Question of Law
"Whether the Insurance Company can be held liable to answer the claims of persons who are either "Unauthorized Passengers" or "Gratuitous Passengers" in a "Goods Vehicle"?

Introduction
There has been a remarkable increase in the use of Motor Vehicle as an indispensable conveyance and for private and public transport. With the emergence of an ultra-modern age, which had led to the strides of progress in all spheres of life, we have switched from fast to faster vehicular traffic with corresponding increase in the number of road accidents resulting in bodily injury, damage to property and, more often than not, in death. Its potentiality to endanger human life is hardly to be emphasized and, despite existence of traffic rules, rigid penal provisions, observance of Security Weeks etc., neither the present nor the future promises fall in accident rates.

It is common knowledge that with the increase of motor vehicles on the road accidents-----the provisions of law have to be strictly applied to insure the legislative intent prohibiting carrying of "Unauthorized Passengers" or "Gratuitous Passenger" in "Goods Vehicle" are complied with and the violation of the terms and conditions of Insurance Policy exempts the Insurance Company from indemnification of the Insured.

Legal Provisions
That Sections 2 (14), 2 (35), 2 (40) and 2 (47) of the Motor Vehicles Act, 1988 define the "Goods Carriage", "Public Service Vehicle", "Stage Carriage" and "Transport Vehicle" in the following terms;
2 (14) "Goods Carriage" means any motor vehicle constructed or adapted for use solely for the carriage of goods, or any motor vehicle not so constructed or adapted when used for the carriage of goods;
2 (35) "Public Service Vehicle" means any motor vehicle used or adapted to be used for the carriage of passengers for hire or reward, and includes a maxicab, a motorcab, contract carriage, and stage carriage;
2 (40) "Stage Carriage" means a motor vehicle constructed or adapted to carry more than six passengers excluding the driver for hire or reward at separate fares paid by or for individual passengers, either for the whole journey or for stages of the journey;
2 (47) "Transport Vehicle" means a public service vehicle, a goods carriage, an educational institution bus or a private service vehicle;

Section 146 of the Motor Vehicles Act, 1988 specifies the necessity for insurance against 3rd party risk, whereas, Section 147 of the Motor Vehicles Act, 1988 deals with the Requirements of Policies and limits of liability

Section 147 of the Motor Vehicles Act, 1988 inter alia, prescribes compulsory coverage against the death of or bodily injury to any passenger of "Public Service Vehicle". Proviso appended thereto categorically states that compulsory coverage in respect of drivers and conductors of "Public Service Vehicle" will be limited to liability under the Workmen's Compensation Act, 1923. It does not speak of any passenger in a "Goods Carriage". Keeping in view the proviso of Section 147 of the Motor Vehicles, 1988 it is apparent that as the provisions thereof do not enjoin any statutory liability on the owner of a vehicle to get his vehicle insured for any passenger traveling in a "Goods Vehicle", the Insurance Company would not be liable.

Relying upon Section 147 of the Motor Vehicles Act, 1988 it is clear that that the Insurance Company is not required to cover the risk in respect of a person who is travelling in a "Goods Vehicle" unless he is shown to be the Owner of the goods or his authorized representative, which were also carried in the Vehicle at the time of the accident. Section 149 (2)(a)(i)(c) of the Motor Vehicles Act, 1988 reads as follows:

"for a purpose not allowed by the permit under which the
vehicle is used, where the vehicle is a transport vehicle."

To contend that the Insurance Company is not bound to satisfy the Judgments and Awards against the Insured in respect of 3rd party risks, if there is breach of a condition in the Insurance Policy or if there is breach of a condition specified in the Insurance Policy enumerated under Section 149 (2)(a)(i) (a), (b), (c) or (d).

Section 147 of the Motor Vehicles Act, 1988 spells out the requirements of the Motor Insurance Policy as well as the limits of liability. While Section 147 (1) deals with the matters which will have to be covered by the Insurance Policy proviso to Section 147 (1) sets out exemptions. Section 147 (1)(b) which requires the Insurance Policy to insure the person or classes of persons specified in the Insurance Policy to the extent specified in sub-section 2 against any liability which may be incurred by him in respect of the death or bodily injury to any person, including owner of the goods or his authorized 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.

