Madhya Pradesh HC: Whether the owner of vehicle can take the defence that minor child drove the vehicle without his knowledge?

The contention of the owner that the vehicle was driven by his minor brother without his consent or knowledge cannot be accepted as the owner of a vehicle must take adequate care to ensure that only a duly licensed and competent person drives the vehicle.

8. It is often said that responsibility is the silent shadow that follows every act of freedom. In the case of the young, whose impulses race faster than their understanding, that shadow must be guided by the hands of their elders. Thus, upon the elder rests the solemn duty to restrain the minor from venturing into paths not yet meant for their age particularly, the act of driving a vehicle, which demands both maturity and lawful permission. The elder must serve as both guardian and guide, ensuring that the thrill of youth does not overrun the boundaries of safety and law. The minor's safety, and the safety of others, depends upon the vigilance of the elder who understands that care is the truest expression of responsibility.

9. In the present case, both the owner and the driver are real brother. It is inconceivable that the owner was unaware of his brother's use of the vehicle. Even assuming otherwise, the duty to keep the vehicle safe and not accessible to an unlicensed person lies squarely on the owner. Hence, the owner cannot escape liability by merely stating lack of consent.

IN THE HIGH COURT OF MADHYA PRADESH (JABALPUR BENCH)

Misc. Appeal No. 376 of 2007

Decided On: 10.11.2025

Branch Manager United India Insu. Comp. Vs. Maneesh Kumar Singrore and Ors.

Hon'ble Judges/Coram:

Himanshu Joshi, J.

Citation: 2025:MPHC-JBP:57157,MANU/MP/3600/2025.

Read full judgment here: Click here.

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Madhya Pradesh HC: Negligently Allowing Minor To Drive Without Valid License Is Breach Of Insurance Policy

 In the present case, both the owner and the driver are real brother. It is inconceivable that the owner was unaware of his brother's use of the vehicle. Even assuming otherwise, the duty to keep the vehicle safe and not accessible to an unlicensed person lies squarely on the owner. Hence, the owner cannot escape liability by merely stating lack of consent. {Para 9}

10. Therefore, it is held that there was a fundamental breach of the policy condition by the owner in permitting or negligently allowing a minor to drive the vehicle.

11. The Insurance Company has raised a valid defence that the vehicle was being driven by a person who was not duly licensed. The breach being fundamental and directly contributing to the cause of the accident, the insurer is entitled to be exonerated from liability to indemnify the claimants.

IN THE HIGH COURT OF MADHYA PRADESH (JABALPUR BENCH)

Misc. Appeal No. 376 of 2007

Decided On: 10.11.2025

Branch Manager United India Insu. Comp. Vs. Maneesh Kumar Singrore and Ors.

Hon'ble Judges/Coram:

Himanshu Joshi, J.

Citation: 2025:MPHC-JBP:57157,MANU/MP/3600/2025

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Supreme Court: Insurance Company should invoke principle of pay and recover if driver of vehicle carrying hazardous goods was not having proper license to drive that vehicle

 In this case, the High Court had set aside the

award passed by the Motor Accidents Claims Tribunal

stating that respondent No. 2, at the relevant time,

was not having a proper license to drive the vehicle

carrying hazardous goods and, in such circumstances,

the insurance company cannot be fastened with the

liability of payment of the award amount.

The only issue for consideration is as to

whether the High Court was right in refusing to adopt

the usual procedure of pay and recover in cases of

motor accident claims.

Considering the facts of the case, we are of the

view that the High Court should have asked the

respondent No.1 - Insurance Company to pay the

appellants – claimants, with liberty to recover it

from respondent No. 2 – owner of the vehicle which

caused the accident in the execution proceedings.

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL [C] NO. /2025

[@ SLP [C] NO.3033/2024]

MANTU MAHATO & ORS. Vs THE NATIONAL INSURANCE  COMPANY LTD. & ANR. 

Dated: FEBRUARY 03, 2025.

