National Insurance v. Roy George — 1992 DIGILAW 477 (KER)

Judgment :- Jagannadha Rao. C.J. This reference to a Full Bench has been made by a Division Bench of this Court doubting the correctness of the judgment of another Division Bench in New India Assurance Co. Ltd. v. Thankamani & others (1984 ACJ 791 (Ker.)). The leamed judges feit that the above decision could not be treated as good law in view of the decisions of the Supreme Court in National Insurance Co. Ltd. v. Jugal Kishore (AIR 1988 SC 719) and M.K. Kunhimohammed v. P.A. Ahmed Kutty & Ors. (AIR 1987 SC 2158). The point in these cases related to the defences that are open to Insurance Company under S.96(6) of the Motor Vehicles Act. 1939. the appeal before as is by the National Insurance Co. Ltd. Of course. during the course of th-s hearing of this appeal. leamed counsel for the respondents has sought to sustain the award passed by the Tribunal on certain other grounds. 2. The facts of the case are as follows: The deceased. who was aged 57 years at the time of the accident. was killed on 25-11-1981 while travelling as a passenger in a stage carriage bus. The accident occurred on account of [he negligent driving of the driver of the said vehicle. The name of the owner of the vehicle is Smt. Panchami. The claimants before the Tribunal were the legal representatives of the deceased. They filed OP (MV) 1101 of 1983 on 12-4-1982 claiming Rs.42. 600/- as damages. making the assessment on the basis that the deceased was aged 57 years and was getting a monthly salary of Rs.1. 685/-from his employer. After conducting an enquiry. the Tribunal found that the driver was negligent and that she owner of the stage carriage bus was. therefore. liable and also that consequently the appellant-insurance Company was also liable for the aforesaid sum of Rs.42. 600/-. Before the Tribunal. the Insurance Company contended that its liability should have been restricted »o the extent covered by S.95(2) of the Motor Vehicles Act. 1939 which. at the relevant time on 25-11-198.1. was only Rs.5. 000/- as per the provisions of S.95(2}(b)(ii) (the limit was later raised to Rs.15. 000/- with effect from 1-10-1982 by Act 47 of 1982 and it has now become an unlimited liability under S.147(2) (a) of the Motor Vehicles Act. 1988 which has come into force with effect from 1-7-1989). at the relevant time on 25-11-198.1. was only Rs.5. 000/- as per the provisions of S.95(2}(b)(ii) (the limit was later raised to Rs.15. 000/- with effect from 1-10-1982 by Act 47 of 1982 and it has now become an unlimited liability under S.147(2) (a) of the Motor Vehicles Act. 1988 which has come into force with effect from 1-7-1989). The contention of the Insurance Company was rejected by the Tribunal on the ground that the same was contrary to the. decision of this Court in New India Assurance Co. Ltd. v. Thaiikamani & Ors. (1984 ACJ 791 (Ker.)) Above referred to. It is against the said judgment that the present appeal has been preferred by the Insurance Company. 3. In this appeal. it is contended on behalf of the Insurance Company by Sri. S.B. Premachandra Prabhu that the view taken in Thankamani's case (supra) is no longer good law in view of the two decisions of the Supreme Court referred to above and that the defences enumerated in S.96(6) are not relevant for the purpose of this case. According to him. the defences that may be taken by the Insurance Company are limited only if the Company wants to avoid the policy totally. but if the Insurance Company wants to claim that its liability is restricted to the statutory limits mentioned in S.95(2). such a defence is not prohibited by the provisions of S.96(6) of the Act. 4. On the other hand. it is contended by Sri. Philip Mathai for the respondents-claimants that even if the judgment of this Court in Tiutnkanumi's case (supra) is to be treated as no longer good law in view of the judgment of the Supreme Court in the two cases referred to above. he could still sustain the award against the Insurance Company on other grounds. He contended that the liability of the Insurance Company. even though it was Rs.5. 000/- under S.95(2)(b)(ii) of the Act. as it stood on 25-11-1981 when the accident occurred. the said liability has become an unlimited liability in view of the provisions of S.147(2) (a) of the Motor Vehicles Act. 1988 which has come into force on 1-7-1989. According to the leamed counsel. the provisions of S.147(2)(a) of the 1988 Act are retrospective in nature and apply to the cases of accidents which occurred before 1-7-1989 and even relate back to 25-11-1981. 1988 which has come into force on 1-7-1989. According to the leamed counsel. the provisions of S.147(2)(a) of the 1988 Act are retrospective in nature and apply to the cases of accidents which occurred before 1-7-1989 and even relate back to 25-11-1981. the date of the accident in the present case. His submission also is that inasmuch as the provisions of the Motor Vehicles Art. 1988 have come int.) force during the pendency of this appeal which was filed in 1987. the provisions of the new Motor Vehicles Act have to be applied. It is also alternatively contended that once that liability on the part of the owner of the vehicle in a sum of Rs.42. 600/- is found. the Insurance Company is bound to indemnify the vehicle owner for for Rs.42.600/- i n view of the provisions in S.96(1) of the Mote r Vehicles Act. 1939 and that under 5.96(4} is will be for the Insurance Company. in its turn. to recover the "excess" amount over and above its statutory limits prescribed by S.95(2)(b)(ii) by way of a separate proceeding by the Company against the insured. 5. On the basis of the above contentions. the following points arise for consideration: (1) Whether under S.96(6) of the Motor Vehicles Act. 1939. the Insurance Company is not entitled to take a defence that its liability is to be limited to the statutory liability mentioned in S.95(2) and whether Thankamani's case (supra) is not correctly decided? (2) Whether the provisions relating to the unlimited liability of the Insurance Company specified in S.147(2) (a) of the Motor Vehicles Act. 1988 (which came into force with effect from 1-7-1989) are retrospective and apply to pending cases and even to an accident which has occurred on 25-11-1981 and to a claim which has been filed on 12-4-1982? (3) Whether in view of S.96(1) of the Motor Vehicles Act. 1939. the Insurance Company is bound to discharge any liability incurred by the vehicle owner and whether the Insurance company is bound to recover the 'excess' amount over and above the statutory liability under S.95(2) from the insured by way of proceedings to be taken out by the Insurance Company against the insured in view of S.96 (4)? 6. Point No.l: -This point does not present much difficulty in view of the decisions of the Supreme Court already referred to. Before doing so. 6. Point No.l: -This point does not present much difficulty in view of the decisions of the Supreme Court already referred to. Before doing so. we shall refer to the facts in Thankamani's case (supra). In that case. two persons suffered injuries while travelling as passengers in a stage carriage vehicle on 23-10-1976 when the bus dashed against a tree. The two persons filed two separate suits. In one suit. the plaintiff claimed Rs.30,000/- while in the other suit. the plaintiff claimed Rs.20,000/-. Negligence of the driver was established and the civil court passed a decree against the vehicle owner. the driver and the conductor as also the Insurance Company. However. the vehicle owner was held liable in a sum of Rs.10. 