CHAPTER I

INTRODUCTION

With the development of civilization, act of negligence have become actionable

wrong. In the English Law any person or the legal representative of deceased person who
expired on account of negligent act of other can besides instituting criminal proceeding,
recover damages under the Law of Torts. Accountable negligence consist in the neglect of
use of ordinary care or skill towards a person to whom the defendant owes due of observing
ordinary care and skill by which neglect the plaintiff have suffered injury to his person or
property. Thus, negligence accompanied with losses to the other party give rise to an action.

In order to give effective rights to the person injured or expired in an accident, Fatal
Accidents Act, 1885 was enacted in India. This Act provided only a procedure and a right of
named legal heirs to claim compensation from the person committing negligence. This
enactment has worked in India for a comfortable long period. Because of increase in
automation and consequential losses of life and property in accident, it was considered that to
give relief to the victims of accident claims an effective law should be brought in.

To facilitate this, provisions have been inserted for compulsory third party insurance
and to provide a machinery of adjudication of claim in Motor Vehicle Act by amending Act
No.110 of 1956, by which Section 93 to 109 with reference to third party insurance and
Section 110(A) to 110(F) with reference to creation of Motor Accident Claims Tribunal and
procedure for adjudication of claim has been provided. Initially the liability was restricted to
a particular sum but after 1982 the liability of the Insurance Company has been made
unlimited and even the defences of the Insurance Companies have been restricted so as to
ensure payment of compensation to third parties.

In the year 1982 a new concept of providing interim compensation on ‘No Fault’ basis
have been introduced by addition of Section 92(A) to 92(E). By the same amendment, relief
has also been given those persons who expire by hit and run accidents, where the offending
vehicles are not identified.

1
 In 1988 a new Motor Vehicle Act has been introduced and in new Motor Vehicle
Act’s Chapter 10 provides for interim award. Chapter 11 provides for insurance of motor
vehicle against third party risk and Chapter 12 provides for the constitution of Claims
Tribunal and adjudication of claim and related matters. This law is still in an era of serious
changes. Supreme Court has number of times held that this is a welfare legislation and the
interpretation of provision of law is required to be made so as to help the victim.

In this process Supreme Court has passed various judgments in recent past, which
have restricted the statutory defences to the Insurance Company to a greater extent as law
relating to burden of proof have been totally changed. Limited defences as to not holding
valid driving license, use of vehicle for hire and reward, use of transport vehicle for the
purpose not allowed by permit are required to be proved in so stringent manner that insurer
are not getting advantage of these defences.

The motor vehicles act, 1939 provided for compulsory insurance for the loss or damage to the
person on property of the third person when the owner of a motor vehicle is made liable for
the accidents, caused by their drivers on the basis of principle of vicarious liability. The act
was amended from time to time, and by the amendment act 47 of 1982 which came into
effect from October 1, 1982 a new chapter was introduced, Chapter (Section 92A-92E)
creating no fault liability. Later when the original Act was repealed and replaced by Motor
Vehicles Act 1988 the same provisions have been reenacted under Chapter 10 (Section 140-
44) under the head ‘liability without fault in certain cases’.

The original Motor Vehicles Act 1939 was intended to secure speedy and certain remedy for
a third party who suffers a loss or damage by an accident on a public road. In all types of
motor policies there is recital that the insurers promise to indemnify the insurers promise to
indemnify the assured, subject to the terms, expectations and conditions in the policy. Though
the Chapter 8 of the original act 1939 makes motor insurance compulsory and imposes
certain conditions, in other respects it leaves the law of liability and the parties to make their
own bargain. What is covered by the policy is only liability of the owner to third party. The
liability of the owner is again left to be determined by the general law. In law of torts, which
deals with the cases of negligence, the plaintiff to make the defendant liable must show that
there is a breach of duty to take care and even in such cases of negligence, the plaintiff to
make the defendant liable must show that there is breach of duty take care and even in such
cases defences like common employment, volenti non fit injuria, contributory negligence are
2
provided which involve technicalities. Except in the case covered by the rule in Rylands v.
Fletcher called a case of ‘absolute or strict liability’ in all other areas the above defences
which involve technical difficulties like evidentiary difficulty are accepted. To avoid these
difficulties in the liability of an employer to his employee victim, the Workmen
Compensation Act was passed abolishing the above defences making the liability of the
master, the employer, a strict liability case thus rendering him almost an insurer for the safety
of his workmen. Based on that principle, a similar advantage is conferred on the motor
vehicle victim.

Rules of Strict and Absolute Liability are based on the concept of ‘No fault liability’. At
times a person may be held responsible for some wrong though there was no negligence or
intention on his part to do such wrong.

3
 CHAPTER II

LEGAL DEFINITION AND THE CONCEPT OF NO FAULT

LIABILITY

‘Absolute legal responsibility for an injury that can be imposed on the wrongdoer
without proof of carelessness or fault is basically known as ‘No fault or Strict or Absolute
liability’.

