NATIONAL UNIVERSITY OF STUDY AND RESEARCH IN
LAW, RANCHI
SUBJECT: CONTRACT
PROJECT TOPIC: Case analysis of “D.M. Oriental Insurance
Corporation Limited Ors. V. Swapna Nayak and Ors.”
SUBMITTED TO: Dr. SONI BHOLA
(ASSISTANT PROFESSOR)
SUBMITTED BY: NITIKA
SEMESTER: II
SECTION: A
ROLL NUMBER: 1121
DECLARATION
This is to declare that the project on the topic “case analysis of D.M Oriental
Insurance Corporation Ltd. V. Swapna Nayak and Ors.”, submitted to Miss. Soni
Bhola, Assistant professor, National University of Study and Research in Law, is
an original work done by the student Nitika of B.A.LL.B (H), Batch 2020-2025,
and has been satisfactorily completed.
ACKNOWLEDGEMENT
I would like to express my special thanks and gratitude to Miss. Soni Bhola, who
gave me the golden opportunity to prepare a project on the topic “case analysis of
D.M Oriental Insurance Corporation Ltd. V. Swapna Nayak and Ors.”. I would
also like to thank her for her guidance in completing my project, without whose
constructive feedback the completion of this project would not have been a
success. I am grateful for the valuable advice and suggestions for corrections,
modification, and improvement. I would also like to thank my parents and friends
who helped me a lot in finalizing this project and for being the source of
inspiration.
D.M. Oriental Insurance corporation limited and others versus Swapna
Nayak and others
Judges Coram: J. Chelameswar and J. Abhay Manohar Sapre
Date of decision: January 23rd,2017
Court of Appeal: The Supreme Court of India
Appellants: DM Oriental Insurance Corporation Limited and others
Respondent: Swapna Nayak and others
Citation: AIR 2017 SC 692, (2017) 3 SCC 598, 2017 (121) ALR 254.
Facts of the case
On 16/12/2006, Mathurananda Nayak [ a resident of U.S.A] along with his mother Jita Nayak
while coming from Cuttack met with an accident in which his car collided with a truck coming
from Pailoli. Mathurananda Nayak, his mother, and the driver of the car died in the accident. So,
the legal hires of the deceased filed two separate petitions for compensation under section 166 of
the motor vehicle act, 1988 and against the owner of the truck and also the insurer i.e Oriental
insurance company limited.
Judgment
The tribunal court held that the accident took place due to the rash and negligent driving of the
truck driver. The said court awarded a compensation of Rs 4,36,9 5,740 to the claimants along
with an interest rate of 7.5 % from the date of the application taking into account that the
deceased was aged 36 years and was president of USA and earning Rs 43,68,624 per annum. The
court also awarded a compensation amount of Rs 1,29,500 with an interest rate of 7.5 % per
annum for the death of Jita Nayak.
An appeal was filed before the H.C. by the Insurance company for reduction of the awarded
amount and by the claimant for enhancement of the compensation. The High court partly
allowed the appeal filed by the Oriental insurance company and thus reduce the compensation
amount of Rs 4,36,95,740 to Rs 3,75,00,000. Also, the claimant's appeal for enhancement of the
compensation amount was dismissed by the high court.
Both the parties again filed an appeal in the supreme court, Oriental Insurance company for
further reduction of the compensation amount and the claimant for enhancement of the
compensation amount awarded to them. The Supreme court held that the compensation awarded
by the high court is just and dismissed the appeal filed by both parties. The supreme court upheld
the judgment given by the High court.
Case comment
The accident occurred due to the rash and negligent driving of the truck and this fact is
undisputed, thus there is no doubt that the owner of the truck is responsible, and also as being the
insurer, the Oriental Insurance Company Limited is responsible for the compensation amount
awarded to the legal heirs of the deceased. The main issue for the appeal was the amount of
compensation to be awarded. If we reconsider the brief of the case.
In the accident with a truck, the deceased and his mother died. The claimants i.e, the wife and
son of the deceased filed a case under section 166 of the motor vehicle act, 1988 against the
owner of the truck and the insurance company for compensation. The tribunal court awarded the
compensation of Rs 4.36,95,740 for the deceased and Rs 1,29,500 for the death of the mother of
the deceased. Both and insurance company and the claimants filed an appeal before the High
court. The H.C. further reduced the compensation for the deceased to Rs 3,75,00,000. Again an
appeal was filed before the supreme court by the insurance company for reduction of
compensation and by the claimants for enhancement of the awarded amount. The appeal was
dismissed and the High court judgment was upheld.
