Holding

The insurer is not liable to pay compensation for the death of the driver because an act policy under the Motor Vehicles Act covers only third‑party risk and the driver was not a third party.

Summary

The owner of a two‑wheeler insured the vehicle with an act policy under the Motor Vehicles Act, 1988. The owner’s son, who was driving the motorcycle, died in an accident. The claimants sought compensation from the insurer, arguing that the son was a "person" covered under Section 147 of the Act. The insurer contended that the son was not a third party and that the act policy provides only statutory liability for third‑party risks, not for the owner’s own loss. The Supreme Court examined the distinction between statutory and contractual liability under the Motor Vehicles Act and the Insurance Act, 1938, and held that the death of the driver (who was not a third party) is not covered by an act policy absent an additional premium. Consequently, the insurer was not liable to pay compensation. The appeal was allowed, setting aside the lower court’s award.

Issues considered

Whether the claimants have a cause of action for compensation and whether the deceased driver qualifies as a third party under the Motor Vehicles Act
Whether the accident was caused by rash or negligent driving of the vehicle
Whether the deceased was himself negligent and responsible for the accident
Whether the owner violated any terms and conditions of the insurance policy
Whether the claimants are entitled to compensation and, if so, the quantum thereof
Whether the insurer is liable to indemnify the insured owner for the death of the driver
Whether the claimants are entitled to any relief under the Motor Vehicles Act

Legislation cited

Insurance Act, 1938
Motor Vehicles Act, 1988s. 146, s. 147, s. 149, s. 165, s. 166
Workmen's Compensation Act, 1923

Subjects

motor vehicle insuranceact policythird partystatutory liabilitycontractual liabilitycompensationdeath of driverMotor Vehicles ActInsurance Act

Judgment

[2008] 17 S.C.R. 1313

NEW INDIA ASSURANCE COMPANY LTD. A
v.
, SADANAND MUKHI AND OTHERS
(Civil Appeal No. 7402 of 2008)
DECEMBER 18, 2008
B
[S.B. SINHA AND CYRIAC JOSEPH, JJ.]

Motor Vehicles Act, 1988: ss.147, 165 - Act policy -
~ Death of son of owner of insured vehicle while driving the
insured vehicle - Liability of insurance company to pay c
compensation to owner- Held: Not liable as son was not third
party - Insurance Act, 1938.
Insurance Act, 1938: Liability of insurer - Statutory or
contractual - Distinction between.
The question which arose for consideration in the D
present appeal is whether the insurance company is
liable to pay the compensation in relation to the accident
occurred by use of vehicle which was driven by the son
of insured.
Allowing the appeal, the Court E
HELD:1.1. Contract of insurance of a motor vehicle
is governed by the provisions of the Insurance Act. The
terms of the policy as also the quantum of the premium
payable for insuring the vehicle in question depends not
only upon the carrying capacity of the vehicle but also F
on the purpose for which the same was being used and
, - ,, the extent of the risk covered thereby. By taking an 'act
policy', the owner of a vehicle fu!fils his statutory
obligation as contained in Section 147 of the Motor
Vehicles Act. The liability of the insurer is either statutory G
or contractual. If it is contractual its liability extends to the
risk covered by the policy of insurance. If additional risks
are sought to be covered, additional premium has to be
"' paid. It is one thing to say that the life is uncertain and
the same is required to be covered, but it is another thing
1313 H
1314 SUPREME COURT REPORTS [2008] 17 S.C.R.

A to say that a statute must be read so as to grant relief to
a person not contemplated by the Act. It is not for the
court, unless a statute is found to be unconstitutional, to
consider the rationality thereof. Even otherwise the
"
provisions of the Act read with the provisions of the
Insurance Act appear to "be wholly rational. [Para 15]
B
(1320-F-A; 1321-8-C]
1.2. It is not a case where even Section 163-A of the
Act was resorted to. Respondents filed an application
....
~

under Section 166 of the Act. Only an Act policy was j
taken in respect of the motor vehicle. Submission of the
c claimants that being a two wheeler, the vehicle was more · -
prone to accident and, therefore, whosoever becomes
victim of an accident arising out of the use thereof would «-:r
r-
come within the purview of the term "a person" as
provided for in Section 147 of the Act is not correct.
D (Paras 13 and 14] (1320-E-F]
United India Insurance Co. Ltd. v. Tilak Singh, (2006) ~
SCC 404; Oriental Insurance Co. Ltd. v. Jhuma Saha, (2007)
9 SCC 263; Oriental Insurance Co. Ltd. v. Meena Variyal
(2007) 5 SCC 428; United India Insurance Co. Ltd. v.
E Davinder Singh, (2007) 8 SCC 698 and National Insurance
Co. Ltd. v. Laxmi Narain Dhi.Jt, (2007) 3 SCC 700, referred
to.
Case Law Reference:

