“Statutory Compensation Is Independent of Contractual Insurance”: Bombay High Court Holds Mediclaim Amount Not Deductible from Motor Accident Compensation under Section 166 of MV Act
Safiya Malik
In a judgment delivered on March 28, 2025, a Full Bench of the Bombay High Court comprising Justice A.S. Chandurkar, Justice Milind N. Jadhav, and Justice Gauri Godse held that any amount received by a claimant under a Mediclaim or medical insurance policy is not liable to be deducted from the compensation awarded under the head “medical expenses” in proceedings under Section 166 of the Motor Vehicles Act, 1988. The Court observed that “the amount under a mediclaim policy is received in view of a contract entered into by the claimant with the insurance company and the same is received in view of the terms of the contract.” Concluding that the statutory compensation for accident victims under the Motor Vehicles Act is distinct from and not diminished by private insurance payments, the Court stated, “the question as framed ought to be answered in the negative.” The matter was remitted to the learned Single Judge for adjudication on merits.
The issue arose from a challenge to a judgment of the Motor Accident Claims Tribunal, Mumbai, awarding compensation under various heads, including “medical expenses,” in a motor accident claim under Section 166 of the Motor Vehicles Act. The appellant, New India Assurance Co. Ltd., contended that the Tribunal erred in awarding medical expenses, as the respondent had already received reimbursement for such expenses under a Mediclaim policy.
In support of this position, the appellant relied on a previous decision in First Appeal No. 657 of 2013 (New India Assurance Co. Ltd. vs. Dineshchandra Shantilal Shah), where the amount received under a Mediclaim policy was held liable to be deducted from the total compensation awarded. Other supporting judgments included decisions of the Karnataka High Court in Manish Gupta, and the Kerala High Court in Akber Badsha and Mariamma James, all of which permitted deduction of insurance amounts paid under Mediclaim policies from the Tribunal’s compensation award.
Senior Advocate Vineet Naik, appearing for the appellant, argued that Mediclaim policies function on the principle of indemnity under Section 124 of the Indian Contract Act, 1872, and hence, once a claimant has been reimbursed under such a policy, no further claim for the same medical expenses should be entertained against the tortfeasor. He distinguished between statutory compensation and contractual reimbursement, submitting that dual recovery would lead to “a windfall to the claimant or double compensation.”
He referred to Supreme Court judgments in Helen C. Rebello v. Maharashtra State Road Transport Corporation and United India Insurance Co. Ltd. v. Patricia Jean Mahajan to support the insurer’s position that deduction was necessary to ensure fair compensation. It was further submitted that the purpose of compensation under the Motor Vehicles Act is to restore the victim to the position he/she was in prior to the accident, and not to allow gain or profit through dual claims.
In response, T.J. Mendon, counsel for the respondent-claimant, argued that a Mediclaim policy is a private contract between the insurer and the insured, and the amounts received under such a policy cannot reduce the statutory liability of the insurer of the offending vehicle under Section 166 of the Motor Vehicles Act. He stated that the statutory right to claim “just compensation” under Section 168 is independent of any contractual benefits.
Citing the decision in Sebastiani Lakra v. National Insurance Co. Ltd., he argued that “amounts received by a deceased or an injured on account of contractual relations entered into were not liable to be deducted so as to defeat the statutory entitlement.” He also referred to multiple decisions of the Bombay High Court in Tulsabai Tukaram Kadave, Michael Joaquim F.D. Souza, and Ajit Chandrakant Rakvi, all of which held that Mediclaim receipts cannot be deducted from compensation under the Motor Vehicles Act.
The Amicus Curiae, Senior Advocate Gautam Ankhad, supported the position of the claimant. He submitted that the statutory right to compensation under the Motor Vehicles Act was distinct and not affected by private contractual arrangements. Referring to the principle laid down in Bradburn v. Great Western Rail Company, he submitted that the right of a claimant to damages cannot be reduced due to benefits received under an accident insurance policy.
