Supreme Court of India

NATIONAL INSURANCE CO. LTD.versusANJANA SHYAM AND ORS.

Citation: 2007 INSC 846
Decided: 20 August 2007
Disposal: Case Partly allowed
Bench: A K MATHUR

Holding

The insurer’s liability is limited to the number of passengers covered under the insurance policy as per the vehicle’s registration and permit; it must pay compensation for those insured passengers (the higher of the awards) and may recover any excess from the vehicle owner.

Summary

A bus with a statutory capacity of 42 passengers was overloaded with about 90 persons and met with an accident, causing 26 deaths and 63 injuries. Claimants filed compensation claims under Section 166 of the Motor Vehicles Act, 1988, and the Motor Accident Claims Tribunal awarded compensation to all claimants, holding the insurer liable for amounts exceeding the number of passengers covered by the policy. The insurer appealed, arguing that its liability was limited to the 42 (or 38) passengers insured under Section 147(1)(b)(ii) and that Section 149 did not compel payment for non‑insured overloaded passengers. The Supreme Court held that "any passenger" means only those authorized by the vehicle’s registration and permit, so the insurer’s liability is confined to the insured passengers; it must deposit the higher of the awards for those passengers and may recover any excess from the vehicle owner. The Court also rejected the State’s contributory negligence claim and clarified that the insurer can recover the excess from the owner.

Issues considered

Whether the insurer is liable to pay compensation for passengers beyond the number insured under Section 147(1)(b)(ii) when the vehicle is overloaded.
Interpretation of the term "any passenger" under the Motor Vehicles Act, 1988.
Whether Section 149 obliges the insurer to satisfy awards for all claimants irrespective of policy coverage.
Whether the insurer can recover the excess amount from the vehicle owner.
Whether the State can be impleaded for contributory negligence in an overloading scenario.

Legislation cited

Motor Vehicles Act, 1988s. 146, s. 147, s. 149, s. 166, s. 170, s. 58, s. 72, s. 86

Subjects

Motor Vehicles Actinsurance liabilityoverloadingthird party riskSection 147Section 149compensationpublic service vehicleexcess recoverycontributory negligence

Judgment

A NATIONAL INSURANCE CO. LTD.
v.
ANJANA SHYAM AND ORS.

AUGUST 20, 2007

B [A.K. MATHUR AND P.K. BALASUBRAMANYAN, JJ.]

Motor Vehicles Act, 1988; Ss. 58, 72, 86, 146, 147, 149 and 166:

Insurance ofvehicle-Liability ofInsurer to representative of the injured
C and dead persons in an accident involving public transport vehicle-
Compensation-Awards passed by Tribunal exceeding the number ofpersons
insured by assured-Execution of-Held: An insurance policy effected in
terms of S. 147(/)(b}(ii) of the Act insure persons/class of persons against
the death of/bodily injury to any passenger caused by or arising out of the
D use of public transport vehicle in public place-Jns1,Uer iffailed to establish
fundamental breach of conditions of the insurance policy to enable it to
disclaim liability has the obligation to satisfy the decree/award made by the
Court/Tribunal in terms of S.147(2)(a) and S. 149(1) of the Act-However,
it could recover from the owner of the vehicle the excess amount paid in
order to satisfy such award/decree-Jn terms of Section 147(/)(b)(iiJ., only
E such number of passengers as shown in the certificate of registration, could
be insured-Affording of insurance for more number of passengers than
permitted would be illegal since it would amount to overloading of the
vehicle-Hence, insurance taken out for permitted number of passengerj
could alone determine liability of Insurer, and it cannot be ~tended to cover
F passengers who got injured or died in the accident but not insured-Since
there is no means of ascertaining the passengers which are permitted to be
carried out by .the permit and covered by the Insurance Policy, the insurance
company is directed to deposit the higher of the awards and consequently
higher of the amounts awarded as compensation to the extent of number of
passengers covered by the Policy-Tribunal is directed to pass appropriate
G orders for distribution of the money so deposited proportionately to all
claimants and claimant could recover the balance from the owner of the
vehicle.

