1 2025:CGHC:53713 NAFR HIGH COURT OF CHHATTISGARH AT BILASPUR MAC No. 546 of 2017 1 - The New India Assurance Company Limited Through Its Branch Manager, Branch Office, Kamthi Line, Rajnandgaon, Distt. Rajnandgaon, Chhattisgarh ...............Non-Applicant No.3, Chhattisgarh … Appellant versus 1 - Gulabchand Sharma S/o Shri Bhawarlal Sharma, Aged About 57 Years R/o Fulwari Chowk Motipur Ward No.6, Rajnandgaon, Distt. Rajnandgaon, Chhattisgarh ...............Applicant No.1, Chhattisgarh 2 - Smt. Sohadra Bai W/o Gulabchand, Aged About 45 Years R/o Fulwari Chowk Motipur Ward No.6, Rajnandgaon, Distt. Rajnandgaon, Chhattisgarh ...............Applicant No.2, District : Rajnandgaon, Chhattisgarh 3 - Purushottam Sahu S/o Padam Ram Sahu, Aged About 30 Years R/o Village Jondhra, Tah. And P.S. Dongargaon, Distt. Rajnandgaon, Chhattisgarh .................Non-Applicant No.1, District : Rajnandgaon, Chhattisgarh 4 - M/s Abis Briolor Private Limited, Baldev Bagh, Rajnandgaon, Tah. And Distt. Rajnandgaon, Chhattisgarh .................Non-Applicant No.2, District : Rajnandgaon, Chhattisgarh ... Respondent(s) (Cause title is taken from Case Information System) For Appellant : Mr. Pravesh Sahu, Advocate appearing on behalf of Mr. Dashrath Gupta, Advocate For Respondents : None (Hon'ble Shri Amitendra Kishore Prasad, Judge) Order on Board 03/11/2025 1. This appeal has been filed under Section 173 of the Motor Vehicle Act, 1988, being aggrieved by the Award dated 14.12.2016 passed by the Digitally signed by SHAYNA KADRI 2 learned Ist Additional Motor Accident Claims Tribunal, Rajnandgaon, Distt. - Rajnandgaon (C.G.) in Claim Case No. 185/2014 in the matter of Gulabchand Sharma & another vs. Purushottam Sahu & Others. 2. The averment in this appeal, in brief, is that on the fateful day of 11.05.2010, at about 4:30 a.m., the deceased Rahul Sharma, who was employed as a conductor in a vehicle bearing Registration No. CG- 08L-0161 (hereinafter referred to as “the vehicle”), was on duty and proceeding towards Rajgangpur, Odisha, from Rajnandgaon, along with the driver and other staff members. The journey was being undertaken in the ordinary course of employment and in connection with the regular transport operations of vehicle. It is alleged that while the vehicle was en route to its destination, the respondent no. 3, who was driving the said vehicle at the relevant time, drove it in a rash and negligent manner, without observing traffic norms or exercising proper caution expected of a prudent driver. Owing to such rash and negligent driving, the vehicle lost control and turned turtle (overturned) on the road, resulting in a severe and tragic accident. In the said mishap, the deceased Rahul Sharma, who was performing his duties as a conductor in the vehicle, sustained serious and grievous injuries all over his body. He was immediately shifted to a nearby hospital for medical treatment; however, despite all efforts made by the attending doctors, he succumbed to his injuries during the course of treatment. As a result of the untimely and unfortunate death of Rahul Sharma, his parents, being the legal representatives and dependents, filed a claim petition under Section 163(A) of the Motor Vehicles Act, 1988, seeking compensation to the tune of Rs. 8,26,000/- from the respondents, 3 namely respondent No. 3 (driver of the vehicle), respondent No. 4 (owner of the vehicle), and the Appellant Insurance Company, which was alleged to be the insurer of the offending vehicle at the time of the accident. The claimants contended that the deceased was contributing to the family income, and his death had caused them immense financial and emotional hardship, thereby entitling them to just and proper compensation under the provisions of the Motor Vehicles Act. Upon service of notice, respondent No. 4, the owner of the vehicle, filed his written statement, wherein he denied the material allegations and averments of the claim petition but contended that, in the event of any liability being established, the same was required to be indemnified and satisfied by the appellant Insurance Company, since the vehicle in question was duly insured with the appellant at the relevant time. The owner thus shifted the burden of liability upon the insurer, asserting that the policy of insurance was valid and subsisting on the date of the accident, and therefore, the insurer was under a statutory obligation to compensate the claimants. 3. The Appellant Insurance Company, on its part, filed a detailed written statement, wherein it categorically denied the allegations and disputed the claim in its entirety. The Insurance Company further denied being the insurer of the offending vehicle at the time of the accident and asserted that, even assuming the existence of an insurance policy, the vehicle was being driven in violation of the terms and conditions stipulated under the policy. It was further submitted that the driver was not authorized or competent to drive the said vehicle, and hence, the insurer was not liable to indemnify the insured for any compensation 4 arising out of the accident. On these grounds, the appellant Insurance Company prayed for the dismissal of the claim petition against it. 4. On the basis of the pleadings of the parties, the Learned Motor Accident Claims Tribunal framed the requisite issues for determination and, after conducting a detailed inquiry and evaluation of evidence, both oral and documentary, came to the conclusion that the accident had indeed occurred due to the rash and negligent driving of respondent No. 3, resulting in the death of Rahul Sharma. Consequently, the Tribunal