Pay and recover principle applies against insurer where driver lacks a valid driving license.

The appellant-Insurance Company challenged the legality of an award dated 23.01.2019 passed by the Claims Tribunal, which granted compensation of Rs. 17,10,110 with 6% interest to the claimant (Respondent No. 1).

The Tribunal found that the driver of the offending vehicle did not possess a valid and effective driving license at the time of the accident.

Consequently, the Tribunal applied the "pay and recover" principle, directing the Insurance Company to satisfy the compensation amount to the claimant first and subsequently recover the same from the owner of the vehicle.

1. Whether the Claims Tribunal erred in law by applying the principle of "pay and recover" in circumstances where the driver lacked a valid and effective driving license.

Section 173 of the Motor Vehicle Act, 1988 regarding the maintainability of appeals.

The Court relied on the Supreme Court’s decision in Shamanna and another v. Divisional Manager, Oriental Insurance Company Limited and others (2018) 9 SCC 650, which upheld the precedents of National Insurance Co. Ltd. v. Swaran Singh (2004) 3 SCC 297 and National Insurance Co. Ltd. v. Laxmi Narain Dhut (2007) 3 SCC 700.

These cases establish that a direction to "pay and recover" is appropriate to protect third-party interests even when policy conditions are breached.

Oriental Insurance Co. Ltd. v. Nanjappan (2004) 13 SCC 224, which clarifies that insurers may recover such amounts through execution proceedings rather than filing fresh suits.

The High Court reviewed the Tribunal's findings, specifically paragraph 21 of the impugned award, which confirmed the driver's lack of a valid license on the date of the accident.

The Court reasoned that the "pay and recover" doctrine is a settled principle intended to ensure that the claimant receives timely compensation despite the owner’s breach of contract with the insurer.

Applying the ratio of Shamanna, the Court found that the Tribunal’s direction was a correct finding of fact based on the evidence available on record.

The Court determined that the insurer’s liability to the third party remains intact in the first instance, with the right to reimbursement from the insured (owner) being the appropriate remedy for the license default.

The Court affirmed that the appellant-Insurance Company must pay the awarded compensation to the claimant and is entitled to recover the same from the owner of the offending vehicle through execution proceedings.

No costs were awarded.