Motor Vehicle Insurance

History, development and Legislative

framework
 History

• Beginning in the UK in the 18th century.

• The motor car was introduced in England in 1894
• The first motor policy was introduced in 1895 to
cover third party liabilities
• By 1899, accidental damage to the car was
added to the policy, thus introducing the
comprehensive policy along with the lines of the
policy issued today.
• In 1903, the car and general Insurance
corporation Ltd, was established for motor
insurance
 Cond.

• After World war-I, there was increase in the

number of vehicles and accidents.
• Many injured persons in road accidents were
unable to recover damages because not all
motorists were insured
• This led to the introduction of compulsory
third party insurance through the passing of
the Road Traffic Acts 1930 and 1934
• The compulsory insurance provisions of these
Acts have been consolidated by the Road
Traffic Act 1960
 The Motor Vehicles Act, 1939

• Need to take into account changes in the road

transport technology, pattern of passengers
road transport technology, development of the
network in the country and particularly the
improved techniques in the motor vehicles
• National Transport Policy Committee
• National Police Commission
• Road Safety Committee
• Low Powered Two Wheelers Committee
• Law commission of India recommended
updating, simplification and rationalization
 Cond.

• Working group was constituted in Jan, 1984 to

review all the provisions of the M.V.Act, 1939 and
to submit draft proposals for a comprehensive
legislation to replace the existing it.
• Based on various committee suggestions and
also recommendations of the LCI,
• The M V Act, 1988 came into force effective from
1st July, 1989
• Totally 217 Sections, divided into XIII chapters
• Chapter: X-XIII, Sections 140-176 deals with
Insurance subject
 Chapter-X to XIII
• Ch.X :Sections 140-144: Liability to pay
compensation in certain cases on the principle
of no fault liability
• Ch.XI :Sections 145-164: Insurance of Motor
Vehicles against third party risks
• Ch.XII:165-176: Motor vehicles Claims Tribunal
• Ch. XIII: offences, penalties and procedure
• Possibilities of Accidents and liability
 Indian Penal Code Provisions

• Section 279. Rash driving or riding on a public way

• Whoever drives any vehicle, or rides, on any public
way in a manner so rash or negligent as to endanger
human life, or to be likely to cause hurt or injury to
any other person, shall be punished with
imprisonment of either description for a term which
may extend to six months, or with fine which may
extend to one thousand rupees, or with both.
• CLASSIFICATION OF OFFENCE
• Punishment—Imprisonment for 6 months, or fine of
1,000 rupees, or both—Cognizable—Bailable—
Triable by any Magistrate—Non-compoundable
 Cond.

• Section 336 I.P.C. deals with Act Endangering

Life or Personal Safety of Others.
• It is provided in the act that whoever does any
act so rashly or negligently as to endanger
human life of the personal safety of others,
shall be punished with imprisonment of either
description for a term which may extend to
three months, or with fine which may extend
to Rs. 250/-, or with both
 Cond.
• Section 337. Causing hurt by act endangering life or
personal safety of others.
• Whoever causes hurt to any person by doing any act
so rashly or negligently as to endanger human life, or
the personal safety of others, shall be punished with
imprisonment of either description for term which
may extend to six months, or with fine which may
extend to five hundred rupees, or with both.
• CLASSIFICATION OF OFFENCE
• Punishment—Imprisonment for 6 months, or fine of
500 rupees, or both—Cognizable—Bailable—Triable
by any Magistrate—Compoundable by the person to
whom hurt is caused with the permission of the court.
 Cond.
• Section 338. Causing grievous hurt by act
endangering life or personal safety of others
• Whoever causes grievous hurt to any person by doing
any act so rashly or negligently as to endanger human
life, or the personal safety of others, shall be punished
with imprisonment of either description for a term
which may extend to two years, or with fine which
may extend to one thousand rupees, or with both.
• CLASSIFICATION OF OFFENCE
• Punishment—Imprisonment for 2 years, or fine of
1,000 rupees, or both—Cognizable—Bailable—Triable
by any Magistrate—Compoundable by the person to
whom hurt is caused with the permission of the court
 Cond.
• Section 304A. Causing death by negligence
• Causing death by negligence.—Whoever causes
the death of any person by doing any rash or
negligent act not amounting to culpable
homicide, shall be punished with imprisonment
of either description for a term which may
extend to two years, or with fine, or with both.
• CLASSIFICATION OF OFFENCE
• Punishment—Imprisonment for 2 years, or fine,
or both—Cognizable—Bailable—Triable by
Magistrate of the first class Non compoundable.
 Subject of Insurance
• Entry-35 of the concurrent list: Mechanically
propelled vehicles
• Hence both parliament and the states can make
laws on the subject and in consistency between
the two has to be resolved in accordance with
the Art-254 of the constitution
• But the provisions of chapter-XI i.e., Insurance
of motor vehicles against third party risks (145-
164) cannot be added to or altered by the state
legislations because insurance subject is in the
Entry-47 of the Union List.
 Contd.

• The main object behind this is protecting the

public from the danger of tort feasors on the
road, that no matter what the parties agreed
in the policy, if the vehicle did an injury to a
third party the insurer should have to pay.
• Sec-148 of Road Traffic Act 1972(English)
having similar provision.
• Remedy in England:-
• In order to assure that third parties who are
injured in motor Accidents do not go without
compensation for want of insurance
 Cond.

• A motor vehicle Bureau was set up by the general

body of insurers in 1946 after second world war.
• The bureau is agreed with the ministry of
transport to satisfy the Judgments of awarding
compensation to third parties under the Road
Traffic Act
• Where there was no insurance or effective
insurance or driver was unidentified and
untraced, the Bureau pays the road victim or his
heirs and gets the Judgments obtained by him
assigned in its favour so that it may reimburse it
self.
 Coverage
• A person seeking insurance in respect of his
motor vehicle enter into a contract with the
insurance to indemnify him
• (a) against loss or damage to the vehicle
• (b) against legal liability he may incur to third
parties in respect of death of or bodily injury
caused to them
• (c) damage to their property caused by the use
of the vehicle.
• Principles of indemnity, utmost most good faith,
insurable interest, subrogation are applicable
 Principles Applicable

• Indemnity: this principle ensures that the

insured does not make profit out of his loss.
• The insured is placed after loss, as far as possible,
in the same financial position as he was before
the loss.
• But in case of theft claims, for repair claims,
insured declared value(IDV) is applied.
• IDV does not take into consideration market
value or depreciated price.
• It is the sum insured agreed at the beginning of
the policy of the new vehicle. It remains constant
 Subrogation and Contribution

• Subrogation usually arises when there is a

collusion between two vehicles, one of, which
is responsible accident. In practice, however,
subrogation is modified by agreements
between insurers,
• Egs: Knock for Knock agreements
• Contribution arises when there is double
insurance, that is, when the same vehicle is
insured under two policies. According to policy
condition the loss is shared pro-rata between
the two insurers
 No fault liability
• In common law
• Under the original law the basis of claim for
compensation was fault.
• The courts awarded compensation only when
the driver was at fault.
• Therefore it was necessary for the claimant to
compensation to assert and establish that the
vehicle involved, at the time of accident, was
being driven with rash and negligent manner.
 Burden of Proof in common law.
• The burden lay on the claimant and the claim
failed, if the defendant was able to prove that
there was sudden failure of brake or the
vehicle suffered from some latent defect.
• The claimant was hardly in a position to rebut
the defendant's evidence on these points.
• In order to shift the burden, the common law
courts evolved the doctrine of res ipsa
laquitur, meaning of which is that, ‘thing or
event speaks for itself’.
 In 1939 Act

• Originally there was no concept of no fault

liability
• The Hon’ble S.C., In Srimati Manjushri Raha
and others v. B.L. Gupta, (1977) 2 SCC 174
observed that
• "The time is ripe for serious consideration of
creating no-fault liability"
• A reminder was issued again in Motor Owners
Insurance Co. Ltd. v. Jadavji Keshavji Modi and
others (1981) 4 SCC 660.
 Amendment to 1939 Act
• The recommendation was accepted and the Motor
Vehicles Act, 1939 was amended through Act No.47
of 1982.
• On the recommendation of Hon’ble S.C. in the case
Manushri Raha v. B.L. Gupta and on the
recommendation of the LCI….
• The 1939 Act was accordingly amended by Motor
Vehicles (Amendment) Act, 1982 incorporating
Sections 92-A to 92-E to provide, for the first time
payment of compensation on the principle of "no
fault".
 Cond.
• By this amendment Sec. 92-A (3) was added and which is
as follows-
• "In any claim for compensation under Sub-Section (1) the
claimant shall not be required to plead and establish
that the death or permanent disablement In respect of
which the claim has been made was due to any wrongful
act, neglect or default of the owner or owners of the
vehicle or vehicles concerned or of any other person.“
• The 1939 Act, however, later repealed and a new Act "Motor
Vehicles Act, 1988" (Act 59 of 1988) was enacted.
• In this Act also incorporated Sections 140 to 144
(corresponding to earlier Sections 92-A to 92-E) on the
principle of ‘no-fault liability’
Originally, Remedy Under the M.V.Act, 1988
• (a) In cases of hit and run of motor accidents
(Section 161)
• (b) ‘Just’ compensation on the principle of
"Fault" (Sections 166 and 168)
• (c) Compensation on the principle of "No
Fault" (Chapter X Sections 140 to 144)
• All these three sets of provisions are
independent and are mutually exclusive.
 Amendment to the M.V.Act, 1988

• The Motor Vehicles Act, 1988 has been again

amended by the Amendment Act 54 of 1994. It
came into force on November 14, 1994.
• By this Amendment Act, Sections 163-A and 163-
B have been inserted in Chapter XI entitled
"Insurance of Motor Vehicles against Third-Party
Risks".
• These two new sections were inserted to provide
for payment of compensation in motor accident
cases on a "predetermined structural formula"
given in the Second Schedule of the Act.
 No-fault Liability…Law & Practice

140. Liability to pay compensation in certain cases on the

principle of no fault.
(1) Where death or permanent disablement of any person has
resulted I from an accident arising out of the use of a motor
vehicle or motor vehicles, the owner of the vehicle shall, or, as
the case may be, the owners of the vehicles shall, jointly and
severally, be liable to pay compensation in respect of such
death or disablement in accordance with the provisions of this
section.
(2) The amount of compensation which shall be payable under
sub-section (1) in respect of the death of any person shall be a
fixed sum of fifty thousand rupees and the amount of
compensation payable under that sub-section in respect of the
permanent disablement of any person shall be a fixed sum of
twenty-five thousand rupees.
 Cond.

• 3) In any claim for compensation under sub-

section (1), the claimant shall not be required
to plead and establish that the death or
permanent disablement in respect of which
the claim has been made was due to any
wrongful act, neglect or default of the owner
or owners of the vehicle or vehicles concerned
or of any other person.
 Cond.
(4) A claim for compensation under sub-section
(1) shall not be defeated by reason of any
wrongful act, neglect or default of the person
in respect of whose death or permanent
disablement the claim has been made nor shall
the quantum of compensation recoverable in
respect of such death or permanent
disablement be reduced on the basis of the
share of such person in the responsibility for
such death or permanent disablement.
 Cond.

(5) Notwithstanding anything contained in sub-

section (2) regarding death or bodily injury to
any person, for which the owner of the vehicle is
liable to give compensation for relief, he is also
liable to pay compensation under any other
law for the time being in force:
Provided that the amount of such compensation
to be given under any other law shall be
reduced from the amount of compensation
payable under this section or under section
163A.
 Cond.

