UNITED INDIA INSURANCE CO. LTD.versusK.M. POONAM & ORS.

                        [2011] 2 S.C.R. 1026


A              UNITED INDIA INSURANCE CO. LTD.
                                v.
                      K.M. POONAM & ORS.
                 (Civil Appeal No. 1928 of 2011)
                        FEBRUARY 18, 2011
B
         [ALTAMAS KABIR AND CYRIAC JOSEPH, JJ.]

         Motor Vehicles Act, 1988 - ss. 147 and 149 - Motor
    accident - Compensation - Liability of insurer - Insurance
C   policy taken by the owner of the vehicle covering six
    passengers including the driver - Vehicle while driven by
    father of the owner, met with an accident - Passengers in
    excess of the number covered by the insurance policy,
    travelling in the vehicle at the time of accident - Death/injury
D   to the passengers - Claim petitions - Liability of the insurer
    - Held: Is confined to the number of persons covered by the
    insurance policy only and liability to pay the other passengers
    is that of the owner of the vehicle - Persons travelling in the
    vehicle in excess of the permitted number of six passengers,
E   though entitled to be compensated by the owner of the vehicle,
    would still be entitled to receive the compensation amount
    from the insurer, who could recover it from the insured owner
    of the vehicle - There can be no pick and choose method to
    identify the five passengers, excluding the driver, in respect
F   of whom compensation would be payable by the Insurance
    Company - In the interest of justice, Insurance Company
    directed to deposit the total amount of compensation awarded
    to the claimants which would be disbursed to the claimants -
    Insurance Company would be entitled to recover the amounts
G   paid by it, in excess of its liability, from the owner of the
    vehicle, by putting the decree into execution.

        Respondent No. 5-owner of the vehicle obtained an
    insurance policy insuring his jeep with a sitting capacity

H                                1026
    UNITED INDIA INSURANCE CO. LTD. v. K.M.             1027
                POONAM & ORS.

of six persons including the driver, for a certain period.      A
During the said period, the father of respondent No. 5,
drove the insured vehicle carrying fifteen passengers.
The vehicle fell into the ditch resulting in the death of the
respondent's father and the death of the majority of the
passengers while causing serio1.,1s injuries to the             B
remaining passengers. The legal representatives of the
deceased filed a claim petition. The Tribunal awarded
compensation in favour of the claimants holding that
carrying a larger number of passengers than was
permitted in terms of the Insurance policy, did not amount      c
to breach of the terms and conditions of the Policy and
the Insurance Company would still be liable since the
vehicle was legally insured. The High Court upheld the
order passed by the Tribunal, but enhanced the amount
of compensation. Therefore, the appellants filed the            0
instant appeals.
    Disposing of the appeals, the Court
    HELD: 1.1 In order to fix the liability of the insurer,
the provisions of Section 147 have to be read with              E
Section 149 of the Motor Vehicles Act, 1988 which deals
with the duty of the insurer to satisfy judgments and
awards against persons insured in respect of third ~rty
risks. The third party risk in the instant case involves
purported breach of the conditions contained in the             F
insurance agreement executed by and between the
insurer and the insured. [Paras 20 and 22] [1041-E-F;
1040-F]

    1.2. The liability of the insurer is confined to the
number of persons covered by the insurance policy and           G
not beyond the same. In the instant case, since the
insurance policy of the owner of the vehicle covered six
occupants of the vehicle in question, including the driver,
the liability of the insurer would be confined to six
                                                                H
    1028    SUPREME COURT REPORTS               [2011) 2 S.C.R.


