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Reportabl e

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL     APPEAL     NO.     8163                    OF     2012   (Arising out of S.L.P. (Civil) No. 1232 of 2012)

National Insurance Company Ltd.         ... Appellants

Versus

Balakrishnan & Another                ...  Respondents

J     U     D     G     M     E     N     T       

Dipak     Misra,     J.   

Leave granted.

2. The singular issue that arises for consideration in this  

appeal is whether the first respondent, the Managing Director  

of the respondent No. 2, a company registered under the  

Companies Act, 1956, is entitled to sustain a claim against the  

appellant-insurer for having sustained bodily injuries.  

Succinctly stated, the facts are that the respondent No. 1 met  

with an accident about 8.30 p.m. on 23.3.2001 while  

travelling in the Lancer car bearing registration No. TN 49 K

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2750 belonging to the respondent No. 2, as it dashed against a  

bullock cart near Muthandipatti Pirivu Road-I.  He knocked at  

the doors of the Motor Accident Claim Tribunal (for short “the  

the tribunal”) in MACOP No. 357 of 2004 under Sections 140,  

147 and 166 of the Motor Vehicles Act, 1988 (for brevity “the  

Act”) claiming compensation of Rs.20,00,000/-  jointly and  

severally from the appellant as well as the company on the  

foundation that the vehicle in question was insured with the  

appellant-company.  Be it noted, the amount was calculated  

on the basis of pecuniary and non-pecuniary damages.  

3. The insurer resisted the claim on the grounds that the  

claimant had suppressed the fact that he was the Managing  

Director of the company and hence, the application deserved  

to be thrown overboard; that even if the petition was  

entertained the insurance company could not be held liable to  

indemnify the respondent as the appellant was himself the  

owner being the Managing Director and under no  

circumstances he could be treated as a third party; that the  

policy taken by the company did not cover an occupant in the  

vehicle but only covered the owner for a limited quantum and  

hence, the claim was not allowable as sought for.   

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4.  The tribunal, in its award dated 19.4.2007, addressed to  

the issues of rash and negligent driving of the driver, injuries  

sustained by the insured and the liability of the insurance  

company.  On the basis of the material brought on record, it  

came to hold that the accident had occurred due to rash and  

negligent driving of the driver of the 1st respondent; that the  

claimant was injured in the accident; that regard being had to  

the injuries sustained he was entitled to get Rs.8,63,200/- as  

compensation with interest @ 7.5% per annum  from the date  

of the petition till the date of deposit; and that the insurance  

company was liable to indemnify as the owner of the vehicle  

was the company, and the injured was travelling in the car as  

a third party.   

5. Being dissatisfied with the award passed by the tribunal,  

the insurer preferred C.M.A. (M.D.) No. 1624 of 2008 before  

the Madurai Bench of Madras High Court and in appeal it was  

urged that the victim, the Managing Director, who was  

running the hospital in the name of his deceased father, was  

the legal owner of the car though the vehicle was insured in  

the name of the company and, therefore, the liability was to  

the limited extent as stipulated in the policy.  It was also  

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canvassed, in any case, he was a non-fare paying passenger in  

the car for which no extra premium was paid and hence, the  

liability could not be fastened on the insurer.   The High Court  

treated the company to be the owner of the vehicle and  

repelled the stand that the Managing Director was the owner,  

and further held that as he was only an occupant of the car  

the insurance company was liable to indemnify the owner for  

the claim put forth by the victim.  It is worthy to note that the  

High Court opined that if no premium is paid to cover the  

owner, the insurer is not liable to make good the loss but if  

another person travels with the owner and suffers injuries the  

insurer is liable to pay the compensation.  Being of this view,  

the High Court dismissed the appeal. Hence, the present  

appeal by the insurer.   

6. We have heard the learned counsel for the parties and  

perused the record.  As has been indicated at the beginning,  

the seminal issue is whether the appellant-company is liable  

to make good the compensation determined by the tribunal to  

the victim in the accident.  On a scrutiny of the award passed  

by the tribunal which has been given the stamp of approval by  

the High Court, it is manifest that the 1st respondent was the  

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Managing Director of the respondent No. 2 and the vehicle was  

registered in the name of the company but the Managing  

Director had signed on behalf of the company in the R. C.  

book of the car that was involved in the accident.  The High  

Court has returned a finding that the company and the  

Managing Director are two different legal entities and hence,  

the Managing Director cannot be equated with the owner.  On  

that foundation, the claimant has been treated as a passenger  

and, accordingly, liability has been fastened on the insurer.  