• Section 141. Provisions as to other right to

claim compensation for death or permanent
disablement.
(1) The right to claim compensation under section
140 in respect of death or permanent disablement
of any person shall be in addition to any other
right, except the right to claim under the scheme
referred to in section 163A such other right
hereafter in this section referred to as the right on
the principle of fault to claim compensation in
respect thereof under any other provision of this
Act or of any other law for the time being in force.
 Cond.

(2) A claim for compensation under section 140 in respect of

death or permanent disablement of any person shall be
disposed of as expeditiously as possible and where
compensation is claimed in respect of such death or
permanent disablement under section 140 and also in
pursuance of any right on the principle of fault, the claim for
compensation under section 140 shall be disposed of as
aforesaid in the first place.
(3) Notwithstanding anything contained in sub-section (1),
where in respect of the death or permanent disablement of
any person, the person liable to pay compensation under
section 140 is also liable to pay compensation in accordance
with the right on the principle of fault, the person so liable
shall pay the first- mentioned compensation and-
 Cond.
(a) if the amount of the first-mentioned
compensation is less than the amount of the
second-mentioned compensation, he shall be
liable to pay (in addition to the first-mentioned
compensation) only so much of the second-
mentioned compensation as is equal to the
amount by which it exceeds the first mentioned
compensation.
(b) if the amount of the first-mentioned
compensation is equal to or more than the amount of
the second-mentioned compensation, he shall not be
liable to pay the second-mentioned compensation.
 Death Claim U/s.140
• Eshwarappa @ Maheshwarappa v. C.S.
Gurushanthappa & anr
• Basavaraj was the driver of a privately owned
car. In the night, on 28th October, 1992 he took
out the car for a joyride and along with five
other persons. On way to the temple, the car
met with a fatal accident, in which Basavaraj and
four other occupants of the car died; the fifth
passenger sustained injuries.
• One of the persons dying in that motor accident
was Nagaraj, whose parents are the appellants
before this Court.
 Cond.

• The heirs and legal representatives of the deceased driver,

Basavaraj filed a claim for compensation under the
Workmen's Compensation Act, 1923. They got nothing.
• The Commissioner under the Workmen's Compensation Act
held that the ‘accident did not take place in the course of
employment’ and rejected the claim for compensation.
• The heirs of the four occupants of the car, dying in the
accident (including the present appellants) and the fifth
passenger suffering injuries in the accident sought
compensation before the Motor Accidents Claims Tribunal.
• It was rejected, the appellants took the matter in appeal
before the High Court where they were equally
unsuccessful. Hence before supreme court through SLP
 Cond.

• The counsel appearing on behalf of the

appellants raised a very limited issue that in
any event the appellants were entitled to the
`no fault compensation' as provided under
section 140 of the Motor Vehicles Act, 1988 but
they were denied even that by the Tribunal for
reasons that are totally unsustainable in law.
• The appellants filed a claim petition MACT,
under section 166 of the Motor Vehicles Act
seeking compensation for the death of Nagaraj.
 Cond.

• From the order of the Tribunal, it appears that

in four among the five cases before it, IA’s
were filed seeking interim compensation of
rupees twenty five thousand (Rs.25,000.00)
only (as the law stood at that time) in terms of
Section 140 of the Act
• No order was passed on IA’s and started
examining the claimants' claim on merits
under section 166 of the Act
 Cond.

• It was held that neither the owner of the car nor the
insurance company was liable to pay anything to any of
the claimants, including the appellants, because
Basavaraj had taken out the car of his employer
unauthorized and against his express instructions and had
caused the accident by driving the car very rashly after
consuming liquor.
• At the time of accident the car had been taken
completely away from the control of its owner. In a sense
it was stolen by the driver, even though temporarily. The
accident was, thus, completely outside the insurance
policy.
• No compensation was, therefore, payable to any of the
claimants under section 166 of the Motor Vehicles Act
 Cond.

• The tribunal rejected the claim even u/s.140 and High court also upheld
the order of tribunal.
• The provisions of section 140 are indeed intended to provide immediate
succour to the injured or the heirs and legal representatives of the
deceased. Hence, normally a claim under section 140 is made at the
threshold of the proceeding and the payment of compensation under
section 140 is directed to be made by an interim award of the Tribunal
which may be adjusted if in the final award the claimants are held entitled
to any larger amounts.
• But that does not mean, that in case a claim under section 140 was not
made at the beginning of the proceedings due to the ignorance of the
claimant or no direction to make payment of the compensation under
section 140 was issued due to the over-sight of the Tribunal, the door
would be permanently closed. Such a view would be contrary to the legal
provisions and would be opposed to the public policy.
 Claim for Permanent disablement u/s.140
142. Permanent disablement.
For the purposes of this Chapter, permanent
disablement of a person shall be deemed to have
resulted from an accident of the nature referred to in
sub-section (1) of section 140 if such person has suffered
by reason of the accident, any injury or injuries
involving:-
(a) permanent privation of the sight of either eye or the
hearing of either ear, or privation of any member or
joint; or
(b) destruction or permanent impairing of the powers of
any member or joint; or
(c) permanent disfiguration of the head or face.
 Indra devi v. Bagada Ram

• On March 31, 1999, one Ramni was while going on a

motorcycle dashed against the rear side of a truck
that was headed in the same direction as the
motorcycle. Ramni was died in the accident. His
heirs and legal representatives, the appellants
before this Court, moved the MACT against the
owner of the truck and its insurer, the New India
Assurance Company Ltd. for compensation in terms
of section 166 of the Motor Vehicles Act, 1988.
• In course of the proceedings, the appellants claimed
no fault compensation under section 140 of the
Motor Vehicles Act, which was granted to them.
 Cond.

• The accident was caused due to the careless

and negligent driving of the deceased himself.
On that finding, the Tribunal naturally rejected
the claim of compensation on the principle of
fault.
• But it did not stop there and went on to hold
that the insurance company was entitled to
the refund of the amount of no fault
compensation along with interest @ 9% p.a.
The impugned direction is clearly erroneous
and unsustainable in law
 Cond.
• The Tribunal has completely failed to realize the true
nature and character of the compensation in terms of
section 140 of the Act. The marginal heading to section 140
describes it as based ‘on the principle of no fault’. As the
expression ‘no fault’ suggests the compensation under
section 140 is regardless of any wrongful act, neglect or
default of the person in respect of whose death the claim
is made.
• The High Court was equally in error in missing out this
grave mistake in the judgment and order passed by the
Tribunal and not setting it right. Order of the Tribunal
insofar as it permits the insurance company to recover the
amount of interim compensation along with the interest
from the claimants/appellants is set aside - Appeal allowed
 MACT v. WCC

• Section 143 in The Motor Vehicles Act, 1988

• 143. Applicability of Chapter to certain claims
under Act 8 of 1923.—The provisions of this
Chapter shall also apply in relation to any claim for
compensation in respect of death or permanent
disablement of any person under the Workmen’s
Compensation Act, 1923 (8 of 1923) resulting from
an accident of the nature referred to in sub-
section (1) of section 140 and for this purpose, the
said provisions shall, with necessary modifications,
be deemed to form part of that Act.
 Option between WCC & MACT
• 167. Option regarding claims for compensation
in certain cases
Notwithstanding anything contained in the
Workmen's Compensation Act, 1923 (8 of 1923)
where the death of, or bodily injury to, any
person gives rise to a claim for compensation
under this Act and also under the Workmen's
Compensation Act, 1923, the person entitled to
compensation may without prejudice to the
provisions of Chapter X claim such compensation
under either of those Acts but not under both.
 Suresh P v.
M/S. Nidish Trading Company anr
• The appellant was employed as a cleaner in a lorry
which met with an accident on 6-12-1998.
• He applied for the claim to the Commissioner under
Workmen's Compensation Act, 1923 claiming
compensation under Section 22 of the Act.
• The Commissioner held that the applicant has 5% loss
of earning capacity and passed an order
• That the accident arose out of the use of a motor
vehicle is not in dispute. The fact that the workman
suffered the injury referable to the entry at SI.No.37 in
Part II of Schedule I of the W.C. Act, is also not disputed.
 Cond.
• But substantial question of law raised in this appeal is as
to whether the appellant was entitled to the benefit of
Section 140 of the Motor Vehicles Act and entitled to
compensation for permanent disablement in terms of
that provision?
• Section 143 lays down that the provisions of that Chapter
shall also apply in relation to any claims under W.C. Act.
• By virtue of this section in the MV Act, the provisions of
Chapter X of that Act gets incorporated, by reference, into
the W.C. Act.
• Section 140 of the MV Act provides for liability to pay
compensation for death or permanent disablement, on
the principle of no fault
 Cond.

• In view of Section 143 of the M.V. Act, to apply Section

140 of that Act to cases falling under the W.C. Act, all
that is necessary is that the situation should be one
that it would fall under the provisions of Section 142 of
the M.V. Act.
• Section 142 of the MV Act enumerates the types of
injuries, which are deemed to result in permanent
disablement for the purpose of Section 140 of that Act.
• Section 140 of the M.V. Act applies to any claim for
compensation in respect of permanent disablement
under the W.C. Act provided, the disablement is one
that would fall within the term "permanent
disablement", as defined in Section 142 of the M.V. Act.
 Cond.

• Now, on to the facts of this case. Loss of one

phalanx of the ring or little finger, little finger
in this case, is an injury which is deemed to
result in permanent partial disablement, going
by he entry at SI.No.37 under Part II of
Schedule I of the W.C. Act.
• Clause (b) of Section 142 provides that the
destruction or permanent impairing of the
power of any member or joint shall be a
permanent disablement of the person.
 Cond.

• Having suffered from permanent disablement

resulting in the destruction of a member of his
right little finger by amputation through distal
interphalangeal joint, the petitioner has
suffered such permanent disablement as is
referable to Section 142 of the M.V. Act and is
therefore entitled to such compensation as is
available to him under Section 140 of the M.V.
Act.
• Nungshiton Begum And Ors. V. United India
Insurance Co. Ltd: Sec-163A applicable to WCC
 Murder v. Accidental Murder

• Rita Devi v. New India Assurance co.(2000) 5

SCC 113
• The Supreme Court. It is held: “ If the
dominant intention of the act of felony is to
kill –it is a murder simplicitor. If the murder
was not originally intended and same was
caused in furtherance of any other felonious
act then such murder is an accidental
murder”.
 Use of the Motor Vehicle

• Sivaji Dayanu patil v. Smt. Vatschala Uttam More,

1991 ACJ 777
• The word ‘use’ has a wider connotation to cover the
period when the vehicle is not moving and
stationary, became immobile due to breakdown or
mechanical defect or accident.
• The accident should be connected with the use of
the motor vehicle. The connection need not be
direct and immediate. The expression used enlarges
the field of protection made available to the victims
and is in consonance with the beneficial object
underlying the enactment.
 Proving Section 140

• Divisional Manager, New India v. Tumu Gurava Reddy And

Ors.
• (i) For a claim under Section 140 of the Act, the claimants
need not plead negligence of the deceased or injured as
the case may be nor wrongful act on the part of the owner
or any other person is necessary to be established.
• (ii) In a claim under Section 140 the following facts have to
be proved.
• (a) that a vehicle was involved in the accident.
• (b) that the victim received injuries in the accident
resulting in his death or a permanent disability as specified
under Section 142 of the Act.
 Cond.

