1-Introduction
On 13/09/2014, Ministry of Road Transport and Highways, Government of India, uploaded the draft “Road Transport and Safety Bill, 2014 on its website inviting response from the public in general and its stake holder in particular.
1-1-Background- During UPA regime, efforts had been made to amend the M V Act, 1988. Accordingly, the M V Amendment Bill, 2007 was passed through various stages of legislation. It was referred to the Statutory Standing Committee headed by Mr. Sitaram Yetchuri, MP, followed by further reference to a Special committee headed by Mr. Sundar, after passage of the Bill in Upper House. However, before the bill was passed in the Lok Sabha, the UPA Government was defeated in the election. With this the bill was also come to an end.
1-2-Proximate cause for the Draft Bill- Unfortunately, just before the newly formed ministry can take oath, Mr. Gopinath Munde, Cabinet Minister, designate, died following a tragic road accident on 03/06/2014. The sudden demise of a Cabinet Minister designate forced the newly elected Government to ponder about the adequacy of the existing Law on road transport and its safety. Accordingly, the Government prepared and uploaded draft “Road Transport and Safety Bill, 2014”.
1-3-Objective- The basic objective of the Draft Bill as highlighted are;
‘An Act to provide a scientifically planned and evolving framework for the safety of all road users in India, including vulnerable road user and for enabling the seamless development of a secure, efficient, cost-effective, sustainable and inclusive transport system for the movement of passenger and freight in the country as well as matters connected therewith or incidental thereto.
2-Arrangement of the provisions
- Complete deletion of ‘Chapter -X’ (S. 140 to 144) relating to “Claims under No-Fault liability”, S. 159 and 163-B and Second Schedule of the M. V. Act, 1988, from the Draft Bill.
- Merger of the provisions of S.150 with S. 154 of the M V Act, 1988 in S. 234 of the draft bill and S.161 with 163 of the M. V. Act, 1988 in S.244 of the draft bill
- Insertion of new sub-sections such as 230(2), 236(2), 249(j), (k) and (l), 250(2), 251(4) to (11), 253(2) and Sections 232, 242, 245, 248, 255, 256, 257and 258 besides substitution and changes in the existing provisions.
3- Important changes in the draft bill.
i. Deletion of the provisions relating to No-Fault liability
ii. Deletion of compulsory coverage to driver, conductor or ticket examiner in public service vehicle and workman being carried in the goods vehicle.
iii. Deletion of the power to override in M V Act, 1988 in case of conflict with other law.
iv. Insertion and or changes in important definitions such as “Goods, Property, Passenger, Goods vehicle, Transport vehicle etc.”
v. Unlimited Third party property damage.
vi. Inclusion of coverage to the passenger in ‘Transport Vehicle’.
vii. Detailed Procedure for converting the Police Report into application for payment of compensation.
viii. Additional power for enforcement of the Tribunal award by way of attachment of the bank account.
ix. Creation of new funds (i) to provide treatment to the victims during ‘Golden Hour’ and (ii) Motor Accident fund to provide compulsory insurance to victims of road accident.
x. Creation of National Authority.
4- Deletion of Chapter-X -Section 140 to 144- No Fault Liability-of the old Act
4-1-Impact on insurer- In view of the mandate in Chapter-X of the old Act, insurer was bound to pay Rs. 50000/- and Rs.25000/- respectively as compensation in case of death or permanent disablement as an interim measure based on the principle of No-Fault liability. Since the amount required to be paid at the inception, without going into the merit of the case, many times, insurer was forced to pay the award even in cases where it had no liability under the law. Moreover awards paid under this chapter was subject to adjustment against the final award only in case higher compensation is payable but it is non-refundable and not subject to recovery in case the claim is not payable or payable for a lesser amount. Now with the deletion of the said chapter, the insurer was relieved from the liability of paying the amount under no-fault liability.
