Amended Second Schedule mandates ₹5 lakh compensation for fatal accidents under Section 163A.

On 1 September 2021, the victim was struck by motorcycle No. WB-18Z-6725 while standing near his residence on Khanakul–Garer Ghat Road. He sustained grievous injuries and died while being taken to hospital. His legal heirs filed a claim under Section 163A of the Motor Vehicles Act, 1988.

The owner appeared initially but subsequently proceeded ex parte, while the National Insurance Company contested the claim.

The Motor Accident Claims Tribunal held that the accident involved the insured motorcycle and resulted from rash and negligent driving. It awarded ₹1,41,500 with interest at 6% per annum from the date of filing of the claim application.

The insurer appealed, contending that the vehicle was driven without a valid licence and that it should not bear the ultimate liability without a right of recovery. The claimants filed a cross-objection seeking compensation under the amended Second Schedule to the Act.

1. Whether the claimants were entitled to the minimum compensation of ₹5,00,000 prescribed under the amended Second Schedule to the Motor Vehicles Act, 1988, instead of ₹1,41,500 calculated by the Tribunal under the earlier structured formula?

2. Whether the insurer was entitled to recover the compensation from the owner because the offending vehicle was allegedly driven without a valid driving licence?

3. Whether the enhanced compensation should carry interest at 6% per annum from the date of filing of the claim application until realization?

The Court applied Section 163A of the Motor Vehicles Act, 1988 and the substituted Second Schedule introduced by the Ministry of Road Transport and Highways notification dated 22 May 2018, which prescribed ₹5,00,000 as compensation for death, with a 5% annual increase from 1 January 2019.

It applied the “pay and recover” principle, under which an insurer must satisfy the award in favour of third-party victims despite a breach of policy conditions, but may recover the amount from the insured owner where the vehicle was driven in violation of the insurance policy.

The Court relied on K. Nagendra v. New India Insurance Co. Ltd. & Others, 2025 SCC OnLine SC 2297, and Akula Narayana v. Oriental Insurance Co. Ltd. & Another, 2025 SCC OnLine SC 2377, which recognized this balance between protecting accident victims and preserving the insurer’s contractual rights.

The accident occurred on 1 September 2021, after the 22 May 2018 notification had substituted the Second Schedule. Since the amended Schedule prescribed ₹5,00,000 for fatal accidents, the Tribunal erred in calculating compensation under the outdated structured formula and awarding only ₹1,41,500.

The Court further accepted the insurer’s contention that driving without a valid licence constituted a breach of the insurance policy. However, following the Supreme Court’s pay-and-recover doctrine, that breach did not defeat the claimants’ right to receive compensation from the insurer. The insurer was therefore required to pay the enhanced award first, while retaining the right to recover the amount from the vehicle owner in accordance with law.

The Court maintained the Tribunal’s interest rate of 6% per annum from the date of filing of the claim application.

The insurer was directed to deposit the amount within six weeks by five separate cheques of equal amount in favour of the five claimants, subject to proper identification and verification.

The insurer was granted liberty to recover the amount paid from the owner of the offending vehicle through due process of law.

The appeal and cross-objection were accordingly disposed of without any order as to costs.