Despite Bus’s Expired Permit, Insurer Must Pay Compensation to Pedestrian’s Family, Then Recover From Owner: Karnataka HC

On 22 August 2015, Ramanji @ Ramanjappa was struck by a bus while walking beside the Kolar–Bangarpet road. He died the following day from his injuries.

His wife, two children and mother brought a claim under Section 166 of the Motor Vehicles Act, 1988. The Tribunal awarded them Rs. 24,40,000 with interest at 9% per annum.

The insurer appealed, challenging its liability because the bus permit had expired before the accident and disputing the compensation calculation.

The High Court considered the insurer’s appeal on liability and quantum.

Section 166 of the Motor Vehicles Act, 1988 provides the basis for a claim for compensation arising from a motor-vehicle accident.

Where a vehicle is operated without a valid permit, the insurer cannot, on that ground alone, avoid payment to third-party claimants; it must pay the compensation and may recover it from the insured.

Under National Insurance Co. Ltd. v. Pranay Sethi, AIR 2017 SC 5157, for a self-employed deceased aged between 40 and 50, future prospects are calculated at 25%, and the applicable multiplier is 14; the deduction for personal expenses depends on the number of dependants.

Compensation under conventional heads is assessed at the applicable standard amounts, with the Court applying a 20% escalation to those amounts in this case.

The permit extract showed that the bus permit expired on 3 November 2011, while the accident occurred on 22 August 2015. The Court therefore found that the bus was being operated without a valid permit, but held that this did not defeat the third-party claimants’ right to recover from the insurer; the insurer could seek recovery from the insured after payment.

For quantum, the deceased’s voter ID showed his birth year as 1974, making him 41 at the time of the accident. Applying Pranay Sethi, the Court used 25% for future prospects, a multiplier of 14 and a one-fourth deduction for personal expenses.

It also substituted the Tribunal’s income assessment of Rs. 10,000 per month with the 2015 notional income of Rs. 9,000 per month. On that basis, it recalculated loss of dependency at Rs. 14,17,500 and assessed total compensation, including conventional heads and medical expenses, at Rs. 16,80,518.

The Court declined to reduce the 9% interest rate.

The apportionment among the claimants was preserved, and the insurer was directed to deposit the balance within six weeks.

The amount in deposit was to be transmitted to the Tribunal for disbursement, and the apportioned compensation was ordered released to the claimants upon deposit.