Holding

The insurance policy is a package policy that covers death or bodily injury of any person, including occupants, and the question of its coverage under the Motor Vehicles Act merits referral to a larger bench.

Summary

The appellants, heirs of a deceased passenger, claimed compensation under Section 166 of the Motor Vehicles Act, 1988 for death incurred while travelling in a private car. The Motor Accident Claims Tribunal awarded compensation, which was set aside by the Karnataka High Court on the ground that the insurance policy did not cover the passenger. The Supreme Court examined the policy, held it to be a package (comprehensive) policy whose terms expressly cover death or bodily injury of any person, including occupants, and noted that the schedule did not limit liability. The Court observed that the question of coverage under such a package policy, especially in view of the Motor Vehicles Act and the Insurance Act, required detailed scrutiny and therefore referred the matter to a larger bench. No final award on liability was made; the papers were ordered to be placed before the Chief Justice for further directions.

Issues considered

The nature of the insurance policy – whether it is a package/comprehensive policy or an act‑only policy.
Whether a package policy covers the risk of death or bodily injury of a gratuitous passenger in a private car under the Motor Vehicles Act, 1988.
Whether the insurer is liable to pay compensation under Section 166 of the Motor Vehicles Act for the death of the passenger.
Whether the amount of premium paid and the absence of explicit limits in the policy affect the coverage.
The necessity of referring the issue to a larger bench for detailed consideration.

Legislation cited

Insurance Act, 1938s. 64VB
Motor Vehicles Act, 1988s. 147, s. 166, s. 95

Subjects

insurance liabilitypackage policythird party riskmotor vehicle accidentpassenger deathMotor Vehicles Actcompensationlarger benchcomprehensive policy

Judgment

[2009] 7 S.C.R. 1031

• ~ BHAGYALAKSHMI AND OTHERS A
V.
UNITED INSURANCE CO. LTD. AND ANOTHER ETC.
Civil Appeal No. 3335 of 2009
MAY 6, 2009
B
[S.B. SINHA AND DR. MUKUNDAKAM SHARMA, JJ.)
Motor Vehicles Act, 1988 - s. 166 - Compensation -
Grant of - Death of passenger travelling in a private car -
'~ Liability of insurance company - Award of compensation by
tribunal, however, set aside by High Court - On appeal, held: c
Insurance policy is a package policy - Contract of insurance
covered risk not only of third party but also of persons travelling
in the car including owners - Court did not deal with package
policy - As regard the question relating to coverage of third
party risk which would include all persons including occupants D
• ),,.
of vehicle and insurer having entered into contract of
insurance in relation thereto, matter referred to Larger Bench.
The question which arose for consideration in this
appeal is with regard to the liability of an insurance
company for death of a person travelling in a private car. E
Referring the matter to Larger Bench, the Court

.,............ -,.i
HELD:1.1 The insurance policy in question is a
package policy. The contract of insurar:ice if given its face
value covers the risk not only of a third party but also of F
person travelling in the car including the owner thereof.
In the instant case the schedule of the policy does not
indicate the limits of liability. It does not indicate exclusion
of any person. It takes any person including 'insured'.
Such person indisputably would come within the purview G
of the liability to third party . There being no limitation with
,.)-
regard to coverage, in terms of the provisions of the Act,
no upper limit is fixed. Liability of the insurer, thus unlike
the old Act, may not be limited. [Para 14 and 16]
1031 H
1032 SUPREME COURT REPORTS [2009] 7 S.C.R.

A 1.2 The submission that whereas carrying of )
passenger in a goods carriage vehicle is prohibited, it is
not so in a private car, may be correct but in a large number
of decisions rendered by this Court it has been held that
a passenger would not be a third party within the meaning
B of the provisions of the Act. [Para 22] [1045-8-C]
1.3 The nature of policies which came up for consi-
deration were Act policies. This Court did not deal with a
package policy. If the Tariff Advisory Committee seeks to J
enforce its decision in regard to coverage of third party ~
c risk which would include all persons including occupants
of the vehicle and the insurer having entered into a contract
of insurance in relation thereto, the matter may require a
deeper scrutiny. Thus, the matter required consideration
by a Larger Bench. [Paras 24 and 27] [1046-G-H; 1047-A-
D B; 1049-B]
l