Words and Phrases:

H 78
+
NA TI ON AL INSURANCE CO. LTD. v. ANJANA SHY AM 79
'Any passenger'-Meaning of in the context of Motor Vehicles Act, A
1988..

A bus owned by the Tehsil Cooperative Union and insured with the
appellant-an Insurance Company met with an accident. The vehicle had a
carrying capacity of 42 passengers including the driver and the conductor.
Allegedly, at the time of the accident, the bus was overloaded having about 90 B
passengers in it As a result of the accident, 26 persons, including the driver,
died and 63 persons got injured. The legal representatives of the deceased
and the injured approached Motor Accident Claims Tribunal claiming
compensation by filing applications under Section 166 of the Motor Vehicles
Act, 1988. The Tribunal passed various awards on the claims and made the C
insurance company liable for paying the amounts covered by all the awards
exceeding the number of passengers covered by the insurance company.
Feeling aggrieved, the insurance company filed appeals challenging the
awards. In these appeals, an application was also made seeking impleadment
of the State, as the authorities had failed to check the overloading of the bus
and it was due to the negligence of the authorities that the accident had D
occurred and thus the State must be found to be liable for contributory
negligence. The High Court taking the view that overloading of the bus, which
had a permit to ply with only 42 passengers, did not amount to violation of the
route permit or any other law for which the State Government could be held
to be contributorily negligent and it is the insurance company which was liable E
to pay the amounts as awarded by the Tribunal. Hence the present appeals.

Appellant-insurance company contended that it had insured 42
passengers, therefore, its liability cannot be enlarged; that there is nothing
in the Motor Vehicles Act which justifies the imposing of the liability on the
insurance company in respect of persons who were not at all covered by the F
insurance policy and in respect of whom there was no obligation on the owner
of the vehicle to take coverage of i·nsurance in terms of Section 147 of the
Act; and that though the relevant provisions of the Act are for the benefit of
third parties or passengers of a transport vehicle injured in an accident, but
the same did not contain any provision which could enlarge the liability of the
insurance company compelling it to cover mote persons than it had contracted G
to cover.

Respondents, on behalf of insured submitted that the victims of accidents
are not to be driven to chase the mirage of recovery of compensation or
damages from the owner of the vehicle and it is to ensure that the victims are H
+-

80 SUPREME COURT REPORTS [2007] 9 S.C.R.

A paid compensation, whatever might be the inter se rights and obligations of -
the owner of the vehicle and the insurance company; that the relevant
provisions are made; and that in terms of Section 149 of the Act once an award
is passed, it was the duty of the insurer to satisfy the judgment and award and
viewed from that angle, the insurance company was bound to pay the victims
B the enti!"Nlmount covered by the various awards.

Partly allowing the appeals, the Court

HELD: 1.1. In terms of the scheme of the Motor Vehicles Act, the
insurance company, ifit is not able to establish that there is a fundamental
breach of a condition which would enable it to disclaim liability, it may have to
C pay the amount of compensation adjudged by a Claims Tribunal subject of
course to its rights to recover from the insured, the owner of the vehicle such
excess as it is obliged to pay. (Para 10) [87-D-E)