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Supreme Court: Insurance company must prove fundamental breach of policy condition if it takes defence of breach of policy conditions

SUMMARY OF FINDINGS :

106. The summary of our findings to the various issues as raised in these petitions are as follows:

(i) Chapter XI of the Motor Vehicles Act, 1988 providing compulsory insurance of vehicles against third party risks is a social welfare legislation to extend relief by compensation to victims of accidents caused by use of motor vehicles. The provisions of compulsory insurance coverage of all vehicles are with this paramount object and the provisions of the Act have to be so interpreted as to effectuate the said object.

(ii) Insurer is entitled to raise a defence in a claim petition filed under Section 163A or Section 166 of the Motor Vehicles Act, 1988 inter alia in terms of Section 149(2)(a)(ii) of the said Act.

(iii) The breach of policy condition, e.g. disqualification of driver or invalid driving licence of the driver, as contained in Sub-section (2)(a)(ii) of Section 149, have to be proved to have been committed by the insured for avoiding liability by the insurer. Mere absence, fake or invalid driving licence or disqualification of the driver for driving at the relevant time, are not in themselves defences available to the insurer against either the insured or the third parties. To avoid its liability towards insured, the insurer has to prove that the insured was guilty of negligence and failed to exercise reasonable care in the matter of fulfilling the condition of the policy regarding use of vehicles by duly licensed driver or one who was not disqualified to drive at the relevant time,

(iv) The insurance companies are, however, with a view to avoid their liability must not only establish the available defence(s) raised in the said proceedings but must also establish 'breach' on the part of the owner of the vehicle; the burden of proof where for would be on them.

(v) The court cannot lay down any criteria as to how said burden would be discharged, inasmuch as the same would depend upon the facts and circumstance of each case.

(vi) Even where the insurer is able to prove breach on the part of the insured concerning the policy condition regarding holding of a valid licence by the driver or his qualification to drive during the relevant period, the insurer would not be allowed to avoid its liability towards insured unless the said breach or breaches on the condition of driving licence is/ are so fundamental as are found to have contributed to the cause of the accident. The Tribunals in interpreting the policy conditions would apply "the rule of main purpose" and the concept of "fundamental breach" to allow defences available to the insured under Section 149(2) of the Act.

(vii) The question as to whether the owner has taken reasonable care to find out as to whether the driving licence produced by the driver, (a fake one or otherwise), does not fulfil the requirements of law or not will have to be determined in each case.

(viii) If a vehicle at the time of accident was driven by a person having a learner's licence, the insurance companies would be liable to satisfy the decree.

(ix) The claims tribunal constituted under Section 165 read with Section 168 is empowered to adjudicate all claims in respect of the accidents involving death or of bodily injury or damage to property of third party arising in use of motor vehicle. The said power of the tribunal is not restricted to decide the claims inter se between claimant or claimants on one side and insured, insurer and driver on the other. In the course of adjudicating the claim for compensation and to decide the availability of defence or defences to the insurer, the Tribunal has necessarily the power and jurisdiction to decide disputes inter se between insurer and the insured. The decision rendered on the claims and disputes inter se between the insurer and insured in the course of adjudication of claim for compensation by the claimants and Se award made thereon is enforceable and executable in the same manner as provided in Section 174 of the Act for enforcement and execution of the award in favour of the claimants.

(x) Where on adjudication of the claim under the Act the tribunal arrives at a conclusion that the insurer has satisfactorily proved its defence in accordance with the provisions of Section 149(2) read with Sub-section (7), as interpreted by this Court above, the Tribunal can direct that the insurer is liable to be reimbursed by the insured for the compensation and other amounts which it has been compelled to pay to the third party under the award of the tribunal Such determination of claim by the Tribunal will be enforceable and the money found due to the insurer from the insured will be recoverable on a certificate issued by the tribunal to the Collector in the same manner under Section 174 of the Act as arrears of land revenue. The certificate will be issued for the recovery as arrears of land revenue only if, as required by Sub-section (3) of Section 168 of the Act the insured fails to deposit the amount awarded in favour of the insurer within thirty days from the date of announcement of the award by the tribunal.

(xi) The provisions contained in Sub-section (4) with proviso thereunder and Sub-section (5) which are intended to cover specified contingencies mentioned therein to enable the insurer to recover amount paid under the contract of insurance on behalf of the insured can be taken recourse of by the Tribunal and be extended to claims and defences of insurer against insured by, relegating them to the remedy before, regular court in cases where on given facts and circumstances adjudication of their claims inter se might delay the adjudication of the claims of the victims.

