Recovery rights cannot be granted to the insurer absent proof of policy breach.

Lakha Ram died in an accident involving tractor No. PB-67-4232. The Motor Accident Claims Tribunal, Jalandhar, awarded ₹1,30,000 to the claimant with interest at 9% per annum, holding that the accident resulted from the rash and negligent driving of Seeta and that the vehicle was involved in the accident.

Although the tractor was insured with the respondent-Insurance Company under cover note Ex.R1, the Tribunal directed the Insurance Company to pay the compensation initially, while granting it the right to recover the amount from the owners, and permitting the owners to recover it from the driver. The driver and owners challenged this “pay and recover” direction, contending that the Insurance Company had neither pleaded nor proved any breach of the insurance policy, including the alleged absence of a valid driving licence.

1. Whether the Tribunal was justified in granting the Insurance Company recovery rights against the owners/insured despite deciding the issue regarding the driver’s lack of a valid driving licence against the Insurance Company for want of evidence.

2. Whether, in the absence of proof of breach of the insurance policy, the Insurance Company was liable to indemnify the insured and bear the entire awarded compensation.

The Court applied the scheme of the Motor Vehicles Act, 1988, under which a claimant proceeding under Section 166 may recover compensation from the persons liable for the accident, subject to the insurer’s statutory and contractual liability under the applicable insurance policy.

The Court further applied the principle that an insurer seeking exoneration or recovery rights must establish a breach of the policy conditions, such as the driver’s failure to possess a valid and effective driving licence. Where the insurer fails to prove such breach, it remains liable to indemnify the insured; a “pay and recover” direction cannot be sustained merely on assertion or without an evidentiary finding of breach.

The Tribunal had expressly framed Issue No.4 on whether the driver lacked a valid driving licence, with the burden placed on the Insurance Company. That issue was decided against the Insurance Company because it led no evidence and did not establish the alleged policy violation.

The vehicle’s insurance on the date of the accident was undisputed. Although the Tribunal correctly directed the Insurance Company to pay the claimant, it inconsistently granted recovery rights against the owners and driver despite finding no proved breach of the policy conditions. The High Court held that, in the absence of proof that the driver lacked a valid licence or that any other policy condition had been violated, the Insurance Company was bound to indemnify the insured and could not recover the award from the owners or driver.

Pending miscellaneous applications, if any, were also disposed of.