Oriental Insurance Co. Ltd. Vs. Kempamani and anr. - Court Judgment

S.R. Nayak, J.

1. Oriental Insurance Co. Ltd., which is the respondent No. 1 in M.V.C. No. 376 of 1999 on the file of the court of the Motor Accidents Claims Tribunal and Additional Judge, Court of Small Causes, Mayo Hall Unit, Bangalore, (SCCH 20), (for short 'the Tribunal'), being aggrieved by the judgment and award of the Tribunal dated 28.3.2002, has preferred this appeal under Section 173(1) of Motor Vehicles Act, 1988 (for short 'the Act').

2. The facts of the case, in brief, are:

The respondent Nos. 1 and 2 herein, namely, Kempamani and Jayanthkumar are the dependants of late C.M. Basavaraju (deceased). The deceased was working at a pub on Brigade Road, Bangalore and he died in a motor accident which took place on Varthur Main Road in front of Sunrise Bar and Restaurant, at about 11 p.m., while he was proceeding to his house on a Hero Puch (a two-wheeler) when a stray cow rushed into the middle of the road from the left side and dashed against the Hero Puch driven by the deceased. Consequently, the deceased lost balance and fell down. The deceased was shifted to Manipal Hospital, where he succumbed to injuries and was declared dead. The age of the deceased was said to be about 38 years and he was earning Rs. 1,746 per month on the date of accident. The respondent Nos. 1 and 2 filed a claim petition under Section 166(1) of the Act claiming total compensation of Rs. 5,00,000 with interest.

3. The petition was opposed by appellant insurance company by filing statement of objections, inter alia, contending that the deceased was the owner-cum-insured travelling on the vehicle and that he was not a third party; that he was a party to the contract of insurance whose risk is not required to be covered under the Act and in fact his risk was not covered under the policy. It was also contended that there was a clause in the policy which excluded the liability of the insurer to pay compensation for death and injury of the insured.

4. On the basis of the above pleadings, the Tribunal framed the following issues:

'(1) Whether the petitioners prove that C.M. Basavaraju, died in motor accident that occurred on 22.2.1998 at about 11 p.m. on Varthur Main Road, while he was going on his moped KA 03-Q 2226?

(2) Whether petitioners further prove that the above said accident occurred due to suddenly rushing of a stray cow into the middle of the road and touched the moped of the deceased?

(3) Whether petitioners are entitled for compensation, if so, to what amount?

(4) What award or order?'

5. Respondent No. 1 examined herself as PW 1 and 11 documents were marked as Exhs. P-1 to P-11 in support of the claim. Senior Assistant of the insurance company was examined as RW 1 and a document was marked as Exh. R-1 on behalf of the appellant insurance company.

6. The Tribunal on appreciation of the evidence on record held that the deceased succumbed to the injuries on account of the accident. Further, the Tribunal placing reliance on condition 1 (1) of the insurance policy and the judgment of the Apex Court in the case of Kaushnuma Begum v. New India Assurance Co. Ltd., : [2001]1SCR8 , awarded Rs. 2,72,456 as compensation together with interest at 6 per cent per annum from the date of claim petition till realisation.

7. Aggrieved by the said judgment and award, the insurance company preferred this appeal.

8. We have heard Mrs. B.V. Naga-rathna, learned counsel for the appellant and Mrs. Sheela Krishna, learned counsel for the respondent. Mrs. Nagarathna contended that in the accident, no other vehicle was involved except the vehicle owned by the deceased and, therefore, deceased could not have been considered as a 'third party'. In terms of contract of insurance produced as Exh. R-1, the appellant company has no obligation to indemnify the insured party in respect of injuries caused to him or his dependants in the event of his death inasmuch as the policy under the provisions of the Act requires that the insurance company has to indemnify the insured only in so far as the third party claims are concerned and the insured could not be considered a 'third party' as far as his vehicle was concerned. Mrs. Nagarathna would contend that the Tribunal ought to have dismissed the claim petition as not maintainable.

9. Mrs. Sheela Krishna, learned counsel for the respondents, per contra, would contend that in deciding maintainability of the petition filed by the dependants of the deceased, the Tribunal cannot take a technical view of the matter, if it has to keep in mind the objects of the Act. Mrs. Sheela Krishna would contend that on the date of the accident, there were only two kinds of policies, namely, (i) policies covering third party risk and (ii) comprehensive policies covering all risks, and that since Exh. PR-1 policy was comprehensive policy, that would cover even the injuries or death caused to the insured in a motor accident and that in order to claim compensation under the Act, it is not necessary that the deceased should have died in an accident involving some other vehicle and not the vehicle owned by him.