Strict liability, sometimes called absolute liability, is the legal responsibility for
damages, or injury, even if the person found strictly liable was not at fault or negligent. Strict
liability has been applied to certain activities in Tort, such as holding an employer absolutely
liable for the torts of her employees, but today it is most commonly associated with
defectively manufactured products. In addition, for reasons of public policy, certain activities
may be conducted only if the person conducting them is willing to insure others against the
harm that results from the risks the activities create.1

Liability that comes out of an exposure that is so onerous that negligence need not be
proven, like Blasting within a city and the keeping of wild animals.2

In Product Liability cases involving injuries caused by manufactured goods, strict

liability has had a major impact on litigation since the 1960s. In 1963, in Greenman v. Yuba
Power Products,3 the California Supreme Court became the first court to adopt strict tort
liability for defective products. Injured plaintiffs have to prove the product caused the harm
but do not have to prove exactly how the manufacturer was careless. Purchasers of the
product, as well as injured guests, bystanders, and others with no direct relationship with the
product may sue for damages caused by the product.

An injured party must prove that the item was defective, that the defect proximately
caused the injury, and that the defect rendered the product unreasonably dangerous. A
1
Available at http://www.thefreedictionary.com, last visited on 10.06.2010 at 7:30pm
2
Available at http://insurance4banks.blogspot.com/2009/02/insurance-terms.html, last visited on 10.06.2010 at
8:00pm.
3
59 Cal. 2d 57, 377 P.2d 897
4
plaintiff may recover damages even if the seller has exercised all possible care in the
preparation and sale of the product.4

In tort law strict liability has traditionally been applied for damages caused by
animals. Because animals are not governed by a conscience and possess great capacity to do
mischief if not restrained, those who keep animals have a duty to restrain them. In most
jurisdictions the general rule is that keepers of all animals, including domesticated ones, are
strictly liable for damage resulting from the Trespass of their animals on the property of
another. Owners of dogs and cats, however, are not liable for their pets' trespasses, unless the
owners have been negligent or unless strict liability is imposed by statute or ordinance.

For purposes of liability for harm other than trespass, the law distinguishes between
domesticated and wild animals. The keeper of domesticated animals, which include dogs,
cats, cattle, sheep, and horses, is strictly liable for the harm they cause only if the keeper had
actual knowledge that the animal had the particular trait or propensity that caused the harm.
The trait must be a potentially harmful one, and the harm must correspond to the knowledge.
In the case of dogs, however, some jurisdictions have enacted statutes that impose absolute
liability for dog bites without requiring knowledge of the dog's viciousness.

Keepers of species that are normally considered "wild" in that region are strictly liable
for the harm these pets cause if they escape, whether or not the animal in question is known
to be dangerous. Because such animals are known to revert to their natural tendencies, they
are considered to be wild no matter how well trained or domesticated.

Strict liability for harm resulting from abnormally dangerous conditions and activities
developed in the late nineteenth century. It will be imposed if the harm results from the
miscarriage of an activity that, though lawful, is unusual, extraordinary, exceptional, or
inappropriate in light of the place and manner in which the activity is conducted. Common
hazardous activities that could result in strict liability include storing explosives or flammable
liquids, blasting, accumulating sewage, and emitting toxic fumes. Although these activities
may be hazardous, they may be appropriate or normal in one location but not another. For
example, storing explosives in quantity will create an unusual and unacceptable risk in the
midst of a large city but not in a remote rural area. If an explosion occurs in the remote area,

4
Ibid
5
strict liability will be imposed only if the explosives were stored in an unusual or abnormal
way.5

Strict liability is a legal doctrine that makes a person responsible for the damage and
loss caused by his/her acts and omissions regardless of culpability (or fault in criminal law
terms, which would normally be expressed through a mens-rea requirement; see Strict
liability (criminal). Strict liability is important in torts (especially product liability),
corporation’s law, and criminal law. For analysis of the pros and cons of strict liability as
applied to product liability, the most important strict liability regime, see product liability.6

In tort law, strict liability is the imposition of liability on a party without a finding of
fault (such as negligence or tortious intent). The plaintiff needs to prove only that the tort
happened and that the defendant was responsible. Strict liability is imposed for legal
infractions that are ‘malum prohibitum’7 rather than malum in se, therefore, neither good faith
5
Id
6
Available at http://thefreedictionary.com/strict+liability, last visited on 10.06.2010 at 7:15pm
7
Malum prohibitum (plural mala prohibita, literal translation: "wrong [as or because] prohibited") is a Latin
phrase used in law to refer to conduct that constitutes a crime only by virtue of statute, as opposed to conduct
evil in and of itself, or malum in se. Conduct that was so clearly violative of society's standards for allowable
conduct that it was illegal under English common law is usually regarded as "malum in se". An offense that is
malum prohibitum, for example, may not appear on the face to directly violate moral standards. The distinction
between these two cases is discussed in State of Washington v. Thaddius X. Anderson (Supreme Court of the
State of Washington, 67826-0, decided August 2000): "Criminal offenses can be broken down into two general
categories -- malum in se and malum prohibitum. The distinction between malum in se and malum prohibitum
offenses is best characterized as follows: a malum in se offense is "naturally evil as adjudged by the sense of a
civilized community," whereas a malum prohibitum offense is wrong only because a statute makes it so. State v.
Horton, 139 N.C. 588, 51 S.E. 945, 946 (1905) "Public welfare offenses" are a subset of malum prohibitum
offenses as they are typically regulatory in nature and often "'result in no direct or immediate injury to person or
property but merely create the danger or probability of it which the law seeks to minimize.' "