A persons only, notwithstanding the larger number of
  persons carried in the vehicle. Such excess 'number of
  persons would have to be treated as third parties, but
  since no premium had been paid in the policy for them,
  the insurer would not be liable to make payment of the
a compensation amount as far as they are concerned.
  However, the liability of the Insurance Company to make
  payment even in respect of persons not covered by the
  insurance policy continues under the provisions of sub-
  section (1) of Section 149 of the Act, as it would be entitled
c to recover the same if it could prove that one of the
  conditions of the policy had been breached by the owner
  of the vehicle. In the instant case, any of the persons
  travelling in the vehicle in excess of the permitted number
  of six passengers, though entitled to be compensated by
0 the owner of the vehicle, would still be entitled to receive
  the compensation amount from the insurer, who could
  then recover it from the insured owner of the vehicle.
  [Para 24) [1042-D-G]
       1.3. In the instant case, the insurance policy taken
E out by the owner of the vehicle was in respect of six
  passengers, Including the driver, travelling in the vehicle.
  The liability of the Insurance Company to pay
  compensation was limited to six persons travelling Inside
  the vehicle only the liability for payment of the other
F passengers In excess of six passengers would be that
  of the owner of the vehicle who would be required to
  compensate the injured or the family of the deceased to
  the extent of compensation awarded by the Tribunal.
  [Paras 25 and 26) [1042-H; 1043-A-B]
G
       1.4. The number of persons to be compensated being
  In excess of the number of persons who could validly be
  carried in the vehicle, the question which arises is one
  of apportionment of the amounts to be paid. Since there
H can be no pick and choose method to Identify the five
    UNITED INDIA INSURANCE CO. LTD. v. K.M.            1029
                POONAM & ORS.

passengers, excluding the driver, in respect of whom A
compensation would be payable by the Insurance
Company, to meet the ends of justice the procedure
adopted in *Baljit Kaur's case is applied. The Insurance
Company is directed to deposit with the Tribunal, the total
amount of compensation awarded to all the claimants B
within the stipulated period and the amou'nts so
deposited be disbursed to the claimants in respect to
their claims. The Insurance Company would be entitled
to recover the amounts paid by it, in excess of its liability,
from the owner of the vehicle, by putting the decree into c
execution. For the said purpose, the total amount of the
six Awards which are the highest would be construed as
the liability of the Insurance Company. After deducting the
said amount from the total amount of all the Awards
deposited in terms of this order, the Insurance Company D
would be entitled to recover the balance amount from the
owner of the vehicle as if it is an amount decreed by the
Tribunal in favour of the Insurance Company. The
Insurance Company would not be required to file a
separate suit in this regard in order to recover the
amounts paid in excess of its liability from the owner of E
the vehicle. [Paras 26 and 27] [1043-D-H; 1044-A-C]

    *National Insurance Co. Ltd. vs. Baljit Kaur (2004) 2 SCC
1 - relied on.
                                                                F
    National Insurance Co. Ltd. vs. Anjana Shyam and Ors.
(2007) 7 SCC 445; National Insurance Co. Ltd. vs. Challa
Bharathamma and Ors. 2004 AIR SCW 5301; New India
Assurance Co. Ltd. vs. Satpal Singh and Ors. (2000) 1 SCC
237; New India Assurance Co. Ltd. vs. Asha Rani and Ors.        G
(2003) 2 SCC 223; National Insurance Company Ltd. vs.
Nicolletta Rohtagi (2002) 7 SCC 456; Mallawwa and Ors. vs.
Oriental Insurance Co. Ltd. and Ors. (1999) 1 SCC 403;
National Insurance Co. Ltd. vs. Swaran Singh (2004) 3 SCC
297 - referred to.
                                                                H
    1030     SUPREME COURT REPORTS                  [2011) 2 S.C.R.


A                         Case Law Reference:
     (2001) 1 sec 445            Referred to        Para 11
     2004 AIR sew 5301           Referred to        Para 12
     (2003) 2 sec 223            Referred to        Para 12, 16, 17
B
     (2002) 1 sec 456            Referred to        Para 12

     (2000) 1 sec 237            Referred to        Para 12, 14, 16,
                                                       17
c    (1999) 1 sec 403            Referred to        Para 16, 17
     (2004) 3 sec 297            Referred to        Para 18
     (2004) 2 sec 1              Relied on          Para 26

D       CIVIL APPELLATE JURISDICTION : Civil Appeal No.
    1928 of 2011.

        From the Judgment & Order dated 25.09.2007 of the High
    Court of Uttarkhand at Nainital, in A.O. No. 311 of 2006.

E                                  WITH

    C.A. Nos. 1929, 1930, 1931, 1932, 1933, 1934 & 1935 of
    2011.

      A.K. De, Keshab Upadhyay, Debasis Misra for the
F Appellant.

        The Judgment of the Court was delivered by

       ALTAMAS KABIR, J. 1. Despite service of notice, none
G of the respondents in these Special Leave Petitions have
  entered appearance or are represented today to contest the
  same. All these Special Leave Petitions involve a common
  question of law as to whether an Insurance Company can be
  held to be liable for payment of compensation to passengers
H travelling in a public transport in breach of the conditions of the
     UNITED INDIA INSURANCE CO. LTD. v. K.M.               1031
       POONAM & ORS. [ALTAMAS KABIR, J.]

permit granted to the owner of the vehicle for operating the        A
same. They are, therefore, taken up for consideration together.
Delay, if any, in filing the Special Leave Petitions is condoned.

