides that a policy shall not be required:
(ii) except where the vehicle is a vehicle in which passengers are carried for hire or reward or by reason of or in pursuance of a contract of employment, to cover liability in respect of the death of or bodily injury to persons being carried in or upon or entering or mounting or alighting from the vehicle at the time of the occurrence of the event out of which a claim arises. Therefore it is not required that a policy of insurance should cover risk to the passengers who are not carried for hire or reward. As under Section 95 the risk to a passenger in a vehicle who is not carried for hire or reward is not required to be insured the plea of the counsel for the insurance company will have to be accepted and the insurance company held not liable under the requirements of the Motor Vehicles Act.
In that view of the matter, the plea that any person, whatever be his manner of entry into the vehicle involved in an accident, is covered by expression 'third party' is not tenable. Strong reliance has been placed by the insured and the claimants on a decision of this court in Oriental Fire and General Insurance Co. Ltd. v. Sanatan Pradhan 1988 ACJ 792 (Orissa) and a decision of Punjab and Haryana High Court in P.R. Valayu Dhan v. R.P. Khosla 1989 ACJ 658 (P&H;). In the first decision, reference was made to the decision in Pushpabai's case 1977 ACJ 343 (SC) and it was observed that as a proposition of law, the observation cannot be disputed. However, referring to the instructions of the Tariff Advisory Committee, it was held that the same was effective from 25.3.1977 and therefore, the liability of the insurer was also extended to death of or bodily injury to any person including occupants carried in the motor car provided that such occupants are not carried for hire or reward. This view was expressed considering the fact that the vehicle involved in that case was a jeep. The view expressed by the Delhi High Court in Sagar Chand Phool Chand Jain v. Santosh Gupta 1985 ACJ 585 (Delhi), was adopted. The Gauhati High Court referred to the view expressed in Delhi and Orissa cases and expressed its concurrence thereto. We are not very much concerned with the applicability of the instructions of the Tariff Advisory Committee because that relates to private car. From documents filed along with an application for acceptance thereof as additional evidence, we find that the insurers were informed to make the intention clear that the comprehensive private car policy covers passengers' liability, the Tariff Advisory Committee decided to amend Clause 1(a) of Section II, private car policies by incorporating the following words after the words 'death of or bodily injury to any person' appearing on sheet 38 of India Motor Tariffs:
including occupants carried in the motor car provided that such occupants are not carried for hire or reward.
They were also advised that all existing policies should be deemed to incorporate the amendment automatically and the decision is brought into force with effect from 25th March, 1977.
We are not very much concerned with the applicability of the Tariff Advisory Committee's recommendation and/or date of applicability, since the vehicle involved in the case at hand is a goods vehicle.
10. An agreement of insurance is one of indemnification for a consideration, commonly known as a premium. The insurer undertakes to indemnify any liability for the insured on account of an accident caused by a vehicle in respect of which the policy of insurance is taken. Ordinarily it is not the concern of the legislature whether the owner of the vehicle insures his vehicle or not. If the vehicle is not insured, any legal liability arising on account of third party risk will have to be borne by the owner of the vehicle. However, the legislature has insisted on a person using a motor vehicle in a public place to insure against third party risk. Section 94 of the Act and Section 146 of the new Act may be referred to in this regard. Certain exceptions have been carved out with regard to liability of the insurer. In view of what has been stated by the Supreme Court in Pushpabai's case 1977 ACJ 343 (SC), we hold that a policy of insurance does not cover risk to the passengers who are not carried for hire or reward. The expression 'third party' does not take within its sweep anybody and everybody involved in an accident wherein a vehicle insured is involved. The limitations prescribed in Section 95 limit its applicability. This is clear from the exposition of law by the Apex Court in Pushpabai's case (supra). The insurer has no liability in respect of a gratuitous passenger in a goods vehicle. In respect of passengers in a private car, the terms of the policy shall determine the question of liability of the insurer.
11. The reference is accordingly answered. Let the matter be now placed before the learned single Judge for disposal of the appeals.
R.C. Patnaik, J.
I agree.