National Insurance Co. Ltd. v. Juga/ Kishore 1988 (1) -,I
SCC 626; Oriental Insurance Co. Ltd. v. Rajni Devi 2008 (5)
SCC 736; Amrit Lal Sood v. Kaushalya Devi Thapar 1998 (3)
SCC 744;0riental Insurance Co. Ltd. v. Cheruvakkara
E Nafeessu 2001 (2) SCC 491; New India Assurance Co. v.
Satpal Singh 2000 (1) SCC 237; New India Assurance Co.
Ltd. v. Asha Rani 2003 (2) SCC 223; United India Insurance
Co. Lgtd. v. Ti/ak Singh (2007) 9 SC C 263; Oriental Insurance
,...>

Co. Ltd. v. Jhuma Saha 2007 (9) SCC 263; Oriental Insurance . •
F Co. Ltd. v. Sudhakaran K. V. 2008 (7) SCC 428; New India
Assurance Company Ltd. v. Sadanand Mukhi and Ors. 2009
(1) SCALE 252; United India Insurance Company MAC Appl
No. 98012006 etc. decided on 31st May, 2007 by Delhi High
Court; Royal Sundaram Insurance Co. Ltd. v. VA. Meenkshi
G and Ors. C.M.A. No. 312 of 2009 decided by Madras High
Court; National Insurance Company Limited v. Pattabhai -; ~
Ramaiah and Ors. (MFA No. 5921 and 7045 of 2006 (M. V)
decided by Karnataka High Court and United India Insurance
Co. Ltd. v. Alka Mang/a and Ors. AIR 2008 Delhi 201 - referred
H to.
BHAGYALAKSHMI AND OTHERS V UNITED INSURANCE 1033
CO. LTD. AND ANOTHER ETC.

-1 Case Law Reference A
1988 (1) sec 626 Referred to Para 14
2008 (5) sec 736 Referred to Para 17
1998 (3) sec 744 Referred to Para 18
B
2001 (2) sec 491 Referred to Para 19
2000 (1) sec 231 Referred to Para 20

1 2003 (2) sec 223 Referred to Para 21
_,,
2006 (4) sec 404 Referred to Para 23 c
2001 (9) sec 263 Referred to Para 23
2008 (7) sec 428 Referred to Para 23
2009 (1) SCALE 252 Referred to Para 23 D
-I
AIR 2008 Delhi 201 Referred to Para 26
\.''
CIVILAPPELLATE JURISDICTION: Civil Appeal No. 3335
of 2009
From the Judgment and Order dated 19.09.2006 of the E
High Court of Karnataka at Bangalore in MFA No. 11996 of
2005 (MV) and MFA Crob. 180 of 2006 (MV)
Paramjit Singh Patwalia, Rajesh Mahale, Harish, with him
for the Appellant( s).
F
P.R. Sikka (for P.N. Puri), for the Respondent(s).
The Judgment of the Court was delivered by
S.B. SINHA, J.
Leave granted. G
~·
1. Liability of an insurance company for death of a person
travelling in a private car arises for consideration in this appeal.
2. Before, however, adverting to the said question, we may
H
- notice the fact of the matter.
1034 SUPREME COURT REPORTS [2009] 7 S.C.R.

A M.N. Lingappa (hereinafter referred to as 'the deceased')
>'
while travelling in a private car owned by one Shri K.N.
Narayanajoshi, respondent No.7 herein met with an accident
and succumbed to the resulting injuries. Appellants are his heirs
and legal representatives.
B They filed an application for grant of compensation of
Rs.1,50,00,000/- (Rupees one crore fifty lakhs) before the Motor
Accident Claims Tribunal, Tumkur (for short 'the Tribunal') in
terms of Section 166 of the Motor Vehicles Act, 1988 (for short
'the Act'). {
c .
3. The learned Tribunal by its order, awarded a
compensation of Rs.98,64,428/-.
4. Respondent No. 1 preferred an appeal thereagainst
before the High Court of Karnataka at Bangalore. The claimants
D also filed cross-objections.
5. The core question that arose for consideration before "
'/
the High Court was as to whether the insurance policy covered
the risk of the passenger travelling in the car. The High Court by
its imRugned judgment answered the said question in favour of
E the 1 respondent.