4-2-Impact on Society- However, from the society point of view, deletion of Chapter-X of the old Act may prove to be disastrous for the poor accident victims. Payment of interim compensation to the legal heirs of victim was in no way less than providing treatment to an injured during golden hour. Because even though the treatment given to the injured during golden hour may not ensure complete cure but it can definitely minimize the gravity of the injury. Similarly, payment of interim compensation soon after the death of the bread-earner comes as a solace to the entire family. This small amount of money used to bring back many poor families into the track of life, derailed due to the sudden demise of the bread-earner. Such interim payment has enabled many poor people to face the difficulties crops up followed by a tragic death of a family member, without which they would have been left as destitute in the street. Since the amount was awarded based on the principle of no-fault liability without provision of recovery, many victims could manage to get some compensation without any technical or legal impediment, even when the claim is barred under normal circumstances. Deletion of such benevolent chapter meant for the poor, downtrodden and have-nots without providing any alternative will put them into a precarious situation. With this draft bill they have no option but to wait and watch till the award was passed, paid and received
4-3-Analysis-It appears that the chapter was deleted in anticipation that henceforth awards will be passed and compensation will be paid more expeditiously at best within a period of 6 month based on the police report. But even effective functioning of the system is no substitute for the deleted chapter mainly for two reasons. First, the system will not ensure timely payment of compensation in cases, where the claim is contested. Secondly, whether the award was based on police report or by way of application, the same will be subject to the principle of fault liability, where victim’s eligibility depends upon his ability to prove the fault. In case of failure, the victim will not be entitled for any compensation. Whereas, the earlier proviso enabling the victims to receive at least some amount of compensation based on no-fault liability, even when he is unable to prove fault. Now in the absence of such an enabling provision in the draft bill similar to Chapter-X, the Tribunal cannot pass such order.
5-Importance of S.147 and S. 149 of the old Act corresponding to S.230 and 233 of the draft bill.
S. 147 and 149 of the old Act corresponding to S.230 and 233 of the draft bill was considered to be the life line of the insurer in India, so far Motor third party insurance is concerned. While the former decide the liability of the insurer, the later dictates the duties of the insurer towards third party. Infact this two provisions are the pivot around which the entire spectrum of third party insurance system and compensation to the road accident victims revolves. Therefore, any deviation will affect all the stakeholders, be it insurer or a victim to considerable extent. Hence the corresponding provision in the draft bill requires special emphasis on these two provisions.
5-1-Scope and coverage of the S. 147 under old Act – In nutshell S.147 of the old Act provides compulsory coverage for the followings;
1. For personal injury and death
2. For damage to third party property.
(While there is no upper limit on the amount of compensation for personal injury or death in concerned, the amount of compensation for third party property damage was limited to Rs. 6000/-.)
So far as the persons required to be covered compulsorily under the Act, the same is categorized as under;
1. Any person who was not using the vehicle that caused the accident in any manner at the time of accident, such as pedestrian.
2. (a) So far as persons using the vehicle that caused the accident are concerned, the following persons are covered.
(i)Driver engaged in driving the vehicle.
(ii) Owner of goods or his authorized representative carried in the vehicle.
(b)In case the vehicle is a public service vehicle,
(i)Passengers carried in the vehicle
(ii)Conductor or ticket examiner engaged in the vehicle.
(c)In case the vehicle is a goods vehicle, workmen carried in the said vehicle.
5-2- Liability under S. 147 of the old Act- So far as liability for the compulsory coverage for persons noted above in para 1, 2(a)(ii) and 2(b)(i) the same was based on the M V Act, 1988, whereas for persons noted in para 2(a)(i), 2(b)(ii) and 2(c) was as per W C Act, 1923.
5-3-Changes in S. 230 of the draft bill corresponding to S. 147 of the old act- Various changes effected in S.230 of the draft bill by way of insertion, deletion, and substitution will have far reaching effect more particularly liability of the insurer towards third party property damage and personal injury or death cases.
5-4-Liability of the insurer for third party property damage after the changes in the draft bill- With the deletion of the words ‘to the extent specified in sub-sec. (2)’ as existed in Section 147(1) (b) of the old Act’ in the corresponding provision of the draft bill, insurers statutory liability for third party property damage is no more restricted to Rs. 6000/-and the same will be unlimited just like compensation for personal injury or death cases.
5-4-1- Change in the definition of Goods in the draft bill- To give wider scope and coverage to third party property damage the draft bill changed and widened the definition of goods in Ss. 3(11) to include even motor vehicle being transferred on another motor vehicle, besides any kind of movable property and includes live stock but does not include persons and their personal effect.
5-4-2-Analysis of changes relating to unlimited third party property damage – In many parts of the world, property damage was not even a part of compulsory coverage. Few countries those who offered also assume limited liability. There may be hardly any nation offering compulsory insurance covering unlimited third party property damage. Hence the change is not as per international best practice.
5-5- Liability of the insurer for personal injury and or death in the draft bill-
5-5-1- Exclusion of compulsory coverage to driver, conductor and workman under W C act, 1923 – So far as the liability of the insurer for personal injury and or death is concerned, with the deletion of Ss. 147(1)(i) and (ii) of the M V Act, 1988, and the changes made in its corresponding Section of the draft bill, the following persons will be barred from compulsory coverage.
