Orissa High Court
An Appeal Under Section-173 Of The Motor … vs Bindhyaben Sahoo And on 26 June, 2025
Author: Biraja Prasanna Satapathy
Bench: Biraja Prasanna Satapathy
IN THE HIGH COURT OF ORISSA AT CUTTACK
MACA No.576 of 2023
An appeal under Section-173 of the Motor Vehicle Act,
1988.
..................
The Divisional Manager,
United India Insurance Co.
Ltd., Cuttack .... Appellant
-versus-
Bindhyaben Sahoo and
Others .... Respondents
For Appellant : Mr. S. Satpathy, Advocate
For Respondents : Mr. D. Patnaik, Advocate
for Respondent Nos.1 to 4
Mr. P.K. Mishra, Advocate
for Respondent No.5
PRESENT:
THE HONBLE JUSTICE BIRAJA PRASANNA
SATAPATHY
---------------------------------------------------------------------------------
Date of Hearing:10.04.2025 & Date of Judgment: 26.06.2025
--------------------------------------------------------------------------------
Biraja Prasanna Satapathy, J.
1. Heard learned counsels appearing for the parties.
// 2 //
2. The present Appeal has been filed by the
Appellant-Company inter alia challenging the
impugned judgment dated 31.01.2023, so passed by
the 3rd Addl. District Judge-cum-4th MACT, Cuttack
in MAC Case No.138 of 2018. Vide the said
judgment, the Tribunal while allowing the claim of
the Claimants-Respondent Nos.1 to 4, held the
appellant-company liable to pay compensation
amount of Rs.45,11,466.25/- with interest payable
@ 6% per annum payable from the date of
application till its realization. The Tribunal also
allowed default interest @ 12% per annum in case
the compensation amount is not paid, within the
period of 2 (two) months from the date of award.
3. While assailing the impugned judgment,
learned counsel for the appellant-company
vehemently contended that taking into account the
nature of policy issued by the appellant and the fact
that the accident occurred beyond the area covered
Page 2 of 34
// 3 //
under the Policy, the appellant is not liable to pay
the compensation as awarded.
3.1. It is contended that the vehicle in question
bearing Registration No.OR-04-P-3025 is a Heavy
Motor Vehicle, to be more specific a Hywa Truck. It
is the case of the claimants that while the deceased
was looking after the road work, standing on the
extreme left side of the road, the offending Truck
bearing Registration No.OR-04-P-3025, came with a
high speed in a rash and negligent manner, dashed
the deceased and accordingly the deceased died on
the spot. Claimants accordingly for such death of
the deceased in a road accident caused by the
offending vehicle, filed the claim application in MAC
No.138 of 2018, claiming compensation amount of
Rs.70 lakhs.
3.2. It is contended that the policy in question was
issued by the appellant covering the period from
31.03.2017 to 30.03.2018. Even though the vehicle
Page 3 of 34
// 4 //
was a Heavy Motor Vehicle (Hywa Truck) but the
owner of the offending vehicle took the policy in the
name and style Contractors Plant and Machinery
Insurance Policy (in short CPM Policy) vide Policy
No.2603044416P118073112. It is also contended
that the policy in question was so issued with the
location code “Parjang Dhenkanal” in the State of
Odisha.
3.3. It is contended that since the policy so issued
in favour of the offending Truck is a CPM Policy and
it’s coverage covers the location Parjang in the
district of Dhenkanal, the accident having taken
place outside the location, the policy does not cover
the liability, as the accident admittedly occurred
beyond the location area coming under Mangalpur
P.S. in the District of Jajpur.
3.4. A further submission was also made that the
policy being the policy in the nature of CPM Policy,
it does not cover the 3rd Party claim arising out of
Page 4 of 34
// 5 //
the motor accident in a public road. A further
submission was also made that in respect of 3rd
Party liability though the company accepted the
premium of Rs.850/- but by fixing the outer limit of
such 3rd Party liability at Rs.5 lakhs. But since the
accident admittedly occurred beyond the location
area, the policy being the policy in the nature of
CPM Policy, the appellant is not at all liable to pay
any compensation amount so awarded by the
Tribunal vide the impugned judgment. A further
submission was also made that in support of the
nature of policy and its coverage, the policy was not
only exhibited vide Ext-A but also the same was
proved by the appellant with examination of its
witness as P.W. 1.
3.5. It is also contended that the policy being the
policy in the nature of a CPM Policy, is not a policy
issued in favour of motor vehicle in terms of the
provisions contained under Section 147 of the Motor
Page 5 of 34
// 6 //
Vehicle Act, which deals with Insurance of Motor
Vehicle against 3rd Party risk.
3.6. In support of his aforesaid submission, reliance
was placed to a decision of this Court passed on
27.02.2023 in MACA No.388 of 2019 and batch.
This Court in Para-10 of the said judgment has held
as follows:-
―It is true that a CPM Policy is not the same
statutory policy according to the provisions
contained in Section 147 of the M.V. Act.‖3.7. Reliance was also placed to a decision of this
Court passed on 23.08.2022 in MACA No.815 of 2020.
This Court in Para-7, 8 and 9 of the said judgment has
held as follows:-
―7. Admittedly, the policies issued under
Exts.B & C are CMP policies. The question falls for
decision is that, even if the policy is not a motor
vehicular policy in terms of Chapter-XI of the M.V. Act,
whether the same can be extended to be considered as
a policy issued under Chapter-XI of the M.V. Act for the
reason that it has accepted to cover the third party
risk.
