Motor Vehicles Act, 1988: s.166 – Comprehensive Private Car ‘B’ Policy – Fatal accident – A surgeon working in respondent no.3 hospital was travelling in a bus owned by the hospital which met with an accident due to rash and negligent driving of the driver of the bus – The surgeon was seriously injured and ultimately succumbed to his injuries – Claim for compensation by his wife – The policy contained a clause that the insurance company would not be liable where death or injury arose out of and in the course of employment of such person by the insured – Insurance company denied the claim on the ground that the deceased surgeon was an employee of the hospital, thereby excluding the liability of insurance company – Tribunal held that the contract was a contract for service as a result of which the deceased could not have been held to be in the employment of respondent no.3 and insurance company was liable – However, High Court held that since the contract was a contract of service, the insurance company could not be held liable – Whether the surgeon could have been said to be the employee of respondent no.3 on the date of accident as a result of which the limitation of liability provision in favour of insurance company would kick in – Held: The intention of the parties is to be gathered from the terms of the contract – The contract between the surgeon and the hospital was for three years extendable only by mutual consent and his remuneration was described as honorarium – The terms of the contract was one for service, and that with effect from the date on which the contract begins, the surgeon would no longer remain as a regular employee of the hospital, making it clear that his services were no longer be as a regular employee but as an independent professional – Also, there was endorsement IMT-5 which provided personal accidental cover to unnamed passengers other than the insured and his paid driver or cleaner – Additional premium was paid for endorsement IMT which would, therefore, be applicable in the facts of this case, the deceased being one such unnamed passenger – High Court’s order is set aside and the order of tribunal is restored.
Allowing the appeal, the Court
HELD: 1. The intention of the parties is to be gathered from the terms of the contract. The terms of the contract makes it clear that the contract is one for service, and that with effect from the date on which the contract begins, Dr. Gandhi shall no longer remain as a regular employee of the Institute, making it clear that his services are now no longer as a regular employee but as an independent professional. Secondly, the remuneration is described as honorarium, and consistent with the position that Dr. Gandhi is an independent professional working in the Institute in his own right, he gets a share of the spoils. Thirdly, he enters into the agreement on equal terms as the agreement is for three years, extendable only by mutual consent of both the parties. Fourthly, his services cannot be terminated in the usual manner of the other regular employees of the Institute but are terminable on either side by notice. The fact that Dr. Gandhi must devote his entire attention to the Institute would not necessarily lead to the conclusion that de hors all other factors the contract is one of service. Equally important is the fact that it is necessary to state Dr. Gandhi will be governed by the Conduct Rules and by the Leave Rules of the Institute, but by no other Rules and even though the Leave Rules apply to Dr. Gandhi, since he is not a regular employee, he is not entitled to any financial benefit as might be applicable to other regular employees. Equally, arbitration of disputes between Dr. Gandhi and the Institute being referred to the Managing Committee of the Institute would show that they have entered into the contract not as master and servant but as employer and independent professional. A conspectus of all the above would certainly lead to the conclusion, applying the economic reality test, that the contract entered into between the parties is one between an Institute and an independent professional. Even otherwise, it is well-settled that exemption of liability clauses in insurance contracts are to be construed in the case of ambiguity contra proferentum. [Paras 28, 29][65-C-H; 66-A-B]
2. The High Court held in the impugned judgment that as additional premium had been paid so as to attract the applicability of IMT-5, in any case the Insurance Company would be liable under the policy to pay compensation in the case of death to unnamed passengers other than the insured and his paid driver or cleaner, Dr. Alpesh Gandhi being one such unnamed passenger. This was done on the footing that the exception to IMT-5 was that a person in the employ of the insured coming within the scope of the Workmen’s Compensation Act, 1923 is excluded from the cover, but that as Dr. Alpesh Gandhi did not come within the scope of the Workmen’s Compensation Act, compensation payable due to his death in a motor accident would be covered by IMT-5. There is no reason to disturb this finding. Section-II, entitled “liability to third parties” in the insurance policy exempts the insurance company from the death of a person carried in a motor car where such death arises out of and in the course of the employment of such person by the insurer. [Para 34][70-G-H; 71-A-B]
General Assurance Society Ltd. v. Chandumull Jain [1966] 3 SCR 500; United India Insurance Co. Ltd. v. Pushpalaya Printers (2004) 3 SCC 694 : [2004] 2 SCR 631; Export Credit Guarantee Corpn. of India Ltd. v. Garg Sons International (2014) 1 SCC 686 : [2013] 1 SCR 336; BHS Industries v. Export Credit Guarantee Corpn. Ltd. (2015) 9 SCC 414 : [2015] 8 SCR 366; United India Insurance Co. Ltd. v. Orient Treasures (P) Ltd. (2016) 3 SCC 49 : [2016] 1 SCR 1; Industrial Promotion & Investment Corpn. of Orissa Ltd. v. New India Assurance Co. Ltd. (2016) 15 SCC 315
– relied on.
Sarla Verma v. DTC (2009) 6 SCC 121 : [2009] 5 SCR 1098; Dharangadhara Chemical Works Ltd. v. State of Saurashtra [1957] SCR 158; National Insurance Company Limited v. Balakrishnan (2013) 1 SCC 731 : [2012] 12 SCR 565; Chintaman Rao v. State of M.P. [1958] SCR 1340; Birdhichand Sharma v. First Civil Judge [1961] 3 SCR 24; Shankar Balaji Waje v. State of Maharashtra [1962] 1 Suppl. SCR 24; D.C. Dewan Mohideen Sahib and Sons v. Secretary, United Beedi Workers’ Union [1964] 7 SCR 646; Silver Jubilee Tailoring House v. Chief Inspector of Shops & Establishments (1974) 3 SCC 498 : [1974] 1 SCR 747; Hussainbhai v. Alath Factory Thezhilali Union (1978)
4 SCC 257 : [1978] 3 SCR 1073; Shining Tailors v. Industrial Tribunal II, U.P. (1983) 4 SCC 464; P.M. Patel & Sons v. Union of India (1986) 1 SCC 32 : [1985] 3 Suppl. SCR 55; Indian Banks Assn. v. Workmen of Syndicate Bank (2001) 3 SCC 36 : [2001]1 SCR 1011; Indian Overseas Bank v. Workmen (2006) 3 SCC
729 : [2006] 3 SCR 19 – referred to.
E v. English Province of Our Lady of Charity and Anr. 2012 EWCA Civ 938; Lee Ting Sang v. Chung
Chi-Keung [1990] 2 A.C. 374 – referred to.
Halsbury’s Laws of England 5th Edition, Vol. 60 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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