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Reportable  

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.  8925  OF 2012 (Arising out of S.L.P. (Civil) No. 17272 of 2006)

Sanjeev Kumar Samrat           ... Appellant

Versus

National Insurance Co. Ltd. and others        ... Respondents

WITH

CIVIL APPEAL NO.  8926  OF 2012 (Arising out of S.L.P. (Civil) No. 17273 of 2006)

Sanjeev Kumar Samrat           ... Appellant

Versus

National Insurance Co. Ltd.                          ... Respondent  

J U D G M E N T

Dipak Misra, J.

Leave granted.

2. The  centripodal  issue  that  emanates  for  

consideration in these appeals is whether the insurer

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is  obliged  under  law  to  indemnify  the  owner  of  a  

goods vehicle when the employees engaged by the  

hirer of the vehicle travel with the owner of the goods  

on  the  foundation  that  they  should  be  treated  as  

“employees”  covered  under  the  policy  issued  in  

accordance  with  the  provision  contained  under  

Section  147  of  the  Motor  Vehicles  Act,  1988  (for  

brevity “the Act”).   

3. The  expose’  of  facts  are  that  a  truck  bearing  

HP/10/0821 was hired on 12.4.2000 for carrying iron  

rod  and  cement  by  one  Durga  Singh  who  was  

travelling  with  the  goods  along  with  two  of  his  

labourers.   When  the  vehicle  was  moving  through  

Khara  Patthar  to  Malethi,  1.5  KM  ahead  of  Khara  

Patthar, about 4.30 p.m., it met with an accident as a  

consequence of which the labourers, namely, Nagru  

Ram and Desh Raj and also Durga Singh, sustained  

injuries and eventually succumbed to the same.

4. The  legal  heirs  of  all  the  deceased  persons  filed  

separate claim petitions under Section 166 of the Act  

before  the  Motor  Accidents  Claims  Tribunal  (II),  

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Shimla (for short “the tribunal”).  Before the tribunal,  

respondent  No.  3,  namely,  National  Insurance  

Company  Ltd.,  apart  from  taking  other  pleas,  

principally  took the stand that  it  was not  liable  to  

indemnify the labourers employed by the hirer.  The  

owner of the truck, the present appellant, admitted  

the fact  of  hiring the  truck but  advanced the plea  

that  the  insurer  was  under  legal  obligation  to  

indemnify the owner.

5. On consideration of the evidence brought on record,  

the  tribunal  came  to  hold  that  the  legal  

representatives  of  Nagru  Ram  and  Desh  Raj  were  

covered  as  per  the  insurance  policy,  exhibit  RW-

2/3/A,  as  the  policy  covered  six  employees  and  

accordingly fixed the liability on the insurer.  As far  

as the legal representative of Desh Raj is concerned,  

the tribunal treated him as the owner of the goods  

who  was  travelling  along  with  the  goods  and  

accordingly saddled the liability on the 3rd respondent  

therein.

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6. Being grieved by the awards passed by the tribunal,  

the insurer preferred FAO (MBA) Nos. 175, 176 and  

178  of  2003  before  the  High  Court  of  Himachal  

Pradesh  at  Shimla.   In  appeal,  the  learned  single  

Judge, by order dated 13.1.2006, allowed FAO Nos.  

175  and  176  of  2003  wherein  the  legal  

representatives of the deceased employees were the  

claimants.   As  far  as  FAO  No.  178  of  2003  is  

concerned, the High Court concurred with the finding  

recorded by the tribunal  that Durga Singh was the  

owner  of  the  goods  and  travelling  along  with  the  

goods and, therefore, the insurer was liable to pay  

compensation  to  his  legal  representatives.   It  is  

worthy to note that as the insurance company had  

already deposited the amount of compensation, the  

High  Court,  placing  reliance  on  the  decision  in  

National Insurance Company Ltd. v. Baljit Kaur  

and others1, directed that the insurance company  

having satisfied the award shall be entitled to recover  

the same along with interest from the owner-insured  

by  initiating  execution  proceedings  before  the  

1 (2004) 2 SCC 1

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tribunal.  Hence, the present appeals at the instance  

of the owner of the vehicle.    

7. We have heard Mr. Rajesh Gupta, learned counsel for  

the appellant, and Mr. M. K Dua, learned counsel for  

respondent No. 1.   

