Holding

The insurer's liability is determined by the law in force on the date the cause of action accrues, i.e., the accident date, so the amended Rs.50,000 limit applies.

Summary

The appellant's husband was killed in a road accident on 5 April 1970 while the truck involved was covered by a statutory insurance policy issued on 30 June 1969. The Motor Vehicles (Amendment) Act 56 of 1969, effective 2 March 1970, raised the insurer's liability limit from Rs.20,000 to Rs.50,000. The Motor Accident Claims Tribunal awarded the appellant Rs.60,000, limiting the insurer's liability to Rs.50,000, but the insurer appealed, arguing that the pre‑amendment limit of Rs.20,000 should apply because the policy was issued before the amendment. The High Court accepted the insurer's view and set aside the award. On appeal, the Supreme Court held that the material date for determining the insurer's liability is the date the cause of action accrues – the date of the accident – and therefore the amended limit of Rs.50,000 applies. The Court restored the Tribunal's award and allowed the appellant's appeal.

Issues considered

The appropriate date for ascertaining the insurer's liability under a statutory motor vehicle insurance policy – whether it is the policy commencement date or the date of the accident (cause of action).
Whether the amendment increasing the liability limit operates retrospectively on policies issued before its commencement.

Legislation cited

Motor Vehicles Act, 1939s. 95(2)(a)
Motor Vehicles (Amendment) Act, 56 of 1969

Subjects

Motor Vehicles Actinsurance liabilitystatutory amendmentretrospective effectcause of actionthird party riskcontract interpretation

Judgment

244

PADMA SRINlVASAN
v.
PREMIER INSURANCE CO. LTD.
B
February 16, 1982.

(Y.V. CHANDRACHUD, C.J., S. MURTAZA FAZAL ALI AND
D.A. DESAI, JJ.]

c Motor Vehicles Act 1939, s. 95(2)(a) as amended by Motor Vehicles ( Amtnd-
ment) Act 56 of 1969-Applicability of.

Accident claim_:_Liabilily of insurer-Material date for ascertainment of
exten.t of liability- Whether date of accident or date of insurance policy.

D' Contract-Contract in accordance with a particular. statute law but not identi-
fying the provision of law-Breach of contract-Determination of quantum of
damages-Law in force on date breach of contract committ~d or law in force on
date contract made.

Section 95 of the Motor Vehicles Act 1939 prescribes the requirements of an
insU.rance policy and the "limits of liability" thereunder. Section 95(2) (a) was
amended by the Motor Vehicles (Amendment) Act 56 of 1969 to provide that the
E
insurer's liability under a policy of insurance be increased from the existing
"twenty·thousand rupees" to "fifty-thousand rupees". The amendtnent came into
force on March 2, 1970.

The appellant's husband, who was driving a scooter was knocked down
dead by a truck on April 5~ 1970. The owner of the truck bad taken a statutory
F insurance policy with the respondent which was operative from June 30, 1969 to
June 29, 1970. l
The appellant. filed an application before the Motor Accident's Claims
Tribunal under section 1lO·A of the Act seeking compensation for her husband's
death. The respondent denied its liability and contested the application The
Tribunal passed an award holding that the appellant was entitled to recover
G compensation in the sum of Rs. 60,000 for self and her children, but limited the
liability of the respondent-insurer to a sum of Rs. 50,000.

The respondent in its appeal to the High Court contended that on the date
on which the insurance policy was issued, its statutory liability was limited to a
H sum Rs, 20,000 only, and therefore the Tribunal was in error in passing an award
against it for a sum of Rs. 50,000. This contention was accepted, and the appeal
was allowed.
PADMA V. PREMIER INSURANCE CO. 245
In the claimant •s appeal to this Court on the question whether the insurer~s A
liability for third party risks under the statutory. policy must be held to be limi-
ted to Rs. 20,000 according to the relevant legal provision as it existed on the
date on which the policy came into force, or wheiher that liability can be extend-
ed to Rs. 50,000 in accordance with f:he legal provision as it stood on the date of
the accident, the accident having occurred during the currency of the policy.

Allowing the appeal,
B

HELD : 1. The material date for ascertaining the extent of liability of the
insurer is the date of the accrual of the cause of action for a claim arising out of
an accident, which in general would be the ~ate of the accident and therefore,
the insurer's Jiability arising out of an accident which happens after March 2,
1970 has to be determined on the basis of the amended provisions of section 95(2)
(a) of the Act, even though the policy of insurance may have been issued prior
c
to th~ date of the amendment, that is, prior to March 2, 1970. [249 G-H; 250A·Bl

