An insurer cannot recover compensation from the owner absent a proved policy breach.

The claimants, dependants of Biswajit Swain, sought compensation under Section 166 of the Motor Vehicles Act, 1988, following his death in a motorcycle–Hywa accident on 12 June 2020.

The Motor Accident Claims Tribunal awarded ₹17,29,200 with 6% annual interest, but assessed the deceased’s income notionally and granted the insurer recovery rights against the vehicle owner.

The insurer had already satisfied the award.

The claimants appealed, principally seeking enhancement of compensation.

Whether the Tribunal erred in assessing the deceased’s income and, consequently, the compensation payable to the claimants.

Whether the insurer could be granted recovery rights against the owner despite the Tribunal’s finding that the policy terms had not been breached.

Sections 166 and 173 of the Motor Vehicles Act, 1988 provide, respectively, for a claim for compensation and an appeal against a Claims Tribunal award.

In assessing compensation, National Insurance Company Ltd. v. Pranay Sethi, (2017) 16 SCC 680, requires the addition of future prospects in accordance with the deceased’s employment status and age, and provides for compensation under conventional heads, subject to periodic enhancement.

An insurer’s recovery right against the insured requires a legal basis, such as a breach of policy terms; it cannot be granted where no such breach is found.

The High Court found that the Tribunal had not addressed the deceased’s appointment and confirmation documents, which supported his employment and remuneration, and had inadequately considered the income evidence.

Considering those documents alongside the salary slip and income-tax return, the Court assessed annual income at ₹4,03,264, deducted ₹5,461 as income tax, and allowed a one-third deduction for personal expenses, rounding the resulting annual dependency to ₹2,65,000.

Applying a multiplier of 14 and adding 25% for future prospects, the Court calculated loss of dependency at ₹46,37,500; it added ₹84,000 under conventional heads, making total compensation ₹47,21,500.

As the Tribunal had found the driver’s licence valid and the policy terms unviolated, its grant of recovery rights to the insurer was unsupported and was set aside.

The insurer was directed to pay the difference between the reassessed compensation of ₹47,21,500 and the amount already paid, with 6% annual interest from the date of the claim petition until deposit, within eight weeks; the recovery right against the owner was set aside.

The Court directed that 50% of the total enhanced amount, including proportionate interest, be placed in an FDR for the minor daughter, 10% each in FDRs for the wife and mother, and the remaining 30% be released in equal proportions to the adult claimants.