Insurer must pay third-party compensation first, with liberty to recover from the unlicensed owner-driver.

Ajay Kumar filed a claim petition under Section 166 of the Motor Vehicles Act, 1988, seeking compensation for injuries suffered in an accident dated 1 February 2014 involving car No. HP-39C-3191, initially bearing temporary registration No. HP-40-T-1967. He alleged that the vehicle was driven rashly and negligently and collided with his motorcycle, causing multiple injuries and a fracture to his left leg.

The Motor Accident Claims Tribunal partly allowed the claim and awarded Rs.3,48,700 with interest at 7.5% per annum, directing the New India Assurance Company Limited to pay the amount with liberty to recover it from Jai Singh, the vehicle owner.

Jai Singh appealed, contending that Kakoo Ram was driving the vehicle and that the accident resulted from the claimant’s own negligence.

Whether Jai Singh, rather than Kakoo Ram, was driving the offending vehicle and was responsible for the accident caused by rash and negligent driving?

Whether the absence of a valid driving licence constituted a breach of the insurance policy conditions, disentitling the insurer from primary liability?

Whether, despite the breach of policy conditions, the insurer should be directed to pay the compensation to the third-party claimant in the first instance, with liberty to recover it from the vehicle owner?

The Court applied Sections 166 and 173 of the Motor Vehicles Act, 1988, concerning claims for compensation and appeals against awards.

Under Section 149(2), an insurer may rely on breach of specified policy conditions, including the absence of a valid driving licence; however, under National Insurance Co. Ltd. v. Swaran Singh, (2004) 3 SCC 297, the insurer must establish both the relevant defence and a fundamental breach by the insured, while a third-party claim cannot ordinarily be defeated merely because the driver lacked a valid licence.

Pappu v. Vinod Kumar Lamba, (2018) 3 SCC 208, establishes that the vehicle owner must first plead and prove foundational facts, including that the vehicle was driven by an authorised person holding a valid licence; failing this, the insurer may obtain recovery rights.

The Court also relied on Jawahar Singh v. Bala Jain, (2011) 6 SCC 425, Shamanna v. Divisional Manager, Oriental Insurance Co. Ltd., (2018) 9 SCC 650, Parminder Singh v. New India Assurance Co. Ltd., (2019) 7 SCC 217, and Kurvan Ansari v. Shyam Kishore Murmu, (2022) 1 SCC 317, for the principle that, in third-party claims, the insurer may be directed to pay first and recover the amount from the owner where the vehicle was driven without a valid licence.

The Court held that Jai Singh’s assertion that Kakoo Ram was driving was unsupported by evidence, whereas the claimant’s testimony was corroborated by Baldev Singh. Accordingly, Jai Singh was found to be the driver responsible for the accident.

Since Jai Singh admitted that he had no driving licence and failed to produce one, he could not establish that the vehicle was being driven by an authorised and duly licensed person. This constituted a breach of the policy conditions and absolved the insurer from ultimate liability as between the insurer and the owner.

Nevertheless, because Ajay Kumar was an innocent third-party claimant, the Court applied the “pay and recover” doctrine. The insurer was therefore required to satisfy the award initially, while retaining the right to recover the amount from Jai Singh.

The Insurance Company was directed to pay the compensation to Ajay Kumar in the first instance, with liberty to recover the amount from Jai Singh, the owner-cum-driver, because the vehicle had been driven without a valid licence.