Case Note & Summary
The case arises from a motor accident claim petition filed by the original claimant (respondent No. 3) who was travelling in a Maruti Eeco Car (No. GJ-14-AK-4164) on 03.08.2018. The car met with an accident when a heavy vehicle coming from the opposite direction with full lights caused the driver to lose control and dash against a tree. The claimant sustained injuries and filed MACP No.114 of 2020 before the Motor Accident Claims Tribunal (Auxi.) Savarkundla. The Tribunal awarded compensation and held the Insurance Company (appellant) liable. The Insurance Company appealed, contending that the vehicle was being used for hire and reward, which was a fundamental breach of the insurance policy. The appellant argued that the claimant was a fare-paying passenger, as evident from the FIR and police papers, and that the Tribunal ought to have exonerated the insurer or at least directed pay and recover. The respondent-claimant opposed the appeal. The High Court, after hearing the parties, allowed the appeal in part. It held that the use of the vehicle for hire was a breach of policy conditions, and the Tribunal should have directed the insurer to pay the award and recover the amount from the owner. The Court modified the award accordingly, directing the appellant to pay the compensation and then recover it from the owner of the vehicle.
Headnote
A) Motor Accident Claims - Insurance Policy - Fundamental Breach - Use of Vehicle for Hire - The appellant-insurer contended that the vehicle was used as a taxi for hire, which was a fundamental breach of the policy. The Court held that the Tribunal erred in not considering this breach and directed the insurer to pay the award amount and recover from the owner. (Paras 1-4)
B) Motor Accident Claims - Pay and Recover - Liability of Owner - The Court, relying on New India Assurance Co. Ltd. v. Jaysukhlal Manganlal Doshi, 2013 (93) GLR 2283, held that where there is a breach of policy conditions, the insurer must pay the award and then recover from the owner. (Para 4)
Issue of Consideration
Whether the Insurance Company is liable to indemnify the owner when the insured vehicle was used for hire and reward in breach of policy conditions, and whether the Tribunal ought to have directed pay and recover.
Final Decision
The appeal is allowed in part. The judgment and award of the Tribunal is modified to the extent that the appellant-insurer shall pay the award amount and then recover the same from the owner of the vehicle.
Law Points
- Fundamental breach of insurance policy
- Pay and recover principle
- Use of private vehicle for hire and reward
- Motor accident claim
- Liability of insurer
Case Details
2026 LawText (GUJ) (01) 308
R/FIRST APPEAL NO. 4247 of 2023
MASUMI V NANAVATY, VIBHUTI NANAVATI for Appellant; HEMAL SHAH for Defendant No. 3
HDFC ERGO GENERAL INSURANCE COMPANY LIMITED
SARFARAJBHAI SULEMANBHAI KHOKHAR & ORS.
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Nature of Litigation
First appeal against judgment and award of Motor Accident Claims Tribunal in a claim petition for compensation for injuries sustained in a motor vehicle accident.
Remedy Sought
The appellant-insurer sought exoneration from liability or in the alternative, a direction for pay and recover from the owner due to breach of policy conditions.
Filing Reason
The appellant contended that the vehicle was used for hire and reward, which was a fundamental breach of the insurance policy, and the Tribunal erred in not considering this.
Previous Decisions
The Motor Accident Claims Tribunal (Auxi.) Savarkundla passed judgment and award dated 02.03.2023 in MACP No.114 of 2020, holding the insurer liable.
Issues
Whether the use of the insured vehicle for hire and reward constitutes a fundamental breach of the insurance policy?
Whether the Tribunal ought to have directed pay and recover instead of exonerating the insurer?
Submissions/Arguments
Appellant argued that the claimant was a fare-paying passenger, as evident from FIR and police papers, and the Tribunal failed to consider this breach.
Appellant relied on New India Assurance Co. Ltd. v. Jaysukhlal Manganlal Doshi to submit that the insurer should be exonerated or at least granted pay and recover.
Ratio Decidendi
When a vehicle insured as a private car is used for carrying passengers for hire, it constitutes a fundamental breach of the policy conditions. The insurer is liable to pay the award amount to the claimant but is entitled to recover the same from the owner of the vehicle.
Judgment Excerpts
Learned advocate for the appellant has submitted that the learned Tribunal has not considered the fact that the original claimant–respondent No. 3 was travelling in the Maruti Eeco Car and that the said car was being used for hire and reward, which fact is admitted and undisputed and clearly emerges from the police papers.
At the least, the Tribunal ought to have passed an order of ‘pay and recover’ and fastened liability upon the owner of the vehicle.
Procedural History
The original claimant filed MACP No.114 of 2020 (Old MACP No.162 of 2018) before the Motor Accident Claims Tribunal (Auxi.) Savarkundla. The Tribunal passed judgment and award dated 02.03.2023. The Insurance Company preferred the present first appeal before the High Court of Gujarat.
Acts & Sections
- Motor Vehicles Act, 1988:
