Case Note & Summary
The Oriental Insurance Company Limited filed three first appeals before the Bombay High Court against the common judgment and award dated 24 March 2009 and the separate award dated 30 March 2009 passed by the Motor Accident Claims Tribunal, Pusad, in MACP Nos. 100 of 2001, 40 of 2004, and 41 of 2004. The Tribunal had held the owner and driver of the offending vehicle liable to pay compensation but directed the insurer to satisfy the awards at the first instance and thereafter recover the amounts from the owner and/or driver. The insurer challenged this direction, contending that it had no statutory or contractual liability to cover the risk, particularly where passengers were carried in a goods vehicle or the driver lacked a valid license. The insurer relied on New India Assurance Co. Ltd. v. Diwakar (2007 ACJ 215 Bom), National Insurance Co. v. Parvathneni (2009 (4) T.A.C. 382 SC), and Bhuwan v. Oriental Insurance Co. (2009) 5 SCC 136 to argue that when the insurer is not liable, it cannot be compelled to pay first and then recover. The claimants and the owner/driver defended the Tribunal’s direction. The High Court, after examining the submissions, analyzed the three-Judge Bench ruling in National Insurance Co. Ltd. v. Swaran Singh (2004) 3 SCC 297, which had extensively considered the pay-and-recover mechanism under the Motor Vehicles Act, 1988. The Court noted that the Apex Court in Swaran Singh categorically held that the insurer can be directed to pay the compensation first and then recover it from the insured, even if it has successfully established a defence under Section 149(2) read with sub-section (7). The High Court observed that this principle had been holding the field for a long time and that the doctrine of stare decisis prevented deviation. The later decisions cited by the insurer did not depart from this settled position. Accordingly, the High Court found no infirmity in the impugned awards and held that no serious prejudice had been caused by the direction requiring the insurer to satisfy the award and then recover the amount along with no-fault liability from the insured by filing execution proceedings and obtaining a certificate under Section 174 of the Act, if necessary, for recovery as arrears of land revenue. The appeals were dismissed, and the amounts deposited by the insurer in the High Court were directed to be transmitted to the MACT for adjustment in execution proceedings.
Headnote
A) Motor Vehicles - Insurance Liability - Pay-and-Recover Principle under Section 149(2) & (7) of the Motor Vehicles Act, 1988 - The High Court held that the insurer may be compelled to satisfy the award first and then recover from the insured, consistent with the ratio in National Insurance Co. Ltd. v. Swaran Singh, (2004) 3 SCC 297, irrespective of whether the risk is covered by the policy. Held that the Tribunal’s direction to pay and recover did not suffer from any infirmity and no serious prejudice resulted, as the insurer could recover the amount from the insured through execution proceedings and a certificate under Section 174 of the Act. (Paras 7-9) B) Precedent - Doctrine of Stare Decisis - Applicability of Swaran Singh - The Court relied on the three-Judge Bench decision in Swaran Singh, which established that the liability of the insurance company to satisfy the decree at the first instance and then recover from the owner or driver has held the field for a long time. Later decisions in Diwakar, Parvathneni, and Bhuwan Singh did not deviate from this principle, and the doctrine of stare decisis prevented the Court from taking a contrary view. Held that the impugned awards were not liable to be interfered with. (Paras 8-9)
Issue of Consideration
Whether the Motor Accident Claims Tribunal erred in directing the insurer to pay compensation to the claimants first and then recover from the owner/driver, despite the insurer's contention that it had no liability under the insurance policy.
Final Decision
All three appeals dismissed; the High Court upheld the MACT’s direction for the insurer to satisfy the awards and then recover from the insured. The deposited amounts were directed to be transmitted to the MACT for adjustment in execution proceedings.
Law Points
- Insurer may be directed to pay compensation first and then recover from insured even if policy does not cover risk
- following Swaran Singh
- doctrine of stare decisis
- recovery as arrears of land revenue under Section 174