It is clear that what has been eventually awarded to the claimant by the high court appeared to
be just and reasonable compensation within the meaning of section 166 of the motor vehicle act,
1988 and thus there appears no good ground for either, further enhancement or the reduction of
the compensation amount awarded. The said amount was determined and awarded after
considering all the facts i.e. age of the deceased, annual income of the deceased, number of
dependents, salary, etc. The amount awarded was not arbitrary and thus the supreme court
upheld the judgment of the H.C.
Issue: Determination of the amount of compensation to be awarded.
Section 166 of the Motor Vehicle Act (MVA), 1988
Section 166 of the Motor Vehicle Act, 1988 deals with the question that who can apply for
claiming compensation in a tribunal due to a motor accident. As per the section a person can
claim compensation if he is the owner of the vehicle, he has sustained an injury, he is a legal heir
or representative of the person who died due to the motor accident or he is the agent authorized
by either the injured person or by the legal representatives of the person died due to the motor
accident. There is no prescribed limit within which the application for compensation need to be
filed but it should be claimed within a reasonable time. According to section 165 (1) of MVA,
1988, the tribunal can award compensation in the circumstances in which the accident involved
death or injury to a person, or when the accident involves loss of property of the third person and
when such accident occurred due to the use of a motor vehicle. MVA, 1988 establishes a claim
tribunal that lies below the high court, where such compensation application can be entertained.
It is mainly established for the speedy disposal of such cases1.
Determination of compensation amount
In “National insurance company limited versus Pranay Sethi” the Supreme court of India,
through a constitutional bench laid down guidelines for determination of compensation by the
tribunal court in case of a motor accident for victims comprising of a person who is employed,
unemployed, receiving a fixed salary, etc.
It was also held that competition for determination should be just, fair, and reasonable without
any discrimination. The criteria that have been laid down by the court for awarding
compensation are:
1. If the deceased has a permanent job and he is
i. Below 40 years: Addition would be made according to 50% of the salary.
ii. Between 40 to 50 years: Addition would be made according to 30 % of his salary.
iii. Between 50 to 60 years: Addition would be made according to 15% of salary.
1 Diganath Raj Sehgal, July 31, 2019, Road accident claim compensation, accessed on July 14, 2021,
https://blog.ipleaders.in/road-accident-claim-compensation/#:~:text=This%20liability%20is%20dealt%20with,there
%20is%20no%20joint%20liability.&text=The%20compensation%20that%20the%20claimant,in%20case%20of
%20permanent%20disability.
2. If the deceased was employed on a fixed salary or self-employed and he is:
i. Below 40 years: Addition would be made according to 40% of his income.
ii. Between 40 to 50 years: Addition would be made according to 25% of his income.
Between 50 to 60 years: Addition would be made according to 10% of the income.
This amount was also held to be enhanced at the rate of 10% after three years2.
Types of claim: In a motor accident, compensation can be claimed under three categories:
1- No-fault liability: A claim can be filed under this category only when the victim has been
permanently disabled or if he dies. There lies no obligation on the claimant to prove the
fault of the other party. It is dealt with under section 140 of the motor vehicle act, 19883.
2- Hit and Run: Section 161 of the motor vehicle act deals with such cases when the
accused hits the victim and runs away instead of helping him. It can be filed in a case
where a person is injured or even in the case of the death of the victim4.
3- Structured Formula Basis: It is dealt with within section 163 A of the motor vehicle act.
According to it, the claimant is not required to prove the fault of the driver instead the
owner of the vehicle or the insurer has to compensate the claimant for any loss or damage
that occurred5.
4- Fair Compensation: The Supreme Court in the case “Ramla and others vs National
insurance company limited and others”, held that compensation awarded is fair and just
only based on the evidence produced. In this case, it was also held that the court can
award compensation even more than what is claimed by the victim or the legal
representative of the victim of a motor accident.
In “Ramla versus National insurance company limited”, the claimants claimed a
compensation amount of Rs. 25,00,000 but then in an appeal for enhancement of
compensation, the supreme court has increased the awarded amount to Rs 28,00,000, i.e
more than what was claimed as compensation by the claimants. The court can award an
2 Case analysis Ramla v. national insurance company Ltd., accessed on July 14, 2021,
https://www.mondaq.com/india/trials-appeals-compensation/801338/case-law-analysis-ramla-v-national-insurance-
company-limited.
3 Section 140, Motor Vehicle Act, 1988.
4 Section 161, Motor Vehicle Act, 1988.
5 Section 163, Motor Vehicle Act, 1988.
amount that may or may not exceed the claimed amount as compensation for the victim of a
motor accident. Thus, there exists no restriction on the court to award the compensation
according to the amount that is claimed by the claimants6.
