Holding

The proviso to Section 147(2) of the Motor Vehicles Act, 1988 does not limit the insurer’s liability to the amount specified in the old‑act policy; the insurer is liable for the full compensation under the New Act.

Summary

National Insurance Company Ltd. issued a motor vehicle insurance policy under the Motor Vehicles Act, 1939, which was in force when the Motor Vehicles Act, 1988 came into effect. A bus insured under this policy met with an accident after the new Act commenced, resulting in a death claim. The insurer argued that the proviso to Section 147(2) of the 1988 Act limited its liability to the Rs 15,000 per passenger prescribed under the old Act, while the claimants and the High Court held that the insurer was liable for the full compensation. The Supreme Court examined the meaning of the phrase “with any limited liability and in force” and the effect of the repeal provision in Section 217(2)(c). It held that the proviso merely extended the validity of existing statutory policies and did not cap the insurer’s liability to the old‑act limits. Consequently, the insurer’s liability is governed by Section 147(2)(a) of the 1988 Act, and the appeal was dismissed, upholding the High Court’s award of full compensation.

Issues considered

The scope and import of the proviso to sub‑section (2) of Section 147 of the Motor Vehicles Act, 1988, particularly whether it limits an insurer’s liability to the amount specified in a policy issued under the Motor Vehicles Act, 1939.
Whether the proviso to Section 147(2) can be read as a proviso to Section 217(2)(c) of the 1988 Act, thereby affecting the effect of the repeal of the old Act.
The applicable law governing the insurer’s liability for an accident occurring after the commencement of the 1988 Act but before the expiry of a policy issued under the 1939 Act.

Legislation cited

Motor Vehicles Act, 1939s. 95(2)
Motor Vehicles Act, 1988s. 147(2), s. 217(2)(c)
Workmen's Compensation Act, 1923

Subjects

Motor Vehicles Actinsurance liabilitystatutory policyrepealinterpretation of statutesprovisosection 147section 95section 217accident compensationpolicy of insurancelimited liability

Judgment

A NATIONAL INSURANCE COMPANY LTD.
v.
BEHAR! LAL AND ORS.

AUGUST 28, 2000

B [SYED SHAH ,MOHAMMED QUADRI AND Y.K. SABHARWAL, JJ.)

Motor Vehicles Act 1988, (New Act) s.147(2) Proviso-Motor Vehicles
Act, 1939, (Old Act) s.95F(2)-Scope and import of phrase "with any limited
liability and in force" occurring in proviso-Bus insured with appellant
C meeting with accident resulting in death of one passenger-Policy valid from
October 28, 1988 to October 27, 1989-Policy continuing to be valid under
proviso to s.147(2) of New Act coming into force on July 1, 1989-Tribunal
allowing claim of legal heirs against owner and driver to the extent of Rs.
1,50,000 but limiting liability of appellant insurance company to Rs. 15,000
under Old Act-High Court allowing appeal by owner and driver and holding
D that liability of appellant was co-extensive with that of the owner and driver-
Held, liability of the appellant was governed by s.147(2)(a) of the New Act,
viz., the liability actually incurred, and not under s.95(2) of the Old Act; the
proviso to s.147(2) of the New Act did not limit the liability of appellant to
amount specified in policy issued under the Old Act.
E Interpretation of Statutes-Repeal-Effect of-Motor Vehicles Act 1988,
(New Act) s.217(1) repealing Motor Vehicles Act 1939, (Old Act)-s.217(2)(c)
of New Act providing that notwithstanding repeal, any document referring to
the Old Act shall be construed as r~ferring to the New Act-Held, proviso to
s.147(2) could not be read as proviso to s.217(2)(c) so as to limit the liability
F of the insurance company to amount mentioned in s.95(2) of Old Act.

Under the proviso to sub-section (2) of s.147 of the Motor Vehicles
Act, 1988 ('New Act'), a policy of insurance issued under the Motor
Vehicles Act, 1939 ('Old Act') "with any limited liability and in force"
immediately before the commencement of the New Act (i.e. July 1, 1989)
G shall continue to be effective for a period of four months after such com-
mencement or till the date of the expiry of such policy whichever is earlier.
S.217(2)(c) of the New Act provided that notwithstanding repeal, any
document referring to the Old Act or provisions thereof shall be construed
as referring to the New Act or corresponding provisions thereof.

