CMA/690/1994 of ORIENTAL INSURANCE CO LTD Vs C SANTHAMANI on 5 December 2002

:JUDGMENT

(Judgment of the Court was made by P. Sathasivam, J.)

Since the appeal and Cross Objection arise against the very same award of theMotor Accidents Claims Tribunal, Coimbatore, the same are being disposed of bythe following common judgment. Aggrieved by the award of the Motor AccidentsClaims Tribunal, Coimbatore dated 10-1-94 in M.C.O.P.No. 224/90, OrientalInsurance Company, Pollachi has filed C.M.A.No. 690/94. Respondents 1 to 4in this appeal, claimants have filed Cross Objection No.73/95, seeking furthercompensation of Rs.1,00,000/-.

2. Heard the learned counsel for the appellant as well as contestingrespondents 1 to 4.

3. Mr. M.B. Raghavan, learned counsel for the appellant Insurance Company,by drawing our attention to Section 95 (2) (a) of Motor Vehicles Act, 1939 andterms and conditions of policy of insurance, namely, Ex.B-5, would contendthat their liability is restricted to Rs.1,50,000/- only and that the Tribunalcommitted an error in passing the entire liability on the Insurance Companywhich is unsustainable in law. Regarding cross objection, it is hiscontention that inasmuch as the appeal is only by the Insurance Companyquestioning its liability, the cross objection in their appeal by theclaimants is not maintainable and liable to be dismissed. On the other hand,Mr. K. Mohan Ram, learned counsel for the respondents 1 to 4/claimants,would contend that the deceased being a third party, and in the light of validinsurance policy, the appellant insurance company is liable to pay the entireamount and the same has been rightly granted by the Tribunal. In any event,according to him, even if the case of the appellant is acceptable, directionmay be issued for payment of the entire amount by the insurance company at thefirst instance with a liberty to them to recover the same from the owner ofthe vehicle. In so far as the cross objection is concerned, it is stated thatthe compensation was arrived at after applying proper multiplier, and thededuction of 1/4th amount towards uncertainty of life etc., cannot be

4. We have carefully considered the rival submissions.

5. First we shall consider the stand taken by the Insurance Company.

6. In terms of section 95 (2) (a) of the Motor Vehicles Act, 1939, theinsurance company is obliged to satisfy the liability to an extent ofRs.1,50,000/- in so far as goods carriage vehicle is concerned. However, itis the case of the respondents 1 to 4/claimants that inasmuch as the insurancecovers third party risk, the liability is unlimited. First we shall considerthe policy of insurance which has been marked as Ex.B-5 through R.W.1. Afterreferring to the registration No., owner of the vehicle etc., Ex.B-5 containsthe following details:

"SCHEDULE OF PREMIUM IN RUPEES

B. Liability to public riskAdd:for LL to authorised non-fare payingpassengers as per ENDT, IMT-14(b) Rs240.00Total No.of authorised non farepaying passengers. Rs.

Limit any one passenger Rs.10000/- Rs36.00

Limit any one accident Rs.50000/-

Add:LL to paid driver and/or Cleaner/Coolies as per ENDT.IMT-16 Rs.16.00

Add:for increased T.P.Limits underSection 11 1(i) unlimitedUnder sec.11 1(ii) Rs. Rs.

---------

292.00---------

Add: Rs.

Less 10% Special Discount Rs.

Absolute Net Premium 'B' Rs.Absolute Net Premium 'A' Rs.

Total Net Premium A +B Rs.

Net Premium Due (rounded off) 292.00

Subject to Endorsement Nos.2a,14b,16 & Warranty Printed/Attached here to?"

