Insurer liable to satisfy award under "Pay and Recover" principle despite absence of valid vehicle permit

The claimant, Karisiddappa, sustained injuries on December 13, 2011, when an auto-rickshaw (KA-20/8528) struck him in Gadag

The Motor Accident Claims Tribunal (MACT), Gadag, awarded compensation of Rs. 1,70,200/- with 6% interest, fastening liability jointly and severally on the owner and the insurer

The insurer appealed, contending that the vehicle lacked a valid permit to ply in Gadag. Evidence showed that while the RTO Udupi had issued a Clearance Certificate (NOC) on May 7, 2011, to transfer the vehicle to Gadag, the owner failed to register the vehicle or obtain a permit from RTO Gadag before the accident

1. Whether fastening liability on the insurer by the Tribunal was erroneous given the admitted lack of a valid permit within the relevant jurisdiction

Section 49 of the Motor Vehicles Act, 1988, which mandates that a vehicle owner must intimate a change of address/place of business to the Registering Authority within 30 days

Principle of "Pay and Recover" as established by the Division Bench of the Karnataka High Court in New India Assurance Co. Ltd. v. Yallavva and the Supreme Court in Shammanna v. Divisional Manager, Oriental Insurance Co., which dictates that an insurer must satisfy an award for third-party claimants even in cases of permit violations and subsequently recover the amount from the owner

The court found that although the vehicle had an NOC from Udupi, the owner failed to apply for registration or a permit in Gadag as required under Section 49 of the MV Act

Testimony from the Gadag RTO official (RW-2) confirmed that a permit cannot be issued without registration, and no such permit existed on the date of the accident

Consequently, plying the vehicle in Gadag constituted a violation of policy terms

However, following settled legal precedents regarding third-party risks, the court determined that the insurer cannot be completely exonerated from paying the claimant. The insurer must first satisfy the judgment to protect the third party and then seek recovery from the owner due to the breach of permit conditions

It modified the Tribunal's order to the extent that while the Insurance Company is directed to pay the compensation amount and interest to the claimant, it is granted the right to recover the said amount from the owner of the offending vehicle in the same proceedings