Insurer Cannot Recover Compensation Without Hearing Vehicle Owner On Alleged Policy Violation: Calcutta High Court
Sanchayita Lahkar
The High Court of Calcutta, Single Bench of Justice Biswaroop Chowdhury directed National Insurance Company Limited to deposit the enhanced motor accident compensation with interest and permitted the insurer to pursue recovery from the vehicle owner only after issuing notice and granting an opportunity of hearing on the alleged policy breach. The dispute arose from the insurer’s allegation that the insured truck was driven without a valid licence for a transport vehicle, and that the compensation paid to third-party claimants should therefore be recoverable from the insured. The Court modified the compensation payable to Rs. 5,00,000 with 6% interest and set a time frame for deposit, while requiring a prior hearing before any recovery steps.
The Learned Additional District Judge awarded compensation of Rs. 4,70,000/- with interest at 6% per annum from the date of filing of the claim. The vehicle owner appeared but did not contest the case. The Insurance Company contested the claim.
In appeal, the Insurance Company contended that the driver lacked a valid transport driving licence and sought an order of pay and recovery. The claimant/respondent filed a cross objection contending that compensation ought to have been Rs. 5,00,000/- under Section 164 of the Motor Vehicles Act, 1988.
On the issue of quantum, the Court observed, “Section 164 of the Motor Vehicles Act 1988 provides compensation of Rs. 500,000/- and the claim compensation legislation is a welfare one the compensation awarded should be enhanced to Rs. 500,000/-.”
Regarding pay and recovery, the Court observed, “It is well settled that in case of violation of Insurance Policy Condition, the Insurance Company is entitled to recover from the insured the compensation amount awarded after making payment to the claimant/victim.”
The Court further stated, “However before proceeding to recover from the insured, the compensation amount the insurer upon making necessary enquiry and upon giving the vehicle owner an opportunity of being heard shall ascertain as to whether the violation of policy condition was bona fide unintentional or deliberate.”
Referring to Reliance General Insurance Company Ltd. vs Niyati Kumar, the Court recorded, “Thus it is well settled that in order to absolve from liability of paying compensation and to obtain an order of pay and recovery it is mandatory for the Insurer to prove breach of the condition of Insurance Policy.”
The Court observed, “In the event the Insurance Company has reasons to believe that policy conditions were violated it should conduct an enquiry issue notice upon the vehicle owner and give him an opportunity of being heard.”
It further recorded, “Upon such enquiry being made the Insurance Company can decide as to whether policy violation was minor or major and whether to condone such violation or recover the amount of compensation paid.”
On procedural safeguards, the Court observed, “In any event prior to directing recovery after payment notice in this regard must be issued specifically and the vehicle owner should be given an opportunity of being heard.”
In the present case, the Court recorded, “In the instant case the vehicle owner/insured was not put to notice with regard to violation of policy condition for the purpose of pay and recovery.”
The Court therefore observed, “Thus no order with regard to recovery can be directed without the Appellant Insurance Company causing enquiry and giving the vehicle owner/insured an opportunity of being heard.”
The Court ordered, “Thus this Appeal FMA-No-1003 of 2025 and COT-155 of 2025 stands disposed.” It further directed, “The Judgment and Award dated 21st day of January 2025… stands modified to the extent that the Respondent no-1 and-2 namely Lirasa Bibi and Kamala Bibi will be entitled to total compensation of Rs. 500,000/- (Rupees five lakh) from the Appellant National Insurance Company Limited along with interest @6% per annum from the date of filing claim case till today.”
“Such deposit shall be made before the Registrar General High Court Calcutta within 8 weeks from the date of communication of the Order. In the event the amount awarded by the trial Court is already deposited, the balance amount shall be deposited.”
“The Appellant/Insurance Company upon making the deposit is granted liberty to proceed for recovery upon compliance of the procedure as observed above.”
“Let a copy of this Order be sent to the Registrar General High Court Calcutta for forwarding the same to all Motor Vehicle claim Tribunals/District Judges within State of West Bengal and Andaman and Nicobar Island with a request to consider the same with regard to similar cases involving pay and recovery.”
Advocates Representing the Parties
For the Petitioners: Mr. Rajesh Singh, Advocate
For the Respondents: Ms. Sima Ghosh, Advocate; Ms. Ankhi Kayel, Advocate
Case Title: National Insurance Co. Ltd. v. Lirasa Bibi And Anr
Case Number: F.M.A. 1003 of 2025
Bench: Justice Biswaroop Chowdhury
