Private Insurer Not Liable For Accident Caused By Vehicle Requisitioned By State Authorities : Supreme Court

The Supreme Court on Monday (March 23) held that when a private vehicle is requisitioned by the State for public purposes such as elections, the liability for accidents rests with the requisitioning authority, not the insurer.

“…where a vehicle is requisitioned for public functions and an incident occurs during the period of such requisition, liability ought properly to be borne by the requisitioning authority, and not by the insurer engaged by the owner for the vehicle's regular and voluntary use.”, observed a bench of Justices Sanjay Karol and N Kotiswar Singh.

The bench upheld the order of the Madhya Pradesh High Court, Gwalior Bench, which had overturned the MACT's decision to fix a liability upon the insurer, and instead fixed liability on the District Magistrate/Election Officer, Gwalior, after a private school bus requisitioned for Gram Panchayat election duty collided with a motorcyclist, resulting in his death.

The Court held that upon requisitioned of a private bus by the State authority, “the owner is divested of custody and decision-making power, and the vehicle is placed at the disposal of the State for governmental functions.”, therefore “the legal consequences arising from that control cannot, in fairness, be shifted back to a private insurer whose contractual engagement was premised on a wholly different footing.”

In support, reliance was placed on Purnya Kala Devi v. State of Assam (2014) 14 SCC 142, to observe that under Section 2(3) of the Motor Vehicle Act, 1988, the definition of the word 'owner' is functional, not merely formal, therefore a person in possession and control of a vehicle, such as a requisitioning authority, qualifies as "owner" for liability purposes.

“To fasten liability upon the insurer in these circumstances would be to extend the contract beyond the risk that was agreed to be covered. Requiring the insurer to answer for consequences arising from a use neither authorised nor controlled by the insured would be unfair. The insurer assesses and underwrites risk based on the insured's ordinary operations. When the State steps in, assumes control, and deploys the vehicle for its own purposes, it assumes with that control the corresponding responsibility. Further, when statutory power is exercised to requisition private property in the public interest, that power carries with it an obligation to answer for the consequences flowing from such compelled use. To hold otherwise would impose upon private parties and their insurers the burden of risks generated exclusively by governmental action.”, the court observed.

The Court further clarified that U.P. SRTC v. Kulsum (2011) and U.P. SRTC v. National Insurance Co. Ltd. (2021), relied upon by the appellant to fasten liability on the insurer, were distinguishable, as those cases involved buses operated by State transport corporations under voluntary agreements, whereas the present case concerned compulsory requisition.

Accordingly, the appeal was dismissed.

Cause Title: DISTRICT MAGISTRATE AND DISTRICT ELECTION OFFICER AND COLLECTOR, GWALIOR, M.P. VERSUS NATIONAL INSURANCE COMPANY LIMITED & ORS.

Citation : 2026 LiveLaw (SC) 280

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Appearance:

For Petitioner(s) :Mr. Siddharth Sharma, Adv. Mr. Shashank Singh, AOR Mr. Ankit Singh, Adv. Mr. Milind Modi, Adv.

For Respondent(s) :Mr. Manu Luv Shalia, Adv. Ms. Manjeet Chawla, AOR Ms. Jyoti, Adv. Mr. Manek Sharma, Adv. Mr. Abid Ali, Adv.