Insurer must pay compensation first and recover it from the owner despite policy breaches involving unauthorized tractor-trolley passengers.

The deceased, Damabhai Rajubhai, was travelling for labour work in a tractor bearing registration no. GJ-7AN-1149 and trolley bearing registration no. GJ-7TT-8805. Due to the allegedly rash and negligent driving of the tractor, the trolley fell into a gutter, causing injuries to Damabhai, who subsequently died during treatment.

His widow and other dependants filed Motor Accident Claim Petition No. 627 of 2007 before the Motor Accident Claims Tribunal, Anand.

The Tribunal awarded total compensation of Rs.4,65,000 but exonerated the insurance company on the grounds that the trolley had no authorised sitting capacity, the deceased was an unauthorised passenger/labourer, the driver possessed only a non-transport LMV licence, and the policy was a farmer package policy that did not cover the use of the tractor-trolley for transporting bricks.

The claimants preferred the present appeal under Section 173 of the Motor Vehicles Act, 1988, challenging both the insurer’s exoneration and the quantum of compensation.

Whether the insurance company could be completely exonerated from liability on the ground that the deceased was travelling in a tractor-trolley having no authorised sitting capacity and that the policy did not cover the deceased’s risk?

Whether the driver’s LMV, non-transport driving licence was valid for driving the tractor-trolley, having regard to its weight and classification under the Motor Vehicles Act?

Whether the compensation awarded by the Tribunal required enhancement by applying the principles governing future prospects and conventional heads of compensation?

The Court exercised appellate jurisdiction under Section 173 of the Motor Vehicles Act, 1988.

It applied the pay-and-recover principle, under which an insurer may be directed to satisfy the award in the first instance despite a proved breach of policy conditions, with liberty to recover the amount from the vehicle owner.

On driving-licence validity, the Court relied on Bajaj Allianz General Insurance Co. Ltd. v. Rambha Devi & Ors., 2025 (3) SCC 95, as followed in New India Assurance Co. Ltd. v. Sindhabhai Mavjibhai Bavaliya, 2026 JX (Guj) 883, holding that a driver holding an LMV licence may drive a transport vehicle with gross vehicle weight below 7,500 kg without a separate transport-vehicle endorsement, subject to statutory exceptions.

For computation of compensation, the Court applied National Insurance Co. Ltd. v. Pranay Sethi, (2017) 16 SCC 680, concerning future prospects and conventional damages, and United India Insurance Co. Ltd. v. Satinder Kaur @ Satwinder Kaur, (2021) 11 SCC 780, concerning consortium payable to each eligible dependent.

The Court held that the Tribunal’s findings regarding the absence of sitting capacity and breach of the farmer package policy did not justify completely relieving the insurer of its obligation to satisfy the award.

Relying on the recent decision in ICICI Lombard General Insurance Co. v. Dharamshibhai Vithalbhai Makwana, the Court applied the pay-and-recover mechanism, thereby protecting the claimants while preserving the insurer’s right of recovery against the owner.

The Court further rejected the finding that the driver lacked a valid licence merely because the licence was for an LMV/non-transport vehicle.

Applying Rambha Devi, it reasoned that where the tractor and trolley fall within the LMV weight category—below 7,500 kg—an LMV licence is sufficient, and a separate transport endorsement is unnecessary.

On quantum, the Court found that the Tribunal had not properly assessed the deceased’s monthly income and had failed to apply the principles in Pranay Sethi and Satinder Kaur.

It recalculated future dependency at Rs.5,56,920 and awarded Rs.2,29,900 under loss of estate, consortium and funeral expenses, resulting in total compensation of Rs.7,86,820.

The claimants were held entitled to an additional compensation of Rs.3,21,820, with interest at 9% per annum from the date of filing of the claim petition until realisation.

All opponents were held jointly and severally liable, and the insurance company was directed to deposit the enhanced amount within eight weeks.

The insurer was required, in the first instance, to satisfy the award but was granted liberty to recover the amount from the vehicle owner by executing the order.

The Tribunal was directed to disburse the awarded amount to the claimants after due verification and deduction of court fees, if applicable.