Section 164 of the Motor Vehicles Act applies retrospectively to allow enhanced compensation for third-party claims.

The appeals arise from a common accident on August 24, 2014, involving a passenger rickshaw and a "chakdo" rickshaw. A cow crossed the path, causing the passenger rickshaw to brake, subsequently being rammed from behind by the chakdo rickshaw.

The accident resulted in three deaths, including a seven-month-old minor.

The Motor Accident Claims Tribunal (MACT), Rajkot, awarded varying compensation amounts but exonerated the Insurance Company (Respondent No. 2) because the driver of the offending vehicle lacked a valid driving license at the time of the accident—the license was issued ten months post-accident.

The appellants challenged the exoneration and sought enhancement of compensation for the minor’s death under Section 163A/164 of the MV Act.

1. Whether the newly inserted Section 164 of the Motor Vehicles Act, providing for a fixed compensation of Rs. 5,00,000/- in case of death, can be applied retrospectively to pending claims.

2. Whether the Insurance Company can be completely exonerated from liability toward third parties due to the driver’s lack of a valid driving license.

Section 164 of the Motor Vehicles Act (as amended), which mandates a fixed compensation of Rs. 5,00,000 for death regardless of proof of fault.

The Supreme Court precedent New India Assurance Company Limited v. Urmila Halder (2024), which established that Section 164 is beneficial legislation that applies retrospectively to pending claims.

The "Pay and Recover" principle established in National Insurance Co. Ltd. v. Swaran Singh (2004), holding that a breach of policy conditions (like an invalid license) does not defeat third-party claims.

The court reasoned that although the claim in MACP No. 137/2015 was filed under the old Section 163A, the subsequent amendment introducing Section 164 acts as a computational clarification that must benefit the claimant in a pending appeal.

On the issue of liability, the court noted that while the driver’s license (Exh. 37) was issued only on June 1, 2015 (after the August 2014 accident), the insurer cannot avoid its statutory duty to compensate third-party victims.

Following Swaran Singh, the court held that the absence of a license is a matter between the insurer and the insured; thus, the insurer must first satisfy the award to the victims and subsequently seek recovery from the owner/driver.

The court set aside the total exoneration of the Insurance Company, directing Respondent No. 2 to satisfy the awards in all three cases at the first instance. The Insurance Company was granted the right to recover the paid amounts from the owner or driver of the offending rickshaw through execution proceedings before the Tribunal.