 IN THE SUPREME COURT OF INDIA

SLP (C) Nos. 15528 and 15772 of 2002, 

Decided On: 05.01.2004

National Insurance Co. Ltd. Vs. Swaran Singh and Ors.

Hon'ble Judges/Coram:

V.N. Khare, C.J., D.M. Dharmadhikari and S.B. Sinha, JJ.

Authored By : V.N. Khare, D.M. Dharmadhikari, S.B. Sinha

Citations: AIR 2004 SUPREME COURT 1531, 2004 (3) SCC 297, MANU/SC/0021/2004

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Bombay HC: Under which circumstance the motor accident claim tribunal should not pass the order of pay and recover against Insurance Company?

 In the case at hand, on the date of accident, the driver of the offending vehicle did not hold valid and effective driving license to driving offending vehicle. Opponent No. 2, being driver as well as the owner of the offending vehicle, was fully aware that on the date of accident, he did not hold valid and effective driving license to drive offending vehicle. Even, then, Opponent No. 2 drove offending vehicle and gave dash to the motorcycle of the claimant. These facts on record clearly indicate that the owner of the offending vehicle was guilty of negligence and failed to exercise reasonable care, in the matter of fulfilling the condition of the policy of insurance, regarding use of vehicle by duly licensed driver. Therefore, this breach of condition of policy of insurance being "fundamental breach", the insurer of the offending vehicle, cannot be compelled to indemnify the Opponent No. 2. Therefore, "to pay and recover" order cannot be passed against the insurer of the offending vehicle. I have no hesitation to hold that the learned Tribunal has rightly exonerated the insurer of the offending vehicle from any liability to pay compensation to the claimant. {Para 16}

17. Before parting with the judgment, I must make it clear that the ratio in "Pappu and Others v. Vinod Kumar Lamba and Another"[supra], relied on by the learned counsel for the insurer is distinguishable on facts, for the reason that in the case at hand, Opponent No. 2 has duly pleaded that the offending vehicle was being driven by the driver holding valid and effective driving license. Accordingly, I hold that the insurer has duly proved "fundamental breach" of condition of policy of the insurance of offending vehicle and therefore, no liability can be fastened against the insurer of the offending vehicle. I hold that the Tribunal has rightly fastened entire liability to pay the compensation on Opponent No. 2, who is owner and driver of the offending vehicle. 

IN THE HIGH COURT OF BOMBAY (AURANGABAD BENCH)

First Appeal Nos. 567 and 568 of 2019

Decided On: 30.04.2019

Swapnil Vs. The Branch Manager, The New India Insurance Co. Ltd. and Ors.

Hon'ble Judges/Coram:

Sunil K. Kotwal, J.

Citation: MANU/MH/1716/2019.

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Bombay HC: Under which circumstances insurance company is liable to pay and recover compensation granted under motor vehicle claim petition?

To prove the defence that the driver of offending vehicle was not holding effective and valid driving licence at the time of accident, the appellant / Insurance Company has examined Poonam Nikam, Junior Clerk of R.T.O. Malegaon at Exhibit-45. This witness has stated that driver of offending vehicle had applied to the Dy. R.T.O. Malegaon for licence of transport vehicle on 05.09.2018 and on the next date i.e. on 06.09.2018, he was declared pass in the said test by that office, however the licence of transport vehicle was issued to him from 19.10.2018. {Para 5}

 