The learned counsel appearing for the insurer would contend  

that assuming he is the owner being a signatory in the R.C.  

book, the liability of the company is limited upto  

Rs.2,00,000/- and under no circumstances a non-fare paying  

passenger would be covered under the policy.  In oppugnation,  

the learned counsel for the respondent-claimant has proponed  

that barring the insurer and the insured, all others are third  

parties and, therefore, he is covered by the policy.  It is also  

urged by him that as he had travelled as an occupant in a  

private car he is a third party vis-à-vis the insurer and hence,  

it is bound to indemnify the owner as the risk of the third  

party is covered.    

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7. As per the command of Section 146 of the Act, the owner  

of a vehicle is obliged to obtain an insurance for the vehicle to  

cover the third party risk.  Section 147 deals with the  

requirements of policies and limits of liability.  Section 147 (1)  

which is relevant for the present purpose is reproduced  

below:-

“147.  Requirement  of  policies and  limits  of  liability. – (1)  In  order  to  comply  with  the  requirements  of  this  Chapter,  a  policy  of  insurance  must  be  a  policy  which -   

(a) is  issued  by  a  person  who is  an  authorised  insurer;  and    

(b) insurers  the  person   or  classes  of  persons  specified  in  the  policy  to  the  extent  specified  in  sub – section (2) –  

(i) 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  authorised  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 ;  

(ii) against  the  death  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;  

Provided that a policy shall not be required –  

(i) to  cover  liability  in respect  of  the  death,  arising  out  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  

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out  of  and  in  the  course  of  his  employment  other  than  a  liability  arising  under  the  Workmen’s  Compensation  Act, 1923 (8  of  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  a  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  

(ii) to cover  any  contractual  liability.  

Explanation. – For    the    removal   of   doubts,    it  is   hereby   declared    that    the  death  of  or  bodily  injury  to  any  person  or  damage   to   any  property  of  a  third   party    shall   be   deemed  to   have   been    caused  by  or  to  have  arisen  out  of,  the  use  of  a  vehicle  in a  public  place  notwithstanding  that  the  person  who  is  dead  or  injured  or  the  property  which  is  damaged  was  not  in  a  public  place  at  the  time  of  the  accident,  if  the  act  or  omission  which  led  to  the  accident  occurred  in  a  public  place.”  

 On a scanning of the aforesaid provision, it is evident  

that the policy of insurance must be a policy which complies  

with the conditions enumerated under Section 147 (1) (a) &  

(b).  It also provides where a policy is not required and also  

stipulates to cover any contractual liability.    

8. In United India Insurance Co. Ltd., Shimla v. Tilak  

Singh and Others1, this Court referred to the concurring  1 (2006) 4 SCC 404

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opinion rendered in a three-Judge Bench decision in New  

India Assurance Co. Ltd. V. Asha Rani2 and ruled thus:-

“In our view, although the observations made in  Asha Rani case were in connection with carrying  passengers in a goods vehicle, the same would  apply with equal force to gratuitous passengers in  any other vehicle also.  Thus, we must uphold the  contention of the appellant Insurance Company  that it owed no liability towards the injuries  suffered by the deceased Rajinder Singh who was a  pillion rider, as the insurance policy was a statutory  policy, and hence it did not cover the risk of death  of or bodily injury to a gratuitous passenger.”

It is worthy to note that in the said case the controversy  

related to gratuitous passenger carried in private vehicle.  

9. In Oriental Insurance Co. Ltd. v. Jhuma Saha (Smt)  

and Others3, the controversy related to fastening of liability  

on the insurer for the death of the owner of a registered  

vehicle, Maruti van.  The Court observed that the accident did  

not involve any other motor vehicle than the one which he was  

driving and as the liability of the insurer Company is to the  

extent of indemnification of the insured against the  

respondent or an injured person, a third person or in respect  

of damages of property, the insured cannot be fastened with  

2 (2003) 2 SCC 223 3 (2007) 9 SCC 263

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any liability under the provisions of the Motor Vehicles Act,  

and, therefore, the question of the insurer being liable to  

indemnify the insured does not arise.  Thereafter, the Bench  

referred to the decision in Dhanraj v. New India Assurance  

co. Ltd.4 and ruled thus:-      

“The additional premium was not paid in respect of  the entire risk of death or bodily injury of the owner  of the vehicle.  If that be so, Section 147 (b) of the  Motor Vehicles Act which in no uncertain terms  covers a risk of a third party only would be  attracted in the present case.”

