Karnataka HC Orders Insurer To Pay Injured Motorcyclist’s ₹5.29 Lakh Award First, Then Recover From Owner Who Let Unlicensed Driver Drive the Tractor

In brief

The question

Whether the insurer could be held liable where the Tribunal found that the tractor’s owner had breached the policy by entrusting the vehicle to a driver without a valid driving licence

The court held

The appeal was partly allowed.

It also directed

The award was modified to direct the insurer to satisfy the compensation award in the first instance and recover the amount from the vehicle owner; interest was reduced from 9% to 6% per annum.

The amount deposited before the High Court was ordered to be transferred to the Tribunal.

01Facts

The claimant was injured when his motorcycle collided with a tractor on 26 April 2018.

pp. 2–5

He sought compensation, and the Motor Accident Claims Tribunal awarded him ₹5,29,520 with interest at 9% per annum.

pp. 2–5

The Tribunal found that the tractor’s owner had breached the insurance policy by allowing a person without a valid driving licence to drive the tractor, but nevertheless held the owner and insurer jointly and severally liable.

pp. 2–5

It also deducted 25% of the compensation on account of the licence issue.

pp. 2–5

The insurer appealed, challenging its liability and the interest rate.

p. 7

02Issues

i.Whether the insurer could be held liable where the Tribunal found that the tractor’s owner had breached the policy by entrusting the vehicle to a driver without a valid driving licence

pp. 4–6

ii.Whether the Tribunal’s award of interest at 9% per annum should be reduced

p. 6

03Law Applied

Under National Insurance Co. Ltd. v. Swaran Singh, (2004) 3 SCC 297, and Shamanna v. Divisional Manager, Oriental Insurance Co. Ltd., AIR 2018 SC 3726, a court may direct an insurer that is not strictly liable to satisfy the award in the first instance and recover the amount from the vehicle owner.

p. 6

The Court also relied on the Karnataka High Court Division Bench decision in Ms. Joyeeta Bose v. Venkateshan V., MFA No. 5896/2018 and connected matters, decided on 24 August 2020, in reducing the applicable interest rate.

pp. 6–7

Provisions in the judgment · 1 · Linked ones open on LawLens

Motor Vehicles Act, 1988 Section 173

04Reasoning

The Tribunal’s finding that the owner breached the policy by permitting an unlicensed person to drive the tractor meant that the insurer was not strictly liable.

pp. 4–7

The Tribunal was therefore wrong to impose ordinary joint and several liability on the insurer; however, applying Swaran Singh and Shamanna, the Court directed the insurer to pay the claimant first and recover from the owner.

pp. 4–7

The Court also found no rationale for the Tribunal’s 25% deduction, but its operative order did not separately specify an adjustment to the compensation on that account.

pp. 4–7

Relying on Joyeeta Bose, it reduced the interest rate from 9% to 6% per annum.

pp. 6–7

05Holding

The appeal was partly allowed.

p. 7

The award was modified to direct the insurer to satisfy the compensation award in the first instance and recover the amount from the vehicle owner; interest was reduced from 9% to 6% per annum.

p. 7

The amount deposited before the High Court was ordered to be transferred to the Tribunal.

p. 7

LawLens.Karnataka High Court

Original Court PDF