Insurer Must Pay Compensation for Unauthorized Tractor Passenger First, Then Recover from Owner.

The claimants sought compensation under Section 166 of the Motor Vehicles Act after Bhagubhai died when he fell from the mudguard of a tractor and was run over by its rear wheel.

The Tribunal awarded Rs. 16,95,800 with 9% interest and held the opponents jointly and severally liable, finding that the deceased was a cleaner-cum-conductor engaged in the vehicle’s operation.

The insurer appealed, challenging its liability to pay.

Whether the insurer was liable under the policy to indemnify the tractor owner for the deceased’s death while he was travelling on the tractor’s mudguard.

Whether, despite the absence of policy cover for the deceased as a passenger, the insurer could be directed to satisfy the award first and recover the amount from the tractor owner.

Section 173 of the Motor Vehicles Act provides for an appeal against an award of a Motor Accident Claims Tribunal.

Under Shivaraj v. Rajendra, (2018) 10 SCC 432, where the policy does not cover the risk of an unauthorised passenger and there is a breach of policy terms, a court may direct the insurer to pay the compensation to the claimant first, with liberty to recover it from the vehicle owner.

The applicable policy terms determine whether a particular occupant’s risk is covered; the Court found that the policy did not cover the deceased’s risk as a passenger.

The Court found that the deceased was travelling on the tractor’s mudguard and that the policy did not cover the risk of a gratuitous passenger.

It rejected the Tribunal’s conclusion that the deceased was covered as a cleaner-cum-conductor, noting that the policy did not show that the insurer had purchased that risk or received an additional premium for it.

Applying Shivaraj, the Court held that the insurer should nevertheless satisfy the award in the first instance and then recover the amount from the tractor’s driver and owner.

The claimants remained entitled to Rs. 16,95,800, costs and interest at 9% per annum from the date of the claim petition until realization, recoverable jointly and severally from opponents 1 and 2.

The insurer was directed to satisfy the award first, with liberty to recover the amount from those opponents by executing the order.