ORIENTAL INSURANCE CO. LTD. versus CHERUVAKKARA NAFEESSU AND ORS.

Citation: [2000] SUPP. 5 S.C.R. 670 · Decided: 14-12-2000 · Supreme Court of India · Bench: K.T. THOMAS, R.P. SETHI · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
B 
ORIENTAL INSURANCE CO. LTD. 
v. 
CHERUVAKKARA NAFEESSU AND ORS. 
DECEMBER 14, 2000 
[K.T. THOMAS AND R.P. SETHI, JJ.] 
Motor Vehicles Act, 1939--Section 95(1)(b) and 96--Accident causing 
death of a person by a vehicle-Legal heirs of the deceased filed claim 
C petition before the Claims Tribunal for Rs. 2, 00, 000--Policy limited liability 
of the appellate/insurer to Rs. 50,000--Claims Tribunal passed an award for 
Rs. 1,94,150 making the appellant solely liable-First appeal dismissed by 
the High Court-On appeal-Held, as per the terms of policy, total extent of 
liability was Rs. 50, 000 only-The appellant was liable to indemnifY the 
insured against all sums including claimants s costs and expenses which 
D insured becomes liable to pay-The insured is liable to repay to the appellant-
company all sums paid by the appellant-company which the company would 
not have been liable to pay but for the condition of liability relating to third 
party. 
In an accident caused by an auto-rickshaw which, was insured by the 
E appellant company, one person died. His legal heirs, the respondents claimed 
Rs. 2,00,000 as compensation by filing a claim petition before the Motor 
Accident Claims Tribunal. In its reply, the appellant company specifically 
stated that under the policy of insurance their liability was limited to 
Rs. 50,000 only. However, the Tribunal awarded compensation of Rs. 1,94,150 
F holding the appellant company to be solely liable. Appeal tiled by the company 
against the said award was dismissed by the High Court. Hence this appeal. 
The appellant contended that under the terms of the insurance policy 
in the instant case, the company was not liable to pay more than Rs. 50,000, 
being the limit of its liability. The excess amount of the award was to be paid 
G by the insured for which the Tribunal was not competent to issue directions 
against the appellant-company. The insured contended that as per the avoidance 
clause in the insurance policy, the appellant was liable to indemnify the whole 
extent of liability towards the claim notwithstanding the limit of liability of 
the insurance. 
H 
Allowing the appeal, the Court 
670 
ORIENTAL INSURANCE CO LTD." CHERUVAKKARA NAFEESSU [SETHI, J.) 671 
HELD: I. A conjoint reading of all the terms of the policy of insurance A 
executed in this case indicates that the total extent of liability of the insurance 
policy is Rs. 50,000 but the company is liable to indemnify the insured against 
all sums including claimant's costs and expenses and nothing in the policy 
affects the right of any person indemnified by the policy or any other person 
to recover an amount under or by virtue of the provisions of Section 96 of the 
Motor Vehicles Act. However, the insured is liable to repay to the company B 
all sums paid by the company which the company would not have been liable 
to pay but for the condition of liability relating to third party. (673-E, F( 
New Asiatic Insurance Co. ltd. v. Pessumal Dhanamal Aswani & Ors., 
AIR (1964) SC 1736 and Amrit Lal Sood & Anr.v. Smt. Kaushalya Devi Thapar C 
& Ors., AIR (1998) SC 1433, referred to. 
T Shantharam v. State of Karnataka & Ors., (1995) 2 SCC 539 and 
National Insurance Co. ltd. New Delhi v. Nand Kishore & Ors., (1998( 1 SCC 
626, distinguished. 
2. Despite holding the liability under the policy limited to the extent of D 
Rs. 50,000, the Claims Tribunal and the High Court were not unjustified in 
directing the appellant-company to pay whole of the awarded amount to the 
claimants on the basis of the contractual obligations contained in clauses 
relating to the liability of the third parties and avoidance clause. However, the 
Claims Tribunal and the High Court were not justified in rejecting the right E 
of the appellant-company to recover from the insured the excess amount paid 
in execution and discharge of the award of the Tribunal. [676-8) 
CIVIL APPELLATE JURISDICTION : Civil appeal No. 7359 of2000. 
From the Judgment and Order dated 8.11.99 of the Kerala High Court F 
in M.F.A. No. 1043of1991-D. 
2-7. 
Kishore Rawat and M.K. Dua for the Appellant. 
S.K. Bhattacharya for the Respondent Nos. 8-9. 
Rajiv Mehta, M. Jayasree and A.K. Sengupta, for the Respondent Nos. G 
The Judgment of the Court was delivered by: 
SETHI, J. Leave granted. 
What is the extent of liability of an insurance company towards the H 
672 
SUPREME COL'RT REPORTS (2000] SUPP. 5 S.C.R. 
A third party as per Section 95(l)(b) of the Motor Vehicl

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