6. It is contention of learned counsel for the appellant/Insurance Company that the date of accident is 18.10.2018, so on the date of accident the driver was not holding effective and valid driving licence. The driver of offending vehicle examined himself to prove that he was having driving licence. He has further stated that in the year 2017, R.T.O. office Malegaon issued him licence of two wheeler as well as four wheeler. Thereafter, on 05.09.2018 he had applied to the R.T.O. Malegaon for licence of the truck i.e. transport vehicle and he passed that driving test on 06.09.2018. He produced the papers on record. The said papers are at Exhibit-58. While dealing with the issue of driving licence the Tribunal has observed that on the date of accident driver was not holding effective and valid driving licence. There was breach of terms and conditions of insurance policy. On that basis Tribunal has passed pay and recover order. I do not find infirmity in it. In my view, driver had licence of driving the four wheeler vehicle it was issued to him in the year 2017. Thereafter, he applied for licence of driving truck on 05.09.2018 he had passed the said test. The licence is issued on the next day of the accident, as licence of driving four wheeler was issued in the year 2017 hence it cannot be said that he was not aware of the driving skill. Moreover, he had passed driving test of transport vehicle prior to accident. At the time of accident the offending vehicle was insured with the appellant/Insurance Company it is settled principle of law that if there is breach of terms and conditions of insurance policy the Insurance company has to pay the compensation and recover it from the owner of the vehicle. Hence, I do not see merit in the contention that the Insurance Company should have been exonerated from paying compensation.

 IN THE HIGH COURT OF BOMBAY

First Appeal No. 1082 of 2023

Decided On: 18.04.2024

The General Manager, Bajaj Allianz General Insurance Company Ltd. and Ors. Vs. Mahesh Ashok Lande

Hon'ble Judges/Coram:

S.G. Dige, J.

 Citation: 2024:BHC-AS:20013,MANU/MH/2853/2024.

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Allahabad HC: Pay and Recover principle still be applicable to Motor accident claim petition for insurance policies taken after 01.04.2022 notwithstanding deletion of proviso in Amended Act,

 CONCLUSION

38. The Court, therefore, holds that mere omission of proviso attached to sub-section (4) of Section 149 of Motor Vehicles Act, 1988 after its replacement by Section 150 of Motor Vehicles (Amendment) Act, 2019 (32 of 2019), neither takes away the liability of the insurer to pay the claimants nor its right to recover the said amount from the owner. The law to this effect remains intact and unaffected by Amendment Act, 2019 and, hence, insurer shall continue to indemnify the owner's risk in relation to accidents taking place after 01.04.2022 and "PAY & RECOVER" principle will still continue to govern the field advancing social object of the Statute protecting third party interest. Principle of law laid down by the Supreme Court in National Insurance Company Limited vs. Swaran Singh and others, MANU/SC/0021/2004 : 2004:INSC:4 : JT 2004 (1) SC 109 has not lost its significance and binding effect despite omission of proviso. Held accordingly.

IN THE HIGH COURT OF ALLAHABAD

First Appeal From Order Nos. 1780 of 2024, 1776 of 2024, 1777 of 2024 and 1789 of 2024

Decided On: 31.01.2025

ICICI Lombard General Insurance Co Ltd Vs. Arti Devi and Ors.

Hon'ble Judges/Coram:

Kshitij Shailendra, J.

Citation: 2025:AHC:14110, MANU/UP/0194/2025.

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Supreme Court: What order the Motor accident claim tribunal should pass if it directs insurance company to pay and recover from owner of offending vehicle?

 The residual question is what would be the appropriate direction. Considering the beneficial object of the Act, it would be proper for the insurer to satisfy the award, though in law it has no liability. In some cases the insurer has been given the option and liberty to recover the amount from the insured. For the purpose of recovering the amount paid from the owner, the insurer shall not be required to file a suit. It may initiate a proceeding before the concerned Executive Court as if the dispute between the insurer and the owner was the subject matter of determination before the Tribunal and the issue is decided against the owner and in favour of the insurer. Before release of the amount to the claimants, owner of the offending vehicle shall furnish security for the entire amount which the insurer will pay to the claimants. The offending vehicle shall be attached, as a part of the security. If necessity arises the Executive Court shall take assistance of the concerned Regional Transport Authority. The Executing Court shall pass appropriate orders in accordance with law as to the manner in which the owner of the vehicle shall make payment to the insurer. In case there is any default it shall be open to the Executing Court to direct realization by disposal of the securities to be furnished or from any other property or properties of the owner of the vehicle i.e. the insured.  {Para 13}

 IN THE SUPREME COURT OF INDIA

Civil Appeal Nos. 6178 of 2004.

Decided On: 21.09.2004

National Insurance Co. Ltd. Vs. Challa Bharathamma and Ors.

