Court’s Decision
The Supreme Court allowed the appeal filed by the legal heirs of the deceased in a motor accident case and held that the Insurance Company, though not liable under the policy terms, must pay the compensation to the claimants and recover it from the vehicle owner. The Court enhanced the compensation amount from ₹19,53,000/- to ₹26,97,500/-, directing the Insurance Company to disburse the amount within four weeks, invoking the “pay and recover” principle in light of established jurisprudence.
Facts
On 27 November 2013, the deceased, aged 32 and working as a cloth seller, was returning from a weekly market in a Tata 407 Truck when the vehicle, driven negligently, met with an accident near Kurwaiha Ghati Road in Madhya Pradesh. The victim died on the spot. His legal representatives filed a claim under Section 166 of the Motor Vehicles Act, 1988 seeking ₹49,26,000/- in compensation, claiming his monthly income as ₹12,000.
The Insurance Company denied liability citing breach of policy conditions, including absence of permit, fitness certificate, and valid driving license for a commercial vehicle.
The Motor Accident Claims Tribunal (MACT), on 19 December 2016, awarded ₹19,53,000/- with 6% annual interest but fastened liability solely on the driver and vehicle owner, citing that the driver had only a Light Motor Vehicle (LMV) license and the policy was a “Liability Only” policy not covering the driver or occupants.
The High Court upheld this decision in its judgment dated 12 December 2022.
Issues
- Whether the Insurance Company was liable to compensate the claimants despite policy violations?
- Whether the driver held a valid license to drive the commercial vehicle involved in the accident?
- Whether the principle of “pay and recover” should have been applied by the lower courts?
- Whether the compensation awarded by the Tribunal was just and fair?
Petitioner’s Arguments
The claimants contended that even if the policy conditions were breached, as per the Supreme Court ruling in National Insurance Co. Ltd. v. Paravathneni, the principle of “pay and recover” should apply, and the insurer must first compensate and then recover the amount from the owner.
They also submitted that the driver’s LMV license was valid for the type of vehicle (Tata 407) involved in the accident, citing the law laid down in Mukund Dewangan.
The claimants also prayed for enhancement of compensation under various heads, including future prospects and conventional heads.
Respondent’s Arguments
The Insurance Company argued that there was a breach of policy conditions, including absence of valid permit, fitness certificate, and that the vehicle was being used for loading goods, while insured only under a “Liability Only” policy.
It claimed that no premium had been paid to cover passengers or the driver, and thus it was not liable. Further, the driver held only an LMV license, not valid for the commercial vehicle involved.
Analysis of the Law
The Court examined the applicability of a driver’s LMV license to commercial vehicles and the implications of a “Liability Only” policy. It noted that the Tata 407 Truck’s gross vehicle weight of 4995 Kg fell under the LMV category (vehicles below 7500 Kg), and as such, the driver’s LMV license was valid in view of the law laid down in Bajaj Alliance v. Rambha Devi, which upheld Mukund Dewangan.
Regarding policy conditions, the Court acknowledged that no premium was paid to cover the deceased as a gratuitous passenger. However, this technicality did not absolve the insurer from liability in light of the “pay and recover” doctrine established in previous rulings.
Precedent Analysis
- Mukund Dewangan v. Oriental Insurance Co. Ltd. (2017) 14 SCC 663: Held that an LMV license suffices for driving transport vehicles under 7500 Kg.
- Bajaj Alliance v. Rambha Devi (2024) 1 SCC 818: A Constitution Bench affirmed Mukund Dewangan, clarifying the scope of LMV licenses and upholding their validity for such vehicles.
- National Insurance Co. Ltd. v. Baljit Kaur (2004) 2 SCC 1: Recognized the principle of “pay and recover” for cases involving gratuitous passengers.
- Anu Bhanvara v. IFFCO Tokio (2020) 20 SCC 632: Applied “pay and recover” despite lack of coverage for gratuitous passengers.
- Pranay Sethi (2017) 16 SCC 680: Laid down guidelines on calculating compensation including conventional heads and future prospects.
- United India Insurance Co. Ltd. v. Satinder Kaur (2021) 11 SCC 780: Considered while increasing the amount under loss of consortium.
Court’s Reasoning
The Court ruled that although the insurer was technically not liable under the terms of the policy, justice and precedents demanded the application of the “pay and recover” principle. The vehicle fell within the LMV classification, and the driver held a valid license. The insurer, therefore, could not escape initial liability.
The Court also found that the original compensation awarded by the Tribunal was inadequate and required enhancement under the conventional heads and due to inflation adjustments as per Pranay Sethi.
Conclusion
The Supreme Court enhanced the compensation to ₹26,97,500/- and directed the Insurance Company to pay this amount to the claimants within four weeks, with interest at 6% p.a. It clarified that the insurer could recover this amount from the owner but not from the driver, who held a valid license.
Implications
This judgment reinforces the “pay and recover” doctrine in motor accident compensation matters where technical policy breaches exist. It affirms that even if gratuitous passengers are not covered, insurers must disburse compensation and seek recovery later. It also clarifies that LMV licenses are valid for light commercial vehicles under 7500 Kg, consistent with the rulings in Mukund Dewangan and Rambha Devi.
Cases Referred and Their Relevance
- Mukund Dewangan v. Oriental Insurance Co. Ltd. – Validated LMV license for commercial vehicles under 7500 Kg.
- Bajaj Alliance v. Rambha Devi – Constitution Bench reaffirmed Mukund Dewangan.
- National Insurance Co. Ltd. v. Baljit Kaur – Introduced “pay and recover” for gratuitous passengers.
- Anu Bhanvara v. IFFCO Tokio – Reaffirmed “pay and recover” principle.
- Pranay Sethi – Compensation guidelines.
- Satinder Kaur, Rajwati v. United India Insurance, Sadhana Tomar – Cited to calculate loss of consortium and other heads.
FAQs
1. Can an LMV license holder drive a Tata 407 truck in accident cases?
Yes, if the gross vehicle weight is under 7500 Kg, as clarified in Bajaj Alliance v. Rambha Devi and Mukund Dewangan, an LMV license suffices.
2. What is the “pay and recover” principle in motor accident claims?
It mandates that insurers must first compensate the victims and then recover the amount from the vehicle owner, even when the policy doesn’t cover the deceased.
3. How is compensation calculated under motor accident claims?
The Court considers income, future prospects, age, dependents, and conventional heads like loss of estate, consortium, and funeral expenses, using the multiplier method and applicable precedents like Pranay Sethi.