(i)Driver engaged in driving the vehicle.
(ii) Conductor or ticket examiner engaged in public service vehicle.
(iii) In case the vehicle is a goods vehicle, workmen carried in the said vehicle.
5-5-2-Extension of compulsory coverage to passengers travelling in Transport vehicle – Under the old Act compulsory coverage was extended only to the passengers carried in the Public Service Vehicle. But Ss. 230(1) (c) of the draft bill extended the compulsory coverage to passenger travelling in Transport vehicle in place limiting the same to the passengers travelling in public service vehicle as provided in the old Act.
5-5-3-Assessment of the changes – In order to know the implication of the changes, it is necessary to know the definition of ‘passenger in transport vehicle”. The term ‘passenger in transport vehicle’ is a combination of two different words (1) Passenger (2) Transport vehicle and both the words are defined under the draft bill as under;
5-5-4-Definition of Passenger – Ss. 3(25) of the draft bill- ‘Passenger’ means a person who travel in a vehicle but bear little or no responsibility for the tasks required for that vehicle to arrive at its destination or otherwise operate the vehicle. Point to be noted that no such definition was exist in the old act.
5-5-5-Definition of Transport Vehicle – Ss. 3(42) draft bill-‘Transport vehicle’ means a motor vehicle used for the carriage of passengers for hire and reward, or goods vehicle or a trailer, or a semi-trailer or machinery but does not include private service vehicle.” Whereas ‘transport vehicle’ was defined in Ss. 2(47) of the old Act means a public service vehicle, a goods carriage, an educational institution bus or a private service vehicle.
5-5-6-Change in the definition relating to vehicles used to carry goods – Difference between ‘goods vehicle’ and ‘goods carriage’-Since the definition of transport vehicle includes a ‘goods vehicle’ it is necessary to know the definition of the same. Under M V Act, 1939 vehicles constructed, adapted and used to carry goods are referred to as ‘goods vehicle’. But in the M V Act, 1988 the term ‘goods vehicle’ was replaced as ‘goods carriage’. The basic difference between these two terms are that while the ‘goods vehicle’ was constructed, adapted and used for carriage of goods, the term ‘goods carriage’ was defined as a vehicle constructed, adapted and used solely for carriage of goods The addition of the word ‘solely’ in the definition of ‘goods carriage’ considered by the Court to held that any person travelling in a goods carriage is not covered since it is meant solely for carriage of goods. To overcome the same, the legislature in the draft bill used the old term and rechristened the vehicle used to carry goods as ‘goods vehicle’ instead of ‘goods carriage’
5-5-7-Implication as to the liability of insurer with the change – While, based on the definition of Public Service Vehicle in Ss. 2(25) of the old act liability of the Insurer was limited to the passengers travelling in vehicles such as Stage carriage, Contract Carriage, Taxi, Auto-rickshaw etc. But now with the change in the draft bill, scope of the compulsory coverage will be extended even to the passengers travelling in goods vehicle, as well as in trailer, semi-trailer and machinery in addition to the traditional coverage of the passengers travelling in public service vehicle.
In view of the changes noted herein above now the insurer will held liable to pay compensation even to the gratuitous passenger, passengers or occupants carried in the goods vehicle, trailer, semi trailer and machineries besides passengers in public service vehicle.
5-5-8-Observation on proposed change in liability of insurer in case of personal injury or death in the draft bill – So far as personal injury or death is concerned, As of now the insurer required to provide compulsory coverage only to passengers travelling in all kinds of ‘Public Service’ Vehicle’.
Extending the same to all the passengers in ‘Transport vehicle’ will mean that any person travelling even in a goods carriage as a passenger will be covered, which is clear cut violation of the proviso in Sss.149 (2)(i)(b) & (d) of the old Act corresponding to Sss.233(2)(b)(d) of the draft bill, which specifically bar a vehicle to be used for hire and reward when the vehicle was not permitted to do so and using the vehicle for a purpose not so authorized by the permit in case the vehicle was transport vehicle. The same is also contrary to the definition of ‘Goods Carriage’ also against the spirit of Rule 28 of the Rules of Road Regulation, 1989 prohibiting carriage of passengers in Tractor and goods vehicle
5-5-9- Suggestion- It is therefore submitted, that the changes in the proviso should be seen as a whole. The proposed changes not only include persons not included earlier but also exclude persons included earlier. Moreover proposed changes in the Act is contrary to the main principles of the Act noted above. Therefore S 230 of the Draft Bill need to be suitably amended and redrafted in consultation with the Ministry or in alternate the earlier proviso may be restored. The present changes if allowed will open a Pandora box for the industry in future.
