Award of Compensation Under The Motor Vehicles Act, 1988: Guiding Principles For Motor Accidents Claims Tribunals

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HIMACHAL PRADESH JUDICIAL ACADEMY

AWARD OF COMPENSATION UNDER THE MOTOR VEHICLES ACT, 1988


GUIDING PRINCIPLES FOR MOTOR ACCIDENTS CLAIMS TRIBUNALS

By Justice Deepak Gupta 


An Overview
Under Common Law there was no right to claim damages in case of death. Right
to claim damages was however always recognized in case of personal injury. After the advent of
the rail and road transport, the Fatal Accidents Act of 1846 was introduced in England and in
case of death due to negligence the tortfeaser was made liable to pay compensation to certain
relatives. Over a period of time, the law further developed and the Fatal Accidents Act was
introduced in India in 1855. The Motor Vehicles Act, 1939 was enacted to deal specifically with
accidents arising out of the use of Motor Vehicles. The Motor Vehicles Act, 1988 was enacted
to consolidate and amend the law relating to accidents arising from motor vehicles. When a law
is enacted to consolidate and amend the law, the Legislature not only takes into consideration the
law as it was existing but also the law which was prevailing prior thereto. 1 This Act further aims
at regularizing the use of Motor Vehicles and to compensate victims who are injured or died in
accident and family members and dependants of the deceased victims. This Act has been further
amended in the year 1994.
It is well settled that in case of motor accident claims, an endeavor is made to put
the claimants in the pre-accidental position. The damages to be awarded are to be adequate in
terms of money so that the injured / claimants are put in the same position had they not
suffered the loss on account of wrong of the respondent, though, no amount of compensation can
restore the loss of limb or experience of pain or loss of life.
Fault liability
The person who brings the petition for compensation, must show that the respondent was
negligent. For a person to be legally responsible for his action, it is essential to have evidence
that he is at fault. For the purpose of such an action, although, there is no statutory definition of
negligence, ordinarily, it would mean omission of duty caused either by omission to do
something which a reasonable man guided upon those considerations, who ordinarily by reason
of conduct of human affairs would do or be obligated to, or by doing something which a
reasonable or prudent man would not do.7
In Rathnashalvan v. State of Karnataka,2 the Supreme Court defined „rashness‟ as
follows :-
"Rashness" consists in hazarding a dangerous or wanton act with the knowledge that it is
so, and that it may cause injury. The criminality lies in such a case in running the risk of
doing such an act with recklessness or indifference as to the consequences."

Judge, High Court of Himachal Pradesh.
1
Machindranath Kernath Kasar Vs. D.S. Mylarappa, (2008) 13 SCC 198.
2
AIR 2007 SC 1064.

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HIMACHAL PRADESH JUDICIAL ACADEMY

In State of Karnataka v. Muralidhar,3 the Supreme Court defined word „negligence‟ as


follows :
"Negligence means omission to do some-thing with reasonable and prudent means
granted by the consideration which ordinarily regulate human affairs or doing something
which prudent and a reasonable means guided by similar considerations would not do."
Who Can Be The Claimants
In Injury Cases, it is the injured, who is the claimant. In Death Cases, the legal heirs of
the deceased are claimants. Those who are not dependants but are the legal heirs are also entitled
to compensation. 4 But the Legal Representative of a person who is himself guilty of rash and
negligent driving, cannot claim compensation.5

It has however been held in Sarla Verma vs. Delhi Transport Corporation 6, as under:
“ Further, subject to evidence to the contrary, the father is likely to have his own
income and will not be considered as a dependant and the mother alone will be
considered as a dependent. In the absence of evidence to the contrary, brothers and
sisters will not be considered as dependents, because they will either be independent
and earning, or married, or be dependant on the father. Thus even if the deceased is
survived by parents and siblings, only the mother would be considered to be a
dependant……..”
In view of the judgment of Supreme Court in Manjuri Bera vs. Oriental Insurance
Company 7, even the brothers or father would be entitled to the compensation under section 140
of Motor Vehicles Act, because the liability under section 140 of the Motor Vehicles Act does
not cease because there is absence of dependency. But an appeal filed by the injured- claimants
for personal injuries cannot be continued by his legal heirs.8
Assessment of Compensation
Life cannot be valued. Similarly no human being can put any monetary value of his limb
or of any other human being. How does one assess the value of the loss of all faculties when
some victim of an accident loses his mental faculties and lives in vegetative state. The courts can
only grant compensation for the pecuniary and monetary loss caused and some other expenses,
but no court can even attempt to grant compensation for loss of life or limb. Mainly pecuniary
loss has to be assessed. Nominal damages for funeral expenses, loss of consortium and

3
AIR 2009 SC 1621.
4
See: The National Insurance Co. Ltd, vs. Budh Ram FAO 383 of 2005, Decided on 31/8/11 and Supla Devi vs. Ramesh
kumar, (2006) 2 Shim. LC 153 (on LRs)..
5
See : Oriental Insurance Co. Ltd. Vs. Raji Devi, (2008) 5 SCC 736 and FAO No. 49 of 2009, decided on 4/07/2011, titled as
New India Insurance Co. Ltd. vs. Smt. Sarita Devi .
6
(2009) 6 S.C.C. 121.
7
(2007) 10 S.C.C. 643.
8
See : Smt. Ram Ashari vs. H.R.T.C, 2005 (1) Sim LC 359.

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HIMACHAL PRADESH JUDICIAL ACADEMY

conventional damages. Long expectation of life is connected with earning capacity.9 In its very
nature whenever a Tribunal or a Court is required to fix the amount of compensation in cases of
accident, it involves some guess work, some hypothetical consideration, some amount of
sympathy linked with the nature of the disability caused.10
Just Compensation
The Tribunal has power to award the compensation above the amount
claimed, so as to award compensation which was just.11 In this regard the following
observations of the Supreme Court in State of Haryana vs. Jasbir Kaur12, are worth noting:-
"7. It has to be kept in view that the Tribunal constituted under the Act as provided in
Section 168 is required to make an award determining the amount of compensation which
is to be in the real sense "damages" which in turn appears to it to be "just and
reasonable". It has to be borne in mind that compensation for loss of limbs or life can
hardly be weighed in golden scales. But at the same time it has to be borne in mind that
the compensation is not expected to be a windfall for the victim. Statutory provisions
clearly indicate that the compensation must be "just" and it cannot be a bonanza; not a
source of profit; but the same should not be a pittance. The courts and tribunals have a
duty to weigh the various factors and quantify the amount of compensation, which should
be just. What would be 'just" compensation is a vexed question. There can be no golden
rule applicable to all cases for measuring the value of human life or a limb. Measure of
damages cannot be arrived at by precise mathematical calculations. It would depend upon
the particular facts and circumstances, and attending peculiar or special features, if any.
Every method or mode adopted for assessing compensation has to be considered in the
background of 'just" compensation which is the pivotal consideration. Though by use of
the expression "which appears to it to be just" a wide discretion is vested in the Tribunal,
the determination has to be rational, to be done by a judicious approach and not the
outcome of whims, wild guesses and arbitrariness. The expression 'just" denotes
equitability, fairness and reasonableness, and non-arbitrary. if it is not so it cannot be just.
(See Helen C. Rebello v. Maharashtra SRTC (1999(1) SCC 90)”
It has been held by Supreme Court in Yadava Kumar Vs. Divisional Manager National
Insurance Co. Ltd. 13 as under:
“14. While assessing compensation in accident cases, the High Court or the
Tribunal must take a reasonably compassionate view of things. It cannot be
disputed that the appellant being a painter has to earn his livelihood by virtue of
physical work. The nature of injuries which he admittedly suffered, and about
which the evidence of PW-2 is quite adequate, amply demonstrates that carrying
those injuries he is bound to suffer loss of earning capacity as a painter and a
consequential loss of income is the natural outcome.

9
See: B.T Krishnappa vs. Divisional Manager,Uunited Insurance Company Ltd. , (2010) 12 S C C 246 and Leela Gupta vs.
State of Uttar Pradesh , (2010) 12 SCC 37.
10
R. D. Hattangadi vs. Pest Control (India) Pvt. Ltd., (1995) 1 SCC 551.
11
See : Municipal Corporation of Greater Bombay vs. Kisan Gangaram, (2009) 16 SCC 259.
12
(2003) 7 S.C.C. 484.
13
(2010) 10 SCC 341. See also: New India Assurance Co.Ltd. vs. Yogesh Devi, (2012) 3 SCC 613.

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15. It goes without saying that in matters of determination of compensation both


the Tribunal and the Court are statutorily charged with a responsibility of fixing a
`just compensation'.
It is obviously true that determination of a just compensation cannot be equated to
a bonanza. At the same time the concept of `just compensation' obviously
suggests application of fair and equitable principles and a reasonable approach on
the part of the Tribunals and Courts. This reasonableness on the part of the
Tribunal and Court must be on a large peripheral field. Both the Courts and
Tribunals in the matter of this exercise should be guided by principles of good
conscience so that the ultimate result become just and equitable (See Mrs. Helen
C. Rebello and others Vs. Maharashtra State Road Transport Corpn. and another -
AIR 1998 SC 3191).
16. This Court also held that in the determination of the quantum of
compensation, the Court must be liberal and not niggardly in as much as in a free
country law must value life and limb on a generous scale (See Hardeo Kaur and
others Vs. Rajasthan State Transport Corporation and another - (1992) 2 SCC
567).
17. The High Court and the Tribunal must realize that there is a distinction
between compensation and damage. The expression compensation may include a
claim for damage but compensation is more comprehensive. Normally damages
are given for an injury which is suffered, whereas compensation stands on a
slightly higher footing. It is given for the atonement of injury caused and the
intention behind grant of compensation is to put back the injured party as far as
possible in the same position, as if the injury has not taken place, by way of grant
of pecuniary relief. Thus, in the matter of computation of compensation, the
approach will be slightly more broad based than what is done in the matter of
assessment of damages. At the same time it is true that there cannot be any rigid
or mathematical precision in the matter of determination of compensation.”

Principles to Determine Compensation in Death Cases


The work of the Tribunal has been made some what easy by the recent judgment of the
Apex Court in Sarla Verma vs. Delhi Transport Corporation 14, wherein the following factors
have to be considered by the Tribunal while awarding compensation:
Step 1 (ASCERTAINING THE MULTIPLICAND )‫‏‬
The income of the deceased per annum should be determined. Out of the said income a
deduction is to be made in regard to the amount which the deceased would have spent on himself
by way of personal and living expenses. The balance which is to be considered to be the
contribution to the dependant family, constitutes the multiplicand.

14
(2009) 6 SCC 121.

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HIMACHAL PRADESH JUDICIAL ACADEMY

Step 2 (ASCERTAINING THE MULTIPLIER )‫‏‬

Having regard to the age of deceased and period of active career, the appropriate multiplier
should be selected.
Step 3 (ACTUAL CALCULATION )‫‏‬
i). The annual contribution to the family (multiplicand) when multiplied by such
multiplier gives the “loss of dependency to the family.”
ii). Thereafter, conventional amount in the range of about Rs.10,000 may be added as loss
of estate. Where the deceased is survived by a widow , another conventional amount in
the range of Rs.10,000 to Rs.20,000 should be added under the head of loss of
consortium.
iii). No amount is to be awarded under the head of pain, suffering or hardship caused to
the legal heirs of the deceased.
iv). The funeral expenses, cost of transportation of the body and cost of medical treatment
of the deceased before death (if incurred) should also be added.
v). The personal and living expenses of deceased should be deducted from his income.