A reading of the above provision makes it clear that an Insurance Policy which is a mandatory statutory requirement is required to cover only certain classes of persons and not every person who chooses to travel in any type of Vehicle. Therefore, there is
no mandatory requirement for the Insurance Company to cover persons who are travelling as passengers in a Non-Passenger Vehicle / Goods Vehicle.

Section 149 of the Motor Vehicles Act, 1988 imposes an obligation on the part of the Insurers to satisfy the Judgments and Awards made against the persons insured in respect of Third Party risks. Section 149 (2) requires the Court or the Tribunal to notify the Insurance Company regarding the claim and also hear the Insurance Company and prescribes the defences that are available to the Insurer in such Third Party claims.

One of the defences that is available to the insurer in such Third Party claims as set out under Section 149 (2)(a)(i)(c) is that the Insured Vehicle being used for a purpose not allowed by the "Permit" under which the Vehicle is used where the Vehicle is a Transport Vehicle. Under the said provision it is open to the Insurance Company to lead and prove that the vehicle was used for the purpose other than which it was permitted and extricate itself from the liability to pay compensation.

Therefore, it is clear that Insurance Company which faces the claim petition can raise a statutory defence to the effect that the Vehicle in question was used for a purpose other than the purpose for which the "Permit" had been issued, in order to avoid the liability. Both these provisions have to be necessarily read together.

Judgments of Apex Court
The law with regard to the liability of the Insurance Company in respect of passengers being carried in a 'Goods Vehicle' is now well settled.

A Three Judge Bench of the Apex Court in ['New India Assurance Co. Ltd. Versus Asha Rani & Ors.', (2003) 1 SCC 223], considered the question whether it is compulsory for the Insurance Company to cover the liability in respect of passengers traveling in a 'Goods Vehicle'. This decision was in context of the un-amended Act. The Apex Court over-ruled its earlier Judgment in ["New India Assurance Co. Ltd. v/s Satpal Singh", (2000) 1 SCC 237] and held as follows:

"….It is held that the insurer will not be liable for paying compensation to the owner of the goods or his authorized representative on being carried in a goods vehicle when that vehicle meets with an accident and the owner of the goods or his representative dies or suffers any bodily injury."
Justice S.B. Sinha in his concurring judgment held as follows:
"25. Section 147 of the 1988 Act, inter-alia, prescribes compulsory coverage against the death of or bodily injury to any passenger of 'Public Service Vehicle'. Proviso appended thereto categorically states that compulsory coverage in respect of drivers and conductors of Public Service Vehicle and employees carried in a Goods Vehicle would be limited to the liability under the Workmen's Compensation Act. It does not speak of any passenger in a 'Good Carriage'.
26. In view of the changes in the relevant provisions in the 1988 Act vis-à-vis the 1939 Act, we are of the opinion that the meaning of the words "any person" must also be attributed having regard to the context in which they have been used i.e. "a third party". Keeping in view the provisions of the 1988 Act, we are of the opinion that as the provisions thereof do not enjoin any statutory liability on the owner of a vehicle to get his Vehicle insured for any passenger traveling in a Goods Vehicle, the insurers would not be liable therefor."

This matter again come up for consideration in ["Oriental Insurance Company v/s Devireddy Konda Reddy', (2003) 2 SCC 339]. The Apex Court considered the difference between the definition of 'Goods Vehicle' appearing in the Motor Vehicles Act, 1939 and 'Goods Carriage' appearing in the Motor Vehicles Act, 1988 and held as follows:

"The difference in the language of "Goods Vehicle" as appearing in the old Act and "Goods Carriage" in the Act is of significance. A bare reading of the provisions makes it clear that the legislative intent was to prohibit goods vehicle from carrying any passenger. This is clear from the expression "in addition to passengers" as contained in the definition of "Goods Vehicle" in the Old Act. The position becomes further clear because the expression used is "goods carriage" is solely for the carriage of "goods". Carrying of passengers in a goods carriage is not contemplated in the Act."