    2. Leave granted.

     3. Since the facts in all these appeals are the same, the      B
facts in SLP(C)No.24188 of 2008, United Insurance Company
Ltd. Vs. K.M. Poonam & Ors., are referred to in this judgment.

      4. The Respondent No.5, Shri Surdeep Gusain, obtained
an insurance policy insuring his Jeep No. UP-06-6244 with a         c
sitting capacity of six persons, including the driver, for the
period covering 23rd July, 2004 to 22nd July, 2005. In other
words, besides the driver, the vehicle was entitled to carry a
maximum number of five passengers.

      5. On 18th August, 2004, the aforesaid vehicle carrying       D
fifteen passengers from Village Nansu to Dharkot Thapli, while
being driven by Bharat Singh Rawat, the father of the
respondents herein, fell into a ditch resulting in his death and
the death of the majority of the passengers while causing
serious injuries to the remaining passengers. The Respondent        E
Nos.1 to 4 as the legal representatives of the deceased filed
an application for compensation before the Motor Accident
Claims Tribunal, Pauri. On the basis of the pleadings filed by
the parties, the following issues were framed :-
                                                                    F
      (1)   Whether on 18.8.2004 the deceased Bharat Singh
            was driving the vehicle No.UP.-06/6244 on Jakheti-
            Nansu Road and due to the mechanical fault in the
            vehicle the jeep met an accident due to which
            Bharat Singh died ?                                     G
      (2)   Whether the aforesaid accident occurred due to the
            negligence of the deceased?
      (3)   Whether on the date of accident the alleged vehicle
            was being plied according to the conditions of          H
    1032         SUPREME COURT REPORTS             [2011] 2 S.C.R.


A                  insurance policy and permit?

           (4)     Whether the complainants are entitled for any
                   relief? If yes, how much and from whom?

       6. In order to support their claim, the claimants filed the
B First Information Report, which was lodged by the owner of the
  jeep, Shri Surdeep Singh, on 19th August, 2004, at Patti
  Patwari Kafolsue, wherein it was stated that he had given the
  vehicle to Bharat Singh and that it had met with an accident
  which killed seven persons on the spot and caused injuries to
C the others. The jeep was badly damaged, but the cause of the
  accident was not known. On the basis of the said report, a case
  was lodged against Bharat Singh under Sections 279, 304-A,
  337 and 338 Indian Penal Code. The witness of the Insurance
  Company, who was examined as OPW.1, deposed that fifteen
D persons were travelling in the jeep at the time of the accident,
  but there was no negligence on the part of the driver.

       7. The claimants also filed the driving licence of the
  deceased, Bharat Singh, which showed that the licence was
E valid till 12.3.2007. The photocopy of the registration certificate
  of the vehicle was also filed by the owner of the vehicle which
  established the fact that it was valid on the date of the accident
  and that taxes had been paid upto date and the fitness of the
  vehicle was valid from 13.8.2004 to 12.8.2005. In addition, a
  photocopy of the Insurance Cover Note was also filed to
F indicate that the vehicle was duly insured from 23.7.2004 to
  22.7.2005. Accordingly, on the date of the accident, all the
  papers Qf the vehicle were valid, the vehicle was legally insured
  and was being driven by Bharat Singh holding a valid and
  effective driving licence. However, on behalf of the Insurance
G Company, the Appellant herein, it was stated that on the date
  of the accident, passengers in excess of the number covered
  by the insurance policy were being carriec;i in the vehicle.