6. Mr. P.S. Patwalia, learned senior counsel appearing on
behalf of the appellants would contend :-
i) The insurance policy being a comprehensive one, >
F the High Court committed a serious error in opining
that the risk of a passenger travelling in the car was
not covered thereunder.
ii) Having regard to the fact that the second proviso
G appended to Section 95(1 )(b) of the Motor Vehicles
Act, 1939 was deleted by the Parliament in the 1988
-1..._
Act, the liability of a passenger in a private vehicle
must also be included in the policy in terms of the
provisions of the 1988 Act.

H 7. Mr. P.R. Sikka, learned counsel on behalf of respondent
BHAGYALAKSHMI AND OTHERS V UNITED INSURANCE 1035
CO. LTD. AND ANOTHER ETC. [S.B. SINHA, J]

~ No.1-lnsurance Company would contend that the respondent A
having not paid the requisite amount of premium, the High Court
... judgment is unassailable .

8. The policy in question was in respect_of a private car. It
was valid for the period 6.10.1995 and 5.10.1996, the relevant .
clauses whereof are as under : B

"SECTION II - LIABILITY TO THIRD PARTIES

1. Subject to the limits of liability as laid down in the
l schedule hereto the company will indemnify the insured in
the event of an accident caused by or arising out of the c
use of the vehicle against all sums which the insured shall
become legally liable to pay in respect of:

i) death of or bodily injury to any person including occupants
carried in the vehicle (provided such octupants are not
D
·f carried for hire or reward) but except so far as it is
~ necessary to meet the requirements of Motor Vehicles
Act, the Company shall not be liable where such death or
injury arises out of and in the course of the employment of
such person by the insured.
E
(ii) Damage to property other than property belonging to
the insured or held in trust or in the custody or control of
the insured."
... 9. We may notice the nature of the policy, which is Private
Car 'B' Policy: F

" PRIVATE CAR 'B' POLICY
Whereas the insured by a proposal and declaration dated
as stated in the Schedule which shall be the basis of this
contract and is deemed to be incorporated herein has G
,. .+ applied to the Company for the insurance contained and
has paid the premium mentioned in the schedule as
consideration for such insurance in respect of accidental
loss or damage occurring during the period of insurance.
H
1036 SUPREME COURT REPORTS [2009] 7 S.C.R. ,

A NOW THIS POLICY WITNESS ETH: ~

That subject to the Terms Exceptions and Conditions
contained herein or endorsed or expressed hereon;

SECTION I. LOSS OR DAMAGE
B The Company will indemnify the insured against loss or
damage to the vehicle insured hereunder and I or its
accessories whilst thereon

a. By fire explosion self ignition or lightning. i
c b. By burglary housebreaking or theft.

C. By riot and strike.

d. By earthquake (fire and shock damage).

e. By Flood, Typhoon, Tempest, Hurricane, Storm,
D
Inundation, Cyclone, Hailstorm, and Frost. ~

'!
f. By accidental external means.

g. By malicious act.

E h. By terrorist activity.

i. whilst in transit by road, rail, inland, waterway lift,
elevator or air.

j. By landslide rockslide.
F Subject to a deduction for depreciation at the rates
.mentioned below in respect of parts replaced :
1. For all rubber, nylon, plastic parts, tyres and tubes,
batteries - 50%
G 2. For all parts made of glass - Nil
3. For all other parts
Age of Motor Car 0% of depreciation
Upto 6 months Nil
H
I
"""1
BHAGYALAKSHMI AND OTHERS V. UNITED INSURANCE 1037
CO. LTD. AND ANOTHER ETC. [S.S. SINHA, J.]

