Full Judgment Text
2025 INSC 1270
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. OF 2025
(Arising out of SLP (C) Nos. 7139-7140 of 2023)
K. NAGENDRA … APPELLANT(S)
Versus
THE NEW INDIA INSURANCE
CO. LTD. & ORS. … RESPONDENT(S)
J U D G M E N T
SANJAY KAROL, J.
Leave granted.
1. These appeals are directed against the common
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final judgment and order dated 25 September 2019 in
Miscellaneous First Appeal No. 2947 of 2017 with
Signature Not Verified
Digitally signed by
NAVEEN D
Date: 2025.10.29
19:57:21 IST
Reason:
Miscellaneous First Appeal No. 1024 of 2018, passed by
CA@SLP(C) Nos 7139-7140 of 2023 Page 1 of 11
the High Court of Karnataka at Bengaluru, which in turn
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were preferred against the judgment and order dated 14
December 2016 passed in Claim Petition No. 566/2014 by
the Senior Civil Judge and JMFC and Addl. MACT,
Channapatna.
2. The brief facts giving rise to these appeals are that
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on 7 October 2014, the deceased, namely Srinivasa alias
Murthy who was riding on his motorcycle and was hit by
the offending vehicle, bearing registration number KA-52-
9099, in a rash and negligent manner, resulting in his death
on the spot.
3. The Appellant(s) ( dependents of the deceased )
filed a claim petition before the Tribunal seeking
compensation to the tune of Rs. 50,00,000/- along with an
interest @ 18%, submitting therein that the deceased was
the only earning member of the family, running a business
of Shamiyana Centre and a Ration Shop; and earning up to
Rs. 15,000/- per month.
th
4. The Tribunal, by its order dated 14 December
2016 awarded the Appellant(s) an amount of
Rs. 18,86,000/- along with interest @ 6% p.a, taking the
notional income of the deceased as Rs. 8,000/- per month.
CA@SLP(C) Nos 7139-7140 of 2023 Page 2 of 11
Being aggrieved with the amount of compensation
awarded, the Claimant-Appellant(s) filed an appeal before
the High Court on the ground that the compensation was
not correctly calculated by the Tribunal. The Insurance
Company also challenged the Tribunal’s order on the
ground of violation by the insurer of the conditions
enumerated in the policy; both the appeals were heard and
disposed of vide the common impugned judgment and
order.
5. The High Court, vide the common impugned
th
judgement and order dated 25 September,2019 partly
allowed both the appeals.
5.1 Accepting the contentions of Claimant-
Appellant(s) by reassessing the monthly income of
the deceased at Rs. 15,750/- per month and by giving
40% towards future prospects, and since in the
present case there were 4 dependents of the deceased
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1/4 of the income was deducted towards personal
expenses and after applying the multiplier of 16 the
compensation payable to the Appellant(s) under the
head ‘ loss of dependency’ was assessed at Rs.
30,24,000/- and Rs. 40,000/- was awarded to the
widow towards ‘ loss of spousal consortium ’ and
CA@SLP(C) Nos 7139-7140 of 2023 Page 3 of 11
Rs. 30,000/- to the deceased's son towards ‘ loss of
parental consortium ’ and Rs. 30,000/- each to the
parents of the deceased towards ‘ loss of filial
consortium ’. In addition to this, the Appellant(s) were
awarded Rs. 15,000/- each towards loss of estate and
for funeral expenses totaling to Rs. 31,84,000/-.