In debating the appropriateness of certain offenses or sanctions, one occasionally encounters the suggestion that
conduct should be given more latitude on the theory that it is "merely" malum prohibitum. Some examples of
malum prohibitum that come to mind include parking violations and copyright violations, which are a form of
trespass. Some laws, like tax laws, make ordinary conduct an offense if done without a license, stamp, or other
official permission, and thus qualify as malum prohibitum. On the other hand, licensing is sometimes done for
safety purposes (to prevent untrained drivers' operation of powerful motorized vehicles where the public is at
risk, or to ensure that persons without minimum qualifications are not permitted to practice medicine or act as
architects or sell services as a member of another licensed profession), and to prevent certain frauds or egregious
violations of trust from being too easy; violation of such licensing rules, by virtue of the peril the conduct
creates, arguably prevents such prohibitions from being merely malum prohibitum.

Whether "victimless crime" can be other than malum prohibitum may depend on how strongly one views the
public need of social order, or how seriously one takes the risk of parties exercising over others such influence
that their consent cannot be regarded as genuine (e.g., statutory rape, sale of banned addictive mental-state-
altering substances, etc.). The degree to which one believes individuals should be protected from themselves
often directs one's conclusions regarding whether conduct barred by current law is "merely" malum prohibitum.
Under Anderson it is arguably the case that categorization of offenses varies with the society in which the
judgment is undertaken.
6
nor the fact that the defendant took all possible precautions are valid defences. Strict liability
often applies to those engaged in hazardous or inherently dangerous ventures

Strict liability is sometimes called absolute liability to distinguish those situations

where, although the plaintiff does not have to prove fault, the defendant can raise a defence of
absence of fault.

A classic example of strict liability is the owner of a tiger rehabilitation centre; no

matter how strong the tiger cages are, if an animal escapes and causes damage and injury, the
owner is held liable. Another example is a contractor hiring a demolition subcontractor that
lacks proper insurance. If the subcontractor makes a mistake, the contractor is strictly liable
for any damage that occurs.8

The law imputes strict liability to situations it considers to be inherently dangerous. It

discourages reckless behaviour and needless loss by forcing potential defendants to take
every possible precaution. It also has the effect of simplifying litigation and allowing the
victim to become whole more quickly.

The concept of strict liability is also found in criminal law, though to a lesser extent. Strict
liability often applies to vehicular traffic offenses. In a speeding case, for example, whether
the defendant knew he or she was exceeding the posted speed limit is irrelevant. The
prosecutor would need to prove that the defendant was indeed operating the vehicle in excess
of the speed limit. Strict liability laws can also prevent defendants from raising diminished
mental capacity defences - since intent does not need to be proven.9

CHAPTER III

DEVELOPMENT OF THE CONCEPT OF NO FAULT LIABILITY

8
See Supra Note 4, at P 3.
9
Ibid
7
 In some cases tort law imposes liability on defendants who are neither negligent nor
guilty of intentional wrongdoing. Known as Strict Liability, or liability without fault, this
branch of torts seeks to regulate those activities that are useful and necessary but that create
abnormally dangerous risks to society. These activities include blasting, transporting
hazardous materials, storing dangerous substances, and keeping certain wild animals in
captivity.10

A distinction is sometimes drawn between moral fault and legal fault. Persons who
negligently or intentionally cause injury to others are often considered morally blameworthy
for having failed to live up to a minimal threshold of human conduct. On the other hand, legal
fault is more of an artificial standard of conduct that is created by government for the
protection of society.

The concept of No Fault liability was originated from the case of Rylands v/s.
Fletcher were it was described elaborately. Rylands v. Fletcher11 is a landmark English legal
case in which the Court of the Exchequer Chamber first applied the doctrine of strict liability
for inherently dangerous activities (on appeal by Rylands, the House of Lords confirmed the
previous judgment but restricted the rule to a non-natural user of the land). It established a
rule related to, though arguably distinct from, the tort of nuisance, the tort of cattle trespass,
and the tort of escape of a domesticated animal which was known in scientia to have an
inclination to harm. The so-called Rylands rule has in Australia become absorbed into the
ordinary law of negligence with all the requirements of duty of care, tests of reasonableness
of care, foresee ability, proximity, and considerations of contributory negligence.12

The dispute in Rylands concerned escape of water onto neighboring land. Later cases
in which the Rylands test was applied involved the escape of all manner of wastes and
materials, extending outwards to a broad range of inherently dangerous activities considered
essential to modern life. The application and interpretation of the Rylands rule has been an
important step in the development of legal policy relating to modern industry, risk allocation,
liability and negligence.

