Doctrine of "Pay And Recover" In Motor Accident Claim Cases Still Holds The Field, Clarifies SC [Read Judgment]

The Supreme Court has held that doctrine of "pay and recover" in motor accident claim cases still holds the field.A bench of Justice Ranjan Gogoi and Justice R Banumathi made this observation (Shamanna vs. Divisional Manager, The Oriental Insurance Co. Ltd.) while setting aside a Karnataka High Court order that had exonerated the insurance company from its liability directing the claimants to recover the compensation from the owner of the vehicle. The high court had noticed a judgment of the apex court (National Insurance Co. Ltd. v. Parvathneni and another) in this regard.Swaran Singh caseThe apex court bench observed that in National Insurance Company Ltd. v. Swaran Singh, it was held that onus is always upon the insurance company to prove that the driver had no valid driving licence and that there was breach of policy conditions and where the driver did not possess the valid driving licence and there was breach of policy conditions, “pay and recover” can be ordered in case of third-party risks.It was also held in Swaran Singh case thus: “Where on adjudication of the claim under the Act the Tribunal arrives at a conclusion that the insurer has satisfactorily proved its defence in accordance with the provisions of Section 149(2) read with sub-section (7), as interpreted by this Court above, the Tribunal can direct that the insurer is liable to be reimbursed by the insured for the compensation and other amounts which it has been compelled to pay to the third party under the award of the Tribunal. Such determination of claim by the Tribunal will be enforceable and the money found due to the insurer from the insured will be recoverable on a certificate issued by the Tribunal to the Collector in the same manner under Section 174 of the Act as arrears of land revenue.”The bench also noted the subsequent decisions, including that in National Insurance Co. Ltd. v. Laxmi Narain Dhut, of the apex court in which this case was followed. It then noted the developments with regard to opinion expressed by a two-judge bench in National Insurance Co. Ltd. v. Parvathneni and another. Parvathneni case (Reference order)In this case, the two-judge bench of the apex court opined that when the insurance company proves that it has no liability to pay compensation to the claimants, it cannot be compelled to make payment and later on recover it from the owner of the vehicle.“We have some reservations about the correctness of the aforesaid decisions of this Court. If the insurance company has no liability to pay at all, then, in our opinion, it cannot be compelled by order of the Court in exercise of its jurisdiction under Article 142 of the Constitution of India to pay the compensation amount and later on recover it from the owner of the vehicle. In our view, Article 142 of the Constitution of India does not cover such type of cases,” the bench had observed noticing some earlier decisions of the apex court.“When a person has no liability to pay at all how can it be compelled to pay? It may take years for the insurance company to recover the amount from the owner of the vehicle, and it is also possible that for some reason the recovery may not be possible at all,” the bench headed by Justice M Katju had observed, while referring the following queries to larger bench: If an Insurance Company can prove that it does not have any liability to pay any amount in law to the claimants under the Motor Vehicles Act or any other enactment, can the Court yet compel it to pay the amount in question giving it liberty to later on recover the same from the owner of the vehicle. Can such a direction be given under Article 142 of the Constitution, and what is the scope of Article 142? Does Article 142 permit the Court to create a liability where there is none?Parvathneni case (three-judge bench) The reference to a three-judge bench ended without any determination on the issue. The bench headed by Justice HL Dattu dismissed the SLP in view the smallness of the amount involved, though with a rider that ‘the questions of law raised in this petition are kept open to be decided in an appropriate case.’ Decision in Swaran Singh case followed in Laxmi Narain Dhut and other cases hold the field Noticing all these, the bench observed: “Since the reference to the larger bench in Parvathneni case has been disposed of by keeping the questions of law open to be decided in an appropriate case, presently the decision in Swaran Singh case followed in Laxmi Narain Dhut and other cases hold the field. The award passed by the Tribunal directing the insurance company to pay the compensation amount awarded to the claimants and thereafter, recover the same from the owner of the vehicle in question, is in accordance with the judgment passed by this Court in Swaran Singh and Laxmi Narain Dhut cases. While so, in our view, the High Court ought not to have interfered with the award passed by the Tribunal directing the first respondent to pay and recover from the owner of...

Doctrine of "Pay And Recover" In Motor Accident Claim Cases Still Holds The Field, Clarifies SC [Read Judgment]

Ashok Kini

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