Contract of Indemnity
A contract of indemnification and guarantee is a unique sort of contract in which compensation
is provided to a person who has suffered a loss or any compensation to save him from loss
caused by various reasons. An indemnity contract is one in which one party promises to
safeguard another against a potential loss.
In an indemnity contract, one party promises to protect the other against injury or loss caused by
the promise's conduct or the conduct of any third party, such as an indemnifier (a person who
promises to indemnify the loss).
The person whose loss is indemnified is called indemnified or indemnity holder.
A contract of indemnity, according to section 124 of the Indian Contract Act 1872, is one in
which one party promises to protect the other from loss caused by the promise and himself or by
the behavior of any other person.
According to English law, a contract of indemnity is a promise to take another from loss caused
as a result of a transaction entered into at the instance of the promise. English Law in comparison
to Indian law is divided about the definition of the term.
According to the Indian contract Act 1872, the loss must be caused by the conduct of the
promisee or any other person, and for the losses caused by accident, there would not be a
contract of indemnity.
Features of the contract of indemnity
6 Supreme court states that there is no restriction per se in awarding compensation beyond the amounts as claimed
by the victims in motor accident claims, accessed on July 14, 2021, https://www.reddyandreddy.org/supreme-court-
states-that-there-is-no-restriction-per-se-in-awarding-compensation-beyond-the-amounts-as-claimed-by-the-victims-
in-motor-accident-claims/.
1- The contract is made for protecting the promise against anticipated or contingent loss.
2- The indemnifier's liability begins when the loss is added to the indemnified.
3- Actual loss is compensated by indemnification.
4- The contract specifies that the event must take place.
5- Contract may be implied and expressed.
Rights and duties of indemnifier and indemnity holder
Rights of indemnity holder
Indian contract act provides in case any person has completed a contract and rating to indemnity
with the provision to pay to any party to a contract or a third person for any loss or harm that
may occur as a result of his activities while working under the supervision of that contracting
party to obtain such compensation or any of the following amounts.
i. Indemnity account- An indemnity account is mentioned in the contract.
ii. If such an individual suffers any loss or damage, the sum is to be paid or borne in
consideration of that loss or damage.
iii. Expenses- The amount he spent in connection with the indemnity contract on the
lawsuit he filed or defended.
iv. Amount spent in the suit- If the legal action is to be taken due to non-payment of the
sum payable mentioned above, the amount is to be spent in the suit.
Duties of indemnifier
The Indian Contract Act makes no provisions for the indemnifier's rights; but, in the following
situations, the indemnifier must indemnify the indemnity holder:
i. There must be some sort of loss or damage.
ii. The loss or damage must have resulted from an accident as specified in the contract.
iii. The bearer of an indemnity must behave carefully, prudently, and following the
authorization of the insuring party.
Insurance contract and contract of indemnity
India
It should be noted that section 124 only recognizes a contract of indemnity where there is a
promise to save another person from harm caused by the chronically infected by the conduct of
any other person; it does not cover a promise to compensate for loss not caused by human
agency, so a contract of insurance is not covered by the definition of section 124 does it under a
contract of insurance and insurer promises to pay compensation in the event of loss by fire, such
contact does not come within the purview of section 124 such contract is valid contract has been
contingent contract as defined in section 31.
England
The term indemnity has a significantly broader meaning in English law than it does in Indian
law, which includes a contract to protect the party against losses caused by human agency or any
other occurrence such as an accident or fire. Under English law contract of insurance is
considered as a contract of indemnity however life insurance is an exception to it. A contract of
life insurance, for instance, may provide the payment of a certain sum of money in such a
circumstance of death or expiry of the period of insurance. In such a case, the question of the
amount of loss experienced by the insured or indemnity for the same does not arise. Furthermore,
even if a particular sum is payable in the event of death, unlike property the life of a person
cannot evaluate the whole of the amount assured, become payable, for that reason also it is not a
contract of indemnity. The Indian Contract Act does not specifically provide that there can be an
implied contract of indemnity. The privy council recognizes and implied indemnity contract
according to the Law Commission of India's assessment, the definition of a contract of
indemnification in section 124 should be enlarged to cover locations of damage caused by events
that may or may not be dependent on the action of any person, and it should also clearly state
that the guarantee may be implied7.
7 Law of Contract II with Indian Partnership Act and Sales of Goods Act, by Dr. R.K Bangia, Vol 2.