      8. On the basis of the aforesaid evidence, the Motor
H Accident Claims Tribunal held that even if a larger number of
     UNITED INDIA INSURANCE CO. LTD. v. K.M.              1033
       POONAM & ORS. [ALTAMAS KABIR, J.]

passengers than was permitted under the terms of the               A
insurance policy were being carried in the vehicle, it could not
be said that the Appellant Insurance Company would stand
exonerated from its liability because the vehicle was insured
for third party coverage for unlimited liability. The learned
Tribunal, accordingly, answered Issue Nos.1 to 3 in favour of      B
the claimants observing that carrying a larger number of
passengers than was permitted in terms of the Insurance Policy,
did not amount to breach of the terms and conditions of the
Policy and the Insurance Company would still be liable since
the vehicle was legally insured.                                   c
        9. As far as the fourth issue is concerned, the first
  Respondent, Kumari Poonam, stated on oath that both her
  parents had died in the same accident and that her father as
  driver was earning Rs.4,000/- per month. Although, the
. claimants did not file the income certificate of the deceased, D
  the Tribunal initially assessed his annual income at Rs.25,000/
  - and applying the multiplier of 16 arrived at a figure of
  Rs.4,03,200/- payable as compensation. After deductions, the
  total amount of compensation was assessed as Rs.1,86,200/
  -, along with interest @9% per annum. On the claimants' cross- E
  appeal being allowed, the Tribunal assessed his income to be
  Rs.36,000/- per annum and since the age of the deceased was
  taken as 43 years at the time of the accident, applying the
  multiplier of 15 indicated in the Table of Section 163A of the
  Motor Vehicles Act, 1980, the total compensation was re- F
  assessed as Rs.5,40,000/-. After deducting one-third of the
  amount on account of personal expenses of the deceased from
  the amount of the compensation, a balance amount of
   Rs.3,60,000/- was arrived at, from which a further one-third was
  deducted so that the amount of compensation to which the G
  claimants were entitled was finally settled at Rs.2,40,000/-.
  Certain other claims were also included so that the total amount
  of compensation was assessed as Rs.2,47,000/-. In keeping
  with its decision on the first three issues, the Tribunal held that
  since the vehicle was insured with the Appellant Insurance H
    1034    SUPREME COURT REPORTS                  [2011) 2 S.C.R.


A Company, it was liable to make payment of the said
  compensation. The Tribunal directed the Appellant Insurance
  Company to pay the aforesaid amount to the claimants within
  two months, failing which they would also be entitled to interest
  at the rate of 9% per annum from the date of the claim petition.
8
        10. The Insurance Company preferred different appeals
  against the aforesaid judgment and awards dated 28.1.2006
  of the Motor Accident Claims Tribunal, Pauri, which were taken
  up for consideration together and were dismissed by the High
  Court by a common judgment and order dated 25th
C September, 2007. Endorsing the views expressed by the Motor
  Accident Claims Tribunal, the High Court chose not to interfere
  with the impugned judgment and awards and confirmed the
  same. However, while doing so, the High Court held that the
  claimants would be entitled to a sum of Rs.2,75,800/- towards
D compensation in place of Rs.1,86,200/- and the rate of interest
  was reduced from 9% per annum to 7.5% per annum. The other
  parts of the impugned judgment and award were confirmed by
  the High Court. Aggrieved thereby, the Insurance Company has
  filed these several appeals.
E
        11. Learned counsel appearing for the appellant submitted
  that having regard to the provisions of Section 149 of the Motor
  Vehicles Act, 1988, the liability, if any, of the Insurance
  Company for payment of compensation would have to be
F limited to the number of passengers validly permitted to be
  carried in the vehicle covered by the insurance policy and did
  not extend to the number of passengers carried in excess of
  the permitted number. Learned counsel submitted that the said
  question had been considered by a two-Judge Bench of this
G Court in National Insurance Co. Ltd. Vs. Anjana Shyam & Ors.
  [(2007) 7 SCC 445] decided on 20th August, 2007. While
  considering the provisions of Section 147(1)(b)(ii) and (2) and
  Section 149(1 )(2) and (5) of the 1988 Act in relation to an
  insurer's liability, their Lordships came to the conclusion that
H the insurer's liability was limited by the insurance taken out for
      UNITED INDIA INSURANCE CO. LTD. v. K.M.               1035
        POONAM & ORS. [ALTAMAS KABIR, J.]

  the number of permitted passengers and did not extend to            A
  paying amounts decreed in respect of other passengers.
  Taking recourse to a harmonious construction of the relevant
  provisions, their Lordships held that the total amount of
  compensation payable should be deposited by the Insurance
  Company which could be proportionately distributed to all the       B
  claimants, who could recover the balance of the compensation
, amounts awarded to them from the owner of the vehicle.