By pointing out the fact that in view of payment of premium of Rs.240 /-towards third party risks (TPR), it is contended on the side of the claimantsthat the liability of the insurance company is unlimited. On the other hand,it is the case of the insurance company that, in the absence of payment ofadditional premium, the liability is to the extent of Rs.1,50,000/-. TheMotor Insurance Rating Guide, which sets out the provisions relating to thebenefits under motor insurance, has defined the types of insurance policies.Though the Motor Insurance Rating Guide has not been marked, the same wasproduced at the time of the argument and we have perused and considered thevarious clauses therein, particularly the liability to public risk policy. Inour case, the policy is a third party liability insurance policy. Learnedcounsel appearing for the appellant has also brought to our notice a DivisionBench judgment of this Court (P. Shanmugam and P. Thangavel, JJ) dated14-02-2002 made in C.M.A.No. 252/95 (National Insurance Company Ltd.,Kumbakonam vs. Pakkiriammal and 5 others) wherein the Bench has consideredthis identical question with reference to Section 95 (1), (2) (a) of the MotorVehicles Act, 1939. The Division Bench has extracted the relevant clausesfrom the Motor Insurance Rating Guide. After referring to various types ofInsurance Policies and the liability to the Public risk, the Bench hasconcluded that, "5. As per the definitions of the three types of policies, we find that eachone of them are distinct and separate. The comprehensive insurance policycovers the following risks:

(a) Public risk including Act Liability

(b) Loss or damage to the vehicle's risk The Public Risk Policy indemnifies the legal liability in respect of thirdparty accidental personal injury or property damage by the vehicle.The Act Liability Policy covers the third party risks in a public place.

In both the policies, expressions 'legal liability for claims' have been usedand in the Act Liability Policy, a further expression "as is necessary to meetthe requirements of section 95 of the Motor Vehicles Act, 1939" has beenincluded. But, none of the policies say that the liability is unlimited.Even in reference to comprehensive policy, it says that the liability issubject to the limitation mentioned in the policy and the liability to thepublic risk, including act liability. By going through the schedule ofPremium, it is seen that the premium differs from the public risk and the actonly liability and the minimum premium payable for goods carrying vehicle forpublic risk is Rs.240/-. If there has to be additional benefit undercommercial vehicles' tariff for a personal injury or unlimited property damageup-to Rs.3 lakhs, an additional premium of Rs.150/- is to be paid. The Noteunder this additional benefit clause makes it clear that the limits ofindemnity under the policy may be increased in accordance with the scale.From the above, it is clear that the liability is limited to the extentmentioned under the Act unless and until additional premium is paid."In our case, we have already referred to the details of payments under Ex.B-5. It is clear that as per policy-Ex.B-5, the owner has paid the minimumbonus for third party risks plus Rs.16/- for paid driver and cleaner, but hehas not paid additional amount for increased T. P.limits. As rightlycontended by the learned counsel for the Insurance company, if the owner had to get an unlimited legal liability, he should have paid extra premium, whichhas not been done in our case. Earlier the Division Bench after considering adecision of the Supreme Court in NATIONAL INSURANCE COMPANY LIMITED Vs. JUGALKISHORE [A. I.R. 1998 S.C. 719], earlier Division Bench decision of thisCourt in NEW INDIA ASSURANCE COMPANY LIMITED Vs. K. CHANDRA [1991 A.C.J.386], and another Division Bench decision in ORIENTAL INSURANCE COMPANY LTD.Vs. JALAJA & OTHERS [1995 A.C.J. 829] held that the insurance company is notliable to pay anything more than the amount limited in the statute unless thepolicy contains a different provision. In NEW INDIA ASSURANCE COMPANY LIMITEDVs. SHANTHI BAI [1995 A.C.J. 470], the Supreme Court, after referring toSection 95 of the Act, held as follows:

"Comprehensive insurance of the vehicle and payment of higher premium on thisscore, however, does not mean that the limit of liability with regard to thirdparty risk becomes unlimited or higher than the statutory liability fixedunder Sub-section (2) of Section 9 5 of the Act. For this purpose, a specificagreement has to be arrived at between the owner and the insurance company andseparate premium has to be paid on the amount of liability undertaken by theinsurance company in this behalf."

