Insurers must pay-and-recover despite policy breaches, but no interest is payable on future prospects.

On August 10, 2019, Gokul Haloi died after being struck by an overspeeding vehicle (AS-25-AC-0672)

The widow and son of the deceased filed a claim under Section 166 of the Motor Vehicles Act, 1988

The Motor Accident Claims Tribunal (MACT) awarded Rs. 14,65,984/- with 9% interest, holding that while the owner breached policy conditions by lacking a valid permit, the insurer must pay the claimants first and then recover from the owner

The Insurance Company appealed, seeking a specific mode of recovery (security deposit from the owner before release of funds) and challenging the award of interest on "future prospects"

1. Whether a specific clarification regarding the mode of recovery (as per the Nanjappan case) is necessary when an insurer is directed to "pay and recover"

2. Whether interest can be legally awarded on the component of "future prospects" added to the income of the deceased

The court primarily applied Section 173 and 174 of the Motor Vehicles Act, 1988 regarding appeals and recovery of money

It relied on the Full Bench decision in National Insurance Co. Ltd. v. Swaran Singh, which established that the Tribunal has the power to direct the insurer to satisfy the award first and then recover from the owner via a certificate to the Collector

Regarding interest, the court followed the precedent set by Coordinate Benches in Khusboo Chirania v. Kamal Kumar Sovasaria and Oriental Insurance Co. Ltd. v. Champabati Ray, which held that interest is not payable on "future prospects" since it pertains to future probable income rather than a present loss of money value

The Court noted that while the Nanjappan case suggested requiring security from the owner before releasing funds, those directions were specific to the facts of that case and did not constitute general guidelines

Instead, the Court held that the Full Bench ruling in Swaran Singh is binding, providing that recovery should proceed via the mechanism in Section 174 of the Act if the insured fails to pay

Consequently, withholding the claimants' compensation pending a notice to the owner was deemed not a legal requirement

On the second issue, the Court reasoned that interest is intended to compensate for the "denial of the right to utilize money" from the date of the accident; however, since "future prospects" relate to income that would have been earned in the future, awarding interest on a lump-sum payment of future income would be illogical

The Court modified the award to exclude interest on the "future prospects" component

The appellant was directed to deposit the remaining 50% of the awarded amount (minus interest on future prospects) within six weeks

The MAC Case No. 2640/2019 records were ordered returned to the Tribunal for compliance