Thus, the Apex Court consisting of Three Judges Bench in ["National Insurance Company Ltd. v/s Baljit Kaur & Others", (2004) 2 SCC 1] considered the impact of the amendment to the Motor Vehicles Act made in 1994. The Apex Court held that after the amendment of 1994, the Insurance Company was bound to cover liability in respect of owner of the goods or his authorized representative traveling in the goods Vehicle. However, it further held that no passenger can be carried in a goods vehicle and the Insurance Company was not liable to pay compensation with respect to passengers especially gratuitous passengers. The Apex Court held thus:

"20. It is, therefore, manifest that in spite of the amendment of 1994, the effect of the provision contained in Section 147 with respect to persons other than the owner of the goods or his authorized representative remains the same. Although the owner of the goods or his authorized representative would now be covered by the policy of insurance in respect of a goods vehicle, it was not the intention of the legislature to provide for
the liability of the insurer with respect to passengers, 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 benefits of insurance to such category of people."

The Apex Court also considered this point in ["National Insurance Company Ltd. v/s Ajit Kumar & Others", (2003) 9 SCC 668]. After considering the definitions and various provisions of the Motor Vehicles Act both amended and un-amended, the Apex Court held as follows:

"The difference in the language of "Goods Vehicle" as appearing in the Old Act and "Goods Carriage" in the Act is of significance. A bare reading of the provisions makes it clear that the legislative intent was to prohibit goods vehicle from carrying any passenger. This is clear from the expression "in addition to passengers" as contained in the definition of "Goods Vehicle" in the Old Act. The position becomes further clear because the expression used in "Goods Carriage" is solely for the "Carriage of Goods". Carrying of passengers in "Goods Carriage" is not contemplated in the Act. There is no provision similar to clause (ii) of the proviso appended to Section 95 of the Old Act prescribing requirement of the Insurance Policy. Even Section 147 of the Act mandates compulsory coverage against death of or bodily injury to any passenger of "Public Service Vehicle".
The proviso makes it further clear that compulsory coverage in respect of drivers and conductors of Public Service Vehicle and employees carried in "Goods Vehicle" would be limited to liability under the Workmen's Compensation Act, 1923 (In short "the WC Act"). There is no reference to any passenger in "Goods Carriage".

Again the Hon'ble Supreme Court of India in ["National Insurance Co. Ltd. v/s Bommithi Subbhayamma & Ors.", 2005 ACJ 721] while following ['New India Assurance Co. Ltd. Versus Asha Rani & Ors.', (2003) 1 SCC 223]; ["Oriental Insurance Company v/s Devireddy Konda Reddy', (2003) 2 SCC 339]; ["National Insurance Company Ltd. v/s Baljit Kaur & Others", (2004) 2 SCC 1]; ["National Insurance Company Ltd. v/s Ajit Kumar & Others", (2003) 9 SCC 668] held that the Passengers travelling as "Gratuitous Passengers" in a "Goods Vehicles" are entitled to claim compensation from the Owner of the Vehicle.

Following the aforesaid Judgments, a similar view was taken by the Apex Court in 'National Insurance Company v/s Chinnamma & Others', (2004) 8 SCC 697 held as under;

"9. The same view was reiterated in National Insurance Co. Ltd. v/s Challa Bharathamma, 2004 ACJ 2094 (SC); Pramod Kumar Agrawal v/s Mushtari Begum, 2004 ACJ 1903 (SC) and National Insurance Co. Ltd. v/s Chinnamma, 2004 ACJ 1909 (SC).
10. In view of the aforementioned authorities /pronouncements of this Court, the impugned Judgment of the High Court cannot be sustained which is set aside accordingly. This appeal is allowed. We, however, make it clear that the claimants-respondents will be entitled to recover the amount of compensation granted in their favour by the Motor Accidents Claims Tribunal from the owner of the vehicle. No costs."