5.2 As regards the Appeal filed by the Insurance
Company, it was contended by the counsel for the
Insurance Company that the route which was
undertaken by the bus driver was not covered by the
permit issued and that the driver of the bus was not
authorized to enter Channapatna City and that the
permit only covered the route from Bengaluru to
Mysore , which is admitted by both the parties, goes
on to show that there was a deviation in route and that
it was in violation of the permit. The High Court
relied on the ratio of the judgment of this Court in
Amrit Paul and Anr. v. TATA AIG General
1
Insurance Company & Ors. wherein this Court held
that:-
24. In the case at hand, it is clearly demonstrable
from the materials brought on record that the
vehicle at the time of the accident did not have a
permit. The appellants had taken the stand that
1
(2018) 7 SCC 558
CA@SLP(C) Nos 7139-7140 of 2023 Page 4 of 11
the vehicle was not involved in the accident. That
apart, they had not stated whether the vehicle had
temporary permit or any other kind of permit. The
exceptions that have been carved out under
Section 66 of the Act, needless to emphasise, are
to be pleaded and proved. The exceptions cannot
be taken aid of in the course of an argument to
seek absolution from liability. Use of a vehicle in
a public place without a permit is a fundamental
statutory infraction. We are disposed to think so
in view of the series of exceptions carved out in
Section 66. The said situations cannot be equated
with absence of licence or a fake licence or a
licence for different kind of vehicle, or, for that
matter, violation of a condition of carrying more
number of passengers. Therefore, the principles
laid down in Swaran Singh [National Insurance
Co. Ltd. v. Swaran Singh, (2004) 3 SCC 297 :
2004 SCC (Cri) 733] and Lakhmi Chand [Lakhmi
Chand v. Reliance General Insurance, (2016) 3
SCC 100 : (2016) 2 SCC (Civ) 45] in that regard
would not be applicable to the case at hand. That
apart, the insurer had taken the plea that the
vehicle in question had no permit. It does not
require the wisdom of the “Tripitaka”, that the
existence of a permit of any nature is a matter of
documentary evidence. Nothing has been brought
on record by the insured to prove that he had a
permit of the vehicle. In such a situation, the onus
cannot be cast on the insurer. Therefore, the
Tribunal as well as the High Court had directed
that the insurer was required to pay the
compensation amount to the claimants with
interest with the stipulation that the insurer shall
be entitled to recover the same from the owner
and the driver. The said directions are in
consonance with the principles stated in Swaran
Singh [National Insurance Co. Ltd. v. Swaran
Singh, (2004) 3 SCC 297 : 2004 SCC (Cri) 733]
and other cases pertaining to pay and recover
principle.
CA@SLP(C) Nos 7139-7140 of 2023 Page 5 of 11
5.3 The High Court directed the Insurance
Company to satisfy the award as passed by the
Tribunal and granted the right to recover the amount
from the owner of the bus, i.e, the Appellant herein.
6. The question that comes up for consideration
before this Court in these appeals is whether any deviation
from the prescribed route as per the permit granted by the
state transportation authority, would impact on the liability
of the Insurance Company for any accident which may
take place while the vehicle is on such a deviated route. An
answer to this question would by itself justify the
correctness or lack thereof, of the order of the High Court
which employs the ‘ pay and recover ’ principle.
7. Before going to the exact issue involved in this
case, it would be appropriate to refer to certain judgments
which will set out the instances in which this Court has
approved the application of the above-mentioned principle.
It is on that benchmark that we will proceed to examine the
correctness of the High Court’s conclusions.
7.1 In National Insurance Co. Ltd. v. Swaran
2
Singh , a bench of 3 learned Judges of this Court
2
(2004) 3 SCC 297
CA@SLP(C) Nos 7139-7140 of 2023 Page 6 of 11
observed thus:
“ 83. Sub-section (5) of Section 149 which
imposes a liability on the insurer must also be
given its full effect. The insurance company may
not be liable to satisfy the decree and, therefore,
its liability may be zero but it does not mean that
it did not have initial liability at all. Thus, if the
insurance company is made liable to pay any
amount, it can recover the entire amount paid to
the third party on behalf of the assured. If this
interpretation is not given to the beneficent
provisions of the Act having regard to its purport
and object, we fail to see a situation where
beneficent provisions can be given effect to. Sub-
section (7) of Section 149 of the Act, to which
pointed attention of the Court has been drawn by
the learned counsel for the petitioner, which is in
negative language may now be noticed. The said
provision must be read with sub-section (1)
thereof. The right to avoid liability in terms of
sub-section (2) of Section 149 is restricted as has
been discussed hereinbefore. It is one thing to say
that the insurance companies are entitled to raise
a defence but it is another thing to say that despite
the fact that its defence has been accepted having
regard to the facts and circumstances of the case,
the Tribunal has power to direct them to satisfy
the decree at the first instance and then direct
recovery of the same from the owner. These two
matters stand apart and require contextual
reading.”