• (c) That the vehicle was insured with the Insurance

Company under Chapter XI of the Act.
• (d) that the claim was made on the owner or the
driver of the vehicle including the Insurance
Company with whom the policy was obtained and
that the policy was in operation as on the date of the
accident.
• (iii) The plea of the defence available under Chapter
XI, or the breach of terms of policy cannot be invoked
by the insurance when a claim under Section 140 is
made by the victims or the dependents.
Application of Strict Liability Principle to MV
Insurance claims in India
Smt. Kaushnuma Begum & Ors. v. The New India
Assurance Co. Ltd. and Ors..
 Cond.

• Can a claim be maintained before the Motor

Accident Claims Tribunal on the basis of strict
liability propounded in Rylands v. Fletcher ?
• The Tribunal dismissed a claim made before it
solely on the ground that there was neither
rashness nor negligence in driving the vehicle
and hence the driver has no liability, and the
corollary of which is that the owner has no
vicarious liability to pay compensation to the
dependents of the victim of a motor accident.
 Facts

• The accident which gave rise to the claim

occurred at about 7.00 P.M. on 20.3.1986. The
vehicle involved in the accident was a jeep. It
capsized while it was in motion.
• The cause of the capsize was attributed to
bursting of the front tyre of the jeep.
• In the process of capsizing the vehicle hit
against one Haji Mohammad Hanif who was
walking on the road at that ill-fated moment
and consequently that pedestrian was crushed
and subsequently succumbed to the injuries
sustained in that accident.
 Cond..

• Appellants are the widow and children of Haji

Mohammad Hanif, the victim of the accident.
They filed a claim petition before the Tribunal
in 1986 itself claiming a sum of Rs.2,36,000/-
as total compensation.
• They said that deceased Haji Mohammad
Hanif was aged 35 when he died and that he
was earning a monthly income of Rs.1500/-
during those days by doing some business in
manufacturing steel trunks
 Cond.

• The owner of the jeep disclaimed the liability by

denying even the fact of the accident in which his jeep
was involved.
• Alternatively, he contended that any liability found
against him in respect of the said jeep the same should
be realized from the insurance company as the vehicle
was covered by valid insurance policy.
• The Tribunal’s Order :-
• It appears that the front wheel of the jeep suddenly got
burst resulting in the misbalanced and occurrence of
this accident as it is mentioned in Ex-2 the report of the
Police Station "Whatever is the circumstance, the rash
and negligence of the alleged jeep is not established”
 Cond.
• Consequently, the Tribunal dismissed the claim for
compensation u/s.166. However, the Tribunal directed
the insurance company to pay Rs.50,000/- to the
claimants by way of no fault liability envisaged in
Section-140 of the Motor Vehicles Act, 1988
• Appeal to High Court:-
• DB of High Court’s Order
• "Heard learned counsel for the appellant. Finding has
been recorded that the tempo overturned and there
were no negligence or rashness of the driver. Hence
Rs.50,000/- has been awarded as compensation which
is the minimum amount. There is no error in the order.
Dismissed."
 Issue before Hon’ble S.C.
• Should there necessarily be negligence of the
person who drove the vehicle if a claim for
compensation is to be sustained?
• U/s.165: Tribunals are constituted for the
purpose of adjudicating upon claims for
compensation in respect of accidents involving
the death of or bodily injury to persons arising
out of the use of motor vehicles, or damages
to any property of a third party so arising, or
both
 Cond.

• Section 175 of the MV Act contains a prohibition

that "no civil court shall have jurisdiction to entertain
any question relating to any claim for compensation
which may be adjudicated upon by the Claims
Tribunal.“
• It must be noted that the jurisdiction of the Tribunal
is not restricted to decide claims arising out of
negligence in the use of motor vehicles. Negligence
is only one of the species of the causes of action for
making a claim for compensation in respect of
accidents arising out of the use of motor vehicles.
• There are other premises for such cause of action.
 Cond.

• Even if there is no negligence on the part of

the driver or owner of the motor vehicle, but
accident happens while the vehicle was in use.
• Whether the owner can be made liable for
damages to the person who suffered on
account of such accident ?
• This question depends upon how far the Rule
in Rylands v. Fletcher can apply in motor
accident cases ?
 Cond.

• The above Rule eventually gained approval in a

large number of decisions rendered by courts in
• The court referred following authorities:-
• Winfield on Tort has brought out even a chapter
on the "Rule in Rylands v. Fletcher". At page 543
of the 15th Edn. of the calibrated work the
learned author has pointed out that
• "over the years Rylands v. Fletcher has been
applied to a remarkable variety of things: fire, gas,
explosions, electricity, oil, noxious fumes, colliery
spoil, rusty wire from a decayed fence, vibrations,
poisonous vegetation....".
 Cond.

• He has elaborated seven defences recognised in common law against action

brought on the strength of the rule in Rylands v. Fletcher. They are:
• (1) Consent of the plaintiff i.e. violent non fit injuria.
• (2) Common benefit i.e. where the source of the danger is maintained for
the common benefit of the plaintiff and the defendant, the defendant is not
liable for its escape.
• (3) Act of stranger i.e. if the escape was caused by the unforeseeable act of
a stranger, the rule does not apply.
• (4) Exercise of statutory authority i.e. the rule will stand excluded either
when the act was done under a statutory duty or when a statute provides
otherwise.
• (5) Act of God or vis major i.e. circumstances which no human
• foresight can provide against and of which human prudence is not bound to
recognise the possibility.
• (6) Default of the plaintiff i.e. if the damage is caused solely by the act or
default of the plaintiff himself, the rule will not apply.
• (7) Remoteness of consequences i.e. the rule cannot be applied ad infinitum
 Indian Senario...
• The Rule in Rylands v. Fletcher has been referred to by this
Court in a number of decisions. While dealing with the
liability of industries engaged in hazardous or dangerous
activities P.N. Bhagwati, CJ, speaking for the Constitution
Bench in M.C. Mehta & anr. vs. Union of India and ors.
expressed the view that there is no necessity to bank on
the Rule in Rylands v. Fletcher. What the learned Judge
observed is this:
• "We have to evolve new principles and lay down new norms
which would adequately deal with the new problems which
arise in a highly industrialized economy. We cannot allow
our judicial thinking to be constricted by reference to the
law as it prevails in England or for the matter of that in any
other foreign country. We no longer need the crutches of a
foreign legal order."
 Cond.

• The Court also referred the following case:-

• Gujarat State Road Transport Corporation,
Ahmedabad v. Ramanbhai Prabhatbhai and anr.
• The observation made by E.S. Venkataramiah, J.
"Today, thanks to the modern civilization, thousands
of motor vehicles are put on the road and the largest
number of injuries and deaths are taking place on the
roads on account of the motor vehicles accidents.
• In view of the fast and constantly increasing volume
of traffic, the motor vehicles upon the roads may be
regarded to some extent as coming within the
principle of liability defined in Rylands v. Fletcher.
 Cond.
• From the point of view of the pedestrian the roads of this
country have been rendered by the use of the motor
vehicles highly dangerous. 'Hit and run' cases where the
drivers of the motor vehicles who have caused the accidents
are not known are increasing in number. Where a
pedestrian without negligence on his part is injured or killed
by a motorist whether negligently or not, he or his legal
representatives as the case may be should be entitled to
recover damages if the principle of social justice should
have any meaning at all.
• In order to meet to some extent the responsibility of the
society to the deaths and injuries caused in road accidents
there has been a continuous agitation throughout the
world to make the liability for damages arising out of motor
vehicles accidents as a liability without fault."
 Cond.
• Like any other common law principle, which is
acceptable to our jurisprudence, the Rule in Rylands v.
Fletcher can be followed at least until any other new
principle which excels the former can be evolved, or
until legislation provides differently.
• In India, According to MV Act, 1988
• "No Fault Liability" envisaged in Section 140 of the MV
Act is distinguishable from the rule of strict liability. In
the former the compensation amount is fixed and is
payable even if any one of the exceptions to the Rule
can be applied.
• Compensation on account of accident arising from the
use of motor vehicles can be claimed under the common
law even without the aid of a statute.
 Cond.

• The court directed the insurance company to

pay compensation as per section 163 A, which
was calculated by applying structured formula
basis.
 Saurabh Kumar Shukla v Hukum Chand, AIR
1998 MP 144
• To award compensation u/s. 140 of the Act,
the resultant effect of the fracture should be
permanent disablement which is the sine que
non for award of compensation.
• If the Injury is simple fracture only without
anything more as contemplated u/s.142 of the
Act, the person is not entitled to get the
compensation.
Theethi v. MACT, Palakkad, AIR 1996 Ker.237

• U/s. 140 of the Act, the liability is joint and

several. This section contemplates
involvement of two or more vehicles. If, two or
more vehicles are involved, the liability is on
both the owners.
• If, owner of the one vehicle is identified, he is
only liable to pay. The claim under sec. 140
cannot be defeated, if other vehicle owner is
not detected.
 Oriental Insurance Co. Ltd. v. Chitaman, AIR
1995 MP 229
• The claim u/s. 140 must be passed after
following the procedure contemplated u/s.
160(2) of the Act. It must indicate the findings
and the reasons, at least briefly.
• These attributes ‘determination’ of the claim
u/s. 140 would certainly make the
determination of an award for the purpose of
Sec. 166 as well as Sec 173 of the Act.
The Manager, Hdfc Ergo General v. Kalpana, 2015

• Interim compensation claim was resisted on the

ground that the driver was driving the motor
vehicle under the influence of liquor and that the
owner of the offending motor cycle had relied
upon fake and bogus policy dt.3.3.2012.
• It is not necessary for the claimant to plead and
establish that death or permanent disablement
has resulted due to any wrongful act, negligent
or default of the owner of the offending motor
vehicle.
 Cond.

• The fact of breach of terms and conditions of the insurance

policy and the fact of fake and bogus policy need not be
considered at the interim stage and shall be decided at the
time of final decision of the Claim Petition.
• The claim u/s. 140 can be passed immediately, which is
joint and several
• Ultimately, it is possible for the Insurer to plead that
Insurance contract was not binding upon it or on the
ground that it was fake or bogus or on any such ground. It
is for the Insurer to establish the pleading at final hearing
of claim petition filed u/s.166 of the Act, so that the
amount paid u/s.140 by way of interim compensation can
be recovered from the owner and/or driver of the
offending motor vehicle.
 Extended Provision of No-fault Liability
• Section. 163A. Special provisions as to payment of
compensation on structured formula basis:
• (1) Notwithstanding anything contained in this Act or in
any other law for the time being in force or instrument
having the force of law, the owner of the motor vehicle or
the authorized insurer shall be liable to pay in the case of
death or permanent disablement due to accident arising
out of the use of motor vehicle, compensation, as
indicated in the Second Schedule, to the legal heirs or the
victim, as the case may be.
• Explanation.-For the purposes of this sub-section,
"permanent disability" shall have the same meaning and
extent as in the Workmen's Compensation Act, 1923 (8 of
1923).
 Cond.