F
(2006) 4 sec 404
(2007) 9 sec 263
referred to
referred to
Para 18
Para 18
-
(2001) s sec 428 referred to Para 18 f -.
(2001) 8 sec 698 referred to Para 18
(2001) 3 sec 100 referred to Para 19
G CIVIL APPELALTE JURISDICTION : Civil Appeal No.
7402 of 2008.
From the final Judgment and Order dated 18.1.2007 of the
High Court of Jharkhand at Ranchi in M.A. No. 135 of 2004. ~

Pradeep Kumar Bakshi, Rajat Navet and Madhur Yadav
H for the Appellant.
NEW INDIA ASSURANCE COMPANY LTD. v. SADANAND 1315
MUKHI AND OTHERS

Arup Banerjee, R.K. Srivastava and T. Mukherjee for the A
Respondent.
..
The Judgment of the Court was delivered by
S.B. SINHA, J. 1. Leave granted.
2. This appeal is directed against a judgment and order
B
dated 18th January, 2007 passed by a Division Bench of the
High Court of Jharkhand at Ranchi whereby and-whereunder
. an appeal preferred by the appellant herein under Section 173
-.. of the Motor Vehicles Act, 1988 (for short 'the Act') from a
judgment and award dated 26th March, 2004 passed by the
District Judge-cum-Motor Vehicle Accident Claim Tribunal at c
Seraikella was dismissed.
3. The admitted fact of the mater is as under:-
First respondent was owner of a motor cycle. He got the
said vehicle insured with the appellant company; the policy
D
being valid for the period 9.9.1999 and 8.9.2000. On 8th
September, 2000 Tasu Mukhi, son of the insured, while driving
the motor cycle met with an accident and died. The accident
allegedly took place as a stray dog came in front of the vehicle.
A First Information Report was also lodged. Respondents
herein filed a claim petition. Amongst them, first respondent, E
who is the owner of the insured vehicle, was the applicant.
4. Appellant herein raised a specific contention that
keeping in view the relationship between the deceased and the
owner of the motor vehicle i.e. father and son, he was not a third
F
. ~
party, stating :-
"5. That section 165 M.V. Act clearly postulates that the
insurer is liable to indemnify the risk of the Third party.
During the motor vehicle accident and the policy also
speaks that in the case of rash and negligent driving the
insurer is liable to indemnify the owner. Here in this case G
~
the driver of the vehicle is admittedly not a third party and
as such the Tribunal has no jurisdiction to pass any order
"' under the Motor Vehicle Act.
6. That so far the negligence of the driver of the Motor cycle

- is concerned the claimants must establish affirmatively and H
1316 SUPREME COURT REPORTS [2008] 17 S.C.R.

A unless it is proved the Claim Tribunal cannot pass any
order of compensation under the Motor Vehicle Act, 1988.
7. That if is further submitted that the claimants had failed
to plead in their claim petition about the negligence which
resulted the accident. On the other hand, the
B ·circumstances speak that it was the deceased himself who
was driving the motor vehicle in uncontrollable speed and
in rash and negligent manner which cause accident as a
result of which he and the pillion rider fell down and
deceased died. Therefore, in absence of negligence on
the part of the owner of the vehicle the Claimants cannot
c seek compensation on the basis of the provisions of the
Act.
8. That the act suggests that the deceased not being a
third party himself caused the accident and out of such act
the loss allegedly occurred to h!m is not supposed to be
D
a person coming within the scope, ambit and provisions
of either section 165(1) of section (1) of the Motor
Vehicles Act, 1988."
5. In view of the aforementioned pleadings of the parties,
issues were framed in the following terms :-
E
"1. Whether the claimants have any cause of action or
right to sue and the case is maintainable and the
deceas.ed was a third party?
2. Whether the accident took place due to rash and
F negligent driving of the vehicle Yamaha Motor Cycle
No.BR-168-6002 by the driver?
3. Whether the deceased was himself rash & 1--
negligent in ~riving the vehicle and was responsible
for the accident and whether the deceased died
G due to motor vehicle accident?
4. Whether the ·owner have violated the terms and
conditions of the vehicle for which ~e vehicle has
been insured under the Insurer, he New India
Assurance Co. Ltd. ? · i- ,,
H 5. Whether the claimants are entitled to receive the
NEW INblA ASSURANCE COMPANY LTD. v. SADANAND 1317
MUKHI AND OTHERS [S.S. SINHA, J.]

