Denying Compensation To Victims Or Dependents Simply Because Accident Took Place Outside Purview Of Insurance Policy Offensive To Sense Of Justice: Supreme Court

The Appeals before the Apex Court were directed against the final judgment of the Karnataka High Court involving a Motor Accident Claim Petition.

The Division Bench of Justice Sanjay Karol and Justice Prashant Kumar Mishra held, “The purpose of an insurance policy in the present context is to shield the owner/operator from direct liability when such an unforeseen/unfortunate incident takes place. To deny the victim/dependents of the victim compensation simply because the accident took place outside the bounds of the permit and, therefore, is outside the purview of the insurance policy, would be offensive to the sense of justice, for the accident itself is for no fault of his. Then, the Insurance Company most certainly ought to pay.”

Senior Advocate Shanthakumar V. Mahale represented the Appellant, while AOR T. Mahipal represented the Respondent.

Factual Background

The incident dates back to the year 2014, when the deceased, who was riding on his motorcycle, was hit by the offending vehicle. He died on the spot. The Appellants (dependents of the deceased) filed a claim petition before the Tribunal seeking compensation to the tune of Rs 50 lakh, submitting that the deceased was the only earning member of the family, running a business of Shamiyana Centre and a Ration Shop and earning up to Rs 15,000 per month. The Tribunal awarded the Appellants an amount of Rs 18,86,000 along with interest @ 6% p.a, taking the notional income of the deceased as Rs. 8,000 per month.

The Claimant-Appellant filed an appeal, and the Insurance Company also challenged the Tribunal’s order on the ground of violation by the insurer of the conditions enumerated in the policy. It was the Insurance Company’s case that the route which was undertaken by the bus driver was not covered by the permit issued, and that the driver of the bus was not authorised to enter Channapatna City. This showed that there was a deviation in the route, and it was in violation of the permit. The High Court granted compensation of Rs 31,84,000. The Company was also granted the right to recover the amount from the owner of the bus, i.e, the Appellant. It was in such circumstances that the appeal came to be filed before the Apex Court.

Reasoning

The Bench found that the offending vehicle did not have the permit to enter Channapatna City, where the accident took place, thereby deviating from the terms of the permit.

Reference was also made to the judgment in New India Assurance Co. v. Kamla (2004) which the insurer was allowed to recover the amount which the insurer was directed to pay to the claimant, from the insured person. It was noticed that in M/s Chatha Service Station v.Lalmati Devi & Ors (2025), it was held that when a vehicle involved in an accident is found to be carrying certain goods which it was not authorized to as per law (in the instant case hazardous goods within the meaning of Rule 9 of Central Motor Vehicles Rules, 1989) the insurance company while would be required to compensate the victim of the accident, it shall be entitled to recover the amount so paid from the holder of the insurance policy.

The Bench was of the view that when an Insurance Company takes on a policy and accepts payments of premium in pursuance thereof, it agrees to do so within certain bounds. The contract lays down the four corners within which such an insurance policy would operate. “If that is the case, to expect the insurer to pay compensation to a third party, which is clearly outside the bounds of the said agreement would be unfair. Balancing the need for payment of compensation to the victim vis-à-vis the interests of the insurer, the order of the High Court applying the pay and recover principle, in our considered view, is entirely justified and requires no interference”, it held.

Thus, the Bench dismissed the appeal.

Cause Title: K. Nagendra v. The New India Insurance Co. Ltd. (Neutral Citation: 2025 INSC 1270)

Appearance

Appellant: Senior Advocate Shanthakumar V. Mahale, Advocates Shreyas Mahale, Madhavendra Singh, Tusar Kanta Swain, Jahanvi Malik, Anuradha Bhat, AOR Harisha S.R.

Respondent: AOR T. Mahipal, Advocate Rohit Kumar Sinha

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