He stated, “if a deduction is permitted on account of receipt of the amount of mediclaim by an insured, it would result in granting an unjust benefit to the insurer resulting in its unjust enrichment.” The Amicus also drew attention to several judgments of the Bombay High Court, including United India Insurance Co. Ltd. v. Anjana Nileshkumar Parmar, Shrikant v. Suryakant Uttam Gaude, and Aman Sanjay Tak, all of which disallowed deduction of Mediclaim amounts from accident compensation.
The Court framed the central question as: “Whether the amount received by a Claimant under a Mediclaim Policy or under a Medical Insurance Policy is liable to be deducted from the amount of compensation payable to a Claimant under the head ‘Medical Expenses’ in proceedings under Section 166 of the Motor Vehicles Act, 1988?”
After a detailed examination of precedents and statutory interpretation, the Court rejected the position taken in Dineshchandra Shantilal Shah, Manish Gupta, and Akber Badsha, holding that the amounts received under Mediclaim policies are contractual and have no nexus with the tortious liability imposed under the Motor Vehicles Act.
The Court observed, “As held in Sebastiani Lakra and Ors., the amount under a mediclaim policy is received in view of a contract entered into by the claimant with the insurance company and the same is received in view of the terms of the contract.” The Bench further stated, “The tortfeasor cannot take advantage of the foresight and wise financial investments made by the deceased.”
The judgment relied on the three-judge Supreme Court decision in Sebastiani Lakra, which clarified that insurance proceeds arising from private contracts cannot reduce compensation under Section 168. It recorded, “The main reason is that all these amounts are earned by the deceased on account of contractual relations entered into by him with others.”
In addition, the Court referenced the Calcutta High Court’s decision in New India Assurance Co. Ltd. v. Bimal Kumar Shah, where it was observed that “what a victim gets from his mediclaim policy is the return for making payment of premiums.” The Bombay High Court stated that such return constitutes “consolation money” and is not a benefit liable for deduction.
The Full Bench found the view taken in Vrajesh Navnitlal Desai, Ajit Chandrakant Rakvi, and other consistent decisions of the Bombay High Court to reflect the correct legal position, which is in line with the Supreme Court’s pronouncements. The Court held that under Section 168 of the MV Act, “just compensation” must be awarded, and this statutory duty cannot be diluted by subtracting benefits arising from an independent contract.
Answering the reference, the Full Bench held: “In the light of the foregoing discussion, we are of the considered opinion that the question as framed ought to be answered in the negative. Thus, any amount received by a claimant under a mediclaim policy or under a medical insurance policy is not liable to be deducted from the amount of compensation payable to a claimant under the head ‘medical expenses’ in proceedings under Section 166 of the M.V. Act.”
The Court directed that “The First Appeal be now placed before the learned Single Judge for its consideration on merits.”
Advocates Representing the Parties
For the Petitioners: Mr. Deelip R. Mahadik with Mr. Devendra Joshi, Advocates
For the Respondents: Mr. T.J. Mendon with Mr. T.R. Kale, Mr. Deepak S. Kilaje, Mr. Navin Sheth and Mr. R.S. Alange, Advocates
For the Intervenor (HDFC Ergo): Mr. Vineet B. Naik, Senior Advocate, with Mr. Sukand Kulkarni, i/by Mr. Sarthak Diwan, Advocates
Amicus Curiae: Mr. Gautam Ankhad, Senior Advocate, with Ms. Samridhi Lodha and Ms. Minal Thakker
Case Title: The New India Assurance Co. Ltd. v. Mrs. Dolly Satish Gandhi and Anr.
Neutral Citation: 2025:BHC-AS:14458-FB
Case Number: First Appeal No.1344 of 2014
Bench: Justice A.S. Chandurkar, Justice Milind N. Jadhav, Justice Gauri Godse
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