compensation amount and if so what should be the A
quantum of compensation?
.~
~

6. Whether the insurer of the vehicle is liable to
indemnify the insured owner of the vehicle?
7. Whether the claimants are entitled to get any relief
or reliefs as claimed by them?"· B
6. The Tribunal did not enter into the question involved

... herein .
However, while determining issue Nos.2 and 3 it was held:-
"So the evidence led on behalf of claimant is practically c
ex-parte in nature and it goes to show that the deceased
died in connection with a vehicular acciden~. In.other words,
he died out of the use of a vehicle. Both the issues are
decided in this way in favour of the claimants.
On issue Nos. 1 and 7 it was opined :- D
"Issue Nos. 1 and 7 : On the basis of the discussions made
above, it follows that 'the claimants· application. is
maintainable and the applicants are entitled to receive
compensation from the O.P. No.1 as indicated above.
Both the issues are accordingly decided in favour of the E
applicants."
Evidently, therefore, no decision was rendered on the said
issue.
~

7. Before the High Court appellant raised specific
contentions in its Memorandum of_ Appeal, which are as under:- F
~ ' "C. For that the learned Court below ought to have
considered that as in the present .case the
deceased was not third party rather he was the son
of the insured at the relevant time of accident who
was driving the vehicle rashly and negligently,. the G
insured cannot claim compensation until and unless
negligence on the part of the insured is established
~~
and proved.
D. For that the learned Court ought to have considered
.. that Motor Vehicle Act provides provisions for H
1318 SUPREME COURT REPORTS [2008] 17 S.C.R.

A compensation for the death of the third party from
the insured vis-a-vis the insurance company but
there is no provision in the Act wherein an insured .,
'
may claim himself compensation from himself'
8. The High Court has also not expressed its opinion on
B the said issue.
9. Mr. Pradeep Kumar Bakshi, learned counsel appearing
on behalf of the appellant would submit that having regard to

c
the provisions contained in Sections 146, 147 and 149 (2) of
the Act, for the death of the son of the insured, it could not have
been held to be liable
-
10. Mr. Arup Banerjee, learned counsel appearing on
behalf of the respondents, on the other hand, would contend that
the legislative policy underlining compulsory insurance of a
motor vehicle was thought of in view of the fact that life being
D uncertain, the same was required to be covered. Learned
counsel would contend that it cannot be held to exclude a rider,
although son of the owner, and, thus, he would be a third party
in relation to the insurance company. According to the learned
counsel, it would be wholly unfair to exclude a driver using the
vehicle as on his death his family suffers.
E
Mr. Banerjee would contend that, indisputably, use of a
motor vehicle is hazardous in nature and thus there cannot be
any reason whatsoever to hold that the provisions containing
compulsory insurance would be held to have excluded the
driver. According to learned counsel the matter might have been
F -.
different if the accident had occurred due to rash and negligent I

driving on the part of the driver and in a case of this nature, "'i·
where the accident had occurred, which was beyond anybody's
control, the High Court judgment should not be interfered with.
11. Provisions relating· to grant of compensation occurring
G
in Chapter XI and XII of the Act have be.en enacted by the
Parliament in order to achieve the purpose and object stated
therein. I(•

12. Section 146 of the Act lays down the requirements for
H
NEW INDIA ASSURANCE COMPANY LTD. v. SADANAND 1319
MUKHI AND OTHERS [S.S. SINHA, J.]

insurance against third party risk. Where a third party risk is A
involved, an insurance policy is required to be mandatorily
taken out.
The requirements of policies and the limits of liability,
however, have been stated in Section 147 of the Act. Section
147(1)(b) of the Act, reads as under: B
"147. 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-
* * *
(b) insures the person or classes of persons specified in
c
the policy to the extent specified in sub-section (2)-
(i) against any liability which may be incurred by him
in respect of the death of or bodily injury to any person,
including owner of the goods or his authorised
representative carried in the vehicle or damage to any D
property of a third party caused by or arising out of the use
of the vehicle in a public place;
(ii) against the death of or bodily injury to any
passenger of a public service vehicle caused by or arisiog E
out of the use of the vehicle in a public place:
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 F
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-
G
(a) engaged in driving the vehicle, or
(b) if it is a public service vehicle engaged as a
conductor of the vehicle or in examining
tickets on the vehicle, or
(c) if it is a goods carriage, being carried in the H
1320 SUPREME COURT REPORTS [2008] 17 S.C.R..
•
1:-
'
A vehicle, or ~

