Insurance Company Liable to Pay and Recover Compensation Despite Breach of Policy Condition for Lack of Driving License

The appellant sustained a shoulder fracture and other injuries in April 2012 when hit by a motorcycle driven negligently by respondent No. 2

The Motor Accident Claims Tribunal (MACT) awarded ₹57,000 in compensation but exempted the respondent Insurance Company from liability, finding that the driver lacked a valid license, which constituted a breach of policy terms

The appellant approached the High Court seeking both an increase in the compensation amount and a reversal of the Insurance Company’s exoneration

1. Whether the compensation awarded by the Tribunal for pain, suffering, and medical amenities was adequate given the nature of the injuries

2. Whether the Insurance Company can be completely exonerated from paying a third party due to a breach of policy conditions regarding a driver's license

The court primarily applied Section 149 and Section 173 of the Motor Vehicles Act, 1988, regarding the liability of insurers toward third parties

It relied on the "pay and recover" doctrine established by the Supreme Court in National Insurance Company Ltd. v. Swaran Singh, which mandates that an insurer must first satisfy an award for a third party even if policy conditions were breached, subsequently seeking reimbursement from the insured

The Court determined the original award was insufficient, noting that a fracture requiring surgery justified a higher payout for pain and suffering than the amount initially granted

Regarding liability, the Court reasoned that while a breach of policy (such as a lack of a driving license) is a valid defense for an insurer against the policyholder, it does not extinguish the insurer's primary obligation to a victim under the Act's beneficial provisions

The Court emphasized that forcing a victim to recover directly from a vehicle owner rather than an established insurer would be "offensive to the sense of justice"

The Court set aside the exoneration of the Insurance Company, holding it jointly and severally liable to pay the claimant first, with the right to recover the sum from the owner and driver thereafter