10
Available at http://law.jrank.org/pages/10820/Tort-Law-Strict-Liability.html#ixzz0rh0m, last visited on
09.06.2010 at 6:45pm
11
(1868)[1] LR 3 HL 330
12
Available at http://www.encyclopedia/englishcase/rylands.com/1863, last visited on 09.06.2010 at 6:30pm.
8
 Background:

John Rylands constructed a reservoir on land he was renting to supply water to his
steam-powered textile mill. Thomas Fletcher operated mines on nearby land and had tunneled
up to old disused mines which were under the land where Rylands' reservoir was located.
Both parties rented land from Lord Wilton and both were engaged in lawful uses of the land.
The lands were in Lancashire, in an area known for its mines. Rylands employed independent
contractors and engineers to do the work of building the reservoir which was completed in
December 1860. While excavating the construction site, the contractors came across some
disused mine shafts which had been loosely filled with marl and soil. No attempt was made to
seal these shafts. These shafts actually led, via a series of interconnected shafts and tunnels,
into Fletcher's mines and land. Water from Rylands' reservoir flooded into Fletcher's mines
on 11 December 1860, just days after completion of the reservoir and after it had been
partially filled. There had been no excessive rains or local floods. Fletcher sued Rylands.13

The case went through four Courts of increasing status, starting in the local Court of
Liverpool Assizes (Summer Session) in 1861. The Liverpool Court found in favor of the
Plaintiff Fletcher on the basis of trespass and nuisance. Actions in the torts of nuisance and
trespass were only available to those with a legal interest in land. Rylands successfully gained
an order for the matter to be heard by the Court of Exchequer before three judges where the
previous decision was overturned with two judges deciding for the Defendant Rylands. The
decision was based on trespass requiring direct human involvement in the invasion of an
interest (the quiet enjoyment of land), which required intent or negligence, and Rylands had
been engaged in a reasonable and lawful act, with no ill-intent or negligence, and there was
no nuisance as there is nothing offensive to the senses about water. Some legal commentators
interpret this as a case of the victim being the one to bear the cost of the accident. Fletcher
took the matter to the Court of Appeal, being the Exchequer Chamber of six judges, in 1866
(L.R. 1 Ex. 265). The prior decision was overturned in favor of the appellant Fletcher. Justice
Colin Blackburn spoke on behalf of all the judges and said,

"We think that the true rule of law is, that the person who for his own purposes brings
on his lands and collects and keeps there anything likely to do mischief if it escapes, must
keep it at his peril, and, if he does not do so, is prima facie answerable for all the damage
which is the natural consequence of its escape. He can excuse himself by showing that the
13
Ibid
9
escape was owing to the Plaintiff’s default; or perhaps, that the escape was the consequence
of vis major, or the act of God; but as nothing of this sort exits here, it is unnecessary to
inquire what excuse would be sufficient." This ruling relied on the liability for damages to
land available through the tort of cattle trespass and the tort of nuisance, as well as the in
scienter action, injury by a domesticated animal known to have a disposition to injure.14

Rylands appealed to the House of Lords which dismissed the appeal and agreed with
the determination for Fletcher, in 1868 (L.R. 3 H.L. 330). Lord Cairns, in speaking for the
House of Lords, stated their agreement of the rule stated above by Justice Blackburn, but
added a further limitation on liability, which is that the land from which the escape occurs
must have been modified in a way which would be considered non-natural, unusual or
inappropriate. The torts being argued in the case were torts relating to the enjoyment of land,
available to land owners (and lawful land users), and the most available outcomes from
judgment were injunctions to stop the activity and / or payment of damages for injury to land.
Damages for personal injury or economic injury are other legal developments.

The issue before the Court was whether the doctrine of strict liability could be applied
to inherently dangerous activities in the same way is was applied in nuisance and cattle
trespass. Trespass was considered not to be an available cause of action as this requires a
direct invasion of an interest (land, goods or person) by a person, and by 1860, for trespass to
succeed, there was the need to prove culpability in the form of negligence or willful intent.
Fletcher argued that the doctrine of strict liability should be applied, that the peaceful
enjoyment (i.e. interest) in his land had been invaded and Rylands should be liable for the
damages caused by his inherently dangerous activity (that is, collecting a dangerous amount
of water on his land which then "escaped" into the mine). Rylands argued that he was acting
reasonably and lawfully on his land and thus should not be held responsible for a simple
accident which resulted without any negligence or willfulness on his part.15

Ruling:

The Court found in favor of Fletcher and ordered Rylands to pay for all the property
damage to the mine. The Court agreed that Rylands had a duty in maintaining the reservoir

14
Id
15
Id
10
and of being liable for all harm caused by it with broad scope of liability (strict but not
absolute) with the extent of defenses described above by Blackburn J and Lord Cairns.

The issue before the Court was whether the doctrine of strict liability could be applied
to inherently dangerous activities in the same way as was applied in nuisance and cattle
trespass. Trespass was considered not to be an available cause of action as this requires a
direct invasion of an interest (land, goods or person) by a person, and by 1860, for trespass to
succeed, there was the need to prove culpability in the form of negligence or willful intent.
Fletcher argued that the doctrine of strict liability should be applied, that the peaceful
enjoyment (i.e. interest) in his land had been invaded and Rylands should be liable for the
damages caused by his inherently dangerous activity (that is, collecting a dangerous amount
of water on his land which then "escaped" into the mine). Rylands argued that he was acting
reasonably and lawfully on his land and thus should not be held responsible for a simple
accident which resulted without any negligence or willfulness on his part.

