Insurer must satisfy compensation awarded to a gratuitous passenger, with liberty to recover it from the vehicle owner.

On 13 February 2011, the deceased was travelling in goods/utility vehicle No. GJ-4-V-6101 from Bhadli to Goradka along with his goods. He fell from the vehicle near the place of the incident, sustained fatal injuries, and died.

His legal heirs filed a claim petition under Section 163-A of the Motor Vehicles Act, 1988.

The Motor Accident Claims Tribunal, Bhavnagar, awarded ₹3,82,800 with 9% interest against the driver and owner but exonerated the insurer, holding that the deceased was a gratuitous passenger in a goods vehicle and that the driver did not possess a valid and effective driving licence.

The claimants appealed under Section 173 of the Act, seeking enhancement to ₹5,00,000 under the amended Section 164 and a direction requiring the insurer to pay the award initially and recover it from the driver and owner.

Whether, despite the deceased being treated as a gratuitous or unauthorised passenger in the goods vehicle, the insurer could be directed to satisfy the award initially and recover the amount from the driver and owner under the “pay and recover” principle.

Whether the claimants were entitled to standardized compensation of ₹5,00,000 under the amended Section 164 of the Motor Vehicles Act, notwithstanding that the accident and claim petition predated the amendment.

Whether the Tribunal’s award of ₹3,82,800 and its exoneration of the insurer required modification.

The Court exercised appellate jurisdiction under Section 173 of the Motor Vehicles Act and considered the claim under Section 163-A.

It applied the amended Section 164, holding—on the basis of New India Assurance Co. Ltd. v. Urmila Halder, 2024 SCC OnLine SC 4983—that the statutory standardized compensation of ₹5,00,000 for death applied retrospectively.

On insurer liability, the Court relied on Kaminiben v. The Oriental Insurance Co. Ltd., 2026 LiveLaw (SC) 174, and the principles stated in Manuara Khatun and National Insurance Co. Ltd. v. Saju P. Paul, (2013) 2 SCC 41, that an insurer may be directed, in appropriate cases, to pay the compensation to the claimants first and recover it from the vehicle owner, even where the victim was a gratuitous passenger and the insurer was not contractually liable to indemnify that risk.

The “pay and recover” mechanism may be implemented in the same proceedings against the insured.

The Court accepted that the deceased had been travelling with goods and that travelling in the utility vehicle was connected with the carriage of those goods.

Although the insurer was not contractually liable for an unauthorised or gratuitous passenger, the Court found the case suitable for applying the equitable and protective “pay and recover” principle, particularly in light of the Supreme Court authorities relied upon.

The Court further held that the amended Section 164 applied retrospectively and therefore replaced the Tribunal’s computation of ₹3,82,800 with the standardized amount of ₹5,00,000 for death.

Consequently, the Tribunal’s award required modification both as to quantum and as to the manner in which the compensation was to be recovered.

Although the insurer was exonerated from ultimate liability, Opponent No. 3 was directed to deposit and satisfy the award within eight weeks and thereafter recover the amount from Opponent Nos. 1 and 2 by executing the judgment.

The Tribunal was directed to disburse the deposited amount to the claimants after due verification.