10. Having heard the learned counsel for the parties, the only point that arises for decision is whether the policy held by the insured-owner covers the risk sustained by the owner himself.

11. Chapter X of the Act makes insurance of motor vehicles compulsory but to some extent only, in view of the danger they pose in public places to human beings, so that the insured may not go without compensation altogether. Generally speaking there are two kinds of policies pertaining to the risk of injury to the person or death, on account of the use of a motor vehicle. The first is an accident insurance policy, where the proposer is the insured and the other person being the subject-matter of the insurance and for the policy to be legal, the insured must have an insurable interest in the other person and if a claim arises, then the sum insured is not received by the other person, but by the insured. The contract here is not one of indemnity in the strict sense, as the sum insured is a predetermined sum. The second kind of policy is a motor insurance policy, where the motor vehicle is the subject-matter of the insurance and if a claim in respect of death or personal injury to third party arises, the insured is indemnified and the third party receives the compensation from the insurer. In such a case, the amount of compensation is not predetermined, but, is assessed by the courts. Under Section 147 of the Act, the insurance policy is required to insure risks to a person or classes of persons to the extent specified in the insurance policy. In this case, the deceased had a policy in respect of third party risk only and, therefore, neither the insured nor his dependants-claimants were entitled to receive compensation for the injuries suffered by the insured or on the death of the insured, as the case may be.

12. Sub-section (1) of Section 140 of the Act reads as follows:

'140. Liability to pay compensation in certain cases on the principle of no fault.--(1) Where death or permanent disablement of any person has resulted from an accident arising out of the use of a motor vehicle or motor vehicles, the owner of the vehicle shall, or, as the case may be, the owners of the vehicles shall, jointly and severally, be liable to pay compensation in respect of such death or disablement in accordance with the provisions of this section.'

13. A plain reading of Section 140 of the Act makes it clear that the liability without fault of the owner arises in so far as third parties are concerned and if the owner suffers personal injury or dies on account of accident while using the motor vehicle owned by himself, he or his dependants is/are not entitled to be compensated under the terms of the policy.

14. Under Section 146(1) of the Act, 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 policy of insurance against third party risk. Section 147 pertains to requirement of policies and limits of liability and Section 149 pertains to duty of insurers to satisfy judgments and awards against persons insured in respect of third party risks. The combined reading of Sections 147 and 149 makes it very clear that a person in whose name a policy has been taken is not entitled to be indemnified by his insurer in case of an accident involving insured motor vehicle as happened in the instant case.

15. In the case of Dr. S. Jayaram Shetty v. National Insurance Co. Ltd., : ILR2002KAR3117 , a private car owned by the appellant therein and being driven by one Madhusudhan, a driver temporarily appointed by appellant. Somewhere between Tumkur and Bangalore, the car dashed against a roadside tree thereby causing an accident and resulting in grievous injuries to the occupants including the driver who later died in the hospital. Two claim petitions for payment of compensation were instituted and one of which was filed by the appellant, owner of the vehicle. The insurance company resisted the claim made by the appellant, inter alia, on the ground that he being the owner of the vehicle concerned was not a 'third party' within the meaning of the Act and, therefore, he was not entitled to claim any compensation for the injuries sustained for him. It was contended that since appellant had not taken a personal accident policy, the insurance company was not liable to pay compensation to him under the existing policy. The Division Bench of this court dealing with the question whether the owner-appellant was entitled for compensation and having noticed the relevant provisions of the Act, and the judgment of the Supreme Court in New Asiatic Insurance Co. Ltd. v. Pessumal Dhanamal Aswani, 1958-65 ACJ 559 (SC) and G. Govindan v. New India Assurance Co. Ltd., : [1999]2SCR476 , held that 'third party' must necessarily refer to a party other than those who are parties to the contract of insurance. In other words, the court had held that the owner being a party to the insurance policy, he cannot be regarded as a 'third party' within the meaning of that term. In the premise of that holding, the Division Bench rejected the argument that the insured-owner of a motor vehicle involved in the motor accident can also claim to be a third party.

16. We are in respectable agreement with the above view of a coordinate Division Bench of this court. A careful reading of provisions of Section 147 makes it very clear that insurance against third party risk is compulsory. The object is to ensure that a third party who suffers any injury to life, limb or property is able to recover compensation regardless of the financial position of the owner or the driver of the offending vehicle. The object underlying Chapter VIII of the earlier Act which corresponds to Chapter XI of the present Act was stated by Hon'ble Supreme Court in New Asiatic Insurance Co. Ltd. v. Pessumal Dhanamal Aswani, 1958-65 ACJ 559 (SC), aptly in the following words:

'Chapter VIII 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 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 the injuries. The provisions have to be construed in such a manner as to ensure this object of the enactment.'