5-6-Impact due to the insertion of the new Ss.230 (2) in the draft bill – Insertion of Proviso Ss.230 (2) in the Draft Bill will now empower the Central Government to decide and determine the minimum premium with maximum liability in Motor Third party Insurance in consultation with IRDA. This provision speaks loudly about the intention of the Government so far as third party insurance is concerned. This is going to be the yardstick to determine the intend and purpose of the legislation.
5-7- Impact due to deletion of Ss. 147 (5) of the old Act – Deletion of the word ‘notwithstanding anything contained in any law for the time being in force’ in Ss 147 (5) of the old Act corresponding to Ss. 230(4) of the Draft Bill (which should be read as Ss. 230 (5) of the Draft Bill). This is the source of power for the M V Act to override the provisions of any other law.
Take for example; When there is a dispute about the overriding effect of two different set of law like a claim under M V Act,1988 hit by S.64 VB of the Insurance Act,1938, as usually happen in cheque dishonor cases, the above wordings enables the MV Act, 1988 to override S.64 VB of the Insurance,1938 Act. But with the deletion of the proviso the M V Act, 1988 is no more empowered to override the provisions of other Act in case of conflict.
6-Importance of S. 149 of the old Act corresponding to S. 233 of the draft bill
This proviso relates to the duty of the insurer to satisfy the awards. Also provides the statutory defences available to insurer and the grounds based on which the insurer can avoid its liability. Therefore, this provision was referred to be the other life line of the insurer’s liability.
6-1- Changes in Section 149 of the old Act corresponding to Ss. 233(4) of the Draft Bill – Ss. 233(4) of the Draft Bill restricts the liability of the insurer by way of reference to condition in Sss. 233(2)(b) of the draft bill. Sss. 233(2) (b) of the draft bill denotes to only one of the defences available to the insurer and not all the statutory defences since the same was enumerated in Sss. 233 (2) (a), (c), (d), (e) and(f ) of the draft bill. It appears that the same is reproduced from the corresponding provision in Sss. 149(2)(b) of the old Act.
6-1-1- Importance of cross reference of the Sections and sub-sections – Change of sub-section numbers more particularly at Ss. 233 (2)(a) onwards in the draft bill corresponding to Ss.149(2)(a)(i)(a) of the old Act need special consideration, since the same will be the deciding factor to fix insurer’s liability. Inadvertam reproduction of sub-section number from one Act to another creates lots of confusion more particularly when one Act is repealed and replaced by another Act and its corresponding change in number of Section in the new Act.
Problem of such nature was encountered earlier with the reproduction of Ss. 96(3) M V Act, 1939 as Ss.149(4) of M V Act, 1988. Ss. 96(3) of M V Act, 1939 as well as its corresponding Ss.149(4) M V Act, 1988 restricts the liability of the insurer by way of reference to the conditions in Sss. 96(2)(b) M V Act, 1939 and Sss. 149(2)(b) of M V Act, 1988.
Point to be noted here that while Sss. 96(2)(b) M V Act,1939 comprises of all the statutory defences available to the insurer under the Act, its corresponding proviso Sss. 149(2)(b) covers only one of the defence relating to non-disclosure of material fact or disclosure of a fact which was false, and placed rest of the defences under Sss. 149(2)(1)(a)M V Act, 1988.
As a result of which the insurer was made liable to pay under M V Act, 1988 even after proving the statutory defences available under the Act on the premises that exemption provided in the proviso was limited only to the defence under Sss. 149(2)(b) while actual and material defences are enumerated under Sss. 149(2)(1)(a). However, in such case insurer is liable to pay and then recover
6-3-Observation on the changes in S. 233 of the draft bill. In the draft bill the same mistake appears to have been repeated. The most conspicuous changes in Sss.233(2)(b) of the draft bill, will have far reaching consequences unless amended suitably. Since the same is subsequently referred in Ss.233(4) of the draft bill as the sole condition that will exonerate the insurer from the liability, thereby taking away all other defenses available to Insurer such as driving licence, permit provided in Sss.233(2)(c),(d),(e) and (f) of the draft Bill.
In this manner the insurer will be liable to pay even after proving the statutory defenses available to it u/Sss. 233(2)(c),(d),(e) and (f), and then recover, which was never the intention of the legislature as the same is in contrary to express provision of the Act.
