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Analysis of the proposed Road Transport and Safety Bill, 2015: Salient features with Special reference to Third Party Claim Compensation/Settlement

Road Transport and Safety Amendment Bill, 2015 has been a key initiative of Shri Nitin Gadkari led Ministry of Road Transport and Highways. The bill has been revised manifold times and has been the subject matter of debate across insurance companies, regulatory authorities and Central Government. The winter session of the Parliament could not see the bill having been passed which led to Mr. Gadkari expressing as his biggest regret in media and citing ulterior motive behind not passing of the bill.

As per the Press Information Bureau release of August 10, 2015 via Ministry of Road Transport & Highways, the draft Road Transport and Safety Bill, 2015 is in consultation stage and has been sent to State Government/Union Territories Administration for their comments and suggestions. Recently a Group of Ministers (GoM) constituted to reform the road transport recommended 34 changes in the MV Act met in Andhra Pradesh to review the bill and existing MV Act. The bill addresses the need of hour to reduce the fatalities caused in road traffic accidents, with the toll rising to 1,46,000 deaths and 4,80,000 injuries in year 2014 alone with Tamil Nadu & Maharashtra leading the count.  

Vision: An Act to provide a scientifically planned and evolving framework for the safety of all road users in India, including vulnerable road users, 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.

The bill consolidates the MVA, 1988 and the amendments made till MV (Amendment) Act, 2015 and the safety mechanism incorporated into the new act. It proposes innovative financing mechanism for funding safety programs which would save over 2,00,000 lives in its 1st 5 years of implementation due to reduction in road traffic accident death.

Increase in fine and punishments: Section 188-195 of the bill provides for punishment relating to use of Motor Vehicle without certificate of registration or without effective driving licence, up to to Rs. 10, 000. Where a motor cycle is being driven on road without valid insurance policy, the increased fine is Rs. 10, 000 to where the vehicle is car or truck, the fine extends to Rs. 70,000. If the vehicle does not have a valid permit, the fine being imposed may extend to Rs. 10, 000 on 1st offence and on subsequent offence, up to Rs. 25, 000. Driving violation in existing S. 188- 194 of the Act have been extended to 7 years of imprisonment in certain cases.

Unified driving licence and registration mechanism: Section 43 of the new bill introduces the provision of Unified Driving License system enabling online applications for driving licence and also standardized practices in issuing them. The 2016 GoM also addressed that over 30% licences in India are fake. The license holders before commencement of the act, will be required to obtain license under the new act within 2 years of the commencement. Section 57 introduces the provisions of the act for grant of registration and ease of distribution of revenues to fix fees for issuance of motor vehicle registration.

Third Party Claim Compensation

Chapter X of the bill deals with third party risks and introduces the definition under Section 124 (d) of “hit and run motor vehicle crash” to mean “arising out of the use of a motor vehicle or motor vehicles the identity whereof cannot be ascertained in spite of reasonable efforts for the purpose”.

“Third Party” now includes Central Government and State Government andGrievous Hurt” to have the same meaning as in IPC.

In the provision of the existing Section 146 dealing with “Necessity for insurance for third party risk”, the words “used for the purposes relating to the defense of the country” have been omitted to now only include vehicle not being connected with commercial objective.

Chapter dealing with liability to pay compensation on principle of no fault under Section 140, MVA Act, 1988 has been removed from the provisions of the new bill and clubbed with Section 163A, MVA 1988 with higher compensation. The proviso to sub-section 1 (b) of existing Section 147 stating “Provided that policy shall not be required to- (…)” has been omitted in the new bill.

Compensation:  Section 126 (2), RT & S Bill, 2015 provides for requirement of policies section stating that the minimum premium to be paid and the maximum liability of an insurer shall be prescribed by the Central Government, in consultation with the IRDA. The proviso to the same section states that the maximum liability for minimum premium paid shall be a sum not exceeding Rs. 25 Lakhs, as the CG may notify.

The provision relating to the Section 163A compensation have been retained in the new bill under Section 143, however, with the modifications that the minimum compensation in cases of death shall not be less than Rs. 25 Lakhs as may be prescribed by the CG.

The compensation application and scheme under Section 166 has also been retained under the new bill, with the insertion of a notwithstanding clause that “the right of a person to claim compensation for injury in a crash shall, upon the death of the person injured, survive to his legal representatives, irrespective of whether the cause of death is relatable to or had any nexus with the injury or not.

Appeals: With the change in the new bill of the minimum compensation being Rs. 10 Lakhs and Rs. 25 Lakhs, the requirement under Section 173 of Rs. 50, 000 and 50% of the amount of compensation, has now been restricted to the condition of “50% of the amount of compensation so awarded”. Similarly, the appeal against any order of the MACT shall not be preferred if the amount in dispute is less than Rs. 1 Lakh, which is Rs. 10, 000 in the present act. 

Settlement by insurance companies

Section 128 in the new bill introduces the provision of “settlement of claims”where the insurance company shall designate an officer to settle claims relating to such claims. The designated officer shall make an offer to claimant for settlement before the Claims Tribunal and should the claimant accept the claim:-

  1. Tribunal shall record the settlement and claim shall be deemed to be settled by consent and;
  2. The payment for the same shall be made by the insurance company within 30 daysfrom the date of receipt of record of settlement. Should the claimant reject the offer, the tribunal shall fix a date for hearing.

Statutory defenses absolving liability of insurance companies

The existing provisions which absolve insurance companies from indemnifying the insured are provided in S. 149 of the Act. The new bill has retained the existing defenses under Section 149 of the MVA, 1988 with the insertion of the defense of non-receipt of premium money(popularly known as Cheque Dishonor) as required under Section 64VB of the Insurance Act, 1948. Under sub-section 7 of the same provision, a duty is caste on the owner of the vehicle to inform the court or tribunal as to whether the vehicle had been insured and if, with which insurance company.

Conclusion

With over 1 death in every 4 mins in India and one injury every min, it is highly necessary for the Parliament to introduce the new mechanism in the place. The passing of the bill shall not only reduce the fatalities by creating a deterrent effect but also save the annual loss to the economy due to accidents in India which is close to 3 per cent of the GDP. India sees nearly 5 Lakh road accidents a year in which 1.5 lakh people die and another 3 lakh get crippled.

(The writer also thanks Mr. Josho Kotoky, Mr. Amit Yawalkar, Mr. G Iyyappan and Mr. Siddhartha Srivastava who contributed in their own possible ways when this article was first presented in Aug, 2015.)

Kaustubh works as in-house counsel with a leading insurance company in India. He takes active interest in matters relating to Motor Vehicle Insurance and Third Party Claims.
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