National Insurance Co. Ltd vs Keshav Bahadur And Ors

The Supreme Court held that under Section 95(2)(b)(i) of the Motor Vehicles Act, 1939, the insurer's liability for third-party claims is limited to Rs.50,000, and any stipulation for penal interest beyond statutory provisions is not permissible. The Court found that the High Court's direction for payment of compensation with a default interest rate of 18% was legally unsound, as there is no provision for penal interest under Section 110CC of the Act. Consequently, the judgment of the Jharkhand High Court was set aside, affirming the insurer's liability limit and rejecting the penal interest stipulation.