Methods To Determine Compensation

UNIT METHOD: 2 units per adult, one unit per child - divide income by total units, subtract
value of units of deceased. Balance is datum figure. This method is preferred when income is
low.

2nd METHOD: Deduct 1/3rd of income on account of personal expenses of deceased.

In case of high income deduct income tax.


In case of business, agriculture etc., where the claimant(s) inherits the business or
orchard, the value of the services of the deceased has to be assessed to calculate the datum
figure.

The unit method was applied in Himachal Pradesh in H.P Road Transport Corporation vs.
Pandit Jai Ram 15 , which is the leading authority on the point.

However, the Supreme Court in Santosh Devi vs. National Insurance Company Ltd.16
held that the deductions cannot be made blindly. It held as under:
“19. It is also not possible to approve the view taken by the Tribunal which has been
reiterated by the High Court albeit without assigning reasons that the deceased would
have spent 1/3rd of his total earning, i.e., Rs. 500/-, towards personal expenses. It seems
that the Presiding Officer of the Tribunal and the learned Single Judge of the High Court
were totally oblivious of the hard realities of the life. It will be impossible for a person

15
1980 ACJ 1.
16
(2012) 6 SCC 421.

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HIMACHAL PRADESH JUDICIAL ACADEMY

whose monthly income is Rs.1,500/- to spend 1/3rd on himself leaving 2/3rd for the
family consisting of five persons. Ordinarily, such a person would, at best, spend 1/10th
of his income on himself or use that amount as personal expenses and leave the rest for
his family.”
Selection of Multiplier

Multiplier is to be used as per law laid down in Sarla Verma vs. Delhi Transport
Corporation 20. The choice of multiplier has to be based on the age of the deceased or of the
claimant whichever is higher and the deduction for personal expenses of the deceased also
depends on number of dependent family members. But the Table of Multiplier is also not to be
blindly followed, as held in Naina Thakur vs. Punjab Women’s Welfare Colleges Board 17, as
under:
“It is thus apparent that the Apex Court has now approved the multiplier in
column No.4 of the aforesaid table. I would, however, like to add a caveat on the
basis of the law laid down in Susamma Thomas & Trilok Chandra and approved
in Sarla Verma. The choice of multiplier has to be based on the age of the
deceased or the claimants whichever is higher. Therefore, if the parents are the
claimants. It is age of the parents which will have to be taken into consideration
while fixing the multiplier. This table is also not to be blindly followed and the
Tribunal may well be within its jurisdiction to make departure from this table in
particular cases. For example if the deceased was aged between 41 to 45 years as
per this judgment multiplier of 14 is to be used. However, the deceased if he had
married late, may have left behind a very young widow and two small children.
The Tribunal in such a case may be justified in increasing the multiplier to 15. On
the other hand there may be a case where the deceased who was aged between 41
to 45 years has not left behind a widow and the claimants are sons who are majors
and are not dependents. The multiplier may be suitably reduced in such cases.
This has to depend on the facts of each case.”
Reference may also be made in this regard to P.S Somanathan vs. District Insurance
18
Officer .

Rule of Sarla Verma's case 20 can be deviated in exceptional circumstances where


income of deceased was bound to increase. 19

Multiplier To Be Used As Mentioned In Column (4) Of The Table Prepared In Sarla


Verma’s‫‏‬Case 20

17
Latest HLJ 2009 (HP) 1449.
18
(2011) 3 SCC 566.
19
See: K.R Madhusudhan vs. Administrative Officer, (2011) 4 SCC 689.

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Increase in future income

The Supreme Court also considered the fact that when the person was employed, then his
income would increase in future. Therefore it was held in Sarla Verma’s case, 20 that while
calculating the multiplicand, provision be made for future increase of income. The Apex Court
held thus:

“11. In Susamma Thomas, this Court increased the income by nearly 100%, in Sarla
Dixit, the income was increased only by 50% and in Abati Bezbaruah the income was
increased by a mere 7%. In view of imponderables and uncertainties, we are in favour of
adopting as a rule of thumb, an addition of 50% of actual salary to the actual salary
income of the deceased towards future prospects, where the deceased had a permanent
job and was below 40 years. Where the annual income is in the taxable range, the words
`actual salary' should be read as `actual salary less tax'. The addition should be only 30%
if the age of the deceased was 40 to 50 years.”
In K.R Madhusudhan vs. Administrative Officer, 20 observing that that there can be
departure from the rule of thumb, it was held as under:
“10. The present case stands on different factual basis where there is clear and
incontrovertible evidence on record that the deceased was entitled and in fact bound to
get a rise in income in the future, a fact which was corroborated by evidence on record.
Thus, we are of the view that the present case comes within the `exceptional
circumstances' and not within the purview of rule of thumb laid down by the Sarla Verma
(supra) judgment. Hence, even though the deceased was above 50 years of age, he shall
be entitled to increase in income due to future prospects.”
Recently, disagreeing with the observations in Sarla Verma case,20 the Supreme Court in
Santosh Devi vs. National Insurance Company Ltd.,21 held as under:

20
(2011) 4 SCC 689.

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HIMACHAL PRADESH JUDICIAL ACADEMY

“14. We find it extremely difficult to fathom any rationale for the observation made in
paragraph 24 of the judgment in Sarla Verma's case that where the deceased was self-
employed or was on a fixed salary without provision for annual increment, etc., the
Courts will usually take only the actual income at the time of death and a departure from
this rule should be made only in rare and exceptional cases involving special
circumstances. In our view, it will be naïve to say that the wages or total
emoluments/income of a person who is self-employed or who is employed on a fixed
salary without provision for annual increment, etc., would remain the same throughout
his life.
15. The rise in the cost of living affects everyone across the board. It does not make any
distinction between rich and poor. As a matter of fact, the effect of rise in prices which
directly impacts the cost of living is minimal on the rich and maximum on those who are
self- employed or who get fixed income/emoluments. They are the worst affected people.
Therefore, they put extra efforts to generate additional income necessary for sustaining
their families.
18. Therefore, we do not think that while making the observations in the last three lines
of paragraph 24 of Sarla Verma's judgment, the Court had intended to lay down an
absolute rule that there will be no addition in the income of a person who is self-
employed or who is paid fixed wages. Rather, it would be reasonable to say that a person
who is self-employed or is engaged on fixed wages will also get 30 per cent increase in
his total income over a period of time and if he / she becomes victim of accident then the
same formula deserves to be applied for calculating the amount of compensation.”
Compensation on Death of a child

The problem arises when the compensation is to be awarded in case of death of a


child, because, the child may not be earning anything and may be studying. Therefore, in such
cases the parents cannot be said to be dependent on the child. But even then the parents would be
suffering the loss of the child and for that they have to be compensated suitably. The Supreme
Court recently in R.K. Malik versus Kiran Paul 22, was dealing with a case of death of a child.
After considering its earlier judgments on the point including Lata Wadhawa vs. State of Bihar23
and M.S. Aggarwal vs. Deep Chand Sood 24, wherein compensation in case of death of school
children was granted, it was held that in addition to awarding compensation for pecuniary losses,
the compensation was also to be granted with regard to future prospects of the child. The
Supreme Court had held in R.K. Malik's case 28 as under:-
“27. In the case of Lata Wadhwa (supra), wherein several persons including
children lost their lives in a fire accident, the Court awarded substantial amount as
compensation. No doubt, the Court noticed that the children who lost their lives
were studying in an expensive school, had bright prospects and belonged to upper
middle class, yet it cannot be said that higher compensation awarded was for
deprivation of life and the pain and suffering undergone on loss of life due to

21
(2012) 6 SCC 421.
22
(2009) 14 SCC 1.
23
(2001) 8 SCC 197.
24
(2001) 8 SCC 151.

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HIMACHAL PRADESH JUDICIAL ACADEMY

financial status. The term "conventional compensation" used in the said case has
been used for non pecuniary compensation payable on account of pain and
suffering as a result of death. The Court in the said case referred to Rs.50, 000/-
as conventional figure. The reason was loss of expectancy of life and pain and
suffering on that account which was common and uniform to all regardless of the
status. Unless there is a specific case departing from the conventional formula,
non- pecuniary compensation should not be fixed on basis of economic wealth
and background.
28. In Lata Wadhawa case (supra), wherein the accident took place on
03.03.1989, the multiplier method was referred to and adopted with approval. In
cases of children between 5 to 10 years of age, compensation of Rs.1.50 lakhs
was awarded towards pecuniary compensation and in addition a sum of
Rs.50,000/- was awarded towards `conventional compensation". In the case of
children between 10 to 18 years compensation of Rs.4.10 lakhs was awarded
including "conventional compensation". While doing so the Supreme Court held
that contribution of each child towards family should be taken as Rs.24,000/- per
annum instead of Rs.12, 000/- per annum as recommended by Justice Y. V.
Chandrachud Committee. This was in view of the fact that the company in
question had an un-written rule that every employee can get one of his children
employed in the said company.
29. In the case of M. S. Grewal v. Deep Chand Sood, (2001) 8 SCC 151, wherein
14 students of a public school got drowned in a river due to negligence of the
teachers. On the question of quantum of compensation, this Court accepted that
the multiplier method was normally to be adopted as a method for assigning value
of future annual dependency. It was emphasized that the Court must ensure that a
just compensation was awarded.
30. In Grewal case (supra), compensation of Rs.5 lakhs was awarded to the
claimants and the same was held to be justified. Learned Counsel for the
respondent no.3, however, pointed out that in the said case the Supreme Court had
noticed that the students belonged to an affluent school as was apparent from the
fee structure and therefore the compensation of Rs.5 lakhs as awarded by the High
Court was not found to be excessive. It is no doubt true that the Supreme Court in
the said case noticed that the students belonged to an upper middle class
background but the basis and the principle on which the compensation was
awarded in that case would equally apply to the present case.
31. A forceful submission has been made by the learned counsels appearing for
the claimants-appellants that both the Tribunal as well as the High Court failed to
consider the claims of the appellants with regard to the future prospects of the
children. It has been submitted that the evidence with regard to the same has been
ignored by the Courts below. On perusal of the evidence on record, we find merit
in such submission that the Courts below have overlooked that aspect of the
matter while granting compensation. It is well settled legal principle that in
addition to awarding compensation for pecuniary losses, compensation must also
be granted with regard to the future prospects of the children. It is incumbent
upon the Courts to consider the said aspect while awarding compensation.
Reliance in this regard may be placed on the decisions rendered by this Court in

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HIMACHAL PRADESH JUDICIAL ACADEMY

General Manager, Kerala S. R. T. C. v. Susamma Thomas, (1994) 2 SCC 176;


Sarla Dixit v. Balwant Yadav, (1996) 3 SCC 179; and Lata Wadhwa case (supra).
32. In view of discussion made hereinbefore, it is quite clear the claim with regard
to future prospect should have been be addressed by the courts below. While
considering such claims, child's performance in school, the reputation of the
school etc. might be taken into consideration. In the present case, records shows
that the children were good in studies and studying in a reasonably good school.
Naturally, their future prospect would be presumed to be good and bright. Since
they were children, there is no yardstick to measure the loss of future prospects of
these children. But as already noted, they were performing well in studies, natural
consequence supposed to be a bright future. In the case of Lata Wadhwa (supra)
and M. S. Grewal (supra), the Supreme Court recognised such future prospect as
basis and factor to be considered. Therefore, denying compensation towards
future prospects seems to be unjustified. Keeping this in background, facts and
circumstances of the present case, and following the decision in Lata Wadhwa
(supra) and M. S. Grewal (supra), we deem it appropriate to grant compensation
of Rs. 75,000/- (which is roughly half of the amount given on account of
pecuniary damages) as compensation for the future prospects of the children, to
be paid to each claimant within one month of the date of this decision. We would
like to clarify that this amount i.e. Rs. 75,000/- is over and above what has been
awarded by the High Court.”