6-4- Suggestion – On a con-joint reading of the changes in Ss. 147 and 149 of the old act, corresponding to Ss, 230 and 233 of the draft bill, leaves without any doubt that the same will have a serious repercussion on the Insurance Industry unless amended suitably.
7-Creation of two more new funds in addition to the existing ‘Solatium Scheme
The draft bill proposes to create three different funds as under;
(1)Solatium Fund for payment of compensation to the hit and run accident victims (S.s 244(4) draft bill) (Existing in the old act)
(2)Fund to provide treatment to the road accident victims during Golden Hour.(Ss. 245(2) draft bill) (New)
(3)Motor accident fund to provide compulsory insurance cover to all road user in India (S.248 draft bill)
7-1. Implication of the change – In view of the above the insurance companies in India will be required to contribute to all the funds, noted above, which may add to their outgo. Earlier insurance companies in India used to contribute only to the Solatium Fund. However, contribution of insurer towards treatment of the victims during Golden Hour will help in minimizing the gravity of the injury, which will ultimately reduce the overall liability of the insurer. So this is a win-win situation for all.
8-Insertion of new sub-sections in the draft bill and its impact
The draft bill inserted some of the new sub-sections as noted above but most of the same may not have any adverse impact on the insurer.
9-Insertion of new Sections
The new provisions noted above relates to followings;
S. 232-Duties of the Insurance Company.
S. 242- Procedure for investigation
S. 245-Special provision as to treatment of road accident victims during golden hour.
S. 248-Motor Accident Fund
S. 255-Judgment and award of compensation
S. 256- Settlement of claims outside of claims tribunal
S. 257- Enforcement of awards of the claims tribunal
S. 258-Register
10- Changes due to insertion of new Sections
10-1- Detailed Procedure for adjudication of claims based on police report and its implication-So far as the addition of the new Sections noted above were concerned, S.232, 242, 255, and 258 relates to the additional procedure aspects prescribed for adjudication of claims filed in pursuance to filing of Detailed Accident Information Report.
Here it may be noted that though the procedures prescribed in the above provisions are new to the Act, but the same was prevailing and was in operation in the NCR Delhi through “The Claims Tribunal Agreed Procedure”, enacted and adopted in consultation with all the insurance companies. All the above provisions are similar in sum and substance to the same. In fact there is nothing new in it. Now instead of restricting the same to NCR Delhi, the same will be extended all over India.
10-2-Detailed Procedure about creation of fund to provide treatment to road accident victims during ‘golden hour’ – S. 245 intend to legalize the treatment provided to the road accident victims during golden hour, which was put into operation on experimental basis by the Ministry, in Delhi-Jaipur highway with the assistance of ICICI Lombard.
10-3- Creation of Road Accident Fund – S.248 is a new proviso intended to create a fund for the purpose of providing compulsory insurance cover to all road users.
10-4-Statutory provision for settlement of claims outside the Claims Tribunal – Earlier, there exists no provision relating to settlement of the claim outside the Claim tribunal. Now S.256 legalize the settlement made outside claims tribunal. However, such settlement will be subject to the satisfaction of the Tribunal.
10-5- Additional power for execution of the award by way of attachment of bank account of the insurer – So far as S. 257 is concerned, the same confers upon the Tribunal additional power to enforce its own award by way of attachment of the bank account of the insurer. Though it is new to the Act but the same was prevalent in many of the States under State Rules. Hence almost all the insurers acquainted with the practice.
10-6- Overall assessment of the new Sections of the draft bill – Therefore most of the provisions are in vague and there is nothing new barring S. 248 relating to creation of Motor Accident Fund. However, the creation of the same appears to be a bold step for providing compulsory insurance to all road accident victims in India.
11-Limited Review
This is a not an exhausted study on the draft bill, but a limited review and analysis of the important provisions of the same relating to third party insurance and its implication on insurance. To understand, the real implication of the Act one need to read not the lines, but between the lines.
12-Conclusion
Motor third party insurance is a loss making portfolio already hitting the bottom line of insurer’s in India. Hence it is anticipated that the Government will introduce a capping system on insurer overall liability towards third party. And the same is also assured by the former finance minister in UPA Government. But the draft bill came as a surprise for the industry which do not contain any such provision, rather the same increased insurer’s liability to greater extent.
Considering the importance of the subject matter and its impact on the society, personally I am of the view that the relevant provisions should be carved out from the draft bill to consolidate a comprehensive exclusive legislation on the subject, in consultation with all the stakeholders, keeping the interest of the insurance industry and victim’s right to receive compensation in mind.
