Court Directs Insurer To Satisfy Award With Right To Recover From Insured Owner

A Bench of Justices K. Vinod Chandran and N.V. Anjaria heard Civil Appeal No. 9669 of 2024 arising from a claim for compensation after a fatal motor accident and examined whether the doctrine of "pay and recover" should apply where the driver did not hold a valid licence and the insurer sought to avoid liability. The appeal was filed by the mother of the deceased challenging the Chhattisgarh High Court’s June 11, 2020 order which enhanced compensation and fastened liability on the driver and owner while absolving the insurer.

The Supreme Court allowed the appeal and directed the insurer to satisfy the award while preserving the insurer’s right to recover the amount from the insured-owner. The Court accepted that the driver did not hold a valid licence on the date of the accident and that, as a matter of law, the insurer could have a defence under the Motor Vehicles Act and the policy conditions; nevertheless, it followed the established line of precedents in favour of immediate relief to the claimant. The Court, in its reasoning, observed: "In the above circumstances, going by the series of decisions of this Court, it is only proper that the insurer be directed to satisfy the award, which however can be recovered by the insurer from the insured-owner of the vehicle. The appeal stands allowed." The judgment also recorded the High Court’s finding that, on account of the licence validity gap, "we do not find any error in the finding recorded by the learned Claims Tribunal that on the date of accident, respondent No.1 was not possessing valid and effective driving license leading to breach of conditions of insurance policy and exonerating the Insurance Company from its liability."

Background The dispute arose from a road accident on October 13, 2011 in which Nand Kumar, a conductor, died when the truck he was on collided with a tractor-trolley. The Claim Tribunal at Raipur awarded Rs. 3,00,000 to the claimants. On appeal, the High Court enhanced the compensation to Rs. 5,33,600 with 7% interest and placed liability on the driver and owner while holding the insurer (respondent No. 3) not liable because the driver’s licence had expired on June 20, 2010 and was renewed only from November 3, 2011 — after the accident. The claimants argued before the Supreme Court that the principle of "pay and recover" should be applied, relying on this Court’s precedents including Shamanna v. Oriental Insurance Co. and Parminder Singh v. New India Assurance Co., which directed insurers to satisfy awards to third-party victims and recover from the insured thereafter. The insurer relied on later decisions raising questions about imposing pay-and-recover where legal liability was disputed and relied on statutory provisions including Section 15 (renewal of driving licences) and Section 149(2)(a)(ii) of the Motor Vehicles Act to contend that breach of licence conditions exonerated it from liability. The Supreme Court noted the line of authorities and, while recognising that the insurer had a valid defence on merits, concluded that established precedent and principles of compensating victims warranted directing the insurer to satisfy the award, with liberty to recover the amount from the insured-owner. The appeal was allowed and any pending application stood disposed of; no separate interim directions were recorded.

Case No.: CIVIL APPEAL NO. 9669 OF 2024 Case Title: RAMA BAI ….APPELLANT VERSUS M/S AMIT MINERALS THROUGH INCHARGE OFFICER/COMPETENT OFFICER & ANRS. ….RESPONDENT(S) Appearances: For the Petitioner(s): Kaustubh Shukla, Advocate For the Respondent(s): Gopal Singh, Advocate