_.. Between 6 months and 1 year 5% A
Between 1 year and 2 years 10%
'" Between 2 years and 3 years 15%
Between 3 years and 4 years 25%
B
Between 4 years and 5 years 35%

Between 5 years and 6 years 40%

'~ Between 10 years 50%
-~-
The company shall not be liable to make any payment in , C
respect of :-
a) Consequential loss, depreciation, wear and tear,
mechanical and electrical break down, failures or
breakages; D
• b) Damage to tyres and tubes unless the Motor Car is
I("
damaged at the same time when the liability of the company
shall be limited to 50% of the cost of replacement, and
c) any accidental loss or damage suffered whilst the
E
insured or any person driving with the knowledge and
consent of the insured is under the influence of intoxicating
liquor or drugs.
In the event of the Motor car being disabled by reason of
loss or damage covered under this Policy the Company F
will bear the reasonable cost of protection and removal to
the nearest repairers and of redelivery to the insured but
not exceeding in all Rs. 1000/- in respect of any one
accident.
The insured may authorise the repair of the Motor car G
..... ~ necessitated by damage for which the Company may be
liable under this Policy provided that :
a) the estimated cost of such repair does not exceed
Rs.500/-;
H
1038 SUPREME COURT REPORTS [2009] 7 S.C.R.

A b) the Company is furnished forthwith with a detailed
t-
estimate of the cost; and
c) the insured shall give the Company every assistance to
see that such repair is necessary and the charge reasonable."

B 10. Indisputably the amount of premium paid was Rs.605/
-. It is in two parts. Part I refers to 'Own Damage' - premium on
vehicle and non-electrical accessories wherefor a sum of
Rs.400/-was paid, apart from the basic premium for the liability
I
'fire and thief amounting to Rs.160/- In addition a sum of Rs.15/ }

c - was paid towards 'Increased Third Party Property Limit'.
11. Whereas the contention of Mr. Patwalia is that as the
liability to third party covers death of or bodily injury to any person
including occupants carried in the vehicle, the contention of Mr.
Sikka is that only a sum of Rs.15/- having been paid towards
D third party limit, the policy cannot be said to have covered the
life of passenger traveling in the car. •
'j
12. The business of insurance is governed by the Insurance
Act, 1938 (for short 'the 1938 Act'), Section 64-VB whereof
reads as under:-
E
"Section 64VB - No risk to be assumed unless premium
is received in advance
(1) No insurer shall assume any risk in India in respect of
any insurance business on which premium is not ordinarily
F payable outside India unless and until the premium payable
is received by him or is guaranteed to be paid by such
person in such manner and within such time as may be
prescribed or unless and until deposit of such amount as
may be prescribed, is made in advance in the prescribed
G manner.
(2) For the purposes of this section, in the case of risks for "~·-
which premium can be ascertained in advance, the risk
may be assumed not earlier than the date on which the
premium has been paid in cash or by cheque to the insurer.
H
BHAGYALAKSHMI AND OTHERS V. UNITED INSURANCE 1039
CO. LTD. AND ANOTHER ETC. [S.B. SINHA, J.]

~ Explanation.-Where the premium is tendered by postal A
money order or cheque sent by post, the risk may be
assumed on the date on which the money order is booked
or the cheque is posted, as the case may be.

(3) Any refund of premium which may become due to an
insured on account of the cancellation of a policy or B
alteration in its terms and conditions or otherwise shall be
-;
--; paid by the insurer directly to the insured by a crossed or
'l
,j
order cheque or by postal money order and a proper
receipt shall be obtained by the insurer from the insured,
and such refund shall in no case be credited to the account c
of the agent.

(4) Where an insurance agent collects a premium on a
policy of insurance on behalf of an insurer, he shall deposit
with, or despatch by post to, the insurer, the premium so
D
f collected in full without deduction of his commission within
'( twenty-four hours of the collection excluding bank and
postal holidays.

(5) The Central Government may, by rules, relax the
requirements of sub-section (1) in respect of particular E
categories in insurance policies."

13. Part 11-B of the 1938 Act provides for Tariff Advisory
Committee and Control of Tariff Rates. Section 64-UC provides
~
for power of the Advisory Committee to regulate rates,
advantages etc. Sub-section (4) of Section 64-UC makes the F
decision of the Advisory Committee final. Sub-section (5) of
Section 64-UC provides that where an insurer is guilty of breach
of any rate, advantage, term or condition fixed by the Advisory
.. Committee, he shall be deemed to have contravened the
provisions of the Act. G
,.. 4-
14. The policy in question is a package policy.The contract
of insurance if given its face value covers the risk not only of a
third party but also of persons travelling in the car including the
owner thereof.
H
1040 SUPREME COURT REPORTS [2009) 7 S.C.R.

