Sikkim High Court Slams Faulty Insurance Rejection | Declares Deceased A ‘Third Party’ | Orders Rs 29.4 Lakh Compensation With 9% Interest
Isabella Mariam
The High Court of Sikkim Single Bench of Justice Meenakshi Madan Rai dismissed an appeal filed by an insurance company challenging an award of compensation granted by the Motor Accidents Claims Tribunal. The Court upheld the finding that the deceased, who died in a motor vehicle accident, was authorised by the vehicle owner to drive the vehicle and thus did not step into the shoes of the owner. The Court held that the claimant was entitled to compensation under Section 166 of the Motor Vehicles Act and directed the insurer to pay ₹29,40,700 within one month, failing which interest at an enhanced rate would apply.
The case arose from a fatal motor accident on 21.06.2022, involving a 27-year-old individual, Suraj Rai, who was driving a Mahindra Bolero bearing registration No. SK 05 P 0815 on the Gangtok road in District Namchi, Sikkim. The accident occurred around 9:15 AM and resulted in the death of the driver. A compensation claim was filed under Section 166 of the Motor Vehicles Act, 1988 by the deceased’s father, who was also the first respondent in the present appeal. The vehicle belonged to the deceased’s mother, the second respondent.
The Motor Accidents Claims Tribunal (MACT) awarded a compensation of ₹15,00,000 in favour of the claimant, reasoning that although the deceased was the owner's son and no other vehicle was involved, he was deemed to have stepped into the shoes of the owner and hence was entitled to the personal accident (PA) cover amount of ₹15,00,000. However, the MACT also held that compensation under Section 166 of the Act was not maintainable.
The insurance company, aggrieved by the decision, filed the appeal. It contended that the vehicle owner, i.e., the mother of the deceased, had opted out of the Compulsory Personal Accident (CPA) coverage at the time of purchasing the insurance policy. It relied on the Supreme Court’s decisions in Ramkhiladi v. United India Insurance Co. and Dhanraj v. New India Assurance Co. to argue that since the deceased was effectively stepping into the shoes of the owner, the insurer had no liability to compensate.
The first respondent (father of the deceased) submitted that the question of opting out of CPA was not raised before the MACT and was now being introduced for the first time in appeal. It was further argued that the deceased was not the owner of the vehicle but was duly authorised to drive the vehicle by the owner, as evidenced by an authorisation letter that was part of the record before the Tribunal.
The second respondent (mother and vehicle owner) endorsed the submissions of the claimant and did not raise any additional arguments.
The insurance company also placed on record the insurance policy (Exhibit 9), which indicated that the insured had opted out of CPA cover. However, the policy still covered liability towards third parties under the statutory provisions of the Motor Vehicles Act.
The Court addressed the first issue regarding the finding of the MACT that no third party was involved and that the deceased was the son of the owner. It stated: “The MACT has failed to consider the doctrine of res ipsa loquitur.”
Referring to the principles laid down in Mohammed Aynuddin alias Miyam v. State of A.P., the Court observed that the circumstances of the accident indicated negligence by the deceased driver, even in the absence of another vehicle. It held: “Where two vehicles are not involved but all circumstances indicate negligence, the claim for compensation cannot be denied.”
On the issue of the personal accident cover, the Court examined Exhibit 9—the insurance policy—and recorded: “The insured owner had not paid premium to be covered by the policy which was specified to be for the owner driver.”
It noted that there was no discussion in the MACT judgment on the actual provisions under which the compensation was awarded, especially when it had declared Section 166 inapplicable. The Court stated: “The judgment also does not reveal under what provision the compensation was granted if Section 166 of the MV Act was found inapplicable.”
Regarding the MACT’s conclusion that the deceased had stepped into the shoes of the owner, the Court found the reasoning to be vague and lacking evidentiary support. It stated: “The reasoning of the MACT... is cryptic and made without reference to any documentary evidence or the evidence of any party and therefore appears to have been decided on a whim.”
Turning to the critical document, Exhibit 11, which was an authorisation letter issued by the vehicle owner to the deceased, the Court observed: “The deceased driver was clearly authorised by Respondent No.2 to drive the vehicle vide Exhibit 11. He had not ‘borrowed’ the vehicle... he would be covered by the definition of ‘third party.’”
The Court distinguished the facts of Ramkhiladi and Dhanraj, noting that in those cases, the deceased had borrowed the vehicle and were therefore deemed the insured. In contrast, in the present case, the deceased was an authorised driver and not the insurer or insured.
It concluded: “The MACT was thus in error in concluding that the deceased stepped into the shoes of the owner by completely bypassing Exhibit 11.”
Having reviewed the evidence and applicable law, the Court held that the deceased was a third party in relation to the contract of insurance, and therefore, the insurance company was liable to compensate under Section 166 of the Motor Vehicles Act.
The Court found the Respondent No.1-Claimant entitled to compensation under Section 166 of the Motor Vehicles Act. It held: “The assailed Judgment is liable to be and is accordingly set aside in its entirety.”
The Court awarded compensation calculated at ₹29,40,700, including components for loss of income, future prospects, funeral expenses, loss of estate, and filial consortium.
The Court directed: “The Appellant-Insurance Company is directed to pay the awarded compensation to the Respondent No.1-Claimant, within one month from today, with simple interest @ 9% per annum, failing which, it shall pay simple interest @ 12% per annum, from the date of filing of the Claim Petition, i.e., 21-12-2022, till final realization.”
It further stated that any amounts already paid by the insurance company shall be deducted from the total compensation awarded.
The appeal was dismissed and disposed of accordingly. There was no order as to costs.
A copy of the judgment was directed to be sent to the Learned MACT along with the records.
Advocates Representing the Parties
For the Appellant: Mr. Dipayan Roy, Advocate
For the Respondents: Mr. Tashi Wongdi Bhutia and Ms. Anjali Pradhan, Advocates: Mr. Mahesh Subba, Advocate
Case Title: The Branch Manager, New India Assurance Co. Ltd. v. Kailash Rai and Another
Case Number: MAC App. No.03 of 2024
Bench: Justice Meenakshi Madan Rai
[Read/Download order]