H The appellant issued a policy in favour of respondent No.l, owner of
698
NATIONAL INSURANCE CO. v. BEHAR! LAL 699
a bus, under the Old Act valid for one year from October 28, 1988 to A
October 27, 1989. The bus while being driven by respondent No. 2 met
with an accident which resulted in the death of one passenger whose heirs
filed a claim before the Motor Accident Claims Tribunal ('Tribunal').

The appellant contested the claim, inter a/ia, on the ground that its
liability under the terms of the policy issued under the Old Act and the
B
provisions of the New Act, was limited to only Rs. 15,000 per passenger
travelling in the bus. The Tribunal held that the claimants were entitled to
compensation of Rs. 1,50,000 from respondents 1 and 2 and that the
liability of the appellant was limited to Rs. 15,000.

\
)
The High Court allowed the appeal filed by respondents 1 and 2
holding that the liability of the appellant was co-extensive with that of
respondents 1 and 2 and thus modified the award of the Tribunal.
c

J Dismissing the appeal, the Court

HELD : 1.1. The proviso to s.147(2) did not limit the liability of
insnram;e companies to payment of compensation to the extent specified in
D

the policy of insurance in terms of s.95(2) of the Old Act which was in force
before the commencement of the New Act or till the date of expiry of such
a policy, whichever was earlier. [706-E] E
1.2. The proviso to s.147(2) could not be so interpreted as to subject
the insurance companies to flifferent maximum liabilities under statutory
policies in respect of accidents occurring during the same period. Having
fixed a date for enforcement of the New Act incorporating the requirement
of a statutory policy under s.147(1) thereof, the effect of the provision F
could not have been whittled down during the period which may vary from
one day to four months depending upon when the existing policy expired
within the said period of four months. It merely indicated the span of
validity of existing policy. [705-D-E]
G
New India Assurance Company v. Satpal Singh, [2000] 1 SCC 237 and
Padma Srinivasan v. Premier Insurance Company Ltd., [1982] 1 SCC 613,
referred to.

Kacharabhai L. Limbachia v. Ratansinh J. Rathod-Patelia, (1998) 1
A.C.J. 326 and National Insurance Company Ltd. v. Puja Roller Flour Mills H
700 SUPREME COURT REPORTS [2000] SUPP. 2 S.C.R.
A (Pvt.) Ltd., (1997) 2 Vol.116 P.L.R.199, approved.

New India Assurance Co. Ltd. v. Paramu, (1990) 2 K.L.T. 645, distin-
guished

2.1. The phrase "with any limited liability and in force" in the
B proviso to s. 147(2) meant a statutory policy under the Old Act with the
limit prescribed therein which was valid immediately before the com-
mencement of the New Act. The phrase was not employed to limit the
liability of an insurance company to the amount specified in the policy by
{
(
virtue of s. 95(2) of the Old Act either for a period of four months or for a
c lesser period during which the policy was valid. [704-F]

2.2. The proviso to s.247(2) could not be read as a proviso to s.217(2)
of the New Act and it did not, in the case of the existing policy in force on

L
the date of occurrence of the accident, limit the liability of the Insurance
Company to the amount mentioned in s.95(2) of the Old Act. [706-D]
D
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4807 of 2000.

From the Judgment and Order dated 29.5.97 of the Rajasthan High Court
in S.B.C.M.A. No. 682 of 1996.
E
Jitendra Sharma, Parmanand Gaur, P.N. Jha, Dr. Sushi! Bal wada, Devendra
Singh, Srilok N. Rath and Shree Pal Singh for the appearing parties.

The Judgment of the Court was delivered by

F SYED SHAH MOHAMMED QUADRI, J. Leave is granted.

This appeal is from the judgment and order of the High Court of Rajasthan
at Jaipur dated May 29, 1997 allowing Civil Misc. Appeal No.682 of 1996 filed
by respondents 1 and 2 herein. The point that arises for consideration is the
scope and import of the proviso to sub-section (2) of Section 147 of the Motor
G Vehicles Act, 1988 (for short, 'the New Act').