Hon'ble Judges/Coram:

Dr. Arijit Pasayat and C.K. Thakker, JJ.

Author: Arijit Pasayat, J.

Citation: (2004) 8 SCC 517,MANU/SC/0779/2004.

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Supreme Court: If the driver of the offending vehicle does not possess a valid driving license, the principle of 'pay and recover' can be ordered

 On the issue of liability to pay the compensation awarded, we affirm the view taken by the High Court that the Respondent - Insurance Company is absolved of the liability to bear the compensation, as evidence has been produced from the office of the Regional Transport Office to prove that the drivers of the two offending trucks were driving on the basis of invalid driving licenses. It is also relevant to note that the owners and drivers of the offending trucks have not appeared at any stage of the proceedings, including this Court. {Para 7}

7.1. This Court in Shamanna and Ors. v. The Divisional Manager, The Oriental Insurance Co. Ltd. & Ors., held that if the driver of the offending vehicle does not possess a valid driving license, the principle of 'pay and recover' can be ordered to direct the insurance company to the pay the victim, and then recover the amount from the owner of the offending vehicle.  MANU/SC/0828/2018 : (2018) 9 SCC 650.

 IN THE SUPREME COURT OF INDIA

Civil Appeal No. 5123 of 2019.

Decided On: 01.07.2019

Parminder Singh Vs. New India Assurance Co. Ltd. and Ors.

Hon'ble Judges/Coram:

Indu Malhotra and M.R. Shah, JJ.

Author: Indu Malhotra, J.

Citation:  MANU/SC/0860/2019,(2019) 7 SCC 217.

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Supreme Court: Principle of “pay and recover” should be invoked in the case of gratuitous passengers in a goods vehicle

The next question is as to which of the Respondents, that is the owner and driver, or the insurer of the vehicle, would be liable for payment of such compensation. As regard the liability for payment of compensation, it has been contended by the learned Counsel for the Appellants that since the vehicle was admittedly insured with the Respondent No. 1-insurance company, the principle of pay and recover would be invoked even in case of a gratuitous passenger in a goods vehicle. The insurance company should thus be made liable for the payment of compensation to the Appellants and in turn they would have the right to realise/recover the same from the owner and driver of the vehicle. {Para 9}

11. We have heard learned Counsel for the parties and perused the record as well as the various decisions cited by learned Counsel for the parties. The insurance of the vehicle, though as a goods vehicle, is not disputed by the parties. The claimants in the present case are young children who have suffered permanent disability on account of the injuries sustained in the accident. Thus, keeping in view the peculiar facts and circumstances of this case, we are of the considered view that the principle of "pay and recover" should be directed to be invoked in the present case.

 IN THE SUPREME COURT OF INDIA

Civil Appeal Nos. 6231-6232 of 2019 

Decided On: 09.08.2019

Anu Bhanvara and Ors. Vs. IFFCO Tokio General Insurance Company Limited and Ors.

Hon'ble Judges/Coram:

Rohinton Fali Nariman and Vineet Saran, JJ.

Author: Vineet Saran, J.

Citation: (2020) 20 SCC 632,MANU/SC/1077/2019.

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Whether insurance company can refuse to pay compensation if owner of vehicle has not checked authenticity of driving license of driver of vehicle?

 This Court in National Insurance Co. Ltd. [National Insurance Co. Ltd. v. Swaran Singh MANU/SC/0021/2004 : (2004) 3 SCC 297 : 2004 SCC (Cri) 733] has noticed the defences available to the insurance company Under Section 149(2)(a)(ii) of the Motor Vehicles Act, 1988. The insurance company is entitled to take a defence that the offending vehicle was driven by an unauthorised person or the person driving the vehicle did not have a valid driving licence. The onus would shift on the insurance company only after the owner of the offending vehicle pleads and proves the basic facts within his knowledge that the driver of the offending vehicle was authorised by him to drive the vehicle and was having a valid driving licence at the relevant time.