It is clear from the above decision that even the comprehensive policy doesnot automatically result in covering the liability of third party risk for theamount higher than the statutory limit. Similar view has been expressed by aDivision Bench of this Court in NEW INDIA ASSURANCE COMPANY LIMITED Vs. R.K.GEETHA AND ANOTHER [Vol.I (1999) A.C.C. 535]. In NATIONAL INSURANCE COMPANYLIMITED Vs. NATHILAL AND OTHERS [1999 (1) S.C.C. 552], the Hon'ble SupremeCourt has held that in the absence of payment of any special premium for thepurpose of unlimited liability, it is presumed that the terms of the policywere limited to Rs.1,50,000/-. Apart from the above decisions, learnedcounsel for the appellant has also relied on a decision of this Court inNATIONAL INSURANCE COMPANY LIMITED, ERODE v. BOOPATHI alias VENKATACHALAPATHY[1999 (II) M.L.J. 653] wherein one of us (P. Sathasivam, J.), afterfollowing the Division Bench decision in NEW INDIA ASSURANCE CO. TD., v. K.CHANDRA [1991 A.C.J. 386] held that under Section 95 (2) (b) of the MotorVehicles Act, 1939 , the insurance company is not liable to pay anything morethan the amount limited by the Statute unless the policy contains a differentprovision. In that case, after referring to Ex.R-1 policy of insurance, it isheld that the liability of the insurance company is restricted toRs.1,50,000/- only. We are in agreement with the said conclusion.

7. Mr.K. Mohan Ram, learned counsel for the respondents 1 to 4/claimants,would contend that in the event of taking a decision that in terms of Ex.B-5,the liability of the insurance company is limited to Rs.1,50,000/-, they maybe directed to pay the entire amount as awarded to the claimants with a rightto recover from the insured the excess amount over and above covered under thepolicy. In support of his claim, he very much relied on a decision of theSupreme Court in ORIENTAL INSURANCE COMPANY LTD., v. C. NAFEESSU [2001 (1)UJ 378 (SC): [2001 A.C.J page 1] wherein Their Lordships have held that theinsurance company is liable to pay the entire award amount to the claimants.They further held that upon making such payment, the insurance company canrecover the excess amount from the insured by executing the award against the insured to the extent of such excess as per Section 174 ofthe Motor Vehicles Act, 1988. By relying upon the above judgment, learnedcounsel for the respondents 1 to 4 prayed for necessary direction to theinsurance company to pay the entire liability. In this regard, learnedcounsel for the appellant pressed into service a recent judgment of theConstitution Bench of the Supreme Court in NEW INDIA ASSURANCE COMPANY LTD.,v. C.M. JAYA & OTHERS [2002 ACJ 271] : [2002 A.I.R. S.C.W 259]. Afterconsidering 2,3 Judges Bench decisions of the Supreme Court, namely, NEW INDIA

ASSURANCE CO., LTD. v. SHANTI BAI [1995 A.C.J.470 (SC)] and AMRIT LAL SOODv. KAUSHALYA DEVI THAPAR [1998 ACJ 531 (SC)], Their Lordships have concludedas follows: (para 11)

"11. In the premise, we hold that the view expressed by the Bench of thethree learned Judges in the case of SHANTI BAI, 1995 ACJ 470 (SC), is correctand answer the question set out in the order of reference in the beginning asunder:

In the case of insurance company not taking any higher liability by acceptinga higher premium for payment of compensation to a third party, the insurerwould be liable to the extent limited under section 95 (2) of the Act andwould not be liable to pay the entire amount."

In the light of the principle laid down by the Constitution Bench in the abovejudgment, we hold that the liability of the insurance company is limited toRs.1,50,000/-, and the insured is bound to pay the remaining amount ofcompensation. It is also relevant to note that similar contention was raisedbefore the Division Bench of this Court in C.M.A.No. 252/95 dated 14-02-2002(cited supra). There also the Division Bench, in the light of theConstitution Bench of the Supreme Court in 2002 A.I.R. S.C.W. 259 (citedsupra), arrived a similar conclusion that in the case of insurance company nottaking any higher liability by accepting a higher premium for payment ofcompensation to the third party, the insurer would be liable to the extentlimited under Section 92 of the Act and would not be liable to pay the entireamount. The said view of the Division Bench of this Court and the presentview of us are in consonance with the view expressed by the Constitution Benchof the Supreme Court. Accordingly, in view of the fact that higher premiumhad not been paid for unlimited liability for payment of compensation to thirdparty, we hold that the liability of the appellant-insurer is limited toRs.1,50,000/- and the insured is liable to pay the remaining amount ofcompensation.