Significance:

This case was a major development in modern law and has influenced many
subsequent rulings. The changes in negligence law as a field of torts have in some
jurisdictions incorporated the Rylands rule. In Australia for example, the High Court of
Australia in Burnie Port Authority v General Jones Pty Ltd16 held that the rule in Rylands had
been absorbed into the ordinary law of negligence with all the requirements of duty of care,
tests of reasonableness of care, foresee ability, proximity, and considerations of contributory
negligence.

In Burnie, Mason CJ, Deane, Dawson, Toohey and Gaudron JJ said, the result of the
development of the modern law of negligence has been that ordinary negligence has
encompassed and overlain the territory in which the rule in Rylands v Fletcher operates. Any
case in which an owner or occupier brings onto premises or collects or keeps a "dangerous
substance" in the course of non-natural use of the land will inevitably fall within a category
of case in which a relationship of proximity under ordinary negligence principles will exist
between owner and occupier and someone whose person or property is at risk of physical
injury or damage in the event of the “escape” of the substance.

16
(1994) 179 CLR 520, 120 ALR 42
11
 In his dissent, McHugh J, (at CLR 594; ALR 96) wrote, Rylands v Fletcher has been
“banished from the books”, with Brennan J adding, (at CLR 570; ALR 77) “another conquest
in the imperial expansion of the law of negligence”. McHugh J stated that, “With great
respect to those who hold the contrary view, much more evidence, analysis and argument
than was put before this Court in this case is needed before the Court can properly determine
whether the rule in Rylands v Fletcher should be banished from the books. In the meantime,
we should continue to apply the established rule. ”

In Transco plc v Stockport Metropolitan Borough Council17 the House of Lords

declined to follow the Australian High Court, and reaffirmed the rule and principle
underlying Rylands. In particular, Lord Walker said, “The last observation that I wish to
make about Burnie is on its implicit assumption that the imposition of strict liability is
unnecessary and undesirable if a claim based solely in negligence would lead to the same
outcome. That assumption seems to me, with respect, to overlook the practical implications,
in a case of this sort, of bringing a claim in negligence, perhaps against a powerful corporate
opponent. In such circumstances fairness may require that, instead of the claimant having to
prove his case, the law casts on the defendant the burden of proving act of God, or some other
defense to strict liability.

CHAPTER IV

CONCEPT OF NO FAULT LIABILITY UNDER MOTOR VEHICLES

ACT 1988

In 1988 a new Motor Vehicle Act has been introduced and in new Motor Vehicle
Act’s Chapter 10 provides for interim award. Chapter 11 provides for insurance of motor
vehicle against third party risk and Chapter 12 provides for the constitution of Claims
Tribunal and adjudication of claim and related matters. This law is still in an era of serious
changes. Supreme Court has number of times held that this is a welfare legislation and the
interpretation of provision of law is required to be made so as to help the victim. In this
process Supreme Court has passed various judgments in recent past, which have restricted the
17
(2003) UKHL 61
12
statutory defences to the Insurance Company to a greater extent as law relating to burden of
proof have been totally changed. Limited defences as to not holding valid driving license, use
of vehicle for hire and reward, use of transport vehicle for the purpose not allowed by permit
are required to be proved in so stringent manner that insurer are not getting advantage of
these defences.18

Scheme of Chapter 10 and 11 of Motor Vehicle Act:

Chapter 10 with Sections 140 to 144 provides for interim compensation on ‘No Fault’
Basis. According to this provision Rs. 50,000/- is to be given to the kith and kin of the
deceased and Rs. 25,000/- to the grievously injured victim. The compensation under Section
140 is made payable if prima facie evidence of following is available;

(1) Accident by the offending vehicle;

(2) Offending vehicle being insured;

(3) Death or grievous injuries have been caused.

• Section 140: Liability to pay compensation in certain cases on the principle of no

fault: (1) Where death or permanent disablement of any person has resulted I from an
accident arising out of the use of a motor vehicle or motor vehicles, the 1 owner of the
vehicle shall, or, as the case may be, the owners of the vehicles shall, I jointly and
severally, be liable to pay compensation in respect of such death or disablement in
accordance with the provisions of this section.19

(2) The amount of compensation which shall be payable under sub-section (1) in
respect of the death of any person shall be a fixed sum of 1[fifty thousand rupees] and
the amount of compensation payable under that sub-section in respect of the
permanent disablement of any person shall be a fixed sum of 2[twenty-five thousand
rupees].

(3) In any claim for compensation under sub-section (1), the claimant shall not be
required to plead and establish that the death or permanent disablement in respect of

18
Available at http://www.legalserviceindia.com/motorvehicles/liability/htm, last visited on 20.06.2010 at
11:25am.
19
Available at http://www.vakilno1/bareacts/motorvehiclesact/motor-vehicles-act/htm, last visited on
20.06.2010 at 11:10am.
13
 which the claim has been made was due to any wrongful act, neglect or default of the
owner or owners of the vehicle or vehicles concerned or of any other person.

(4) A claim for compensation under sub-section (1) shall not be defeated by reason of
any wrongful act, neglect or default of the person in respect of whose death or
permanent disablement the claim has been made nor shall the quantum of
compensation recoverable in respect of such death or permanent disablement be
reduced on the basis of the share of such person in the responsibility for such death or
permanent disablement.