17. To the same effect is the decision of the Supreme Court in G. Govindan v. New India Assurance Co. Ltd., : [1999]2SCR476 . In that case, the Supreme Court has held:

'The heading of Chapter VIII of the 1939 Act reads as 'Insurance of Motor Vehicles against Third Party Risks'. Its provisions clearly indicate that the legislature made insurance of motor vehicles compulsory against third party (victim) risks. Since insurance against third party risks is compulsory, once the insurer company had undertaken liability to third parties incurred by the persons 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.'

18. Alternatively, it needs to be noticed that Section 147 enjoins that the policy issued by the authorised insurer should insure the person specified in the policy against any liability which may be incurred by him in respect of death of/or bodily injury to any person specified in Sub-section (1) (b) (i) and (ii). The critical expression 'against any liability which may be incurred by him' occurring in Section 147(1)(b)(i) undoubtedly shows that the policy of the insurance which the owner obtained from the authorised insurer is meant to insure the owner or the holder of the policy against any liability that he may incur qua third parties whether such liability be on account of death or bodily injury to any such person or damage to any property owned by him due to the accident involving motor vehicle/vehicles. Subsection (1) (b) (ii) of Section 147 further requires that the policy must also insure the owner against the death of or bodily injury caused by or arising out of the use of the vehicle if it is public service vehicle used in a public place. Therefore, it is clear that if no liability arises against the holder of the policy, the same cannot arise against the insurance company.

19. The judgment of the Apex Court in Oriental Insurance Co. Ltd. v. Sunita Rathi, : AIR1997SC4228 , has settled the above legal position. In that case, the High Court while exempting the owner of the vehicle made the insurer liable to pay the compensation. The Supreme Court has declared the approach of the High Court to be erroneous and held that liability of the insurer arises only when the liability of the insured has been made out for the purposes of indemnifying the insurer under the contract of insurance. Sustenance could also be derived in support of the above position from the judgment of the Apex Court in Minu B. Mehta v. Balkrishna Ramchandra Nayan, 1977 ACJ 118 (SC). While examining the provisions of Section 95 of the repealed Act which corresponds to Section 147 of the present Act held as follows:

'The insurance policy is only to cover the liability of a person which he might have incurred in respect of death or bodily injury. The accident to which the owner or the person insuring is liable is to the extent of his liability in respect of death or bodily injury and that liability is covered by the insurance. It is, therefore, obvious that if the owner has not incurred any liability in respect of death or bodily injury to any person there is no liability and it is not intended to be covered by the insurance. The liability contemplated arises under the law of negligence and under the principle of vicarious liability. The provisions as they stand do not make the owner or the insurance company liable for any bodily injury caused to a third party arising out of the use of the vehicle unless the liability can be fastened on him. It is significant to note that under Sub-clause (ii) of Section 95(1)(b) of the Act, the policy of insurance must insure a person against the death or bodily injury to any passenger of a public service vehicle caused by or arising out of the use of the vehicle in a public place. Under Section 95(1)(b) clause (ii) of the Act the liability of the person arises when bodily injury to any passenger is caused by the use of the vehicle in a public place. So far as the bodily injury caused to a passenger is concerned it need not be due to any act or liability incurred by the person. It may be noted that the provisions of Section 95 are similar to Section 36 (1) of the English Road Traffic Act, 1930, the relevant portion of which is to the effect that a policy of insurance must be a policy which insures a person in respect of any liability which may be incurred, by him in respect of death or bodily injury to any person caused by or arising out of the use of the vehicle on road. The expression 'liability which may be incurred by him' is meant as covering any liability arising out of the use of the vehicle. It will thus be seen that the person must be under a liability and that liability alone is covered by the insurance policy.'

It is trite, a contract of motor vehicle insurance indemnifies the owner of the vehicle against liability arising out of claims of third parties arising against the insured-owner out of the use of the motor vehicle. A contract of insurance which stipulates to pay compensation for the injury or death of the insured person himself cannot be said to be a contract of indemnity. In a case where the owner of the vehicle has the benefit of indemnity is himself not covered by the policy, it is needless to state that his defendant, unless he/she be an employee covered by the first proviso to Section 95(1)(b) of the Act cannot claim compensation under the policy. In aid of the above principle, we may draw sustenance from the ratio decidendi of the judgment of this court in M. Akkavva v. New India Assurance Co. Ltd., 1988 ACJ 445 (Karnataka). Therefore, the argument of Mrs. Sheela Krishna that the term 'third party' included in the heading of Chapter XI and Section 149, is wide enough to include the insured also, is not acceptable to us.