awarded a compensation amount of Rs. 2,66,000/-, along with interest at the rate of 6% per annum from the date of the filing of the application till realization, in favor of respondent Nos. 1 and 2 (the parents of the deceased) and against respondent Nos. 3 and 4 (the driver and owner of the vehicle). However, while holding the driver and owner primarily liable, the Tribunal directed the Appellant Insurance Company to first deposit the awarded compensation amount, with a further direction that the appellant may recover the same from respondent Nos. 3 and 4 in accordance with law. Being aggrieved by the direction and the impugned award of the learned Tribunal, particularly the part which fastens the liability to deposit the compensation upon it despite alleged violations of the policy conditions, the Appellant Insurance Company has preferred the present appeal, challenging the legality, propriety, and correctness of the said award. 5. Learned counsel for the appellant submits that the impugned award dated 14.12.2016, passed by the Learned Ist Additional Motor Accident Claims Tribunal, Rajnandgaon in Claim Case No. 185/2014 5 (Gulabchand Sharma & another vs. Purushottam Sahu & others), is bad in law, contrary to the settled principles governing motor accident claims, and deserves to be set aside. The learned Tribunal, while directing the appellant Assurance Company to “pay and recover,” has failed to appreciate the facts, evidence, and legal provisions in their true perspective, resulting in a grave miscarriage of justice. The learned counsel for appellant submits that the learned Claims Tribunal erred in holding the appellant Insurance Company liable to pay compensation to the claimants, despite clear and cogent evidence on record establishing that there was a fundamental breach of the terms and conditions of the policy. The appellant, by leading reliable and unimpeachable evidence before the Tribunal, successfully proved that on the date and time of the alleged accident, the driver of the offending vehicle (respondent No. 3) was not holding a valid and effective driving license to operate the said vehicle. This fact goes to the very root of the matter. The holding of a valid and effective driving license is a mandatory statutory requirement under the Motor Vehicles Act, 1988, and also a fundamental term of the insurance contract. In the absence of such a license, the insurer cannot be made liable to indemnify the insured for any loss arising out of the use of the vehicle. The Tribunal, despite this categorical proof, erroneously directed the appellant to first pay the compensation and then recover it from the owner and driver. Such a direction, it is submitted, is unsustainable in law. Once a fundamental breach of the policy condition is proved, the insurer must be completely exonerated from liability and cannot be fastened with any obligation to pay, even temporarily. The learned counsel for the 6 appellant further submits that the deceased Rahul Sharma was a minor at the time of the accident. It has been alleged by the claimants that the deceased was employed as a conductor in the offending vehicle. However, the appellant Insurance Company had not received any premium towards coverage of risk for a conductor under the policy in question. The said policy was issued under a limited liability clause, covering only risks for which premiums had been duly paid. Therefore, the risk of a conductor, and particularly a minor conductor, was not covered under the terms of the insurance policy. In the absence of such coverage, the insurer cannot be held responsible for compensating the dependents of the deceased. The Tribunal failed to appreciate that the liability of an insurer is contractual and statutory, and cannot be extended to risks for which no premium or consideration has been paid. 6. It is further submitted by learned counsel for appellant that the deceased was not a third party within the meaning of the Motor Vehicles Act, 1988. The claimants have themselves admitted that the deceased was employed in the vehicle as a conductor. Therefore, the deceased falls within the category of an employee of the owner, not a third party. The principle of “pay and recover” applies only where the claim pertains to a genuine third party who is injured or killed in an accident caused by the insured vehicle. In the instant case, as the deceased was an employee and not a third party, the learned Tribunal erred in extending the “pay and recover” principle. Such a direction is inconsistent with the statutory scheme. It is further contended by the appellant that, as per the provisions of the Indian Contract Act, 1872, 7 the essence of every valid contract is consideration. Where no consideration is paid or agreed upon, the contract becomes void ab initio. In the present case, as no premium was paid for the risk of the conductor, there was no valid consideration for the insurance coverage of that risk. Therefore, the contract, to that extent, cannot be enforced against the insurer. The liability of the appellant Company cannot be extended by implication or by equity where there is no express contractual obligation. The Tribunal, in ignoring this cardinal principle of contract law, has committed an error apparent on the face of the record. In light of the foregoing submissions, the direction of the learned Tribunal requiring the appellant Assurance Company to pay the compensation amount and then recover it from the driver and owner of the vehicle is illegal, arbitrary, and unsustainable. The Tribunal failed to appreciate that once it had recorded findings regarding