A 15. The question is as to whether the policy in question is
t-
a comprehensive policy or only an Act policy.
We may, however, notice that in National Insurance Co.
Ltd. v. Juga/ Kishore, [ (1988) 1 SCC 626 ], this Court opined:-

B "6. We have accordingly perused the photostat copy of
the policy to ascertain whether risk for any amount higher
than the amount of Rs 20,000 contemplated by clause (b)
aforesaid was covered. Our attention was invited by
learned counsel for the respondents to the circumstance ,;
I.
c that at the right-hand corner on the top of p.1 of the policy
the words "Commercial Vehicle Comprehensive" were
printed. On this basis and on the basis that the premium
paid was higher than the premium of an "act only" policy
it was urged by the learned Counsel for the respondents
that the liability of the appellant was unlimited and not
D
confined to Rs 20,000 only. We find it difficult to accept
this submission. Even though it is not permissible to use
y
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. In case, however, it is got
E comprehensively insured a higher premium than for an
"act only" policy is payable depending on the estimated
value of the vehicle. Such insurance entitles the owner to
claim reimbursement of the entire amount of loss or
damage suffered up to the estimated value of the vehicle
F calculated according to the rules and regulations framed
in this behalf. Comprehensive insurance of the vehicle
and payment of higher premium on this score, however,
do not mean that the limit of the liability with regard to third
party risk becomes unlimited or higher than the statutory
G liability fixed under sub-section (2) of Section 95 of the
Act. For this purpose a specific agreement has to be •
arrived at between the owner and the insurance company
and separate premium has to be paid on the amount of
liability undertaken by the insurance company in this behalf.
H Likewise, if risk of any other nature for instance, with regard
BHAGYALAKSHMI AND OTHERS V. UNITED INSURANCE 1041
CO. LTD. AND ANOTHER ETC. [S.B. SINHA, J.]

to the driver or passengers etc. in excess of statutory A
~
liability, if any, is sought to be covered it has to be clearly
specified in the policy and separate premium paid therefor.
.,' This is the requirement of the tariff regulations framed for
the purpose. Coming to the photostat copy of the policy in
the instant case it would be seen that Section 2 thereof B
deals with liability to third parties. Sub-section (1) minus
the proviso thereto reads as hereunder:
'I
~
"(1) Subject to the Limits of Liability the Company will
,j
indemnify the insured against all sums including claimant's
cost and expenses which the insured shall become legally c
liable to pay in respect of-
(1) death or bodily injury to any person caused by or arising
out of the use (including the loading and or unloading) of
the motor vehicle
D
f (i1) damage to property caused by the use (including the
'{ loading and/or unloading) of the motor vehicle." "
16. There, however, the schedule of the policy indicated
the limits of the liability of the amount paid. However, in the
present case the schedule of the policy does not indicate the E
limits of liability. It does not indicate exclusion of any person. It
takes any person including 'insured'. Such person indisputably
would come within the purview of the liability to third party to
which we have referred to heretobefore.
F
There being no limitation with regard to coverage, in terms
of the provisions of the Act, no upper limit is fixed. Liability of
the insurer, thus unlike the old Act, may not be limited.
17. In Oriental Insurance Co. Ltd. v. Rajni Devi, [ (2008) 5
SCC 736 , this Court has held :- G
• Ir "7. It is now a well-settled principle of law that in a case
where third party is involved, the liability of the insurance
company would be unlimited. Where, however,
compensation is claimed for the death of the owner or
H
1042 SUPREME COURT REPORTS (2009) 7 S.C.R.