      12. Reliance was also placed on another two-Judge Bench
 decision of this Court in National Insurance Co. Ltd. Vs. Challa C
 Bharathamma & Ors., 2004 AIR SCW 5301, in which, while
 taking note of the earlier decisions rendered by a two-Judge
 Bench of this Court in New. India Assurance Company Vs.
 Satpal Singh & Ors. [(2000) 1 SCC 237]) and a three-Judge
 Bench in New India Assurance Co. Ltd. Vs. Asha Rani & Ors.,
 [(2003) 2 sec 223], and also the decision of another two- D
 Judge Bench of this Court in National Insurance Company Ltd.
  Vs. Nicol/etta Rohtagi, [(2002) 7 SCC 456), Their Lordships
 held that when an insurer proved not to be liable to pay
 compensation in terms of Section 149(2) of the 1988 Act, it
 could not be made liable for payment of the compensation E
 awarded. However, their Lordships also observed that having
  regard to the beneficial object of the Act, it would be proper
 for the insurer to satisfy the award and to recover the amount
 from the owner, without taking recourse to a separate suit, from
 the Executing Court itself.                                      F

        13. Learned counsel for the Insurance Company submitted
  that having regard to the aforesaid decisions of this Court, the
  liability of making payment of compensation would be to the
  extent of six passengers only, though it c0uld be directed to pay   G
  the balance amount of the total compensation awarded, with
  liberty to recover the balance amount from the owner of the
  vehicle ..

     14. The law relating to the insurer's liability for payment of
  compensation to gratuitous passengers in a vehicle after the        H
    1036     SUPREME COURT REPORTS                   [2011) 2 S.C.R.


A enactment of the Motor Vehicles Act, 1988, which replaced the
   Motor Vehicles Act, 1939, initially came up for consideration
  in Satpa/ Singh's case (supra) wherein this Court was called
  upon to consider the change in the provisions relating to third
  party risk, as was contained in Section 95 of the 1939 Act as
B against the provisions of Section 147 of the 1988 Act. Their
  Lordships held that as per the proviso to Section 95(1) when
  read with its Clause (ii), it would be clear that the policy of
  insurance was not required to cover the liability in respect of
  the death of or bodily injury to persons who were gratuitous
c passengers of that vehicle. In contrast, under Section 147 of
  the 1988 Act, the insurance policy was required to insure the
  person or classes of persons specified in the policy to the
  extent specified in Sub-section (2) 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 authorized
0
  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 _9,e'ath 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.
E
        15. On an interpretation of the aforesaid provisions of
  Section 147 of the 1988 Act, it was held that under Sub-section
  (2) there is no upper limit for the insurer regarding the amount
  of compensation awarded in respect of death or bodily injury
F of a victim of the accident. It was, therefore, apparent that the
  limit contained in the old Act having been removed the policy
  should insure the liability incurred and cover injury to any person,
  including the owner of the goods or his authorized
  representative, carried in the vehicle. Their Lordships concluded
G that as a result of the provisions of the new Act, the earlier
  decisions rendered under the 1939 Act were no longer relevant
  and an insurance policy covering third party risk was not
  required to exclude gratuitous passengers in a vehicle, no
  matter that the vehicle was of any type or class.
H
    UNITED INDIA INSURANCE CO. LTD. v. K.M.            1037
      POONAM & ORS. [ALTAMAS KABIR, J.]

      16. The said view which had followed an earlier three- A
Judge Bench decision of this Court in Mal/awwa & Ors. Vs.
Oriental Insurance Co. Ltd. & Ors. [(1999) 1 SCC 403], came
up for consideration once again in a batch of appeals filed by
different insurance companies, including the present Appellant
Company, in the decision of this Court (eported in [(2001) 6 B
sec 724] under the lead case of New India Assurance Co.
Ltd. Vs. Asha Rani & Ors. Upon considering the various
decisions which had preceded the judgment in Satpal Singh's
case (supra) the two-Judge Bench was of the view that some
of the striking features of the new Act had not been brought to c
the notice of the Court which could have a bearing on the
conclusion arrived at in Satpal Singh's case, i.e., that on
account of the definition of "goods vehicle" and "goods carriage"
under the new Act, goods carriages were no longer used to
carry any passenger. Their Lordships were also of the view that D
the defence available to the Insurance Company under Section
149(2) of the 1988 Act would stand obliterated on account of
the law as declared in Satpal Singh's case. Their Lordships
felt that under the new Act, it would be a breach of condition in
case the vehicle was used for a purpose other than for which E
permit had been issued. Apart from the above, the effect of the
deletion of Clause (ii) to the Proviso to Section 95(1)(b) in the
new Act also required reconsideration. The matter was,
therefore, referred to the Hon'ble Chief Justice to have the
various issues reconsidered by a larger Bench.
                                                               F
     17. The aforesaid questions were, thereafter; gone into by
a Bench of three-Judges, where the issues decided in Satpal
Singh's case were revisited. In the decision reported in New
India Assurance Co. Ltd. Vs. Asha Rani & Ors. [(2003) 2. SCC ·
223) the three-Judge Bench considered the provisions of G
Section 95 of the 1939 Act and Section 147 of the 1988 Act
in detail and also the amendments effected to Section
147(1)(b)(i) by the Amendment Act 54 of 1994 and came to
the conclusion that in Satpal Singh's case (supra), this Court
had proceeded on the assumption that the provisions of Section H
    1038    SUPREME COURT REPORTS                      [2011] 2 S.C.R.


