Judgment:
T.H.B. Chalapathi, J.
1. The only point that arises in this appeal filed by the Insurance Company is whether the liability of the appellant is limited to the extent of Rs. 1,50,000/-.
2. The motor vehicle accident took place on 29.9.1989 in which one A.R. Jain died. His widow Satya Bala Jain and children namely Kumari Chetna Jain and Master Vikas Jain and his mother Bhulan Devi filed an application Under Sections 166 and 140 of the Motor Vehicles Act in MACT Case No. 148 of 1994 on the file of Motor Accident Claims Tribunal, Karnal which awarded a sum of Rs. 6,72,000/- (Rs. Six lacs seventy two thousands) as compensation, but the Tribunal held that the Insurance Company was liable to pay the compensation to the extent of Rs. 1,50,000/- as per statutory provisions contained in the Motor Vehicles Act, 1939 and the balance of the amount of the compensation to the extent of Rs. 5,22,000/- was to be paid by the owner of the vehicle namely. Puja Roller Flour Mills (Pvt.) Limited. The owner of the offending vehicle filed an appeal bearing FAO No. 303 of 1995. The learned Single Judge vide his judgment dated 6.9.1995 set aside the finding of the Tribunal whereby the Tribunal determined the liability of the National Insurance Company (appellant in this LPA) to the extent of Rs. 1,50,000/- and held that the liability of the Insurance Company is unlimited and directed the appellant Insurance Company to pay the full amount of compensation to the claimants. Aggrieved by the said judgment of the learned Single Judge, the Insurance Company preferred this Letters Patent Appeal.
3. The learned counsel for the appellant Insurance Company contended that Sub-section (2) of Section 147 of the Motor Vehicles Act gives an option to opt for the provisions of the contract of insurance and if the option was not exercised, the liability of the Insurance Company will be under the provisions of the new Act namely under the provisions of Section 147 of Motor Vehicles Act, 1988. The learned Single Judge relied upon the judgment of the Division Bench of this Court rendered in FAO No. 1174 of 1991 decided on 22.11.1991. The Division Bench in the aforesaid appeal observed as follows:-
'The accident took place on July 14, 1989. The amending Act came into force on July 1, 1989. Section 147 of the amending Act makes the liability of the Insurance Company unlimited. Under Section 95A of the old Motor Vehicles Act, in the case of public carriers, the liability of the Insurance Company was limited to the extent of Rs. 1,50,000/-. Under the Amending Act, four months' period was allowed to the Insurance Company to opt to be governed by old provisions or the new provisions of the Act. Admittedly, they did not exercise the option to revise the policy under the Act. as far as the policy in dispute is concerned, that being the position, now the Amending Act would apply to the case in hand and the Motor Accident Claims Tribunal rightly fixed the liability of the Insurance Company alongwith this for the entire amount of Rs. 1,70,000/-'.
4. According to the Counsel for the appellant, the reasoning of the Division Bench of this Court in FAO No. 1174 of 1991 decided on 22.11.1991 is contrary to the provisions as contained in proviso to Sub-section (2) of Section 147 of the Motor Vehicles Act. According to him, the said proviso does not give any option to the Insurance Company either to opt to be governed by the old Act or the new Act. The proviso to Sub-section (2) of Section 147 of the new Act reads as follows;-
'Provided that any policy of insurance issued with any limited liability and in force immediately before the commencement of this Act, shall continue to be effective for a period of four months, after such commencement or till the date of expiry of such policy whichever is earlier.'
5. We find sufficient force in the contention of the learned counsel for the appellant, but on a consideration of other provisions of the Act, we need not go into that question in this appeal. Therefore, we leave this question open and decide the matter whether the provisions of the Motor Vehicles Act, 1988 will apply to the insurance policies which are in force at the time of the accident though issued prior to the commencement of the Motor Vehicles Act, 1988. Undoubtedly, the amount of liability of the Insurance Company is unlimited under the provisions of Sub-section (2) of Section 147, but the contractual liability under the policy will continue to be in force for a period of four months in respect of the policy issued immediately before the commencement of the 1988 Act.
6. The condition in the policy in regard to liability reads as follows:-
'the liability of the insurance company extends to such amount as is necessary to meet the requirements of the Motor Vehicles Act 1939'.
