Insurer Has To Pay Claimants, Recover Amount From Vehicle Owner In Absence Of Valid Permit At The Time Of Accident: Karnataka HC Reiterates

The Karnataka High Court has reiterated that even though the vehicle which causes an accident does not hold a valid permit and fitness certificate at the time of accident, the insurance company is liable to pay the compensation amount due to the claimants and recover it from the vehicle's owner.

A single judge bench of Justice T G Shivashankare Gowda refused to accept the contention of Shriram General Insurance Company Limited that at the time of accident, the vehicle in question was plying on the road without valid permit and fitness certificate. The court rejected the company's argument that since a "fundamental breach" on vehicle owner's part is "demonstrated", so the Insurance Company can avoid its "liability completely" and its for the owner to pay the compensate the claimant. 

The company had also claimed that the charge sheet was filed against the driver of the vehicle under Sections 56(Certificate of fitness of transport vehicles), 66 (Necessity for permits) of the Motor Vehicles Act and Rule 52 (Renewal of certificate of registration) of the Central Motor Vehicles (CMV) Rules.

Referring to the Supreme Court's decision in National Insurance Co. Ltd., v. Swaran Singh and others (2004) and the high court full bench's verdict in New India Assurance Co.Ltd., Bijapur vs Yallavva and Another (2020) Justice Gowda said: 

"This argument cannot be sustained as the law has been settled by the Hon'ble Apex Court and also the full Bench of this Court, which are binding in nature. In view of the law laid down by Swaran Singh's case as well as Yallavva's case, even though this is a case of fundamental breach, the Insurance Company can avoid its liability, as the petitioners are 3rd parties in view of the contract of insurance, the Insurance Company has to pay the compensation and recover the same from the owner of the vehicle. Hence, principle of pay and recovery is applicable to facts of this case".  

Accordingly it held the owner of the vehicle liable to pay the compensation. It further directed the Insurance Company to deposit the amount within eight weeks and recover it from the owner of the vehicle in the same proceedings.

The high court passed the order while hearing cross appeals moved by the wife of the deceased seeking enhancement of compensation awarded by the Motor Accident Claims Tribunal (MACT), and the Insurance Company which questioned the liability and cause of the death of the deceased. 

The court took into account that since the accident on June 17, 2013, the deceased Nandishappa–who was cycling when was he hit by a goods vehicle–was treated at different hospitals and throughout he was in an unconscious state.

The court further rejected the contention that the deceased died due to cardiac arrest. It said “From 17.06.2013 to 23.07.2013, the deceased was in an unconscious state and in spite of several treatments, he was not recovered. Within 7 days thereafter, he succumbed to death. The manner in which treatment was provided and the medical records itself speaks that from the day one till the date of death, the deceased was under unconscious state.”

"Mere mentioning of cardiac respiratory arrest in the postmortem report is not a ground to urge that the death was not connected to the accident. Medical evidence persuaded that the deceased succumbed to death on account of head injury sustained in the accident and the petitioners are able to demonstrate the nexus between the injuries and the cause of death," it added. 

Partly allowing the appeals filed by the claimants and the insurance company, the high court modified the tribunal order and held that the claimants are entitled to total compensation of Rs.13,44,209 instead of Rs.13,88,209, with interest at the rate of 6% per annum from the date of petition till the date of deposit.

Case Title: The Legal Manager Shriram General Insurance Company Limited AND Nagamma & Others and

Smt Nagamma and Others AND Sri P Penkatesh and others

Appearance: Advocate O Mahesh for Appellant.

Advocate A.K Bhat FOR R1 TO R3.

Citation No: 2024 LiveLaw (Kar) 429

Case No: MISCELLANEOUS FIRST APPEAL NO. 7089 OF 2016 (MV-D) C/W MISCELLANEOUS FIRST APPEAL NO. 6824 OF 2016.

Click Here To Read/Download Order