8. In this regard, the definition as
contemplated in Section 145 (b) postulates that
―certificate of insurance‖ means a certificate issued byPage 6 of 34
// 7 //an authorized insurer in pursuance of Sub-section (3)
of Section 147. Section 147 (3) speaks that a policy
shall be of no effect for the purpose of Chapter-XI
unless and until it is issued by the insurer in favour of
the person by whom the policy is effected containing
the prescribed particulars of any condition subject to
which the policy is issued and for any other prescribed
matter. Section 147(1) prescribes that, in order to
comply with the requirements of this Chapter, a policy
of insurance must be issued by an authorized insurer
insuring a person or class of persons to the extent
specified in Sub-Section 2. Sub-section (2) read with
subsection (1) of Section 147 says that a policy of
insurance shall cover such liability incurred in respect
of any accident to a third party caused by or arising
out of the use of the motor vehicle in a public place up
to such limits. Therefore a thorough examination of the
provisions contained in Chapter-XI makes it clear that
the policy of insurance and its limit shall be against
such liability that may be incurred in respect of an
accident arising out of use of a motor vehicle. Thus a
thorough reading of all such provisions under Chapter-
XI of the M.V. Act does not imply such a conclusion
that a policy issued for plants and machineries would
be treated or extended in respect of a motor vehicle.
9. In the instant case the Tribunal has
assigned the reason that, despite Exts.B & C are
undisputedly CPM policy and the offending
vehicle is a motor vehicle and place of accident is a
public place, the same would cover the risk involved in
the accident because under the said policy, the
insured has paid premium of Rs.313/- for coverage of
third party liability to the extent of Rs.1,25,000/-. As
discussed in the above paragraph, this Court is unable
to agree with such finding of the Tribunal in view of
the clear provisions contained in Section 147 of the
M.V. Act. The policy as in the present case is in respect
of a machine cannot at any stretch be extended to use
of a motor vehicle for which specific statutory
provisions have been provided for issuance of valid
insurance policy. Therefore the finding of the Tribunal
to the extent that the CPM policy covers the risk of
third party in respect of a motor vehicle to indemnify
the liability is set aside.‖
Page 7 of 34
// 8 //
3.8. It is also contended that since policy taken by the
owner of the offending vehicle is in the nature of a
contract, the terms of the agreement have to be strictly
followed to determine the liability of the insurer. Since
in the present case on the face of the 3rd Party liability
fixed at Rs.5 lakhs, the accident admittedly occurred
beyond the location area, the appellant is not liable to
pay the compensation even to the tune of Rs.5,00,000/-.
3.9. In support of the aforesaid submission, reliance
was also placed to a decision of the Hon’ble Apex
Court in the case of Shivram Chandra Jagarnath
Cold Storage and others Vs. New India Assurnce
Company Limited and Others, reported in 2022 4
SCC 539. Hon’ble Apex Court in Para-17 of the said
judgment has held as follows:-
―17. This Court held thus : (Oriental Insurance case
[Oriental Insurance Co. Ltd. v. Sony Cheriyan, (1999)
6 SCC 451] , SCC pp. 455-56, para 17)―17. The insurance policy between the insurer and
the insured represents a contract between the
parties. Since the insurer undertakes to compensate
the loss suffered by the insured on account of risks
covered by the insurance policy, the terms of the
agreement have to be strictly construed to determinePage 8 of 34
// 9 //the extent of liability of the insurer. The insured
cannot claim anything more than what is covered by
the insurance policy.‖3.10. It is contended that since the appellant by
exhibiting the policy and proving the same through
its witness has proved that the terms and conditions
of the policy has been violated, the company is also
not liable to pay the compensation to the tune of
Rs.5,00,000/-. Reliance was also placed to a
decision of the Hon’ble Apex Court in the case of
New India Assurance Co. Ltd. and Others Vrs.
Rajeswar Sharma and Others, reported in 2019
(2) SCC 671. Hon’ble Apex Court in Para-14,15 of
the said judgment has held as follows:-
―14. According to The Law Relating to Accidental
Insurance [ A.W. Baker Welford, The Law Relating to
Accidental Insurance (Butterworth & Company, 1923) at
p. 126.] , insurers are exempt from any liability where the
loss is attributable to an excepted cause which is
inserted ex abundanti cautela to make it quite clear to the
assured that the policy is not intended to cover such
losses. The position is elucidated below:
―The object of the exceptions is to define with greater
precision the scope of the policy by making clear what is
intended to be excluded and contrasting it with what is
intended to be included.
Since exceptions are inserted in the policy mainly for the
purpose of exempting the insurers from liability for aPage 9 of 34
// 10 //loss which, but for the exception, would be covered by
the policy, they are construed against the insurers with
the utmost strictness and it is the duty of the insurers to
except their liability in clear and unambiguous terms.
The onus of proving that the loss falls within an
exception lies upon the insurers, unless by proving the
language of the exception the assured is expressly
required to prove that, in the circumstances, the
exception does not apply.‖
15. In 2016, the UK Supreme Court dealt with the
interpretation of an exclusion clause in a solicitors’
professional indemnity insurance policy in Impact
Funding Solutions Ltd. v. Barrington Support Services
Ltd. [Impact Funding Solutions Ltd. v. Barrington
Support Services Ltd., Supreme Court as per Lord
Toulson, JSC (with whom Lord Mance, Lord Sumption
and Lord Hodge, JJSC agreed) 2017 AC 73 : 2016
UKSC 57] Dealing with the construction of insurance
exclusions, Lord Toulson, JSC observed thus : (AC pp.