1.2. Section 147(1)(b) of the Act compels insuring the person or classes
D of persons specified in the policy to the extent specified in sub-section (ii) of
that Section. The case on hand will come under sub-clause (ii) of clause (b) of
Section 147(1) of the Act which obliges the owner to take out insurance
compulsorily against the death of or bodily injury to any passenger of a public
service vehicle caused by or arising out of the use of t~e vehicle in a public
place. [Para 11) [87-FJ
E
1.3. In terms of Section 58 of the Act, the registration of the vehicle,
which alone makes it usable on the road, records the number of passengers
to be carried and the certificate of registration also contains that entry. So,
an insurance company insuring the passengers carried in a vehicle in terms
of Section 147(l)(b)(ii) cf the Act, can only insure such numbe·r of passengers
F as are shown in the certificate of registration. The position is reinforced by
Section 72 of the Act, which deals with grant of stage carriage permits. Sub-
section (2) provides that when a permit is decided to be granted for a stage
carriage, the Regional Transport Authority can attach to the permit one or
more of the conditions specified therein. Clause (vii) is the condition regarding
G the maximum number of passengers that may be carried in a stage carriage.
Overloading also invites a consequence which can be termed penal. Section
86 of the Act provides for cancellation of a permit if any condition contained
in the permit is breached. Therefore, the apparent wide words of Section
147(1}(b)(ii} of the Act have to be construed harmoniously with the other
provisions of the Act, namely, Sections 58 and 72 of the Act.
H (Para 12) [87-G-H; 88-A-CI
NATIONAL INSURANCE CO. LTD. v. AN JANA SHY AM 81
1.4. The expression 'any passenger' must be understood as passenger A
authorized to be carried in the vehicle and 'use of the vehicle' as permitted
use of the vehicle. Affording of insurance for more number of passengers
than permitted, would be illegal since in that case the manifest intention would
be the overloading of the vehicle, something not contemplated by law. Thus, it
is not possible to accept a contention that the insurance can be taken to cover B
more passengers than permitted by the certificate of registration and the
permit as a stage carriage and that it will cover all the passengers overloaded.
(Para 12( (88-D-F)

Queen v. Eduljee Byramjee, (1846) 3 MIA 468, referred to.

1.5. The insurance taken out for the number of permitted passengers C
can alone determine the liability of the insurance company in respect of those
passengers. In terms of Section 149 of the Act, the duty of the insurer is
only to satisfy judgments and awards against persons insured in respect of
the third party risk. Obviously, this is to the extent the third party risk is
coverable and is covered. (Para 13( (88-G) D
1.6. Section 149 could not be understood as compelling an insurance
company to make payment of amounts covered by decrees not only in respect
of the number of persons covered by the policy itself but even in respect of
those who are not covered by the policy and who have been loaded into the
vehicle against the terms of the permit and against the terms of the condition E
of registration of the vehicle and in terms of violation of a statute.
(Para 13) (88-H; 89-A-B)

2.1. It is true that the provisions in Chapter XI of the Act are intended
for the benefit of third parties with a view to ensure that they receive the fruits
of the awards obtained by them straightaway with an element of certainty and F
not to make them wait for a prolonged recovery proceeding as against the
owner of the vehicle. But from that, it would not be possible to take the next
step and find that the insurance company is bound to cover liabilities not
covered by the contract of insurance itself. The Act only imposes an obligation
to take out insurance to cover third party risks and in the case of stage G
carriages, the passengers to be carried in the vehicle and the passengers to
be carried in the vehicle can be understood only as passengers authorized or
permitted to be carried in the vehicle. (Para 14( (89-C-D)

2.2. The insured is covered only to the extent of the passengers permitted
H
82 SUPREME COURT REPORTS (2007] 9 S.C.R.

A to be insured or directed to be insured by the statute and actually covered by
the contract. The High Court has considered only the aspect whether by
overloading the vehicle, the owner had put the vehicle to a use not allowed by
the permitunder which the vehicle is used. This aspect is different from the
aspect of determining the extent of the liability of the insurance company in
respect of the passengers of a stage carriage insured in terms of Section
B 147(l)(b)(ii) of the Act. The insurance company can be made liable only in
respect of the number of passengers for whom insurance can be taken under
the Act and for whom insurance has been taken as a fact and not in respect
of the other passengers involved in the accident in a case of overloading.
!Para 15) 189..:F-H; 90-AJ
c 2.3. There is no means of ascertaining who out of the overloaded
passengers constitute the passengers covered by the insurance policy as
permitted to be carried by the permit itself. However, the purpose of the Act
is to bring benefit to. the third parties who are either injured or dead in an
accident. It serves a social purpose. Keeping that in mind, the practical and
D proper course would be to hold that the insurance company, in such a case,
would be bound to cover the higher of the various awards and will be compelled
to deposit the higher of the amounts of compensation awarded to the extent of
the number of passengers covered by the insurance policy.
(Para 16) (90-B-C)