Again Three Judges Bench in "M. V. Jayadevappa & Anr. v/s Oriental Fire & Genl. Ins. Co. Ltd. & Ors.", 2005 ACJ 1801 held that the liability of the passengers being carried in Goods Vehicle exonerates the Insurance Company of its liability of indemnification.

The Hon'ble Supreme Court of India again in ["New India Assurance Co. Ltd. v/s Vedwati & Ors.", 2007 ACJ 1043] and ["National Insurance Co. Ltd. v/s Prema Devi & Ors.", 2008 AIR SCW 2023] reiterated that the Insurance Company cannot be held liable to indemnify the insured for the "Gratuitous Passengers" travelling in "Goods Carriage".

In 'National Insurance Co. Ltd. v/s Cholleti Bharatamma & Others', (2008) (1) SCC 423, the Apex Court was dealing with a matter in which a large number of persons were traveling in a "Goods Carriage". It was contended on behalf of the Claimants that all these persons were traveling as Owners of the Goods and hence, the Insurance Company was liable to pay the compensation. The Apex Court rejected this contention and held as follows:

"8. The Act does not contemplate that a 'Goods Carriage' shall carry a large number of passengers with small percentage of Goods as considerably the Insurance Policy covers the death or injury either of the Owner of the Goods or his authorized representative.
9.Correctness of the decision in Satpal Singh (supra) came up for consideration before a three Judge Bench of this Court in New India Assurance Co. Ltd. v. Asha Rani and Others,3 [(2003) 2 SCC 223].
In Asha Rani (supra), having regard to various definitions involving the legal question, it was held:
"23. The applicability of the decision of this Court in Mallawwa v. Oriental Insurance Co. Ltd. in this case must be considered keeping that aspect in view. Section 2 (35) of the 1988 Act does not include passengers in goods carriage whereas Section 2 (25) of the 1939 Act did as even passengers could be carried in a goods vehicle. The difference in the definitions of goods vehicle in the 1939 Act and goods carriage in the 1988 Act is significant. By reason of the change in the definitions of the terminology, the legislature intended that a goods vehicle could not carry any passenger, as the words in addition to passengers occurring in the definition of goods vehicle in the 1939 Act were omitted. Furthermore, it categorically states that goods carriage would mean a motor vehicle constructed or adapted for use solely for the carriage of goods. Carrying of passengers in a goods carriage, thus, is not contemplated under the 1988 Act."

In all these Judgments, it was held that an "Unauthorized" / "Gratuitous Passenger" traveling in a "Goods Vehicle" is not entitled to claim from the Insurance Company, though such Passenger or his/her dependants are entitled to recover compensation from the Owner of the Vehicle involved in the accident. Thus a "Gratuitous Passenger" traveling in a "Goods Vehicle" is not covered in the Insurance Policy and a Third Party claim for the death/injury of such "Gratuitous Passenger" is not maintainable.

Question of Law
"Whether the doctrine of "pay and recover" evolved by Hon'ble Supreme Court of India in ["National Insurance Company Limited v/s Swaran Singh & Ors.", (2004) 3 SCC 297)] would apply to the claims of persons who are either "Unauthorized Passengers" or "Gratuitous Passengers" in a "Goods Vehicle"?

In ["New India Assurance company Ltd. v/s. Asha Rani & Ors.", 2003 ACJ 1 (SC)], a Two Judge Bench of the Hon'ble Supreme Court doubted the correctness of the conclusion reached by another Two Judge Bench in ["New India Assurance Company v/s. Shri Satpal Singh & Ors.", 2000 ACJ 2 (SC)] and placed the matter before a Larger Bench for reconsideration. The question referred to by the Judgment in ["New India Assurance Company Ltd. v/s. Asha Rani & Ors.", 2003 ACJ 1 (SC)], was decided by a Larger Bench consisting of Three Judges of the Hon'ble Supreme Court in ["New India Assurance Company Ltd. v/s. Asha Rani and & Ors.", 2003 (2) SCC 223]. The Larger Bench of the Hon'ble Supreme Court after an elaborate consideration of the provisions of Sections 147 and 149 of the
Motor Vehicles Act, 1988 as amended by the Amendment Act 54 of 1994 held that the Judgment in ["New India Assurance Company v/s. Shri Satpal Singh & Ors.", 2000 ACJ 2 (SC)] has not been correctly decided.