85-86, para 35)
35. The fact that a provision in a contract is expressed
as an exception does not necessarily mean that it
should be approached with a pre-disposition to construe
it narrowly. Like any other provision in a contract,
words of exception or exemption must be read in the
context of the contract as a whole and with due regard
for its purpose. As a matter of general principle, it is
well established that if one party, otherwise liable,
wishes to exclude or limit his liabilityto the other party,
he must do so in clear words; and that the contract
should be given the meaning it would convey to a
reasonable person having all the background
knowledge which is reasonably available to the person
or class of persons to whom the document is
addressed…. This applies not only where the words of
exception remove a remedy for breach, but where they
seek to prevent a liability from arising by removing,
through a subsidiary provision, part of the benefit which
it appears to have been the purpose of the contract to
provide. The vice of a clause of that kind is that it can
have a propensity to mislead, unless its language is
sufficiently plain. All that said, words of exception may
be simply a way of delineating the scope of the primary
obligation.‖
Page 10 of 34
// 11 //
3.11. Reliance was also placed to a decision of the
Hon’ble Apex Court in the case of National
Insurance Co. Ltd. Vrs. Chief Electoral Officer
and Others, reported in 2023 (6) SCC 441. Hon’ble
Apex Court in Para-27, 28,29,30 and 31 has held as
follows:-
―27. We would first like to elucidate the principles on
which a claim under any insurance policy is
examined. It is trite to say that the terms of the
insurance policy are to be strictly construed.
28. The insurance contracts are in the nature of
special class of contracts having distinctive features
such as utmost good faith, insurable interest,
indemnity subrogation, contribution and proximate
cause which are common to all types of insurances.
Each class of insurance also has individual features
of its own. The law governing insurance contracts is
thus to be studied in three parts, namely, (1) general
characteristics of insurance contracts, as contracts;
(2) special characteristics of insurance contracts, as
contracts of insurance, and (3) individual
characteristics of each class of insurance.
29. Now turning to some of the judicial
pronouncements, wherein it has been opined that the
words used in a contract of insurance must be given
paramount importance and it is not open for the court
to add, delete or substitute any words [Suraj Mal
Ram Niwas Oil Mills (P) Ltd. v. United India Insurance
Co. Ltd. [Suraj Mal Ram Niwas Oil Mills (P) Ltd. v.
United India Insurance Co. Ltd., (2010) 10 SCC 567 :
(2010) 4 SCC (Civ) 267] ]. Insurance contracts are in
the nature where exceptions cannot be made on
ground of equity and the courts ought not to interfere
with the terms of an insurance agreement [Export
Credit Guarantee Corpn. (India) Ltd. v. Garg Sons
International [Export Credit Guarantee Corpn. (India)Page 11 of 34
// 12 //Ltd. v. Garg Sons International, (2014) 1 SCC 686 :
(2014) 1 SCC (Civ) 648] ].
30. This Court in Vikram Greentech (I) Ltd. v. New
India Assurance Co. Ltd. [Vikram Greentech (I) Ltd. v.
New India Assurance Co. Ltd., (2009) 5 SCC 599 :
(2009) 2 SCC (Civ) 590] reiterated that the insured
cannot claim anything more than what is covered by
the insurance policy. The terms of the contract have
to be construed strictly, without altering the nature of
the contract as the same may affect the interests of
the parties adversely. The clauses of an insurance
policy have to be read as they are. Consequently, the
terms of the insurance policy, that fix the
responsibility of the Insurance Company must also be
read strictly.
31. In several other judgments [Oriental Insurance
Co. Ltd. v. Sony Cheriyan, (1999) 6 SCC 451;
Polymat India (P) Ltd. v. National Insurance Co. Ltd.,
(2005) 9 SCC 174; Sumitomo Heavy Industries Ltd. v.
ONGC Ltd., (2010) 11 SCC 296 : (2010) 4 SCC (Civ)
459 and Rashtriya Ispat Nigam Ltd. v. Dewan Chand
Ram Saran, (2012) 5 SCC 306.] , this Court has held
that the insurance contract must be read as a whole
and every attempt should be made to harmonise the
terms thereof, keeping in mind that the rule of contra
proferentem does not apply in case of commercial
contract, for the reason that a clause in a commercial
contract is bilateral and has mutually been agreed
upon.‖
3.12. It is contended that in the aforesaid decision,
Hon’ble Apex Court has held that the words used in
Contract of Insurance must be given paramount
importance and it is not open for the Court to act,
delete or substitute any word. Placing reliance on
the aforesaid decisions of this Court as well as
Hon’ble Apex Court, it is finally contended that
Page 12 of 34
// 13 //
since the policy in the nature of a CPM Policy with
location code at Parjang, Dhenkanal and the
accident admittedly having taken place beyond the
location area in the district of Jajpur, even though
3rd Party liability as per the policy covers the claim
to the extent of Rs.5 lakhs, but in view of such
violation of the policy condition, the appellant is not
liable to pay any compensation lest Rs.5 lakhs
towards 3rd Party Liability. It is accordingly
contended that the impugned award needs
interference of this Court.
4. Mr. D. Patnaik, learned counsel appearing for
the Claimants-Respondent Nos.1 to 4 on the other
hand while supporting the award, contended that
since the deceased admittedly died because of a
road accident caused by the offending vehicle on
21.12.2017, the appellant is liable to pay the
compensation and if as alleged the policy condition
Page 13 of 34
// 14 //
has been violated, the appellant may recover the
same from the owner-Respondent No.5.
