Motor Accident | Vehicle Owner's Lack Of Personal Assets Can't Be A Ground To Deny 'Pay And Recover' Relief: Karnataka High Court

The Karnataka High Court has held that the financial incapacity or lack of personal assets of an offending vehicle owner cannot be a ground to deny the equitable doctrine of “Pay and Recover” to an innocent third-party victim of a motor accident.

“The legal proposition in this regard is well settled: even where a fundamental breach of policy conditions is established, such as the rider lacking a valid and effective driving license, the insurer is required in law to satisfy the award in favor of the third party in the first instance, with liberty to recover the amount so paid from the owner,” the Division Bench of Justice D.K. Singh and Justice H. Shanthi Bhushan said.

The Bench further added, “In our opinion, the alleged financial standing or lack of personal assets of the vehicle owner cannot alter this statutory obligation or disentitle the third-party victim from securing the fruits of the award.”

The case arose from a motor vehicle accident that took place on August 26, 2016. The appellant, Mahesh, was riding his motorcycle when another motorcycle came from the opposite direction, ridden in a rash and negligent manner by the offending driver, collided head-on with him. The appellant sustained severe life-threatening injuries and 10% functional whole-body disability. Following this, he filed a claim petition under Section 166 of the Motor Vehicles Act.

The MACT partly allowed the claim, granting ₹5,62,658 with 6% interest. However, it completely exonerated the Insurance Company and fastened sole liability on the vehicle owner because the rider lacked a valid driving license at the time. The Tribunal further refused to invoke "pay and recover" because the owner testified that he possessed no movable or immovable assets, concluding that the owner was merely trying to pass off his financial burden. Aggrieved by this, the claimant approached the High Court.

Commenting on the third-party insurance, the Court said, “Compulsory third-party insurance is anchored in beneficial social welfare legislation intended to protect innocent road accident victims. Under Section 149 of the Act, the statutory duty of the insurer towards a third-party victim remains paramount, notwithstanding an underlying breach of policy conditions between the insurer and the insured.”

The Court added, “Accordingly, we deem it just and proper that respondent No. 2 Insurance Company be directed to deposit the compensation awarded to the appellant in the first instance, with liberty to recover the same from respondent No. 1 (owner) in execution proceedings in accordance with law.”

Accordingly, the Court partly allowed the petition, directing the insurance company to deposit the total compensation before the Tribunal within eight weeks.

It also enhanced the compensation, by calculating the notional monthly income at Rs 9,500 instead of Rs 8,000, as per the Karnataka State Legal Services Authority. Consequently, the quantum of the award was increased from Rs 5,62,658 to Rs 5,99,558.