{Para 12}

17. This issue has been answered in National Insurance Co. Ltd. [National Insurance Co. Ltd. v. Swaran Singh MANU/SC/0021/2004 : (2004) 3 SCC 297 : 2004 SCC (Cri) 733] In that case, it was contended by the insurance company that once the defence taken by the insurer is accepted by the Tribunal, it is bound to discharge the insurer and fix the liability only on the owner and/or the driver of the vehicle. However, this Court held that even if the insurer succeeds in establishing its defence, the Tribunal or the court can direct the insurance company to pay the award amount to the claimant(s) and, in turn, recover the same from the owner of the vehicle. The three-Judge Bench, after analysing the earlier decisions on the point, held that there was no reason to deviate from the said well-settled principle. In para 107, the Court then observed thus: (SCC p. 340)

107. We may, however, hasten to add that the Tribunal and the court must, however, exercise their jurisdiction to issue such a direction upon consideration of the facts and circumstances of each case and in the event such a direction has been issued, despite arriving at a finding of fact to the effect that the insurer has been able to establish that the insured has committed a breach of contract of insurance as envisaged Under Sub-clause (ii) of Clause (a) of Sub-section (2) of Section 149 of the Act, the insurance company shall be entitled to realise the awarded amount from the owner or driver of the vehicle, as the case may be, in execution of the same award having regard to the provisions of Sections 165 and 168 of the Act. However, in the event, having regard to the limited scope of inquiry in the proceedings before the Tribunal it had not been able to do so, the insurance company may initiate a separate action therefor against the owner or the driver of the vehicle or both, as the case may be. Those exceptional cases may arise when the evidence becomes available to or comes to the notice of the insurer at a subsequent stage or for one reason or the other, the insurer was not given an opportunity to defend at all. Such a course of action may also be resorted to when a fraud or collusion between the victim and the owner of the vehicle is detected or comes to the knowledge of the insurer at a later stage.

10. The owner of the vehicle is expected to verify the driving skills and not run to the licensing authority to verify the genuineness of the driving license before appointing a driver. Therefore, once the owner is satisfied that the driver is competent to drive the vehicle, it is not expected from the owner thereafter to verify the genuineness of the driving license issued to the driver.

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 4919 of 2022 

Decided On: 26.07.2022

Rishi Pal Singh Vs. New India Assurance Co. Ltd. and Ors.

Hon'ble Judges/Coram:

Hemant Gupta and Vikram Nath, JJ.

Author: Hemant Gupta, J.

Citation: MANU/SC/1303/2022,2022 SCCONLINE SC 2119.

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Whether the insurance company can pay and recover compensation from the offending vehicle owner if the vehicle driver had no driving license on the date of the incident?

 In Parminder Singh vs. New India Assurance Company Ltd.

& Ors.2019 SAR (Civil) 795, the Hon'ble Apex Court has held as under :

“7. On the issue of liability to pay the

compensation awarded, we affirm the view taken

by the High Court that the Respondent – Insurance

Company is absolved of the liability to bear the

compensation, as evidence has been produced from

the office of the Regional Transport Office to prove

that the drivers of the two offending trucks were

driving on the basis of invalid driving licenses. It is

also relevant to note that the owners and drivers of

the offending trucks have not appeared at any

stage of the proceedings, including this Court.

7.1. This Court in Shamanna & Ors. v. The

Divisional Manager, The Oriental Insurance Co. Ltd.

& Ors., held that if the driver of the offending

vehicle does not possess a valid driving license, the

principle of ‘pay and recover’ can be ordered to

direct the insurance company to the pay the victim,

and then recover the amount from the owner of the

offending vehicle. (2018) 9 SCC 650. {Para 6}

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

CIVIL APPELLATE JURISDICTION

FIRST APPEAL NO.172 OF 2019

WITH

INTERIM APPLICATION NO.765 OF 2021

IN

FIRST APPEAL NO.172 OF 2019

 THE NEW INDIA ASSURANCE CO. LTD. V/s.  SMT. MANISHA SANJAY NIKAM 

CORAM : V. G. BISHT, J.