The appellant (hereinafter referred to as, 'the Insurance Company')
issued a policy in favour of the first respondent (Behari Lal), owner of the bus
bearing registration No.R.J.P. 4719. The policy of insurance, issued under the
H provisions of the Motor Vehicles Act, 1939 (for short, 'the Old Act'), was valid
NATIONAL INSURANCE CO. v. BEHAR! LAL [QUADRI, J.] 701
for one year - from October 28, 1988 to October 27, 1989. The said bus, while A
being driven by respondent No.2, met with an accident which resulted in the
.. death of one passenger - Shiv Bhagwan and injuries to the other passengers
travelling therein. Respondent Nos.3 to 8, heirs of the said Shiv Bhagwan,
filed a petition b~fore the court of Additional District Judge, Khetri, Rajas than
- the Motor Accident Claims Tribunal (for short, 'the Tribunal'), claiming
B
compensation of Rs.14,14,000 from respondent Nos.l and 2 (being the owner
and the driver of the bus) and the Insurance Company as the insurer. The
Insurance Company contested the claim, inter alia, on the ground that its
liability under the terms of the policy issued under the Old Act and the
provisions of the New Act, was limited to only Rs.15,000 per passenger
travelling in the bus. On June 1, 1996, the Tribunal held that respondent Nos.3 C
to 8 were entitled to compensation of Rs.1,50,000 from respondent Nos.l &
2 and that the liability of the Insurance Company was limited only to Rs.15,000.
Respondent Nos. l & 2 filed appeal before the High Court challenging that part
of the order of the Tribunal, which limited the liability of the Insurance
Company. On May 29, 1997 a learned Single Judge of the High Court allowed D
the appeal holding that the liability of the Insurance Company is co-extensive
with that of respondent Nos. l & 2 herein and thus modified the Award of the
Tribunal. It is from that order of the High Court, the Insurance Company is in
appeal before us.

Mr. Jitendra Sharma, learned senior counsel appearing for the Insurance E
Company, contended that in view of the proviso to sub-section (2) of Section
147 of the New Act, the liability of the Insurance Company is limited only to
Rs.15,000 per passenger as the existing policy was issued under Section 95(2)
of the Old Act, therefore, the High Court erred in law in modifying the Award
of the Tribunal. F
Dr. Sushi! Balwada, learned counsel appearing for the respondents, has
submitted that under the New Act the liability of the Insurance Company is
unlimited; the existing policy which was issued under the Old Act and was
valid beyond the period of four months from coming into force of the New Act
was kept alive within that period by the proviso but it did not limit the liability G
of the Insurance Company to the amoµnt mentioned in the policy in accordance
with the terms of Section 95(2) of the Old Act.

In the light of the above contentions and the relevant provisions of the
New Act, we shall examine the scope of the proviso to sub-section (2) of H
702 SUPREME COURT REPORTS [2000] SUPP. 2 S.C.R.
A Section 147 of the New Act. Insofar as the provisions of the Section 147 are
relevant for purposes of the present discussion, they are set out hereunder :

"CHAPTER XI

147. Requirements of policies and limits of liability -
B
(!)In order to comply with the requirements of this Chapter, a policy
of insurance must be a policy which -

(a) is issued by a person who is an authorised insurer; and

c (b) insures the person or classes of persons specified in 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 representa-
D tive carried in the vehicle) or damage to any 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 arising out of the use
E 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
F
by the policy or in respect of bodily injury sustained by such an
employee arising out of and in the coun;e 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 conductor of the
vehicle or in examining tickets on the vehicle, or

H (c) if it is a goods carriage, being carried in the vehicle, or
NATIONAL INSURANCE CO. v. BEHAR! LAL [QUADRI, J.] 703
(ii) to cover any contractual liability. A

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 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 B
was not in a public place at the time of the accident, if the act or
omission which led to the accident occurred in a public place.