Death of house wife


In India the Courts have recognised that the contribution made by the wife to the house
is invaluable and cannot be computed in terms of money. The gratuitous services rendered by
wife with true love and affection to the children and her husband and managing the household
affairs cannot be equated with the services rendered by others. A wife/mother does not work by
the clock. She is in the constant attendance of the family throughout the day and night unless she
is employed and is required to attend the employer's work for particular hours. She takes care of
all the requirements of husband and children including cooking of food, washing of clothes, etc.
She teaches her small children and provides invaluable guidance to them for their future life. A
housekeeper or maidservant can do the household work, such as cooking food, washing clothes
and utensils, keeping the house clean etc., but she can never be a substitute for a wife/mother
who renders selfless service to her husband and children.25
In Rakesh Kumar vs. Prem Lal 26 the High Court discussed how the income of the
house wife has to be assessed as under:
“16. We are in full agreement with the preposition that the children and husband of
the deceased are entitled to compensation on the ground of the loss of the services of
the deceased which were no doubt gratuitous, for the reason that the members of the

25
Arun Kumar Agarwal vs. National Insurance Company, AIR 2010 SC 3426.
26
1996 (1) Sim. L.C. 448 (DB).

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HIMACHAL PRADESH JUDICIAL ACADEMY

family can replace such gratuitous services only by incurring expenditure and that
while estimating the “services” of the deceased housewife, a narrow meaning should
not be given to the meaning of the word “services” but should be construed broadly”.
In Sher Singh vs. Raghubir Singh, 27 the ld. Tribunal had assessed the dependency of
the family on the house-wife at Rs. 600/- per month. The High Court held as under:-
“4. I am unable to agree with the reasoning given by the Ld. Tribunal. The Tribunal
has assessed the work being rendered by the house wife at Rs. 600/- per month. The
Tribunal has done this by coming to the conclusion that the services rendered by the
deceased to her family can be replaced by hiring a servant at the salary of Rs. 600/-
per month. This reasoning is totally fallacious. The work being done by a wife and
mother cannot be done by a made-servant. No servant can work for 24 hours at a
salary of Rs. 600/- per month. Further more such servant would have to be provided
food, clothing and other facilities. In any event, in my opinion, the role of a mother or
house wife should not even be compared to that of a servant”
Accordingly, the High Court estimated the dependency on the house wife at the
rate of Rs.1500/- per month i.e. Rs. 18,000/- per year in that case. In Arun Kumar Agarwal vs.
National Insurance Company 28, the Supreme Court has also elaborately dealt with the subject
as under:
“27. It is not possible to quantify any amount in lieu of the services rendered by
the wife/mother to the family i.e. husband and children. However, for the purpose
of award of compensation to the dependents, some pecuniary estimate has to be
made of the services of housewife/mother. In that context, the term `services' is
required to be given a broad meaning and must be construed by taking into
account the loss of personal care and attention given by the deceased to her
children as a mother and to her husband as a wife. They are entitled to adequate
compensation in lieu of the loss of gratuitous services rendered by the deceased.
The amount payable to the dependants cannot be diminished on the ground that
some close relation like a grandmother may volunteer to render some of the
services to the family which the deceased was giving earlier.
35. In our view, it is highly unfair, unjust and inappropriate to compute the
compensation payable to the dependents of a deceased wife/mother, who does not
have regular income, by comparing her services with that of a housekeeper or a
servant or an employee, who works for a fixed period. The gratuitous services
rendered by wife/mother to the husband and children cannot be equated with the
services of an employee and no evidence or data can possibly be produced for
estimating the value of such services. It is virtually impossible to measure in
terms of money the loss of personal care and attention suffered by the husband
and children on the demise of the housewife. In its wisdom, the legislature had, as
early as in 1994, fixed the notional income of a non-earning person at Rs.15,000/-
per annum and in case of a spouse, 1/3rd income of the earning/surviving spouse
for the purpose of computing the compensation.

27
2006(1) Cur, L.J. (HP) 15.
28
AIR 2010 SC 3426.

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HIMACHAL PRADESH JUDICIAL ACADEMY

36. Though, Section 163A does not, in terms apply to the cases in which claim
for compensation is filed under Section 166 of the Act, in the absence of any other
definite criteria for determination of compensation payable to the dependents of a
non-earning housewife/mother, it would be reasonable to rely upon the criteria
specified in clause (6) of the Second Schedule and then apply appropriate
multiplier keeping in view the judgments of this Court in General Manager Kerala
State Road Transport Corporation v. Susamma Thomas (Mrs.) and others (supra),
U.P. S.R.T.C. v. Trilok Chandra (supra), Sarla Verma (Smt.) and others v. Delhi
Transport Corporation and another (supra) and also take guidance from the
judgment in Lata Wadhwa's case. The approach adopted by different Benches of
Delhi High Court to compute the compensation by relying upon the minimum
wages payable to a skilled worker does not commend our approval because it is
most unrealistic to compare the gratuitous services of the housewife/mother with
work of a skilled worker.”

Injury Cases
Injuries cause deprivation to the body which results in losses, entitling the claimant
to claim damages. The damages may vary according to the gravity of the injuries.
The damages can be pecuniary as well as non-pecuniary. But all this has to be
converted into rupees and paisa. The Court has to make a judicious attempt to award the
damages, so as to compensate the claimant for the loss suffered by him. The compensation
should not be assessed conservatively. On the other hand, compensation should also not be
assessed in so liberal fashion as to make it a bounty for the claimant. There must be an
endeavour to secure some uniformity and consistency. It is desirable that so far as possible
comparable injuries should be compensated by comparable awards. Uniformity is very
important. To compensate in money for pain and for physical consequences is invariably
difficult, but no other method can be devised than that of making a monetary assessment.
Assessibility : In cases of grave injury, where the body is wrecked or brain destroyed, it is very
difficult to assess a fair compensation in money, so difficult that the award must basically be a
conventional figure, derived from experience or from awards in comparable cases.
Predictability: Parties should be able to predict with some measure of accuracy the sum which
is likely to be awarded in particular case, for this means cases can be settled peaceably and not
brought to Court, a thing very much for the public good.
How To Assess Damages
Damages have to be assessed under two heads, viz; Pecuniary Damages and Special
or General Damages.
Pecuniary Damages may include expenses incurred by the claimant on :
1. Medical treatment, attendance, transportation, special diet, etc;
2. Actual loss of earning of profit up to the date of trial;

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HIMACHAL PRADESH JUDICIAL ACADEMY

3. Future loss of earning


Non- pecuniary Damages include:
1. Damages for mental and physical shock, pain and suffering already suffered or likely to
be suffered in the future;
2. Damages to compensate for the loss of amenities of life which may include a variety of
matters, i.e., on account of injury the claimant may not be able to walk, run or sit.
It has been held in Raj Kumar vs. Ajay Kumar 29 as under:
“6. The heads under which compensation is awarded in personal injury cases are the
following :
Pecuniary damages (Special Damages)
(i) Expenses relating to treatment, hospitalization, medicines, transportation,
nourishing food, and miscellaneous expenditure.
(ii) Loss of earnings (and other gains) which the injured would have made had he
not been injured, comprising :
(a) Loss of earning during the period of treatment;
(b) Loss of future earnings on account of permanent disability.
(iii) Future medical expenses. Non-pecuniary damages (General Damages)
(iv) Damages for pain, suffering and trauma as a consequence of the injuries.
(v) Loss of amenities (and/or loss of prospects of marriage).
(vi) Loss of expectation of life (shortening of normal longevity).
In routine personal injury cases, compensation will be awarded only under
heads (i), (ii)(a) and (iv).
It is only in serious cases of injury, where there is specific medical
evidence corroborating the evidence of the claimant, that compensation will be
granted under any of the heads (ii)(b), (iii), (v) and (vi) relating to loss of future
earnings on account of permanent disability, future medical expenses, loss of
amenities (and/or loss of prospects of marriage) and loss of expectation of life.
7. Assessment of pecuniary damages under item (i) and under item (ii)(a) do not
pose much difficulty as they involve reimbursement of actuals and are easily
ascertainable from the evidence. Award under the head of future medical expenses -
item (iii) -- depends upon specific medical evidence regarding need for further
treatment and cost thereof. Assessment of non-pecuniary damages - items (iv), (v)
and (vi) -- involves determination of lump sum amounts with reference to
circumstances such as age, nature of injury/deprivation/disability suffered by the
claimant and the effect thereof on the future life of the claimant. Decision of this
Court and High Courts contain necessary guidelines for award under these heads, if
necessary…………...”
In Raj Kumar Vs. Ajay Kumar,30 in a case relating to personal injuries the Supreme
Court held as under:

29
(2011) 1 SCC 343. See also: Kavita vs. Deepak, (2012) 8 SCC 604 and Subulaxmi vs. TN State Transport Corporation,
(2012) 10 SCC 177.
30
(2011) 1 SCC 343.

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HIMACHAL PRADESH JUDICIAL ACADEMY

“14. ………. In fact, there may not be any need to award any compensation under the
head of `loss of future earnings', if the claimant continues in government service, though
he may be awarded compensation under the head of loss of amenities as a consequence of
losing his hand. Sometimes the injured claimant may be continued in service, but may not
found suitable for discharging the duties attached to the post or job which he was earlier
holding, on account of his disability, and may therefore be shifted to some other suitable
but lesser post with lesser emoluments, in which case there should be a limited award
under the head of loss of future earning capacity, taking note of the reduced earning
capacity.”
While determining pecuniary and non pecuniary heads some guesswork is
permissible. In this regard reference may be made to Laxman aliass Laxman Mourya vs.
Divisional Manager, Oriental Insurance Company Limited. 31
Damages for loss of expectation of life, i.e. on account of injury the normal longevity
of the person concerned is shortened, can be awarded. In case of Loss of marital prospects etc.,
compensation can be awarded.32

Assessing Disability
33
The Apex Court has dealt with this subject at length in Raj Kumar vs. Ajay Kumar .
The relevant discussion reads thus:
“9. The percentage of permanent disability is expressed by the Doctors with reference
to the whole body, or more often than not, with reference to a particular limb. When a
disability certificate states that the injured has suffered permanent disability to an
extent of 45% of the left lower limb, it is not the same as 45% permanent disability
with reference to the whole body. The extent of disability of a limb (or part of the
body) expressed in terms of a percentage of the total functions of that limb, obviously
cannot be assumed to be the extent of disability of the whole body. If there is 60%
permanent disability of the right hand and 80% permanent disability of left leg, it
does not mean that the extent of permanent disability with reference to the whole
body is 140% (that is 80% plus 60%). If different parts of the body have suffered
different percentages of disabilities, the sum total thereof expressed in terms of the
permanent disability with reference to the whole body, cannot obviously exceed
100%.
11. What requires to be assessed by the Tribunal is the effect of the permanently
disability on the earning capacity of the injured; and after assessing the loss of
earning capacity in terms of a percentage of the income, it has to be quantified in
terms of money, to arrive at the future loss of earnings (by applying the standard
multiplier method used to determine loss of dependency). We may however note that
in some cases, on appreciation of evidence and assessment, the Tribunal may find
that percentage of loss of earning capacity as a result of the permanent disability, is

31
(2011) 10 SCC 756.
32
See: Govind Yadav vs. New India Insurance Company Limited, (2011) 10 SCC 683 and Ibrahim vs. Raju, (2011) 10 SCC
634.
33
(2011) 1 SCC 343.