(ii) 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
B 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 pµblic place at the time of the
accident, if the act or omission which led to the accident ""
c occurred in a public place."
13. The provisions of the Act, therefore, provide for two
types of insurance - one statutory in nature and the other
contractual in nature. Whereas the insurance company is bound
to compensate the owner or the driver of the motor vehicle in
D case any person dies or suffers injury as a result of an accident;
in case involving owner of the vehicl.e or others are proposed
to be covered, an additional premium is required to be paid
for covering their life and property. ,Jr

14. It is not a case where even Section 163-A of the Act
E was resorted to. Respondents filed an application under
Section 166 of the Act. Only an act policy was taken in respect "'
of the motor vehicle. Submission of the learned counsel that
being a two wheelers, the vehicle was more prone to accident
and, therefore, whosoever becomes victim of an accident
arising out of the use thereof would come within the purview of
F
the term "a person" as provided for in Section 147 of the Act,
in our opinion, is not correct. ! J(

15. Contract of insurance of a mot6r vehicle is governed
by the provisions of the Insurance Act. The terms of the policy
as also the quantum of the premium payable for insuring the
G
vehicle in question depends not only upon the carrying capacity
of the vehicle but also on the purpose for which the same was
being_ used and the extent of ttie risk covered thereby. By taking
?
)t.._1'
an 'act policy', the owner of a vehicle fulfils his statutory
obligation as contained in Section 147 of the Act. The liability
H
NEW INDIA ASSURANCE COMPANY LTD. v. SADANAND 1321
MUKHI AND OTHERS [S.B. SINHA, J.]

of the insurer is either statutory or contractual. If it is contractual A
its liability extends to the risk covered by the policy of insurance.
" 1f additional risks are sought to be covered, additional premium
has to be paid. If the contention of the learned counsel is to be
accepted, then to a large extent, the provisions of the Insurance
Act become otiose. By reason of such an interpretation the B
insurer would be liable to cover risk of not only a third party but
also others who would not otherwise come within the purview
~
thereof. It is one thing to say that the life is uncertain and the
• same is required to be covered, but it is another thing to say
that we must read a statute so as to grant relief to a person
not contemplated by the Act. It is not for the court, unless a
c
statute is found to be unconstitutional, to consider the rationality
thereof. Even otherwise the provisions of the Act read with the
provisions of the Insurance Act appear to be wholly rational.
16. Only because driving of a motor vehicle may cause
accident involving loss of life and property not only of a third D
party but also the owner of the vehicle and the insured vehicle
-, itself, different provisions have been made in the Insurance Act
as also the Act laying down different types of insurance
policies. The amount of premium required to be paid for each
of the policy is governed by the Insurance Act. A statutory E
regulatory authority fixes the norms and the guidelines.
17. Keeping in view the aforementioned Parliamentary
object, let us consider the fact of the present case so as to
consider as to whether the insurer is liable to pay the amount
of compensation in relation to the accident occurred by use of F
.... ' the vehicle which was being driven by the son of the insured .
18. We may,,for the said purpose, notice certain decisions
covering different categories of the claims.
In United India Insurance Co. Ltd. v. Tilak Singh, [ (2006)
4 SCC 404 ] this Court considered the provisions of the Motor G
Vehicles Act, 1939 as also 1988 Act and inter alia opined that
•.-, the insurance company would have no liability towards the
injuries suffered by the deceased who was a pillion rider, as
the insurance policy was a statutory policy which did not cover
the gratuitous passenger. H
1322 SUPREME COURT REPORTS [2008] 17 S.C.R.

A In Oriental Insurance Co. Ltd. v. Jhuma Saha, [ (2007) 9 /-
sec 263 ], it was held :-
.,.
"10. The deceased was the owner of the vehicle. For the
reasons stated in the claim petition or otherwise, he
himself was to be blamed for the accident. The accident
B did not involve motor vehicle other than the one which he
was driving. The question which arises for consideration
is that the deceased himself being negligent, the claim
petition under Section 166 of the Motor Vehicles Act, 1988
would be maintainable.
c 11. Liability of the insurer Company is to the extent of
indemnification of the insured against the respondent or
an injured person, a third person or in respect of damages
of property. Thus, if the insured ·cannot be fastened with
any liability under the provisions of the Motor Vehicles Act,
D the question of the insurer being liable to indemnify the
insured, therefore, does not arise."
It was furthermore held:-
"13. The additional premium was not paid in respect of
the entire risk of death or bodily injury of the owner of the
E vehicle. If that be so, Section 147(b) of the Motor Vehicles
Act which in no uncertain terms covers a risk of a third party
only would be attracted in the present case."
The matter came up for consideration yet again in Oriental
Insurance Co. Ltd. v. Meena Variyal [(2007) 5 SCC 428)
F wherein it was observed :-
"13. As we understand Section 147(1) of the Act, an f AfJ
insurance policy thereunder need not cover the liability in
respect of death or injury arising out of and in the course
of the employment of an employee of the person insured
G by the policy, unless it be a liability arising under the
~
Workmen's Compensation Act, 1923 in respect of a driver,
also the conductor,· in the case of a public service vehicle,
and the one carried in the vehicle as owner of the goods ,.
or his representative, if it is a goods vehicle. It is provided
that the policy also shall not be required to cover any
H
NEW INDIA ASSURANCE COMPANY LTD. v. SADANAND 1323
MUKHI AND OTHERS (S.B. SINHA, J.]