000/- in each of the two suits. The vehicle owner and his servants did not prefer any appeal to the High Court. The appeal was preferred only by the Insurance Company. In that appeal. it was argued for the Insurance Company that its liability to a passenger was only Rs.5,000/- under S.95 (2)(b)(ii) and that. therefore. the award of the Tribunal was liable to be modified to conform to the statutory limits prescribed in the Act. The Division Bench of this Court rejected the said contention of the Insurance Company by holding that under S.96(2) of the Act. the statute specified the various defences which an Insurance Company could lake. The said defences were exhaustive as stated by the Supreme Court in British India General Insurance Co. Ltd. v. Captain Itbar Singh (AIR 1959 SC 1331). The Division Bench took the view that in view of the said decision of the Supreme Court in Itbar Singh's case. no other defence could be taken by the Insurance Company. According to the Division Bench. a defence based on the limits specified in S.95(2) is not one of the defences enumerated in S.96 (2) of the Act. Accordingly. the Division Bench dismissed the appeal and held that the Insurance Company was liable for the amount of Rs. 10.000/- each for each of the passengers instead of Rs.S. 000/- each as provided in S.95(2)(b)(ii). It is the correctness of this view that is in question before us. 7. In National Insurance Co. Ltd. v. JugalKishore (AIR 1988 SC 719). the same question fell for consideration. In the above said case before the Supreme Court. 10.000/- each for each of the passengers instead of Rs.S. 000/- each as provided in S.95(2)(b)(ii). It is the correctness of this view that is in question before us. 7. In National Insurance Co. Ltd. v. JugalKishore (AIR 1988 SC 719). the same question fell for consideration. In the above said case before the Supreme Court. Itbar Singh's case (AIR 1959 SC 1331) was also cited. The Supreme Court pointed out that the principle laid down by the Supreme Court in Itbar Singh's case applies only to a case where the Insurance Company intends to avoid the. Policy in to on the basis of the defence mentioned in S.96(6). The word "avoid" used in S.96(6) is referable to a case of total avoidance of the insurance policy (see S.96 extracted under Point No.3). Itbar Singh's case (supra). therefore. is not be a bar to the Insurance Company raising a contention that it is not liable for more than the limits prescribed in S.95(2). This is what the Supreme Court observed in Jugal Kishore's case (para.9 at page 722): "Leamed counsel for the appellant then urged relying on the decision of this Court in British India General Insurance Co. Ltd. v. Captain Itbar Singh (AIR 1959 SC 1331) that in view of sub-sec. (6) of S.96 of the Act no insurer to whom the notice referred to in sub-sec. (2) there of has been given. is entitled to avoid his liability' to any person entitled to the benefit of any such judgment as is referred to in sub-sec. (1) thereof otherwise than in the manner provided for in sub-sec. (2). On this basis it was urged that the appellant was not entitled to assert that its liability was confined to Rs.20. 000/- only inasmuch as this is not one of the defences specified in sub-sec. (2) of S.96 of the Act. We find it difficult to agree with this submission either. Firstly. in paragraph 12 of the report of this very case it has been held that sub-section (2) of S.96 in fact deals with defences other than those based on the conditions of a policy. Secondly. from the words *to avoid his liability" used in sub-sec. (6) of S.96 it is apparent that the restrictions placed with regard to defences available to the insurer specified in sub-sec. Secondly. from the words *to avoid his liability" used in sub-sec. (6) of S.96 it is apparent that the restrictions placed with regard to defences available to the insurer specified in sub-sec. (2) of S.96 are applicable to a case where the insurer wants to avoid his liability. In the instant case the appellant is not seeking to avoid its liability but wants a determination of the extent of its liability which is to be determined. in the absence of any contract to the contrary. in accordance with the statutory provision contained in this behalf in cl.(b) of sub-sec. (2) of S.95 of the Act. In the instant case since as seen above the appellant did not undertake in the policy any liability in excess of the statutory liability the award against it could be only in accordance with the said statutory liability." 8. In M.K. Kunhimotiammed v. PA. Ahmed Kutty & Others (AIR 1987 SC 2158). the above said principle was applied by the Supreme Court and the liability of the Insurance Company was limited to the statutory liability. Of course. there was no occasion to lay down the principle in the clear terms in which it was laid down in Jugal Kishore's case (supra). but the fact remains that the decision conforms to the principle laid down in that case. In view of the above said two decisions of the Supreme Court. there can be no doubt that Thankamani's case (supra) is wrongly decided. We agree with the leamed judges who referred the matter to the Full Bench that the said decision must be over-ruled. and it is accordingly over ruled. Point No.l is answered in favour of the appellant-insurance Company. 9. Point No.2: - The contention raised is that Insurance Company's liability is now unlimited in view of the provisions of S.147(2) (a) of the Motor Vehicles Act. 1988 which has come into force on 1-7-1989. It is argued that S.147(2) (a) applies as the said provision is retrospective and applies to pending cases even though the accident in this case occurred on 25-11-1981 and the claim was filed on 12-4-1982. Therefore. the Insurer is liable for the whole amount. it is claimed. 9(a). As already staled, it we go by the provisions of the Motor Vehicles Act. 1939. as they stood on 25-11-1981 when the accident occurred. Therefore. the Insurer is liable for the whole amount. it is claimed. 9(a). As already staled, it we go by the provisions of the Motor Vehicles Act. 1939. as they stood on 25-11-1981 when the accident occurred. the statutory liability of the Insurance Company will be only Rs.S. 000/- under S.95(2)(b)(ii). The said statutory liability was enhanced to Rs.15000/- by the amendment to S.95(2)(b)(ii) by Act 47 of 1982. which came into force on 1-10-1982. Subsequently. by the provisions of S.147(2) (a) of the Motor Vehicles Act. 1988. which came into force on 1-7-1989. the said liability of the Insurance Company has been made unlimited. We shall extract the provisions of S.147(2) of the Motor Vehicles Act. 1988 including its provision "147(2) Subject to the proviso to sub-section (1). a policy of insurance referred to in subsection (1). shall cover any liability incurred in respect of any accident. up to the following limits. namely: - (a) Save as provided in clause (b). the amount of liability incurred; (b) In respect of damage to any property of a third party. a limit of rupees six thousand: Provided that any policy of insurance issued with any limited liability and in force. immediately before the commencement of this Act. shall continue to be effective for a period of four months after such commencement or till the date of expiry of such policy whichever is earlier." 10. The Motor Vehicles Act. 1988 contains provisions for repeal and savings in S.217. S.217(2)(a) to (f) contain various provisions as to savings and a reading of these saving provisions shows that they do not specifically deal with the question of the statutory liability or compulsory insurance. S.217 (4) reads as follows: "217(4). The mention of particular matters in this section shall not be held to prejudice or affect the general application of S.6 of the General Clauses Act. 1S97 (10 of 1897). with regard to the effect of repeals." It is. therefore. clear that the provisions of S.6 of the General Clauses Act are attracted and under that Acts. the Court must first find whether the new Act shows any intention to apply its provisions with retrospective effect. Otherwise. the new Act has to be treated only as prospective. 11. In this context. it is necessary to refer to the proviso to S.147(2)(a). which we have already extracted. the Court must first find whether the new Act shows any intention to apply its provisions with retrospective effect. Otherwise. the new Act has to be treated only as prospective. 