4.1. It is contended that because of the fault
committed by the Appellant as well as the Owner-
Respondent No.5, the claimants could not be made
to suffer.
5. Mr. P.K. Mishra, learned counsel appearing for
the Respondent No.5-Owner on the other hand
made his submission in support of the award. It is
contended that though it is not disputed that the
policy is a CPM Policy, but since the appellant while
issuing the policy accepted the premium to the tune
of Rs.850/- towards 3rd Party liability, outer limit
fixed in the policy by putting the limit towards 3rd
Party liability at Rs.5 lakhs is not sustainable in the
eye of law. Once the insurer takes the premium
towards 3rd Party liability, no limit can be fixed in
that regard.
Page 14 of 34
// 15 //
5.1. It is accordingly contended that on the face of
the acceptance of the premium towards 3rd Party
liability, liability fixed in the policy at Rs.5 lakhs, is
illegal and the Tribunal has erred in permitting the
appellant to recover the 3rd Party liability to the tune
of Rs.5,00,000/- from the Owner-Respondent. It is
contended that as provided under Section 146 of the
Motor Vehicle Act, 1988, covering 3rd Party risk is
mandatory for a Motor Vehicle to ply in a public
road. Section 146 of the Act reads as follows:-
―146. Necessity for insurance against third party
risk. – (1) No person shall use, except as a
passenger, or cause or allow any other person to
use, a motor vehicle in a public place, unless
there is in force, in relation to the use of the
vehicle by that person or that other person, as the
case may be, a policy of insurance complying
with the requirements of this Chapter:
Provided that in the case of a vehicle carrying, or
meant to carry, dangerous or hazardous goods,
there shall also be a policy of insurance under
the Public Liability Insurance Act, 1991.
Explanation. – For the purposes of this sub-
section, a person driving a motor vehicle merely
as a paid employee, while there is in relation to
the use of the vehicle no such policy in force as is
required by this sub-section, shall not be deemed
to act in contravention of the sub-section unless
he knows or has reason to believe that there is
no such policy in force.
Page 15 of 34
// 16 //
(2)The provisions of sub-section (1) shall not
apply to any vehicle owned by the Central
Government or a State Government and used for
purposes not connected with any commercial
enterprise.
(3)The appropriate Government may, by order,
exempt from the operation of sub-section (1), any
vehicle owned by any of the following authorities,
namely: –
(a)the Central Government or a State
Government, if the vehicle is used for purposes
connected with any commercial enterprise;
(b)any local authority;
(c)any State Transport Undertaking:
Provided that no such order shall be made in
relation to any such authority unless a fund has
been established and is maintained by that
authority in such manner as may be prescribed
by appropriate Government.‖5.2. It is contended that once the insurer has
accepted the 3rd Party liability by taking a premium
of Rs.850/-, by fixing the liability of the insurer at
Rs.5 lakhs is not permissible in view of the
provisions contained under Section 147 of the Act.
Section 147 of the Act reads as follows:-
―147. Requirements of policies and limits of
liability. – (1) In order to comply with the
requirements of this Chapter, a policy of insurance
must be a policy which –
(a)is issued by a person who is an authorised
insurer; andPage 16 of 34
// 17 //
(b)insures the person or classes of persons
specified in the policy to the extent specified in
sub-section (2) –
(i)against any liability which may be incurred
by him in respect of the death of or bodily injury to
any person including owner of the goods or his
authorised representative carried in the motor
vehicle or damage to any property of a third party
caused by or arising out of the use of the motor
vehicle in a public place;
(ii)against the death of or bodily injury to any
passenger of a transport vehicle, except gratuitous
passengers of a goods vehicle, caused by or
arising out of the use of the motor vehicle in a
public place.
Explanation. – For the removal of doubts, it is
hereby clarified that the death of or bodily injury to
any person or damage to any property of a third
party shall be deemed to have been caused by or
to have arisen out of, the use of a vehicle in a
public place, notwithstanding that the person who
is dead or injured or the property which is
damaged was not in a public place at the time of
the accident, if the act or omission which led to the
accident occurred in a public place.
(2)Notwithstanding anything contained under
any other law for the time being in force, for the
purposes of third party insurance related to either
death of a person or grievous hurt to a person, the
Central Government shall prescribe a base
premium and the liability of an insurer in relation
to such premium for an insurance policy under
sub-section (1) in consultation with the Insurance
Regulatory and Development Authority.
(3)A policy shall be of no effect for the
purposes of this Chapter unless and until there is
issued by the insurer in favour of the person by
whom the policy is effected, a certificate of
insurance in the prescribed form and containing
the prescribed particulars of any condition subject
to which the policy is issued and of any other
prescribed matters; and different forms,
particulars and matters may be prescribed in
different cases.
Page 17 of 34
// 18 //
(4)Notwithstanding anything contained in this
Act, a policy of Insurance issued before the
commencement of the Motor Vehicles (Amendment)
Act, 2019 shall be continued on the existing terms
under the contract and the provisions of this Act
shall apply as if this Act had not been amended by
the said Act.
(5)Where a cover note issued by the insurer
under the provisions of this Chapter or the rules or
regulations made thereunder is not followed by a
policy of insurance within the specified time, the
insurer shall, within seven days of the expiry of
the period of the validity of the cover note, notify
the fact to the registering authority or to such other
authority as the State Government may prescribe.
