MACC LIMITED LIABILITY TO PAY

LIMITED LIABILITY OF THE INSURANCE COMPANY

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 5681 OF 2008

[Arising out of SLP (C) No. 26255/04]

( Also reported in 2008 AC 2741 )

United India Insurance Company Ltd. ... Appellant

Versus

A. N. Subbulakshmi & Ors. ... Respondents

WITH

CIVIL APPEAL NO. 5684 OF 2008

[Arising out of SLP (C) No. 26258/04]

United India Insurance Company Ltd. ... Appellant

Versus

C. T. Meenakshi & Ors. ... Respondents

JUDGMENT

AFTAB ALAM,J.

2. These appeals by the Insurance Company are on a limited issue insofar as in the order of the High Court coming under appeal the appellant is directed to make payment of the compensation amounts to the claimants and then to recover from the owner of the vehicle involved in the accident excess amounts paid over and above its liability under the insurance policy by instituting appropriate actions against them.

3. The matter arises from an unfortunate accident in which two lives were lost. On 14 May, 1981 at about 6.30 in the morning a head-on collision between an Ambassador car bearing Registration No. MDO 7789 and a lorry bearing Registration No. MDR 3106 took place on the Trichy -Chennai highway near Thozhuthur. As a result of the collision the Ambassador Car was badly smashed and turned turtle. Its owner, Annamalai, who was on the driver's seat died on the spot. Another person, namely, Sigappi, aged about 24 years who worked as Annamalai's Secretary and who was sitting on the rear seat along with the latter's son was thrown out of the car and she too died on the spot. However, Annamalai's wife and daughter sitting on the front seat and his son sitting on the rear seat survived. In the accident the truck also suffered substantial damage.

9. Mr. P. K. Seth, learned counsel appearing on behalf of the appellant, submitted that the accident took place on 14 May, 1981, when the Motor Vehicles Act, 1939 was in operation and the liability of the insurer was governed by Section 95(2)(a) of the Act. Learned counsel submitted that under Section 95(2)(a), the insurer's liability could not exceed the sum of Rs.50, 000/- and the direction of the High Court asking the appellant to pay the entire amounts of Rs.25, 000/- and Rs.3, 25,000/- to the claimants and then to recover it from the insurer was without any sanction of law. In support of the submission he relied upon a Constitution Bench decision in New Indian Assurance Co. Ltd. vs. C .M. Jaya & Ors., (2002) 2 SCC 78. In that case the same question came up for consideration before the Constitution Bench of this Court and it was held that under Section 95(2)(a) of the Act even in case of a comprehensively insured vehicle the liability of the insurer was limited to Rs.50, 000/- (raised to Rs.1,50,000=00 with effect

from 1 October 1982). An unlimited or a higher liability than the statutory liability of the insurer would arise only in case there is a separate contract and payment of additional premium by the owner of the vehicle. In paragraph 17 of the decision it was held as follows:

"In the circumstances, we hold that the liability of the appellant-Insurance Company is limited to Rs.50, 000/-, as held by the Tribunal. In the view we have taken, it is unnecessary to go into the question relating to either maintainability of cross-objections before the High Court against the appellant alone or as to the enhancement of compensation when the owner and driver have not filed appeal against the impugned judgment."

10. The Constitution Bench decision applies to the facts of this case with full force. We accordingly hold and find that the impugned direction of the High Court is unsustainable in law. The direction as contained in paragraph 36 of the High Court judgment is therefore set aside.

11. In terms of an interim order passed in this appeal, the appellant had deposited a sum of Rs.50, 000/- before the Trial Court it will be open to the claimants to withdraw that amount. The balance amount in terms of the High Court judgment would be payable by the owner of the lorry, namely, M/s. Aruppukottai Sri Jaya Vilas Pvt. Ltd., unless the judgment of the High Court is modified in any appeal preferred by the lorry's owner.

12. In the result, the appeals are allowed but with no order as to costs.

[Tarun Chatterjee]

[Aftab Alam]

New Delhi,

September 16, 2008.