11. In this context. it is necessary to refer to the proviso to S.147(2)(a). which we have already extracted. It will be noticed that policies of insurance issued with limited liability and which are in force immediately before the commencement of the new Act. i.e.. in force on 1-7-1989. shall continue to be effective for a period of four months after such commencement or on the date of expiry of such policy. whichever is earlier. That would mean that even in cases where a policy issued under the 1939 Act was in force on 1-7-1989. it would continue to be in force only for a period of four months after 1-7-1989 and the policyholders are obliged to take new policy under the Act of 1988. This. in our opinion is a clear indication that the provisions of S.147(2) are not intended to be retrospective. Under S.217(2)(c). it is. no doubt. staled that notwithstanding the repeal by S.217(1). any document referring to any of the repealed enactments or the provisions thereof shall be construed as referring to the new Act or to the corresponding provisions of the new Act. This provision. in our view. cannot help the claimants. It cannot be said that the policy issued under the old Act should be treated as a policy issued under the new Act. Any such argument is clearly negatived by the provisions of the proviso to S.147(2). which we have already referred to. Further. in this case. the policy which was issued on 29-8-1981 was for a period of one-year up to 28-8-1982 on which date it expired. In fact. the policy itself matured on the date of the accident on 25-11-1981. Therefore. the policy was not in force even on 1-10-1982 when by Act 47 of 1982. the liability of the Insurance Company was raised from Rs.S. 000/- to Rs.15. 000/-. nor was it in force on 1-7-1989 when the 1988 Act came into force. 12. In this context. it is also necessary to refer to a decision of the Supreme Court in PadmaSrinivasan v. Premier Insurance Co.Ltd. (AIR 1982 SC 836). In that case. the policy issued by the Insurance Company covered "liability under Chapter VIII of the Motor Vehicles Act. 12. In this context. it is also necessary to refer to a decision of the Supreme Court in PadmaSrinivasan v. Premier Insurance Co.Ltd. (AIR 1982 SC 836). In that case. the policy issued by the Insurance Company covered "liability under Chapter VIII of the Motor Vehicles Act. 1939" The facts were that the policy was issued or. 31-5-1969 for the period from 30-6-1969 to 29-6-1970. Section 95(2) (a) was amended by the Motor Vehicles Amendment Act 56 of 1969 by which the particular coverage under the statutory liability was increased from Rs.20.000/- to Rs.50. 000/-. The said amendment came into force on 2-3-1970. The conteaon for the claimants was that inasmuch as the amendment came into force during the currency of the policy. the said amendment applied. But the Supreme Court held that "liability as the one under Chapter VIII of the Motor Vehicles Act. 1939" mentioned in the policy must mean a liability as determinable under Chapter VIII at the relevant lime. Relevant time is the time when the liability actually. arises Since the liability of the insurer to pay a claim under a motor accident policy arises on the occurrence of the accident and not until then. one must necessarily have regard to the State of the law obtaining at the time of the accident for determining the extent of the insurer's liability under a statutory policy. Therefore. hi our opinion. the material date is the dote of the accident and on that date the rights of the parties-crystallise. The liability of the Insurance Company. on the date of the accident in the. Present case. i.e. or 25-11-1981. was only Rs.S. 000/-. The provisions of 1988 Act came into force or. 1-7-1989 and there can be absolutely no doubt that the same cannot be applied to an accident which occured on 25-11-1981. In fact. the term of the policy expired on 28-8-1982 long before 1-7-1989. The policy itself matured before 1-7-1989 and ceased to be in force. Fierce S.147(2)(a) of the 1988 Act has no application. 13. It is then contended that inasmuch as this appeal is pending when the new Act came into force. the new Act should be applied. In this context. we have to refer to a recent judgment of a Full Bench of this Court. consisting of one of us (Jagannadha Rao. C.J.) In Neeli and others v. PadmanabhaPiHaiNarayanaPillai& Ors. 13. It is then contended that inasmuch as this appeal is pending when the new Act came into force. the new Act should be applied. In this context. we have to refer to a recent judgment of a Full Bench of this Court. consisting of one of us (Jagannadha Rao. C.J.) In Neeli and others v. PadmanabhaPiHaiNarayanaPillai& Ors. (MFANo.462 of 1983 dated 28-10-1992:1992 (2) KLT 807 (FB) wherein in the context of the retrospectively of S.92-A of the Motor Vehicles Act. 1939 which was introduced on 1-10-1982 in relation to its application to the case of an accident which occurred on 9-4-1977. this Court rejected a similar contention. It was pointed out by this Court that merely because a statute came into force during the pendency of a case. it did not automatically follow that the said statute had to be applied. There must be some provisions in the statute which expressly or by necessary implication lead to an inference that the rights of the parties as on the date of the commencement of the proceedings are intended to be altered. We do not find anything in the new Act of 1988. which seeks to alter the liability of the Insurance Company as it stood on the date of the accident. i.e. on 25-11-1981. It may be true that there are beneficial provisions in the new Act. but even where beneficial provisions are introduced. it does not automatically lead to the inference that such provisions are retrospective in nature. As we have considered the said question exhaustively in the above said Full bench judgment. we do not propose to deal with the same once again. We are of the view that the reasoning given in that judgment squarely applies to the case before us. We hold that provisions of S.147(2) (a) are not retrospective. They cannot be applied to the case of an accident which took place on 25-11-1981 even though the claim raised in connection with such an accident is pending in appeal by the date of commencement of the new Act. Point No.2 is held accordingly is against the claimants. 14. Point No.3:- The contention is that inasmuch as the owner of the passenger vehicle has been made liable for the total sum of Rs.42.600/-. Point No.2 is held accordingly is against the claimants. 14. Point No.3:- The contention is that inasmuch as the owner of the passenger vehicle has been made liable for the total sum of Rs.42.600/-. the Insurance Company is liable to discharge the entire liability of Rs.42.600/- under S.96(1) and that it will be for the Insurance Company to resort to S.96(4) to seek to recover any amount paid to the claimants in excess of the statutory liability upon Insurance Company under S.95(2). S.96 of the Motor Vehicles Act. 1939 is a very lengthy Section and we shall. therefore. try to refer only to that part of the Section. which is relevant for our purpose. "96. Duty of insurers to satisfy judgments against persons insured hi respect of third party risks: - (1) If. after a certificate of insurance has been issued under sub-section (4) of S.95 in favour of the person by whom a policy has been effected. judgment in respect of any such liability as is required to be covered by a policy under clause (b) of sub-section (1) of S.95 (being a liability covered by the terms of the policy) is obtained against any person insured by the policy. then. notwithstanding that the insurer may be entitled to avoid or cancel or may have avoided or cancelled the policy. the insurer shall. subject to the provisions of this section. pay to the person entitled to the benefit of the decree any sum not exceeding the sum assured payable thereunder, as if he were the judgment-debtor. in respect of the liability, together with any amount payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any enactment relating to interest on judgments. (2) No sum shall be payable by an insurer under sub-section (1) in respect of any judgment unless before or after the commencement of the proceedings in which the judgment is given the insurer had notice through the Court of the bringing of the proceedings. or in respect of any judgment so long as execution is stayed thereon pending an appeal; and an insurer to whom notice of the bringing of any such proceeding is so given shall be entitled to be made a party thereto and to defend the action on any of the following grounds. or in respect of any judgment so long as execution is stayed thereon pending an