the absence of a valid driving license and the non-coverage of the risk of conductor under the policy, the appellant ought to have been completely exonerated from any liability. The doctrine of “pay and recover” cannot be invoked mechanically or as a matter of routine; it is applicable only in exceptional cases where third-party interests are involved and the liability of insurer is statutory. The present case does not fall within such parameters. Therefore, for all the reasons stated hereinabove, the impugned award dated 14.12.2016 passed by the learned Tribunal is bad in law, perverse, and contrary to the evidence on record. The direction fastening liability upon the appellant Assurance Company to pay and recover the compensation is illegal and without jurisdiction. The appellant, having been exonerated from liability in view of the 8 fundamental breach of policy conditions and absence of risk coverage, cannot be saddled with any financial burden whatsoever. Hence, it is prayed that this Court may be pleased to set aside the award dated 14/12/2016 passed by Ist Additional Motor Accident Claims Tribunal, Rajnandgaon, District Rajnandgaon (C.G.), in Claim Case No. 185/2014 (Gulabchand Sharma & another vs. Purushottam Sahu & others), insofar as it directs the appellant / Insurance Company to pay the compensation amount and recover the same from the driver and owner of the vehicle, and to hold that the appellant Assurance Company stands exonerated from all liability in the matter, in the interest of justice and equity. 7. 7. I have heard learned counsel for the appellant and perused the record of the claim case carefully. 8. The present appeal has been filed by the Appellant, Insurance Company, being aggrieved by the direction of the learned Tribunal fastening liability upon it to pay the awarded compensation amount to the claimants and thereafter recover the same from the owner and driver of the offending vehicle. The learned Claims Tribunal, after appreciating the pleadings and evaluating both oral and documentary evidence, held that the accident occurred due to the rash and negligent driving of respondent No. 3, resulting in the death of the deceased Rahul Sharma. The Tribunal awarded a compensation amount of Rs. 2,66,000/-, together with interest at 6% per annum from the date of the application till realization, in favour of the claimants and against the driver and owner of the vehicle. However, the Tribunal directed the appellant–Insurance Company to deposit the compensation amount in 9 the first instance and then recover the same from the driver and owner in accordance with law. The Insurance Company, being dissatisfied with this direction of “pay and recover,” has preferred the present appeal, contending primarily that the learned Tribunal has erred in law and in fact by fastening any liability upon it. 9. Upon careful consideration of the rival submissions and a thorough perusal of the record, this Court finds no merit in the contentions advanced on behalf of the appellant–Insurance Company. The Tribunal has recorded a well-reasoned and justified finding based on the material available on record, which does not call for any interference in appellate jurisdiction. 10. The first and foremost contention of learned counsel for appellant is that the driver of the offending vehicle did not possess a valid and effective driving licence at the time of the accident, and hence there was a fundamental breach of the policy conditions. However, a perusal of the record reveals that although the insurer made such an allegation, no conclusive or cogent evidence was adduced to establish that the driver was entirely disqualified or that the licence produced was fake or invalid. The Tribunal, on appreciation of evidence, rightly observed that even if there was an irregularity in the licence, the statutory liability of insurer towards third-party victims remains intact under the beneficial provisions of the Motor Vehicles Act. 11. The Supreme Court in National Insurance Co. Ltd. vs. Swaran Singh & Others, reported in (2004) 3 SCC 297 has categorically held that even if the driver’s licence is found invalid or fake, the insurer must first satisfy the award to protect the rights of the third-party victims, and 10 thereafter recover the same from the insured. “104. It is, therefore, evident from the discussions made hereinbefore that the liability of the insurance company to satisfy the decree at the first instance and to recover the awarded amount from the owner or driver thereof has been holding the field for a long time. 110. The summary of our findings to the various issues as raised in these petitions is as follows: xxx xxx xxx xxx xxx xxx (iii) The breach of policy condition e.g. disqualification of the driver or invalid driving licence of the driver, as contained in sub-section (2)(a)(ii) of Section 149, has to be proved to have been committed by the insured for avoiding liability by the insurer. Mere absence, fake or invalid driving licence or disqualification of the driver for driving at the relevant time, are not in themselves defences available to the insurer against either the insured or the third parties. To avoid its liability towards the insured, the insurer has to prove that the insured was guilty of negligence and failed to exercise reasonable care in the matter of fulfilling the condition of the policy regarding use of vehicles by a duly licensed driver or one who was not disqualified to drive at the relevant time. xxx xxx xxx xxx xxx xxx (vi) Even where the insurer is able to prove breach on the part of the insured concerning the policy condition