A another passenger of the vehicle, the contract of insurance
being governed by the contract qua contract, the claim of
the insurance company would depend upon the terms
thereof. The Tribunal, in our opinion, therefore, was not
correct in taking the view that while determining the amount
B of compensation, the only factor which would be relevant
would be merely the use of the motor vehicle."
18. Mr. Patwalia has relied upon the decision of this Court
in Amrit Lal Sood v. Kausha/ya Devi Thapar, [ (1998) 3 SCC
744 ], wherein upon considering the meaning of the terms, '
\.
C 'comprehensive policy' and 'comprehensive insurance' it was
held:-
"8. Thus under Section 11(1 )(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
D
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 the car. The
remaining part of clause (a) relates to cases of death or
injury arising out of and in the course of employment of
E such person by the insured. In such cases the liability of
the insurer is only to the extent necessary to meet the
requirements of Section 95 of the Act. Insofar as gratuitous
passengers are concerned there is no limitation in the
policy as such. Hence under the terms of the policy, the
F insurer is liable to satisfy the award passed in favour of
the claimant. We are unable to agree with the view
expressed by the High Court in this case as the terms of
the policy are unambiguous."
G 19. Even in Oriental Insurance Co. Ltd. v. Cheruvakkara
Nafeessu, [ (2001) 2 SCC 491), a Division Bench of this Court
distinguished Jugal Kishore (supra) and following Amrit Lal .;, ,
(supra) held as under:-:
"9. The reliance of the learned counsel for the appellant on
H New India Assurance Co. Ltd. v. Shanti Bai and National
BHAGYALAKSHMI AND OTHERS V. UNITED INSURANCE 1043
CO. LTD. AND ANOTHER ETC. [S.B. SINHA, J.]

~ Insurance Co, Ltd. v. Jugal Kishore is of no help to him A
inasmuch as in those cases the effect of judgment in Amrit ·
Lal Sood case has not been considered. In Shanti Bai
case the Court was dealing with the effect of a
comprehensive policy vis-a-vis the liability of the insurer in
respect of third-party risk on the basis of the estimated B
value of the vehicle and found that the limit of liability with
regard to third-party risk does not become unlimited or
oii
higher than the statutory liability only account of entering
• into a comprehensive policy. It was pointed out that the
" comprehensive policy only entitles the owner to claim c
reimbursement of the entire amount of loss or damage
suffered up to the estimated value of the vehicle which did
not mean the limit of liability with regard to third-party risk
becoming unlimited or higher than the statutory liability. In
the case of National Insurance Co. Ltd. v. Jugal Kishore
D
• this Court observed that the liability under the policy could
.. not exceed the statutory liability under Section 95 of the
Act only on the ground that the insured had undertaken
comprehensive insurance of the vehicle. The payment of
higher premium on that score, however, did not mean that
the limit of liability with regard to third-party risk became E
unlimited or higher than the statutory liability fixed under
sub-section (2) of Section 95 of the Act."

.J.t ~
20. We may also notice that in New India Assurance Co.
v. Satpal Singh, [ (2000) 1 SCC 237 ], this Gourt held as under:- F
"10. The proviso to the said sub-section is not relevant
here as it pertains to de~th or bodily injury to the employee
mentioned therein. Sub-section (2) provides that a policy
of insurance shall cover any liability incurred in respect of
any accident, up to the following limits, namely: G
.. ~ "(a) save as provided in clause (b), the amount of liability
incurred;
(b) in respect of damage to any property of a third party,
a limit of rupees six thousand: H
1044 SUPREME COURT REPORTS [2009] 7 S.C.R.

A 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."
B Hence, under sub-section (2), there is no upper limitation
for the insurer regarding the amount of compensation
awarded in respect of death or bodily injury of a victim of
the accident. It is, therefore, apparent that the limit '
)<
contained in the old Act has been removed and the policy
c should insure the liability incurred and cover injury to any
person including owner of the goods or his authorised
representative carried in the vehicle. The legislature has
also taken care of even the policies which were in force
on the date of commencement of the Act by specifically
D providing that any policy of insurance containing any limit
regarding the insurer's liability shall continue to be effective
•
~
for a period of four months from commencement of the
Act or till the date of expiry of such policy, whichever is
earlier. This means, after the said period of four months,
E a new insurance policy consistent with the new Act is
required to be obtained."
21. However, with regard to goods carriage vehicle Satpal
Singh (supra) was overruled in New India Assurance Co. Ltd. -
1 ,),,.
v. Asha Rani, [ (2003) 2 SCC 223 ], wherein it was observed :-
F
"23. The applicability of the decision of this Court in
Mal/awwa v. Oriental Insurance Co. Ltd. 2 in this case must
be considered keeping that aspect in view. Section 2(35)
of the 1988 Act does not include passengers in goods
carriage whereas Section 2(25) of the 1939 Act did as
G
even passengers could be carried in a goods vehicle. -; ;
The difference in the definitions of "goods vehicle" in the
1939 Act and "goods carriage" in the 1988 Act is
significant. By reason of the change in the definitions of
the terminology, the legislature intended that a goods
H
BHAGYALAKSHMI AND OTHERS V. UNITED INSURANCE 1045
CO. LTD. AND ANOTHER ETC. [S.B. SINHA, J.]