appeal; and an insurer to whom notice of the bringing of any such proceeding is so given shall be entitled to be made a party thereto and to defend the action on any of the following grounds. namely: - (a) That the policy was cancelled by mutual consent or by virtue of any provision contained therein before the accident giving rise to the liability. and that cither the certificate of insurance was surrendered to the insurer or that the person to whom the certificate was issued has made an affidavit stating that the certificate has been lost or destroyed. or that cither before or not later than fourteen days after the happening of the accident the insurer has commenced proceedings for cancellation of the certificate after compliance with the provisions of S.105; or (b) That there has been a breach of a specified condition of the policy. being one of the following conditions. namely: - (i) A condition excluding the use of the vehicle - (a) For hire or reward. where the vehicle is on the date of the contract of insurance a vehicle not covered by a permit to ply for hire or reward. or (b) For organized racing and speed testing. or (c) For a purpose not allowed by the permit under which the vehicle is used. where the vehicle is a transport vehicle. or (d) Without side-car being attached. where the vehicle is a motor cycle; or (ii) A condition excluding driving by a named person or persons or by any person who is not duly licensed. or by any person who has been disqualified for holding or obtaining a driving licence during the period of disqualification; or (iii) A condition excluding liability for injury caused or contributed to by conditions of war. civil war. riot or civil commotion; or (c) That the policy is void on the ground that it was obtained by the non-disclosure of a material fact or by a representation of fact. which was false in some material particular. (3) Where a certificate of insurance has been issued under sub-section (4) of S.95 to the person by whom a policy has been effected. which was false in some material particular. (3) Where a certificate of insurance has been issued under sub-section (4) of S.95 to the person by whom a policy has been effected. so much of the policy as purports to restrict the insurance of the persons insured thereby by reference to any conditions other than those in clause (b) of sub-section (2) shall. as respects such liabilities as arc required to be covered by a policy under clause (b) of sub-section (1) of S.95. be of no effect: Provided that any sum paid by the insurer in or towards the discharge of any liability of any person which is covered by the policy by virtue only of this sub-section shall be recoverable by the insurer from that person. (4) If the amount which an insurer becomes liable under this section to pay in respect ot'a liability incurred by a person insured by a policy exceeds the amount for which the insurer would apart from the provisions of this section be liable under the policy in respect of that liability, the insurer shall be entitled to recover the excess from that person. (5) In this section the expressions "material fact and material particulars" mean. respectively. a fact or particular of such a nature as to influence the judgment of a prudent insurer in determining whether he will take the risk and. if so. at what premium and on what conditions. and the expression "liability covered by the terms of the policy" means a liability which is covered by the policy or which would be so covered but for the fact that the insurer is entitled to avoid or cancel or has avoided or cancelled the policy. (6) No insurer to whom the not ice referred to in sub-section (2) or sub-section (2-A) has been given shall be entitled to avoid his liability to any person entitled to the benefit of any such judgment as is referred to in sub-section (1) or sub-section (2A) otherwise than in the manner provided for in sub-section (2) or in the corresponding law of the reciprocating country. as the case may be." (Emphasis supplied) 15. as the case may be." (Emphasis supplied) 15. The contention here is that under S.96(1) whenever a judgment is given in respect of a liability incurred by a policy holder under S.95(1)(b) (being a liability covered by the terms of the policy) then the Insurance Company shall pay to the persons entitled to the benefit of the decree. any sum not exceeding the sum assured payable "there under". as if the insurer were the judgment-debtor in respect of the liability. together will any amount of costs and interests. It is the further contention of the claimants that the effect of the above said provision in S.96(1) is that whatever decree or award is passed against the insured. here the vehicle owner. the Insurance Company is liable to discharge the liability "there under". It is argued that the words "there under" refer to the decree as passed against the insured. It is the further contention that under S.96(4) inasmuch as the word "exceeds" is used. the Insurance Company shall first discharge the liability incurred by the insured in to. whatever be such liability and then after deducting the amount covered by the statutory liability of the Insurance Company under S.95(2) the company has to recover the excess amount from the insured by way of a separate action. In the present case. the contention is that if the statutory liability of the Insurance Company under S.95(2)(b)(ii) to a passenger carried in the stage carriage vehicle is restricted to Rs.5. 000/- as on 25-11-1981. then the Insurance Company has to first pay the entire amount of Rs.42. 600/- to the legal representatives of the deceased thereby discharging the entire liability under the award or decree and then the Insurance Company has to recover the excess amount (Rs. 42.600 - 5000 = 37.600) from the vehicle owner. The question is whether such a contention can. be accepted. 16. The provisions of S.96 of the Motor Vehicles Act. 1939 are more or less based upon the corresponding provisions of the Road Traffic Act. 1934 in England. which sought to protect the interests of third parties. In fact. we find that the provisions of the said Act sought to supplement the provisions of the Road Traffic Act of 1930. We also find that the provisions of the above said vivo Acts have more or less been adopted not only in India in the Motor Vehicles Act. which sought to protect the interests of third parties. In fact. we find that the provisions of the said Act sought to supplement the provisions of the Road Traffic Act of 1930. We also find that the provisions of the above said vivo Acts have more or less been adopted not only in India in the Motor Vehicles Act. 1939 but also in Sri Lanka and also in other Commonwealth Countries wish minor local changes. Il would be convenient to refer to the history of these provisions briefly. .. 17. In the 1920s. motorcars on the roads were rapidly becoming a menace to life in England. The persons injured had no recourse against anyone except the driver or his principal (the owner of the vehicle). Sometimes. the owner was insured in full or in part against third party risks. Sometimes. lie was not insured at all. In any case. the injured person had no right to call upon the Insurance Company whatsoever or on the moneys which were payable under the policies. The injured person's only recourse was against the negligent driver and he was often worth nothing or did not have enough money to pay the damages. In order to mitigate these evils. the British Parliament in 1930 passed two Statutes within a few days of one another. The principal one was the Road Traffic Act. 1930. Section 35(1) of that Acts corresponds to 3.94(1) of the Motor Vehicles Act. 1939 while S.36 thereof corresponds to our S.95 and S.38 corresponds to S.96(3) of our Act. Under the Road Traffic Act. 1930 it was compulsory for motorists to insure against third parties in respect of certain classes of liability. They were not bound to insure in respect of their employees or in respect of passengers in private cars. But. they were bound to insure for other classes of insurance. The other Act was the Third Party (Rights Against Insurers) Act. 1930. That applied to cases where she driver or the owner of the car became insolvent - even