8. It is submitted by Mr. Gupta that the High Court has  

committed serious  error  in  coming to hold  that  an  

employee  of  the  hirer  is  not  covered  without  

appreciating the terms of the policy which covers the  

driver and six employees.  Learned Counsel has laid  

emphasis on the words “any person” used in Section  

147 of the Act.  Referring to the said provision, it is  

urged by him that  the term “employee” has to be  

given  a  broader  meaning  keeping  in  view  the  

language employed in the policy and also in view of  

the  fact  that  the  Act  is  a  piece  of  beneficial  

legislation.  It is his further submission that there is a  

distinction between “passenger” in a goods vehicle  

and an “employee” of the hirer of the vehicle but the  

High Court has gravely erred by not appreciating the  

said distinction in proper perspective.  

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9. Mr.  M.K.  Dua,  learned  counsel  for  the  first  

respondent, combating the aforesaid proponements,  

contended  that  the  decision  rendered  by  the  High  

Court is  absolutely flawless inasmuch as the entire  

controversy  is  covered  by  many  a  dictum  of  this  

Court some of which have been appositely referred to  

by  the  High  Court.   It  is  urged  by  him  that  the  

extended meaning which is argued to be given to the  

term  “employee”  by  the  appellant  is  not  legally  

acceptable  as  the employee has to  be that  of  the  

insurer.   It  is  canvassed  by  him  that  there  is  a  

manifest  fallacy  in  the  argument  propounded  on  

behalf  of  the appellant that the policy covers such  

kinds of employees though on the plainest reading of  

the policy, it would be vivid that the same does not  

cover such categories of employees.   It is his further  

submission  that  the  policy  in  question  is  an  “Act  

Policy” and in the absence of any additional terms in  

the  contract  of  insurance,  the  same  can  be  

broadened to travel beyond the language employed  

in the policy to cover the employees of the owner of  

the goods making the insurer liable.   

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10.  To  appreciate  the  controversy,  it  is  necessary  to  

refer to certain statutory provisions.  Section 146 of  

the Act provides for the necessity for injuries against  

third party risk.  On a reading of the said provision,  

there can be no trace of doubt that the owner of the  

vehicle is statutorily obliged to obtain an insurance  

for  the  vehicle  to  cover  the  third  party  risk,  apart  

from the exceptions which have been carved out in  

the said provision.  Section 147 of the Act deals with  

requirements of policies and limits of liability.   The  

relevant part of Section 147 (1) is reproduced below:-  

“147. Requirements 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; or

(b)  insures  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  

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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 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 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.”

11. Be  it  noted,  before  Section  147(1)(b)(i)  came  into  

existence  in  the  present  incarnation,  it  stipulated  

that  a  policy  of  insurance must  be  a  policy  which  

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insured  the  person  or  classes  of  persons  to  the  

extent specified in sub-section (2) against the liability  

incurred by him in respect of the death of or bodily  

injury to any person or damage to any property or  

third party caused by or arising out of the use of the  

vehicle in public place.

12. Regard  being  had to  the  earlier  provision  and the  

amendment,  this  Court  in  New India  Assurance  

Co. Ltd. v. Satpal Singh2, scanned the anatomy of  

the provision and also of Section 149 of the Act and  

expressed  the  view  that  under  the  new  Act,  an  

insurance policy  covering the third  party  risk  does  

not  exclude  gratuitous  passenger  in  a  vehicle,  no  

matter that the vehicle is of any type or class.  It was  

further opined that the decisions rendered under the  

1939 Act in respect of gratuitous passengers were of  

no avail while considering the liability of the insurer  

after the new Act came into force.   

13. The  correctness  of  the  said  decision  came  up  for  

consideration  before  a  three-Judge  Bench  in  New  

India  Assurance  Co.  Ltd.  v.  Asha  Rani  and  

2 (2000) 1 SCC 237

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Others3.  The  learned  Chief  Justice,  speaking  for  

himself and H.K. Sema, J. took note of Section 147(1)  

prior to the amendment and the amended provision  

and  the  objects  and  reasons  behind  the  said  

provision and came to hold as follows:-   

“The objects and reasons of clause 46 also  state that it seeks to amend Section 147 to  include  owner  of  the  goods  or  his  authorised  representative  carried  in  the  vehicle  for  the  purposes  of  liability  under  the insurance policy. It is no doubt true that  sometimes the legislature amends the law  by way of amplification and clarification of  an inherent position which is  there in  the  statute, but a plain meaning being given to  the words used in the statute, as it  stood  prior to its amendment of 1994, and as it  stands  subsequent  to  its  amendment  in  1994 and bearing in mind the objects and  reasons  engrafted  in  the  amended  provisions referred to earlier,  it  is  difficult  for  us  to  construe  that  the  expression  “including  owner  of  the  goods  or  his  authorised  representative  carried  in  the  vehicle”  which  was  added  to  the  pre- existing expression “injury to any person” is  either  clarificatory  or  amplification  of  the  pre-existing statute.  On the  other  hand it  clearly  demonstrates  that  the  legislature  wanted to bring within the sweep of Section  147  and  making  it  compulsory  for  the  insurer to insure even in case of a goods  vehicle,  the  owner  of  the  goods  or  his  authorised representative being carried in a  goods vehicle when that vehicle met with  an accident and the owner of the goods or  his  representative  either  dies  or  suffers  

