Summary and Analysis of Shyam Lal vs Shriram General Insurance Co Ltd 2025 INSC 1078

1. Heading of the Judgment

Case Title: Civil Appeal Nos. 5177-81 of 2022
Parties: Shyam Lal (Appellant - Vehicle Owner) versus Shriram General Insurance Co. Ltd. and Others (Respondents)
Court: Supreme Court of India
Bench: Hon'ble Mr. Justice K. Vinod Chandran and Hon'ble Mr. Justice N.V. Anjaria
Date of Judgment: September 4, 2025
Citation: 2025 INSC 1078

2. Related Laws and Sections

The judgment interprets and applies provisions from the following legal framework:

• Motor Vehicles Act, 1988:
  Section 2(7): Defines a "contract carriage" as a motor vehicle which carries passengers for hire or reward under a contract, including a motor cab.
  Section 2(14): Defines a "goods carriage" as a motor vehicle constructed or adapted for use solely for the carriage of goods.

• Insurance Law: The case revolves around the interpretation of an insurance policy, specifically the "Limitation as to Use" clause typically found in policies for goods vehicles, which restricts the carriage of passengers.

3. Basic Judgment Details

This appeal was filed by the owner of a utility vehicle involved in a fatal accident. The accident led to the filing of five claim petitions before the Motor Accident Claims Tribunal (MACT). The insurer denied liability based on a "Limitation as to Use" clause in the policy. The MACT held the insurer liable, but the High Court, in an appeal filed by the insurance company, modified this order and directed "pay and recover" (meaning the insurance company had to pay the claimants but could later recover the amount from the vehicle owner).

The vehicle owner appealed to the Supreme Court against this "pay and recover" order, arguing that the insurance company was fully liable and that the clause did not apply to his vehicle.

4. Explanation of the Judgment

The Core Dispute

The central legal issue was whether the insurance company could legally avoid its liability to pay the compensation claims. The insurer's defense rested on a "Limitation as to Use" clause in the policy, which stipulated that the insurance cover was valid only if the vehicle was used for the "carriage of goods." The insurer argued that since the deceased were passengers and not goods, this clause was violated, freeing them from their obligation to pay.

The appellant (vehicle owner) contended that his vehicle was not a "goods carriage" but a "utility vehicle" registered and permitted to carry both goods and passengers. Therefore, the restrictive clause did not apply.

Supreme Court's Analysis and Findings

The Supreme Court allowed the owner's appeal, set aside the High Court's "pay and recover" order, and restored the MACT's order holding the insurance company fully liable. The Court's reasoning was based on a meticulous examination of the facts and documents:

1. Classification of the Vehicle: The Court first determined the fundamental nature of the vehicle. It examined three key documents:
   Certificate of Registration (Annexure P1): This document clearly classified the vehicle as a "Utility Van" with a seating capacity of 5 (4+1, including the driver).
   Contract Carriage Permit (Annexure P2): The permit issued by the transport authority authorized the vehicle to operate as a "contract carriage" (as defined under Section 2(7) of the MV Act) to carry up to 5 passengers for hire.
   Package Policy (Annexure P3): The insurance policy itself described the vehicle's make/model (Mahindra Bolero Camper Utility) and explicitly noted its seating capacity as "4+1".The Court emphasized the legal distinction between a "goods carriage" (solely for goods) and a "utility vehicle" (for both passengers and goods). It concluded that the vehicle was unequivocally a utility van, not a goods vehicle.

2. Interpretation of the "Limitation as to Use" Clause: The Court held that the restrictive clause in the policy, which applied only to "carriage of goods," was meant for goods carriages. Since the insured vehicle was a utility vehicle with a valid contract carriage permit to carry passengers, this clause was irrelevant and inapplicable. The insurance company, having issued a policy after inspecting the registration certificate and permit, could not later use this clause to deny a claim for carrying passengers—an activity the vehicle was legally built, registered, and permitted for.

3. Evidence from the Insurance Company's Witness: The Court found the testimony of the insurance company's Branch Manager (Annexure P6) to be crucial and self-defeating for the insurer. The witness admitted that:
   The policy was issued after reviewing the vehicle's registration certificate and permit.
   The vehicle was registered as a "Utility Van."
   A utility van is designed with half the portion for carrying goods and the front half for carrying passengers.
   These admissions destroyed the insurance company's case and confirmed that the vehicle was never intended to be insured as a pure goods carrier.

4. Facts of the Accident: The insurer argued that since five claim petitions were filed, it proved the vehicle was carrying more than its permitted capacity of four passengers, indicating "overloading." The Supreme Court rejected this argument. It relied on the MACT's finding, based on eyewitness testimony (PW2), that the vehicle had only four passengers at the time of the accident. The fifth claimant was a pedestrian who was dragged into the accident. The insurance company had not challenged this evidence during cross-examination.

Supreme Court's Directions

• The Supreme Court allowed the appeals filed by the vehicle owner.

• The impugned judgment of the High Court ordering "pay and recover" was set aside.

• The order of the MACT, which directed the insurance company to indemnify the owner and pay the compensation to the claimants, was restored.

• The insurance company was directed to satisfy the awarded compensation amounts fully.

A Note on One Specific Claim

The Court also addressed a specific issue in one of the claim petitions (MACT Case No. 134 of 2014 related to the death of Jagdish Prasad Gaur). The insurer had argued before the High Court that the Tribunal had failed to deduct one-third of the deceased's income for personal expenses, a standard calculation in compensation awards. Since the Tribunal's order was not produced before the Supreme Court, it could not verify this. However, in the interest of ensuring "just compensation," the Supreme Court directed that upon disbursement, the Tribunal must ensure this one-third deduction is made from the computed loss of income for that specific case.