bankrupt or the Company went into liquidation. The Act enabled the insured person to go direct against the Insurance Company: but only for the sum covered by the policy. The Insurance Company was not bound to pay any more than the policy provided as solace in S.1(4) of that Act. The result. therefore. was that under these two acts. The Act enabled the insured person to go direct against the Insurance Company: but only for the sum covered by the policy. The Insurance Company was not bound to pay any more than the policy provided as solace in S.1(4) of that Act. The result. therefore. was that under these two acts. the Insurance Company could not be made liable beyond their contractual obligations. The Insurance Company could still say that they were bound under their own contract. So much so. the protection became illusory. In Zurich General Accident & Liability Insurance Co. Ltd. v. Mormon & Others ((1942) 72 L1.L.R.167). Lord Justice Goddard poialed out that a position had arisen which to a great extent nullified the protection which compulsory insurance was intended to afford. So a year or two later are important Act was passed to remedy disposition. It was the Road Traffic Act. 1934. Il made the Insurance Company pay directly to the third parties even though such parties' arc not parties to the insurance contract. The provisions of S.10f the 1934 Act correspond to S.96 of the Motor Vehicles Act. 1939. Ii will be advantageous to extract the provisions of S.10. so that the same could be compared with the provisions of S.96 of the Act: "The Road Traffic Act. 1934. 10(1). If. after a certificate of insurance has been delivered under sub-s.5 of S.36 of the principal Act (Road Traffic Act. 1930) to the person by whom a policy has been effected. judgment in respect of any such liability as is required to be covered by a policy under para.(b) of sub-sec. 1 of S.36 of the principal Act (being a liability covered by the terms of the policy) is obtained against any person insured by the policy. then now it standing that the insurer may be entitled to avoid or cancel. or may have avoided or cancelled. the policy. the insurer shall. subject to the provisions of this section. pay to the persons entitled to the benefit of the judgment any sum payable there under in respect of the liability. including the amount payable in respect of costs and any sum payable in respect interest on that sum by virtue of any enactment relating to interest on judgments. (2) No sum shall be payable by an insurer under the foregoing provisions of this section - (a) In respect of any judgment. including the amount payable in respect of costs and any sum payable in respect interest on that sum by virtue of any enactment relating to interest on judgments. (2) No sum shall be payable by an insurer under the foregoing provisions of this section - (a) In respect of any judgment. unless before or within seven days after the commencement of the proceedings in which the judgment was given. the insurer had notice of the bringing of the proceedings; (3) No sum shall be payable by an insurer under the foregoing provisions of this section. if. in an action commenced before. or within three months after. the commencement of the proceedings in which the judgment was given. he has obtained a declaration that. apart from any provision contained in the policy. he is end it led to avoid it on the ground that it was obtained by the non-disclosure of a material fact. or by a representation of fact which was false in some material particular. or. if he has avoided the policy on that ground. that he was entitled so to do apart from any provision contained in it: Provided that an insurer who has obtained such a declaration as aforesaid in an action shall not thereby become entitled to the benefit of this sub-section as respects any judgment obtained in proceedings commenced before the commencement of that action. unless before or within seven days after the commencement of that action he has given notice thereof to the person who is the plaintiff in the said proceedings specifying the non disclosure or false representation on which he proposes to rely. and any person to whom notice of such an action is so given shall be entitled. if he thinks fit. to be made a party thereto. (4) If the amount which an insurer becomes liable under this section to pay in respect of a liability of a person insured by a policy exceeds the amount for which he would. apart from the provisions of this section. be liable under the policy in respect of that liability. he shall be entitled to recover the excess from that person." It will be noticed that provisions of S.10 of the Road Traffic Act. 1934. and the provisions of S.96 of the Motor Vehicles Act. 1939 are similar. 18. A question. similar to the one now raised before us under S.96(2) and (4). he shall be entitled to recover the excess from that person." It will be noticed that provisions of S.10 of the Road Traffic Act. 1934. and the provisions of S.96 of the Motor Vehicles Act. 1939 are similar. 18. A question. similar to the one now raised before us under S.96(2) and (4). arose before the Court of Appeal in Harker v. Caledonian Insec. ((1979) 2 L1.L.R.193). Roskill and Cumming-Bruce. L.JJ. (Lord Denning. M.R. dissenting) were dealing with a case under the British Honduras Motor Vehicles Insurance (Third Party risks ) Ordinance. 1958. provisions of which were similar to S.10 of the British Road Traffic' Act. 1930 and S.96 of the Motor Vehicles Act. 1939. In that case. plaintiff was the exclusion of the estate of James Marker. a soldier in the British Army. who suffered grave injuries in a motor accident in British Honduras. An action in the Supreme Court of Belize. British Honduras. ended with a consent judgment for 175.000 british Honduras dollars with interest and costs. but the car driver was unable to pay any of part of that judgment. He was. however. insured by the defendants under a motor insurance policy. which was issued in accordance with the above said Ordinal nee. The material clauses of Ss.3. 4 and 20 of the said Ordinance read thus: "3(1) - Subject to the provisions of this Ordinance. no person shall use. or cause-or permit any other person to use. a motor vehicle on a public road unless there is in force in relation to the user of the motor vehicle by that person 01 that other person. as the case may be. such a policy of insurance or such a security in respect of third party risks as complies with the requirements of this Ordinance. 4(1) - In order to comply with the requirements of this Ordinance. a policy of insurance must be a policy which - (a) is issued by a person-who is an insurer. and (b) insures such person. persons. such a policy of insurance or such a security in respect of third party risks as complies with the requirements of this Ordinance. 4(1) - In order to comply with the requirements of this Ordinance. a policy of insurance must be a policy which - (a) is issued by a person-who is an insurer. and (b) insures such person. persons. or classes of persons as may be specified in the policy in respect of any liability which may be incurred by him or them in respect of the death or bodily injury to any person caused by or arising out of the use of the motor vehicle on a public road: Provided that such a policy shall not be required to cover (i) liability in respect of the death arising out of anti in the course of his employment of a person in the employment of a person insured by the policy or of bodily injury sustained by such a person arising out of and in the course of his employment; or (i i) except in the case of a motor vehicle in which passengers are being carried for hire or reward or by reason of or in pursuance of a contract of employment. liability in respect of the death of or bodily injury to persons being carried in or upon or entering or getting on to or alighting from the motor vehicle at the time of the occurrence of the event out of which the claims arise. (iii) any contractual liability. (iv) liability in respect of the first twenty-four dollars of any claim by any one person. (v) liability in respect of any sum in excess of four thousand dollars arising out of any one claim by any one person. (vi) liability in respect of any sum in excess of eight thousand dollars arising out of the total claims for any one accident for each vehicle concerned. 