However, in ["National Insurance Company Ltd. v/s. Baljit Kaur & Ors.", 2004 (2) SCC 1], a Three Judge Bench of the Hon'ble Supreme Court again went into the question as to "whether an Insurance Policy in respect of the "Goods Vehicle" would also cover "Gratuitous Passengers" in view of the legislative amendment to Section 147 introduced by Act 54 of 1994. After referring to the Larger Bench decision in ["New India Assurance Company Ltd. v/s. Asha Rani & Ors.", 2003 (2) SCC 223], the Hon'ble Supreme Court observed as follows:

"It is therefore, manifest that in spite of the amendment of 1994, the effect of the provision contained in Section 147 with respect to persons other than the owner of the goods or his authorized representative remains the same. Although the owner of the goods or his authorized representative would now be covered by the Policy of Insurance in respect of a Goods Vehicle, it was not the intention of the legislature to provide for the liability of the Insurer with respect to passengers, especially Gratuitous Passengers, who were neither contemplated at the time the Contract of Insurance was entered into, nor any premium was paid to the extent of the benefit of insurance to such category of people."

However, the Hon'ble Supreme Court clarified that the said judgment will have only prospective effect so that the Awards that were made against the Insurer during the period between the decision in ["New India Assurance Company Limited v/s. Shri Satpal Singh & Ors.", 2000 ACJ 2 (SC)] and the decision of the Larger Bench in [New India Assurance Company Ltd. v/s. Asha Rani & Ors.", 2003 (2) SCC 223] will not be nullified.

The Hon'ble Supreme Court also permitted the Insurance Company in the said case to pay the Award amount and recover the same from the Owner of the Vehicle insured. From the above, it is clear that the Policy of Insurance which is mandatory under the provisions of Motor Vehicles Act, 1988 is not required to cover the risk in case of an "Unauthorized" or a "Gratuitous Passenger" in the "Goods Vehicle" after the amendment of Section 147 by Act 54 of 1994 and it will be the liability of the Insured only to satisfy such awards and not the Insurance Company.

Conclusion
The concept of "pay and recover" has been discussed by the Hon'ble Supreme Court of India in the cases of ["National Insurance Company Limited v/s Swaran Singh, (2004) 3 SCC 297], ["Mangla Ram v/s. Oriental Insurance Co. Ltd. & Ors.", (2018) 5 SCC 656], ["Rani & Ors. v/s. National Insurance Co. Ltd. & Ors.", (2018) 8 SCC 492] and ["Manuara Khatun & Ors. v/s. Rajesh Kumar Singh" & Ors., (2017) 4 SCC 796].

The Supreme Court in all these cases has recognized the power of the Tribunal to direct that the award in the first instance be satisfied by the insurer with a right to recover the same from the insured. However, in all these cases, the question regarding liability of the Insurance Company to pay the compensation in respect of an "Unauthorized Passenger" travelling in a "Goods Carriage" Vehicle did not arise for consideration.

In the light of categorical pronouncement of Larger Bench of the Hon'ble Supreme Court in ["New India Assurance Company Ltd. v/s. Asha Rani and & Ors.", 2003 (2) SCC 223] and ["National Insurance Company Ltd. v/s. Baljit Kaur & Ors.", 2004 (2) SCC 1] referred to supra, it can be safely concluded that the doctrine of "pay and recover" evolved by Hon'ble Supreme Court of India in ["National Insurance Company Limited v/s Swaran Singh & Ors.", (2004) 3 SCC 297)] would not apply to the claims of persons who are either "Unauthorized Passengers" or "Gratuitous Passengers" in a "Goods Vehicle".

Written By: Dinesh Singh Chauhan, Advocate, High Court of Judicature, J&K, Jammu.
Email: [email protected], [email protected].