10. In National Insurance Co. Ltd. v. Laxmi Narain  

Dhut5, after elaborately referring to the analysis made in Asha  

Rani (supra), the Bench stated thus:-

“Section 149 is part of Chapter XI which is titled  “Insurance of Motor Vehicles against Third-Party  Risks”.  A significant factor which needs to be  noticed is that there is no contractual relation  between the insurance company and the third  party.  The liabilities and the obligations relatable to  third parties are created only by fiction of Sections  147 and 149 of the Act.”

In the said case, it has been opined that although the statute  

is a beneficial one qua the third party, yet that benefit cannot  

be extended to the owner of the offending vehicle.   

4 (2004) 8 SCC 553 5 (2007) 3 SCC 700

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11. In Oriental Insurance Company Ltd. v. Meena Variyal  

and Others6, the facts were that a Regional Manager of the  

company, which was the owner of the vehicle, was himself  

driving a vehicle of the company and met with an accident and  

eventually succumbed to the injuries.  It was contended by the  

insurer before this Court that the policy did not cover the  

employee of the owner who was driving the vehicle while  

attending the business of the employer-company and the  

deceased was not a third party in terms of the policy or in  

terms of the Act.  It was also urged that the same would be the  

position even if the deceased was only travelling in the car in  

his capacity as a Regional Manger of the owner-company and  

the vehicle was being driven by the driver.  This Court  

observed that a contract of insurance is ordinarily a contract  

of indemnity and when a car belonging to an owner is insured  

with the insurance company and it is being driven by a driver  

employed by the insured, when it meets with an accident, the  

primary liability under law for payment of compensation is  

that of the driver.  Once the driver is liable, the owner of the  

vehicle becomes vicariously liable for payment of  

compensation.  It is this vicarious liability of the owner that is  6 (2007) 5 SCC 428

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indemnified by the insurer.  Dealing with the said liability, the  

Bench analysed the language employed under Section 147 (1)  

of the Act and observed as follows:-  

“The object of the insistence on insurance under  Chapter XI of the Act thus seems to be to  compulsorily cover the liability relating to their  person or properties of third parties and in respect  of employees of the insured employer, the liability  that may arise under the Workmen's Compensation  Act, 1923 in respect of the driver, the conductor  and the one carried in a goods vehicle carrying  goods. On this plain understanding of Section 147,  we find it difficult to hold that the Insurance  Company, in the case on hand, was liable to  indemnify the owner, the employer Company, the  insured, in respect of the death of one of its  employees, who according to the claim, was not the  driver. Be it noted that the liability is not one  arising under the Workmen's Compensation Act,  1923 and it is doubtful, on the case put forward by  the claimant, whether the deceased could be  understood as a workman coming within the  Workmen's Compensation Act, 1923. Therefore, on  a plain reading of Section 147 of the Act, it appears  to be clear that the Insurance Company is not liable  to indemnify the insured in the case on hand.”

12. After so stating, the Bench adverted to the decisions in  

National Insurance Co. Ltd. v. Swaran Singh7, Laxmi  

Narain Dhut (supra), Asha Rani (supra) and Tilak Singh  

(supra) and opined that a policy in terms of Section 147 of the  

Act does not cover persons other than third parties.  

Eventually, it ruled thus:-  

7 (2004) 3 SCC 297

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“The victim was the Regional Manager of the  Company that owned the car. He was using the car  given to him by the Company for use. Whether he is  treated as the owner of the vehicle or as an  employee, he is not covered by the insurance policy  taken in terms of the Act—without any special  contract—since there is no award under the  Workmen's Compensation Act that is required to be  satisfied by the insurer. In these circumstances, we  hold that the appellant Insurance Company is not  liable to indemnify the insured and is also not  obliged to satisfy the award of the Tribunal/Court  and then have recourse to the insured, the owner of  the vehicle.”

