Administration Manual - B.E.S.T. Undertaking.

After the amendment in 1956 to the Principal Motor Vehicle Act, 1939,
the Central Government had enacted the Motor Vehicles (Third Party
Insurance) Amendment Rules, 1960 to further amend the Motor
Vehicles (Third Party Insurance) Rules 1946 which inter-alia laid down
that any Local Authority (which the Undertaking legally is) or any State
Transport Undertaking may not, if they so desire, take out an
Insurance Cover with an insurance company to cover Third Party Risks
under the Rules but can establish a Fund with an initial amount of not
less than Rs. 5,00,000.00 which is to be deposited in a bank and then
at the beginning of each accounting year pay a sum of Rs.500.00 per
vehicle in running condition into the Fund. This annual deposit is
continued to be paid till such time the Fund reaches a ceiling of
Rs.20,00,000.00 or Rs.1,500 per vehicle of the entire fleet, whichever is
less. The Undertaking has to maintain a cash deposit of Rs.50,000.00
and the remaining amount can be invested in Government securities
which have to be transferred to the bank and it is open to us to
exchange these securities for cash or other Government Securities of
equal or greater market value or both.
All liabilities to Third Parties including liabilities arising out of
Workmen’s Compensation Act, 1923, are met by withdrawals from this
Fund.
Looking to the general scheme of Chapter VIII of the M.V. Act, it does
not seem incumbent on the Undertaking to meet claims arising out of
the use of any vehicle of the Undertaking from the Fund. All that is
required is that the fund be established to meet such claims but it is
open to the Undertaking to meet such claims from any other source.
Therefore, though the yearly contribution may be inadequate to meet
all liabilities arising out of the motor vehicle accidents from this Fund
it is not necessary to transfer to this Fund any amount to maintain the
minimum balance as claims may be met from the undertaking’s Third
Party Insurance Fund.
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