Insurer's Statutory Liability Cannot Be Wiped Out Without Proof | Supreme Court Restores Tribunal's Award And Holds That The Obligation To Satisfy The Third-Party Claim Revives In Full
Kiran Raj
The Supreme Court Division Bench of Justice Vikram Nath and Justice Sandeep Mehta held that the insurer’s statutory obligation to satisfy third-party claims remained intact as there was no proven breach of policy conditions. Setting aside the High Court’s order which had exonerated the insurer, the Court restored the compensation award originally passed by the Motor Accident Claims Tribunal. It directed the insurer, United India Insurance Co. Ltd., to deposit the full compensation within four weeks and permitted immediate withdrawal by the claimants in accordance with the Tribunal's apportionment.
The case arose from a motor accident that occurred on 23 August 2016 at approximately 05:15 a.m. near Erragadda Rythu Bazar, Hyderabad. A bus owned by the appellant, M/s New Morning Star Travels, struck a pedestrian, Mohammed Arif, resulting in fatal injuries. He succumbed to the injuries at Gandhi Hospital at 09:25 a.m. the same day. Consequently, Crime No. 580/2016 was registered under Section 304-A IPC against the bus driver at Sanjeeva Reddy Nagar Police Station.
Respondents 2 to 5, the legal heirs of the deceased, filed M.V.O.P. No. 1010 of 2016 before the Motor Accident Claims Tribunal-cum-IV Additional District Judge, Ranga Reddy District. The Tribunal awarded a total compensation of ₹16,58,000/- with interest at 7.5% per annum and held the driver, owner, and insurer jointly and severally liable.
Subsequently, the insurer, United India Insurance Co. Ltd., challenged the Tribunal’s order by filing M.A.C.M.A. No. 228 of 2022 before the High Court of Telangana. The insurer contended that (i) the bus driver did not possess a valid driving licence and (ii) the bus was being operated in Telangana without a valid route permit.
Accepting these submissions, the High Court modified the Tribunal’s award by reducing the compensation to ₹15,78,000/-, limiting the award under the head of filial consortium only to the parents, and directing the owner of the bus to bear the entire liability. The High Court thus exonerated the insurer from any financial responsibility.
The appellant-owner of the bus then approached the Supreme Court, challenging the High Court’s findings. The principal contention raised was that the High Court had rendered the decision without serving effective notice to the appellant and had proceeded without examining the crucial documents establishing the existence of a valid permit and licence.
The appellant placed on record a cash receipt dated 01 July 2016, issued by the Telangana Transport Authority, showing payment of ₹1,50,675/- for a temporary contract-carriage permit valid up to 30 September 2016. Since the accident occurred on 23 August 2016, the bus was covered under the said permit at the relevant time.
Regarding the driver's licence, records obtained from the Licensing Authority, Tenali, demonstrated that the driver held a transport-vehicle licence valid up to 14 April 2027. The only contrary material on record was a remark in the Motor Vehicle Inspector’s report stating that licence details were “not furnished”. No documentary proof of licence invalidity was adduced by the insurer.
The appellant argued that the High Court failed to provide an opportunity to rebut decisive allegations and disregarded the documentary evidence on record, thus violating principles of natural justice.
The Supreme Court discussed the obligations of an insurer under the Motor Vehicles Act, 1988, especially when a policy is valid and in force. “An order that prejudices a party without affording an opportunity to rebut decisive allegations offends the foremost principle of natural justice.”
The Court recorded that the temporary permit issued by the Telangana Transport Authority for the relevant period was valid, observing: “The accident occurred on 23.08.2016, squarely within that period. The conclusion that the bus plied ‘without permit’ is thus factually unsustainable.”
Regarding the driver's licence, the Court noted: “The particulars obtained from the Licensing Authority, Tenali establish that respondent 6 held a transport-vehicle licence valid until 14.04.2027.”
The insurer, the Court observed, failed to produce any evidence contradicting this record and relied solely on a statement in the MVI report that the details were “not furnished”. The Court stated:
“Such silence does not translate into proof of breach, and the onus to establish a statutory defence under Section 149(2)(a)(ii) of the Motor Vehicles Act, 1988 squarely rested on the insurer.”
Further, the Court held that even in instances where a breach of policy is shown, the insurer must first satisfy the award and then recover the amount from the insured. Citing precedent, it recorded:
“This principle has been thoroughly explained in the case of Shamanna & Others vs. the Divisional Manager, The Oriental Insurance Co. Ltd. & Ors (2018) 9 SCC 650 whereby this Court directed the Insurance Company to pay the compensation and thereafter recover the same from the owner of the vehicle.”
The Court found that the High Court had disregarded key documents and allowed the insurer's assertions without adequate scrutiny. It observed: “The High Court erred in accepting, at face value, the insurer’s bare assertions that the bus lacked a Telangana permit and that the driver was unlicensed.”
It further noted: “Compounding the mistake, the High Court deleted the sums the Tribunal had awarded to the deceased’s parents under the heads of parental and filial consortium. Both steps ignored the documentary record placed before the Tribunal and brushed aside binding precedents of this Court.”
The Court allowed the appeal and set aside the High Court’s judgment. It restored the Tribunal’s original award, stating:
“The judgment of the High Court dated 14.09.2022 in M.A.C.M.A. No. 228 of 2022 is set aside, and the award dated 28.12.2021 passed by the Motor Accident Claims Tribunal cum IV Additional District Judge, Ranga Reddy District, in M.V.O.P. No. 1010 of 2016 is restored.”
The insurer was directed to satisfy the claim in full:
“The respondent no. 1 insurer shall deposit the compensation as directed by the Tribunal, within four weeks from today and upon deposit, the claimants may forthwith withdraw the amounts in terms of the Tribunal’s apportionment.”
The Court disposed of any pending applications.
Advocates Representing the Parties
For the Petitioners: Mr. K.L.N.V. Veeranjaneyulu, Mr. Nischal Kumar Neeraj, Advocates-on-Record
For the Respondents: Mr. A.K. De, Mrs. Ananya De, Ms. Chandni Sharma, Mr. Pramit Saxena, Mr. Vamsikrishna Thota, Mr. Kedar Nath Tripathy, Mr. Jogy Scaria, Advocates-on-Record
Case Title: M/s New Morning Star Travels vs. United India Insurance Co. Ltd. & Ors.
Case Number: Civil Appeal No. 6326 of 2025 (Arising out of SLP(C) No. 25951 of 2023)
Bench: Justice Vikram Nath, Justice Sandeep Mehta
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