Third-party motor insurance liability stays capped by statute unless the policy clearly extends cover for enhanced risk.

Comprehensive motor insurance and payment of a higher premium for vehicle cover do not, by themselves, enlarge third-party bodily injury liability beyond the statutory limit under Section 95(2)(b) of the Motor Vehicles Act, 1939. In the absence of a specific contractual undertaking and a separate premium for enhanced third-party risk, the policy remains confined to the statutory minimum. Section 96(6) does not prevent the insurer from contending that its liability is limited to that extent, because such a contention concerns the scope of liability rather than an attempt to avoid it. The insurer's liability was therefore restricted to the statutory amount.

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Issues: (i) Whether the insurer's liability for third-party bodily injury claims was confined to the statutory limit under Section 95(2)(b) of the Motor Vehicles Act, 1939, or was enlarged by the terms of the policy. (ii) Whether Section 96(6) of the Motor Vehicles Act, 1939 prevented the insurer from contending that its liability was limited to the statutory amount.

Issue (i): Whether the insurer's liability for third-party bodily injury claims was confined to the statutory limit under Section 95(2)(b) of the Motor Vehicles Act, 1939, or was enlarged by the terms of the policy.

Analysis: The policy was examined to see whether it contained any express undertaking beyond the statutory minimum. The comprehensive nature of the vehicle cover and the higher premium related to damage to the vehicle and related cover, but did not by themselves extend third-party liability beyond the amount required by the statute. In the absence of a specific contractual agreement and separate premium for enhanced third-party risk, the policy clause relating to bodily injury to any person remained tied to the statutory requirement.

Conclusion: The insurer's liability for third-party bodily injury was limited to Rs. 20,000 and did not extend to the higher amount awarded by the High Court.

Issue (ii): Whether Section 96(6) of the Motor Vehicles Act, 1939 prevented the insurer from contending that its liability was limited to the statutory amount.

Analysis: The restriction on defences under Section 96 applies where the insurer seeks to avoid liability. A contention that liability is confined to the extent undertaken under the policy and the statute is not an attempt to avoid liability, but a request for determination of its extent. On that footing, the insurer was entitled to rely on the statutory limit where the policy did not provide for a higher undertaking.

Conclusion: Section 96(6) did not bar the insurer from contending that its liability was restricted to the statutory limit.

Final Conclusion: The award against the insurer was reduced to the statutory limit, while the decree against the driver and owner was maintained and the appeal succeeded only to that extent.

Ratio Decidendi: In motor accident insurance, comprehensive cover and payment of higher premium for the vehicle do not enlarge third-party liability beyond the statutory limit unless the policy specifically provides for enhanced risk and separate premium is paid for that liability.

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