vehicle could not carry any passenger, as the words "in A
·,
.. addition to passengers" occurring in the definition of goods
vehicle in the 1939 Act were omitted. Furthermore, it
categorically states that "goods carriage" would mean a
motor vehicle constructed or adapted for use "solely for
the carriage of goods". Carrying of passengers in a "goods B
carriage", thus, is not contemplated under the 1988 Act."
22. Submission of Mr. Patwalia is that whereas carrying
of passenger in a goods carriage vehicle is prohibited, it is not
•... so in a private car. Learned counsel may be correct but we must
notice that in a large number of decisions rendered by this Court c
it has. been held that a passenger would not be a third party
within the meaning of the provisions of the Act. We may notice
some of them.
23. In United India Insurance Co. Ltd. v. Tilak Singh, [
D
(2006) 4 sec 404], it was held :-

"<'.
"21. In our view, although the observations made in Asha
Rani case were in connection with carrying passengers in
a goods vehicle, the same would apply with equal force to
gratuitous passengers in any other vehicle also. Thus, we E
must uphold the contention of the appellant Insurance
Company that it owed no liability towards the injuries
I
suffered by the deceased Rajinder Singh who was a pillion
I; rider, as the insurance policy was a statutory policy, and
~ hence it did not cover the risk of death of or bodily injury F
to a gratuitous passenger."
This Court in Oriental Insurance Co. Ltd. v. Jhuma Saha,
[(2007) 9 sec 263 ] has held :-
"10. The deceased was the owner of the vehicle. For the G
reasons stated in the claim petition or otherwise, he himself
....·\- was to be blamed for the accident. The accident did 'not
involve motor vehicle other than the one which he was
driving. The question which arises for consideration is
'I that the deceased himself being negligent.. the claim
H
1046 SUPREME COURT REPORTS [2009] 7 S.C.R.

A petition under Section 166 of the Motor Vehicles Act, 1988
would be maintainable. ~

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
8 of property. Thus, if the insured cannot be fastened with
any liability under the provisions of the Motor Vehicles Act,
the question of the insurer being liable to indemnify the
insured, therefore, does not arise."
I<
•
c In Oriental Insurance Co. Ltd. v. Sudhakaran K. V, [(2008)
7 SCC 428] this Court has opined :-
"17. This Court in a catena of decisions has categorically
held that a gratuitous passenger in a goods carriage would
not be covered by a contract of insurance entered into by
D and between the insurer and the owner of the vehicle in
terms of Section 147 of the Act. (See New India Assurance
Co. Ltd. v. Asha Rani." 'r

It was held :-
E "25. The law which emerges from the said decisions, is:
(i) the liability of the insurance company in a case of this
nature is not extended to a pillion-rider of the motor vehicle '
unless the requisite amount of premium is paid for covering •
his/her risk; (ii) the legal obligation arising under Section
F 147 of the Act cannot be extended to an injury or death of 'f
the owner of vehicle or the pillion-rider; (iii) the pillion-rider
in a two-wheeler was not to be treated as a third party
when the accident has taken place owing to rash and
negligent riding of the scooter and not on the part of the
G driver of another vehicle."
[See also New India Assurance Company Ltd. v. -1 •
Sadanand Mukhi and others, (2009) 1 SCALE 252 ].
24. Before this Court, however, the nature of policies which
came up for consideration were Act policies. This Court did not t
H
BHAGYALAKSHMI AND OTHERS V. UNITED INSURANCE 1047
CO. LTD. AND ANOTHER ETC. [S.8. SINHA, J.]