• (2) In any claim for compensation under sub-section (1),

the claimant shall not be required to plead or establish
that the death or permanent disablement in respect of
which the claim has been made was due to any
wrongful act or neglect or default of the owner of the
vehicle or vehicles concerned or of any other person.
• (3) The Central Government may, keeping in view the
cost of living by notification in the Official Gazette, from
time to time amend the Second Schedule.
• 163B. Option to file claim in certain cases
Where a person is entitled to claim compensation under
section 140 and section 163A, he shall file the claim
under either of the said sections and not under both.
 Second Schedule

• 1. Multiplier- on the basis of age

• 2. Amount of compensation shall not be less than Rs
50,000
• 3. General Damages (in case of death):
• The following General Damages shall be payable in
addition to compensation outlined above:
(i) Funeral expenses -Rs 2000
(ii)Loss of Consortium, if beneficiary is the spouse- Rs 5000
(iii) Loss of Estate- Rs 2500
(iv) Medical Expenses - actual expenses incurred before
death supported by bills/vouchers but not exceeding -
Rs 15000
 Cond.

• 4. General Damages in case of Injuries and

Disabilities:
• (i) Pain and Sufferings
• (a)Grievous injuries - Rs 5000
• (b) Non-grievous injuries - Rs 1000
• (ii) Medical Expenses - actual expenses
incurred supported by bills/vouchers but not
exceeding as one time payment - Rs 15000
 Cond.

• 5. Disability in non-fatal accidents:

• The following compensation shall be payable in case of disability
to the victim arising out of non-fatal accidents:
• Loss of income, if any, for actual period of disablement not
exceeding fifty-two weeks.

• PLUS either of the following:

• (a) In case of permanent total disablement the amount payable
shall be arrived at by multiplying the annual loss of income by the
Multiplier applicable to the age on the date of determining the
compensation, or
• (b) In case of permanent partial disablement such percentage of
compensation which would have been payable in the case of
permanent total disablement as specified under Item (a) above.
 Cond.

• Injuries deemed to result in Permanent Total

Disablement/Permanent Partial Disablement and
percentage of loss of earning capacity shall be as per
Schedule I under Workmen's Compensation Act, 1923.
• 6. Notional Income for compensation to those who had
no income prior to accident:
• Fatal and disability in non-fatal accidents:
• (a) Non-earning persons - Rs. 15,000 p.a.
• (b) Spouse – Rs. 1/3rd of income of the earning
surviving spouse
• In case of other injuries only "General Damages" as
applicable.
National Insurance Co.Ltd v. Sinitha & Ors, (2012) 2 SCC
356
• The Tribunal in holding, that the rider Shijo was responsible
for the accident, had placed reliance on copies of the first
information report, post mortem certificate, scene
mahazor, report of inspection of vehicle, inquest report and
final report. Neither of these in our considered view, can
constitute proof of "negligence" at the hands of Shijo.
• That in a claim raised under Section 163A of the Act, the
claimants have neither to plead nor to establish negligence.
• That negligence (as also, "wrongful act" and "default") can
be established by the owner or the insurance company (as
the case may be) to defeat a claim under Section 163A of
the Act.
 Cond.

• The court referred, The Oriental Insurance Co.

Ltd vs Hansrajbhai v. Kodala & Ors
 Third Party Insurance
146. Necessity for insurance against third party risk.
(1) No person shall use, except as a passenger, or cause or allow any
other person to use, a motor vehicle in a public place, unless there
is in force in relation to the use of the vehicle by that person or that
other person, as the case may be, a policy of insurance complying
with the requirements of this Chapter:
[Provided that in the case of a vehicle carrying, or meant to carry,
dangerous or hazardous goods, there shall also be a policy of
insurance under the Public Liability Insurance Act, 1991 (6 of
1991).]
Explanation.-A person driving a motor vehicle merely as a paid
employee, while there is in force in relation to the use of the
vehicle no such policy as is required by this sub-section, shall not be
deemed to act in contravention of the sub-section unless he knows
or has reason to believe that there is no such policy in force.
 Cond.

(2) Sub-section (1) shall not apply to any vehicle owned by the
Central Government or a State Government and used for
Government purposes unconnected with any commercial enterprise.
(3) The appropriate Government may, by order, exempt from the
operation of sub-section (1) any vehicle owned by any of the
following authorities, namely:-
(a) the Central Government or a State Government, if the vehicle is
used for Government purposes connected with any commercial
enterprise;
(b) any local authority;
(c) any State transport undertaking: Provided that no such order shall
be made in relation to any such authority unless a fund has been
established and is maintained by that authority in accordance with
the rules made in that behalf under this Act for meeting any liability
arising out of the use of any vehicle of that authority which that
authority or any person in its employment may incur to third parties.
 Cond.

Explanation: For the purposes of this sub-section,

"appropriate Government" means the Central
Government or a State Government, as the case may be,
and:-
(i) in relation to any corporation or company owned by
the Central Government or any State Government, means
the Central Government or that State Government
(ii) in relation to any corporation or company owned by
the Central Government and one or more State
Governments, means the Central Government
(iii) in relation to any other State transport undertaking or
any local authority, means that Government which has
control over that undertaking or authority.
 Sec-147
147. Requirements of policies and limits of liability.
(1) In order to comply with the requirements of this Chapter, a
policy of insurance must be a policy which-
(a) is issued by a person who is an authorised insurer ;or
(b) insurer the person or classes of persons specified in the
policy to the extent specified in sub-section (2)-
(i) against any liability which may be incurred by him in
respect of the death of or bodily 1[injury to any person,
including owner of the goods or his authorised representative
carried in the vehicle] or damage to any property of a third
party caused by or arising out of the use of the vehicle in a
public place;
(ii) against the death of or bodily injury to any passenger of
a public service vehicle caused by or arising out of the use of
the vehicle in a public place
 Cond.
• Provided that a policy shall not be required-
(i) to cover liability in respect of the death, arising out of and
in the course of his employment, of the employee of a person
insured by the policy or in respect of bodily injury sustained by
such an employee arising out of and in the course of his
employment other than a liability arising under the
Workmen's Compensation Act, 1923 (8 of 1923) in respect of
the death of, or bodily injury to, any such employee-
(a) engaged in driving the vehicle, or
(b) if it is a public service vehicle engaged as conductor of
the vehicle or in examining tickets on the vehicle, or
(c) if it is a goods carriage, being carried in the vehicle, or
(ii) to cover any contractual liability.
 Cond.
• Explanation. —For the removal of doubts, it is hereby declared that the
death of or bodily injury to any person or damage to any property of a third
party shall be deemed to have been caused by or to have arisen out of, the
use of a vehicle in a public place notwithstanding that the person who is
dead or injured or the property which is damaged was not in a public place
at the time of the accident, if the act or omission which led to the accident
occurred in a public place.
• (2) Subject to the proviso to sub-section (1), a policy of insurance referred
to in sub-section (1), shall cover any liability incurred in respect of any
accident, up to the following limits, namely:—
• (a) save as provided in clause (b), the amount of liability incurred;
• (b) in respect of damage to any property of a third party, a limit of rupees
six thousand:
• Provided that any policy of insurance issued with any limited liability and in
force, immediately before the commencement of this Act, shall continue to
be effective for a period of four months after such commencement or till
the date of expiry of such policy whichever is earlier.
 Cond.

• (3) A policy shall be of no effect for the purposes of this Chapter

unless and until there is issued by the insurer in favour of the
person by whom the policy is effected a certificate of insurance
in the prescribed form and containing the prescribed particulars
of any condition subject to which the policy is issued and of any
other prescribed matters; and different forms, particulars and
matters may be prescribed in different cases.
• (4) Where a cover note issued by the insurer under the
provisions of this Chapter or the rules made thereunder is not
followed by a policy of insurance within the prescribed time,
the insurer shall, within seven days of the expiry of the period
of the validity of the cover note, notify the fact to the
registering authority in whose records the vehicle to which the
cover note relates has been registered or to such other
authority as the State Government may prescribe.
 Cond.

• (5) Notwithstanding anything contained in any

law for the time being in force, an insurer
issuing a policy of insurance under this section
shall be liable to indemnify the person or
classes of persons specified in the policy in
respect of any liability which the policy
purports to cover in the case of that person or
those classes of persons.
 Third party

• Who is a third party? The expression third party

includes everyone, he may be a person travelling in
vehicle or one walking on the road.
• The vehicle may be private, govt, passenger or
goods or any kind of vehicle.
• There is no exclusion clause with regard to third
party insurance on the basis of the nature of the
vehicle.
• In G. Govindan v. New India Assurance Co. Ltd, the
court held that third party insurance is compulsory
for all motor vehicles. This provision cannot be
overridden by any clause in the insurance policy.
 Cond.

• Third party insurance does not cover injuries

to the insured himself but to the rest of the
world who is injured by the insured.
• Beneficiary of third party insurance is the
injured third party, the insured or the policy
holder is only nominally the beneficiary of the
policy.
• In practice the money is always paid direct by
the insurance company to the third party (or
his solicitor) and does not even pass through
the hands of the insured person.
 National Insurance Co. Ltd. v. Faqir Chand
And Ors.
• A contract of insurance has two parties to it, the
insurer and the insured. These are the contracting
parties of the contract of insurance and they,
therefore, can be called as the first party and the
second party.
• Any party, therefore, who is not a contracting party
to the policy of insurance will automatically be
referred to and called as a third party because he is
neither the first party (the insurer) nor the second
party (the insured) (or vice versa, if one pleases).
 Cond.

• The use of the words "third party" therefore, in Chapter XI

of the Motor Vehicles Act clearly refers to the intention of
the Legislature to point out to a party who is neither the
first party nor the second party to a contract of insurance.
• The expression "third party" therefore, should include
everyone, be it a person travelling in another vehicle, one
walking on the road or a passenger in the vehicle itself
which is the subject matter of the insurance policy. Every
insured takes out an insurance policy against a third party
risk, and enters into a contract with insurer, only with the
motive, intention and purpose of covering the risks which
may arise in relation to claims lodged against him by a
third party.
 Cond.

• Arising out of use of the vehicle: use or allow any

other person to use:-
• Use a vehicle on the road means have the use of the
vehicle on the road. It need not be capable of being
driven. If it is on road and can be moved, it must be
covered by insurance as it is potential danger to the
persons.
• Babu v. Remeson, A motor vehicle stopped in the
highway for the workmen loading it with materials.
• While so engaged they were electrocuted by the
high tensions wires running above that place. It was
covered by the words arising out of the use of motor
vehicle.
 Gratuitous Passengers-Third Party
• MPSRTC v. Zenabai (AIR 1977 SC 2206)
• Whether ticketless passengers are entitled to
be covered or not:
• The SC while granting compensation held that,
in view of enormous increase in suffering of
motor accident victims, which makes no
distinction between fare paying and gratuitous
passengers.
• It was held that gratuitous passengers in
public service vehicles are also to be
compulsory insured.
 UII Co. Ltd v. Lakshmi-Third Party
• A lorry owner lost his life while travelling in his
vehicle in an accident caused by the rash and
negligent driving of the lorry and collided with
another lorry.
• The owner’s wife claimed compensation from
the insurer of the lorry.
• It pointed out that, the insurer is one party to
the policy contract, and the owner or insured
is the second party to the contract and the
person insured by the use of the vehicle that is
the insured claimant is the third party.
 Claims Tribunal-Establishment

• As per Sec. 165(1), the State Government may

constitute one or more MACT-Specifying the area etc
• Section 175. Bar on jurisdiction of Civil Courts.—
Where any Claims Tribunal has been constituted for
any area, no Civil Court shall have jurisdiction to
entertain any question relating to any claim for
compensation which may be adjudicated upon by
the Claims Tribunal for that area, and no injunction in
respect of any action taken or to be taken by or
before the Claims Tribunal in respect of the claim for
compensation shall be granted by the Civil Court.
• Section 176 : Power of the state to make rules
 Adjudication-Subject matter

• As per Section 165(1)

• Adjudicating upon claims for compensation in
respect of
• accidents involving the death of,
• or bodily injury to, persons arising out of the
use of motor vehicles,
• or damages to any property of a third party so
arising,
• or both.
 MACT-Application & Jurisdiction

• Application: Who can file ?