contractual liability. Uninfluenced by authorities, we find no A
difficulty in understanding this provision as one providing
that the policy must insure an owner against any liability
to a third party caused by or arising out of the use of the
vehicle in a public place, and against death or bodily injury
to any passenger of a public service vehicle caused by or
B
arising out of the use of vehicle in a public place. The
proviso clarifies that the policy shall not be required to
.... cover an employee of the insured in respect of bodily injury
!
or death arising out of and in the course of his employment.
Then, an exception is provided to the last foregoing to the
effect that the policy must cover a liability arising under the c
Workmen's Compensation Act, 1923 in respect of the
death or bodily injury to an employee who is engaged in
driving the vehicle or who serves as a conductor in a public
service vehicle or an employee who travels in the vehicle
of the employer carrying goods if it is a goods carriage. D
Section 149(1 ), which casts an obligation on an insurer to
.... satisfy an award, also speaks only of award in respect of
such liability as is required to be covered by a policy under
clause (b) of sub-section (1) of Section 147 (being a
liability covered by the terms of the policy). This provision
. cannot therefore be used to enlarge the liability if it does
E

not exist in terms of Sectio9 147 of the Act.
14. The object of the insistence on insurance under
Chapter XI of the Act thus seems to be to compulsorily
cover the liability relating to their person or properties of F
...
) third parties and in respect of employees of the insured
"""""'
employer, the liability that may arise under the Workmen's
Compensation Act, 1923 in respect of the driver, the
conductor and the one carried in a goods vehicle carrying
goods. On this plain understanding of Section 147, we find
it difficult to hold that the Insurance Company, in the case G
on hand, was liable to indemnify the owner, the employer
-~ Company, the insured, in respect of the death of one of
its employees, who according to the claim, was not the
driver. Be it noted that the liability is not one arising under
the Workmen's Compensation Act, 1923 and it is doubtful, H
1324 SUPREME COURT REPORTS [2008] 17 S.C.R.

A on the case put forward by the claimant, whether the
deceased could be understood as a workman coming '
within the Workmen's Compensation Act, 1923. Therefore,
on a plain reading of Section 147 of the Act, it appears to
be clear that the Insurance Company is not liable to
indemnify the insured in the case on hand."
B
The said principle was reiterated in United India Insurance
Co. Ltd. v. Davinder Singh, [ (2007) 8 SCC 698) holding :-
"10. It is, thus, axiomatic that whereas an insurance "
company may be held _to be liable- to indemnify the owner
c for the purpose of meeting the object and purport of the
provisions of the Motor Vehicles Act, the same may not
be necessary in a case where an insurance company may
refuse to compensate the owner of the vehicle towards his
own loss. A distinction must be borne in mind as regard~
the statutory liability of the insurer vis-a-vis the purport and
D
object sought to be achieved by .a beneficent legislation
before a forum constituted under the Motor Vehicles Act ,..,
and enforcement of a contract qua contract before a
Consumer Forum."
19. Learned counsel for the respondents would contend ,,,
E
that the object and purport of the Act being to cover the risk to
life of any person, the said decision should be applied in this
case also. We do not think that it would be a correct reading
of the said judgment as therein National Insurance Co. Ltd. v.
Laxmi Narain Dhut, ((2007) 3 SCC 700] has been followed.
F In Laxmi Narain Dhut (supra) a distinction between a statutory
I~
policy and a contractual policy has clearly been made out.
These decisions, clearly, are applicable to the fact of the
present base.
20. In view of the aforementioned authoritative
G
pronouncements, we have no hesitation of hold that the
insurance company was not liable. The impugned judgments,
therefore, cannot be sustained. They are set aside accordingly.
The appeal is allowed. No costs.
~

-
D.G. Appeal allowed.
H