Insurer must first satisfy the award and may recover despite the driver’s invalid licence.

The claimants—Smt. Ramkumari Pandey, widow of deceased Ashok Pandey, and their two minor children—sought compensation under Section 166 of the Motor Vehicles Act, 1988, for Ashok Pandey’s death in a road accident on 27 February 2023.

The Motor Accident Claims Tribunal, in Claim Case No. 46/2023, awarded total compensation of ₹15,46,780/- by award dated 6 December 2024.

Although the Tribunal found that the offending vehicle’s driver, Tushar Rathore, did not possess a valid and effective driving licence, constituting a breach of the insurance policy, it directed the appellant-insurer to satisfy the award initially, with liberty to recover the amount from the owner-cum-driver.

The insurance company challenged the pay-and-recover direction under Section 173 of the Motor Vehicles Act, contending that it should be completely exonerated from liability.

Whether the insurer could be directed to satisfy the compensation award despite the Tribunal’s finding that the offending vehicle was being driven without a valid and effective driving licence?

Whether the Tribunal’s direction permitting the insurer to recover the amount from the owner-cum-driver required interference?

The Court applied Section 173 of the Motor Vehicles Act, 1988, governing appeals against awards of the Claims Tribunal.

The settled principle that, even where the insured has breached a policy condition by permitting an unlicensed person to drive the vehicle, the insurer may be directed to pay the compensation to the third-party victims in the first instance and recover it from the vehicle owner or responsible party.

The Court relied on Sunita & Others v. United India Insurance Co. Ltd. & Others, 2025 SCC OnLine SC 1464, and Manuara Khatun & Others v. Rajesh Kumar Singh & Others, (2017) 4 SCC 796, which support the pay-and-recover principle in cases involving breach of insurance policy conditions.

The Tribunal had correctly found a breach of the insurance policy because the driver, Tushar Rathore, lacked a valid and effective driving licence at the time of the accident.

However, the existence of that breach did not automatically entitle the insurer to avoid satisfying the award as against the third-party claimants.

Applying the Supreme Court’s settled pay-and-recover doctrine, the High Court held that, since the vehicle was insured with the appellant, the insurer was required to satisfy the compensation award initially, while retaining the right to recover the amount from the owner-cum-driver responsible for the breach.

The insurer failed to establish any legally sufficient ground for disturbing the Tribunal’s direction.

It upheld the Tribunal’s direction requiring the appellant-insurance company to pay the awarded compensation of ₹15,46,780/- to the claimants in the first instance, with liberty to recover the amount from the owner-cum-driver.

The appeal under Section 173 of the Motor Vehicles Act was dismissed as devoid of merit.

The Tribunal’s records, along with a copy of the judgment, were directed to be transmitted for compliance and necessary action.