8. Even at the outset, learned counsel appearing for the appellant insurancecompany pointed out that inasmuch as they are questioning their liability, theCross Objection by the claimants in this appeal is not maintainable. Insupport of the above contention regarding maintainability of the Memorandum ofCross Objection, the insurance company relied on a Division Bench decision ofthis Court in UNITED INDIA INSURANCE CO.LTD. v. M.R. SUBRAMANIAN & ANOTHER[1996 ACJ 1260]. In that decision, it was pointed out that since the appealis confined to the liability of the insurance company and in that appeal the claimant cannot make a claim for enhancement, which is really directed againstthe owner of the vehicle who is a co-respondent in the appeal. Afterreferring to the earlier Division Bench decision of this Court in UNITED INDIAINSURANCE COMPANY LTD., v. RAJAMMAL [1993 A.C.J 486 (Madras)], and afterexpressing their agreement with the decision arrived at therein, the DivisionBench has held that the memorandum of cross objection is not maintainable anddismissed the same. In the light of the said contention, we have carefullyconsidered the facts in the decision of the Division Bench referred to aboveand various grounds raised in this appeal. As rightly pointed out by Mr. K.Mohan Ram, learned counsel for cross objectors, though the insurance companyhas mainly contended their limited liability in terms of Section 92 (2) of theMotor Vehicles Act, 1939, a perusal of their grounds of appeal shows that theychallenged the entire award of compensation, including interest, as directedby the Tribunal and after arriving the value of the appeal, paid court-fee forthe entire amount. It is clear that the entire amount as awarded by theTribunal including interest and costs are being questioned in this appeal. Inthis regard, it is relevant to refer a decision of the Supreme Court in M/ s.BIHAR SUPPLY SYNDICATE v. ASIATIC NAVIGATION [AIR 1993 Supreme Court 2054].In the said decision, Their Lordships, after referring to Order 41 Rule 33,Civil Procedure Code, have observed thus: (para 29)

"29. Really speaking the Rule is in three parts. The first part confers onthe appellate Court very wide powers to pass such orders in appeal as the casemay require. The second part contemplates that this wide power will beexercised by the appellate Court notwithstanding that the appeal is as to partonly of the decree and may be exercised in favour of all or any of therespondents or parties, although such respondents or parties may not havefiled any appeal or objection. The third part is where there have beendecrees in cross-suits or where two or more decrees are passed in one suit,this power is directed to be exercised in respect of all or any of thedecrees, although an appeal may not have been filed against such decrees."

In the light of the decision of the Supreme Court, more particularly in viewof the fact that the entire amount is being questioned in the memorandum ofappeal by paying requisite court-fee (though in the argument they confined totheir liability to the extent of Section 92 (2) of the Motor Vehicles Act,1939), in view of the peculiar circumstances of the case, we hold that thepresent cross objection is maintainable and we intend to consider the meritsof the same in the subsequent paragraph.

9. Now we shall consider the cross objection No.735 filed by respondents 1 to4 herein seeking a further compensation of Rs.1,00,000/- in addition to theamount awarded by the Tribunal. Since in the cross appeal the cross objectorsrestricted their claim to the extent of Rs.1,00,000/-, the only issue to beconsidered in the cross appeal is whether they (cross objectors) are entitledto a further compensation of Rs.1,00,000/- as claimed. It is seen from theevidence of P.W.1, second claimant that at the time of the accident, thedeceased father was aged about 58 years and at the relevant time, he wasworking as an Adviser in textile mills. He further deposed that his fathersecured decree in textiles in the United States and on the date of retirementin 1987 he was getting Rs.15,000/-p.m. According to him, even after his