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HIMACHAL PRADESH JUDICIAL ACADEMY

approximately the same as the percentage of permanent disability in which case, of


course, the Tribunal will adopt the said percentage for determination of compensation
(see for example, the decisions of this court in Arvind Kumar Mishra v. New India
Assurance Co.Ltd. - 2010(10) SCALE 298 and Yadava Kumar v. D.M., National
Insurance Co. Ltd. - 2010 (8) SCALE 567).
13. Ascertainment of the effect of the permanent disability on the actual earning
capacity involves three steps. The Tribunal has to first ascertain what activities the
claimant could carry on in spite of the permanent disability and what he could not do
as a result of the permanent ability (this is also relevant for awarding compensation
under the head of loss of amenities of life). The second step is to ascertain his
avocation, profession and nature of work before the accident, as also his age. The
third step is to find out whether (i) the claimant is totally disabled from earning any
kind of livelihood, or (ii) whether in spite of the permanent disability, the claimant
could still effectively carry on the activities and functions, which he was earlier
carrying on, or (iii) whether he was prevented or restricted from discharging his
previous activities and functions, but could carry on some other or lesser scale of
activities and functions so that he continues to earn or can continue to earn his
livelihood.
15. It may be noted that when compensation is awarded by treating the loss of future
earning capacity as 100% (or even anything more than 50%), the need to award
compensation separately under the head of loss of amenities or loss of expectation of
life may disappear and as a result, only a token or nominal amount may have to be
awarded under the head of loss of amenities or loss of expectation of life, as
otherwise there may be a duplication in the award of compensation….”
Compensation for future treatment
It has been held by the Supreme Court in Sapna Devi vs. United Insurance company
34
that under the Motor Vehicles Act claim cases cannot be reopened in future if in case the
petitioner requires further amount for treatment and fresh award cannot be passed. Because, the
Award qua the Tribunal is final, while passing the award, some provision should also be made
for future treatment of the claimant.
‘Pecuniary‫‏‬advantage’‫‏‬not‫‏‬liable‫‏‬for‫‏‬deduction‫‏‬
Any cash, bank balance, shares, fixed deposits, etc. are all pecuniary advantage receivable
by the heirs on account of one's death. But all these have no co-relation with the amount
receivable under a statute occasioned only on account of accidental death. This amount is
receivable by the claimant not on account of any accidental death but otherwise on insured's
35
death. In Helen C. Rebello vs. Maharashtra State Road Transport Corpn. it has been held by
the Supreme Court that the deduction is not permissible out of the aforesaid amount at the time
of awarding compensation by the Tribunal, when it was specifically held as under:

34
(2008) 7 SCC 613. See also Nagappa v. Gurudayal Singh , (2003) 2 SCC 274.
35
(1999) 1 SCC 90.

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HIMACHAL PRADESH JUDICIAL ACADEMY

“ Broadly, we may examine the receipt of the provident fund which is a deferred
payment out of the contribution made by an employee during the tenure of his
service. Such employee or his heirs are entitled to receive this amount irrespective
of the accidental death. This amount is secured, is certain to be received, while the
amount under the Motor Vehicles Act is uncertain and is receivable only on the
happening of the event, viz., accident, which may not take place at all. Similarly,
family pension is also earned by an employee for the benefit of his family in the
form of his contribution in the service in terms of the service conditions
receivable by the heirs after his death. The heirs receive family pension even
otherwise than the accidental death. No co-relation between the two. Similarly,
life insurance policy is received either by the insured or the heirs of the insured on
account of the contract with the insurer, for which insured contributes in the form
of premium. It is receivable even by the insured, if he lives till maturity after
paying all the premiums, in the case of death insurer indemnifies to pay the sum
to the heirs, again in terms of the contracts for the premium paid. Again, this
amount is receivable by the claimant not on account of any accidental death but
otherwise on insured's death. Death is only a step or contingency in terms of the
contract, to receive the amount. Similarly any cash, bank balance, shares, fixed
deposits, etc. though are all a pecuniary advantage receivable by the heirs on
account of one's death but all these have no co-relation with the amount
receivable under a statute occasioned only on account of accidental death.
How could such an amount come within the periphery of the Motor Vehicles Act
to be termed as 'pecuniary advantage' liable for deduction. When we seek the
principle of loss and gain, it has to be on similar and same plane having nexus
inter se between them and not to which, there is no semblance of any co-relation.
The insured (deceased) contributes his own money for which he receives the
amount has no co-relation to the compensation computed as against tortfeasor for
his negligence on account of accident. As aforesaid, the amount receivable as
compensation under the Act is on account of the injury or death without
making any contribution towards it, then how can fruits of an amount received
through contributions of the insured be deducted out of the amount receivable
under the Motor Vehicles Act. The amount under this Act, he receives without
any contribution. As we have said the compensation payable under the Motor
Vehicles Act is statutory while the amount receivable under the life insurance
policy is contractual.”
Section 163-A

Compensation under this section is payable on the basis of no fault liability. This
section makes special provisions as to payment of compensation on structured formula basis. In
case of death claimants must prove that they are legal heirs, the income and the age of deceased.
In injury cases, claimant must prove disability, if any, expenses of treatment etc. Compensation
under this section is only payable in case of those victims whose income is less than Rs. 40,000/-
per annum.36 A claim with regard to the death of the person who is himself a co-owner and

36
Deepal Girishbhai Soni vs. United India Insurance Co. Ltd, Baroda, (2004) 5 SCC 385.

Page 16 of 36
HIMACHAL PRADESH JUDICIAL ACADEMY

one of insured person is not maintainable under Section 163-A. Reference in this regard can be
made to Dhanraj vs. New India Assurance Co. Ltd.37. For the vicarious liability of the owner
for the act of others such as driver etc., the reference can be made to New India Assurance Co
Ltd. vs. Lachhmi Devi 38; Pritam Chand vs H.R.T.C.39; Union of India vs. Smt. Raj Rani 40 and
Jawahar Singh vs Bala Jain.41
Recently the Supreme Court in National Insurance Company Ltd. Vs. Sinitha 42 has
however interpreted the provisions of section 163-A to be based on „fault liability‟, when it was
held as under:

“31. At the instant juncture, it is also necessary to reiterate a conclusion already drawn
above, namely, that Section 163A of the Act has an overriding effect on all other
provisions of the Motor Vehicles Act, 1988. Stated in other words, none of the provisions
of the Motor Vehicles Act which is in conflict with Section 163A of the Act will negate
the mandate contained therein (in Section 163A of the Act). Therefore, no matter what,
Section 163A of the Act shall stand on its own, without being diluted by any provision.
Furthermore, in the course of our determination including the inferences and conclusions
drawn by us from the judgment of this Court in Oriental Insurance Company Limited vs.
Hansrajbhai V. Kodala (supra), as also, the statutory provisions dealt with by this Court
in its aforesaid determination, we are of the view, that there is no basis for inferring that
Section 163A of the Act is founded under the "no-fault" liability principle.”
In view of the above authoritative pronouncement of the Apex Court, it will be open to
the owner or insurance company, as the case may be, to defeat a claim under Section 163-A of
the Act by pleading and establishing through cogent evidence a „fault‟ ground i.e. accident being
result of „wrongful act‟ or „neglect‟ or „default‟.
In claims falling under Section 163-A, the Tribunal can only grant compensation in
terms of the Second Schedule of the Act. No amount not provided for in the Schedule can be
awarded.
Composite and Contributory Negligence
Contributory negligence is when the claimant himself has been negligent and has
contributed to the occurrence of the accident. Contributory negligence is normally not attributed
to young children. In contributory negligence the victim himself has contributed and therefore,
his compensation gets reduced in proportion to his fault. Thus, if the victim is equally negligent
and has contributed to the accident in equal measures, he would get only half the compensation.
On the other hand, composite negligence means where the accident occurs due to negligence of

37
(2004) 8 SCC 553.
38
1996 ACJ 496.
39
2005(1) Sim LC 415.
40
Latest HLJ 2006 (1) (HP) 585.
41
(2011) 6 SCC 425.
42
(2012) 2 SCC 356.

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HIMACHAL PRADESH JUDICIAL ACADEMY

two or more persons but not the victim. In Andhra Pradesh Road Transport Corporation vs. K.
Hemlatha 43, the Apex Court has held as under:-
“13. In an accident involving two or more vehicles, where a third party (other than
the drivers and/or owners of the vehicles involved) claims damages for loss or
injuries, it is said that compensation is payable in respect of the composite
negligence of the drivers of those vehicles. In such a case, each wrongdoer, is
jointly and severally liable to the injured for payment of the entire damages and
the injured person has the choice of proceeding against all or any of them. In such
a case, the injured need not establish the extent of responsibility of each
wrongdoer separately, nor is it necessary for the court to determine the extent of
liability of each wrongdoer separately.
But in respect of such an accident, if the claim is by one of the drivers
himself for personal injuries, or by the legal heirs of one of the drivers for loss on
account of his death, or by the owner of one of the vehicles in respect of damages
to his vehicle, then the issue that arises is not about the composite negligence of
all the drivers, but about the contributory negligence of the driver concerned.
Where the injured is guilty of some negligence, his claim for damages is not
defeated merely by reason of the negligence on his part but the damages
recoverable by him in respect of the injuries stands reduced in proportion to
his contributory negligence.”
In composite negligence though the Tribunal may ascertain the percentage of
contribution of negligence between the two or more negligent parties but all the tortfeasers have
to be held jointly and severally liable. The claimant can claim the entire compensation from all
or any one of them. In this regard reference may be made to judgments of the High Court of H.P.
in H.R.T.C vs. Smt. Breekan Devi 44 ; H.R.T.C vs. Smt. Meena 45 and that of the Apex Court
in New India Assurance Company Limited vs. Yadu Sambhaji More .46
Recently, it has been held in National Insurance Company Ltd. Vs. Sinitha 47 that it is
open to the owner or insurance company, as the case may be, to defeat a claim u/s 163A of the
MV Act by pleading and establishing through cogent evidence a 'fault' ground (wrongful act or
neglect or default) as Section 163A of the Act was held to be founded under 'fault' liability
principle. In such circumstances, the compensation can be reduced on proof of contributory
negligence.

Statutory Defenses Available To Insurance Company


Statutory defense must be available under the Act and must also be reserved in the
policy; such defense should be reserved impliedly or explicitly. Defense must be pleaded and
proved by Insurance company. Issues with regard to such defenses must be framed. Defenses
are available under Sections 147 and 149 of Motor Vehicle Act.