A 95(1) of the Motor Vehicles Act, 1939, were identical to the
  provisions of Section 147(1) of the Motor Vehicles Act, 1988
  as it stood before its amendment. It was held that Section 147
  of the new Act deals with the requirements of the policy and ·
  limits of liability incurred to third party risks, but the Proviso
B thereto makes an exception to the main provision, which reads
  as follows:

              "Provided that a policy shall not be required-

               (i) to cover liability in respect of the death, arising out
C       of and in the course of his employment, of the employee
        of a person insured by the policy or in respect of bodily
        injury sustained by such an employee arising out of and in
        the course of his employment other than a liability arising
        under the Workmen's Compensation Act, 1923 (8 of
D       1923), in respect of the death of, or bodily injury to, any
        such employee-

              (a) engaged in driving the vehicle, or

              (b) if it is a public service vehicle engaged as
E       conductor of the vehicle or in examining tickets on the
        vehicle, or

              (c) if it is a goods carriage, being carried in the
        vehicle, or
F
              (ii) to cover any contractual liability."

       It was also noticed that as far as employees of the owner
  of the motor vehicle were concerned, an insurance policy was
  not required to be taken in relation to their liability, other than
G arising in terms of the provisions of the Workmen's
  Compensation Act, 1923. On the other hand, Proviso (ii), -
  included under Section 95 of the 1939 Act, imposed a liability
  ·upon the owner of the vehicle to take out an insurance policy
  to cover the liability in respect of a person who was travelling
H in a vehicle pursuant to a contract of employment. The same ·
    UNITED INDIA INSURANCE CO. LTD. v. K.M.                   1039
      POONAM & ORS. [ALTAMAS KABIR, J.]

was consciously omitted from the provisions of the 1988 Act. A
It was further held that the applicability of the decision in
Ma//awwa's case (supra) to the facts of the case before Their
Lordships would have to be considered keeping that aspect
of the matter in view. Proceeding further, their Lordships
observed that Section 2(35) of the 1988 Act does not include B
passengers in goods carriages whereas Section 2(25) of the
1939 Act did, since even passengers could be carried in a
goods vehicle. Noting the difference in the definitions of "good&,
vehicle" in the 1939 Act and "goods carriage" in the 1988 Act,
Their Lordships held that carrying of passengers in a goods c
carriage was not contemplated under the 1988 Act. On the
basis of the aforesaid findings, the three-Judge Bench over-
ruled the decision of this Court in Satpal Singh's case, holding
that the law had not been laid down correctly therein.

      18. The aforesaid issue once again surfaced in the case           D
of National Insurance Co. Ltd. Vs. Swaran Singh [(2004) 3
SCC 297], where the provisions of Section 149 and also
Section 147 fell for consideration. While considering the liability
cast upon an insurer under Section 149(1) and the limited
grounds of liability in the insurance contract and third party          E
claims as envisaged in the Proviso to Section 149(4), this Court
also had occasion to refer to Section 147 relating to the
statutory liability and any contractual liability under the insurance
contract and whether the contractual exclusion of liability in
respect of third party claim was permissible. The three-Judge           F
Bench held that such a condition in the insurance policy,
whereby the right of the third party is taken away would be void
and that except under the situation provided for by Section
149(2)(b), the insurer would not be entitled to avoid its statutory
liability, since its rights of recovery were preserved against the      G
insured under the Proviso to Section 149(4) of the 1988 Act.