• As per Section 166(1)
• (a) by the person who has sustained the injury; or
• (b) by the owner of the property; or
• (c) where death has resulted from the accident,
by all or any of the legal representatives of the
deceased; or
• (d) by any agent duly authorised by the person
injured or all or any of the legal representatives
of the deceased, as the case may be
 Jurisdiction-Option of the Claimant

• (1) Either to the Claims Tribunal having jurisdiction

over the area in which the accident occurred,
• (2) or to the Claims Tribunal within the local limits
of whose jurisdiction the claimant resides
• (3) or carries on business or within the local limits
of whose jurisdiction the defendant resides
• As per Section 167: Option to file before either of
the forums (MACT or Commission, EC Act) but not
under both
 Award and Procedure

• Section 168 Award of the Claims Tribunal.—

• On receipt of an application for compensation made under
section 166,
• the Claims Tribunal shall, after giving notice of the application to
the insurer and after giving the parties (including the insurer) an
opportunity of being heard,
• hold an inquiry into the claim or, as the case may be, each of the
claims and, subject to the provisions of section 162 may make an
award determining the amount of compensation which
appears to it to be just and specifying the person or
persons to whom compensation shall be paid and in making the
award the Claims Tribunal shall specify the amount which shall be
paid by the insurer or owner or driver of the vehicle involved in
the accident or by all or any of them, as the case may be:
 Disposal of application u/s.140

• Provided that where such application makes a

claim for compensation under section 140 in
respect of the death or permanent disablement
of any person, such claim and any other claim
(whether made in such application or otherwise)
for compensation in respect of such death or
permanent disablement shall be disposed of in
accordance with the provisions of Chapter X.
• As per clause (2) deliver the copies within 15 days
• As per clause (3) depositing the amount within 30
days
 Powers of the Claims Tribunal

• 169. Procedure and powers of Claims Tribunals.

• (1) In holding any inquiry under section 168, the Claims Tribunal
may, subject to any rules that may be made in this behalf, follow
such summary procedure as it thinks fit.
• (2) The Claims Tribunal shall have all the powers of a Civil Court for
the purpose of taking evidence on oath and of enforcing the
attendance of witnesses and of compelling the discovery and
production of documents and material objects and for such other
purposes as may be prescribed; and the Claims Tribunal shall be
deemed to be a Civil Court for all the purposes of section 195 and
Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974).
• (3) Subject to any rules that may be made in this behalf, the Claims
Tribunal may, for the purpose of adjudicating upon any claim for
compensation, choose one or more persons possessing special
knowledge of and matter relevant to the inquiry to assist it in
holding the inquiry.
 Appeals against the order of MACT

• Sec 173 Appeals.—(1) Subject to the provisions of sub-section

(2) any person aggrieved by an award of a Claims Tribunal
may, within ninety days from the date of the award, prefer
an appeal to the High Court:
• Provided that no appeal by the person who is required to pay
any amount in terms of such award shall be entertained by
the High Court unless he has deposited with it twenty-five
thousand rupees or fifty per cent. of the amount so awarded,
whichever is less, in the manner directed by the High Court:
Provided further that the High Court may entertain the appeal
after the expiry of the said period of ninety days, if it is
satisfied that the appellant was prevented by sufficient cause
from preferring the appeal in time.
• (2) No appeal shall lie against any award of a Claims Tribunal if
the amount in dispute in the appeal is less than ten thousand
rupees.
 Defence:Sec-149(2)

• (a) that there has been a breach of a specified

condition of the policy, being one of the following
conditions, namely:—
• (i) a condition excluding the use of the vehicle—
• (a) for hire or reward, where the vehicle is on the date
of the contract of insurance a vehicle not covered by a
permit to ply for hire or reward, or
• (b) for organised racing and speed testing, or
• (c) for a purpose not allowed by the permit under
which the vehicle is used, where the vehicle is a
transport vehicle, or
• (d) without side-car being attached where the vehicle
is a motor cycle; or
 Cond.

• (ii) a condition excluding driving by a named

person or persons or by any person who is not
duly licensed, or by any person who has been
disqualified for holding or obtaining a driving
licence during the period of disqualification; or
• (iii) a condition excluding liability for injury
caused or contributed to by conditions of war,
civil war, riot or civil commotion; or
• (b) that the policy is void on the ground that it
was obtained by the non- disclosure of a
material fact or by a representation of fact which
was false in some material particular.
 Supreme Court’s Interpretation
• The Insurance Company cannot avoid the liability
except on the grounds specified under Section 149(2).
• The courts one after one have held that the burden of
proving availability of defence is on Insurance
Company and Insurance Company has not only to lead
evidence as to breach of condition of policy or
violation of provisions of Section 149(2) but
• has to prove also that such act happens with the
connivance
• or knowledge of the owner.
• If knowledge or connivance has not been proved, the
Insurance Company shall remain liable even if defence
is available.
National Insurance Co. Ltd v. Swaran Singh &
Ors
• Interpretation of Section 149(2)(a)(ii)-
• ((ii) a condition excluding driving by a named
person or persons or by any person who is not
duly licensed, or by any person who has been
disqualified for holding or obtaining a driving
licence during the period of disqualification; or)
• Filed by the National Insurance Company
Limited assailing various awards of the Motor
Vehicle Claims Tribunal and judgments of the
High Courts.
 Issue raised

• Defences raised by the Insurance company

• (a) driving licence produced by the driver or owner of
the vehicle was a fake one;
• (b) driver did not have any licence whatsoever;
• (c) licence, although was granted to the concerned
driver but on expiry thereof, the same had not been
renewed;
• (d) licence granted to the drivers being for one class
or description of vehicle but the vehicle involved in
the accident was of different class or description; and
• (e) the vehicle in question was driven by a person
having a learner's licence.
 When Admittedly No Licence Was Obtained
By A Driver
• The owner of a motor vehicle in terms of Section
5 of the Act has a responsibility to see that no
vehicle is driven except by a person who satisfy
the provisions of Section 3 or 4 of the Act.
• In a case, where the driver of the vehicle
admittedly did not hold any licence and the same
was allowed consciously to be driven by the
owner of the vehicle by such person, the insurer
is entitled to succeed in its defence and avoid
liability.
 Cond.

Where the owner of the vehicle committed a breach of

the terms of the contract of insurance as also the
provisions of the Act by consciously allowing any person
to drive a vehicle who did not have a valid driving licence.
In the case of V. Mepherson v. Shiv Charan Singh [1998 ACJ
601 (Del.)]
The court held that owner of the vehicle was held not to be
guilty of violating the condition of policy by willfully
permitting his son to drive the car who had no driving
licence at the time of accident.
In that case, it was held that the owner and insurer both
were jointly and severally liable.
(Knowledge is not been proved)
 Cond.

• In New India Assurance Co. Ltd. v. Jagtar Singh

and Others [1998 ACJ 1074],
• Where there was no evidence that the society
which employed the driver was having
knowledge that the driver was not holding a
valid licence, it was held the insurance
company is liable
 Cond.

• When The Person Has Been Granted Licence

For One Type Of Vehicle But At The Relevant
Time He Was Driving Another Type Of Vehicle
• Section 10 of the Act provides for forms and
contents of licenses to drive. The licence has to
be granted in the prescribed form. Thus, a
licence to drive a light motor vehicle would
entitle the holder there to drive the vehicle
falling within that class or description.
• Section 3 of the Act casts an obligation on a
driver to hold an effective driving licence for
the type of vehicle which he intends to drive.
 Cond.

• Section 10 of the Act enables Central Government to

prescribe forms of driving licences for various categories
of vehicles mentioned in sub-section (2) of said section.
• The definition clause in Section 2 of the Act defines
various categories of vehicles which are covered in broad
types mentioned in sub- section h(2) of Section 10.
• For egs: They are `goods carriage', `heavy-goods vehicle',
`heavy passenger motor-vehicle', `invalid carriage', `light
motor-vehicle', `maxi-cab', medium goods vehicle',
`medium passenger motor-vehicle', `motor-cab',
`motorcycle', `omnibus', `private service vehicle', `semi-
trailer', `tourist vehicle', `tractor', `trailer', and `transport
vehicle'
 Cond.

• A person possessing a driving licence for

`motorcycle without gear', for which he has no
licence.
• Cases may also arise where a holder of driving
licence for `light motor vehicle' is found to be
driving a `maxi-cab', `motor-cab' or `omnibus' for
which he has no licence.
• In each case on evidence led before the tribunal, a
decision has to be taken whether the fact of the
driver possessing licence for one type of vehicle
but found driving another type of vehicle, was the
main or contributory cause for the accident.
 Cond.

• If on facts, it is found that accident was caused

solely because of some other unforeseen or
intervening causes like
• mechanical failures and similar other causes
having no nexus with driver not possessing
requisite type of licence, the insurer will not be
allowed to avoid its liability merely for
technical breach of conditions concerning
driving licence.
 Cond.
• Minor breaches of licence conditions, such as
want of medical fitness certificate,
requirement about age of the driver and the
like not found to have been the direct cause of
the accident, would be treated as minor
breaches of inconsequential deviation in the
matter of use of vehicles.
• Such minor and inconsequential deviations
with regard to licensing conditions would not
constitute sufficient ground to deny the benefit
of coverage of insurance to the third parties
 Where The Driver's Licence Is Found To Be
Fake
• It may be true as has been contended on behalf of
the petitioner that a fake or forged licence is as
good as no licence but the question is whether the
insurer must prove that the owner was guilty of the
willful breach of the conditions of the insurance
policy or the contract of insurance.
• Such defence can certainly be raised but it will be for
the insurer to prove that the insured did not take
adequate care and caution to verify the genuineness
or otherwise of the licence held by the driver.
 SUMMARY OF FINDINGS
(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 163 A or Section 166
of the Motor Vehicles Act, 1988 inter alia in terms
of Section 149(2)(a)(ii) of the said Act
 Cond.
• (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.
 Cond.

(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 wherefore 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.
 Cond.

• (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.
 Cond.

• (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.
 Cond.

(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.
 Cond.
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 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.
 Contd.

• (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.
 Contd.

• 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.
 Burden of proof

• Sec-103 of the I E Act, 1872 states that the

burden of proof as to any particular fact lies
on that person, who wishes to court to believe
in its existence, unless it is provided by law
that the proof of that fact shall lie on any
particular person..
• The insurer should establish that, it is for the
insurer and only for the insurer to plead and
prove that there had been a breach of policy
on the party of the owner of the vehicle.
 Cancellation of policy
• The contract of insurance is a contract of utmost
good faith and can be repudiated on the ground of
any fraud, misrepresentation, suppression or
concealment of any material fact on the part of the
insured.
• However this condition may hardly be made
applicable to the cases of MI where the insurance
relates not to a person but to the vehicle, which is
presented at or before issuance of the policy for
inspection by the authorized officer of the insurer
who examines the vehicle and even makes a note of
its registration engine and chassis as also the
condition of the vehicle.
 Contd.

