Damages For Death Of Fare Paying Passenger Of Goods Carriage Not To Be Indemnified By Insurer: Supreme Court Upholds Order Setting Aside Pay & Recover Direction

The issue before the Apex Court related to the question of ‘pay and recover’, where the claimants had not received the award amounts.

The Division Bench of Justice K. Vinod Chandran and Justice N. V. Anjaria held, “This is a case in which there was a fundamental breach noticed and the deceased claimant, being a person who travelled in the goods carriage after paying fare, the damages for his death was not entitled to be indemnified by the insurer. There was no amount deposited or paid by the insurance company. In the above circumstances, we find absolutely no reason to interfere with the order of the High Court, especially, when it was passed before Satpal Singh’s case (supra) which stood overruled in Asha Rani (supra). Shamanna (supra) was a case in which the driver did not have a valid driving licence at the time of the accident in which the pay and recover direction was issued, relying on the decision in National Insurance Co. Ltd. v. Swaran Singh and Others.”

Advocate Mohan Raj represented the Appellant, while Senior Advocate Joy Basu represented the Respondent.

Factual Background

The Tribunal made the award after computing the compensation for the death of the husband of the first petitioner and mulcted the liability on the insurance company, brushing aside the contention that the insured vehicle was a goods vehicle, and the deceased was a travelling passenger on a fare. An appeal was filed before the High Court by the insurance company, which resulted in the impugned judgment, which assailed both the quantum and the liability to indemnify the insured. The quantum as awarded by the Tribunal was confirmed by the High Court. However, the pay and recovery directed by the Tribunal was set aside.

Arguments

The Counsel appearing for the insurance company pointed out that the earlier view regarding a third-party coverage to a goods vehicle, including the gratuitous passenger, was reversed by the Apex Court in New India Assurance Co. Ltd. v. Asha Rani (2003). It was the company’s case that there was a clear admission that the deceased had travelled in a vehicle on payment of fare.

Reasoning

The Bench took note of the fact that one of the witnesses of the claimants, who was also an eyewitness stated unequivocally before the Tribunal that while the deceased and others were standing at the bus stand, the offending vehicle, which was a three-wheeler, came to the spot and the deceased and others travelled in it as passengers after paying fare. “The deposition clearly absolves the liability of the insurance company to indemnify the owner. The goods vehicle is not allowed to carry passengers, unless he is the owner of the goods carried therein or his authorised representative”, it stated.

Reference was made to the judgment in Manager, National Insurance Company Ltd. v. Saju P. Paul and Anr. (2013), which indicated that the injured/claimant was travelling in a vehicle as a spare driver, as contended by the claimant himself. The claimant was stated to be the driver of another vehicle of the owner, and a spare driver was not covered under a third-party insurance policy, which along with the third-party coverage included only the driver and cleaner of the vehicle. It was further noticed that the Tribunal and the High Court had allowed the compensation based on New India Assurance Company v. Satpal Singh and Others (2004) and the measure of pay and recover was adopted in the said case.

The Bench thereafter referred to National Insurance Company Limited v. Kaushalaya Devi and Others (2008), which was a case in which an identical condition of a gratuitous passenger being carried in a good carriage vehicle had resulted in the liability being mulcted on the owner and the insurer was absolved of its liability to indemnify. Therein, it was directed that the amount deposited by the insurer if withdrawn, it would be recovered from the owner, and if not returned, it would be refunded to the insurance company, and the claimants would be entitled to proceed against the owner for recovery of the award amounts.

Considering that there was a fundamental breach and holding that the damages for the death were not entitled to be indemnified by the insurer, the Bench dismissed the Special Leave Petition.

Cause Title: Amudhavalli & Ors. v. HDFC Ergo General Insurance Company Ltd. (Neutral Citation: 2025 INSC 1219)

Appearance

Appellant: AOR Nikhil Jain, Advocate Divya Jain

Respondent: Advocate Atul Nigam, AOR Priya Puri, Advocates Tanvi Nigam, Sachin Dubey, Riya Dogra, Lubhanshi Tanwar

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