E 2.4. The liability of the insurance company would be to pay the
compensation awarded to 42 out of the 90 passengers. It is to ensure that the
maximum benefit is derived by the insurance taken for the passengers of the
vehicle, that the 42 awards to be satisfied by the insurance company would be
the 42 awards in the descending order starting from the highest of the awards.
F [Para 16) (90-D-F)

2.5. It will be for th_e Tribunal thereafter to direct distribution of the
money so deposited by the insurance company proportionately to all the
claimants, here all the 90, and leave all the claimants to recover the balance
from the owner of the vehicle. In such cases, it will be necessary for the
G Tribunal, even at the initial stage, to make appropriate orders to ensure that
the amount could be recovered from the owner by ordering attachment or by
passing other restrictive orders against the owner so as to ensure the
satisfaction in full of the awards that may be passed ultimately.
(Para 16) 190-F-GJ

H
NATIONAL INSURANCE CO. LTD. 11. ANJA NA SHYAM [BALASUBRAMANYAN, J.] 83
3. This Court has not issued notices to the claimants. Therefore, the A
decision of the High Court as regards the claimants is not varied. But, the
law on the question has been clarified and the insurance company is granted
a decree to recover the excess amount that it has deposited, from the owner,
who has been issued notice and who has contested these appeals. Obviously,
the principle indicated by this Court here will have to be applied by the· B
Tribunal in the case from which the appeal against the interim award has
been filed by the insurance company. (Para 171(90-H;91-AI

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 2422-2459 of
2001.

From the final Judgment and Order dated 28.12.99 of the High Court of
c
Himachal Pradesh at Shimla in FAO Nos. 345, 325, 328, 329, 330, 331, 332, 333,
334, 335, 336, 337, 338, 339, 342, 343, 344, 346, 347, 348, 349, 396 & 397of1997,
134, 135, 136, 137, 138, 139, 140, 141, 142, 143, 144, 145, 300, 301and335 of
1999.
D
WITH

C.A. Nos. 5992-6026 of2002, 4288 of2006 & 3824 of2007.

M.K. Dua, Kishore Rawat, Dr. Manish Singhvi (for P.V. Yogeshwaran),
Atul Nanda and Charu Singhal (for Mis. Law Associates) for the Appellant. E
J.S. Mehta, Balraj Dewan, Subhash Sharma, Aishwarya Bhati and Krishna
Mohansha (for K.S. Bhati) for the Respondents.

The Judgment of the Court was delivered by
F
P.K. BALASUBRAMANYAN, J. 1. Delay condoned and leave granted
in SLP(C) No. 14167 of2001.

2. A bus bearing registration No. HP-06-1245, owned by the Tehsil
Cooperative Union and· insured with the appellant met with an accident on
4.3 .1996. The vehicle had a carrying capacity of 42 passengers, one driver and G
one c;onductor and in terms of Section 147(l)(b)(ii) of the Motor Vehicles Act
(here'!nafter "the A~t") was .insured for the 42 passengers. It goes without
saying that the route permit of.the vehicle was for carrying 42 passengers
other than the driver and the conductor.

H
84 SUPREME COURT REPORTS [2007] 9 S.C.R.