13. In Oriental Insurance Company Ltd. v. Sudhakaran K.  

V. and Others8, a two-Judge Bench, while dealing with the  

issue whether a pillion rider on a scooter would be a third  

party within the meaning of Section 147 of the Act, after  

referring to number of authorities, stated thus:-  

“The contract of insurance did not cover the owner  of the vehicle, certainly not the pillion-rider. The  deceased was travelling as a passenger, stricto  sensu may not be as a gratuitous passenger as in a  given case she may not (sic) be a member of the  family, a friend or other relative. In the sense of the  term which is used in common parlance, she might  not be even a passenger. In view of the terms of the  contract of insurance, however, she would not be  covered thereby.

xxx      xxx     xxx     xxx   xxx

The law which emerges from the said decisions,  is: (i) the liability of the insurance company in a  

8 (2008) 7 SCC 428

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case of this nature is not extended to a pillion-rider  of the motor vehicle unless the requisite amount of  premium is paid for covering his/her risk; (ii) the  legal obligation arising under Section 147 of the Act  cannot be extended to an injury or death of the  owner of vehicle or the pillion-rider; (iii) the pillion- rider in a two-wheeler was not to be treated as a  third party when the accident has taken place  owing to rash and negligent riding of the scooter  and not on the part of the driver of another vehicle.”

14. In New India Assurance Company Limited v.  

Sadanand Mukhi and Others9, the son of the owner of the  

insured while driving the motor cycle met with an accident  

and died.  The accident allegedly took place as a stray dog  

came in front of the vehicle.  The stand of the insurance  

company was that in view of the relationship between the  

deceased and the owner of the vehicle being father and son the  

deceased was not a third party.  The Bench relied on the  

decisions in Tilak Singh (supra), Jhuma Saha (supra),  

Meena Variyal (supra), Laxmi Narain Dhut (supra) and  

United India Insurance Co. Ltd. v. Davinder Singh10 and  

came to hold that the insurance company was not liable to  

indemnify the owner.   

9 (2009) 2 SCC 417 10 (2007) 8 SCC 698

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15. At this juncture, we may refer with profit to a two-Judge  

Bench decision in Bhagyalakshmi and others v. United  

Insurance Company Limited and another11 wherein the  

learned Judges took note of the contention of the learned  

senior counsel for the claimant-appellant which was to the  

effect that after the deletion of the second proviso appended to  

Section 95(1)(b) of the Motor Vehicles Act, 1939 in the 1988  

Act, the liability of a passenger in a private vehicle must also  

be included in the policy in terms of the provisions of the 1988  

Act. The Bench reproduced the policy, referred to Section 64-B  

of the Insurance Act, 1938, took note of the role of the Tariff  

Advisory Committee and referred to the decisions in Amrit Lal  

Sood and Another v. Kaushalya Devi Thapar and  

Others12, Asha Rani (supra), Tilak Singh  (supra), Jhuma  

Saha (supra) and  Sudhakaran K. V. and Others (supra)  

and observed thus :-  

“Before this Court, however, the nature of policies  which came up for consideration were Act policies.  This Court did not deal with a package policy. If the  Tariff Advisory Committee seeks to enforce its  decision in regard to coverage of third-party risk  which would include all persons including  occupants of the vehicle and the insurer having  

11 (2009) 7 SCC 148 12 (1998) 3 SCC 744

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entered into a contract of insurance in relation  thereto, we are of the opinion that the matter may  require a deeper scrutiny.”

On a perusal of the aforesaid paragraph, it is clear as  

crystal that the decisions that have been referred to in  

Bhagyalakshmi (supra) involved only “Act Policies”.  The  

Bench felt that the matter would be different if the Tariff  

Advisory Committee seeks to enforce its decision in regard to  

coverage of third party risk which would include an occupant  

in a vehicle.  It is worth noting that the Bench referred to  

certain decisions of Delhi High Court and Madras High Court  

and thought it appropriate to refer the matter to a larger  

Bench.  Be it noted, in the said case, the Court was dealing  

with comprehensive policy which is also called a package  

policy.  In that context, in the earlier part of the judgment, the  

Bench had stated thus:-

“The policy in question is a package policy. The  contract of insurance if given its face value covers  the risk not only of a third party but also of persons  travelling in the car including the owner thereof.  The question is as to whether the policy in question  is a comprehensive policy or only an Act policy.”

