An insurer cannot avoid liability on a gratuitous-passenger defence without cogent evidence.

Kusumben Kishorbhai Shethia travelled in a rickshaw bearing registration No. GJ-12-T-6901 from Gundala towards Mundra on 26 April 1999. The rickshaw collided with another Chhakda rickshaw, registration No. GJ-12-T-7569, between Gundala and Sadau villages. Kusumben sustained fatal injuries and was declared dead at the Government Hospital, Mundra.

Her legal representatives filed MACP No. 173 of 2002 before the Motor Accident Claims Tribunal, Kachchh at Bhuj, claiming compensation of Rs.8,00,000/-.

The Tribunal awarded Rs.5,24,200/- with interest at 7.5% per annum from the date of the claim petition until realization.

The Insurance Company challenged the award under Section 173 of the Motor Vehicles Act, 1988, contending that the deceased was travelling as a gratuitous passenger in a goods transport vehicle, constituting a breach of the insurance policy conditions and entitling the insurer to exoneration.

The claimants asserted that she was travelling along with goods purchased from Kutch.

Whether the Insurance Company established, by cogent evidence, that the deceased was travelling as a gratuitous passenger in the insured transport vehicle, thereby constituting a breach of the insurance policy conditions and relieving the insurer of liability?

Whether the Insurance Company was barred from raising the gratuitous-passenger contention in the appeal because it had not challenged the finding recorded in the proceedings under Section 140 of the Motor Vehicles Act?

The Court applied Section 173 of the Motor Vehicles Act, 1988, governing appeals against awards of the Motor Accident Claims Tribunal.

An insurer seeking exoneration on the ground of breach of policy conditions must establish the alleged breach through cogent and convincing evidence; a mere pleading or bald assertion that the deceased was a gratuitous passenger is insufficient.

The Court relied on the Full Bench decision in New India Assurance Company Ltd. v. Kalabhai Maganbhai Koli, 2016 (1) GLH 68, holding that the insurer’s failure to challenge a finding in proceedings under Section 140 does not, by itself, prevent it from raising the issue in an appeal under Section 173 on the basis of res judicata.

However, the insurer must still prove the alleged policy breach on the evidence available in the claim proceedings.

The High Court held that the Tribunal’s reasoning—that the insurer could not raise the issue because it had not challenged the Section 140 finding—was legally unsustainable in view of Kalabhai Maganbhai Koli.

Nevertheless, the Court examined the merits of the insurer’s contention. The Insurance Company had pleaded that the deceased was a gratuitous passenger but led no evidence proving that fact.

Conversely, the claimants specifically pleaded and stated on oath that the deceased was travelling with goods purchased from Kutch.

Since the insurer failed to discharge its burden of establishing the alleged policy breach through cogent evidence, the Court upheld the Tribunal’s substantive conclusion that the insurer could not avoid liability.

On the second issue, it held that the insurer was not barred merely by res judicata from raising the contention in the appeal; however, the contention failed on merits for want of evidence.

The appeal was dismissed, and the Tribunal’s award of Rs.5,24,200/- with interest at 7.5% per annum was confirmed.

Any interim relief was vacated, and amounts lying with the Registry or Tribunal were directed to be disbursed to the claimants in accordance with law.