20. Section 145(g) defines the 'third party' thus: 'third party' will include the Government. It is trite, the above definition simply states that 'third party' includes the Government. The term 'third party' must necessarily refer to a party other than those, who are parties to the contract of insurance. If a party to the contract of insurance is regarded as a third party within the meaning of that term, it would offend the natural and ordinary meaning of the term 'third party'. It is trite, the insurer is one party while the insured is the other party for a contract of insurance. Therefore, it is unreasonable to construe that any person other than the said two parties would also be a third party. In reaching this conclusion, we may derive support from the fact how the term 'third party' is understood in legal parlance. In Stroud's Judicial Dictionary, which explains third party risks in the following words:

'Third party risks [Road Traffic Act, 1930 (C 43), Section 35, Road Traffic Act, 1972 (C 20), Section 143] connotes that the insurer is one party to the contract, that the policyholder is another party, and that the claims made by others in respect of the negligent use of the car may be naturally described as claims by third parties. [Digby v. General Accident Fire and Life Insurance Corporation, (1943) AC 121].'

21. In Black's Law Dictionary, 7th Edn., the terms 'third party' and 'third party beneficiary' are defined thus:

'Third party. One who is not a party to a lawsuit, agreement, or other transaction but who is somehow involved in the transaction; someone other than the principal parties--Also termed outside party.'

'Third party beneficiary. A person who, though not a party to a contract, stands to benefit from the contract's performance. For example, if Ann and Bob agree to a contract under which Bob will render some performance to Chris, then Chris is a third party beneficiary.'

22. Having regard to the above discussion and the definition of 'third party' and 'third party beneficiary' it cannot be said that the same person can be under a liability to pay compensation as well as can have a right to receive benefit of compensation. Such a situation is inconceivable in law. The crux of the matter is that if no liability arises against the holder of the policy, the same cannot arise against the insurance company. This position is unexceptionable. In this case, no liability arose on account of the accident involving insured motor vehicle against the holder of the policy, namely, late C.M. Basavaraju. Therefore, the liability cannot arise against the insurance company.

23. However, drawing our attention to the phrase 'for the purpose of adjudicating upon claims for compensation in respect of accidents involving the death of, or bodily injury to, persons arising out of the use of motor vehicles, or damage to any property of a third party so arising, or both' occurring in Sub-section (1) of Section 165 of the Act and pointing out that under the 'Explanation' to Sub-section (1) of Section 165 the expression 'claims for compensation in respect of accidents involving the death of or bodily injury to persons arising out of the use of motor vehicles includes claims for compensation under Section 140' would contend that the owner could also be a third party beneficiary for the purpose of the Act. The argument is based on the assumption that under Section 140 of the Act regardless of the fault each and every person who suffers permanent disability and the dependants of a person who dies in motor accident involving a motor vehicle are entitled to claim compensation in respect of such disablement or death in terms of the provisions of Sub-section (2) of Section 140. It needs to be noticed that the liability to pay compensation under Section 140 is fastened on the owner of the vehicle. There is absolutely no indication either in the provisions of Section 140 or in those of Section 165 that the owner himself could be a third party beneficiary for the purpose of receiving compensation under the Act.

24. Mrs. Sheela Krishna further sought to support the impugned award placing reliance upon the judgment of a learned single Judge of this court in Vimala S. v. Chikkahanumanthaiah bin Laxmanappa, : ILR1999KAR157 . In that case, the appellants were the widow and children of the deceased who died on 3.6.1992 due to the injuries he suffered in a scooter accident. According to appellants the deceased was driving the scooter on 2.6.1992 at about 12.20 noon through M.E.S. Road and at that time a monkey suddenly crossed the road and in order to avoid hitting the monkey, he applied sudden brake and losing control of the vehicle he fell down and sustained serious injuries resulting in his death on the next day at NIMHANS, Bangalore. Deceased was not the owner of the scooter but, he drove the scooter on the instructions of its owner, the respondent No. 1 who entrusted him with some work. The scooter was insured with the respondent No. 2 insurance company. The appellants claimed compensation of Rs. 25,000 under the no fault liability provision of Section 140 of the Act. The respondent No. 1 owner of the vehicle remained ex parte and only the respondent No. 2 insurance company filed objections and contested the petition mainly on the ground that the deceased suffered fatal injuries due to his own negligence and Section 140 does not apply to such a situation and the petition was, therefore, not maintainable. The Tribunal after hearing the parties has dismissed the petition on the ground that deceased died due to his own fault and under such circumstance the appellants who are the legal representatives of the deceased are not entitled to compensation under no fault liability basis. When the correctness of the said judgment was called in question before this court, a learned single Judge having opined that necessary conditions to award compensation under Section 140 of the Act existed, allowed the appeal and set aside the award of the Tribunal and allowed the claim petition. Firstly, that case could be distinguished on facts because the person who died in the accident was not the owner of the vehicle. Secondly, the judgment was handed down by the learned Judge arising out of a claim under Section 140 of the Act. The learned Judge was not called upon to decide the maintainability of a claim petition filed by legal representatives of an insured person under Section 166 of the Act. Thirdly, the learned Judge did not notice relevant provisions of the Act which have a bearing on the decision-making and the binding authorities of the Supreme Court to which reference would be made presently. Therefore, we hold that the judgment of the learned single Judge in Vimala S. v. Chikkahanumanthaiah bin Laxmanappa (supra), is not a good law.