16. Thus, it is quite vivid that the Bench had made a  

distinction between the “Act policy”  and “comprehensive  

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policy/package policy”.  We respectfully concur with the said  

distinction.  The crux of the matter is what would be the  

liability of the insurer if the policy is a  

“comprehensive/package policy”.  We are absolutely conscious  

that the matter has been referred to a larger Bench, but, as is  

evident, the Bench has also observed that it would depend  

upon the view of the Tariff Advisory Committee pertaining to  

enforcement of its decision to cover the liability of an occupant  

in a vehicle in a “comprehensive/package policy” regard being  

had to the contract of insurance.

17. At this stage, it is apposite to note that when the decision  

in Bhagyalakshmi (supra) was rendered, a decision of High  

Court of Delhi dealing with the view of the Tariff Advisory  

Committee in respect of “comprehensive/package policy”  had  

not come into the field.  We think it apt to refer to the same as  

it deals with certain factual position which can be of  

assistance.  The High Court of Delhi in Yashpal Luthra and  

Anr. V. United India Insurance Co. Ltd. and Another13,  

after recording the evidence of the competent authority of  

Tariff Advisory Committee (TAC) and Insurance Regulatory and  

13 2011 ACJ 1415

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Development Authority (IRDA), reproduced a circular dated  

16.11.2009 issued by IRDA to CEOs of all the Insurance  

Companies restating the factual position relating to the  

liability of Insurance companies in respect of a pillion rider on  

a two-wheeler and occupants in a private car under the  

comprehensive/package policy. The relevant portion of the  

circular which has been reproduced by the High Court is as  

follows:-

“IRDA

Ref: IRDA/NL/CIR/F&U/073/11/2009  16.11.2009

To

CEOs of all general insurance companies

Re: Liability of insurance companies in respect of  occupants of a Private car and pillion rider on a  two-wheeler under Standard Motor Package Policy  (also called Comprehensive Policy).

Insurers’  attention is drawn to wordings of Section  (II) 1 (ii) of Standard Motor Package Policy (also  called Comprehensive Policy) for private car and  two-wheeler under the (erstwhile) India Motor Tariff.  For convenience the relevant provisions are  reproduced hereunder:-

‘Section II - Liability to Third Parties

1. Subject to the limits of liabilities as laid down in  the Schedule hereto the company will indemnify the  insured in the event of an accident caused by or  arising out of the use of the insured vehicle against  

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all sums which the insured shall become legally  liable to pay in respect of -

(i) death or bodily injury to any person including  occupants carried in the vehicle (provided such  occupants are not carried for hire or reward) but  except so far as it is necessary to meet the  requirements of Motor Vehicles Act, the Company  shall not be liable where such death or injury arises  out of and in the course of employment of such  person by the insured.’

It is further brought to the attention of insurers that  the above provisions are in line with the following  circulars earlier issued by the TAC on the subject:

(i) Circular M.V. No. l of 1978 - dated 18th March,  1978 (regarding occupants carried in Private Car)  effective from 25th March, 1977.

(ii) MOT/GEN/10 dated 2nd June, 1986 (regarding  pillion riders in a two-wheeler) effective from the  date of the circular.

The     above     circulars     make     it     clear     that     the     insured    liability     in     respect     of     occupant(s)     carried     in     a     private    car     and     pillion     rider     carried     on     two-wheeler     is    covered     under     the     Standard     Motor     Package     Policy  . A  copy each of the above circulars is enclosed for  ready reference.

The Authority vide circular No.  066/IRDA/F&U/Mar-08 dated March 26, 2008  issued under File & Use Guidelines has reiterated  that pending further orders the insurers shall not  vary the coverage, terms and conditions wording,  warranties, clauses and endorsements in respect of  covers that were under the erstwhile tariffs.  Further     the     Authority,     vide     circular     No.    019/IRDA/NL/F&U/Oct-08     dated     November     6,    2008     has     mandated     that     insurers     are     not     permitted    to     abridge     the     scope     of     standard     covers     available    under     the     erstwhile     tariffs     beyond     the     options    permitted     in     the     erstwhile     tariffs.      All     general    

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insurers     are     advised     to     adhere     to     the     afore-   mentioned     circulars     and     any     non-compliance     of     the    same     would     be     viewed     seriously     by     the     Authority  .  This is issued with the approval of competent  authority.