(5) Notwithstanding anything contained in sub-section (2) regarding death or bodily

injury to any person, for which the owner of the vehicle is liable to give compensation
for relief, he is also liable to pay compensation under any other law for the time being
in force:

Provided that the amount of such compensation to be given under any other law shall be
reduced from the amount of compensation payable under this section or under section 163A.]

• Section 141 Provisions as to other right to claim compensation for death or

permanent disablement:

(1) The right to claim compensation under section 140 in respect of death or
permanent disablement of any person shall be in addition to 1[any other right, except
the right to claim under the scheme referred to in section 163A (such other right
hereafter] in this section referred to as the right on the principle of fault) to claim
compensation in respect thereof under any other provision of this Act or of any other
law for the time being in force].

(2) A claim for compensation under section 140 in respect of death or permanent
disablement of any person shall be disposed of as expeditiously as possible and where
compensation is claimed in respect of such death or permanent disablement under
section 140 and also in pursuance of any right on (the principle of fault, the claim for
compensation under section 140 shall be disposed of as aforesaid in the first place.20

(3) Notwithstanding anything contained in sub-section (1), where in respect of the

death or permanent disablement of any person, the person liable to pay compensation

20
Ibid
14
 under section 140 is also liable to pay compensation in accordance with the right on
the principle of fault, the person so liable shall pay the first- mentioned compensation
and-

(a) if the amount of the first-mentioned compensation is less than the amount of the
second-mentioned compensation, he shall be liable to pay (in addition to the first-
mentioned compensation) only so much of the second-mentioned compensation as is
equal to the amount by which it exceeds the first mentioned compensation;

(b) if the amount of the first-mentioned compensation is equal to or more than the
amount of the second-mentioned compensation, he shall not be liable to pay the
second-mentioned compensation.

• Section 142 Permanent disablement:

For the purposes of this Chapter, permanent disablement of a person shall be deemed
to have resulted from an accident of the nature referred to in sub-section (1) of section
140 if such person has suffered by reason of the accident, any injury or injuries
involving:-

(a) permanent privation of the sight of either eye or the hearing of either ear, or
privation of any member or joint; or

(b) destruction or permanent impairing of the powers of any member or joint; or

(c) permanent disfiguration of the head or face.

• Section 143 Applicability of Chapter to certain claims under Act 8 of 1923:

The provisions of this Chapter shall also apply in relation to any claim for
compensation in respect of death or permanent disablement of any person under the
Workmen's Compensation Act, 1923 resulting from an accident of the nature referred
to in sub-section (1) of section 140 and for this purpose, the said provisions shall, with
necessary modifications, be deemed to form part of that Act.

• Section 144 Overriding effect:

15
 The provisions of this Chapter shall have effect notwithstanding anything contained in
any other provision of this Act or of any other law for the time being in force.21

Chapter 11 (Section 145 to 164) provides for compulsory third party insurance, which
is required to be taken by every vehicle owner. It has been specified in Section 146(1) that no
person shall use or allow using a motor vehicle in public place unless there is in force a
policy of insurance complying with the requirement of this chapter. Section 147 provides for
the requirement of policy and limit of liability. Every vehicle owner is required to take a
policy covering against any liability which may be incurred by him in respect of death or
bodily injury including owner of goods or his authorized representative carried in the vehicle
or damage to the property of third party and also death or bodily injury to any passenger of a
public service vehicle.22

According to this section the policy not require covering the liability of death or
injuries arising to the employees in the course of employment except to the extent of liability
under Workmen Compensation Act. Under Section 149, the insurer has been statutorily liable
to satisfy the judgment and award against the person insured in respect of third party risk.
Insurance Companies have been allowed no other defence except the following: -

(1) Use of vehicle for hire and reward not permit to ply such vehicle.

(2) For organizing racing and speed testing;

(3) Use of transport vehicle not allowed by permit.

(4) Driver not holding valid driving license or have been disqualified for holding such
license.

(5) Policy taken is void as the same is obtained by non-disclosure of material fact.

Section 163A has been added in this Chapter by amending Act 54 of 1994 w.e.f.
14.11.94 whereby special provision as to payment of compensation on structural formula
basis has been provided. This provision is being introduced to provide compensation to the
third party victims without proving negligence or tortious act. Schedule-II has been appended
to the Act to give such structural formula. Hon'ble Supreme Court has held that award under
Section 163A is final, independent and not in addition of award in claim petition under
21
Id
22
See Supra Note
16
Section 166 where claim is sought on negligence basis. Thus, one can claim compensation in
either of the Section.