A 3. On the day of the accident, the materials indicate that the bus was
overloaded. There were at least 90 passengers. The bus fell off the road into
a nullah leading to the death of 26 including the one who was driving the
vehicle and injuring 63 persons. The legal representatives of the deceased
and the injured, all approached the Motor Accident Claims Tribunal claiming
B c-ompensation and seeking its adjudging on applications made under Section
166 of the Motor Vehicles Act, 1988. The claim was resisted by the owner,
the insured and by the insurance company. The insurance company mainly
contended that the bus was overloaded; that it was being driven not by an
authorized driver at the time of the accident; and that the insurance company
had no liability. Alternatively, it was sought to be pleaded that the owner
C having permitted the vehicle to be overloaded had committed a fundamental
breach of the contract of insurance and therefore the insurance company
could repudiate the policy and hence was not liable for the compensation that
may be adjudged. The Tribunal had brushed aside these objections and
passed various awards on the various claims and made the insurance company
D liable for paying the amounts covered by all the awards exceeding the 42
covered by the insurance. Feeling aggrieved, the insurance company filed 38
appeals challenging the awards. In the appeals, an application was made
seeking impleadment of the State of Himachal Pradesh. This was on the basis
that the authorities under the State had failed to check the overloading of the
bus and it was due to the negligence of the authorities of the State in not
E checking overloading and adherence to the conditions of the permit by the
owner of the vehicle and the relevant provisions of the Act that the accident
had occurred and hence the State must be found to be liable in contributory
negligence and for that purpose it was just and necessary to imp lead the State
as a party to the proceedings. An amendment of the written statement of the
F company was also sought for to introduce the plea that the bus carried 90
passengers at the time of the accident as against the sitting capacity of 42 .>'

including the driver and the. conductor and in that situation the liability
should be apportioned between the insurance company, the owner and the
State and the insurance company could be found liable only to the extent of
the insurance it had provided and it was bound to provide in terms of Section
G 147 of the Act and in terms of the conditions of the permit held by the owner
of the bus. The Insurance Company also sought permission to raise other
contentions which were not normally open to it, by invoking Section 170 of
the Act. The High Court taking the view that overloading of the bus which
had a permit to ply on the route with only 42 passengers, did not amount to
H violation of the route permit or any other law for which the State Government
+-
/

NATIONAL INSURANCE CO. LTD. v. ANJANA SHY AM [BALASUBRAMANY AN, J.] 85

,.
could be held to be contributorily negligent and that the insurance company A
was liable to pay the amounts as awarded by the Tribunal since it could not
also question the quantum of compensation awarded. Thus, the High Court
dismissed the appeals filed by the insurance company. It also dismissed the
three appeals filed by three different claimants seeking enhancement of
compensation in their respective cases. The insurance company has filed Civil B
Appeal Nos.242i-2459 of 200 l challenging the decision of the High Court.

4. In the accident giving rise to C.A. Nos.5992-6026/2002, the vehicle
had only the capacity to carry 42 passengers but at the time of the accident,
there were 70 passengers in the bus. The stand of the insurance company is
that only 42 passengers were insured and they cannot be compelled to meet C
the award beyond the contract of insurance itself. The appeals actually
challenge only the interim awards made in respect of the claims, even beyond
the insured 42.

5. In the accident giving rise to C.A. No.4288/2006 the vehicle was
insured for 38 passengers and two more including the driver and the conductor. D
There were more than 70 passengers at the time of the accident. The insurance
company contends that its liability is limited to the cfaim of 38 passengers.

6. In the civil appeal arising from SLP(C) 14167 of2001, the claim was
one arising out of the accident that has given rise to Civil Appeal Nos.2422-
2459/2001. The appeal before the High Court was disposed of in the light of E
the earlier judgment from out of which C.A. Nos. 2422-2459 have arisen.

7. Learned counsel for the insurance company did not pursue his
argument before us that overloading the bus was a breach of a specified
condition of the insurance in that it was a user of the insured vehicle for a
purpose not allowed by the permit under which the vehicle is used where the F
vehicle is a transport vehicle. His only contention in all these appeals was
that the insurance company having insured 42 passengers in two of the cases
and 38 passengers in another, the liability of the insurance company cannot
be enlarged and the liability is confined only to the 42 passengers insured.
It was submitted that there is nothing in the Act which justifies the imposing G
of the liability on the insurance company in respect of persons who were not
at all covered by the insurance policy and in respect of whom there was no
obligation on the owner of the vehicle to take coverage of insurance in terms
of Section 147 of the Act. Counsel submitted, however much we may keep
in mind that the relevant provisions of the Motor Vehicles Act are for the
H
86 SUPREME COURT REPORTS (2007} 9 S.C.R.