(6)Notwithstanding anything contained in any
other law for the time being in force, an insurer
issuing a policy of insurance under this section
shall be liable to indemnify the person or classes
of persons specified in the policy in respect of any
liability which the policy purports to cover in the
case of that person or those classes of persons.‖
5.3. It is contended that while dealing with similar
issue, this Court in its judgment dated 24.08.2023
in MACA No.92 of 2022, did not accept the plea
taken by the insurer on the face of the view taken by
this Court in MACA No.815 of 2020.
5.4. It is accordingly contended that since it is not
disputed that the appellant accepted the premium
towards 3rd Party liability, in view of the provisions
contained under Section 146 and Section 147 of the
Page 18 of 34
// 19 //
Motor Vehicle Act, it is the appellant who is liable to
pay the entire compensation as awarded and such a
direction has been rightly issued by the Tribunal
which needs no interference.
5.5. Not only that, permission given by the Tribunal
to recover a sum of Rs.5 lakhs from the Owner-
Respondent No.5 is not sustainable, as in view of
the provisions contained under Section 147 of the
Act, no outer limit can be fixed once the insurer
accepts the premium towards 3rd Party liability and
the vehicle being a Motor Vehicle in terms of the
provisions contained under Section 146 of the Act.
6. To the submission made by the learned counsel
appearing for the Respondent No.5-owner, learned
counsel for the appellant made further submission
and contended that this Court in MACA No.92 of
2022 was not inclined to interfere with the award as
on the face of the policy being a CPM policy, the
accident however had taken place in the premises of
Page 19 of 34
// 20 //
the work shade. View expressed by this Court in
Para-7 of the said judgment reads as follows:-
―7. Mr. Khan relies on the decision of this Court
dated 23rd August 2022 rendered in MACA No.815 of
2020 to contend that the risk coverage in respect of CPM
policy cannot be extended to cover the risk provided
under the MV Act in respect of a third party. It needs to
be mentioned here that in said case cited by Mr.Khan,
the third party premium due was in respect of damages
up to the extent of Rs.1,25,000/- and the accident took
place in the premises of the worksite. Therefore, said
earlier decision of this Court is found distinguishable on
the facts of the present case.‖6.1. It is accordingly contended that judgment
passed in MACA No.92 of 2022 is not applicable to
the facts of the present case as the accident
admittedly has not taken place within the location
area so indicated in the policy. It is accordingly
contended that the appellant is not liable to pay the
compensation as directed by the tribunal.
7. This Court taking into account the pleadings
made and the decisions relied on, is inclined to
decide first as to whether the policy taken by the
offending vehicle is a lawful contract in terms of the
provisions contained under the Contract Act.
Page 20 of 34
// 21 //
7.1. It is not disputed that the offending vehicle is a
Heavy Motor Vehicle (Hywa Truck). On the face of
such status of the vehicle, it is the view of this Court
that no policy could have been issued in favour of
the offending vehicle by issuing a CPM Policy. Since
the offending vehicle is a motor vehicle within the
definition of Section 146 of the Motor Vehicle Act,
such policy in the nature of CPM Policy could not
have been issued in favour of the offending vehicle
and the said contract is not a lawful contract.
Hon’ble Apex Court in Para-98, 99, 100 and 102 of
the decision in the case of G.T. Girish Vrs. Y.
Subba Raju, reported in 2022 (12) SCC 321 with
regard to lawful contract has opined as follows:-
―98. Section 10 of the Contract Act declares as
to what agreements are contracts and all
agreements are declared contracts, if they are made
by the free consent of parties competent to contract
with a lawful consideration and with the lawful
object and not expressly declared to be void under
the Contract Act. Section 23 must be read
with Section 10. Without the illustrations, Section 23,
reads as follows:
―23. What consideration and objects are lawful, and
what not. –The consideration or object of anPage 21 of 34
// 22 //agreement is lawful, unless– — The consideration
or object of an agreement is lawful, unless–” it is
forbidden by law; or is of such a nature that, if
permitted, it would defeat the provisions of any law;
or is fraudulent; or involves or implies, injury to the
person or property of another; or the Court regards it
as immoral, or opposed to public policy.
In each of these cases, the consideration or object of
an agreement is said to be unlawful. Every
agreement of which the object or consideration is
unlawful is void.‖
99. The very first head under which an agreement
become unlawful is, when the consideration or object
of agreement is forbidden by law. In regard to the
same, we may notice the view of a Bench of three
learned Judges in Gherulal Parakh v. Mahadeodas
Maiya and others19. Therein, quoting from Pollock
and Mullah from their work Indian Contract Act, this
Court has stated as follows:
―8. xxx xxx xxx An act or undertaking is equally
forbidden by law whether it violates a prohibitory
enactment of the Legislature or a principle of
unwritten law. But in India, where the criminal law
is codified, acts forbidden by law seem practically to
consist of acts punishable under the Penal Code and
of acts prohibited by special legislation, or by
regulations or orders made under authority derived
from the Legislature.‖ (Emphasis supplied)
100. In regard to the Commentary by the very same
Author, under the Second Head of ―illegal object or
consideration‖ in Section 23 of the Contract Act, viz.,
if the consideration or object is of such a nature that
if permitted, it would defeat the provisions of any
law, it is that, this Court took the view that law for
the purpose of Section 23 would be, law made by the
Legislature. Quite apart from the fact that what is
involved in the said case was only a letter, the
Judgment of this Court in Gherulal Parakh (supra)
and the Commentary from the very same Author,
was not noticed by this Court. Therefore, it becomes
all the more reason as to why we need not refer the
matter to a larger Bench. We may also notice that
‗law’, for the purposes of Clauses (1) and (2) cannot
be different. It is very clear that Regulations or
Orders made under the Authority derived from the
Legislature referred to by this Court, are species ofPage 22 of 34
// 23 //subordinate legislation. Statutory Rules would also,
therefore, clearly be law.
xxxx xxxx xxxx xxxx
102. A contract may expressly or impliedly, be
prohibited by provisions of a law. The intentions of
the parties do not salvage such a contract. [See AIR
1968 SCC 1328 (supra)]. What is involved in this
case, may not be a mere case of a conditional decree
for specific performance being granted as was the
case in the line of decisions commencing with Motilal
(supra) and ending with Ferrodous Estates (supra).