(2) Subject to the proviso to sub-section (I), a policy of insurance
referred to in sub-section (!), shall cover any liability incurred C
in respect of any accident, up to the following limits, namely :-

(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 D
of rupees six thousand:

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
E
earlier.

(3) to (5) *** *** ***"

A plain reading of sub-section (1) of Section 147 of the New Act shows F
that to comply with the requirements of Chapter XI, it enjoins that a policy of
insurance must be a policy which is issued by an authorised insurer and insures
the person or classes of persons specified in the policy to the extent specified
in sub-section (2), referred to in this judgment as a statutory policy. A statutory
policy covers any liability which the insured person may incur in respect of the
death of or bodily injury to any person, including owner of the goods or his G
authorised representative carried in the vehicle or damage to any property of
a third party caused by or arising out of the use of the vehicle in a public place
and also 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 proviso thereto enumerates the liabilities which are not required to H
704 SUPREME COURT REPORTS [2000] SUPP. 2 S.C.R.
A be covered by a statutory policy.

It is quite clear that sub-section (2) of Section 147 of the New Act directs
that subject to proviso to sub-section (I), a statutory policy shall cover the
amount of liability incurred except in respect of damage to any property of a
third party for which a limit of rupees six thousand is specified. A careful
B
reading of the proviso to sub-section (2) discloses that any policy of insurance,
issued with any limited liability and in force immediately before the com-
mencement of the New 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.
c
Now, a policy of insurance may be a contract policy or a statutory policy.
The proviso does not deal with unlimited liability which an insurer may
undertake under a contract policy. It deals with a statutory policy with limited
liability. The question, which, arises here is : what is the import of the phrase,
"with any limited liability and in force"? To understand the meaning of this
D
phrase, it becomes necessary to refer to Section 95 of the Old Act which deals
with requirements of policies and limits of liability. Under sub-section (2) of
Section 95 a policy of insurance (a statutory policy) was required to cover any
liability incurred in respect of any one accident, in the case of a vehicle in
which passengers are carried for hire or reward or by reason of or in pursuance
E of a contract of employment : (I) in respect of persons other than passengers
carried for hire or reward, a limit of one lakh and fifty thousand rupees in all;
and (2) in respect of passengers a limit of fifteen thousand rupees for each
individual passenger. Therefore, the phrase means a statutory policy under the
Old Act with the limit prescribed therein which was valid immediately before
F the commencement of the New Act. The words are not employed to limit the
liability of an insurance company to the amount specified in the policy by
virtue of the provisions of Section 95(2) of the Old Act either for a period of r

four months or for a lesser period during which the policy is valid. It is argued
by ·Mr.Sharma that by the proviso the liability of the Insurance Company is
limited to the amount mentioned in the existing statutory policy issued under
G the Old Act. We are afraid, we cannot accede to this contention and he can
derive no benefit by relying on the following observation of this Court in New
India Assurance Company v. Satpal Singh & Ors., [2000] I SCC 237 :
c
'The legislature has also taken care of even the policies which were
H in force on the date of commencement of the Act by specifically
NATIONAL INSURANCE CO. v. BEHAR! LAL [QUADRI, J.] 705
providing that any policy of insurance containing any limit regarding A
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, a new insurance policy consistent with the new Act is
required to be obtained."
B
There the question before this Court was with regard to liability of the
Insurance Company in case of death of a gratuitous passenger in the truck
which met with an accident resulting in his death. We cannot read the obser-
vation, quoted above, as laying down the law that the amount specified in the
policy in force on the date of the commencement of the New Act will be C
payable for a period of four months after such commencement or till the date
of expiry of such policy, whichever is earlier.

In our view, the proviso cannot be so interpreted as to subject the,
insurance companies to different maximum liabilities under statutory policies
D
in respect of accidents occurring during the same period. We do not think that
this could be the intention of the Parliament. Having fixed a date for enforce-
ment of the New Act incorporating the requirement of a statutory policy under
Section 147(1) thereof, the effect of the provision could not have been whittled
down during the period which may vary from one day to four months depend-
ing upon when the existing policy expires within the said period of four E
months. It merely indicates the span of validity of existing policy. Here, it is
pertinent to notice the provisions of Section 217(2) of the New Act which deal
with the effect of repeal of the Old Act (under which a statutory policy was
taken}on coming into force of the New Act. Sub-section (1) of Section 217
repeals, inter alia, the Old Act. Clause (c) of sub-section (2), which is relevant, F
provides that notwithstanding the repeal under sub-section (1) of the Old Act
any document, referring to any of the repealed enactments or the provisions
thereof, shall be construed as referring to the New Act or the corresponding
provisions thereof.