Sd/-  (Prabodh Chander) Executive Director”

[emphasis supplied]

18. The High Court has also reproduced a circular issued by  

IRD dated 3.12.2009.  It is instructive to quote the same:-

“IRDA

IRDA/NL/CIR/F&U/078/12/2009 3.12.2009.

To

All CEOs of All general insurance companies (except  ECGC, AIC, Staff Health, Apollo)  

Re: Liability of insurance companies in respect of  occupant of a private car and pillion rider in a two- wheeler under Standard Motor Package Policy (also  called Comprehensive Policy).

Pursuant to the Order of the Delhi High Court dated  23.11.2009 in MAC APP No. 176/2009 in the case  of Yashpal Luthra v. United India and Ors., the  Authority convened a meeting on November 26,  2009 of the CEOs of all the general insurance  companies doing motor insurance business in the  presence of the counsel appearing on behalf of the  Authority and the leaned amicus curie.  

Based on the unanimous decision taken in the  meeting by the representatives of the general  insurance companies to comply with the IRDA  circular dated 16th November, 2009 restating the  

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position relating to the liability of all the general  insurance companies doing motor insurance  business in respect of the occupants in a private car  and pillion rider on a two wheeler under the  comprehensive/package policies which was  communicated to the court on the same day i.e.  November 26, 2009 and the court was pleased to  pass the order (dt. 26.11.2009) received from the  Court Master, Delhi High Court, is enclosed for your  ready reference and adherence. In     terms     of     the     said    order     and     the     admitted     liability     of     all     the     general    insurance     companies     doing     motor     insurance    business     in     respect     of     the     occupants     in     a     private     car    and     pillion     rider     on     a     two-wheeler     under     the    comprehensive/package     policies,     you     are     advised     to    confirm     to     the     Authority,     strict     compliance     of     the    circular     dated     16  th     November,     2009   and orders dt.  26.11.2009 of the High Court. Such compliance on  your part would also involve:

(i) withdrawing the plea against such a contest  wherever taken in the cases pending before the  MACT, and issue appropriate instructions to  their respective lawyers and the operating  officers within 7 days;

(ii) with respect to all appeals pending before the  High Courts on this point, issuing instructions  within 7 days to the respective operating  officers and the counsel to withdraw the  contest on this ground which would require  identification of the number of appeals  pending before the High Courts (whether filed  by the claimants or the insurers) on this issue  within a period of 2 weeks and the contest on  this ground being withdrawn within a period of  four weeks thereafter;

(iii) With respect to the appeals pending before the  Hon'ble Apex Court, informing, within a period  of 7 days, their respective advocates on record  about the IRDA Circulars, for appropriate  

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advice and action.  Your attention is also  drawn to the discussions in the CEOs meeting  on 26.11.2009, when it was reiterated that  insurers must take immediate steps to collect  statistics about accident claims on the above  subject through a central point of reference  decided by them as the same has to be  communicated in due course to the  Honourable High Court. You are therefore  advised to take up the exercise of collecting  and collating the information within a period of  two months to ensure necessary & effective  compliance of the order of the Court. The  information may be centralized with the  Secretariat of the General Insurance Council  and also furnished to us.

IRDA requires a written confirmation from you on  the action taken by you in this regard.

This has the approval of the Competent Authority. Sd/-

(Prabodh Chander) Executive Director”

[emphasis added]  

19. It is extremely important to note here that till 31st  

December, 2006 the Tariff Advisory Committee and, thereafter,  

from 1st January, 2007, IRDA functioned as the statutory  

regulatory authorities and they are entitled to fix the tariff as  

well as the terms and conditions of the policies by all  

insurance companies.  The High Court had issued notice to  

the Tariff Advisory Committee and the IRDA to explain the  

factual position as regards the liability of the insurance  

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companies in respect of an occupant in a private car under the  