regarding holding of a valid licence by the driver or his qualification to drive during the relevant period, the insurer would not be allowed to 11 avoid its liability towards the insured unless the said breach or breaches on the condition of driving licence is/are so fundamental as are found to have contributed to the cause of the accident. The Tribunals in interpreting the policy conditions would apply “the rule of main purpose” and the concept of “fundamental breach” to allow defences available to the insurer under Section 149(2) of the Act.” 12. The direction of Tribunalfor “pay and recover” is thus in consonance with the settled legal position and cannot be faulted. The second contention of the appellant that the deceased was a “minor” conductor and that no premium was paid for such risk is also untenable. The claim petition was filed under Section 163-A of the Motor Vehicles Act, which provides for compensation on a “no-fault basis,” and the liability under this provision is statutory in nature. Once it is established that the vehicle was duly insured and the accident arose out of the use of the insured vehicle, the insurer cannot evade its liability on technical or contractual grounds, particularly when the claimants are dependents of the deceased and fall within the protective umbrella of the statute. The object of the Motor Vehicles Act being social welfare legislation, the provisions must be construed liberally in favour of the victims rather than in favour of the insurer. 13. The next argument raised by learned counsel for the appellant that the deceased was not a third party, and therefore, the “pay and recover” principle was wrongly applied, also fails to persuade this Court. In numerous decisions, including United India Insurance Co. Ltd. vs. K.M. Poonam & Others, reported in (2015) 15 SCC 297 has held thus : 12 “27. The aforesaid issue once again surfaced in National Insurance Co. Ltd. v. Swaran Singh [National Insurance Co. Ltd. v. Swaran Singh, (2004) 3 SCC 297 : 2004 SCC (Cri) 733] where the provisions of Section 149 and also Section 147 fell for consideration. While considering the liability cast upon an insurer under Section 149(1) and the limited grounds of liability in the insurance contract and third-party claims as envisaged in the proviso to Section 149(4), this Court also had occasion to refer to Section 147 relating to the statutory liability and any contractual liability under the insurance contract and whether the contractual exclusion of liability in respect of third-party claim was permissible. The three-Judge Bench held that such a condition in the insurance policy, whereby the right of the third party is taken away would be void and that except under the situation provided for by Section 149(2)(b), the insurer would not be entitled to avoid its statutory liability, since its rights of recovery were preserved against the insured under the proviso to Section 149(4) of the 1988 Act.” 14. In view of the above legal pronouncement, the direction to “pay and recover” thus strikes a balance between protecting the rights of victims and preserving the right of insurer of recovery. As regards the contention that the contract of insurance becomes void ab initio in the absence of consideration (premium) for the risk of conductor, the same is equally misplaced. The validity of the insurance policy as a whole cannot be questioned once the insurer has accepted the premium for third-party liability. Even if specific risks are not separately covered, the statutory third-party liability under Section 147 of the Motor Vehicles Act remains operative and binding upon the insurer. The Tribunal has 13 rightly observed that the liability of insurer in such cases is not merely contractual but statutory, and any attempt to dilute it would defeat the very purpose of the Act. Therefore, upon a holistic appraisal of the evidence and the law governing the field, this Court is of the considered opinion that the learned Tribunal has committed no error of fact or law in directing the appellant–Insurance Company to pay the awarded compensation to the claimants and to recover the same from the driver and owner of the vehicle. 15. The finding is well supported by the ratio laid down in Swaran Singh (supra) and several subsequent pronouncements affirming the principle that the insurer cannot be absolved of its primary statutory obligation towards third-party victims. The quantum of compensation awarded by the Tribunal, i.e., Rs. 2,66,000/- with interest at 6% per annum, is also found to be just, fair, and reasonable, having been calculated in accordance with the structured formula prescribed under the Second Schedule of the Act. No material has been brought on record by the appellant to demonstrate that the award suffers from any illegality, perversity, or arbitrariness. 16. In light of the foregoing discussion, this Court finds no merit in the appeal. The direction issued by the learned Tribunal for the appellant– Insurance Company to pay the compensation amount and thereafter recover the same from the driver and owner of the offending vehicle is perfectly in accordance with law and the principles of justice, equity, and good conscience. 17. Accordingly, the appeal stands dismissed. 14 18. The impugned award dated 14.12.2016, passed by the learned Ist Additional Motor Accident Claims Tribunal, Rajnandgaon, in Claim Case No. 185/2014, is hereby affirmed. The amount, if already deposited by the appellant, shall be disbursed to the claimants in accordance with the terms of the award. No order as to costs. Sd/- (Amitendra Kishore Prasad) JUDGE Shayna