The Rules contemplate a definite scheme. Land,
which is acquired by the Public Authority, is meant to
be utilised for the particular purpose. The object of
the law is to invite applications from eligible persons,
who are to be selected by a Committee and the sites
are allotted to those eligible persons, so that the
chosen ones are enabled to put up structures, which
are meant to be residential houses.‖
7.2. Hon’ble Apex Court in the case of Union of
India and Others Vrs. A.K. Pandey reported in
2009 (10) SCC 552 in Para-14 on similar issue has
held as follows:-
―14. In Mannalal Khetan v. Kedar Nath Khetan [(1977)
2 SCC 424] while dealing with Section 108 of the
Companies Act, 1956 a three-Judge Bench of this Court
held: (SCC pp. 429-31, paras 17-23)―17. In Raza Buland Sugar Co. Ltd. v. Municipal
Board, Rampur [AIR 1965 SC 895 : (1965) 1 SCR
970] this Court referred to various tests for finding
out when a provision is mandatory or directory.
The purpose for which the provision has been
made, its nature, the intention of the legislature in
making the provision, the general inconvenience or
injustice which may result to the person from
reading the provision one way or the other, the
relation of the particular provision to other
Page 23 of 34
// 24 //
provisions dealing with the same subject and the
language of the provision are all to be considered.
Prohibition and negative words can rarely be
directory. It has been aptly stated that there is one
way to obey the command and that is completely
to refrain from doing the forbidden act. Therefore,
negative, prohibitory and exclusive words are
indicative of the legislative intent when the statute
is mandatory. (See Maxwell on Interpretation of
Statutes, 11th Edn., pp. 362 et seq.; Crawford:
Statutory Construction, Interpretation of Laws, p.
523 and Bhikraj Jaipuria v. Union of India [AIR
1962 SC 113 : (1962) 2 SCR 880] .)
18. The High Court said that the provisions
contained in Section 108 of the Act are directory
because non-compliance with Section 108 of the
Act is not declared an offence. The reason given
by the High Court is that when the law does not
prescribe the consequences or does not lay down
penalty for non-compliance with the provision
contained in Section 108 of the Act the provision is
to be considered as directory. The High Court
failed to consider the provision contained in
Section 629(a) of the Act. Section 629(a) of the Act
prescribes the penalty where no specific penalty is
provided elsewhere in the Act. It is a question of
construction in each case whether the legislature
intended to prohibit the doing of the act altogether,
or merely to make the person who did it liable to
pay the penalty.
19. Where a contract, express or implied, is
expressly or by implication forbidden by statute,
no court will lend its assistance to give it effect.
(See Melliss v. Shirley Local Board [(1885) 16 QBD
446] .) A contract is void if prohibited by a statute
under a penalty, even without express declaration
that the contract is void, because such a penalty
implies a prohibition. The penalty may be imposed
with intent merely to deter persons from entering
into the contract or for the purposes of revenue or
that the contract shall not be entered into so as to
be valid at law. A distinction is sometimes made
between contracts entered into with the object of
committing an illegal act and contracts expressly
or impliedly prohibited by statute. The distinction
is that in the former class one has only to look and
see what acts the statute prohibits; it does not
Page 24 of 34
// 25 //
matter whether or not it prohibits a contract: if a
contract is made to do a prohibited act, that
contract will be unenforceable. In the latter class,
one has to consider not what act the statute
prohibits, but what contracts it prohibits. One is
not concerned at all with the intent of the parties,
if the parties enter into a prohibited contract, that
contract is unenforceable. (See St. John Shipping
Corpn. v. Joseph Rank Ltd. [(1957) 1 QB 267 :
(1956) 3 WLR 870 : (1956) 3 All ER 683] ) (See
also Halsbury’s Laws of England, 3rd Edn., Vol. 8,
p. 141.)
20. It is well established that a contract which
involves in its fulfilment the doing of an act
prohibited by statute is void. The legal maxim a
pactis privatorum publico juri non derogatur
means that private agreements cannot alter the
general law. Where a contract, express or implied,
is expressly or by implication forbidden by statute,
no court can lend its assistance to give it effect.
(See Melliss v. Shirley Local Board [(1885) 16 QBD
446] .) What is done in contravention of the
provisions of an Act of the legislature cannot be
made the subject of an action.
21. If anything is against law though it is not
prohibited in the statute but only a penalty is
annexed the agreement is void. In every case
where a statute inflicts a penalty for doing an act,
though the act be not prohibited, yet the thing is
unlawful, because it is not intended that a statute
would inflict a penalty for a lawful act.