7. Thus the Insurance Company has undertaken to reimburse the amount of the loss of the owner of the vehicle to the extent of the liability imposed by the statute. Admittedly, the accident in this case took place on 29.9.1989 and the amending Act came into force on July 1, 1989. The contract of insurance does not provide any specific limited liability. Therefore, there is no limit of contractual liability under the terms of the policy. The policy issued clearly specifies that the Insurance Company is liable to pay such amount as is payable under the statute. The Motor Vehicles Act 1988, as already stated, came into force from Ist July, 1989 i.e. before the accident, in this case, took place. Under Clause 2(c) of Section 217 any document referring to any of the repealed enactments or the provisions thereof shall be construed as referring to 1988 Act or to the corresponding provisions of 1988 Act. Therefore, a legal fiction created Under Section 217(2)(C) is that the provisions of 1988 Act are to be read as the corresponding provisions of the Motor Vehicles Act, 1939 which were referred to in the Policy of Insurance. In other words, the reference to 'the requirement of the Motor Vehicles Act 1939 are to be taken as referring to the 1988 Act.' Therefore, any reference made to the. provisions of 1939 Act is to be read as provisions of the new Act. If so read, the liability of the Insurance Company will be under the provisions of the new Act. As the policy of the Insurance stipulates that the liability of the Insurance Company is the same as fixed by the statute on the date of the accident, the provisions of the new Act have come into force, therefore, the provisions of the new Act have to be read into the policies which are in force at the time when 1988 Act came into force. When the policy itself refers to the statutory liability, it means the liability as fixed by the provisions of the new Motor Vehicles Act, 1988. If the contract of insurance itself fixes the liability i.e. the contractual liability, the same will be in force for a period of four months after the commencement of the 1988 Act according to proviso to Sub-section (2) of Section 147 of the Act. But in this case, admittedly, the contract of Insurance does not provide any contractual liability nor does it say that the liability of the Insurance Company is limited to a particular amount. The contract of policy speaks of statutory liability and when there is change of law on the date of accident, the provisions of the changed law will apply.
8. This view of ours finds support from the following decisions:
In Mulka Vengamma and Ors. v. K. Durvasalu and Ors., (1978) A.C.J. 180 (A.P.) Justice Jeevan Reddy (as his Lordship then was), observed as follows:-
'Prima facie, it would appear that the insurer's liability is only to pay the amount mentioned in the policy, and nothing more. But, if such an interpretation is placed, Sub-section (4) of Section 96 becomes otiose. We have, therefore, to harmonize the said words occurring in Sub-section (1) of Section 96 with the other provisions and the scheme of the said chapter. Once we hold,- as we have already done herein before that the insurer's liability towards third parties is governed exclusively by the provisions of law, and not by the terms of the contract, it would follow that the limits, if any, mentioned in the insurance policy with respect to the liability towards third parties shall automatically be deemed to have been modified with any modification in law. In other words, an amendment has the necessary effect of raising the limits of insurer's liability. The words 'to the extent specified in Sub-section (2) occurring in Section 95(l)(b) have to be understood and read as 'to the extent specified from time to time in Sub-section (2). So read, the words afore-mentioned occurring in Section 96(1) will become consistent with the rest of the provisions and spirit of Chapter VIII.'
A Full Bench of the Karnataka High Court in Sanjiv Shetty v. Anantha and Anr., (1978 ACJ 508) dissenting from an earlier view expressed by a Division Bench of that Court in 1976 A.C.J. 190 observed as under:-
'We hold that the material date for ascertaining the extent of liability of the insurer is the date of the accrual of the cause of action for a certain claim arising out of an accident, which in general would be the date of the accident and so in respect of a claim arising out of an accident on 2.3.70 the extent to the pecuniary limit of liability of the insurer is to be determined on the basis of the provisions of Section 95, as at that date and in the instant case the higher limit provided by Section 95 as amended with effect from 2.3.70 is attracted.'
9. In this view of the matter, we are of the opinion that the liability of Insurance Company is unlimited because of the provisions contained in Sub-section (2) of Section 147 read with Section 217(2)(c) of the Motor Vehicles Act, 1988. We, therefore, do not find any ground warranting interference with the judgment under appeal. Consequently, the appeal fails and is, accordingly, dismissed. However, there will be no order as to costs.