Absence of permit and fitness certificate is a fundamental breach; insurer must pay first and recover from the owner.

On 11.11.2013, Suresh, aged approximately 23 years, was travelling in Tata Sumo bearing registration No. HP-01K-0404, driven by Raj Kumar. Near Kowaji Mor, Shour, the vehicle went off the road and rolled into a gorge, resulting in Suresh’s death.

His dependants filed a claim petition under Section 166 of the Motor Vehicles Act, 1988, seeking compensation of Rs.15,00,000/-.

The Motor Accidents Claims Tribunal awarded Rs.7,79,000/- with interest at 9% per annum and directed the Insurance Company to indemnify the award.

The Insurance Company appealed, contending that the vehicle was being operated without a valid permit and fitness certificate, in breach of the insurance policy.

Evidence from the RTO established that the vehicle’s fitness certificate had expired on 06.07.2005 and its contract carriage permit had expired on 07.08.2008, whereas the accident occurred on 11.11.2013.

Whether a transport vehicle could be operated in a public place without a valid permit, and whether such operation constituted a breach of the insurance policy.

Whether operation of the transport vehicle without a valid fitness certificate constituted a fundamental breach disentitling the insurer from bearing the ultimate liability.

Whether, notwithstanding the breach, the Insurance Company should first satisfy the compensation award and thereafter recover the amount from the vehicle owner.

Section 66 of the Motor Vehicles Act, 1988 requires a transport vehicle to be used in a public place only in accordance with a valid permit, subject to statutory exceptions.

Under National Insurance Co. Ltd. v. Challa Bharathamma, (2004) 8 SCC 517, plying a vehicle without a permit is an infraction and constitutes a defence available to the insurer under Section 149(2), although the insurer may be directed to satisfy the award and recover the amount from the insured.

Amrit Paul Singh v. TATA AIG General Insurance Co. Ltd., (2018) 7 SCC 558, holds that use of a vehicle in a public place without a permit is a fundamental statutory infraction and supports the “pay and recover” direction.

Section 56 provides that a transport vehicle is not deemed to be validly registered for Section 39 purposes unless it carries a valid certificate of fitness; consequently, a transport vehicle without fitness certification cannot lawfully be operated.

Relying additionally on Pareed Pillai v. Oriental Insurance Co. Ltd., AIR 2019 Kerala 9, the Court held that absence of a permit or fitness certificate is a fundamental, rather than technical, breach.

The pay-and-recover principle was also supported by Shamanna v. Divisional Manager, Oriental Insurance Co. Ltd., (2018) 9 SCC 650.

The vehicle was admittedly a transport vehicle. The RTO evidence showed that both its permit and fitness certificate had expired long before the accident, and the owner neither pleaded nor proved that any statutory exception under Section 66 applied.

Since Section 66 prohibits use of a transport vehicle in a public place without a permit, and Section 56 treats a transport vehicle without a fitness certificate as not validly registered for the purposes of Section 39, the vehicle was being operated in fundamental breach of the statutory and insurance requirements.

The Tribunal therefore erred in fastening the ultimate liability on the Insurance Company.

However, considering the beneficial object of the Motor Vehicles Act and the Supreme Court’s decisions in Amrit Paul Singh and Shamanna, the Court maintained the immediate obligation of the insurer to pay the awarded compensation to the claimants, while preserving its right to recover the amount from the owner.

The award was modified to hold the owner of vehicle No. HP-01K-0404 ultimately liable for the compensation because the vehicle was being operated without a valid permit and fitness certificate.

The Insurance Company was directed to first pay the awarded sum of Rs.7,79,000/- with applicable interest to the claimants and was granted liberty to recover the amount from the owner in accordance with law.

The remaining terms of the Tribunal’s award, including the interest component, were affirmed.

The appeal and pending applications were disposed of accordingly.