3 (2003) 2 SCC 223

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bodily injury.”                           [Emphasis   supplied]  

14. S.B. Sinha, J., in his concurring opinion, stated thus: -

“Furthermore, sub-clause (i) of clause (b) of  sub-section  (1)  of  Section  147  speaks  of  liability  which  may  be  incurred  by  the  owner of a vehicle in respect of death of or  bodily  injury  to  any person or  damage to  any property of a third party caused by or  arising out  of  the  use of  the vehicle  in  a  public place, whereas sub-clause (ii) thereof  deals with liability  which may be incurred  by the owner of a vehicle 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.

 An  owner  of  a  passenger-carrying  vehicle must pay premium for covering the  risks of the passengers.  If  a liability other  than the limited liability provided for under  the  Act  is  to  be  enhanced  under  an  insurance  policy,  additional  premium  is  required to be paid. But if the ratio of this  Court's decision in New India Assurance Co.  v.  Satpal  Singh4 is  taken  to  its  logical  conclusion,  although  for  such  passengers,  the  owner  of  a  goods  carriage  need  not  take out an insurance policy, they would be  deemed  to  have  been  covered  under  the  policy  wherefor  even  no  premium  is  required to be paid.”

[Emphasis supplied] Being  of  the  aforesaid  view,  the  three-Judge  Bench  

overruled the decision in Satpal Singh (supra).

4 (2000) 1 SCC 237

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15. In Baljit Kaur (supra) and National Insurance Co.  

Ltd.  v.  Bommithi  Subbhayamma  and  Others5,  the  

aforesaid view was reiterated.

16. In New India Assurance Co. Ltd. v. Vedwati and  

Others6, after referring to the scheme of the Act and the  

earlier  pronouncements,  it  has  been  held  that  the  

provisions of the Act do not enjoin any statutory liability  

on the owner of a vehicle to get his vehicle insured for any  

passenger  travelling  in  a  goods  carrier  and  the  insurer  

would have no liability therefor.

17. In  National  Insurance  Co.  Ltd.  v.  Cholleti   

Bharatamma and Others7, the Court laid down that the  

provisions engrafted under Section 147 of the Act do not  

enjoin any statutory liability on the owner of a vehicle to  

get his vehicle insured for any passenger travelling in a  

goods  vehicle  and  hence,  any  injury  to  any  person  in  

Section 147(1)(b) would only mean a third party and not a  

passenger  travelling  in  a  goods  carriage,  whether  

gratuitous or otherwise.

5 (2005) 12 SCC 243 6 (2007) 9 SCC 486 7 (2008) 1 SCC 423

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18. At  this  juncture,  we  may  refer  with  profit  to  the  

decision of a three-Judge Bench in  National Insurance  

Co. Ltd. v. Prembati Patel and Others8 wherein the  

legal  representatives  of  the  driver  of  the  truck  had  

succeeded  before  the  High  Court  and  were  granted  

compensation of Rs.2,10,000/- repelling the contention of  

the  insurer  that  the  liability  was  restricted  as  provided  

under the Workmen’s Compensation Act, 1923 (for short  

“the  1923  Act”).   After  discussing  the  schematic  

postulates of the provision, the Court ruled that where a  

policy  is  taken  by  the  owner  of  the  goods  vehicle,  the  

liability of the insurance company would be confined to  

that arising under the 1923 Act in case of an employer.  It  

further  observed that  the  insurance 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 in Sub-Sections (a), (b) or (c) of the proviso to  

Section  147(1)(b)  may  be  fastened  upon  the  insurance  

company and the insurer may become liable to satisfy the  

entire  award.   But  for  the  said  purpose,  he  may  be  

8 (2005) 6 SCC 172

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required to pay additional premium and the policy must  

clearly show that the liability of the insurance company is  

unlimited.   

