Vehicle Insurance Exemption U/S 146 MV Act Does Not Free Government Authorities From Paying Accident Compensation: Delhi High Court

The Court directed the Municipal Corporation of Delhi (MCD) to pay the entire compensation of ₹22.05 lakh, with accrued interest, awarded to the legal heirs of a motorcyclist killed by an MCD truck.

The Court was hearing an appeal filed by the truck driver against a Motor Accident Claims Tribunal order fastening joint and several liability upon him and the MCD under the Motor Vehicles Act, 1988.

A Bench of Justice Anish Dayal observed: “Therefore, any vehicle belonging to /owned by Central or State government or local authority, which takes the benefit of the exemption under Section 146 of MV Act, cannot wash its hands away from the liability to pay compensation to a claimant, who has been injured or died as a result of an accident involving a vehicle maintained by them. Even if the fund is not maintained for any reason or is not being established, that cannot be to the disadvantage of the claimant who has suffered on account of the accident.”

The Court added: “The MCD’s submission that the driver should pay 50% of the compensation is inconsistent with the principle of vicarious liability and the requirement that such liability be met through insurance or a fund established by the authority under Section 146 (2) of MV Act and the Central Motor Vehicle Rules.”

Advocate Shafiq Khan appeared for the appellant-driver. Advocate Manoj Kumar appeared for the claimants, while Standing Counsel Gaganmeet Singh Sachdeva appeared for the MCD.

Background

The accident occurred in December 2014 when an MCD truck driven by the appellant hit the motorcycle of a 26-year-old service technician from behind. The motorcyclist suffered fatal injuries.

The Tribunal found that the death resulted from the appellant’s rash and negligent driving. It awarded the deceased’s legal heirs ₹22.05 lakh with interest at 9% per annum and held the driver and MCD jointly and severally liable.

The driver challenged only the apportionment of liability. He argued that the MCD owned the truck, employed him and had assigned him to drive it during his employment. He therefore submitted that the MCD should pay the entire award under the principle of vicarious liability and the statutory scheme governing government and local-authority vehicles exempted from compulsory insurance.

The MCD did not dispute the fund-related aspect of Section 146 but contended that it should be required to pay only 50% of the compensation, leaving the negligent driver liable for the remaining half.

Court’s Observations

Insurance Exemption Substitutes A Statutory Fund For An Insurer

The Court observed that the Motor Vehicles Act is beneficial legislation and that its provisions must be construed from the perspective of protecting accident victims. It stated that compulsory third-party insurance under Section 146(1) was enacted for that purpose.

The Court explained that an exemption available to specified government and local-authority vehicles was not intended to leave accident victims without compensation. Instead, the requirement of establishing a fund transferred responsibility for satisfying third-party liabilities from an insurer to the exempted authority itself.

The Court stated: “The exemption under Section 146 (2) was for government vehicles, was not to leave a claimant high and dry and without any compensation for having been injured or died as a result of an accident with a government vehicle. Quite to the contrary, the mandate that a fund would be established, effectively transfers the responsibility of shoring up the liability from an insurance company to the organization itself.”

The Bench referred to Rules 148 and 151 to 158 of the Central Motor Vehicles Rules, 1989. It observed that these provisions contemplate records for uninsured exempted vehicles and prescribe the establishment, replenishment, investment and administration of a fund for meeting liabilities arising from their use.

The Court held: “The statutory framework thus envisages that exemption from compulsory insurance is accompanied by an institutional mechanism for meeting third-party liabilities arising from the use of such vehicles.”

MCD Was Vicariously Liable For Its Employee’s Negligence

The Court noted that the driver’s negligence was undisputed. It was also admitted that he was an MCD employee, that the truck belonged to the municipal authority and that it was being driven during his employment.

The driver had testified that he was assigned the truck after making the necessary entry in the vehicle movement register. The Court noted that the MCD did not cross-examine him on this assertion. The MCD’s affidavit also admitted that the uninsured truck was being used for official purposes.

Referring to Oriental Insurance Co. Ltd. v. Meena Variyal (2007), the Court observed that although the driver bears primary liability for an accident caused by his negligence, the owner becomes vicariously liable when the driver acts during his employment. That liability is ordinarily indemnified by an insurer.

The Bench also considered State of Rajasthan v. Smt. Shekhu (2004), M.C.D. v. Raj Kishore Tiwari (2008), State of Maharashtra v. Kanchanmala Vijaysing Shirke (1995) and State of Rajasthan v. Vidhyawati (1962). It observed that these decisions recognised an employer’s liability for negligent acts committed by an employee in the course of employment and rejected immunity for the State in such circumstances.

The Court stated: “In these circumstances, the MCD’s vicarious liability as owner of the vehicle cannot be displaced or questioned.”

Failure To Maintain Fund Cannot Defeat Victims’ Rights

The Court held that the exemption from compulsory insurance could not be construed as immunity from satisfying a compensation award. It further observed that the absence of insurance could not shift the entire burden to an employee-driver where the requirements of the owner’s vicarious liability were established.

The Court stated: “Any failure to establish or adequately maintain the fund contemplated under the applicable statutory provisions cannot, in itself, be permitted to defeat the rights of third-party victims or their legal representatives.”

The Bench held that establishing and maintaining an adequately funded pool to satisfy compensation awards was MCD’s statutory duty. It found that non-compliance with that obligation could not frustrate the purpose of the legislation.

The Court emphasised: “In no circumstances can an injured claimant, or the legal representatives of a deceased victim, be left without compensation for the harm suffered in an accident involving a vehicle owned by a government entity. In a welfare state, the obligation of the State and its authorities, particularly government authorities, to ensure that compensation is paid, fully and promptly, is all the more compelling.”

Conclusion

The Court allowed the driver’s appeal and directed the MCD to pay the entire compensation, together with accrued interest, within four weeks. If any part had already been paid, the MCD was directed to pay the balance within the same period.

The Court set aside the execution proceedings against the driver and directed that they should not continue. It nevertheless left the MCD free to take action against him under the applicable service and conduct rules. The pending application was rendered infructuous.

Cause Title: Rohtash Kumar v. Sangeeta Verma & Others (Neutral Citation: 2026:DHC:9208)

Appearances

Appellant: Advocates Shafiq Khan, Vikasdeep Sharma, Mukesh Kumar, Abhishek Salwan and Tanya Sharma

Respondents: Advocate Manoj Kumar; Standing Counsel Gaganmeet Singh Sachdeva

Click here to read/download Judgment