     19. While the aforesaid judgment was delivered on 5th
January, 2004, on the very next day, another three-Judge Bench
of this Court rendered a decision in National Insurance Co.             H
    1040     SUPREME COURT REPORTS                  [2011] 2 S.C.R.

A Ltd. Vs. Baljit Kaur [(2004) 2 SCC 1], in the context of the
  provisions of Section 147(1)(b) of the 1988 Act after its
  amendment in 1994. While referring to the earlier decision in
  the reference decided in Asha Rani's case (supra), their
  Lordships held that inspite of the amendment effected to
B Section 147(1)(b) in 1994, the position remained the same in
  respect of persons other than the owner of the goods and his
  authorized representative being carried in the goods vehicle.
  It was held that it was not the intention of the legislature to
  provide for the liability of the insurer with respect to passengers,
c especially gratuitous passengers who were neither
  contemplated at the time the contract of insurance was entered
  into, nor was any premium paid to the extent of the benefit of
  insurance to such category of people. It was, therefore, felt that
  the interest of justice would be subserved if the Insurance
  Company satisfied the awarded amount and recovered the
0
  same from the owner of the vehicle and for the said purpose it
  would not be necessary for the Insurance Company to file a
  separate suit, but to initiate a proceeding before the executing
  Court as if the dispute between insurer and the owner was the
E subject matter of the determination before the Tribunal which
  had decided in favour of the insurer and against the owner of
  the vehicle.
        20. The law as regards the liability of insurers towards third
  parties killed or injured in accidents involving different types of
F motor vehicles, has been crystallized in the several decisions
  of this court referred to hereinabove. The kind of third party risk
  that we are concerned with in this case involves purported
  breach of the conditions contained in the insurance agreement
  executed by and between the insurer and the insured.
G
        21. From the decision in Baljit Kaur's case (supra), which
  was later also articulated in Anjana Shyam's case (supra) what
  emerges is that a policy of insurance, in order to be valid, would
  have to comply with the requirements of Chapter XI of the Motor
H Vehicles Act, 1988, which deals with insurance of motor
      UNITED INDIA INSURANCE CO. LTD. v. K.M.                  1041
        POONAM & ORS. [ALTAMAS KABIR, J.]

  vehicles against third party risks. Section 146 of the Act             A
' stipulates that no person shall use, except as a passenger, or
  cause or allow any other person to use, a motor vehicle in a
  public place, unless there is a valid policy of insurance in
  relation to the use of the vehicle complying with the
  requirements of the said Chapter. Section 147 of the Act is an         B
  extension of the provisions of Section 146 and sets out the
  requirements of policies and the limit of their liability. Section
  147(1)(a) provides that a policy of insurance must be issued
  by a person who is an authorized insurer. Section 147(1)(b}
  provides that a policy of insurance must be a policy which             c
  insures the person or class of persons specified in the policy
  to the extent specified in sub-section (2). Sub-section (2) of
  Section 147 indicates that subject to the proviso to sub-section
  (1) which excludes the liability of the insurer in certain specific
  cases, a policy of insurance referred to therein must cover any
                                                                         0
  liability incurred in respect of any accident, inter alia, for the
  amount of liability incurred.

       22. However, in order to fix the liability of the insurer, the
 provisions of Section 147 have to be read with Section 149 of
 the Act which deals with the duty of the insurer to satisfy             E
 judgments and awards against persons insured in respect of
 third party risks. Although, on behalf of the Insurance Company
 it has been sought to be contended that no third party risks were
 involved in the accident and that the persons travelling in the
 ill-fated vehicle were gratuitous passengers, the Insurance             F
 Company cannot get away from the fact that the vehicle was
 insured for carrying six persons and the liability of the Insurance
 Company was to pay compensation to the extent of at least six
 of the occupants of the vehicle, including the driver.
                                                                         G
      23. Sub-section (1) of Section 149 of the Motor Vehicles
 Act, 1988, makes it amply clear that once a certificate of
 insurance is issued under sub-section (3) of Section 147, then
 notwithstanding that the insurer may be entitled to avoid or
 cancel the policy, it shall pay to the person entitled to the benefit   H
    1042     SUPREME COURT REPORTS                    [2011] 2 S.C.R.