Claim Application:

Claim application can be filed under Section 163A for claim to be determined on
structural formula basis provided in Schedule-II. Schedule-II has been adjudged as suffering
from severe mistakes and the Supreme Court has held that total reliance cannot be placed on
this schedule. Further the Schedule do not provide any computation chart for the persons
having more than Rs.40,000/- annual income. Claim petition can also be filed under Section
166 of Motor Vehicle Act pleading negligence where the claim shall be assessed by the Judge
not on the basis of structural formula but on the basis of evidence led.23

The injured or the legal representatives of deceased can file claim application in a
prescribed format making driver, owner and insurer as party. Driver is not a necessary party
in some states. For e.g. in the Rajasthan Motor Accident Claims Tribunal Rules only owner
and insurer are required to be party. No limitation has been prescribed for filing of the claim
application. Initially when the law has come into force the limitation was 6 months which
was later increased to one year and ultimately in the garb of welfare legislation the provision
of limitation has been deleted. In my humble view when there is limitation prescribed for all
type of causes, some limitation of 2 or 3 years must be prescribed for filing of claim
application. It should not be made indefinite, as it will cause serious problems to the
defendant. The procedure has been prescribed as a summary procedure for determining the
compensation.

Accidents arising out of use of Motor Vehicle:

Section 165 provides the form of constitution of Claim Tribunal in adjudging claims
of compensation in respect of accidents involving the death of bodily injury to persons
"arising out of the use of Motor Vehicle". Being welfare legislation the scope of this term
have been widened which includes accident by a stationery vehicle, injuries suffered by
passengers in bomb blast, injuries due to fire in petrol tanker. Murder in a motor vehicle has
also been covered as a motor accident.24

Assessment of Claim:
23
Ibid
24
Id
17
 The assessment of compensation, however, be made good but cannot be said to be
foolproof. In every such assessment certain assumptions are to be made and there is all
possibility of variance from Judge to Judge in applying the various principles enunciated by
the Courts from time to time. Lord Viscount Simon has evolved a method of assessment
known as "Nance's method" more popularly as "discounting method". Another popular
method, which is known as Davis Method was evolved by Lord Wright. 25

Hon'ble Supreme Court while dealing with a matter evolved a formula. Yearly
Income Yearly expenditure on Deceased gives the sum expended on legal representatives. If
this amount is capitalized subject to certain deductions, pecuniary loss to the family can be
assessed. While improving the above formula Supreme Court in CKS Iyer’s case has stated
that there is no exact uniform rule for measuring the value of human life and measure of
damages cannot be arrived at by a mathematical calculation but the amount recoverable
depends upon life expectancy of legal representative beneficiaries.

In the same period Lord Diploc has evolved Interest Capitalization method by
calculating net pecuniary loss on annual basis and multiplied with number of years purchase.
The Hon'ble Supreme Court of India with the development of accident claims has decided the
landmark case of Susamma Thomas has started giving appreciation to the annual income of
deceased. This appreciation ranges to the double of income depending upon the nature of job,
age, future prospects etc. Supreme Court has held that after determining and doubling annual
income, 1/3 should be deducted towards the expenses to be incurred on the deceased and the
remaining amount should be multiplied by a multiplier depending on the age of deceased and
beneficiary. The maximum multiplier approved by Supreme Court in this case was 16. Later,
Supreme Court's 3 Judges Bench have approved the Davis formula along with determination
of dependency on unit basis in which the adults have been taken as 2 units and the minors has
been taken as 1 unit. The multiplier, which was approved as 16 in Sushma Thomas case, was
increased to maximum of 18. In this case the court did not allow double of the amount except
that a premium may be given looking to the future prospects.

But, in a recent Supreme Court judgment, in order to make compensation just and to
take consideration of overall factors multiplier was reduced from 16 to 12 in case of deceased
of 38 years. In same facts and circumstances, in another case Supreme Court has said for
determination of multiplier depends upon (1) age of deceased (2) age of claimants (3) marital

25
Id
18
status (4) education and employment of the claimants; and (5) loss of pecuniary benefits. The
Supreme Court has also held that criteria of awarding compensation include some guess
work; some hypothetical consideration and some amount of sympathy linked with the nature
of disability caused are all involved. But, all such elements are required to be viewed with the
objective standard.

In view of the above case laws, one can say that the assessment of compensation is to
be guided by way of applying precedents on the facts and circumstances of a particular case.
It should not be misunderstood that an injured or legal representatives of the deceased should
be given exorbitant claim, but the law restrict them to be "just compensation" so as to save
the injured or legal representatives of deceased from possible pecuniary and non-pecuniary
losses guided by the above judgments.

Legal defence available to the Insurance Companies towards third party:

The Insurance Company cannot avoid the liability except on the grounds and not any
other ground, which have been provided in Section 149(2). In recent time, Supreme Court
while dealing with the provisions of Motor Vehicle Act has held that even if the defence has
been pleaded and proved by the Insurance Company, they are not absolve from liability to
make payment to the third party but can receive such amount from the owner insured. The
courts one after one have held that the burden of proving availability of defence is on
Insurance Company and Insurance Company has not only to lead evidence as to breach of
condition of policy or violation of provisions of Section 149(2) but has to prove also that
such act happens with the connivance or knowledge of the owner. If knowledge or
connivance has not been proved, the Insurance Company shall remain liable even if defence
is available.26

26
Id
19
 CHAPTER V

CASE LAWS UNDER NO FAULT LIABILITY

There are many judicial pronouncements which give some important directions regarding this
matter of ‘No fault liability’. Some of those important pronouncements have been given
below.