20(1) - If. after a certificate of insurance has been issued under sub-section (4) of S.4 to the person by whom a policy has been effected. judgment in respect of any such liability as is required to be covered by a policy under paragraph (b) of sub-section (1) of S.4 (being A liability covered by the terms of the policy) is obtained against any person insured by the policy. then. notwithstanding that the insurer may. be entitled to avoid or cancel. judgment in respect of any such liability as is required to be covered by a policy under paragraph (b) of sub-section (1) of S.4 (being A liability covered by the terms of the policy) is obtained against any person insured by the policy. then. notwithstanding that the insurer may. be entitled to avoid or cancel. or may have avoided or cancelled. the policy. the insurer shall. subject to the provisions of this section. pay to the persons entitled 10 the benefit of the judgment any sum payable there under in respect of the liability. including any amount payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any enactment relating to interest on judgments. 20(4) - If the amount which an insurer becomes liable under this section to pay in respect of a liability of a person insured by n policy exceeds the amount for which he would. apart from the provisions of (his section. be liable under the policy in respect of that liability. he shall be entitled to recover the excess from that person." The Insurance Company paid the plaintiff 4.000 dollars and the issue before the Court was whether they were liable for the entire amount of 175.000 dollars with a right to recover 171.000 dollars from the driver. The question. therefore. was whether the plaintiff should recover 171.000 dollars from the driver or whether the Insurance Company should first pay the plaintiff even beyond their statutory liability of 4.000 dollars to cover the decree and then try to recover the balance of 171.000 dollars from the driver. 19. It will be noticed that S.3(1) of the Ordinance corresponds to S.94; S.4(1) to S.95(1)(b) and S.95 (2)(b) while S.20(1) corresponds to S.96(1) and S.20(4) corresponds to S.96(4) of the Motor Vehicles Act. 1939. It was initially held by Donaldson. J.. on a construction of S.20 sub-clause (1). that the insurers were liable only " in respect of any such liability as is required to be covered by a policy under S.4(1)(b)". He held that the Insurance Company was liable up to the statutory liability of 4.000 dollars and not for the entire judgment in the sum of Rs.175. 000 dollars. 20. The said view was affirmed by the majority of the Court of Appeal. namely. Roskill and Cumming-Brucc. LJ'J. While Lord Denning dissented. He held that the Insurance Company was liable up to the statutory liability of 4.000 dollars and not for the entire judgment in the sum of Rs.175. 000 dollars. 20. The said view was affirmed by the majority of the Court of Appeal. namely. Roskill and Cumming-Brucc. LJ'J. While Lord Denning dissented. The majority held that the word 'liability'. which occured in the last three provisos to S.4(1) had the same meaning which it bore in the three provisos and there was no reason why the legislature should not have provided cither for total exemption of liability or for partial limited exemption liability above a slated figure. Lord Roskili pointed out that S.4 (1)(b) of the Honduras Ordinance. which was in line with S.36 of the Road Traffic Act. 1930. required the policy of insurance to insure "such person. persons or classes of persons as may be specified in the policy in respect of any liability which may be incurred by him or them in respect of the death or bodily' injury to any person caused by or arising out of the use of the motor vehicle on a public road". (This is provision corresponds to S.95(1)(b)(i) of U'C Motor Vi hides Act. 1939). The learned judge then pointed out that thereafter there arc six provisos (1) to (6) in the Honduras Act while the corresponding English provisions contain three provisos. The leamed judge then referred to the argument of the plaintiff as follows: The argument was that the judgment Lad been obtained in respect of such liability as is required to be covered by S.4(1)(b) (being A liability covered by the policy).'and. therefore. the Insurance Company must pay to the plaintiff as the person entitled to the benefit of thoudgmcnt. any sum payable thereunder in respect of that liability. namely. 175.000 dollars. The Insurance Company contended that the only relevant liability required to be covered by S.4(1)(b) is the liability upto 4.000 dollars and that alone was the sum payable thereunder in respect of the liability. The plaintiff thereafter contended that the words "thereunder" in the context mean under the judgment. The leamed judge observed That it would be open to the legislature to limit the liability of the Insurance Company to a particular amount. Such limitations in the quantum of liability of She Insurance Company were there - for example. The plaintiff thereafter contended that the words "thereunder" in the context mean under the judgment. The leamed judge observed That it would be open to the legislature to limit the liability of the Insurance Company to a particular amount. Such limitations in the quantum of liability of She Insurance Company were there - for example. in Ss.502 and 50.3 of the U.K. Merchant Shipping Act. 1894. If the legislature wanted the Insurance Company lobe initially liable for the whole amount nothing precluded the legislature from saying so clearly. The leamed judge further observed that the words "amount in excess" in S.20(4) of the Honduras Act (corresponding to S.96(4) of the Motor Vehicles Act. 1939). no doubt. suggested quantum rather liability but this was not the view taken by the editor (Prof. Ivarny) in the fourth edition of Halsbury's Laws of England. para.779 which reads as follows: "Rights of insurers against their assured: If insurers. by virtue of the provisions relating to payments on judgments. become liable to pay to a third party a sum in excess of 'what. under the policy. they would be liable to pay to their assured in respect of the relevant accident. they are entitled to recover the excess from the assured. It would seem. therefore. that where the insurers would not be liable to pay anything under their policy by reason of misrepresentation or non -disclosure giving them a right to repudiate. they are entitled to recover from the assured anything which they are compelled by she statutory provisions to pay. whether or not they seek to obtain the relief which the statutory provisions afford them." 21. The other leamed Judge. Cumming-Bruce. LJ observed that She Honduras Ordinance was manifestly modelled upon the example and language" of the U.K. legislation of 1934. So far as England was concerned. an insured. apart from his remedy against the Insurance Company. had a separate right against the Motor Insurance Bureau to recover the balance amount of the award to the extent it was not covered by the statutory iiubilily. Such a device was not there in other countries. Even so. So far as England was concerned. an insured. apart from his remedy against the Insurance Company. had a separate right against the Motor Insurance Bureau to recover the balance amount of the award to the extent it was not covered by the statutory iiubilily. Such a device was not there in other countries. Even so. the policy of the legislature in Central America apj>cared to be the same which was in the Carrebean legislatures where a similar view hail been taken in Jamaica Cooperative Fire and General Insurance Co.Ltd. v. Sanchez ((1968) 13 W.L.R. Delimiting the liability of the Insurance Company to the statutory liability only and rejecting the contention that the Insurance Company should pay the lull amount covered by the judgment and recover the balance ever the statutory liability from the insured. The word'liability' in S.20(4) of the Honduras Ordinance had the same meaning as the liability mentioned in the proviso to S.4(1)(b) (corresponding to S.95(2) of the Motor Vehicles Act. 1939). The majority followed the. earlier decision of the Privy Council from Ceylon. namely. Free Lanks lnsurance Co. Lid v. A.E. raw-sl'ighe (1964 A.C. 541). 