Court’s Decision
The Supreme Court set aside the High Court’s reduction of compensation to ₹2 lakhs and restored the Motor Accident Claims Tribunal’s (MACT) award of ₹25.82 lakhs to the family of a deceased driver who died due to a tyre burst. The Court held that the insurer failed to raise the issue of limited liability at the trial or appellate stage and thus could not rely on Motor Tariff Guidelines to escape its contractual liability. The Court directed the insurer to pay the full amount with 8% interest within two months.
“Pleadings and proof of such pleadings by valid evidence led, is the crux and core of any adjudicatory process. Trite is the principle that there can be no proof offered without specific pleadings.”
Facts
The deceased, who was the brother of the vehicle owner, died in a car accident caused by a tyre burst while driving the vehicle. The claimants — his widow, children, and parents — filed a compensation claim before the MACT. The Tribunal awarded ₹25.82 lakhs based on his income, expenses towards transportation, consortium, and funeral costs.
The insurance company appealed, arguing that the driver had stepped into the shoes of the owner and thus was not a “third party” under the Motor Vehicles Act, 1988. It also contended that liability under the comprehensive insurance policy was limited to ₹2 lakhs.
The High Court agreed and reduced the insurer’s liability to ₹2 lakhs. This judgment was challenged before the Supreme Court.
Issues
- Whether the insurer could be held liable for full compensation under a personal accident cover taken under a comprehensive policy.
- Whether the insurer’s liability was limited to ₹2 lakhs in the absence of pleadings and policy production.
- Whether the guidelines under the Indian Motor Tariffs (IMT) could override the actual terms of the policy or fill in the absence of specific terms.
Petitioner’s Arguments
The claimants argued that the insurer never raised the issue of limited liability or placed the relevant guidelines or policy documents before the Tribunal. The High Court’s finding of a ₹2 lakh cap was therefore without basis in pleadings or evidence. They also submitted that the accident occurred due to a tyre burst and not due to the negligence of the deceased driver, who had a valid license and was driving with due caution.
Respondent’s Arguments
The insurance company contended that the deceased, being the brother of the owner and driving the vehicle, stepped into the shoes of the owner and was not covered for full liability under Section 147 of the Motor Vehicles Act. It cited the IMT guidelines — particularly IMT 16 — which prescribed a limited liability for unnamed passengers or owner-drivers. They further relied on several Supreme Court decisions to argue that no compensation could be claimed for the death of the driver-owner under statutory liability.
Analysis of the Law
The Court drew a clear distinction between statutory liability under Section 147 and contractual liability under a comprehensive policy. It noted that the question here was not about third-party liability under Section 147 but about personal accident cover, which arises from a contract of insurance. The insurer had indeed received a premium for personal accident cover, which imposes a separate contractual obligation.
Precedent Analysis
Several cases were cited by the insurance company, but the Court held they were distinguishable:
- Oriental Insurance Co. Ltd. v. Rajni Devi (2008) 5 SCC 736: Concerned statutory liability under Section 163A; not applicable to contractual liability from a personal accident cover.
- Dhanraj v. New India Assurance Co. Ltd. (2004) 8 SCC 553: Held no statutory liability existed for owner’s injury; again distinguished from personal accident coverage.
- Ramkhiladi v. United India Insurance Co. (2020) 2 SCC 550: Pertained to no-fault liability under Section 163A and absence of employer-employee relationship; the case emphasized the necessity of pleadings and evidence.
The Court emphasized that none of these cases dealt with situations where a personal accident cover was taken and then disowned without any pleadings or proof.
Court’s Reasoning
The Court held that the insurance company never pleaded limited liability before the Tribunal or the High Court. Neither was the policy document nor the IMT guidelines produced as evidence. It noted that pleadings form the foundational requirement of adjudication, and absent pleadings cannot be supplemented by external guidelines like the IMT. The High Court had erred by entertaining arguments based on guidelines and documents not presented in evidence.
The Court also clarified that IMT 16 is applicable only when expressly incorporated into the policy and cannot operate in the abstract. Since there was no evidence that a cap was inserted or pleaded, the High Court’s reduction was legally unsustainable.
Conclusion
The Supreme Court allowed the appeal, restored the MACT’s award of ₹25.82 lakhs with 8% interest, and directed the insurance company to pay the amount within two months. It observed that the insurer could not escape its contractual obligations in the absence of specific pleadings or evidence and that guidelines like IMT could not override unproduced policy terms.
Implications
This decision underscores the primacy of pleadings and evidence in insurance disputes. It clarifies that insurers cannot retroactively invoke Motor Tariff Guidelines or abstract policy terms to deny claims unless these are pleaded and proven. The judgment reaffirms the enforceability of personal accident covers under comprehensive policies and will significantly impact how insurers handle claims involving owner-drivers or family members.
Cases Referred
- Oriental Insurance Co. Ltd. v. Rajni Devi (2008) 5 SCC 736: Held that the owner is not a third party under Section 147.
- Dhanraj v. New India Assurance Co. Ltd. (2004) 8 SCC 553: Held that comprehensive cover does not automatically include personal accident unless paid for.
- Ramkhiladi v. United India Insurance Co. (2020) 2 SCC 550: Emphasized need for pleadings and evidence to prove employer-employee relationship.
- National Insurance Co. Ltd. v. Laxmi Narain Dhut (2007) 3 SCC 700: Limited own-damage claims to consumer forums.
- Ningamma v. United India Insurance Co. Ltd. (2009) 13 SCC 710: Clarified that a borrower-driver steps into the shoes of the owner.
FAQs
1. Can a deceased driver’s family claim compensation under a personal accident policy if he was not a third party?
Yes. If a personal accident cover was taken under a comprehensive policy and there’s no cap pleaded or proven, compensation is enforceable despite the driver being a non-third party.
2. Are Motor Tariff Guidelines like IMT 16 binding on the insured even if not in the policy?
No. Such guidelines are regulatory but do not bind the insured unless incorporated in the specific policy and pleaded as part of the insurer’s case.
3. Can an insurance company raise new grounds like limited liability for the first time in appeal or Supreme Court?
No. The Court held that issues not pleaded before the Tribunal or in the memorandum of appeal cannot be raised for the first time in higher courts.