retirement, he was employed as the Adviser in Narasimma Mill and was gettingsizeable income. Though the claimants have produced acceptable documentaryevidence in respect of his avocation, income, payment of income tax etc.,taking note of all the aspects including the fact that the second claimant(P.W.1) and third claimant are earning members, the Tribunal arrived an amountof Rs.7,75 0/- as his monthly income and Rs.93,000/- as his annual income andafter deducting a portion towards his personal expenses, it arrived aconclusion that he would contribute at least Rs.6,000/- per month to hisfamily and annual contribution would be Rs.72,000/-. Based on the evidence ofP.W.1 and upon the reference made in the post-mortem certificate-Ex.P-7, theTribunal fixed the age of the deceased as 58 years which is acceptable. Afterholding that but for the accident, the deceased Chandrasekaran would liveup-to the age of 65, multiplied the same by multiplier of 7 and arrived anamount of Rs.5,04,000/-. From and out of the said amount, the Tribunaldeducted 1/4th towards uncertainty of life and arrived an amount ofRs.3,78,000/- as loss caused to the claimants. After adding a sum ofRs.15,000/- towards loss of love and affection, mental agony etc., Rs.25,000/-towards damage to his vehicle and other belongings, passed an award forRs.04,18,000 /-. Considering the fact that the deceased was aged about 58years on the date of the accident, in the light of his educationalqualification and of the fact that even after retirement he was working asAdviser to many textile mills, we are of the view that as rightly observed bythe Tribunal, undoubtedly, he would contribute at least Rs.6,00 0/- per monthto his family till 65 years. Likewise, the application of 7 years multiplierfor arriving a pecuniary loss to the family is also quite reasonable. Asstated earlier, it is to be noted that even on the date of filing of the claimpetition, the claimants 2 and 3 were not depending on the deceased. However,as rightly contended by the learned counsel for the cross objectors, havingapplied multiplier method and selecting proper multiplier, namely, 7, theTribunal is not justified in deducting 1/4th of the amount towards uncertaintyof life. We have already referred to the fact that the Tribunal after fixingthat the deceased would earn Rs.7,750/-, deducted a portion towards hispersonal expense and arrived Rs.6,000/-per month as his contribution to hisfamily. When multiplier is adopted, there is no need to deduct amount towardsuncertainty. In this regard, it is useful to note a Division Bench decisionof this Court in VIJAYALAKSHMI, C. & ANOTHER v. N. SIVA BAGIYAM 7 ANOTHER[1996-2-L.W. 238]. In that decision, while determining the amount byapplying multiplier method, speaking for the Bench, one of us (P. Sathasivam, J) has held that if proper multiplier and multiplicant is applied andthe same is reasonable, there is no need to deduct any amount towardsuncertainty of life and lump sum payment. Since the Tribunal in our caseselected proper multiplier and fixed acceptable multiplicant, as stated in theDivision Bench decision, there is no need to deduct 1/4th towards uncertaintyof life. In such a circumstance, we hold that the Tribunal committed an errorin allowing a deduction of 1/4th of the amount towards uncertainty of life.We set aside the said order of the Tribunal. Inasmuch as the deducted amounttowards uncertainty of life is Rs.1,26,000/-, and in view of our conclusion,we hold that the claimants are entitled to the said amount, however, in thecross objection, they are claiming Rs.1,00,000/- only, hence we grant the sameas claimed.

10. In the light of what is stated above, we pass the following order:

(i) The award of compensation of Rs.4,18,000/- fixed by the Tribunal isenhanced to Rs.5,18,000/- (Rs.4,18,000 + Rs.1,00,000) with interest at 9 percent per annum (for the enhanced amount) from the date of petition till dateof payment;

(ii) Out of the said amount of Rs.5,18,000/-, the liability of theappellant-Insurance Company is limited to Rs.1,50,000/- in terms of Ex.B-5-Insurance policy;

(iii) The insured of the vehicle-lorry/ R.Marimuthu/5th respondent herein, isliable to pay the balance amount over and above Rs.1 ,50,000/- to theclaimants.

(iv) The first respondent herein - C. Santhamani, wife of the deceasedChandrasekar is entitled to the enhanced compensation as ordered above.

The Civil Miscellaneous Appeal as well as the Cross Objection are allowed tothe extent mentioned above. No costs.

R.B.

Index:- YesInternet:- Yes

To:-1) The Motor Accidents Claims Tribunal (Sub Court),Coimbatore (with records).

2) The Section Officer, V.R. Section, High Court,Madras.