Insurer must first pay third-party compensation and recover it from the vehicle owner despite policy breach.

Respondent Nos. 1 and 2 filed a claim petition under Section 163-A of the Motor Vehicles Act, 1988, seeking compensation of ₹6,00,000 for the death of their son, Aithe Sailu, in a motor vehicle accident on 29 December 2012.

The deceased was travelling in a trolley attached to a tractor when he allegedly fell from the vehicle due to its rash and negligent driving and died while being taken to the hospital.

The Motor Accidents Claims Tribunal awarded ₹5,00,000 with interest at 7.5% per annum and directed the Insurance Company to pay the amount initially and recover it from the vehicle owner.

The Insurance Company appealed under Section 173 of the Motor Vehicles Act, contending that the deceased was a minor/student and an unauthorised or gratuitous passenger, thereby constituting a breach of the policy conditions.

Whether the Insurance Company could be directed to pay the compensation to the claimants in the first instance and recover it from the vehicle owner, despite the alleged breach of policy conditions arising from the deceased’s status as an unauthorised or gratuitous passenger?

Whether the Tribunal’s award of ₹5,00,000 with interest at 7.5% per annum constituted just and reasonable compensation warranting appellate interference?

The Court applied Section 173 of the Motor Vehicles Act, 1988, governing appeals against awards of Claims Tribunals, and considered the claim under Section 163-A, which provides for compensation on a structured basis in cases arising out of motor vehicle accidents.

The Court applied the principle that, where a valid and subsisting insurance policy covers the offending vehicle and third-party liability is involved, the insurer may be directed to satisfy the award initially and recover the amount from the owner where a breach of policy conditions is established or alleged.

The Court also applied the settled principles governing assessment of compensation for deceased minors or young victims, including compensation under the heads of loss of dependency, loss of love and affection, and funeral expenses.

The Court noted that the insurance policy covering the tractor and trolley was valid from 30 June 2012 to 29 June 2013 and therefore covered the accident dated 29 December 2012.

Although the FIR described the deceased as a 14-year-old Class VIII student, the post-mortem report recorded his age as 18 years, while the testimony of P.Ws. 2 and 3 supported the claim that he was engaged to work on the vehicle.

The Insurance Company did not adduce oral evidence to rebut this material.

In these circumstances, the Tribunal’s direction requiring the insurer to pay the award first and recover it from the owner was held neither illegal nor perverse.

The Court further found that the Tribunal had properly assessed the compensation under the relevant heads and that the total award of ₹5,00,000 with 7.5% interest was just, reasonable, and supported by the record.

It upheld the Tribunal’s direction requiring the Insurance Company to pay ₹5,00,000 with interest at 7.5% per annum from the date of the claim petition until deposit, with liberty to recover the amount from the vehicle owner.

The appeal was dismissed, with no order as to costs, and pending miscellaneous petitions, if any, were closed.