A of the decree any sum not exceeding the sum assured, payable
  thereunder, as if he was the judgment debtor, in respect of the
  liability, together with any amount payable in respect of costs
  and any sum payable in respect of interest on that sum by virtue
  of any enactment relating to interest on judgments. Sub-section
B (2), however, places a fetter on the payment of any sum by the
  insurer under sub-section (1) in respect of any judgment or
  award unless, the insurer had notice of the proceedings in which
  the said judgment or award is given and an insurer to whom
  such notice is given shall be entitled to be made a party thereto
c and to defend the action on the grounds enumerated therein
  involving a breach of a specified condition of the policy.

          24. The liability of the insurer, therefore, is confined to the
    number of persons covered by the insurance policy and not
    beyond the same. In other words, as in the present case, since
D   the insurance policy of the owner of the vehicle covered six
    occupants of the vehicle in question, including the driver, the
    liability of the insurer would be confined to six persons only,
    notwithstanding the larger number of persons carried in the
    vehicle. Such excess number of persons would have to be
E   treated as third parties, but since no premium had been paid
    in the policy for them, the insurer would not be liable to make
    payment of the compensation amount as far as they are
    concerned. However, the liability of the Insurance Company to
    make payment even in respect of persons not covered by the
F   insurance policy continues under the provisions of sub-section
    (1) of Section 149 of the Act, as it would be entitled to recover
    the same if it could prove that one of the conditions of the policy
    had been breached by the owner of the vehicle. In the instant
    case, any of the persons travelling in the vehicle in· excess of
G   the permitted number of six passengers, though entitled to be
    compensated by the owner of the vehicle, would still be entitled
    to receive the compensation amount from the insurer, who
    could then recover it from the insured owner of the vehicle.
         25. As mentioned hereinbefore, in the instant case, the
H
    UNITED INDIA INSURANCE CO. LTD. v. K.M.                 1043
      POONAM & ORS. [ALTAMAS KABIR, J.]

insurance policy taken out by the owner of the vehicle was in        A
respect of six passengers, including the driver, travelling in the
vehicle in question. The liability for payment of the other
passengers in excess of six passengers would be that of the
owner of the vehicle who would be required to compensate the
injured. or the family of the deceased to the extent of              s
compensation awarded by the Tribunal.

     26. Having arrived at the conclusion that the liability of the ·
Insurance Company to pay compensation was limited to six
persons travelling inside the vehicle only and that the liability
to pay the others was that of the owner, we, in this case, are
                                                                      c·
fa~ed with the same problem as had surfaced in Anjana
Sh'}?am's case (supra). The number of persons to be
com~nsated being in excess of the number of persons who
could ~lidlybecarried in the vehicle, the question which arises
i$Qfne of;apportionment of the amounts to be paid. Since there D
can'~ n~ick and choose method ·to identify the five
passen~rs; excluding the driver, in respect of whom
compensatiOf:twould be payable by the Insurance Company,
to meet the ends of justice we may apply the procedure
adopted in Ba/jif'Kaur's case (supra) and direct that the E
Insurance Company should deposit the total amount of
compensation awarded to all the claimants and the amounts
so deposited be disbursed to the claimants in respect to their
claims, with liberty to the Insurance Company to recover the
amounts paid by it over and above the compensation amounts F
payable in respect of the persons covered by the Insurance
 Policy from the owner of the vehicle, as was directed in Baljit
 Kaur's case.

     27. In other words, the Appellant Insurance Company shall       G
deposit with the Tribunal the total amount of the amounts
awarded in favour of the awardees within two months from the
date of this order and the same is to be utilized to satisfy the
claims of those claimants not covered by the Insurance Policy
along with the persons so covered. The Insurance Company will        H
    1044     SUPREME COURT REPORTS                  (2011] 2 S.C.R.

A be entitled to recover the amounts paid by it, in excess of its
  liability, from the owner of the vehicle, by putting the decree into
  execution. For the aforesaid purpose, the total amount of the
  six Awards which are the highest shall be construed as the
  liability of the Insurance Company. After deducting the said
B amount from the total amount of all the Awards deposited in
  terms of this order, the Insurance Company will be entitled to
  recover the balance amount from the owner of the vehicle as if
  it is an amount decreed by the Tribunal in favour of the
  Insurance Company. The Insurance Company will not be
c required to file a separate suit in this regard in order to recover
  the amounts paid in excess of its liability from the owner of the
  vehicle.
       28. The Appeals are, accordingly, disposed of. Having
  regard to the nature of the case, the parties shall bear their own
D costs.

    N.J.                                      Appeals disposed of.