25. A Division Bench of this court in Dr. S. Jayaram Shetty v. National Insurance Co. Ltd., : ILR2002KAR3117 , rejected the argument that even the insured car owner should be treated as 'third party' because he has not statutorily or contractually excluded from being treated as a 'third party' and, therefore, could maintain a claim in that capacity. The court held that the term 'third party' must necessarily refer to a party other than those who are parties to the contract of insurance.

26. It is also relevant to notice that it is not the case of the dependants of the deceased owner that the insured had paid higher premium covering risk to him also. Therefore, the dependants of the deceased cannot claim compensation in the light of the judgment of the Supreme Court in New India Assurance Co. Ltd. v. CM. Jaya, : [2002]1SCR298 . In that case, the deceased was riding the pillion seat of a two-wheeler when it hit a truck which was comprehensively insured with the appellant. In terms of the policy, the liability in such a case was limited to Rs. 50,000. The appellant had not paid any additional or higher premium to cover unlimited or higher liability than the statutory liability. The Motor Accidents Claims Tribunal awarded by way of compensation, a larger amount but limited the insurer's liability to Rs. 50,000. Holding that the liability of the appellant was unlimited as the vehicle was comprehensively insured, the Delhi High Court enhanced the amount of compensation to Rs. 3,60,000 with interest at 15 per cent per annum from the date of application. The insurance company being aggrieved by the judgment of the Delhi High Court came up before the Supreme Court. The Apex Court held in para 5 thus:

'(5) Thus, a careful reading of these decisions clearly shows that the liability of the insurer is limited, as indicated in Section 95 of the Act, but it is open to the insured to make payment of additional higher premium and get higher risk covered in respect of third party also. But in the absence of any such clause in the insurance policy the liability of the insurer cannot be unlimited in respect of third party and it is limited only to the statutory liability. This view has been consistently taken in the other decisions of this court.'

27. Therefore, the above judgment of the Supreme Court is an authority to state that unless higher premium is paid by the insured, the higher liability of the insurer than the liability of the insured cannot be assumed. There is no need for us to dilate this aspect further because of the discussion made supra.

28. Lastly, Mrs. Sheela Krishna realizing the weakness in her clients' case has appealed to compassion and sympathy of the court and requested the court to sustain the impugned award passed by the Tribunal. Sympathy of a man, therefore, of a Judge, in the very nature of things is subjective, and we are afraid that would be a basis for the decision of the Judge, though it is widely believed that a Judge cannot escape the current of the underlying philosophy of his life any more than the other mortals, and that his decision may reflect philosophy of his life. But, appeal to the Judge's sympathy and compassion should not create a shadow or act as an obscurant in seeing legal justification to grant a relief to a litigant. The relief that a Judge grants should be grounded on legal justification and not on a benevolence of the Judge. There are many pronouncements of the Apex Court and High Courts cautioning against exercise of jurisdiction characterized more by the benevolence than on set legal principles. One of us (S.R. Nayak, J.) speaking for the Andhra Pradesh High Court in Sri Sarathi Institute of Engineering and Technology, Hyderabad v. AICTE, New Delhi, (1998) 3 ALT 564, observed thus:

'A relief must be such as could be considered permissible in law and worked out by the application of legally recognised principles. The decision must have legitimacy of legal reasoning and should not incur the criticism of want of legal reasoning and should not incur the criticism of lacking objectivity of purpose and rational and legal justification.'

29. In the result and for the foregoing reasons we cannot sustain the impugned award of the Tribunal. Consequently, we allow the appeal with no order as to costs and set aside the impugned award of the Tribunal and dismiss M.V.C. No. 376 of 1999 filed by the respondents as not maintainable.