Insurer must satisfy the third-party award first, then recover from the owner for the driver’s licence breach.

The appellants, the deceased’s wife, daughters and son, sought compensation after Lalsab Mattikoppa was fatally struck by a truck on 21 December 2020.

The Tribunal awarded total compensation of ₹16,72,000 with 6% annual interest, but placed liability on the truck’s owner after the driver’s licence was not produced. The appellants challenged the liability determination, seeking an order requiring the insurer to pay first and recover from the owner. The compensation amount was not challenged in the appeal.

1. Whether the insurer should be directed to satisfy the compensation award in the first instance and recover the amount from the vehicle owner, where the driver did not have a valid driving licence.

2. Whether the compensation awarded by the Tribunal required reconsideration in this appeal.

Under the “pay and recover” principle, an insurer may be directed to pay compensation to an innocent third-party claimant first and then recover the amount from the insured owner where a policy condition has been breached, including by driving without a valid licence.

The Court relied on Ram Bai v. Amit Minerals (2025 SCC OnLine SC 2067), which reaffirmed this approach by reference to Shamanna and Parminder Singh. It also relied on K. Nagendra v. The New India Insurance Company Limited (2025 INSC 1270) for the principle that a third-party victim should not be denied compensation for a breach of policy conditions.

The appeal was brought under Section 173(1) of the Motor Vehicles Act, 1988.

The accident and the Tribunal’s compensation assessment were not in dispute; the appeal concerned liability alone.

Although the insurer contended that the driver lacked a valid licence, the policy was valid and the claimants were third parties. Applying the authorities on “pay and recover,” the Court held that the claimants should receive payment from the insurer first, leaving the insurer to recover the amount from the owner. Recovery could be pursued before the Executing Court without a separate petition.

The insurer was directed to deposit the compensation with accrued interest before the Tribunal within four weeks of receiving the certified judgment, and was permitted to recover the amount from the owner. The compensation award itself was not altered.