• Only the cases of cancellation of policy on the ground

of non-payment of the premium are frequent.
• New India Assurance Co. Ltd v. sham sad
• In the case the policy is cancelled on the ground of
dishonor of cheque, the insurer can still be made
liable to pay the compensation though it can recover
the same from the owner of the vehicle.
• M. Nageshwar Rao v. NIA Co.Ltd
• When a cheque is dishonoured the procedure is that
the drawer has to be informed about dishonour of
cheque and given an opportunity to make good the
loss sustained by the drawee.
 Contd.

• Where the insurer failed to produce any evidence that

notices were served on the insured, the insurer cannot
be exempted from its liability on the plain reason that
insured was not given opportunity to remit the
premium amount in lieu of the dishonor of cheque.
• Tipu v. New India Assurance Co.Ltd
• Where the payment of premium through cheque was
made to the development officer of the insurer who
accordingly issued the cover note, but unfortunately
the insured died in an accident within 3-4 days. There
after payment against cheque was stopped by the
bank because of death of insured account holder and
eventually the insurer cancelled the cover note.
 Contd.
• It was held that:-
• (i) cover not and policy both serve one and
same purpose though the cover note is
superseded after issue of the policy
• (ii) contract becomes concluded just on
receipt of cheque and consequent issue of
cover note
• (iii) case was not of dishonor of cheque but
one of inevitable stop payment
 Over loading

• Over loading is not a breach of policy nor

negligence or state contributory negligence
• National Insurance Co. Ltd v. Anjana shyam
• The bus fell off the road into a nullah leading
to the death of 26 including the one who was
driving the vehicle and injuring 63 persons.
• The legal representatives of the deceased and
the injured, all approached the Motor
Accident Claims Tribunal under Section 166 of
the Motor Vehicles Act, 1988.
 Insurance Company’s defence

• the bus was overloaded;

• that it was being driven not by an authorized
driver at the time of the accident; and that the
insurance company had no liability.
• that the owner having permitted the vehicle
to be overloaded had committed a
fundamental breach of the contract of
insurance and therefore the insurance
company is not liable
 Cond.

• But, the Tribunal had brushed aside these

objections and passed various awards on the
various claims and made the insurance
company liable for paying the amounts covered
by all the awards exceeding the 42 covered by
the insurance.
• Aggrieved by the order, the insurance company
filed 38 appeals challenging the awards.
• In the appeals, an application was made seeking
impleading the State of Himachal Pradesh as a
party
 Cond.

• On the ground that, the authorities under the

State had failed to check the overloading of
the bus and it was due to the negligence of the
authorities of the State in not checking
overloading and not adherence to the
conditions of the permit by the owner of the
vehicle the accident had occurred
• Hence the State must be found to be liable in
contributory negligence
 Contd.

• Insurance company also submitted that bus

carried 90 passengers at the time of the accident
as against the sitting capacity of 42 including the
driver and the conductor and in that situation the
liability should be apportioned between the
insurance company, the owner and the State.
• The High Court taking the view that overloading
of the bus which had a permit to ply on the route
with only 42 passengers, did not amount to
violation of the route permit or any other law for
which the State Government could be held to be
contributory negligent
 Cond.
• Section 149 of the Act speaks of the judgment or
award in respect of the liability as is required to be
covered by a policy under clause (b) of sub-section (1)
of Section 147 of the Act having to be satisfied.
• Section 147(1)(b) compels insuring the person or
classes of persons specified in the policy to the extent
specified in sub-section (ii) of that Section.
• The case on hand will come under sub-clause (ii) of
clause (b) of Section 147 (1) of the Act which obliges
the owner to take out insurance compulsorily against
the death of or bodily injury to any passenger of a
public service vehicle caused by or arising out of the
use of the vehicle in a public place.
 Cond.
• Section 58 of the Act makes special provisions in regard
to transport vehicles. Sub-Section (2) provides that a
registering authority, when registering a transport
vehicle, shall enter in the record of registration and in
the certificate of registration various particulars.
• Clause (d) provides that if the vehicle is used or
adapted to be used for carriage of passengers, the
number of passengers for whom accommodation is
provided.
• Thus the registration of the vehicle, which alone
makes it usable on the road, records the number of
passengers to be carried and the certificate of
registration also contains that entry.
 Cond.

• So, an insurance company insuring the passengers

carried in a vehicle in terms of Section 147(1)(b)(ii) of
the Act, can only insure such number of passengers as
are shown in the certificate of registration.
• The position is reinforced by Section 72 of the Act, which
deals with grant of stage carriage permits. Sub-Section
(2) provides that when a permit is decided to be granted
for a stage carriage, the Regional Transport Authority
can attach to the permit one or more of the conditions
specified therein.
• Clause (vii) is the condition regarding the maximum
number of passengers that may be carried in a stage
carriage. Overloading also invites a consequence which
can be termed penal.
 Cond.
• Section 86 of the Act provides for cancellation of a permit if
any condition contained in the permit is breached.
• Therefore, the apparent wide words of Section 147(1)(b)(ii)
of the Act have to be construed harmoniously with the other
provisions of the Act, namely, Sections 58 and 72 of the Act.
• As early as in 1846, Dr. Lushington in Queen V. Eduljee
Byramjee, posited that to ascertain the true meaning of a
clause in a statute that the court must look at the whole
statute, at what precedes and at what succeeds and not
merely at the clause itself.
• This Court has accepted this approach in innumerable cases.
Thus, the expression 'any passenger' must be understood as
passenger authorized to be carried in the vehicle and 'use of
the vehicle' as permitted use of the vehicle.
 Cond.

• Therefore, the insurance taken out for the

number of permitted passengers can alone
determine the liability of the insurance
company in respect of those passengers.
• In terms of Section 149 of the Act, the duty of
the insurer is only to satisfy judgments and
awards against persons insured in respect of
the third party risk. Obviously, this is to the
extent the third party risk is coverable and is
covered
 Cond.

• The Act only imposes an obligation to take out

insurance to cover third party risks and in the case
of stage carriages, the passengers to be carried in
the vehicle and the passengers to be carried in the
vehicle can be understood only as passengers
authorized or permitted to be carried in the vehicle.
• The insured is covered only to the extent of the
passengers permitted to be insured or directed to
be insured by the statute and actually covered by
the contract. The High Court has considered only
the aspect whether by overloading the vehicle, the
owner had put the vehicle to a use not allowed by
the permit under which the vehicle is used
 Cond.

• This aspect is different from the aspect of

determining the extent of the liability of the
insurance company in respect of the
passengers of a stage carriage insured in terms
of Section 147(1)(b)(ii) of the Act.
• We are of the view that the insurance
company can be made liable only in respect of
the number of passengers for whom insurance
can be taken under the Act and for whom
insurance has been taken as a fact and not in
respect of the other passengers involved in the
accident in a case of overloading.
 Contd.

• Then arises the question, how to determine the

compensation payable or how to quantify the
compensation?
• The purpose of the Act is to bring benefit to the
third parties who are either injured or dead in an
accident. It serves a social purpose.
Keeping that in mind, we think that the practical and
proper course would be to hold that the insurance
company, in such a case, would be bound to cover the
higher of the various awards and will be compelled to
deposit the higher of the amounts of compensation
awarded to the extent of the number of passengers
covered by the insurance policy.
 Contd.

• In the case on hand, 42 passengers were the

permitted passengers and they are the ones who
have been insured by the insurance company. 90
persons have either died or got injured in the
accident. Awards have been passed for varied
sums.
• The Tribunal should take into account, the
higher of the 42 awards made, add them up and
direct the insurance company to deposit that
lump sum. Thus, the liability of the insurance
company would be to pay the compensation
awarded to 42 out of the 90 passengers.
 Contd.
• In other words, the higher of the 42 awards will be taken
into account and it would be the sum total of those higher
42 awards that would be the amount that the insurance
company would be liable to deposit. It will be for the
Tribunal thereafter to direct distribution of the money so
deposited by the insurance company proportionately to
all the claimants, here all the 90, and leave all the
claimants to recover the balance from the owner of the
vehicle.
In such cases, it will be necessary for the Tribunal, even at
the initial stage, to make appropriate orders to ensure that
the amount could be recovered from the owner by ordering
attachment or by passing other restrictive orders against the
owner so as to ensure the satisfaction in full of the awards
that may be passed ultimately.
Carrying more passengers in goods vehicle

• B.V. Nagaraju v. Oriental Insurance Co. Ltd Divisional

Officer, Hassan
• In this case, the insurance company had taken the defence that
the vehicle in question was carrying more passengers than the
permitted capacity in terms of the policy at the time of the
accident.
• The said plea of the insurance company was rejected.
• The Court held that the mere factum of carrying more passengers
than the permitted seating capacity in the goods carrying vehicle
by the insured does not amount to a fundamental breach of the
terms and conditions of the policy so as to allow the insurer to
eschew its liability towards the damage caused to the vehicle.
 Cond.

• “It is plain from the terms of the Insurance Policy

that the insured vehicle was entitled to carry six
workmen, excluding the driver.
• If those six workmen when travelling in the
vehicle, are assumed not to have increased risk
from the point of view of the Insurance Company
on occurring of an accident, how could those
added persons be said to have contributed to the
causing of it is the pose, keeping apart the load it
was carrying.
• In the present case the driver of the vehicle was
not responsible for the accident.
 Cond.
• Merely by lifting a person or two, or even three, by
the driver or the cleaner of the vehicle, without the
knowledge of the owner,
• cannot be said to be such a fundamental breach
that the owner should, in all events, be denied
indemnification.
• The misuse of the vehicle was somewhat irregular
though, but not so fundamental in nature so as to
put an end to the contract, unless some factors
existed which by themselves, had gone to
contribute to the causing of the accident.”
Lakhmi Chand v. Reliance General Insurance,
on 7 January, 2016
• This was a case of vehicle damage claiming incurred
expenses amounting to Rs.1,64,033/- for the repair of
his vehicle
• The respondent-Company filed a detailed written
statement before the District Forum disputing the claim
of the appellant.
• It took the plea that the complainant had violated the
terms and conditions of the policy, as five passengers
were travelling in the goods-carrying vehicle at the time
of accident, whereas the permitted seating capacity of
the motor vehicle of the appellant was only 1+1.
 Cond.

• District forum in favour of applicant

• State and National Commission in favour of
Insurance Company
• Hon’ble S.C. set aside the order of National
commission and upheld the district forum
order
 Owner-cum-driver Coverage
• The National Insurance Co. Ltd v. Krishnan
• A owner may travel in a vehicle, either driving
the vehicle or as an occupant.
• He has taken a policy to cover himself for the
bodily injuries or death, due to an accident,
arising out of and use of the vehicle.
• The policy is to cover him in both the
capacities, either as a owner of the vehicle or
as a driver.
 Cond.
• Merely because, at the time of accident, he did
not drive the vehicle, it cannot be contended
that the contract of insurance cannot be
extended to cover the owner of the vehicle.
• When he travels in the vehicle, not actually
driving the vehicle, but as an occupant, there is
no alteration in his status, as the owner of the
vehicle.
• The performance of an act, ie., driving the
vehicle, alone is not the criteria, to determine
the enforceability of the contract of Insurance.
 Cond.

• So long as there is a payment of additional premium for the

owner cum driver and during the period of validity, an
accident has occurred, the policy would cover the owner also,
even if he was not on the wheels, at the time of accident.
• The expression owner cum driver cannot be split up to
narrow down the enforceability of the policy to the driver
only, if he is also the owner of the vehicle.
• When an occupant in the vehicle is covered, then the owner
of the vehicle, who travelled in the offending vehicle, as an
occupant, is also entitled to seek for just compensation, when
the vehicle is covered by a comprehensive/package policy.
• If the policy is comprehensive/package policy and when
additional premium has been paid to cover any loss, then the
Insurance Company is liable to pay compensation.
 Cond.