2. The governing factor for determiniD.g the application of the appropriate
law is not the da.te on which the policy of insurance came into force, but the
date on which the cause of action accrued foi; enforciD.g liability arising under
the terms of tho policy. [248 G] D
3. The application of a Jaw to facts which came into existence after that
law has come into force does not involve giving retrospective operation to the
law, merely because _the f~cts to which the law is being applied are relatable to
a contract or an instrument whfoh had com~ into ·operation prior to the date on
which the law itself had come into force. [249 E-F) ·
E
4. If the parties to a contract agree that one shall pay to the oiher damages
for breach of contract in accordance ·with the law contained in any particular
· l'tatute without identifying the law as the provision Which is in force on the date
of the contract, the Jaw which will apply for determining the quantum of damages
is the one which is in force on which the breach of contract is committed, that
being 'the date on which the caus~ of action arises, and not the law which was
in force on the d~te on which tbe contract was n1ade. (249 B-C] F
In. the instant case, the insurance policy came into fQrce on June 30, 1969
and. covered the period from June 30, 1969 to June 29, 1970. The amendment by
which the statutory liability of the insurer was increased from Rs. 20,000 to
Rs: 50,000 came into force on March 2, 1970. The accident which gave rise to
these proceedings occurred on April 5, 1970. The extent of the insurer's liability
must therefore be determined by the application of the law introduced by the G
Amendment which had come into force before the date of accident. [248C; 249E]

Sanjiva Shelly S. v. Anantha, [1978] 2 Kamataka Law Journal 227, appro-
ved.
H
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1282
of 1976.
246 SUPREM~ COURT REPORTS [1982) 3 s.C.R.
A From the Judgment and Decree dated the 8th and 9th
January 1976 of the Karnataka High Co~rt in Misc. First Appeal
No. 19 of 1973.

K.N. Bhatt for the Appellant.
B K.C. Dua for the Respondent.

The Judgment of the Court was. delivered by_

CHANDRACHUD, C.J. This appeal by certificate of fitness arises
ont of the judgment of the Karnataka High Court dated January 9,
c 1976 in Misc. First Appeal No. 19 of 1973.

On April 5, 1970, the appellant's husband was driving. a
·scooter, MYL 8574, on the Kasturba Road, Bangalore, when a
goods truck, MYT 3298, knocked him dead. The owner of the
truck had taken a statutory insurance policy with the respondent.
D The Premier Insurance Co. J.,td., Gandhinagar, Bangalore, which
was operative from June 30, 1969 to June 29, 1970. The appellant
filed an application before the Motor Accidents Claims Tribunal,
Bangalore, under section 110-A of the Mo.tor Vehicles Act, 1939,
seeking compensation for her husband's death. The respondent
denied its liability on· the ground, amongst others, that its record
E
did not disclose that it had issued any insurance policy in respect . of
the particular truck. On a consideration of the entire evidence, the
Tribunal passed an award on November 20, I 972, holding that the·
appellant was entitled to recover compensation in t.Jie sum of
Rs. 60,000 for herself and her children. The Tribunal limited the
F liability of the respondent-insurer to a sum of Rs. 50,000.

The respondent filed an appeal in the High Couri contending
that on the date on which the insurance policy was alleged to have
been issued by it, its statutory liability was limited to a sum of
Rs. 20,000 only and, therefore, the Tribunal was in error in passing
G an award against it in the sum of Rs. 50,000. This contention
was accepted by the High Court and hence this appeal by the
claimant.

H Chapter VIII of the Motor Vehicles Act, 1939 (The Act),
bears the heading "Insurance of motor vehicles against third party
risks". By section 94 (I) of the Act, no person can use a motor
PADMA v. PREMIER INSURANCE co. (Chandrachud, C.J.) 247

A
vehicle in a public place, except as a passenger, unless there is in
force in relation to the use of the vehicle a policy of insurance
complying with the requirements of the chapter. Section 95 pres-
cribes the requirements of the insurance policy and the "limits of
liability" thereunder. Broadly, by sub-section (I) of section 95, a
policy of insurance must insure the person or classes of persons B
speeified in the policy to the extent specified in sub-section (2) ·
against any liability which may be incurred by him or them in · res-
pect of the death of or bodily injury to any person caused by or
arising out of the use of the vehicle in a public place. Section 95
(2) (a) of the Act, with which alone we are concerned in this appeal,
was originally cast thus : c
•
"95 (2)-Subject to the proviso to sub-section (I}, a policy
of insurance shall cover any liability incurred in
respect of any one accident upto the following
limits, namely -
D
(a) where the vehicle is a vehicle used or adapted
to be used for the carriage of goods, a limit
of twenty thousand rupees."

This section was amended by Amendment Act I 00 of I 956 E
which, inter alia, introduced therein tho words "in all" after the
words "twenty thousand rupees". We are not concerned with that
amend~t. What we are concerned with is the amendment made
to clause (a) of section 95 (2; by the Motor Vehicles (Amendment)
Act 56 of 1969, which substituted therein the word "fifty" for the
word "twenty". Section 95 (2) (a) so amended reads thus :

"95 (2)-Subject to the proviso to sub-section (I), a policy
of insurance shall cover any liability incurred ·in
respect of any one accident upto the following
limits, namely :- ·
G
(a) where the vehicle is a goods vehicle, a limit
of fifty thousand rupees in all ......."