43
AIR 2008 SC 2851.
44
FAO No. 221 of 1996, decided on 2/08/2005.
45
FAO No. 7 of 1999, decided on 02/08/2005.
46
(2011) 2 SCC 416.
47
(2012) 2 SCC 356

Page 18 of 36
HIMACHAL PRADESH JUDICIAL ACADEMY

Defenses Under Section 147


Section 147 prescribe requirement of policies and limits of liability. After 1994 no
passenger in a goods carriage is covered other than owner of goods or his authorized
representative or labourer cleaner, extra driver. Owner of goods means the person who travels in
the cabin of vehicle.48
In tractor, the sitting capacity is only one. No passenger can be carried either on the
tractor or in the trolley and as such Insurance Company cannot be held liable.49

Defenses Under Section 149

i). Condition excluding use of vehicle for hire or reward where the vehicle has no permit
to carry passengers. 50

ii). Violation of terms and permit in case of transport vehicle;

iii). Validity of Driving License. 51

Validity of Driving License

License to drive heavy goods vehicle include license to drive heavy passengers
52
vehicle. License to drive LMV does not entitle driver to drive two wheeler scooter or motor
cycle. 53
License to Drive LMV includes both transport and non- transport vehicles. However, for
the license to be effective it should be expressly stated that license is valid to drive a transport or
non transport vehicle. The specific Endorsed to drive transport vehicle is required only after
28/3/2001. 54
However mere renewal of fake license does not clothe it with validity. 55
Burden of proving fake license is on Insurance company. 56 License is deemed valid after its
expiry, only for 30 days.57

48
See also: New India Assurance Co. vs Asha Rani, AIR 2003 SC 607; National Insurance Company vs. Chinamma, (2004) 8
SCC 697; FAO 143 of 2000, decided on 28/07/2005, titled as National Insurance Company vs. Smt. Savitri Devi and Prakash
Chand vs. New India Insurance Company Ltd, 2011 (suppl) Him. L.R 1794.
49
FAO No., 485 of 2003, Decided on 3/04/2007, Surjit Singh Vs. Jagraj Singh .
50
FAO no. 421 of 2003, decided on 2/04/2006, Rajender Singh vs. Smt. Kalasho.
51
Swaran Singh „s case 2004 ACJ 1.
52
FAO No. 373 of 2001, Decided on 27/09/2005, Barmu Ram Sharma & another vs. United India Insurance Co. Ltd.
53
FAO No. 165 of 2010, Decided on 9/10/11, New India Assurance Company Ltd. Vs Ghanshyam.
54
National Insurance Company Ltd. Vs. Annapia Irappa Nesria, (2008) 3 SCC 464 and FAO No. 272 of 2005, Decided on
20/07/2011, titled as New India Assurance Co. Ltd. Vs. Mandip Kaur.
55 FAO No. 442 of 2008, decided on 1/11/11, titled as National Insurance Co. Ltd vs. Hem Raj.
56
FAO No. 218 of 2003, decided on 6/01/06, titled as New India Insurance Company vs. Sushila Bragta and Kamala Mangalal
Vayani vs. United India Insurance Co., Ltd., (2010) 12 SCC 488.
57
FAO No. 284 of 2005, decided on 23/12/2008, titled as National Insurance Company vs. Smt. Situ Devi. See: section 14 MV
Act.

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HIMACHAL PRADESH JUDICIAL ACADEMY

License to drive a tractor permits the driver to drive the same, even when a trailer is
attached to the tractor.58
"Goods carriage" has been defined in Section 2(14) to mean any motor vehicle
constructed or adapted for use solely for the carriage of goods, or any motor vehicle not so
constructed or adapted when used for the carriage of goods. "Transport vehicle" has been
defined in section 2(47) to mean a public service vehicle, a goods carriage, an educational
institution bus or a private service vehicle.
The effect of the different licences granted in terms of the provisions of Section 2(14)
and 2(47) has also been noticed by Supreme Court in New India Assurance Co. Ltd. vs. Prabhu
Lal 59, as under :
“37. The argument of the Insurance Company is that at the time of accident,
Ram Narain had no valid and effective licence to drive Tata 709. Indisputably,
Ram Narain was having a licence to drive light motor vehicle. The learned
counsel for the Insurance Company, referring to various provisions of the Act
submitted that if a person is having licence to drive light motor vehicle, he cannot
drive a transport vehicle unless his driving licence specifically entitles him so to
do (Section 3). Clauses (14), (21), (28) and (47) of Section 2 make it clear that if a
vehicle is "light motor vehicle", but falls under the category of transport vehicle,
the driving licence has to be duly endorsed under Section 3 of the Act. If it is not
done, a person holding driving licence to ply light motor vehicle cannot ply
transport vehicle. It is not in dispute that in the instant case, Ram Narain was
having licence to drive light motor vehicle. The licence was not endorsed as
required and hence, he could not have driven Tata 709 in absence of requisite
endorsement and the Insurance Company could not be held liable.”
Further, in Oriental Insurance Co. Ltd. vs. Angad Kol ,60 it has been held by the Supreme
Court as under:
“10. The distinction between a `light motor vehicle' and a `transport vehicle' is,
therefore, evident. A transport vehicle may be a light motor vehicle but for the
purpose of driving the same, a distinct licence is required to be obtained. The
distinction between a `transport vehicle' and a `passenger vehicle' can also be
noticed from Section 14 of the Act. Sub- section (2) of Section 14 provides for
duration of a period of three years in case of an effective licence to drive a
`transport vehicle' whereas in case of any other licence, it may remain effective
for a period of 20 years.”
Minor as Driver
In United India Insurance Co.Ltd. vs. Rakesh Kumar Arora 61 the driver was found to
be minor and was not holding valid and effective driving licence. Therefore, it was held by the

58
Nagashitty vs. United Insurance Co. Ltd. & others, (2001) 8 SCC 56 and United India Insurance Co. Ltd v. Krishan Chand &
Others, Latest HLJ 2005 (2) 993.
59
(2008) 1 SCC 696.
60
(2009) 11 SCC 356.
61
IV (2008) ACC 709 (SC).

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HIMACHAL PRADESH JUDICIAL ACADEMY

Supreme Court that insurance company was not liable to pay compensation, as there was breach
of condition of the insurance policy.
Liability of Insurance Company
Under 1988 Act in most cases liability of Insurance Company is unlimited. In case of
workmen in goods vehicle under the Act liability of Insurance Company is limited to the extent
of the liability provided under the Workmen‟s Compensation Act. 62
Overloading – Compensation how regulated
It has been explained in United India Insurance Co. Ltd. vs. K.M. Poonam 63 as
to how the compensation is to be paid, in case vehicle is carrying more passengers than allowed
in the insurance policy. It was held as under:
“11. Learned counsel appearing for the appellant submitted that having regard to
the provisions of Section 149 of the Motor Vehicles Act, 1988, the liability, if any,
of the Insurance Company for payment of compensation would have to be limited
to the number of passengers validly permitted to be carried in the vehicle covered
by the insurance policy and did not extend to the number of passengers carried in
excess of the permitted number. Learned counsel submitted that the said question
had been considered by a two-Judge Bench of this Court in National Insurance
Co. Ltd. vs. Anjana Shyam & Ors. |(2007) 7 SCC 445] decided on 20th 5 August,
2007. While considering the provisions of Section 147(l)(b)(ii) and (2) and Section
149(1)(2) and (5) of the 1988 Act in relation to an insurer's liability, their Lordships
came to the conclusion that the insurer's liability was limited by the insurance taken
out for the number of permitted passengers and did not extend to paying amounts
decreed in respect of other passengers. Taking recourse to a harmonious
construction of the relevant provisions, their Lordships held that the total amount of
compensation payable should be deposited by the Insurance Company which could
be proportionately distributed to all the claimants, who could recover the balance of
the compensation amounts awarded to them from the owner of the vehicle.
26. Having arrived at the conclusion that the liability of the Insurance Company
to pay compensation was limited to six persons travelling inside the vehicle only
and that the liability to pay the others was that of the owner, we, in this case, are
faced with the same problem as had surfaced in Anjana Shyam's case (supra). The
number of persons to be compensated being in excess of the number of persons
who could validly be carried in the vehicle, the question which arises is one of
apportionment of the amounts to be paid. Since there can be no, pick and choose
method to identify the five passengers, excluding the driver, in respect of whom
compensation would be payable by the Insurance Company, to meet the ends of
justice we may apply the procedure adopted in Baljit Kaur's case (supra) and
direct that the Insurance Company should deposit the total amount of
compensation awarded to all the claimants and the amounts so deposited be

62
National Insurance Company ltd., vs. Smt. Asha Devi , Latest HLJ 2010 (HP) 80; National Insurance vs. Prembai, (2005) 6
SCC 172.
63
JT 2011 (3) SC 149.

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HIMACHAL PRADESH JUDICIAL ACADEMY

disbursed to the claimants in respect to their claims, with liberty to the Insurance
Company to recover the amounts paid by it over and above the compensation
amounts payable in respect of the persons covered by the Insurance Policy from
the owner of the vehicle, as was directed in Baljit Kaur's case.
27. In other words, the Appellant Insurance Company shall deposit with the
Tribunal the total amount of the amounts awarded in favour of the awardees
within two months from the date of this order and the same is to be utilized to
satisfy the claims of those claimants not covered by the Insurance Policy along
with the persons so covered. The Insurance Company will be entitled to recover
the amounts paid by it, in excess of its liability, from the owner of the vehicle, by
putting the decree into execution. For the aforesaid purpose, the total amount of
the six Awards which are the highest shall be construed as the liability of the
Insurance Company. After deducting the said amount from the total amount of all
the Awards deposited in terms of this order, the Insurance Company will be
entitled to recover the balance amount from the owner of the vehicle as if it is an
amount decreed by the Tribunal in favour of the Insurance Company. The
Insurance Company will not be required to file a separate suit in this regard in
order to recover the amounts paid in excess of its liability from the owner of the
vehicle.”
Third party property damage

Under the Act limit is Rs. 6,000 unless extra premium is charged. Insurance company is not
liable if the vehicle is not insured at the time of the accident. 64 The phrase “Any property of a
third party” occurring in Sections 147 and 165 of the Motor Vehicles Act will mean property
which is outside the goods vehicle and not being carried in the goods vehicle. And goods of a
consignor /consignee being carried in a goods vehicle cannot be termed to be property of a third
party.65 The Insurance Company shall be at liberty to cross-examine the claimants and other
witnesses and also to contest the claim on all issues including the issues of negligence and
quantum by leading evidence. 66
Dishonour of cheque of premium before accident
Insurance Company cannot escape its liability with regard to third party claims on
ground of dishonour of cheque unless it specifically cancelled the policy and intimated the
insured and concerned Registering Authority about cancellation of policy.67
In some cases, it so happens that the cheque which has been given by owner of the
vehicle for payment of premium is dishonoured, but it is not proved that the letter intimating
cancellation of policy was received prior to the accident by the owner. In such cases the

64
FAO No. 413 of 2003, Decided on 25/05/2006, United India Insurance Co. Ltd vs. Bishani Devi.
65
Jagdish Chand Sharma vs. Sh. Bachan Singh , FAO No. 97 of 1999, Decided on 06/01/10.
66
CMPMO No. 344 of 2010, Decided on 15/09/2011, titled as The IFFCO Tokio General Insurance Company vs. Kamla Devi
and United India National Insurance Company vs. Shila Dutta, 2011 ACJ 2729.
67
Daddappa vs. Branch Manager, National Insurance Co. Ltd, 2008 ACJ 581; Oriental Insurance Company Ltd, vs. Smt. Rani,
FAO 200 & 201 of 2010, Decided on 1/08/11.

