The Himachal Pradesh High Court has held that a transport vehicle being operated without a valid permit and fitness certificate amounts to a violation of the terms and conditions of the insurance policy.

The Court accordingly held that the insurer could not be fastened with the ultimate liability for compensation, while applying the “pay and recover” principle to direct the Insurance Company to first satisfy the award and recover the amount from the vehicle owner.

Justice Sushil Kukreja remarked that: “Since the offending vehicle was not having permit and fitness certificate on the date of the accident, therefore, the terms and conditions of the insurance policy were violated. Therefore, the tribunal below has erroneously fastened the liability on the appellant/Insurance Company.”

Background:

The case arose from a November 11, 2013 road accident in which Bhupinder, aged 24, died after the Tata Sumo he was travelling in went off the road and rolled into a gorge near Kowaji Mor, Chamba. His legal representatives filed a claim petition seeking ₹15 lakh in compensation, alleging rash and negligent driving.

The Motor Accident Claims Tribunal awarded ₹8,08,200 with 7.5% interest and directed the Insurance Company to indemnify the award. Aggrieved, the insurer approached the Himachal Pradesh High Court, contending that the vehicle was being operated without a valid permit and fitness certificate, in breach of the insurance policy.

The High Court found that the offending vehicle was a transport vehicle and, on the date of the accident, was being operated without a valid permit.

The Court further noted that the vehicle's fitness certificate had expired in 2005, while the accident occurred in 2013. Referring to Sections 39 and 56 of the Motor Vehicles Act, it held that a transport vehicle without a valid fitness certificate is deemed to be an unregistered vehicle and cannot legally be plied on the road.

Accordingly, the Court held that the absence of both the permit and fitness certificate constituted a fundamental breach of the insurance policy. While the owner was ultimately liable to pay the compensation, the insurer was directed to first satisfy the award and recover the amount from the owner.

Case Name: Oriental Insurance Co. Ltd. v/s Jamana & Ors.

Case No.: FAO(MV) No.67 of 2017

Date of Decision: 02.09.2026

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