• An occupant in a vehicle, may include all the

persons, including the owner.
• When there are different kinds of policies, for the
owner-cum-driver, employee, unnamed passengers,
etc., for which, different rates of premium is
prescribed under the Indian Motor Tariff, it cannot
be contended that the claim for compensation is
maintainable, only when the owner is on the wheels
and not when he travelled in the vehicle, as an
occupant.
• Respondent is entitled to maintain a claim for
compensation, against the insurer alone.
 Computation of Compensation

• Sec-168: provides that the claims tribunal shall

make an award to determine the amount of
compensation which appears to be ‘just’
• Divisional controller, KSRTC v. Mahadeva
shetty, (2003) 1 SCC 197
• Hon’ble SC held that expression ‘just’ denotes
equitability, fairness and reasonableness.
• It has to be borne in mind that compensation
for loss of limbs or life can hardly be weighed
in golden scales.
 Cond.

• The quantum of compensation fixed should be

in accordance to the injury. An injury may
bring about many consequences like loss of
earning capacity, loss of mental pleasure and
many such consequential losses.
• Statutory provisions clearly indicate the
compensation must be ‘just’ and it cannot be
a bonanza; not a source of profit but same
should not be a pittance.
• There is no golden rule applicable in all cases
 Cond.

• Helel C Rebello v. Maharashtra SRTC, 1999 ACJ

10:
• Hon’ble SC held that the word ‘just’ as its
nomenclature, denotes equitability, fairness
and reasonableness having a large peripheral
field.
• The largeness is, of course, not arbitrary; it is
restricted by the conscience which is fair,
reasonable and equitable, if it exceeds; it is
termed as unfair, unreasonable, inequitable,
not just
 Computation in case of death

• Multiplier method:-
• Compensation is based on the pecuniary loss caused
to the dependants by the death of the victim
• The dependency of the dependants is determined
by taking the annual earning of the deceased at the
time of the accident.
• Thereafter, effect is given to the future prospects of
the deceased.
• After the income of the deceased is established, the
deduction is made towards the personal expenses of
the deceased which he would have spent on himself.
 Cond.

• If the deceased was unmarried, normally 50%

of the income is deducted towards his
personal expenses.
• If the deceases was married and leaves
• two to three dependents-1/3rd deduction
• four to six family members-deduction of 1/4th
• if the number exceeds six-the deduction of
1/5th of the income is made.
 Cond.

• The ramaining amount of income after

deduction of personal expenses is taken to be
the loss of dependency of the family members
which is multiplied by 12 to determine the
annual loss of dependency.
• The annual loss of dependency of the
dependents of the deceased is multiplied by
the multiplier according to the age of the
deceased.
 Sarla Verma & Ors. v. DTC

• Before the Tribunal:-

• Facts:-
• Monthly salary of Rs.3402/- + benefits (ICAR)
• Widow, three minor children, parents and
grandfather
• Age of retirement (as per ICAR) -60 years
• Salary -Rs.4004/- per month (as on the date of
death)
• Judgment dated 6.8.1993,
 MACT Considered as follows:-

• Salary-Rs.3402/- per month

• 1/3rd deductions as personal expenses
• contribution to the family -Rs.2250/-month (or
Rs.27,000/- per annum)
• Period of service lost-22 Years
• Loss of dependency=(2250X 12 X 22) =5 94,000/-
• Interest rate-9% from the date of filing the claim
application
• (Apportionment-Rs.3,00,000/- to the widow,
Rs.75000/- to each of the two daughters, Rs.50000/-
to the son, Rs.19000/- to the grandfather and
Rs.30000/- to each of the parents)
 HC’s Consideration (15.2.2007)

• As per the evidence of PW-4 and Claim

petition-Salary Rs.3,402 plus other benefits,
Hence, pay should be taken as Rs.4,004/- per
month
• Due of revision of pay scale for rest of 22
years, salary would have been atleast doubled,
which is Rs. 8008/-
• Hence, average of Rs. 8008 and Rs. 4004 shall
be taken into consideration i.e., Rs. 6006/-
• 1/4th deduction can be applied instead of 1/3rd
 HC’s Consideration…Cond.

• Deduction-1/4x6006=1501 (deduction)
• Remaining (Contribution to the family)-Rs.
6006-Rs. 1501=Rs. 4504/-(monthly)
• Yearly-4504x12=Rs.54,048/-
• Chosen the Multiplier -13
• Loss of dependency-54048x13=Rs.702,624/-
• + Rs.15,000/- towards loss of consortium
• + Rs. Rs.2,000/- as funeral expenses
• Total =Rs. Rs.7,19,624/-
• Interest granted at the rate of 6% PA
 Contentions before the Hon’ble SC

• Produced copy of the ICAR regarding revision of

pay scale before HC=Rs.20,890/- per month as
on 31.12.1999 and Rs.32,678/- as on 1.10.2005,
had he been alive.
• High Court did not take note of those
indisputable documents
• Contended that, salary should have been taken
average of Rs. 4004/-(as on the date of death)
and Rs. 32,678/-(as on the date of retirement)
• Average -Rs.18341/-
 Cond.

• Only 1/8th shall be deducted, even if it is 1/4th,

the deduction shall be Rs.4585/-(Out of Rs.
Rs.18341/-)
• Contribution to the family-
4585x3=Rs.13,756/- per month
• Rs.1,65,072/- per annum
• Multiplier as per Schedule-II-16
• Total Dependency-Rs.26,41,152/-
• +Rs.1,00,000/- should be given for pain and
sufferings.
 Issued Before the Hon’ble SC

• (i) Whether the future prospects can be taken

into account for determining the income of
the deceased ? If so, whether pay revisions
that occurred during the pendency of the
claim proceedings or appeals therefrom
should be taken into account ?
• (ii) Whether the deduction towards personal
and living expenses of the deceased should be
less than one-fourth (1/4th) as contended by
the appellants, or should be one-third (1/3 rd)
as contended by the respondents ?
 Cond.

• (iii) Whether the High Court erred in taking

the multiplier as 13 ?
• (iv) What should be the compensation ?
 General Principles Evolved…

• Nance v. British Columbia Electric Rly. Co. Ltd. [1951

AC 601]
• Davies v. Powell Duffryn Associated Collieries Ltd.,
[1942 AC 601]
• Difference between above two cases are discussed
in the following case…
• General Manager, Kerala State Road Transport
Corporation v. Susamma Thomas [1994 (2) SCC 176]
• The Court preferred from Davies to Nance
• Susamma’s ratio was followed in UP State Road
Transport Corporation v. Trilok Chandra [1996 (4)
SCC 362],
 Applied
• What is Just Compensation ?
• Compensation awarded does not become ‘just
compensation’ merely because the Tribunal
considers it to be just.
• Just compensation is adequate compensation
which is fair and equitable, on the facts and
circumstances of the case, to make good the
loss suffered as a result of the wrong, as far as
money can do so, by applying the well settled
principles relating to award of compensation.
 Cond.

• The observation of Susamma Thomas that,

“So the proper method of computation is the
multiplier method. Any departure, except in
exceptional and extra-ordinary cases, would
introduce inconsistency of principle, lack of
uniformity and an element of unpredictability,
for the assessment of compensation.”
• Was adopted
 Cond.
• Basically only three facts need to be established in case
of death:-
• (a) age of the deceased;
• (b) income of the deceased; and the
• (c) the number of dependents.
• Issues to be considered for calculating the Loss of
dependency are:-
• (i) additions/deductions to be made for arriving at the
income;
• (ii) the deduction to be made towards the personal living
expenses of the deceased;
• (iii) the multiplier to be applied with reference of the age
of the deceased.
 Step 1: Ascertaining the multiplicand-

• The income of the deceased per annum

should be determined.
• Out of the said income a deduction should be
made in regard to the amount which the
deceased would have spent on himself by way
of personal and living expenses.
• The balance, which is considered to be the
contribution to the dependent family,
constitutes the multiplicand.
 Step 2: Ascertaining the multiplier

• Having regard to the age of the deceased and

period of active career, the appropriate
multiplier should be selected.
• This does not mean ascertaining the number of
years he would have lived or worked but for the
accident. Having regard to several
imponderables in life and economic factors, a
table of multipliers with reference to the age
has been identified by this Court.
• The multiplier should be chosen from the said
table with reference to the age of the deceased
 Step 3 : Actual calculation

• The annual contribution to the family (multiplicand)

when multiplied by such multiplier gives the `loss of
dependency' to the family.
• Thereafter, a conventional amount in the range of Rs.
5,000/- to Rs.10,000/- may be added as loss of estate.
Where the deceased is survived by his widow, another
conventional amount in the range of 5,000/- to 10,000/-
should be added under the head of loss of consortium.
But no amount is to be awarded under the head of pain,
suffering or hardship caused to the legal heirs of the
deceased.
• The funeral expenses, cost of transportation of the body
(if incurred) and cost of any medical treatment of the
deceased before death (if incurred) should also added.
 (i) Future prospects.
• An addition of 50% of actual salary to the actual salary income
of the deceased towards future prospects, where the
deceased had a permanent job and was below 40 years.
[Where the annual income is in the taxable range, the words
`actual salary' should be read as `actual salary less tax'].
• The addition should be only 30% if the age of the deceased
was 40 to 50 years.
• There should be no addition, where the age of deceased is
more than 50 years.
• Where the deceased was self-employed or was on a fixed
salary (without provision for annual increments etc.), the
courts will usually take only the actual income at the time of
death.
• A departure there from should be made only in rare and
exceptional cases involving special circumstances.
 (ii) Deductions

• Where the deceased was married, the

deduction towards personal and living
expenses of the deceased, should be one-third
(1/3rd) where the number of dependent
family members is 2 to 3,
• one-fourth (1/4th) Where the number of
dependent family members is 4 to 6,
• one-fifth (1/5th) Where the number of
dependent family members exceeds six.
• bachelors, normally, 50% is deducted as
personal and living expenses
 Cond.

• Subject to evidence to the contrary, the father

is likely to have his own income and will not be
considered as a dependant and the mother
alone will be considered as a dependent.
• In the absence of evidence to the contrary,
brothers and sisters will not be considered as
dependents
• Only the mother would be considered to be a
dependant
 Question (iii) - selection of multiplier

• The multiplier to be used should be as mentioned in column (4) of the Table

(prepared by applying
• Susamma Thomas, Trilok Chandra and Charlie case,
• which starts with an operative multiplier of 18 (for the age groups of
• M-18 for 15 to 20
• M-18 for 21 to 25 years,
• reduced by one unit for every five years, that is
• M-17 for 26 to 30 years,
• M-16 for 31 to 35 years,
• M-15 for 36 to 40 years,
• M-14 for 41 to 45 years, and
• M-13 for 46 to 50 years,
• then reduced by two units for every five years, that is,
• M-11 for 51 to 55 years,
• M-9 for 56 to 60 years,
• M-7 for 61 to 65 years and
• M-5 Above 66 to 70 years
Question (iv) - Computation of compensation

• Monthly income as an average of Rs.4004/- and Rs.8008/-

that is Rs.6006/- per month or Rs.72072/- per annum. In
conformity with the legal principle that about 50% can be
added to the actual salary, by taking note of future prospects
• one-fifth is deducted as the personal and living expenses of
the deceased.
• After such deduction, the contribution to the family
(dependents) is determined as Rs.57,658/- per annum.
• The multiplier will be 15 having regard to the age of the
deceased at the time of death (38 years).
• Therefore the total loss of dependency would be Rs.57,658 x
15 = Rs.8,64,870/-.
 Cond.