“comprehensive/ package policy”.  Before the High Court, the  

Competent Authority of IRDA had stated that on 2nd June,  

1986, the Tariff Advisory Committee had issued instructions  

to all the insurance companies to cover the pillion rider of a  

scooter/motorcycle under the “comprehensive policy” and the  

said position continues to be in vogue till date.  It had also  

admitted that the “comprehensive policy” is presently called a  

“package policy”.  It is the admitted position, as the decision  

would show, the earlier circulars dated 18th March, 1978 and  

2nd June, 1986 continue to be valid and effective and all  

insurance companies are bound to pay the compensation in  

respect of the liability towards an occupant in a car under the  

“comprehensive/package policy” irrespective of the terms and  

conditions contained in the policy.  The competent authority of  

the IRDA was also examined before the High Court who stated  

that the circulars dated 18th March, 1978 and 2nd June, 1986  

of the Tariff Advisory Committee were incorporated in the  

Indian Motor Tariff effective from 1st July, 2002 and they  

continue to be operative and binding on the insurance  

companies.  Because of the aforesaid factual position, the  

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circulars dated 16th November 2009 and 3rd December, 2009,  

that have been reproduced hereinabove, were issued.

20. It is also worthy to note that the High Court, after  

referring to individual circulars issued by various insurance  

companies, eventually stated thus:-  

“In view of the aforesaid, it is clear that the  comprehensive/package policy of a two wheeler  covers a pillion rider and comprehensive/package  policy of a private car covers the occupants and  where the vehicle is covered under a  comprehensive/package policy, there is no need for  Motor Accident Claims Tribunal to go into the  question whether the Insurance Company is liable  to compensate for the death or injury of a pillion  rider on a two-wheeler or the occupants in a private  car. In fact, in view of the TAC’s directives and those  of the IRDA, such a plea was not permissible and  ought not to have been raised as, for instance, it  was done in the present case.”

21. In view of the aforesaid factual position, there is no  

scintilla of doubt that a “comprehensive/package policy”  

would cover the liability of the insurer for payment of  

compensation for the occupant in a car.  There is no cavil that  

an “Act Policy”  stands on a different footing from a  

“Comprehensive/Package Policy”.  As the circulars have made  

the position very clear and the IRDA, which is presently the  

statutory authority, has commanded the insurance companies  

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stating that a “Comprehensive/Package Policy”  covers the  

liability, there cannot be any dispute in that regard.  We may  

hasten to clarify that the earlier pronouncements were  

rendered in respect of the “Act Policy” which admittedly cannot  

cover a third party risk of an occupant in a car.  But, if the  

policy is a “Comprehensive/Package Policy”, the liability would  

be covered.  These aspects were not noticed in the case of  

Bhagyalakshmi (supra) and, therefore, the matter was  

referred to a larger Bench.  We are disposed to think that there  

is no necessity to refer the present matter to a larger Bench as  

the IRDA, which is presently the statutory authority, has  

clarified the position by issuing circulars which have been  

reproduced in the judgment by the Delhi High Court and we  

have also reproduced the same.

22. In view of the aforesaid legal position, the question that  

emerges for consideration is whether in the case at hand, the  

policy is an “Act Policy”  or “Comprehensive/Package Policy”.  

There has been no discussion either by the tribunal or the  

High Court in this regard.  True it is, before us, Annexure P-1  

has been filed which is a policy issued by the insurer.  It only  

mentions the policy to be a “comprehensive policy” but we are  

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inclined to think that there has to be a scanning of the terms  

of the entire policy to arrive at the conclusion whether it is  

really a “package policy” to cover the liability of an occupant in  

a car.

23. In view of the aforesaid analysis, we think it apposite to  

set aside the finding of the High Court and the tribunal as  

regards the liability of the insurer and remit the matter to the  

tribunal to scrutinize the policy in a proper perspective and, if  

necessary, by taking additional evidence and if the conclusion  

is arrived at that the policy in question is a  

“Comprehensive/Package Policy”, the liability would be  

fastened on the insurer.  As far as other findings recorded by  

the tribunal and affirmed by the High Court are concerned,  

they remain undisturbed.   

24. Consequently, the appeal is allowed to the extent  

indicated above and the matter is remitted to the tribunal for  

the purpose of adjudication as directed hereinabove. There  

shall be no order as to costs.

……………………………….J. [K. S. Radhakrishnan]

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……………………………….J.                [Dipak Misra]

New Delhi;  November 20, 2012.       

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