19. Keeping in view the aforesaid enunciation of law, it is  

to be seen how the term “employee” used in Section 147  

is required to be understood.  Prior to that, it is necessary  

to  state  that  as  per  Section  147(1)(b)(i),  the  policy  is  

required  to  cover  a  person  including  the  owner  of  the  

goods  or  his  authorised  representative  carried  in  the  

vehicle.  As has been interpreted by this Court, an owner  

of the goods or his authorised agent is covered under the  

policy.   That  is  the  statutory  requirement.   It  does not  

cover any passenger.  We are absolutely conscious that  

the authorities to which we have referred to hereinbefore  

lay  down  the  principle  regarding  non-coverage  of  

passengers.  The other principle that has been stated is  

that  the  insurer’s  liability  as  regards  employee  is  

restricted to the compensation payable under the 1923  

Act.  In this context, the question that has been posed in  

the beginning to the effect whether the employees of the  

owner of goods would come within the ambit and sweep  

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of the term “employee” as used in Section 147(1), is to be  

answered.  In this context, the proviso to Section 147(1)

(b) gains significance.  The categories of employees which  

have been enumerated in the sub-clauses (a), (b) and (c)  

of  the proviso  (i)  to  Section 147(1)  are the driver  of  a  

vehicle,  or  the conductor  of the vehicle if  it  is  a public  

service vehicle or in examining tickets on the vehicle, if it  

is  a  goods carriage,  being carried in  the  vehicle.   It  is  

submitted by the learned counsel for the appellant that  

sub-clause (c) is of wide import as it covers employees in  

a goods carriage being carried in a vehicle.  The learned  

counsel for the insurer would submit that it should be read  

in the context of the entire proviso, regard being had to  

the schematic concept of the 1923 Act and the restricted  

liability of the insurer.  It is further urged that contextually  

read,  the  meaning  becomes  absolutely  plain  and  clear  

that employee which is statutorily mandated to be taken  

by the insured only covers the employees employed or  

engaged by the employer as per the policy.   

20. It is the settled principle of law that the liability of an  

insurer  for  payment  of  compensation  either  could  be  

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statutory or contractual.  On a reading of the proviso to  

Sub-Section  (1)  of  Section  147  of  the  Act,  it  is  

demonstrable that the insurer is required to cover the risk  

of certain categories of employees of the insured stated  

therein.  The  insurance  company  is  not  under  statutory  

obligation to cover all kinds of employees of the insurer as  

the  statute  does  not  show  command.   That  apart,  the  

liability  of  the  insurer  in  respect  of  the  said  covered  

category  of  employees  is  limited  to  the  extent  of  the  

liability that arises under the 1923 Act.  There is also a  

stipulation in Section 147 that the owner of the vehicle is  

free  to  secure  a  policy  of  insurance  providing  wider  

coverage.   In  that  event,  needless  to  say,  the  liability  

would travel beyond the requirement of Section 147 of the  

Act,  regard being had to its  contractual  nature.   But,  a  

pregnant one, the amount of premium would be different.  

21. At this stage, we may usefully refer to Section 167 of  

the Act which reads as follows: -

“167.   Option  regarding  claims  for  compensation  in  certain  cases.-  Notwithstanding  anything  contained  in  the Workmen’s Compensation Act, 1923  (8 of 1923) where the death of, or bodily  

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injury to, any person gives rise to a claim  for compensation under this Act and also  under the Workmen’s Compensation Act,  1923,  the  person  entitled  to  compensation  may without  prejudice  to  the  provisions  of  Chapter  X  claim such  compensation under either of those Acts  but not under both.”

From the aforesaid provision, it is quite vivid that where a  

death or bodily injury to any person gives rise to a claim  

under the Act as well  as under the 1923 Act,   the said  

person  is  entitled  to  compensation  under  either  of  the  

Acts, but not under both.

22. Coming to the scheme of the 1923 Act, it is worth  

noticing that under Section 3 of the said Act, the employer  

is liable to pay compensation to the workman in respect of  

personal injury or death caused by an accident arising out  

of or in the course of his employment.  Section 4 provides  

the procedure how the amount of compensation is to be  

determined.    In  this  context,  we may usefully  quote a  

passage  from  Oriental  Insurance  Co.  Ltd.  v.   