22. The above said decision of the Court of Appeal was taken to the Privy Council and the majority view was upheld in Marker v. Caledonian Insurance Co. (1980 (1) L11L.R.556 (PC)). The Judicial Committee stated that the wording of the Ordinance was clear and free from any ambiguity. In effect. they nek) that there was nothing unusual if there was some difference between the position in England as compared to other countries in she sense that in England She entire liability of the insured (or even in the case of non-insurance) would be cleared by the Motor Insurer's Bureau. apart from what was covered by the Insurance Company while in certain other countries the compulsory insurance provisions in the statute could limit the questions of liability of the Insurance Company. Their Lordships agreed with the majority of the Court of Appeal that the words in S.20(1) "liability" as is required to be covered by a policy under para.(b) of sub-section (1) of S.4 (being a liability covered by the terms of the policy) are inferrable not only to the basic liability but also to the statutory quantum mentioned therein. After referring to S.4(1) and S.20(1) of the British Honduras Ordinance. 1958 (already set out). After referring to S.4(1) and S.20(1) of the British Honduras Ordinance. 1958 (already set out). Lord Diplock posed the question: "In a sentence. the 'question of construction is: Is liability in respect of any sum in excess of four thousand dollars arising out of any one claim. by any one person which by proviso (v) to sub-section (1)(b) of S.4. a policy is not required to cover. nevertheless included in "such liability as is required to be covered by a policy under paragraph (b) of sub-sec. (1) of S.4". where that expression is used in S.20(1)?" and answered the question as follows: "So stated. the only possible answer is. in my view. "no". Your Lordships were taken through various other provisions of the Ordinance which it was suggested threw some darkness upon the apparent clarity of the language of Ss.4(1) and 20(1). In particular an argument was based on sub-section (4) of S.20.... The reference to the liability of the insurer in a direct action "exceeding ' his liability to his assured under the policy was relied upon as indicating that monetary limits lawfully provided for by I he policy would be ineffective as a defence. in part. to a direct action on the judgment obtained against the assured". and explained by the following crucial words: "This sub-section was. in my view. intended to cover inter alia. cases where the insurer was entitled to avoid or cancel the policy; But the absence of the words 'if any' after the word 'amount' where it appears for the second time in the sub-sect ion. i lie verb 'exceeds' is not the most apt to express an 'excess over nil', there are instances. of which costs and interest on the judgment are examples. where the insurer would be liable in the direct action for sums in excess of the permissible monetary limits upon the cover afforded by the policy. So even on -its-narrowest construction. the subsection is not inconsistent with the clear and unambiguous meaning of S.20(1)." Therefore. inspite of a provision similar to S.96(1) and S.96(4). the liability of the Insurance Company was restricted to the statutory liability and not to the extent of the entire liability of the insured. 23. We have then to refer to two more decisions of the Privy Council in regard to a similar provision in Ceylon and Bermuda. 24. We have stated that in Marker's case. the liability of the Insurance Company was restricted to the statutory liability and not to the extent of the entire liability of the insured. 23. We have then to refer to two more decisions of the Privy Council in regard to a similar provision in Ceylon and Bermuda. 24. We have stated that in Marker's case. that the Privy Council followed its earlier decision in Free Lanka Insurance Co. Ltd. v. A.E. Ranasinglie (1964 AC 541). In that case too. the position was the same. The claimant. who was an injured person. was awarded daingcs for Rs.30.000 against the owner of the lorry. who was insured against third party risks. The statutory liability of the Insurance Company was upto Rs.20.000 only. The claimant started an action against the Insurance Company and obtained judgment for the entire Rs.30.000 from the Supreme Court of Ceylon rather than Rs.20.000. The said judgment was reversed by the Privy Council. The provisions of S.133(1) of the Motor Car Ordinance. 1938 of Ceylon(1) corresponds to S.96(1) while S.128(1)(b) corresponds to S.95(1)(b) and S. I28(4)(c) to S.95(2). S.138 of the Ordinance (2) corresponds to S.96(4). Lord Evershed. speaking for the Board. construed S.138 to say that the liability of the Insurance Company was only Rs.20.000. The words 'required to be covered' in S.133 meant that the Section did not render the insurer liable to third party fora greater sum than that which he was liable to the assured under S. 128 of the Ordinance. 25. In the other decision of the Privy Council in V.G. Suttle v. Eleanor Joyce Simmons (1989 92) L1.L.R.227 - (PC). the same question arose under the Bermudan Motor Car Insurance (Third Parly risks) Act. 1943. The respondent was injured by the negligent driving of Mr. Kennctl Simmons. The car was owned by Mrs. Me Callan and was insured with the appellants under a policy. The respondent claimed damages for personal injuries against Mr. Simmons. for 100.000 dollars and costs by consent. The respondent-claimant wanted that the entire sum be paid by the insurer-appellant even though by virtue of the provision of the Act of 1943. the statutory liability was restricted to 24.000 dollars. The Court of Appeal at Bermuda held the appellant liable for the whole amount. Allowing the appeal. their Lordships held the appellant liable only to an extent of 24.000 dollars. the statutory liability was restricted to 24.000 dollars. The Court of Appeal at Bermuda held the appellant liable for the whole amount. Allowing the appeal. their Lordships held the appellant liable only to an extent of 24.000 dollars. S.3(1) of the Act there is similar to S.94 while S.4(1) is similar to S.95(1)(b). The proviso to S.4(1) corresponds to S.95(2) limiting the liability of the (1) S.133(1):- if after a certificate of insurance has been issued under S.128(4) to the persons by whom a policy has been effected. a decree in respect of any such liability as is required by S. 128(1)(b) to be covered by a policy of insurance (being a liability covered by the terms of the policy). then ... (2) S.138:-If the amount which an insurer becomes liable under S.133 to pay in respect of a liability of a person insured by a policy exceeds the amount for which he would. apart from the provisions of that section be liable under the policy in respect of that liability. he shall be entitled to recover the excess from that person. Insurance Company to 24.000 dollars and to other amounts in various situations. Again S.6(1) of the Act (3) corresponds to S.96(1) while S.6(4) (4) corresponds to S.96(4). Their Lordships followed the decision in Marker's case (supra) and Ranasinglie 'scase (supra). The contention that Marker's case was wrongly decided and that the view of Lord Denning. M.R. in the Court of Appeal in Marker's case was correct. was rejected. 