A benefit of third parties or passengers of a transport .vehicle injured in an
accident, the same did no~ contain any provision which could enlarge the
liability of the insurance company compelling it to cover more persons than
it had contracted to cover.

8. Counsel for the respondents in these appeals submitted that the
B victims of an accidents are not to be driven to chase the mirage of recovery
of compensation or damages from the owner of the vehicle and it is to ensure
that the victims are paid compensation, whatever might be the inter se rights
and obligations of the owner of the vehicle a,nd the insurance company, that
the relevant provisions are made~ Counsel reHed on Section 149 of the Act
C to contend that once an award. is passed, it was the duty of the insurer to
satisfy the judgment and award and viewed from .that angle, the insurance
company was bound to pay the victims the entire amount covered by the
various awards.

9. Before us, there were attempts by learned counsel for the insurance
D company to suggest the adoption of a fo~ula in cases of ovet;.loaded
vehicles meeting with the. accidents .and mor€? people than those covered by
the policy getting killed or injured. Counsel for the respondent submitted that
that was not an acceptable formula and it w~ not practicable to adopt the
same. We shall consider that aspect et a later stage if it becomes necessary.

E IO. Under Section 146 of the Motor Vehicles Act, 1988, no vehicle can
be plied on the road without taking out an insurance against third party risk.
Section 147(l)(b)(ii) provides that in order to comply with the requirements
of Chapter XI of the Act, a policy of insurance must be a policy which insures
persons or classes of persons, specified in the policy to the extent specified
F in sub-section ~(2) of that Section against the death of 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. The limit in tenns of Section 147(2)(a) of the Act
is the amount of liability incurred. Under Section 149(1) of the Act, the ·
insurance -company has the obligation, subject to the provisions of that
Section, to satisfy the decree or award ma~e by. the concerned court or
G Tribunal on claims by third parties; s~ction 149(2) of the Aet provides that.
no sum shall be payable by an insurer unless, notice of the proceedings had
been given to the insurance company before the commencement of the
proceedings through the court or the Claims; Tribunal, and that. it shall not
be liable if there has been a breach of a specified condition of the policy as
H indicated in that sub-section. These cover use of the vehicle for hire or reward
NATIONAL INSURANCE CO. LTD. v. AN JANA SHYAM [BALASUBRAMANYAN, J.) 87

where the vehicle is on the date· of the contract of insurance a vehicle not A
covered by a pennit to ply for hire or reward, or use for organized racing and
speed testing, or use for a purpose not allowed by the pennit under which
the vehicle is used where the vehicle is a transport vehicle, or use without
side-car being attached where the vehicle is a motor cycle, or there is a breach
of a condition excluding driving by a named person or persons or by any
person who is not duly licensed, or by any person who has been disqualified B
for holding or obtaining a driving licence during the period of disqualification,
or a condition excluding· liability for injury caused or contributed to by
conditions of war, civil war, riot or civil commotion, or that the policy is void
on the ground that it was obtained by the non-disclosure of a material fact
or by a representation of fact which was false in some material particular. C
Under sub-section (5), it is provided that if the amount which an insurer
becomes liable to pay under thi-s Section in respect of a liability incurred by
a person insured by a policy exceeds the amount for which the insurer would,
apart from the provisions of this Section be liable under the policy in respect
of that liability, the insurer shall be entitled to recover the excess from that
person. Therefore, on the scheme of the Act, the insurance company, if it is D
not able to establish that there is a fundamental breach of a condition which
would enable it to disclaim liability, it may have to pay the amount of
compensation adjudged by a Claims Tribunal subject of course to its rights
to recover from the insured, the owner of the vehicle such excess as it is
obliged to pay. E
11. Section 149 of the Act speaks of the judgment or award in respect
of the liability as is required to be covered by a policy under clause (b) of
sub-section (I) of Section 147 of the Act having to be satisfied. Section
147(1)(b) col!lpels insuring the person or classes of persons specified in the
policy to the extent specified in sub-section (ii) of that Section. The case on F
hand will come under sub-clause (ii) of clause (b) of Section 147 (I) of the
Act which obliges the owner to take out insurance compulsorily against the
death of 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.