22. Penalties are imposed by statute for two
distinct purposes:
(1) for the protection of the public against fraud, or
for some other object of public policy;
(2) for the purpose of securing certain sources of
revenue either to the State or to certain public
bodies. If it is clear that a penalty is imposed by
statute for the purpose of preventing something
from being done on some ground of public policy,
the thing prohibited, if done, will be treated as
void, even though the penalty if imposed is not
enforceable.
Page 25 of 34
// 26 //
23. The provisions contained in Section 108 of the
Act are for the reasons indicated earlier
mandatory. The High Court erred in holding that
the provisions are directory.‖
7.3. Similarly, Hon’ble Apex Court in Para-45 of the
decision in the case of Asha John Divianathan
Vrs. Vikram Malhotra and Others, reported in
(2021) 19 SCC 629 has held as follows:-
―45. Even a Division Bench of the Madras High
24 1986 SCC OnLine Bom 234 : 1986 Mah LJ 1031 25
(2001) 1 Mad LJ 188 : 2000 SCC OnLine Mad 737 26
(2018) 1 KLJ 525 : 2017 SCC OnLine Ker 25269 Court
in Mrs. Shoba Viswanatha v. D.P. Kingsley27, while
considering the purport of Section 31 of the 1973 Act,
vide its erudite judgment considered the scope of Section
23 of the Contract Act and the principles delineated in
that regard in Pollock and Mulla Indian Contract Act,
VII Edition, page 158 including the decisions in Joaquim
Mascarenhas Fiuza (supra), Beharilal Maudgi v. The
Secretary to Govt. of A.P. Home Department, Hyderabad
& Ors.28 and the considerations governing public policy
as delineated in Gherulal Parakh v. Mahadeodas Maiya
& Ors.29, Rattan Chand Hira Chand v. Askar Nawaz
(Dead) by L.Rs. & Ors. 30 and other treaties, to
eventually conclude that the position of law is clear that
when the enforcement of the contract is against any
provision of law, that will amount to enforcement of an
illegal contract. The contract per se may not be illegal.
But its enforcement requires compliance of statutory
conditions, failure of which will amount to statutory
violation. A court which is expected to enforce the law,
cannot be a party to such a decree. The view so taken in
this judgment commends to us. As a matter of fact, this
judgment has become 27 1996 (I) CTC 620 : 1996 SCC
Online Mad 319 28 1986 (2) ALT 241 29 AIR 1959 SC
781 30 1991 (3) SCC 67 final in view of dismissal of SLP
(Civil) No.15024 of 1996 by this Court vide order dated
14.08.1996.‖
Page 26 of 34
// 27 //
7.4. Placing reliance on the decision of the Hon’ble
Apex Court in the case of G.T. Girish, A.K. Pandey
and Asha John Divianthan, it is the view of this
Court that since the offending vehicle which is not
disputed is a Motor Vehicle, no such policy either
could have been taken by the owner-Respondent
No.5 as CPM Policy, nor such a policy could have
been issued by the appellant/insurer.
7.5. Since knowing fully well that such a policy is
not issuable, no such policy could have been issued
in favour of the offending vehicle. Neither the
appellant nor the owner-Respondent No.5 can take
undue advantage for their own fault. View expressed
by the Hon’ble Apex Court on the aforesaid issue in
Para-14 to 16 in the case of Kusheshwar Prasad
Singh Vrs. State of Bihar and Others, reported in
(2007) 11 SCC 447 on the aforesaid issue reads as
follows:-
Page 27 of 34
// 28 //
―14. In this connection, our attention has been
invited by the learned counsel for the appellant to a
decision of this Court in Mrutunjay Pani & Another v.
Narmada Bala Sasmal & Another, AIR 1961 SC 1353,
wherein it was held by this Court that where an
obligation is cast on a party and he commits a breach
of such obligation, he cannot be permitted to take
advantage of such situation. This is based on the Latin
maxim ‘Commodum ex injuria sua nemo habere debet’
(No party can take undue advantage of his own wrong).
15. In Union of India & Ors. v. Major General
Madan Lal Yadav (Retd.), (1996) 4 SCC 127, the
accused-army personnel himself was responsible for
delay as he escaped from detention. Then he raised an
objection against initiation of proceedings on the
ground that such proceedings ought to have been
initiated within six months under the Army Act, 1950.
Referring to the above maxim, this Court held that the
accused could not take undue advantage of his own
wrong. Considering the relevant provisions of the Act,
the Court held that presence of the accused was an
essential condition for the commencement of trial and
when the accused did not make himself available, he
could not be allowed to raise a contention that
proceedings were time-barred. This Court referred to
Broom’s Legal Maxims (10th Edn.) p. 191 wherein it
was stated;
“it is a maxim of law, recognised and established,
that no man shall take advantage of his own
wrong; and this maxim, which is based on
elementary principles, is fully recognised in Courts
of law and of equity, and, indeed, admits of
illustration from every branch of legal procedure”.
16. It is settled principle of law that a man
cannot be permitted to take undue and unfair
advantage of his own wrong to gain favourable
interpretation of law. It is sound principle that he who
prevents a thing from being done shall not avail himself
of the non-performance he has occasioned. To put it
differently, “a wrong doer ought not to be permitted to
make a profit out of his own wrong”.‖
Page 28 of 34
// 29 //
7.6. Similar view has also been made by the
Hon’ble Apex Court in the case of Municipal
Committee Katra and Others Vrs. Ashwani
Kumar (Civil Appeal No.14970-71 of 2017 decided
on 09.05.2024). Hon’ble Apex Court in Para-18 and
19 of the judgment has held as follows:-
―18. The situation at hand is squarely covered
by the latin maxim ‘nullus commodum capere
potest de injuria sua propria’, which means that
no man can take advantage of his own wrong.
