Insurer must "pay and recover" compensation for third-party victims despite driver's lack of valid license.

On March 27, 2014, Narendrasinh Kalusinh Baraiya was riding a motorcycle with his wife, Varshaben, as a pillion rider

An offending vehicle (Tata Magic) driven by respondent no. 1 in a negligent manner collided with them, resulting in Narendrasinh's death and serious injuries to Varshaben

The Motor Accident Claims Tribunal (MACT), Nadiad, held the driver solely negligent but exonerated the respondent no. 2 Insurance Company from liability because the driver lacked a valid driving license, making only the owner-driver (respondent no. 1) liable

The claimants appealed, seeking enhancement of compensation and the invocation of the "pay and recover" principle against the insurer.

1. Whether the Insurance Company can be exonerated from liability toward third parties due to the driver's lack of a valid license, or if the "pay and recover" principle should apply.

2. Whether the Tribunal erred in the assessment of the deceased’s annual income by using an average of two years instead of the most recent Form 16.

3. Whether the injured appellant is entitled to a higher assessment of income based on minimum wages and addition of future prospects.

The Court applied the "pay and recover" doctrine established in *National Insurance Co. Ltd. v. Swaran Singh* (2004) 3 SCC 297, holding that an insurer must satisfy an award for a third party even if policy conditions are breached

It relied on *Shamanna v. Oriental Insurance Co. Ltd.* (2018) 9 SCC 650 regarding the statutory duty to satisfy awards despite licensing defaults

For quantum, it followed *Sarla Verma v. DTC* (2009) 6 SCC 121 and *National Insurance Co. Ltd. v. Pranay Sethi* (2017) ACJ 2700 for calculating future prospects and multipliers

and *Nidhi Bhargava v. National Insurance Co. Ltd.* (2025) SCC OnLine 872 regarding the use of recent tax records to determine income

The Court observed that while the driver failed to produce a license, the victims were "third parties" to the insurance contract

Under Section 149 of the Motor Vehicles Act, the insurer’s liability to third parties remains intact; thus, the Tribunal erred in total exoneration instead of ordering "pay and recover"

Regarding quantum in the fatal case (FA 3068/2022), the Court held that the Tribunal should have used the most recent Form 16 (showing ₹3,19,264) rather than a lower average

It also corrected the consortium and conventional heads to align with *Magma General Insurance*

In the injury case (FA 3043/2022), the Court applied the minimum wage for unskilled workers (₹5,300) as the "foundational benchmark" since the appellant's household income was not proved, and added 40% for future prospects which the Tribunal had omitted

In FA 3068/2022, compensation was enhanced by ₹6,23,388

In FA 3043/2022, compensation was enhanced by ₹2,11,904

Critically, the Court set aside the exoneration of the Insurance Company and directed it to pay the total compensation to the claimants first, with the liberty to recover the same from the owner (respondent no. 1) via execution proceedings without filing a separate suit

The Insurance Company was directed to deposit the additional amounts with interest within four weeks