Kiran Raj

The Supreme Court of India’s Division Bench comprising Justice Sudhanshu Dhulia and Justice Ahsanuddin Amanullah dismissed a civil appeal filed by an insurance company challenging the High Court of Karnataka’s order, which had enhanced compensation in a motor vehicle accident case and fastened liability on the insurer. The apex court held that the insurer was liable since the accident was caused by the insured tractor while pulling an attached trailer, thereby establishing a continuous chain of causation.

The Court upheld the High Court’s decision enhancing the compensation to Rs.13,28,940 with interest at 6% per annum and directed that the insurer must pay the amount within two months. The appeal was dismissed subject to the insurer’s right to recover the differential amount, if any, from the vehicle owner.

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The case stems from an accident that occurred on 29 February 2012, where the deceased Nagarajappa was travelling as a coolie in a tractor-trailer used for unloading soil. The vehicle overturned due to the rash and negligent driving of the driver, causing fatal injuries to Nagarajappa. His wife and two minor daughters filed a claim petition before the Motor Accident Claims Tribunal (MACT), Harihar, seeking compensation.

The MACT, after considering the evidence, awarded Rs.9,50,000 with 6% annual interest, holding the owner and driver liable as the employee risk in a tractor-trailer was not covered under Section 147(1)(b) of the Motor Vehicles Act, 1988.

Aggrieved by the quantum, the claimants approached the High Court of Karnataka, which enhanced the compensation to Rs.13,28,940 and imposed liability on the insurer. The insurer then appealed to the Supreme Court.

The appellant-insurer argued that the policy did not cover the trailer or employees/passengers travelling on it, as additional coverage options for these were available but not subscribed to by the policyholder. The insurer contended that the High Court erroneously shifted liability and also exceeded the amount originally claimed.

Citing Sarla Verma v. DTC, (2009) 6 SCC 121 and New India Assurance Co. Ltd. v. C M Jaya, (2002) 2 SCC 278, it was submitted that compensation could not exceed the statutory or contractual coverage. The insurer also referenced Dhondubai v. Hanmantappa, Civil Appeals No.5459-5460/2023, to claim non-liability due to the trailer being uninsured.

The Supreme Court recorded that the accident occurred when a trailer, attached to and being pulled by an insured tractor, upturned due to rash driving. It stated in clear terms: "the accident was caused by the tractor, as during the course of being driven/pulled by the tractor, the accident occurred."

The Bench observed that the insurer’s liability extended to accidents resulting from the use of the insured tractor, even if the fatality occurred on the trailer: "this crucial fact cannot be lost sight of".

It distinguished the facts from Dhondubai noting that the judgment did not lay down an absolute rule. Referring to United India Insurance Co. Ltd., Kadapa v. Koduru Bhagyamma, the Court cited with approval: "when the trailer is attached to the tractor which is insured, it becomes the part of the tractor".

In analysing Section 147 of the Motor Vehicles Act, the Court reiterated that an accident arising out of the use of a motor vehicle includes chain reactions caused by the insured vehicle: "it is the result of the action in the same chain of events which cannot be segregated or compartmentalized."

The Bench addressed the insurer’s reliance on C M Jaya and clarified: "A statutory liability cannot be more than what is required under the statute itself. However, there is nothing... prohibiting the parties from contracting to create unlimited or higher liability to cover wider risk."

It further examined the policy terms, which specified liability "to the extent necessary to meet the requirements of the Motor Vehicles Act, 1988", and found no clause to exclude coverage for such an incident involving the tractor.

The Court dismissed the appeal stating: "we do not find any infirmity in the Impugned Order, either with regard to the quantum of compensation awarded or fixation of liability on the insurer-Appellant for the accident."

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It directed that the compensation "shall be paid within two months from today after adjusting whatever has been paid earlier, in terms of Order dated 06.02.2023 passed in the present case."

The Court also granted liberty to the appellant-insurer to recover the differential amount, if any, from the owner, stating: "liberty is granted to the Appellant to recover the differential amount (if any) ... from the Respondent No.4-owner."

Accordingly, the appeal was dismissed with no order as to costs.

Advocates Representing the Parties

For the Petitioner(s):  Mr. G. Balaji, AOR Mr. Neeleshwar Pavani, Adv. Ms. Arzu Paul, Adv. Mr. Shiv Kumar, Adv. Ms. Vaishnavi, Adv.

Case Title: The Royal Sundaram Alliance Insurance Company Limited v. Smt. Honnamma & Others

Neutral Citation: 2025 INSC 625

Case Number: Civil Appeal No.of 2025 [@ SLP (Civil) No.2135 of 2023]

Bench: Justice Sudhanshu Dhulia, Justice Ahsanuddin Amanullah

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