This principle was applied by this Court in the
case of Union of India v. Maj. Gen. Madan Lal
Yadav 1 observing as below:-
“28. In this behalf, the maxim nullus
commodum capere potest de injuria sua propria
– meaning no man can take advantage of his
own wrong – squarely stands in the way of
avoidance by the respondent and he is
estopped to plead bar of limitation contained in
Section 123(2).
In Broom’s Legal Maxim (10th Edn.) at p. 191 it
is stated:
“it is a maxim of law, recognised and
established, that no man shall take advantage
of his own wrong; and this maxim, which is
based on elementary principles, is fully
recognised in courts of law and of equity, and,
indeed, admits of illustration from every branch
of legal procedure.”
The reasonableness of the rule being manifest,
we proceed at once to show its application by
reference to decided cases. It was noted therein
Page 29 of 34
// 30 //
that a man shall not take advantage of his own
wrong to gain the favourable interpretation of
the law. In support thereof, the author has
placed reliance on another maxim frustra legis
auxilium invocat quaerit qui in legem committit.
He relies on Perry v. Fitzhowe [(1846) 8 QB 757
: 15 LJ QB 239] . At p. 192, it is stated that if a
man be bound to appear on a certain day, and
before that day the obligee puts him in prison,
the bond is void. At p. 193, it is stated that “it is
moreover a sound principle that he who
prevents a thing from being done shall not avail
himself of the non-performance he has
occasioned”. At p. 195, it is further stated that
“a wrong doer ought not to be permitted to
make a profit out of his own wrong”. At p. 199 it
is observed that “the rule applies to the extent
of undoing the advantage gained where that
can be done and not to the extent of taking
away a right previously possessed”.
19. It is beyond cavil of doubt that no one can
be permitted to take undue and unfair
advantage of his own wrong to gain favourable
interpretation of law. It is a sound principle that
he who prevents a thing from being done shall
not avail himself of the non-performance he has
occasioned. To put it differently, ‘a wrong doer
ought not to be permitted to make profit out of
his own wrong’. The conduct of the respondent-
writ petitioner is fully covered by the aforesaid
proposition.”
8. Having heard learned counsel for the parties
and considering the submissions made and the
issue decided hereinabove, point of consideration to
be decided by this Court is as to whether on the face
of the policy issued by the appellant, the appellant
Page 30 of 34
// 31 //
is liable to pay the compensation as awarded. It is
not disputed that the offending vehicle is a Heavy
Motor Vehicle (Hywa Truck) bearing Registration
No.OR-04-P-3025. In the certificate of Registration
issued in favour of the offending vehicle, description
of the vehicle has been indicated as a Transport
vehicle with class Heavy Goods Vehicle.
8.1. Since the offending vehicle is a Transport
vehicle more in the nature of a Heavy Goods Vehicle,
in view of the provisions contained under Section
146 of the Motor Vehicle Act, the policy in the name
and style, CPM Policy could not have been issued by
the appellant, nor such a policy could have been
taken by the Owner-Respondent No.5. Placing
reliance on the decision in the case of Asha John
Divianathan, A.K. Pandey and G.T. Girish as
cited (supra), it is the view of this Court that such a
policy with the nature of Contract could not have
Page 31 of 34
// 32 //
been issued as the policy is not a contract in the eye
of law.
8.2. Similarly, since knowing fully well that the
offending vehicle is a Heavy Goods Vehicle and such
a policy could not have been issued, the appellant
by taking the premium issued the policy in the
name and style CPM Policy and Owner-Respondent
No.5 on the face of nature of vehicle took the said
policy by paying the premium, it is the view of this
Court that both the parties cannot take advantage
of their own wrong.
8.3. In view of the decisions of the Hon’ble Apex Court
in the case of Kusheshwar Prasad Singh and
Municipal Committed Katra as cited (supra), it is the
view of this Court that the policy so issued by the
appellant-company and taken by the Owner-Respondent
No.5 being an illegal contract and knowing its
repercussion, such a policy was issued as well as taken,
both the appellant and Respondent No.5 are equally and
Page 32 of 34
// 33 //
severally liable to pay the compensation. For the latches
on the part of the appellant and Respondent No.5,
Claimants/Respondent Nos.1 to 4 cannot be deprived to
get the benefit of the compensation.
8.4. Therefore, this Court while is not inclined to
interfere with the impugned award, held the
appellant and owner-Respondent No.5 liable to pay
the awarded compensation amount along with
interest equally. While holding so, this Court directs
the Appellant and Respondent No.5 to deposit their
respective share to the extent of 50% before the
Tribunal within a period of 8(eight) weeks from the
date of receipt of this order. On such deposit of the
amount, the compensation amount be disbursed in
favour of the claimants-Respondents proportionately
in terms of the judgment dated 31.01.2023.
8.5. Statutory deposit be refunded to the appellant
after satisfaction of its share of the award as
Page 33 of 34
// 34 //
directed along with accrued interest if any, on
proper identification.
9. The Appeal accordingly stands dismissed.
(Biraja Prasanna Satapathy)
Judge
Orissa High Court, Cuttack
Dated the 26th of June, 2025/Basudev
Signature Not Verified
Digitally Signed
Signed by: BASUDEV SWAIN
Reason: Authentication
Location: High Court of Orissa, Cuttack
Date: 26-Jun-2025 18:59:46
Page 34 of 34