Gleen v. Margeton & Co. (1893) Lord Halsbury Ld. C.J says “It seems to me that in
construing this document, which is a contract of carriage between the parties, one must in the
first instance look at the whole of the instrument and not at one part of it only. Looking at the
whole of the instrument, and seeing what one must regard, for a reason which I will give in a
moment, as its main purpose, one must reject words, indeed whole provisions, if they are
inconsistent with what one assumes to be the main purpose of the contract”. Although this
role playing a development of doctrine of fundamental breach, the continued validity of the
rule was acknowledged when the doctrine was rejected by the House of Lords in Suisse
Atlantyee Societed Maritime S.A v. N.V.Rotterdamsche Kolen Contrale.

Accordingly, wide exclusion classes shall be read down to the extent to which they are in
consistent with the main purpose or object of the contract.

20
Northern India General Insurance Co. Ltd v. Kanwarjit Singh Sodhi 27, owner driver
transferee and insurance company- four people involved. A truck was acquired by Ram
Prakash Thukral, it was registered on May 5, 1965. The vehicle was sold to Gopal Das
(transferee) effected an insurance policy on May 3, 1968 to May 2, 1969.

Accident took place on October 21, 1968. Truck was transporting material belonging to Ram
Prakash Thukral. It collided with a scoter and the scooterist’s leg had to be imputed.ha made
a claim of Rs. 2 lakhs.

The victims quoted the names of Thukhral, Gopal Das and Ram Dayal (who drove the
vehicle) in the proceedings three defences were pleaded:

a) Thukral pleads no liability as he was not the owner of the vehicle.

b) Gopal Das admitted that he happened to be the sole owner of the vehicle and the
driver also admitted that he drove the vehicle.

c) All three alleged persons pleaded that the victims were negligent and not themselves
and hence no compensation needs to be paid.

The insurer contends that policy was void ab initio, as the correct ownership was concealed
and the facts that the vehicle had met with an accident in the past years and that the driver
had been convicted was also concealed. The third plea is that the insurance policy was lapsed
because of the transfer of vehicle from Thukral to Gopal Das.

Ostensible ownership: a person is not the owner of a property but he appears to be the
owner. The MACT decided that Thukral and Gopal Das were both owners and insurers are
liable to compensation of Rs. 20,000/- as per policy. The insurers made an appeal to High
Court. The other issues were neglected by compromise between victims and the respondents.

The only issue before High Court was whether the insurance company is liable to pay Rs.
20,000? The owner of the vehicle alone or any person who uses it having been allowed by the
owner to use it can have an insurable interest to effect the insurance policy on the Motor
Vehicle so used, covering the risk of injury caused in an accident by use of the vehicle
insured. The insurance contract was vitiated and the policy being rendered void by non-
disclose of material facts, which are false in material particulars.

27
AIR 1973 All 357
21
The insurance company on the other hand contends that was wageing contract between
Thukral and Gopal Das.

Finally the High Court held that Insurance Company is liable as the policy is in currency
hence it was effected by Gopal Das. Unless rebutted the presumption remains that the
Insurance company is liable.

Prakash v. Amritlal and ors.28 Appeal filled ny the owner. Claimant met with an accident
with an accident on April 22, 1991 at %.30 pm. Truck was owned by Resp 1. Resp 2 was the
driver Resp 3 is the insurance company.

The High Court observed that it is the Insurance policy and not the Cover note which
determines the rights and liabilities of the parties. The MP High Court allowed the appeal and
held that the insurer is also equally liable as the Respondent 1 and 2.

As regards, enhancement of compensation the same is not a question of law but a discretion
of court on the basis of evidence. The High Court on the basis of evidence enhanced the
compensation to Rs. 1 lakh.

28
(1997 (I) ACC 502)
22
CHAPTER VI

CONCLUSION AND SUGGESTIONS

The law of accident claims is fast growing and the amendments to suit the requirement of the
object are necessitated but at the same time interest of those should be watched who are
disbursing the compensation i.e. Insurance Companies. Without affording them right to
contest, imposing liability to make payment cannot be approved by law. Section 170 provides
for seeking permission but this provision can be misused by the owners and claimants in
collusion. Presently because of increasing scale of compensations almost 10 to 15% or even
more cases presented to the Claim Tribunals are fake or the other accidents have been
converted into road accidents with connivance of the police authorities. It is necessary that
while increasing the burden of the Insurance Companies they must get a right of proper
contest to mitigate fake cases and also the quantum.

The time is matured for bringing legislation for award of the fixed compensations as in case
of rail or airways. A person dying in rail accident cannot get beyond Rs. 4 lakh but a person
dying in road accident can get Rs.4 crore. The payment of compensation based on the vehicle
is not reasonable and a structural basis compensation formula without reference to income or
age may be brought in so that each and everybody can get compensation of their life
irrespective of his poverty or richness. A Scheme should be formulated with the State Police
Authorities and the Insurance Companies by which the Insurance Company must know
immediately after happening of accident and can make necessary investigations. Insurance
Company comes in picture when the claim petition is filed and by that time the evidence can
be created to convert the non-accident into accident and also on quantum. The intention of
legislation is to provide just compensation and not exorbitant compensation. This should
always be kept in mind.

23
24