NATIONAL INSURANCE CO. LTD. versus PREMBAI PATEL AND ORS.

Citation: [2005] 3 S.C.R. 655 · Decided: 18-04-2005 · Supreme Court of India · Bench: R.C. LAHOTI · Disposal: Disposed off
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Judgment (excerpt)

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NATIONAL INSURANCE CO. LTD. 
V. 
PREMBAI PATEL AND ORS. 
APRIL 18, 2005 
[R.C. LAHOTI, CJ., G.P. MATHUR AND A.K. MATHUR, JJ.) 
Motor vehicles Act, 1988; Ss. 140, 146, 147, 149, 166 and 1731 
Workmen's Compensation Act, 1923; Section 3: 
A 
B 
Goods vehicle-Accident-Death of driver-Claim Petition-Liability C 
of insurer and owner of vehicle under 1988 Act and Workmen's Compensation 
Act-Held: In order to make the insurer liable to pay entire amount of 
fiOmpensation under the insurance policy covering the death/bodily injury 
caused to assured/employee in the course of employment, the owner must take 
a policy which clearly shows that insurer's liability under the policy is not D 
restricted to liabilities under the Workmen's Compensation Act but is either 
more/unlimited-Since the policy in question contained Act liability Clause, 
the liability of the insurer is restricted to that arising under the 1923 Act-
Owner of the vehicle directed to satisfy the remaining part of the award--
Insurer could recover the excess amount if paid to the claimants from owner 
of the vehicle-Motor Vehicles Act, 1939. 
E 
'Policy for Act Liability' or 'Act Liability '-Meaning of-Discussed 
The driver of a Truck met with an accident and died. Family members 
of the deceased filed a claim petition before the Motor Vehicles Accident 
Tribunal for award of compensation. The petition was dismissed by the F 
Tribunal. On appeal, High Court held that the accident took place due to some 
defects developed in the vehicle and not because of the negligence of the driver/ 
employee; that the owner of the vehicle had not taken due care in maintaining 
the vehicle; and that the Insurer was liable. to satisfy the entire amount of 
compensation awarded to the claimants. Hence the present appeal. 
G 
Disposing of the appeal, the Court 
HELD: 1.1. Section 149 of the Motor Vehicles Act imposes a duty upon 
the insurer to satisfy judgments and awards against persons insured in respect 
655 
H 
656 
SUPREME COURT REPORTS 
(2005] 3 S.C.R. 
A of third party risks. The expression - "such liability as is required to be covered 
by a policy under clause (b) of sub-section (1) of Section 147 of the Act (being 
a liability covered by _the terms of the policy)" - occurring in sub-section (1) 
of Section 149 of the A~t clearly shows that any such liability, which is 
mandatorily required to be covered by a policy under clause (b) of Section 
147(1), has to be satisfied by the insurance company. The effect of this 
B provision is that an insuranfe policy, which covers only the liability arising 
under the Workmen's Compensation Act in respect of death of or bodily 
injury to any such employee as described in sub-clauses (a) or (b) or (c) to 
proviso (i) to Section 147(l)(b) of the Act is perfectly valid and permissible 
under the Act Therefore, where any such policy has been taken by the owner 
C of the vehicle, the liability of the insurance company will be confined to that 
arising under the Workmen's Compensation Act (663-B-C-D-E) 
. 
. 
. 
1.2: Tlitdnsurance policy being in the nature of a contract, it is 
permissible for an owner to take such a policy whereunder the entire liability 
in respect of the death of or bodily injury to any such employee as is described 
D in sub-clauses (a) or (b) or (c) of proviso (i) to Section 147(1)(b) of the Act 
may be fastened upon the insurance company and insurance company may 
become liable to satisfy the entire award. However, for this purpose the owner 
must take a policy of that particular kind for which he may be required to 
I 
. 
. 
pay additional premium and the policy must clearly show that the liability of 
E the insurance company in case of death of or bodily injury to the employees 
is not restricted to that provided under the Workmen's Act and is either more 
or unlimited depending upon the quantum of premium paid and the terms 
of the policy. However, where the policy mentions "a policy for Act Liability" 
or "Act Liability", the li~bility of the insurance company qua the employees 
would not be unlimited· but would be limited to that arising under the 
F Workmen's Act [663-F-G] 
New India Assurance Co. Ltd v. C.M Jaya and Ors., (20021 2 SCC 278, 
followed . 
. 2. The High Court directed the insurance company to pay the entire 
G amount of c(Jmpensation to the claimants. Since the insurance policy contained 
a clause that it was a policy for "Act Liability" only, the liability of the 
insurance company woul
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