• In addition, the claimants will be entitled to a

sum of Rs.5,000/- under the head of ‘loss of
estate’ and Rs.5000/- towards funeral
expenses.
• The widow will be entitled to Rs.10,000/- as
loss of consortium.
• Thus, the total compensation will be
Rs.8,84,870/-. After deducting Rs.7,19,624/-
awarded by the High Court, the enhancement
would be Rs.1,65,246/-.
 Non-dependent spouse-Loss of estate

• Compensation in Case of Death of Non-dependent

Spouse/Legal Representative;-
• These principles are enunciated in the judgment of
the Karnataka High Court in the case of A.
Manavalaganda v. A. Krishnamurty and followed by
Delhi High Court in the case of Keith Rower v.
Prashant Sagar
• Non-dependant spouse/legal representative of the
deceased is not entitled to compensation for loss of
dependency.
• However, the non-dependant spouse/legal
representative is entitled to the loss of estate.
 Cond.
• The loss of estate is computed by taking the savings
of the deceased. The quantum of savings can be
taken as 1/3 of the income of the deceased where the
spouses were having common establishment
• And ¼-where the spouses were having independent
establishment.
• Where the claimants are non-dependent
brothers/sisters claiming loss of estate, the saving can
be taken as 15% of the income.
• The above percentages are subject to any specific
evidence to the contrary by the claimants. Such
savings are then multiplied to compute the total loss
of estate of the claimants.
 Compensation in Case of Death of a
Housewife-determination of income
• In Lata Wadhwa v. State of Bihar, the Hon'ble Supreme
Court held that:-
• in the absence of any data and as the housewives were
not earning any income, attempt has been made to
determine the compensation, on the basis of services
rendered by them to the house
• On the basis of the age group of the housewives,
appropriate multiplier has been applied, but the
estimation of the value of services rendered to the house
by the housewives,
• which has been arrived at Rs. 12,000/- per annum in cases
of some and Rs. 10,000/- for others
 Cond.

• The multifarious services rendered by the housewives for

managing the entire family,
• even on a modest estimation, should be Rs. 3,000/- per
month and Rs. 36,000/- per annum. This would apply to
all those housewives between the age group of 34 to59
and as such who were active in life.
• So far as the elderly ladies are concerned, in the age
group of 62 to 72, the value of services rendered has
been taken at Rs. 10,000/- per annum and multiplier
applied is eight. Though, the multiplier applies is correct,
but the values of services rendered at Rs. 10,000/- per
annum, cannot be held to be just and, we, therefore,
enhance the same to Rs. 20,000/- per annum.
 Death of a Professional/student
• Compensation in cases of Death of a Professional/student
pursuing professional course
• The compensation in respect of death of a professional is
computed on the basis of earning capacity of the deceased as
held by the Hon'ble Supreme Court in the case of Haji Zainullah
Khan v. Nagar Mahapalika and followed by Delhi High Court in
the case of Union of India v. Dr. Rita Pant.
• The compensation in respect of death of a student pursuing a
professional course is determined according to his earning
capacity after completion of the professional course.
• In New India Assurance Company Limited v. Ganga Devi & Ors.,
the deceased had completed his MBBS and was doing one year
internship. In was proved that after completion of his internship
he would have earned Rs.18,000 to Rs.20,000/- per month which
was taken into consideration for computation of compensation
 No Proof of Income of Deceased
• Compensation in Cases of no Proof of Income of Deceased
• In Kiran Devi v. Surjeet Yadav, an accident resulted in to death of
a man aged 44 years having no proof of income. The minimum
wages as prescribed by the State Government at the time of
accident were taken for the purpose of compensation.
• Following the judgments of Delhi High Court in Kanwar Devi v.
Bansal Roadways and National Insurance Co. Ltd. v. Renu Devi,
• the Court took judicial notice of the increase of minimum wages
to meet the price index and inflation rate.
• The Court held the minimum wages get doubled over the
period of 10 years and increase in minimum wages is not akin
to future prospects. The Delhi High Court took the average of
minimum wages of Rs.4,100 and its double to compute the loss
of income and applied the multiplier of 14 to compute the loss
of dependency at Rs.7,74,900/-
 Injury Cases

• General principles relating to compensation in injury

cases:
• C. K. Subramonia Iyer v. T. Kunhikuttan Nair, AIR 1970
SC 376, R. D. Hattangadi v. Pest Control (India) Ltd,1995
(1) SCC 551 and Baker v. Willoughby, 1970 AC 467
• A person is not only to be compensated for the
physical injury, but also for the loss which he suffered
as a result of such injury.
• This means that he is to be compensated for his
inability to lead a full life, his inability to enjoy those
normal amenities which he would have enjoyed but for
the injuries, and his inability to earn as much as he
used to earn or could have earned.
 Cond.

• The heads under which compensation is awarded in

personal injury cases:-
• Pecuniary damages (Special Damages):-
(i) Expenses relating to treatment, hospitalization,
medicines, transportation, nourishing food, and
miscellaneous expenditure.
(ii) Loss of earnings (and other gains) which the injured
would have made had he is not been injured,
comprising :
(a) Loss of earning during the period of treatment;
(b) Loss of future earnings on account of permanent
disability.
(iii) Future medical expenses.
 Cond.

• Non-pecuniary damages (General Damages)

(iv) Damages for pain, suffering and trauma as a
consequence of the injuries.
(v) Loss of amenities (and/or loss of prospects of
marriage).
(vi) Loss of expectation of life (shortening of
normal longevity).
 Illustration-1

• The injured, a workman, was aged 30 years and earning

Rs.3000/- per month at the time of accident. As per
Doctor's evidence, the permanent disability of the limb as a
consequence of the injury was 60% and the consequential
permanent disability to the person was quantified at 30%.
The loss of earning capacity is however assessed by the
Tribunal as 15% on the basis of evidence, because the
claimant is continued in employment, but in a lower grade.
Calculation of compensation will be as follows:
a) Annual income before the accident : Rs.36,000/-.
b) Loss of future earning per annum (15% of the prior annual
income): Rs. 5400/-.
c) Multiplier applicable with reference to age: 17
d) Loss of future earnings : (5400 x 17) : Rs. 91,800/-
 ILLustration-2

• The injured was a driver aged 30 years, earning

Rs.3000/- per month. His hand is amputated and his
permanent disability is assessed at 60%. He was
terminated from his job as he could no longer drive.
His chances of getting any other employment was
bleak and even if he got any job, the salary was likely
to be a pittance. The tribunal therefore assessed his
loss of future earning capacity as 75%.
a) Annual income prior to the accident : .Rs. 36,000/-
b) Loss of future earning per annum (75% of the prior
annual income): Rs.27,000/-
c) Multiplier applicable with reference to age: 17
d) Loss of future earnings : (27000 x 17) : Rs. 4,59,000/-
 Hit and Run cases
• 161. Special provisions as to compensation in case of
hit and run motor accident.
• (1) For the purposes of this section, section 162 and
section 163(a) " grievous hurt" shall have the same
meaning as in the Indian Penal Code; (45 of 1860 .)
• (b) " hit and run motor accident" means an accident
arising out of the use of a motor vehicle or motor
vehicles the identity whereof cannot be ascertained
in spite of reasonable efforts for the purpose;
• (c) " scheme" means the scheme framed under
section 163.
 Contd.
• (2) Notwithstanding anything contained in the General
Insurance Business (Nationalization) Act, 1972 (57 of
1972 .) or any other law for the time being in force or
any instrument having the force of law, the General
Insurance Corporation of India formed under section 9
of the said Act and the insurance companies for the
time being carrying on general insurance business in
India shall provide for paying in accordance with
• the provisions of this Act and the scheme,
compensation in respect of the death of, or grievous
hurt to, persons resulting from hit and run motor
accidents.
 Cond.
• (3) Subject to the provisions of this Act and the scheme,
there shall be paid as compensation—
• (a) in respect of the death of any person resulting from a
hit and run motor accident, a fixed sum of eight
thousand and five hundred rupees;
• (b) in respect of grievous hurt to any person resulting
from a hit and run motor accident, a fixed sum of two
thousand rupees.
• (4) The provisions of sub- section (1) of section 166 shall
apply for the purpose of making applications for
compensation under this section as they apply for the
purpose of making applications for compensation
referred to in that sub- section.
 Cond.

• This Section provides for payment of

compensation (solatium) as follows:
• In respect of the death of any person resulting
from a hit and run motor accident, now a fixed
sum of Rs.25,000
• In respect of grievous hurt to any person
resulting from a hit and run motor accident,
now a fixed sum of Rs.12,500
 Procedure

• The victim of the “hit-and-run” vehicle or his legal

representative shall make an application to the
Claim Enquiry Officer in each Taluka.
• After due enquiries, the Claims Enquiry Officer will
submit a report together with certificate of post
mortem or injury certificate to the claims settlement
commissioner who will either the District Collector
or the Deputy Commissioner at the District level.
• He will process the claims and sanction the payment
within 15 days from the receipt of report from Claim
Enquiry Officer and communicate sanction order to
the nominated office of the Insurance Company.
 Cond.
• The compensation under Hit and Run Accident
cases are made from a Solatium Fund which is
contributed by General Insurance industry
under an agreed formula.
• The administration of claims is done by New
India Assurance Co Ltd which has nominated
one Divisional Manager in each district at
District Level Committee which is headed by
District Collector.
 Puttamma v. K.L. Narayana Reddy
(2013)15SCC45

• In absence of any specific reason and evidence

on record, Tribunal or Court should not apply
split multiplier in routine course and should
apply multiplier as per decision of Supreme
Court in case of Sarla Verma v. Delhi Transport
Corporation, (2009) 6 SCC 121.
 Cond.
• According to the English Law compensation/damages were
payable according to the proportionate loss whereas in India
compensation is payable which appears to the Tribunal to be
just is payable. The approach of the Courts according to the
English law and according to the Indian Law have to be
distinct and separate. Indian Law recognizes just
compensation whereas English law required compensation
proportionate to the loss suffered.
• English courts have been calculating loss of money as a
bargain as to how much monetary loss has been caused to the
claimant, as a result the death of bread earner/deceased. The
English Law being different, English judges were having
different approach towards the grant of compensation to the
deceased's family.
 Cond.
• The Second Schedule of the Motor Vehicles Act as
enacted in 1994 has now become redundant, irrational
and unworkable due to changed scenario including the
present cost of living, current rate of inflation and the
increased life expectancy.
• The central Government has failed to amend the
Second Schedule for 19 years in spite of repeated
observations of the Supreme Court.
• Hence, directions are issued to the Central
Government to amend Schedule II Table keeping in
view the present cost of living, subjection to
amendment of Schedule II as proposed or may be
made by the Parliament.
 Cond.

• Till such amendment is made in cases where

application is made under Section 163A, the
Supreme Court directed that for death of children
upto the age of 5 years, the claimants shall be
entitled to fixed compensation of Rs. 1 lakh and for
death of persons more than 5 years of age, the
claimants shall be entitled to fixed compensation
of Rs. 1,5 Lakhs or the amount as may be
determined in terms of Schedule II, whichever is
higher. Such amount is to be paid if any application
is filed under Section 163A of the Act, 1988.