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HIMACHAL PRADESH JUDICIAL ACADEMY

insurance company cannot be absolved from its liability. It has been held in Oriental Ins Comp.
vs Inderjeet Kaur68, as under:
“9. We have, therefore, this position. Despite the bar created by Section 64-VB of the
Insurance Act, the appellant, an authorised insurer, issued a policy of insurance to cover
the bus without receiving the premium therefor. By reason of the provisions of Sections
147(5) and 149(1) of the Motor Vehicles Act, the appellant became liable to indemnify
third parties in respect of the liability which that policy covered and to satisfy awards of
compensation in respect thereof notwithstanding its entitlement (upon which we do not
express any opinion) to avoid or cancel the policy for the reason that the cheque issued in
payment of the premium thereon had not been honoured.
10. The policy of insurance that the appellant issued was a representation upon which the
authorities and third parties were entitled to act. The appellant was not absolved of its
obligations to third parties under the policy because it did not receive the premium. Its
remedies in this behalf lay against the insured.
12. It must also be noted that it was the appellant itself who was responsible for its
predicament. It had issued the policy of insurance upon receipt only of a cheque towards
the premium in contravention of the provisions of Section 64-VB of the Insurance Act.
The public interest that a policy of insurance serves must, clearly, prevail over the interest
of the appellant.”
Further in National Ins. Comp. vs Rulla, 69, it was held as under :
“8. The contract of insurance in respect of motor vehicles has, therefore, to be construed
in the light of the above provisions. Section 146(1) contains a prohibition on the use of
the motor vehicles without an insurance policy having been taken in accordance with
Chapter 11 of the Motor Vehicles Act. The manifest object of this provision is to ensure
that third party, who suffers injuries due to the use of the motor vehicle, may be able to
get damages from the owner of the vehicle and recoverability of the damages may not
depend on the financial condition or solvency of the driver of the vehicle who had caused
the injuries.
9. Thus, any contract of insurance under Chapter 11 of the Motor Vehicles Act, 1988
contemplates a third party who is not a signatory or a party to the contract of insurance
but is, nevertheless, protected by such contract. As pointed out by this Court in New
Asiatic Insurance Co. Ltd. v. Pessumal Dhanama' Aswani, AIR 1964 SC 1736, the rights
of the third party to get indemnified can be exercised only against the insurer of the
vehicle. It is thus clear that the third party is not concerned and does not come into the
picture at all in the matter of payment of premium. Whether the premium has been paid
or not is not the concern of the third party who is concerned with the fact that there was a
policy issued in respect of the vehicle involved in the accident and it is on the basis of
this policy that the claim can be maintained by the third party against the insurer.”
The Apex Court after noting the above authorities amongst others clarified the legal
position recently in United India Insurance Co. Ltd. vs. Laxmamma70, as under:

68
1998 (1) SCC 371. See also: United India Ins. Comp. vs. Sandhya Devi, Latest HLJ 2009 H.P. 9
69
(2000) 3 SCC 195.
70
(2012) 5 SCC 234.

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HIMACHAL PRADESH JUDICIAL ACADEMY

“19. In our view, the legal position is this : where the policy of insurance is issued by an
authorized insurer on receipt of cheque towards payment of premium and such cheque is
returned dishonoured, the liability of authorized insurer to indemnify third parties in
respect of the liability which that policy covered subsists and it has to satisfy award of
compensation by reason of the provisions of Sections 147(5) and 149(1) of the M.V. Act
unless the policy of insurance is cancelled by the authorized insurer and intimation of
such cancellation has reached the insured before the accident. In other words, where the
policy of insurance is issued by an authorized insurer to cover a vehicle on receipt of the
cheque paid towards premium and the cheque gets dishonored and before the accident of
the vehicle occurs, such insurance company cancels the policy of insurance and sends
intimation thereof to the owner, the insurance company's liability to indemnify the third
parties which that policy covered ceases and the insurance company is not liable to
satisfy awards of compensation in respect thereof.”

Liability of Insurance Company in case of gratuitous passengers


The position of the gratuitous passengers has been explained in the recent judgments of
the Supreme Court in National Insurance Co. Ltd. vs. Bommithi Subbhayamma 71 as under:-

“ It is therefore, manifest that in spite of the amendment of 1994, the effect of the
provision contained in Section 147 with respect persons other than the owner of
the goods or his authorized representatives remains the same. Although the owner
of the goods or his authorized representative would now be covered by the policy
of insurance in respect of a goods vehicle, it was not the intention of the
legislature to provide for the liability of the insurer with respect to passengers,
especially gratuitous passengers who were neither contemplated at the time the
contract of insurance was entered into nor any premium was paid to the extent of
the benefit of the insurance to such category of people.”
72
In New India Assurance Co. Ltd. vs. Vedwati the Supreme Court further held as
under :
“13. The difference in the language of "goods vehicle" as appear in the old Act
and "goods carriage" in the Act is of significance. A bare reading of the
provisions makes it clear that the legislative intent was to prohibit goods vehicle
from carrying any passenger. This is clear from the expression "in addition to
passengers" as contained in definition of "good vehicle" in the old Act. The
position becomes further clear because the expression used is "good carriage" is
solely for the carriage of goods. Carrying of passengers in a goods carriage is not
contemplated in the Act. There is no provision similar to Clause (ii) of the proviso
appended to Section 95 of the old Act prescribing requirement of insurance
policy. Even Section 147 of the Act mandates compulsory coverage against death
of or bodily injury to any passenger of "public service vehicle". The proviso
makes it further clear that compulsory coverage in respect of drivers and
conductors of public service vehicle and employees carried in goods vehicle

71
2005 ACJ 721 (SC).
72
(2007) 9 S.C.C. 486.

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HIMACHAL PRADESH JUDICIAL ACADEMY

would be limited to liability under the Workmen's Compensation Act, 1923 (in
short 'WC Act"). There is no reference to any passenger in "goods carriage".
14. The inevitable conclusion, therefore, is that the provisions of the Act do not
enjoin any statutory liability on the owner of a vehicle to get his vehicle insured
for any passenger traveling in a goods carriage and the insurer would have no
liability therefore.
15. Our view gets support from a recent decision of a three-Judge Bench of this
court in New India Assurance Co. Ltd. –Vs- Asha Rani, 2003 ACJ 1 (SC), in
which it has been held that Satpal Singh‟s case, 2000 ACJ 1(SC), was not
correctly decided. That being the position, the Tribunal and the High Court were
not justified in holding that the insurer had the liability to satisfy the award.”
73
In National Insurance Co. Ltd. vs. Prema Devi the Apex Court reiterated the
above view.
74
In National Insurance Co. Ltd. vs. Kaushalaya Devi the question before the
Supreme Court was whether the insurance company can be held liable in respect of death of
gratuitous passenger in a public goods vehicle. After discussing the entire law on the subject, the
Supreme Court held that insurance company could not be held so liable.
75
Recently the High Court of H.P. in Jagdish Chand vs Bachan Singh held as
under:
“38. In fact, till the amendment of Section 147 of the Act was carried out by the
Amendment Act,54, of 1994 w.e.f. 14.11.1994,the Apex Court had held that even
the risk to the owner of the goods or his authorized representative was not
covered. They were not treated as third parties. If all these authorities of the Apex
Court were taken into consideration, it is obvious that gratuitous passengers,
unauthorized‫‏‬passengers,‫‏‬even‫‏‬employees‫‏‬not‫‏‬covered‫‏‬under‫‏‬the‫‏‬Workmen’s‫‏‬
Compensation Act and pillion riders who were all traveling in a vehicle have
not been considered to be third parties. It is, therefore, obvious that the Apex
Court has not upheld the view expressed by certain courts including the view
expressed by a learned single judge in Noor Dass case,2006 ACJ 142 (HP) that
other than the insurer and insured, all other persons are third parties. Therefore,
this plea of the claimants cannot be accepted. It is, therefore, obvious that the
words „third party‟ cannot include such persons.”
In view of the above authoritative pronouncements of the High Court and the Supreme
Court, gratuitous passenger cannot seek compensation from the insurance company and it is the
owner/driver of the vehicle, who are liable to pay compensation. In this regard reference may
also be made to the recent judgment of the High Court of H.P. reported in New India Assurance
Company vs. Sadh Ram 76 wherein it was held as follows:-

73
2008 JT (3) 320; 2008 ACJ 1149 (SC).
74
2008 ACJ 2144 (SC).
75
2010 ACJ 1229 (Full Bench).
76
Latest HLJ 2010 (HP) 94.

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HIMACHAL PRADESH JUDICIAL ACADEMY

“13. Once it is held that the claimant was not a conductor the only natural
consequence is that he was traveling in the vehicle as a gratuitous passenger.
Since there is no allegation or any proof to show that he was traveling as a owner
of the goods, therefore, the insurance Company cannot be held liable to pay
compensation.”
Sometimes, it is argued that the insurance company be directed to pay and recover
the amount, as is normally done in other cases, as directed in Swaran Singh's case. 77
But, it is to be remembered that Swaran Singh's case 83, has no application to cases
other than „third party‟ risks and it is only in case of „third party‟ risks, that the insurer has to
indemnify the amount and if so advised, to recover the same from the insured.78 But this
principal cannot be so stretched to direct the Insurance company to bear the burden without any
basis.

Pillion rider
In New India Assurance Co. Ltd. v. Asha Rani 79 it has been held as follows:
"Section 147 of the 1988 Act, inter alia, prescribes compulsory coverage against
the death of or bodily injury to any passenger of "public service vehicle". Proviso
appended thereto categorically states that compulsory cover- age in respect of
drivers and conductors of public service vehicle and employees carried in a goods
vehicle would be limited to the liability under the Workmen's Compensation Act.
It does not speak of any passenger in a "goods carriage". In view of the changes in
the relevant provisions in the 1988 Act vis-`a-vis the 1939 Act, we are of the
opinion that the meaning of the words "any person" must also be attributed having
regard to the context in which they have been used i.e. "a third party". Keeping in
view the provisions of the 1988 Act, we are of the opinion that as the provisions
thereof do not enjoin any statutory liability on the owner of a vehicle to get his
vehicle insured for any passenger travelling in a goods vehicle, the insurers would
not be liable therefor. Furthermore, sub-clause (i) of clause (b) of sub-section (1)
of Section 147 speaks of liability which may be incurred by the owner of a
vehicle in respect of death of or bodily injury to any person or damage to any
property of a third party caused by or arising out of the use of the vehicle in a
public place, whereas sub-clause (ii) thereof deals with liability which may be
incurred by the owner of a vehicle against the death of or bodily injury to any
passenger of a public service vehicle caused by or arising out of the use of the
vehicle in a public place."
The above view was reiterated in United India Assurance Co. Ltd., Shimla v. Tilak
80
Singh , wherein it has been noted as follows:

77
(2004) 3 S.C.C. 297.
78
National Insurance Co. Ltd. v. Laxmi Narain Dhut (2007) 3 SCC 700.
79
(2003) 2 SCC 223.
80
(2006) 4 SCC 404.

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HIMACHAL PRADESH JUDICIAL ACADEMY

"In our view, although the observations made in Asha Rani case (supra) were in
connection with carrying passengers in a goods vehicle, the same would apply
with equal force to gratuitous passengers in any other vehicle also. Thus, we must
uphold the contention of the appellant Insurance Company that it owed no
liability towards the injuries suffered by the deceased Rajinder Singh who was a
pillion rider, as the insurance policy was a statutory policy, and hence it did not
cover the risk of death of or bodily injury to a gratuitous passenger."
In Oriental Insurance Co. Ltd. vs. Sudhakaran K.V.,81 the Supreme Court, after
discussing its earlier judgments , summarised the law regarding the pillion rider on a two wheeler
as under:
“25. The law which emerges from the said decisions, is:
(i) the liability of the insurance company in a case of this nature is not extended to
a pillion rider of the motor vehicle unless the requisite amount of premium is paid
for covering his/her risk
(ii) the legal obligation arising under Section 147 of the Act cannot be extended to
an injury or death of the owner of vehicle or the pillion rider;
(iii) the pillion rider in a two wheeler was not to be treated as a third party when
the accident has taken place owing to rash and negligent riding of the scooter and
not on the part of the driver of another vehicle.”

