An insurer must satisfy third-party claims but may recover from the owner when the rider lacks a valid licence.

The claimants sought compensation for the death of Nanjundappa in a road accident on 20 June 2017, allegedly caused by the negligent riding of a motorcycle insured by the appellant.

The MACT awarded ₹6,78,000 with interest at 6% per annum and directed the insurer to pay. The insurer appealed, contending that the rider lacked a valid driving licence and that this breached the policy terms.

The charge sheet alleged offences under Sections 180, 181 and 196 of the Motor Vehicles Act, 1988, in addition to IPC offences.

1. Whether the rider’s lack of a valid driving licence established a breach of the insurance policy terms, relieving the insurer of liability to pay the award.

2. If the insurer was not ultimately liable, whether it should nevertheless satisfy the award in favour of the third-party claimants and recover the amount from the vehicle owner.

The Court considered Sections 180, 181 and 196 of the Motor Vehicles Act, 1988, concerning permitting an unlicensed person to drive, driving without a licence, and use of an uninsured vehicle, respectively.

It applied the principle that, where a policy breach involving an unlicensed driver is established but the claim is by a third party, the insurer must first satisfy the award and may then recover the amount from the vehicle owner.

The Court relied on the charge sheet, which specifically alleged that the rider had no valid driving licence and that the owner had permitted him to ride the motorcycle.

It also noted that the rider neither gave evidence establishing that he held a valid licence nor specifically asserted this in his objections; the owner likewise did not assert that the rider was licensed.

On these circumstances, the Court found a breach of the policy terms. Because the deceased was a third party, however, it directed the insurer to satisfy the award first, leaving it to recover the amount from the owner.

It was granted liberty to recover the amount from the vehicle owner in accordance with law; before releasing the amount, the Tribunal was directed to notify the owner to furnish surety for the deposited amount. Any amount in deposit was ordered to be transmitted to the Tribunal.