PRONOUNCED ON : 17th FEBRUARY 2022

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Guidelines of Supreme Court as when pay and recover can be ordered in case of motor accident

The question whether the insurer can avoid its liability in the
event it raises a defence as envisaged in sub section 2 of section 149 of

the Motor Vehicles Act, 1988 has been considered by the three Judge
Bench of the Supreme Court in Swarana Singh (Supra). The law laid
down in Swarna Singh has been reiterated in Shamanna v/s.
Divisional Manager, the Oriental Insurance Co. Ltd. (supra) as
under :6.
In the case of third party risks, as per the decision in
National Insurance Company Ltd. v. Swaran Singh and
others (2004) 3 SCC 297, the insurer had to indemnify the
compensation amount payable to the third party and the
Insurance Company may recover the same from the insured.
Doctrine of "pay and recover" was considered by the Supreme
Court in Swaran Singh case wherein the Supreme Court
examined the liability of the Insurance Company in cases of
breach of policy condition due to disqualifications of the
driver or invalid driving licence of the driver and held that in
case of third party risks, the insurer has to indemnify the
compensation amount to the third party and the Insurance
Company may recover the same from the insured.
Elaborately considering the insurer's contractual liability as
well as statutory liability visavis
the claims of third parties,
the Supreme Court issued detailed guidelines as to how and
in what circumstances, “pay and recover” can be ordered. In
para (110), the Supreme Court summarised its conclusions
as under:“
110. The summary of our findings to the various issues as
raised in these petitions is as follows:
(i) Chapter XI of the Motor Vehicles Act, 1988 providing
compulsory Insurance of vehicles against thirdparty
risks is a
social welfare legislation to extend relief by compensation to
victims of accidents caused by use of motor vehicles. The
provisions of compulsory Insurance coverage of all vehicles are
with this paramount object and the provisions of the Act have to
be so interpreted as to effectuate the said object.
(ii) An insurer is entitled to raise a defence in a claim petition

filed under Section 163A
or Section 166 of the Motor Vehicles
Act, 1988, inter alia, in terms of Section 149(2)(a)(ii) of the
said Act.
(iii) The breach of policy condition e.g. disqualification of the
driver or invalid driving licence of the driver, as contained in
subsection
(2)(a)(ii) of Section 149, has to be proved to have
been committed by the insured for avoiding liability by the
insurer. Mere absence, fake or invalid driving licence or
disqualification of the driver for driving at the relevant time,
are not in themselves defences available to the insurer against
either the insured or the third parties. To avoid its liability
towards the insured, the insurer has to prove that the insured
was guilty of negligence and failed to exercise reasonable care
in the matter of fulfilling the condition of the policy regarding
use of vehicles by a duly licensed driver or one who was not
disqualified to drive at the relevant time.
(iv) Insurance companies, however, with a view to avoid their
liability must not only establish the available defence(s)
raised in the said proceedings but must also establish "breach"
on the part of the owner of the vehicle; the burden of proof
wherefore would be on them, 

(v) The court cannot lay down
any criteria as to how the said burden would be discharged,
inasmuch as the same would depend upon the facts and
circumstances of each case.
(vi) Even where the insurer is able to prove breach on the
part of the insured concerning the policy condition regarding
holding of a valid licence by the driver or his qualification to
drive during the relevant period, the insurer would not be
allowed to avoid its liability towards the insured unless the
said breach or breaches on the condition of driving licence
is/are so fundamental as are found to have contributed to the
cause of the accident. The Tribunals in interpreting the policy
conditions would apply "the rule of main purpose" and the
concept of "fundamental breach" to allow defences available
to the insurer under Section 149(2) of the Act.
(vii) The question, as to whether the owner has taken
reasonable care to find out as to whether the driving licence
produced by the driver (a fake one or otherwise), does not
fulfill the requirements of law or not will have to be