The above views have again been followed in General Manager United Insurance
Co. Ltd. vs. M. Laxmi 82. It is thus, settled that the liability of the insurance company is not
extended to a pillion rider of the motor vehicle unless the requisite amount of premium is paid
for covering this risk. The legal obligation arising under Section 147 of the Act cannot be
extended to an injury or death of the owner of vehicle or the pillion rider. Further, the pillion
rider on a two wheeler cannot to be treated as a third party when the accident has taken place
owing to rash and negligent riding of the scooter and not on the part of the driver of another
vehicle.
Travelling in Tractor-trolly
So far as the question of liability regarding labourers travelling in trollies is concerned,
the matter was considered by the Supreme Court in Oriental Insurance Company Ltd. vs. Brij
Mohan 83 and it was held that the Insurance Company is not liable.
Involvement of Stationary vehicle in accident

The vehicle need not be in motion at the time of the accident. That means, the driver of
the vehicle need not be driving the vehicle at the time of accident. Careless parking of the vehicle
without indication or without parking lights and not taking proper care of the parked vehicle also

81
(2008) 7 SCC 428.
82
AIR 2009 SC 626.
83
(2007) 7 SCALE 753.

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HIMACHAL PRADESH JUDICIAL ACADEMY

amounts to rash and negligent use of the vehicle.84 In V.G. Sumant vs. Shailendra
Kumar 85 it was observed as follows:-

“.....A motorcycle, which was mechanically in order, was parked by the side of
the road. It rolled down a slope through the intervention of some of the
mischievous children. The question came up for consideration was whether it was
an accident or not. It was held that it was an accident, which arose due to the use
of the motorcycle.”

Arising out of the use of a motor vehicle


In Shivaji Dayanu Patil v. Smt. Vatschala Utam More 86 there was a collision between
a petrol tanker and a Truck on the National Highway. As a result of the said collision, the petrol
tanker went off the road and fell on its left side at a distance of about 20 feet from the highway.
As a result of overturning of the petrol tanker, the petrol contained in it leaked and collected
nearby. After about four hours, an explosion took place in the petrol tanker. The fire spread. The
petrol which stood spread also caught fire. Number of people who had assembled there sustained
burn injuries and some of them died. It was argued that the petrol tanker was stationary and was
not in use and, the accident taking place after four hours. It was observed that the accident even
though occurring after sometimes would be covered by the expression 'arising out of the use of
the motor vehicle'.
In Himachal Road Transport Corporation vs. Om Prakash, 87 the bomb planted in the
bus exploded, when the bus was parked and had just started. It was held as under.-
"...Where bodily injuries have been caused and some of them were fatal on
account of explosion of bomb planted in the bus by someone else after the bus
was just started and covered a short distance, to the passengers of bus. The bodily
injuries and death of passengers arose out of use of vehicle and the M. A. C. T.
could exercise jurisdiction to entertain claims made by the passengers and
dependants of passengers who died in explosion of bomb either immediately or
after some treatment in hospital. The Roadways authority was responsible for and
negligence in not checking luggage and allowing bus to remain unattended in
disturbed times."
Violation of permits
The Insurance company can take a valid defence of the violation of the route permit.
Sometimes the owner is having stage carriage permit but the vehicle is plied in such a way that
the owner must have contact carriage permit for that, say for example of taking Barat in the bus.
„Contract carriage‟ has been defined in section 2(7) of the M.V. Act, 1988 to mean a motor
vehicle which carries a passenger or passengers for hire or reward from one point to another or

84
See: Mangilal v. M.P.S.R.T.C. Bhopal, AIR 1988 MP 109.
85
AIR 1980 MP 101.
86
AIR 1991 SC 1769.
87
1992 ACJ 40 (HP).

Page 28 of 36
HIMACHAL PRADESH JUDICIAL ACADEMY

on a time basis without stopping to pick up or set down passengers. „Stage Carriage‟ has been
defined in section 2(40) of the M.V. Act, 1988 to mean a motor vehicle constructed or adapted to
carry more than six passengers excluding the driver, for hire or reward at separate fares paid by
or for individual passengers, either for the whole journey or for stages of the journey.
The above definition of the „Contract carriage‟ and the „Stage Carriage‟ show that for
carrying the Barat, the owner has to have a „Contract carriage‟ permit and the ordinary „Stage
Carriage‟ will not save the owner, which is issued to the ordinary buses being plied on routes
daily by roadways or other transporters.
In such cases if an accident occurs, then the Insurance will not be liable. In National
Insurance Co. Ltd. vs, Chella Bharathamma 88 the Supreme Court held as under:-
“12. The High Court was of the view that since there was no permit, the question
of violation of any condition thereof does not arise. The view is clearly fallacious.
A person without permit to ply a vehicle cannot be placed on a better pedestal vis-
a-vis one who has a permit, but has violated any condition thereof. Plying of a
vehicle without a permit is an infraction. Therefore, in terms of Section 149(2)
defence is available to the insurer on that aspect. The acceptability of the stand is
a matter of adjudication. The question of policy being operative had no relevance
for the issue regarding liability of the insurer. The High Court was, therefore, not
justified in holding the insurer liable.”
Vehicle in the name of original owner even after sale - Effect
Sometimes a vehicle is sold through affidavits or agreement to sell, but neither the
intimation is given to the licensing authority (RLA) concerned as required under the M.V.Act
nor the vehicle is subsequently registered in the name of the purchaser. The problem arises in
case the accident is caused before the registration of the vehicle in the name of the subsequent
purchaser. In this regard the law has been stated in Vinod Kumar vs. Nirmala Devi 89, wherein,
the High Court of H.P. held as under:

“30. Section 50 of the Act provides the procedure for effecting the transfer of own-
ership of the registered vehicle. The Act mandates the transferor to report the fact of
transfer to the Registering Authority, within 14 days of the transfer, in such form and
with such documents and in such manner as is prescribed under the law. Thereafter the
transferee, within 30 days of the transfer is to report the transfer to the Registering
Authority requesting for effecting the necessary changes in the certificate of registration.
Failure to comply with the mandatory requirements entails penalty.
31. Therefore, from the scheme of the Act as also the definition, it is evident that the
transfer is not effected till the time the requirements of law are complied with.
32. Importantly, there is nothing on record to show that either the transferor or the
transferee had taken any steps for effecting the transfer in accordance with law.
33. The definition under the new Act is exhaustive whereas under the old Act, the
definition being inclusive the word 'owner' included the registered owner as well as the
88
2004 (4) RCR (Civil) 399 Supreme Court.
89
AIR 2009 HP 37.

Page 29 of 36
HIMACHAL PRADESH JUDICIAL ACADEMY

unregistered owner or transferee of a vehicle. The definition under the new Act carves
out only three exceptions and does not cover a case of sale of vehicle where the price is
paid and the possession of the vehicle is delivered to the purchaser/transferee. Even if
sale is effectuated in the absence of compliance of mandatory requirements of law,
transfer does not take place and the transferor continues to be the registered owner.
Therefore, the registered owner cannot be absolved of liability qua third party. Impor-
tantly, the person in whose name the vehicle is registered is considered to be the owner
and unless the name of the transferee is registered he does not become the owner
thereof.”
Accident Information Report - Sections 158(6) and 166(4) M.V. Act
The Apex Court has held that the Tribunals should follow the procedure under sections
158 (6) and 166 (4) M.V. Act, as it will minimize the time taken in the disposal of the claim
petitions, when filed. Otherwise the Tribunals can convert the AIR as claim petitions. The
following directions were also issued in Jai Prakash vs. National Insurance Company Limited
90
, as under:
“Directions‫‏‬to‫‏‬the‫‏‬Claims‫‏‬Tribunals
20. The Registrar General of each High Court is directed to instruct all Claims Tribunals
in his State to register the reports of accidents received under Section 158(6) of the Act as
applications for compensation under Section 166(4) of the Act and deal with them
without waiting for the filing of claim applications by the injured or by the family of the
deceased. The Registrar General shall ensure that necessary registers, forms and other
support is extended to the Tribunal to give effect to Section 166(4) of the Act.
21. For complying with Section 166(4) of the Act, the jurisdictional Motor Accidents
Claims Tribunals shall initiate the following steps:
(a) The Tribunal shall maintain an institution register for recording the AIRs which are
received from the Station House Officers of the police stations and register them as
miscellaneous petitions. If any private claim petitions are directly filed with reference to
an AIR, they should also be recorded in the register.
(b) The Tribunal shall list the AIRs as miscellaneous petitions. It shall fix a date for
preliminary hearing so as to enable the police to notify such date to the victim (family of
the victim in the event of death) and the owner, driver and insurer of the vehicle involved
in the accident. Once the claimant(s) appear, the miscellaneous application shall be
converted to claim petition. Where a claimant(s) file the claim petition even before the
receipt of the AIR by the Tribunal, the AIR may be tagged to the claim petition.
(c) The Tribunal shall enquire and satisfy itself that the AIR relates to a real accident and
is not the result of any collusion and fabrication of an accident (by any "police officer-
advocate-doctor" nexus, which has come to light in several cases).
(d) The Tribunal shall by a summary enquiry ascertain the dependent family
members/legal heirs. The jurisdictional police shall also enquire and submit the names of
the dependent legal heirs.

90
(2010) 2 SCC 607.

Page 30 of 36
HIMACHAL PRADESH JUDICIAL ACADEMY

(e) The Tribunal shall categorise the claim cases registered, into those where the insurer
disputes liability and those where the insurer does not dispute the liability.
(f) Wherever the insurer does not dispute the liability under the policy, the Tribunal shall
make an endeavour to determine the compensation amount by a summary enquiry or
refer the matter to the Lok Adalat for settlement, so as to dispose of the claim petition
itself, within a time-frame not exceeding six months from the date of registration of the
claim petition.
(g) The insurance companies shall be directed to deposit the admitted amount or the
amount determined, with the Claims Tribunals within 30 days of determination. The
Tribunals should ensure that the compensation amount is kept in a fixed deposit and
disbursed as per the directions contained in Kerala SRTC v. Susamma Thomas.
(h) As the proceedings initiated in pursuance of Sections 158(6) and 166(4) of the Act are
different in nature from an application by the victim(s) under Section 166(1) of the Act,
Section 170 will not apply. The insurers will therefore be entitled to assist the Tribunal
(either independently or with the owners of the vehicles) to verify the correctness in
regard to the accident, injuries, age, income and dependants of the deceased victim and in
determining the quantum of compensation.”

Permission under section 170 M.V.Act

Recently, the Supreme Court noticed that in the claim petitions, the Insurance companies
are made parties, though special notice is required to be issued to the companies under section
149(2). But the Supreme Court also noted that the Insurance company can be allowed to contest
the petitions where grounds are made, by passing short orders. It was held in National Insurance
Company Limited vs. Meghji Naran Soratiya 91 as under:
“6. But in practice, virtually in all claim petitions, the insurer is impleaded as a party
respondent alongwith the driver and owner. Consequently, many Tribunals instead of
issuing the special notice under section 149(2) notifying the insurer of the lodging of a
claim against the insured (so as to give the insurer an option to deny the validity of the
policy or repudiate its liability under the policy under any of the grounds mentioned in
section 149(2) of the Act), issues regular notice to the insurer. As a result, in practice
the insurers file their reply in all claim petitions. They raise the grounds available under
section 149(2), if such grounds exist. Otherwise they generally traverse the averments
in the claim statement, though not permitted to contest on merits. But where one of the
two circumstances mentioned in section 170 exists, that is collusion or non-contest on
the part of driver/owner, then the insurer who is already a party, files an application
under section 170 of the Act seeking permission to contest, which is routinely granted.
Where the insurer is already a party respondent in the claim petition and it makes an
application seeking permission to contest the claim on merits on the ground that the
driver and owner have failed to contest the claim, even a one-line order or non-reasoned
order may be sufficient as the Tribunal can satisfy itself about the need to grant the
permission by a perusal of the record, without anything more. But where the

91
(2009) 12 SCC 796 .
Page 31 of 36
HIMACHAL PRADESH JUDICIAL ACADEMY

driver/owner are defending the claim, but the insurer seeks permission on the ground
that there is collusion between the claimants and the driver/owner, it may be necessary
for the tribunal to record reasons to show that it is satisfied that there is collusion,
before granting permission. Where applications under section 170 of the Act filed by
the insurer specifically alleged that the driver/owner failed to contest the claim and
therefore it was seeking permission, the same is verifiable from the record. On such
verification, the Tribunal may pass a separate order or even endorse the order "granted"
on the application itself. Even if any reason was to be recorded, all that the Tribunal is
required to say is : "Permission is granted as driver/owner have failed to contest the
claim". In such cases, failure to record reasons can not render the order invalid or
illegal as the record on the face of it would show the claim was not being defended by
the driver/owner. Procedural requirements should not be stretched to absurd levels to
defeat the ends of justice itself.”