, deal with a package policy. If the Tariff Advisory Committee A
seeks to enforce its decision in regard to coverage of third party
risk which would include all persons including occupants of the
vehicle and the insurer having entered into a contract of
insurance in relation thereto, we are of the opinion that the matter
may require a deeper scrutiny. B
25. We may notice that the effect of package policy in
relation to three wheelers, came up before the Delhi High Court
in United India Insurance Company, (MAC App. No.980/2006
•..j etc. decided on 31st May, 2007) wherein it has been opined :-
c
"33. Tilak Sing h's case (Supra) holds that the proposition
of law in Asha Rani's Case (Supra) in relation to goods
vehicle shall apply with equal force to 'gratuitous
passenger' in any other vehicle also. As noted herein above
Tilak Singh's case (supra) related to a statutory policy. It
D
would be pertinent to mention here that Tilak Sing h's case
(supra) related to the death of a pillion rider on a two
~
wheeler scooter and his legal representatives had claimed
compensation against the registered owner of the scooter
and the insurer. The two wheeler scooter was insured for
third party risk for the period 07/03/1989 to 06/03/1990 · E
and the accident had taken place on 31.10.1989. The
Court found that the Insurance Policy covering the risks
i, did not contain an endorsement of IMT 70 covering liability
to pillion riders and, therefore, in that context held that the1
" Insurer Company was not liable to indemnify the insured F
and pay compensation to the legal representatives of the
deceased. I may indicate here that IMT-70 is no longer in
operation and as per Section 3 of the present tariffs everi
a pillion rider is covered by Third Party risks unless he
happens to be an employee of the insured for which extra G
.. \- premium is to-be required to be paid .
34. To summarize, where the policy is a statutory policy or
an act only policy, a gratuitous passenger in a private
vehicle would not be covered for a bodily injury or death
H
1048 SUPREME COURT REPORTS [2009] 7 S.C.R.

A under the policy of insurance. But, nothing prevents the ;-
insurance company from issuing a wider coverage i.e.
assuming a greater risk liability. As in the instant case,
where the policy is a Package Policy for Private Cars,
terms of the policy and the applicable conditions as notified
B by the Tariff Advisory Committee would have to be looked
into to determine the risk liability assumed by the insurer."
26. The question as to whether gratuitous passengers
travelling in a private car or pillion riders carried on two-wheelers •
are automatically covered under a package policy/ !•
c comprehensive policy came up also before The Madras High
Court recently in Royal Sundaram Insurance Co. Ltd. v. \/. A.
Meenakshi and Ors. (C.M.A No. 312 of 2009). The Division
Bench of the Court, after observing the judgment of this court
and various High Courts on the subject, dismissing the appeal
D filed by the insurance company and affirming the order of the
Tribunal awarding compensation of Rs. 19.10 Lakh to the legal
representatives of the deceased passenger of the insured )

vehicle, held that:
"29. Therefore it is clear from the Act itself, the words of
E the policy and the decision in Amritlal Sood's case (supra)
that a Comprehensive Policy covers the risk of a gratuitous
passenger to the extent of the liability incurred. We may
_imagine what will happen in a case where the owner is ;

driving his car covered by a Comprehensive Policy. He is f
F accompanied by his wife and children. There is an accident
as in this case. The wife and children are permanently
disabled by the injuries. If we agree with the appellant
Insurance Company, those pathetic claimants will not get
any compensation. The law never intended this to happen.
G That is why the TAC explicitly came out with the clarificatory
Circular in 1978. We cannot forget that the words used -.j_

are "third party" and "Comprehensive", so we cannot deny
.,,
this relief to the third party occupant in a car covered by
a Comprehensive Policy."
H
BHAGYALAKSHMI AND OTHERS V. UNITED INSURANCE 1049
CO. LTD. AND ANOTHER ETC. [S.B. SINHA, J.]

[See also the decisions of High Court of Karnataka in A
National Insurance Company Limited v. Pattabhi Ramaiah
and Ors. (M.F.A No. 5921 and 7045 of 2006 (M.V)) and Delhi
High Court in United India Insurance Co. Ltd. v. Atka Mang/a
and Ors. (AIR 2008 Delhi 201)].
27. We, therefore, are of the opinion that the matter B
requires consideration by a Larger Bench. We order
· accordingly. Let the papers be placed before the learned Chief
Justice for appropriate orders.

- N.J. Matter referred to Larger Bench