Devireddy Konda Reddy and Others9: -

“....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  

9 (2003) 2 SCC 339

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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.”  [Underlining is ours]

23. In  Ved  Prakash  Garg  v.  Premi  Devi  and  

Others10, after referring to the scheme of the 1923 Act in  

the  context  of  payment  of  penalty  for  default  by  the  

insurer under Section 4-A of the Act, this Court held thus: -  

“On a conjoint  operation of  the relevant  schemes of the aforesaid twin Acts, in our  view,  there  is  no  escape  from  the  conclusion that the insurance companies  will  be liable to make good not only the  principal  amounts  of  compensation  payable  by  insured  employers  but  also  interest  thereon,  if  ordered  by  the  Commissioner to be paid by the insured  employers.  Reason for  this  conclusion is  obvious.  As  we  have  noted  earlier  the  liability  to  pay  compensation  under  the  Workmen's Compensation Act gets foisted  on the employer provided it is shown that  the  workman  concerned  suffered  from  personal injury, fatal or otherwise, by any  motor accident arising out of and in the  course  of  his  employment.  Such  an  accident is also covered by the statutory  coverage contemplated by Section 147 of  the  Motor  Vehicles  Act  read  with  the  identical  provisions  under  the  very  contracts  of  insurance  reflected  by  the  

10 (1997) 8 SCC 1

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policy  which  would  make  the  insurance  company liable to cover all such claims for  compensation for which statutory liability  is imposed on the employer under Section  3  read  with  Section  4-A  of  the  Compensation Act.”                                     [Emphasis supplied]

 Thereafter, the Bench proceeded to state thus:-

“So  far  as  interest  is  concerned  it  is  almost  automatic  once  default,  on  the  part  of  the  employer  in  paying  the  compensation  due,  takes  place  beyond  the  permissible  limit  of  one  month.  No  element of penalty is involved therein. It  is a statutory elongation of the liability of  the employer to make good the principal  amount  of  compensation  within  permissible  time-limit  during  which  interest  may  not  run  but  otherwise  liability  of  paying  interest  on  delayed  compensation will ipso facto follow.”

Though  the  said  decision  was  rendered  in  a  different  

context,  yet  we  have  referred  to  the  same  only  to  

highlight the liability of the insurer in respect of certain  

classes of employees.   

24. It is worthy to note that sub-clause (i)(c) refers to an  

employee who is being carried in the vehicle covered by  

the  policy.   Such  vehicle  being  a  goods  carriage,  an  

employee has to be covered by the statutory policy.  On  

an  apposite  reading  of  Sections  147  and  167  the  

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intendment of the Legislature, as it  appears to us,  is to  

cover the injury to any person including the owner of the  

goods or his authorised representative carried in a vehicle  

and an employee who is carried in the said vehicle.  It is  

apt  to  state  here  that  the  proviso  commences  in  a  

different way.  A policy is not required to cover the liability  

of the employee except an employee covered under the  

1923 Act and that too in respect of an employee carried in  

a vehicle.  To put it differently, it does not cover all kinds  

of  employees.  Thus,  on  a  contextual  reading  of  the  

provision, schematic analysis of the Act and the 1923 Act,  

it is quite limpid that the statutory policy only covers the  

employees of the insured, either employed or engaged by  

him in a goods carriage.  It does not cover any other kind  

of  employee  and  therefore,  someone  who  travels  not  

being an authorised agent in place of the owner of goods,  

and  claims  to  be  an  employee  of  the  owner  of  goods,  

cannot  be  covered  by  the  statutory  policy  and  to  hold  

otherwise  would  tantamount  to  causing  violence  to  the  

language  employed  in  the  Statute.   Therefore,  we  

conclude that the insurer would not be liable to indemnify  

the insured.    

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25. Presently,  for  the  sake  of  completeness,  we  shall  

refer  to  the  policy.   The  policy,  exhibit  R-2/3/A,  clearly  

states  that  insurance  is  only  for  carriage  of  goods  and  

does  not  cover  use  of  carrying  passengers  other  than  

employees not more than six in number coming under the  

purview of the 1923 Act.  The language used in the policy  

reads as follows:-

“The Policy does not cover :

1. Use  for  organized  racing,  pace- making reliability trial or speed testing  

2. Use whilst dwaing a trailer except the  towing (other then for  reward) or  any  one  disabled  mechanically  propelled  vehicle.

3. Use  for  varying  passengers  in  the  vehicle  except  employees  (other  than  driver)  not  exceeding  six  in  number  coming under the purview of Workmen’s  Compensation Act, 1923.”

On a bare reading of the aforesaid policy, there can  

be no iota of doubt that the policy relates to the insured  

and it  covers six  employees (other  than the driver,  not  

exceeding six in number) and it is statutory in nature.  It  

neither covers any other category of person nor does it  

increase any further liability in relation to quantum.   

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26. In  view  of  the  aforesaid  analysis,  we  repel  the  

contentions  raised  by  the  learned  counsel  for  the  

appellant and as a fall-out of the same, the appeals,  

being sans merit, stand dismissed without any order  

as to costs.  

   ……………………............J.      [K. S. Radhakrishnan]

……………………………….J. [Dipak Misra]

New Delhi; December 11, 2012.     

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