12. Section 58 of the Act makes special provisions in regard to transport G
vehicles. Sub-Section (2) provides that a registering authority, when registering
a transport vehicle, shall enter in the record of registration and in the certificate
of registration various particulars. Clause (d) provides that if the vehicle is
used or adapted to be used for carriage of passengers, the number of
passengers for whom accommodation is provided. Thus the registration of H
88 SUPREME COURT REPORTS [2007] 9 S.C.R.

A the vehicle, which alone makes it usable on the road, records the number of
passengers to be carrie.d and the certificate of registration also contains that
entry. So, an insurance company insuring the passengers carried in a vehicle
in tenns of Section 147(1){b)(ii) of the Act, can only insure such.number of
passengers as are shown in the certificate of registration. The position is
reinforced by Section 72 of the Act, which deals with. grant of stage carriage
B permits. Sub-Section (2) proYides that when a permit is decided to be granted
for a stage carriage, the Regional Transport Authority can attach to the pennit
one or more of the conditions specified therein, Clause (vii) is the condition
regarding the maximum number of passenge~s that may be carried in a stage
carriage. Overloading also invites a consequence which can be tenned penal.
C Section 86 of the Act provides for cancellation of a permit if any condition
contained in the permit is breached. Therefore, the apparent wide words of
Section 147(1)(b)(ii) of the Act have to be construed hannoniously with the
other provisions of the Act, namely, Sections 58 and 72 of the Act. As early
as in 1846, Dr. Lushington in Queen v. Eduljee Byramjee [(1846) 3 MIA 468]
posited that to ascertain the true meaning of a clause in a statute the court
D must look at the whole statute, at what precedes and at what succeeds and
not merely at the clause itself. This Court has accepted this approach in
innumerable cases. Thus, the expression 'any passenger' must be understood
as passenger authorized to be carried in the vehicle and .'use of the vehicle'
as permitted use of the vehicle. Affording of insurance for more number of
E passengers than permitted, would be illegal since in that case the manifest
intention would be the overloading of the vehicle, something not contemplated
by law. Thus, it is not possible to accept a contention that the insurance can
be taken to cover more passengers .than permitted by the certificate of
registration and the permit as a stage carriage and that it will cover all the
passengers overloaded. Of course, in these cases, there is no dispute that the
F insurance cover took in only the pennitted number of passengers.

13. In this situation, the insurance taken out for the number ofpennitted
passengers can alone determine the liability of the insurance company in
respect of those passengers. In terms of Section 149 of the Act, the duty of
G the insurer is only to satisfy judgments and awards against persons insured
in respect of the third party risk. Obviously, this is to the extent the third party
risk is coverable and is covered. Section 149 of the Act speaks of judgment
or award being obtained against any person insured by the policy and the
·liability of the insurer to pay to the person entitled to the benefit of the decree
any sum not exceeding the sum assured payable thereunder subject to any
H claim the insurer may have against the owner of the vehicle. Section 149 could
NATIONAL INSURANCE CO. LTD. v. ANJANA SHY AM [BALASUBRAMANY AN, J.] 89
not be understood as compelling an insurance company to make payment of A·
amounts covered by decrees not only in respect of the number of persons
covered by the policy itself but even in respect of those who are not covered
by the policy and who have been loaded into the vehicle against the terms
of the permit and against the terms of the condition of registration of the
vehicle and in terms of violation of a statute.
B
14. It is true that the provisions in Chapter XI of the Act are intended
for the benefit of third parties with a view to ensure that they receive the fruits
of the awards obtained by them straightaway with an element of certainty and
not to make them wait for a prolonged recovery proceeding as against the
owner of the vehicle. But from that, it would not be possible to take the next C
step and find that the insurance company is bound to cover liabilities not
covered by the contract of insurance itself. The Act only imposes an obligation
to take out insurance to cover third party risks and in the case of stage
carriages, the passengers to be carried in the vehicle and the passengers to
be carried in the vehicle can be understood only as passengers authorized
or permitted to be carried in the vehicle. D
15. In spite of the relevant provisions of the statute, insurance still
remains a contract between the owner and the insurer and the parties ;ire
governed by the terms of their contract. The statute has made insurance
obligatory in public interest and by way of social security and it has also
provided that the insurer would be obliged to fulfil his obligations as imposed E
by the contract and as overseen by the statute notwithstanding any claim he
may have against the othe.r contracting party, the owner, and meet the claims
of third parties subject to the exceptions provided in Section 149(2) of the
Act. But that does not mean that an insurer is bound to pay amounts outside
the contract of insurance itself or in respect of persons not covered by the F
contract at all. In other words, the insured is covered only to the extent of
the passengers permitted to be insured or directed to be insured by the .
statute and actually covered by the contract. The High Court has considered
only the aspect whether by overloading the vehicle, the owner had put the
vehicle to a use not allowed by the permit under which the vehicle is used.
This aspect is different from the aspect of determining the extent of the G
~ liability of the insurance company in respect of the passengers of a stage
carriage insured in terms of Section 147(1Xb)(ii) of the Act. We are of the view
that the insurance company can be made liable only in respect of the number
of passengers for whom insurance can be taken under the Act and for whom
insurance has been taken as a fact and not in respect of the other passengers H
90 SUPREME COURT REPORTS [2007] 9 S.C.R.

