Insurer must satisfy third-party claims despite illegal sand transport, with a right to recover from the owner.

The injured claimant sought compensation under Section 166(1) of the Motor Vehicles Act, 1988, alleging that a tipper lorry hit him while he was standing near a road junction on 29 October 2017. He died while the claim petition was pending, and his legal representatives were impleaded.

The Tribunal found the lorry driver negligent and awarded compensation of ₹11,06,044. It also found that the lorry had been used to transport sand illegally, but directed the insurer to pay the award. The insurer appealed, challenging the finding on liability and seeking a pay-and-recover order; the negligence finding was not disputed before the High Court.

Whether the insurer was entitled to a pay-and-recover order because the insured lorry was used for the illegal transportation of river sand in breach of policy conditions.

Whether the Tribunal’s finding of negligence or its assessment of compensation required interference.

Section 173 of the Motor Vehicles Act, 1988 provides for an appeal against a Claims Tribunal’s award; the underlying claim was brought under Section 166(1).

Applying the Division Bench decision in The Divisional Manager, Royal Sundaram Alliance Insurance Co. Ltd. v. Shabiullah and Others, CMA No. 2183 of 2017, decided 12 September 2018, the Court held that a policy breach arising from the vehicle’s use for an illegal purpose does not absolve the insurer of liability to third-party claimants; the insurer may be directed to satisfy the award first and recover the amount from the vehicle owner.

The Court treated the FIR as showing that the lorry was used to transport river sand illegally and that the driver was charged under Section 21(1) of the Mines and Minerals (Development and Regulation) Act, 1957. It concluded that this use breached the policy conditions.

Following Shabiullah, however, the breach did not defeat the claimants’ third-party rights: the insurer remained liable to pay the award, with a right to recover from the owner. As the negligence finding was undisputed and the Court found no ground to alter the compensation, it left the award otherwise undisturbed.

The compensation award of ₹11,06,044 was otherwise confirmed. Since the insurer had deposited the award, the claimants were permitted to withdraw it upon application before the Tribunal. No costs were ordered.