Practice And Procedure


A claim petition for compensation in regard to a motor accident (filed by the injured or
in case of death, by the dependant family members) before the Motor Accident Claims Tribunal
constituted under section 165 of the Act is neither a suit nor an adversarial lis in the traditional
sense. It is a proceedings in terms of and regulated by the provisions of Chapter XII of the Act
which is a complete Code in itself.92
Evidence Act is strictly not applicable. However, Courts/Tribunals should not admit into
evidence photocopies of documents. Documents are required to be proved. In Claim Cases, it is
difficult to get witnesses, much less eye witnesses, thus extremely strict proof of facts in
accordance with provisions of Indian Evidence Act may not be adhered to religiously. Some
amount of flexibility has to be given to those cases, but it may not be construed that a complete
go-by is to be given to the Indian Evidence Act. The Motor Vehicles Act is a social piece of
legislation and has been enacted with intent and object to facilitate the Claimants/Victims to get
redress for the loss of family member or for injuries at an early date. In any case, money cannot
be any substitute for it, but in the long run it may have some soothing effect. Thus, it is desirable
to adopt a more realistic, pragmatic and liberal approach in these matters. 93
In injury cases specially where damages sought are high, Doctors must be
examined. Doctor must be examined to prove the percentage of disability i.e., whether disability
is in relation to entire body or in relation to a particular limb. Efforts should be made to record
the evidence of the treating doctors on commission, after ascertaining their convenient timings.
Evidence of doctors may be recorded without delay, ensuring that he is not required to wait.
Doctor may be given specific time for evidence before the Tribunal so that he may not be
required to wait. Where certificate given by doctor is not contested, it may be marked by
consent, dispensing with oral evidence.

92
United India Insurance Co. Ltd. Vs. Shila Datta, (2011) 10 SCC 509.
93
Bimla Devi vs. Satbir Singh, 2012 (4) SCALE 217.

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HIMACHAL PRADESH JUDICIAL ACADEMY

Similarly, in Injury Cases, the Petitioner should be directed to produce disability


certificate, original bills of medicines and documents relating to accident and treatment before
framing issues. Where more than one claim petition arises out of one accident, all claim petitions
should as far as possible be tried together. The District Judges should ensure that all claim
petitions arising out of one accident are normally assigned to one MACT. If more than one
claim petition is filed with regard to the death of same person, it is the duty of the tribunal to
ensure that such claim petitions are heard and decided together. Even if the Tribunal finds out
that another claim petition with regard to the death of the same person is pending before some
other Tribunal, it should ensure that only one proceeding continues. 94
A proceedings for award of compensation in regard to a motor accident before the
Tribunal can be initiated either on an application for compensation made by the persons
aggrieved (claimants) under section 166(1) or section 163A of the Act or suo moto by the
Tribunal, by treating any report of accident (forwarded to the tribunal under section 158(6) of the
Act as an application for compensation under section 166 (4) of the Act. The rules of pleadings
do not strictly apply as the claimant is required to make an application in a form prescribed under
the Act. In fact, there is no pleading where the proceedings are suo moto initiated by the
Tribunal. In a proceedings initiated suo moto by the tribunal, the owner and driver are the
respondents. The insurer is not a respondent, but a noticee under section 149(2) of the Act has to
be sent to it. Where a claim petition is filed by the injured or by the legal representatives of a
person dying in a motor accident, the driver and owner have to be impleaded as respondents. The
claimants need not implead the insurer as a party. But they have the choice of impleading the
insurer also as a party respondent. When it is not impleaded as a party, the Tribunal is required to
issue a notice under section 149(2) of the Act. If the insurer is impleaded as a party, it is issued
as a regular notice of the proceedings. The words `receipt of an application for compensation' in
section 168 refer not only to an application filed by the claimants claiming compensation but
also to a suo motu registration of an application for compensation under section 166(4) of the
Act on the basis of a report of an accident under section 158(6) of the Act. Though the tribunal
adjudicates on a claim and determines the compensation, it does not do so as in an adversarial
litigation. On receipt of an application (either from the applicant or suo motu registration), the
Tribunal gives notice to the insurer under section 149(2) of the Act, gives an opportunity of
being heard to the parties to the claim petition as also the insurer, holds an inquiry into the claim
and makes an award determining the amount of compensation which appears to it to be just.
(Vide Section 168 of the Act). The Tribunal is required to follow such summary procedure as it
thinks fit. It may choose one or more persons possessing special knowledge of and matters
relevant to inquiry, to the assist it in holding the enquiry (vide section 169 of the Act). The award
of the Tribunal should specify the person/s to whom compensation should be paid. It should also
specify the amount which shall be paid by the insurer or owner or driver of the vehicle involved

94
Oriental Insurance Company vs. Sh. Parveen and Others, (2011) 3 Him. L.R. 1339; Raj Kumar vs. Ajay Kumar and another,
2011 ACJ 1 and FAO No. 488 of 2010, Decided on 12/01/2012, titled as National Insurance Company Ltd. vs. Sh. Parveen
Kumar.

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HIMACHAL PRADESH JUDICIAL ACADEMY

in the accident or by all or any of them. (Vide section 168 of the Act). The Tribunal should
deliver copies of the award to the parties concerned within 15 days from the date of the award.
(Vide section 168 (2) of the Act).95
The Tribunal has no jurisdiction to grant consequential loss arising out of damage to the
96
property. Only those provisions of CPC which are specifically mentioned, will apply to
proceedings under M.V.Act. 97 Delay in filing FIR is not a ground to dismiss claim petition. 98
Claimants are not required to prove the case in motor accident compensation claims as it is
required to be done in a criminal case. 99

Deposit of Compensation:

Normally, the compensation awarded to the claimants should not be released to them
immediately. The Supreme Court in various cases has laid guidelines in this regard. In cases of
minors, women and illiterate persons, as a matter of abundant precautions, the amount should be
invested in long term deposits. Interest should, however, be paid on monthly or quarterly basis
to the claimants to meet their day to day expenses. However, in cases of persons who are
educated, well established in life and who, the Tribunal feels, can suitably look after their own
money, the same may be ordered to be released. This, however, cannot be done in cases of the
minor‟s share unless it is shown that some portion of the money falling to the share of the minor
is required for his education, treatment etc., where the Tribunal may by justified in releasing the
amounts.

In General Manager , Kerala State Road Transport Corporation, Trivandrum vs


Susamma Thomas,100 the Apex Court laid down the following guidelines regarding the deposit
of compensation or its payment to the claimants:

"(i) The Claims Tribunal should, in the case of minors, invariably order the
amount of compensation awarded to the minor invested in long term fixed
deposits at least till the date of the minor attaining majority. The expenses
incurred by the guardian or next friend may however be allowed to be
withdrawn;
(ii) In the case of illiterate claimants also the Claims Tribunal should follow
the procedure set out in (1) above, but if lump sum payment is required for
effecting purchases of any movable or immovable property, such as,

95
United India Insurance Co. Ltd. vs. Shila Datta, (2011) 10 SCC 509.
96
National Insurance Company Ltd., vs. HRTC, Latest HLJ 2010 (HP) 165.
97
Miss. Lata vs. United India Insurance Co. Ltd, 2005 (1) Shim. L.C 278.
98
Ravi vs Badrinarayan , (2011) 4 SCC 693.
99
Kusum Lata vs. Satbir , (2011) 3 SCC 646.

100
(1994) 2 Supreme Court Cases 176.

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HIMACHAL PRADESH JUDICIAL ACADEMY

agricultural implements, rickshaw etc., to earn a living, the Tribunal may


consider such a request after making sure that the amount is actually spent for
the purpose and the demand is not a rouge to withdraw money;
(iii) In the case of semi-literate persons the Tribunal should ordinarily resort to
the procedure set out at (i) above unless it is satisfied, for reasons to be stated
in writing, that the whole or part of the amount is required for expanding and
existing business or for purchasing some property as mentioned in (ii) above
for earning his livelihood, in which case the Tribunal will ensure that the
amount is invested for the purpose for which it is demanded and paid;
(iv) In the case of literate persons also the Tribunal may resort to the
procedure indicated in (1) above, subject to the relaxation set out in (ii) and
(iii) above, if having regard to the age, fiscal background and strata of society
to which the claimant belongs and such other considerations, the Tribunal in
the larger interest of the claimant and with a view to ensuring the safety of the
compensation awarded to him thinks it necessary to do order;
(v) In the case of widows the Claims Tribunal should invariably follow the
procedure set out in (i) above;
(vi) In personal injury cases if further treatment is necessary the Claims
Tribunal on being satisfied about the same, which shall be recorded in writing,
permit withdrawal of such amount as is necessary for incurring the expenses
for such treatment;
(vii) In all cases in which Investment in long term fixed deposits is made it
should be on condition that the Bank- will not permit any loan or advance on
the fixed deposit and interest on the amount invested is paid monthly directly
to the claimant or his guardian, as the case may be;
(viii) In all cases Tribunal should grant to the claimants liberty to apply for
withdrawal in case of an emergency. To meet with such a contingency, if the
amount awarded is substantial, the Claims Tribunal may invest it in more than
one Fixed Deposit so that if need be one such F.D.R. can be liquidated."

These guidelines should be borne in mind by the Tribunals in the cases of compensation in accident
cases.
Recently, the Apex Court in A.V. Padma versus R. Venugopal,101 held that the aforesaid
guidelines are not to be followed rigidly and that the Tribunals can in appropriate cases order the
release of compensation amount especially when the claimants are very old and need the money
or when the claimants are educated and well versed in managing their lives and finances.
While releasing the money, the Tribunals and Courts should be careful that the amount
actually released reaches the claimants and is not taken away by some other person. Therefore,
the Tribunals as well as the Courts should insist that the amount should be transferred directly to
the bank accounts of the claimants. Preferably the bank account should be the personal account

101
2012 (3) SCC 378.

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HIMACHAL PRADESH JUDICIAL ACADEMY

of the claimant himself. However, where close family members are involved, the Tribunal in its
discretion may direct that the amount be deposited in joint account of the claimants. While
releasing the amounts, the Tribunals and Courts should insist that the copy of the first page of the
pass book alongwith the photograph of the claimant, to whom the amount is released, is placed
on the court file.

Is the Insurance Company entitled to deduct Income Tax on the amount of compensation
deposited?

The Insurance Company cannot deduct tax on compensation. The Insurance Company is
entitled to deduct tax at source if interest income is more than Rs. 50,000. In this regard
reference may be made to Oriental Insurance Company vs. Viyasan Devi .102

102
CMPMO No. 386 of 2010, Decided on 30/12/2010 .

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