A involved in the accident in a case of overloading.

16. Then arises the question, how to determine the com_pensation
payable or how to quantify the compensation since there is no means of
ascertaining who out of the overloaded passengers constitute the passengers
covered by the insurance policy as permitted to be carried by the permit itself.
B. As this Court has indicated, the purpose of the Act is to bring benefit to the
third parties who are either injured or dead in an accident. It serves a social
purpose. Keeping that in mind, we think that the practical and proper course
would be to hold that the insurance company, in such a case, would be bound
to cover the higher of the various awards and will be compelled to deposit
C the higher of the amounts of compensation awarded to the extent of the
number of passengers covered by the insurance policy. Illustratively, we may
pu~ it like this. In the case on hand, 42 passengers were the permitted
passengers and they are the ones who have been insured by the insurance
company. 90 persons have either died or got injured in the accident. Awards
have been passed for varied sums. The Tribunal should take into account,
D the higher of the 42 awards made, add them up and direct the insurance
company to deposit that lump sum. Thus, the liability of the insurance
company would be to pay the compensation awarded to 42 out of the 90
passengers. It is to ensure that the maximum benefit is derived by the insurance
taken for the passengers of the vehicle, that we hold that the 42 awards to
E be satisfied by the insurance company would be the 42 awards in the
descending order starting from the hig_hest of the awards. In other words, the
higher of the 42 awards will. be taken into account and it would be the sum
total of those higher 42 awards that would be the amount that the insurance
company would be liable to deposit. It will be for the Tribunal thereafter to
direct distribution of the money so deposited by the insurance company
F proportionately to all the claimants, here all the 90, and leave all the claimants
to recover the balance from the owner of the vehicle. In such cases, it will
be necessary for the Tribunal, even at the initial stage, to make appropriate
orders to ensure that the amount could be recovered from the owner by
ordering attachment or by passing other restrictive orders against the owner
G so as to ensure the satisfaction in full of the awards that may be passed
ultimately.

17. In these cases, we find that th is Court has not issued notices to the
claimants. We are therefore not in a position to vary the decision of the High
Court as regards the claimants. But, we have clarified the law on the question
H and we grant the insurance company a decree to recover the excess amount
NATIONAL INSURANCE CO. LTD. v. ANJANA SHY AM [BALASUBRAMANYAN, J.] 91

that it has deposited, from the owner, who has been issued notice and who A
has contested these appeals. Obviously, the principle indicated by us here
will have to be applied by the Tribunal in· the case from wi1ich the appeal
against the i!1terim award has been filed by the insurance company.

18. Thus, the appeals are allowed to the extent indicated above. There
will be no order as to costs. B
S.K.S. Appeals partly allowed.

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