Insurer directed to pay and recover compensation despite policy breach involving unauthorized hire and reward usage.

On 01.08.1997, the appellant/claimant was traveling to Ambaji in a jeep (GJ-9-B-1651) which collided with an ST bus (GJ-1-Z-2598)

The claimant sustained head and forehead fractures and filed a claim for Rs. 50,000

The Motor Accident Claims Tribunal (MACT) awarded Rs. 35,395 with 7.5% interest, holding the jeep driver 100% negligent and exonerating the jeep’s insurance company (Respondent No. 5) because the vehicle was used for "hire and reward" in breach of the insurance policy

The claimant appealed, seeking a finding of composite negligence and liability against the insurance company

1. Whether the accident was caused by the composite negligence of both drivers or the sole negligence of the jeep driver.

2. Whether the insurance company of the jeep is liable to satisfy the award despite the claimant being a fare-paying passenger in breach of the policy conditions.

The court applied the negligence principles under the Motor Vehicles Act, 1988, where liability is determined based on oral and documentary evidence like the FIR and Panchnama

Regarding insurance liability, the court recognized the contractual "hire and reward" exclusion clause in a comprehensive policy

However, it invoked the equitable principle of "Pay and Recover," derived from the "benevolent objective of the Motor Vehicles Act," which requires an insurer to satisfy a third-party claim initially and subsequently recover the amount from the insured in cases of policy breach

Regarding negligence, the court observed that while the claimant alleged a head-on collision, his own cross-examination admitted the jeep entered the wrong side of the road

This was corroborated by the FIR (Exh. 42) and the Panchnama (Exh. 43), which showed the bus on the correct side and the jeep on the wrong side post-accident; thus, the Tribunal's finding of 100% negligence on the jeep driver was upheld

On the issue of liability, the court noted that the claimant admitted to hiring the jeep at Rs. 4 per km, confirming a breach of the "hire and reward" restriction in the policy (Exh. 51)

However, the court determined that to fulfill the Act’s social welfare purpose, the insurance company must first pay the compensation to the claimant and then recover it from the jeep’s driver and owner via execution proceedings

It held that while the jeep driver was solely negligent, Respondent No. 5 (Insurance Company) is directed to deposit the compensation amount with interest within six weeks

The Insurance Company is granted the liberty to recover the said amount from the driver (Respondent No. 3) and owner (Respondent No. 4) of the jeep

The Tribunal was directed to disburse the amount to the claimant upon deposit