Conflict between "Geographical Area" and "Limitation as to Use" Clauses – Special Permit for Foreign Territory - The appellant-insurer disputed liability on the ground that the policy's geographical area was limited to "India" - the "Limitation as to Use" clause covered the vehicle's use under a "permit" within the meaning of the MVA - A special permit was validly issued under Section 88(8) of the MVA, explicitly authorizing the vehicle to ply on the Durg-Nepal route - Held, since the "Limitation as to Use" clause was cast in general terms without geographical boundaries, the existence of a valid permit extending to a foreign territory meant the policy covered the use irrespective of the geographical location - If the insurer intended to exclude cross-border territory entirely, it ought to have drafted the exclusion clearly and unambiguously.
14. The Appellant-insurer ought to have expressly mentioned that their policy would not cover any area outside the territory of India even with a permit. It should have effectively and clearly communicated the terms of contract as the terms are unilaterally drafted by the insurer only. Essentially, "Cover what you want. Exclude what you want. But make sure you do it clearly. Sloppy drafting could cost you something."7 Since specific geographical exclusion is not expressly provided for, the Appellant's contention cannot be accepted. Here only we may observe that the vehicle in question was lawfully allowed to travel outside India and into Nepal. The authorities at the International Border Post, only after being satisfied with all compliances of law allowed it to cross the border. Also, when the clauses are such that there is scope of interpreting the insurance policy, in multiple ways then the interpretation which aligns with the beneficial purposes of the MVA should be adopted.
16. Keeping with the beneficial intent, it is a well settled position of law that in case of any ambiguity, the interpretation that favours the insured must be adopted i.e. the rule of contra proferentem.
IN THE SUPREME COURT OF INDIA
Civil Appeal No. 9204 of 2026
Decided On: 20.07.2026
The Oriental Insurance Co. Ltd. Vs. Durg Roadways Private Limited and Ors.
Hon'ble Judges/Coram:
Sanjay Karol, J.
