Insurance Company must satisfy third-party claims before recovering from owners for hire-and-reward policy breaches.

On 04.05.2021, claimant Hansa Ashokkumar Hadat (aged 18, a labourer) in MACP No.35/2023 and claimant Sanjaybhai Ramanbhai Manat (aged 25, a mason) in MACP No.36/2023 were travelling in an Eeco car (GJ.18.BF.9637) driven rashly and negligently by respondent no.1, which turned turtle, causing both claimants serious injuries including fractures.

The Motor Accident Claims Tribunal (Main), Arvalli at Modasa, by judgments dated 03.10.2025, awarded Rs.4,06,760/- (MACP No.35/2023) and Rs.2,10,860/- (MACP No.36/2023), each with 7.5% p.a. interest.

The Tribunal assessed notional income at Rs.7,000/- per month in the absence of cogent proof of income, granted no future prospects, and, holding the claimants to be fare-paying passengers (implying use of the vehicle for hire and reward in breach of policy conditions), exonerated the insurer from satisfying the awards.

1. Whether the Tribunal erred in assessing notional income at Rs.7,000/- per month without recourse to prevailing minimum wages, and in denying addition towards future prospects?

2. Whether the compensation awarded under the heads of pain, shock and suffering, actual loss of income, and special diet/attendant/transportation charges was inadequate and warranted enhancement?

3. Whether the insurance company, having proved breach of policy conditions (vehicle plied for hire and reward), was rightly exonerated, or is liable to satisfy the awards in favour of third-party claimants with liberty to recover from the owner/driver?

The Court applied the principles of National Insurance Company Ltd. v. Pranay Sethi, (2017) 16 SCC 680, mandating addition of 40% towards future prospects where the deceased/injured is below 40 years.

Sidram v. Divisional Manager, United India Insurance Company Ltd., 2022 INSC 1202, holding that minimum wages ought to be adopted where income is not proved by cogent evidence and that future prospects apply even to such notional income.

Government of Gujarat's notified minimum wages for skilled workers (Rs.9,495/- per month, as on 04.05.2021).

On insurer liability, the Court invoked the benevolent objective of the Motor Vehicles Act, 1988 towards third parties, applying the "pay and recover" doctrine—that even upon proved breach of policy conditions, the insurer must first satisfy third-party awards and may thereafter recover from the owner/driver.

On quantum, the Court found that since neither claimant proved actual income, the Tribunal ought to have adopted the notified minimum wage; it accordingly reassessed income at Rs.9,500/- per month (rounded from Rs.9,495/-) for both. Adding 40% future prospects per Pranay Sethi and Sidram yielded Rs.13,300/- monthly.

For the 18-year-old claimant (23% functional disability, undisputed; multiplier 18), future loss was computed at Rs.6,60,744/-; medical expenses of Rs.13,000/- (proved at Exh.40) were maintained; pain and suffering was enhanced from Rs.20,000/- to Rs.30,000/- given fracture injuries and indoor treatment; actual loss (3 months) was recomputed at Rs.28,500/-; and diet/attendant/transport enhanced to Rs.10,000/-—totalling Rs.7,42,244/-, i.e., an enhancement of Rs.3,35,484/-.

On exoneration, the Court accepted that the insurer had proved breach of policy conditions through the investigating ASI (Exh.43, six persons travelling on payment of fare), its Deputy Manager (Exh.51), and the claimants' own admissions (Exh.26) that they knew neither the owner nor the driver. However, since the claimants were third parties, the Court held that the benevolent scheme of the MV Act required the insurer to first pay the compensation, with liberty to recover it from the owner and driver.

The insurer's exoneration was set aside in effect: respondent no.3/insurance company was directed to deposit the awarded amounts with interest and thereafter recover the same from the owner and driver by filing execution petitions before the concerned Tribunal.