Gujarat High Court applies amended ₹5 lakh death compensation to a 2006 accident, orders insurer to pay first and recover from vehicle owner

On 16 February 2006, the deceased was travelling in a Chhakdo Rickshaw carrying castor seeds and beans when it overturned; he later died from his injuries.

The claimant sought compensation under Section 163A of the Motor Vehicles Act, 1988.

The Tribunal awarded ₹3,74,100 with interest but exonerated the insurer, treating the deceased as a gratuitous passenger in a goods vehicle.

The claimant appealed.

Whether the insurer should first satisfy the compensation award and then recover the amount from the vehicle owner, although the deceased was treated as a gratuitous passenger in a goods vehicle.

Whether the claimant was entitled to fixed compensation of ₹5,00,000 under Section 164, despite the accident having occurred before that provision came into force.

Under the Motor Vehicles Act, 1988, an insurer may ordinarily avoid indemnifying the insured where a gratuitous passenger travels in a goods vehicle contrary to the policy; however, applying Saju P. Paul, Manuara Khatun, and Shamanna, a court may direct the insurer to satisfy the award first and recover the amount from the insured in the same proceedings, particularly to prevent third-party claimants from being deprived of compensation on policy-related technicalities.

The Court relied on New India Assurance Co. Ltd. v. Urmila Halder, 2024 JX (SC) 1154, for the proposition that the beneficial fixed-compensation provision in Section 164 may apply retrospectively where no specific bar prevents the benefit from being given to the claimant.

The Tribunal had relied on the FIR to find that the deceased was a gratuitous passenger, despite the driver’s testimony denying that account; the Court also noted that the policy was in force and the deceased was a third party.

Applying the authorities on “pay and recover,” the Court held that the insurer should satisfy the award first and then recover from the owner, rather than leave the claimant to pursue the owner directly.

It further applied Urmila Halder to the amended Section 164 provision and enhanced the compensation to the statutory fixed amount of ₹5,00,000.

The award was modified to grant ₹5,00,000, with interest at 7.5% per annum from the claim-petition date until realization, excluding 356 days attributable to delay in filing the appeal.

The insurer was directed to deposit the amount, after credit for any sum already deposited, within eight weeks; it may recover the payment from the vehicle owner by executing the judgment.

The Tribunal was directed to disburse the deposited amount to the claimant after verification and compliance with the prescribed procedure.