In this context, it will be useful to refer to the decision of this Court in G
Padma Srinivasan v. Premier Insurance Company Ltd., [1982] 1 SCC 613 =
(1982) ACJ 191 SC. In that case after the policy was taken under Section
95(2)(a) of the Old Act, it was amended in 1969 so as to increase the liability
of the insurer from Rs.15,000 to Rs.50,000. The accident which gave rise to
the appeal occurred after the amended provision came into force. Chandrachud, H
706 SUPREME COURT REPORTS [2000] SUPP, 2 S.C.R.
A CJ. speaking for a three-Judge Bench observed :

"Since the liability of the insurer to pay a claim under a motor
accident policy arises on the occurrence of the accident and not until
then, one must necessarily have regard to the state of the law obtaining
at the time of the accident for determining the extent of the insurer's
B liability under a statutory policy. In this behalf, the governing factor
for determining the application of the appropriate law is not the date
on which the policy of insurance came into force but the date on which
the cause of action accrued for enforcing liability arising under the
terms of the policy. That we consider to be a reasonable manner in
c which to understand and interpret the contract of insurance entered
into by the insured and the insurer in this case."

We are not persuaded to accept the contention of Mr. Sharma that the proviso,
in question, is incorporated to nullify the effect of that judgment. The proviso
to sub-section (2) of Section 147 cannot be read as a proviso to Section
D 217(2)(c) of the New Act and it does not, in case of the existing policy being
in force on the date of the occurrence of the accident, limit the liability of
the Insurance Company to the amount mentioned in Section 95(2) of the Old
Act.

From the above discussion, it follows that the proviso to sub-section (2)
E of Section 147 does not limit the liability of Insurance Companies to payment
of compensation to the extent specified in the policy of insurance in terms of
Section 95(2) of the Old Act which is in force before the commencement of
. the New Act for a period of four months after commencement of the New Act
or till the date of expiry of such a policy, whichever is earlier. In this view of
F the matter, we endorse the view taken by the Division Bench of the High Court
of Gujarat in Kacharabhai L. Limbachia v. Ratansinh J. Rathod-Patelia &
Ors., [1998] 1 A.CJ. 326 and by the Division Bench of the Punjab & Haryana
High Court in National Insurance Company Ltd. v. Puja Roller Flour Mills
(Pvt.) Ltd. & Ors., [1997] 2 Vol. 116 P.L.R. 199.

G It is, however, submitted that a Division Bench of the Kerala High Court
took a contrary view in New India Assurance Co. Ltd. v. Paramu, (1990) 2
K.L.T. 645. Inasmuch as in that case the policy under which the Insurance
Company was held liable, was issued on May 11, 1983 and was noted to have
expired on March 10, 1984 long prior to coming into force of the New Act and
H the question with which we are concerned here, neither arose nor was it dealt
NATIONAL INSURANCE CO. v. BEHAR! LAL [QUADRI, J.] 707
with in that case, so it has no bearing on the issue. A

In the instant case, the policy was issued on October 28, 1988 and it was
valid up to October 27, 1989. The New Act came into force on July 1, 1989
and the accident occurred on September 4, 1989, after the New Act came into
force but before the expiry of the policy in force. On these facts the liability
of the Insurance Company will be governed by sub-section (2)(a) of Section B
147 of the New Act, namely, the amount of liability incurred but not under
Section 95(2) of the Old Act. The High Court is, therefore, right in allowing
the appeal of the respondents claiming the whole amount of compensation
awarded by the Tribunal from the Insurance Company. We find no merits in
this appeal. It is, accordingly, dismissed with costs. c
S.M. Appeal dismissed.