Thus, the insurer's liability under the statutory policy was increased H
by this amendment from twenty thousand rupees to fifty thousand
~J:Upees. The amendment came into force on March 2i 1970,
248 SUPRllME COURT REPORTS (1982) 3 s.c.R. ·

The question which arises for consideration is whether the
insurer's liability for third party risks under the statutory policy
must be held to be limited to Rs. 20,000 according to the relevant
legal provision as it existed on the date on which the policy came
into force or, whether, that liability can be extended to Rs. 50,000
B in accordance wi i h the legal provision as it stood on the date of the
accident, the accident having occurred during the currency of the
policy. The relevant dates which have to be borne in mind in this
behalf are these : The insurance policy came into force on June 30,
1969 and covered the period from June 30, 1969 to June 29, 1970;
the amendment by which the statutory liability of the insurer was
c increased from Rs. 20,000 to Rs. 50,000 came into force on March 2,
1970, and the accident which gave rise to these proceedings" occurred
on April 5, 1970.

The High Court, in its judgment, has referred to the principles
D governing retrospectivity of statutes and has held by the application
of those principles that the amendment introduced by Amending
Act 56 of 1969 is prospective in nature and cannot be given any
retrospective effect. We consider that. the High Court, with respect,
has· failed to appreciate the true nature of the issue before it. The
certificate of insurance, Exhibit p. 9, which was issued by the
E respondent's agent on May 31, 196Q for the period June 30, 1969 to
June 29, 1970 shows that the respondent-insurer had undertaken
"liability as the one under Chapter VIII of the Motor Vehicles Act,
1939". That must mean liability as determinable und~[,Chapter
VIII at the relevant time, that is to say, at the time· when the
liability arises. Since the liability of the insurer to pay ·a claim
F 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 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
G
came into force but the date on which the cause of action accrued
for enforcing liability arisin~ under the terms of the policy. That
we consider to be a reasonable manner in which to understand and
interpret the contract of insurance entered into by the insured and
H the insurer in this case. The contraeting parties did not incorpo-
rate the provisions of Chapter VIII of the Act in their contract.
That is to say, they di~ not identify the liability of the promisor on
PADMA v. PREMIER INSURANCE co. (Chandrachud, C.J.) 249

the basis of the provisions of Chapter VIII as they stood on the date
when the contract was made. They merely• referred to the provi·
sions of Chapter VIII, which means "the provisions of Chapter VIII
in force at any given time", the given time being the date on which
the right to sue accrues or, correspondingly, the liability arises. If
the parties to a contract agree that one shall pay to the othe.r
damages for breach of contract in accordance with the law contained
in any particular statute, without identifying the law as the provision
which is in force on the date of the contract, the law which will
apply for determining the quantum of damages is the one which
is in force on the date on which the breach of contract is committed,
that being the date on which the cause of action arises, and not the
law which was in force on the date on which the contract was
c
made.

Thus, there is no question here, as the High Court thought,
of giving retrospective operation to the amendment introduced by
Amending Act 56 of 1969, by which the statutory liability of D
the insurer was increased from twenty thousand rupees to fifty
thousand rupees with .effect from March 2, 1970. That
question would have arisen if the accident had happened
prior to that date. The accident having happened on April 5, 1970,
the question as to the extent of the insurer's liability must be deter·
mined by the application of the law)ntroduced by the Amendment E
which had come into force before the date of the accident. The
application of a law to facts which come into existence after that
law has come into force does not involve giving .retrospective
operation to the law, merely because the facts to which the law is
being applied are relatable to a contract or an instrument which had
come into operation prior to the date on which the law itself had F
come into force.

We endorse the view taken by the Full Bench of the Karnataka
High Court in Sanjiva Shetty S. v. Anantha.(1) The Full Bench
overruled the judgment which is under appeal in the instant case
and held that the material date for ascertaining the extent of liability
G
of the insurer is the date of the accrual of the cause of action for
a claim arising out of an accident, which in general would be the
date o{ the accident and therefore, the insurer's liability arising out
of an accident which happens after March 2, 1970, has to be

(!) (1978] 2 Karnataka Law Journal 227,
250 SUPREME COURT REPORTS [1982) 3 s.c.a.

determined on the basis of the amended provisions of section 95 (2)
(a) of the Act,· even •though the policy of insurance may
have been issued prior to the date of the amendment, that is, prior
to March 2, 1970.

For these reasons, we set ·aside the judgment of the High
B Court, restore the award of the Tribunal dated November 20, 1972
and allow the appeal with costs throughout.

N.V.K. Appeal allowed.