Insurance Company Liable to Compensation for Out-of-State Service but Entitled to Pay and Recover Rights

On June 23, 2010, Respondent No. 1 (Claimant) was injured when his motorcycle was hit from behind by a dumper (offending vehicle) near Arjun Garh, New Delhi

The Motor Accidents Claims Tribunal (MACT) awarded compensation of Rs. 3,55,200/- plus 9% interest, holding the Appellant Insurance Company liable

The Insurance Company appealed, contending that while the vehicle had a valid permit for Haryana, the accident occurred in Delhi.

They argued this violation of "route permit" conditions should at least entitle them to "pay and recover" rights against the owner

Additionally, the respondents challenged the loss of income and medical expense calculations

1. Whether plying a vehicle in a State for which it does not possess a valid permit constitutes a violation of insurance policy conditions under Section 149(2) of the Motor Vehicles Act, 1988, entitling the insurer to recovery rights.

2. Whether the compensation awarded for loss of income and medical expenses was sustainable without original prescriptions or documentary proof of leave.

The court primarily applied Section 149(2) of the Motor Vehicles Act, 1988, regarding the insurer’s defenses for breach of policy conditions

K. Nagendra v. The New India Insurance Co. Ltd. (2025), which established that plying outside permit bounds justifies the "pay and recover" principle to balance victim compensation with insurer interests

Amrit Paul v. TATA AIG General Insurance Co. (2018) and National Insurance Co. Ltd. v. Challa Upendra Rao (2004), affirming that the insurer must satisfy the award first and then recover from the owner to fulfill the "beneficial object" of the Act

The Court noted that while the MACT originally relied on a 2011 Punjab Haryana High Court decision (Rajender Giri) to deny recovery rights, subsequent Supreme Court jurisprudence has clarified the position

The High Court observed that because the offending vehicle deviated from the territorial bounds of its permit (Haryana permit vs. Delhi accident), the insurer is technically outside its contractual bounds

The Court examined the testimony of PW-1 and evidence including a certificate from Resil Chemicals Pvt. Ltd. and duplicate medical receipts

The Court reasoned that since original bills were submitted for Mediclaim, the production of duplicates supported by detailed oral testimony regarding head injuries and surgeries was sufficient to sustain the MACT’s findings

The Court upheld the MACT’s assessment of compensation for loss of income and medical expenses, finding the evidence sufficient

The appeal was allowed only to the extent of granting recovery rights, and the Insurance Company was directed to satisfy the award in the first instance