determined in each case.
(viii) If a vehicle at the time of accident was driven by a
person having a learner's licence, the Insurance companies
would be liable to satisfy the decree.
(ix) The Claims Tribunal constituted under Section 165 read
with Section 168 is empowered to adjudicate all claims in
respect of the accidents involving death or of bodily injury or
damage to property of third party arising in use of motor
vehicle. The said power of the Tribunal is not restricted to
decide the claims inter se between claimant or claimants on
one side and insured, insurer and driver on the other. In the
course of adjudicating the claim for compensation and to
decide the availability of defence or defences to the insurer,
the Tribunal has necessarily the power and jurisdiction to
decide disputes inter se between the insurer and the insured.
The decision rendered on the claims and disputes inter se
between the insurer and insured in the course of adjudication
of claim for compensation by the claimants and the award
made thereon is enforceable and executable in the same
manner as provided in Section 174 of the Act for
enforcement and execution of the award in favour of the
claimants.
(x) Where on adjudication of the claim under the Act the
Tribunal arrives at a conclusion that the insurer has
satisfactorily proved its defence in accordance with the
provisions of Section 149(2) read with subsection
(7), as
interpreted by this Court above, the Tribunal can direct that
the insurer is liable to be reimbursed by the insured for the
compensation and other amounts which it has been
compelled to pay to the third party under the award of the
Tribunal. Such determination of claim by the Tribunal will
be enforceable and the money found due to the insurer from
the insured will be recoverable on a certificate issued by the
Tribunal to the Collector in the same manner under Section
174 of the Act as arrears of land revenue. The certificate will
be issued for the recovery as arrears of land revenue only if,
as required by subsection
(3) of Section 168 of the Act the
insured fails to deposit the amount awarded in favour of the
insurer within thirty days from the date of announcement of
the award by the Tribunal.

(xi) The provisions contained in subsection
(4) with the
proviso there under and subsection
(5) which are intended
to cover specified contingencies mentioned therein to enable
the insurer to recover the amount paid under the contract of
Insurance on behalf of the insured can be taken recourse to
by the Tribunal and be extended to claims and defences of
the insurer against the insured by relegating them to the
remedy before regular court in cases where on given facts
and circumstances adjudication of their claims inter se might
delay the adjudication of the claims of the victims,”
(Underlining added)
7. As per the decision in Swaran Singh case, onus is always
upon the Insurance Company to prove that the driver had no
valid driving licence and that there was breach of policy
conditions. Where the driver did not possess the valid driving
licence and there are breach of policy conditions, “pay and
recover” can be ordered in case of third party risks. The
Tribunal is required to consider as to whether the owner has
taken reasonable care to find out as to whether the driving
licence produced by the driver, does not fulfill the
requirements of law or not will have to be determined in
each case. ”
15. In National Insurance Co. Ltd. Vs. Laxmi Narayan Dhut
(2007) 3 SCC 700, the Apex Court has drawn a distinction between
own damage claim not involving any third party visàvis
the liability in
respect of the third party risk. In the aforestated case the Supreme
Court relied upon the decision in Swarana Singh (supra) to hold that
even in cases of willful breach the insurer's liability visàvis
third party
was statutory and that it is for the Insurance Company to satisfy the
award and then recover the compensation from the insured.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
FIRST APPEAL NO. 50 OF 2016

National Insurance Co. Ltd. V/s.  Pallavi Anand Hegde & Ors. 

CORAM: SMT. ANUJA PRABHUDESSAI, J.

JUDGMENT PRONOUNCED ON: 21st JUNE, 2019.

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Supreme Court: Motor accident tribunal can apply the doctrine of pay and recover

Since the reference to the larger bench in Parvathneni case

has been disposed of by keeping the questions of law open to be

decided in an appropriate case, presently the decision in Swaran

Singh case followed in Laxmi Narain Dhut and other cases hold

the field. The award passed by the Tribunal directing the insurance

company to pay the compensation amount awarded to the

claimants and thereafter, recover the same from the owner of the

vehicle in question, is in accordance with the judgment passed by

this Court in Swaran Singh and Laxmi Narain Dhut cases. While

so, in our view, the High Court ought not to have interfered with the

award passed by the Tribunal directing the first respondent to pay

and recover from the owner of the vehicle. The impugned judgment

of the High Court exonerating the insurance company from its

liability and directing the claimants to recover the compensation

from the owner of the vehicle is set aside and the award passed by

the Tribunal is restored.

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 8144 OF 2018

[Arising out of SLP(C) No.26955 of 2017]

SHAMANNA AND ANOTHER Vs THE DIVISIONAL MANAGER THE ORIENTAL INSURANCE CO. LTD. AND ORS.

Dated:August 08, 2018

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