[This judgment was followed in
Shamanna v. Oriental Insurance Co.
3
Ltd. ]
( emphasis supplied )
7.2 K.T Thomas J., in New India Assurance
3
(2018) 9 SCC 650]
CA@SLP(C) Nos 7139-7140 of 2023 Page 7 of 11
4
Co. v. Kamla , stated the position of law succinctly,
thus:
“ 25…. The insurer and the insured are bound by
the conditions enumerated in the policy and the
insurer is not liable to the insured if there is
violation of any policy condition. But the
insurer who is made statutorily liable to pay
compensation to third parties on account of the
certificate of insurance issued shall be entitled
to recover from the insured the amount paid to
the third parties, if there was any breach of
policy conditions on account of the vehicle
being driven without a valid driving licence.
Learned counsel for the insured contended that
it is enough if he establishes that he made all
due enquiries and believed bona fide that the
driver employed by him had a valid driving
licence, in which case there was no breach of
the policy condition. As we have not decided on
that contention it is open to the insured to raise
it before the Claims Tribunal. In the present
case, if the Insurance Company succeeds in
establishing that there was breach of the policy
condition, the Claims Tribunal shall direct the
insured to pay that amount to the insurer. In
default the insurer shall be allowed to recover
that amount (which the insurer is directed to pay
to the claimant third parties) from the insured
person.
7.3 In Parminder Singh v. New India
5
Assurance Co. Ltd . , this Court approved the
application of this principle in cases where the driver
of the offending vehicle does not possess a valid
driving license.
4
(2001) 4 SCC 342
5
(2019) 7 SCC 217
CA@SLP(C) Nos 7139-7140 of 2023 Page 8 of 11
7.4 In S. Iyyapan v. United India Insurance
6
Co. Ltd . , it was held that if at the time of accident,
there is a discrepancy in the vehicle being dofven by
the driver and the endorsement on the driver’s license
( i.e., the kind of vehicle said driver is permitted to
operate ) then, in such a case, pay and recover shall be
permitted.
7.5 In M/s Chatha Service Station v. Lalmati Devi
7
& Ors it was held that when a vehicle involved in an
accident is found to be carrying certain goods which it
was not authorized to as per law ( in the instant case
hazardous goods within the meaning of Rule 9 of
Central Motor Vehicles Rules, 1989 ) the insurance
company while would be required to compensate the
victim of the accident, it shall be entitled to recover
the amount so paid from the holder of the insurance
policy.
8. Now, let us consider the instant case. The record
reveals that the offending vehicle did not have the permit
to enter Channapatna City, where the accident took place.
This position is not in dispute. Unquestionably, therefore,
6
(2013) 7 SCC 62
7
2025 SCC OnLine SC 756
CA@SLP(C) Nos 7139-7140 of 2023 Page 9 of 11
the terms of the permit have been deviated.
9. The purpose of an insurance policy in the present
context is to shield the owner/operator from direct liability
when such an unforeseen/unfortunate incident takes place.
To deny the victim/dependents of the victim compensation
simply because the accident took place outside the bounds
of the permit and, therefore, is outside the purview of the
insurance policy, would be offensive to the sense of
justice, for the accident itself is for no fault of his. Then,
the Insurance Company most certainly ought to pay.
10. At the same time though, when an Insurance
Company takes on a policy and accepts payments of
premium in pursuance thereto, it agrees to do so within
certain bounds. The contract lays down the four corners
within which such an insurance policy would operate. If
that is the case, to expect the insurer to pay compensation
to a third party, which is clearly outside the bounds of the
said agreement would be unfair. Balancing the need for
payment of compensation to the victim vis-à-vis the
interests of the insurer, the order of the High Court
applying the pay and recover principle, in our considered
view, is entirely justified and requires no interference.
CA@SLP(C) Nos 7139-7140 of 2023 Page 10 of 11
11. The appeals are dismissed; however, there shall be
no order as to costs. Pending application(s), if any, shall
stand disposed of.
………………………………..…J.
(SANJAY KAROL)
……………………………….…..J.
(PRASHANT KUMAR MISHRA)
New Delhi;
October 29, 2025
CA@SLP(C) Nos 7139-7140 of 2023 Page 11 of 11