26. A further point was also argued that the policy there covered 125.000 dollars while the. statutory liability of the Insurance Company was only 24.000 dollars. and the award is for 10.000 dollars and that Marker's case was distinguishable. But Lord Keith of Kinkel observed: "It is true that the Harkcr's case was in certain respects different in its facts from the present one. But the reasoning of Ix>rd Diplock may nevertheless be applicable. That reasoning indicates that so far as the 1943 Act is concerned. the words in S.6(1) - '.... such liability as is required to be covered by a policy under paragraph (b) of subsection (i) of S.4....' do not include liability in respect of any sum in excess of 24.000 dollars arising out of any one claim by any one person. since by virtue of proviso (iii) to S.4(1)(b). the words in S.6(1) - '.... such liability as is required to be covered by a policy under paragraph (b) of subsection (i) of S.4....' do not include liability in respect of any sum in excess of 24.000 dollars arising out of any one claim by any one person. since by virtue of proviso (iii) to S.4(1)(b). such a liability is not required to be covered. It is. in their Lordships' opinion. nothing to the point. so far as the construction of S.6 is concerned. that the insurers might under the terms of the policy be bound to indemnify the insured in respect of any excess over the statutory minimum for which an injured third party might have obtained judgment against the insured. The effect of S.6(1) is to limit the amount which the injured third party can recover directly from the insurers." It is not necessary for us to go into this further question for it is not contended here that the policy covers any amount in excess of the compulsory liability under the Act. No doubt. the above observations would show that even if the policy was for a higher amount. than (iie statutory li mi I. the claimants would be entitled as against the Insurance Company. only to She amount compulsorily required to be covered under S.95(2) and the balance had to be recovered from the insured. The insured might seek reimbursement from the Insurance Company to the extent the policy amount exceeded the statutory liability. We are. as stated above. not concerned with this laltcraspect which additionally arose in Sultle v. Simmons. (supra). 27. The same view as in the Privy Council cases was taken by a Division Bench of this Court consisting of Viswnatha Iyer and Manoharan. JJ. in M.F.A.No.308 of 1986 (3) S.6(1) : -If. after a certificate of insurance has been delivered under sub-section (4) of S.4 to the persons by whom a policy has been effected. judgment in respect of any such liability as is required to be covered by a policy under paragraph (b) of sub-section (1) of S.4 (being a liability covered by the terms of the policy).... (4) S.6(4):- If the amount which an insurer becomes li.'ible under this section to pay in respect of a liability of a person insured by a policy exceeds the amount. for which he would. apart from the provisions of this Section. (4) S.6(4):- If the amount which an insurer becomes li.'ible under this section to pay in respect of a liability of a person insured by a policy exceeds the amount. for which he would. apart from the provisions of this Section. be liable under the policy in respect of that liability. he shall be entitled to recover the excess from that person. dated 3-9-1992 after distinguishing New Asiatic Ins. Co. v. Pessumol. AIR 1964 SC 1736. 28. Applying the above case law. the following principles can be summarised: (1) The provisions of S.96(1) are unambiguous and clear that where a judgment in respect of the liability referred to in S.95(1)(b) - (being a liability covered by the policy) -. then the Insurance Company shall pay U) the claimants-decree holders any sum. got exceeding the sum assured. payable thereunder. as if the insurer was the judgment debtor in respect of the liability. together with any amount payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any enactment relating to interest on judgments. The words 'liability referred to in S.95(1)(b)' are confined to the statutory-liability mentioned in S.95(1)(b) to the extent covered by S.95(2) for S.95(1)(b) itself refers to S.95(2). In other words. the insurer is not under S.96(1) liable to the claimants for the entire amount covered by the judgment but only uplo the extent covered by S.95(1)(ta) read with S.95(2). (2) No doubt. S.96(4) enab'cs the insurer to recover 'excess' from the insured. But this does not refer to a situation where the insurer pays the entire amount covered by the judgment to the claimants and to its recovering the excess over statutory liability from the insured. This is because the basic liability of the insurer is only to he statutory liability covered by S.95(1)(b) read with S.95(2). But. the provisions of S.96(4) are not redundant or otiose. They have a meaning and are meant to cover atleast one of two different situations. In a case where the entire policy is avoided under S.96(6) by the insurer on grounds mentioned in S.96(2) as against the insured. the insurer. after paying to the claimants the amount covered upto its statutory liability under S.95(1)(b) read with S.95(2). recover whatever it has so paid to the claimants. from the insured. In that case. In a case where the entire policy is avoided under S.96(6) by the insurer on grounds mentioned in S.96(2) as against the insured. the insurer. after paying to the claimants the amount covered upto its statutory liability under S.95(1)(b) read with S.95(2). recover whatever it has so paid to the claimants. from the insured. In that case. it am get back Hie whole of the amount covered by the statutory liability from the insured and would be a case of 'excess over nil' as stated by Lord Diplock in Harkcr 's case. There can also be a second situation where after paying to the claimants the amount covered by the statutory liability under S.95(1)(b) rend with S.95(2) together with interest and costs. the insurer could recover the 'excess' amount only and above the specific statutory figure. governing its liability under S.95(1)(b) read vyith S.95(2) and obviously the word 'excess' would then mean that the insurer could recover the costs and interest from the insured. Of course. there is no practice in our country for the general insurance companies to proceed to recover the interest and costs from the insured nor are we to be understood as permitting such a course by laying down a new convention. (3) That would. in effect. mean that in case the insurance policy is totally avoided by the insurance companies on the ground of misrepresentation or otherwise. then the entire amount paid or payable to the claimants becomes 'excess'. and can be recovered from the insured. In other cases. the statutory liability of the Insurance Company under S.95(2) being the amounts stated therein. the 'excess' that the company becomes liable to pay to iheclaim ants is the costs and interest payable because of the provisions of S.96(1). which. apart from that provision. was not payable by the insurance company and the insurance company's recovery of 'excess' under S.96(4) could refer to these two amounts. ntimely. costs and interest. There is. however. no claim generally. by any insurance company against the insured for the interest and costs and we should not be understood as permitting such 11 course (4) 1 h ms. the liability of the insurance company could only be to the statutory limits and there is no question of recovering the entire amount from fhc insurance company nor is it necessary to make the company recover the excess from the vehicle owner. the liability of the insurance company could only be to the statutory limits and there is no question of recovering the entire amount from fhc insurance company nor is it necessary to make the company recover the excess from the vehicle owner. We make it clear thai we are here dealing with an Act policy only. We hold Point No.3 accordingly. 29. For the aforesaid reasons. we allow the appeal of the Insurance Company. over-rule New India Assurance Co. Lid. v. Tlwnkani& Ors.. 1984 ACJ 791 (Ker.). hold that 8.147(2) of the Motor Vehicles Act. 1988 is not retrospective. that the liability of the Insurance. Company under S.96(1) is restricted to the statutory liability provided under S.95(2) and that the claimants cannot rely on S.96(4) to con tend that the Insurance Company is liable for the entire liability of the insured and they cannot say that the Insurance Company should recover. the excess over the statutory liability. from the insured. The claimants can recover from the Insurance Company only upto the limits stated in S.95(2) and the balance. if any. has to be recovered from the insured. On the facts. the Insurance Company is liable only upto Rs.5.000/- with interest thereon and costs to the claimants. The balance of Rs.37.600/- with interest thereon is not recoverable from the Insurance Company. The Appeal is allowed as stated above. No costs.