Section 147: Requirements of policies and limits of liability
Motor Vehicles Act • Official Statutory Text & Practice Guide
Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 1988
Motor Vehicles Act • Official Statutory Text & Practice Guide
(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; and (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.
(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.
Legal Commentary & Landmark Judgments: Section 147
Section 147 of the Motor Vehicles Act, 1988 defines the mandatory statutory coverage of third-party insurance policies, indemnification limits, and the legal status of vehicle passengers, drivers, and cargo owners.
Crucially, the section delineates the boundaries of mandatory coverage: it requires statutory coverage for employees falling within the Workmen's/Employee's Compensation Act engaged in driving or operating public service vehicles. However, it does not mandate statutory coverage for gratuitous passengers carried in a goods carriage or pillion riders on two-wheelers unless an 'act-only' policy is upgraded to a comprehensive or package policy covering occupants.
Section 147 is the focal point of disputes regarding policy coverage. Litigants must distinguish between 'Act Only' statutory policies and 'Package/Comprehensive' policies. While an Act-Only policy excludes gratuitous passengers in private cars and pillion riders on two-wheelers, IRDAI-mandated package policies include occupants within their contractual ambit under binding tariff circulars.