After bus crash killed 25, insurer must pay all compensation awards first and recover the excess over 23 covered passengers from the owner

On 24 September 2014, passenger bus No. HP69-A-5103 left the road and fell into the Sutlej River near Rahian, Bilaspur.

The accident caused multiple deaths and injuries; the bus’s permitted capacity was recorded as 23 persons.

The Motor Accident Claims Tribunals awarded compensation in claims arising from the accident and generally fastened liability on the insurer.

In the lead appeal, the insurer challenged liability on the grounds that the driver held a fake licence, the bus was overloaded, and negligence had not been established; it also challenged the quantum of compensation.

Claimants in connected appeals sought enhancement.

The High Court considered the appeals together, addressing insurer liability and revising compensation in individual claims.

Whether the insurer could avoid indemnifying the vehicle owner because the driver’s licence was fake, where the owner claimed to have checked the licence and the driver’s competence.

Whether carrying more passengers than the bus’s permitted capacity amounted to a fundamental breach of the policy, and how the insurer’s liability should be apportioned among the claimants.

Whether the compensation awarded in the connected claims required alteration to conform to the governing principles for assessing just compensation.

Under Section 149(2)(a)(ii) of the Motor Vehicles Act, 1988, an insurer relying on a fake or invalid driving licence must establish a wilful breach by the insured;

proof that the licence was fake, without proof that the insured knew or had reason to believe it was fake and nevertheless permitted the driver to drive, does not by itself absolve the insurer (*National Insurance Co. Ltd. v. Swaran Singh*; *United India Insurance Co. Ltd. v. Lehru*; *Nirmala Kothari v. United India Insurance Co. Ltd.*)

Mere overloading is not necessarily a fundamental breach of the policy (*B.V. Nagaraju v. Oriental Insurance Co. Ltd.*; *Lakhmi Chand v. Reliance General Insurance Co. Ltd.*)

Where the number of claimants exceeds the insured passenger capacity, the insurer’s liability is determined by the principles in *National Insurance Co. Ltd. v. Anjana Shyam* and *United India Insurance Co. Ltd. v. K.M. Poonam*

Compensation is assessed under the established framework in *National Insurance Co. Ltd. v. Pranay Sethi*—including future prospects and conventional heads—read with *Sarla Verma v. Delhi Transport Corporation* on personal-expense deductions and multipliers; consortium is assessed in light of *Magma General Insurance Co. Ltd. v. Nanu Ram*

For claims involving homemakers, the Court also applied *Shishu Pal @ Shish Ram v. Surjeet* to assess domestic contribution

The insurer established that the licence produced for the driver was not genuine, but the owner testified that she had examined it, tested the driver, and had no reason to doubt its authenticity; the insurer did not establish that the owner knew or had reason to believe the licence was fake.

The Court therefore upheld the Tribunal’s rejection of the insurer’s licence-based defence.

It also held that overloading alone did not establish a fundamental breach warranting complete exoneration.

Applying *Anjana Shyam* and *K.M. Poonam*, it limited the insurer’s ultimate liability to the highest awards corresponding to the 23 insured passenger places, while directing it to pay the remaining awards in the first instance with a right to recover the excess from the owner.

In the lead claim, the Court recalculated the deceased’s income, future prospects, dependency loss and conventional heads, reducing the award from ₹12,71,600 to ₹11,35,000.

It applied the compensation principles separately in the connected claims, resulting in both reductions and enhancements.

The insurer was held ultimately liable for the highest 23 awards and required to pay the other awards in the first instance, with a right to recover the excess from the vehicle owner.

The lead award was modified to ₹11,35,000, with interest at 7.5% per annum.

The connected appeals were disposed of with claim-specific modifications to compensation and interest, and the claimant appeals were allowed or dismissed as set out in the judgment.