SC applies “pay and recover” doctrine where driver of the offending vehicle was not holding a valid driving license on the date of the accident
In a recent judgment, the Hon’ble Supreme Court in a motor accident claim upheld the doctrine of “pay and recover” where the driver of the offending vehicle was not holding a valid driving license on the date of the accident and directed insurance company to satisfy the award, which can be recovered by it from the owner of the vehicle.
ABCAUS Case Law Citation:
4756 (2025) (09) abcaus.in SC
In the instant case, the appellant was aggrieved by the order of the High Court whereby the High Court enhanced the road accident compensation payable to the appellant-claimant and absolved the insurance company from the liability to pay the amount, fastening the same on the driver and the owner of the vehicle respectively.
A truck met with an accident with a tractor-trolley, tractor. The deceased was a conductor in the truck who died succumbing to injuries suffered in the accident. The appellant was the mother of the deceased.
A claim was made by the appellant before the Motor Accident Claims Tribunal which awarded compensation by applying the relevant parameters for determination of compensation. The compensation amount was ordered to be deposited by the owner and driver of the truck. It was also found that the driver of the truck was not holding a valid licence on the date of the accident.
The Hon’ble High Court was of the view that as the driver was not holding a valid license on the date of the accident, it was not legally permissible for him to drive the vehicle on the date of accident leading to breach of conditions of insurance policy and thus exonerating the Insurance Company from its liability.
The High Court enhanced the amount of compensation. However, while enhancing the compensation, the High Court relying on the judgment of the Hon’ble Supreme Court, fastened the liability to pay the amount on the driver and the owner of the vehicle holding that Insurance Company was entitled in law to avoid the liability.
Before the Hon’ble Supreme Court, the case and grievance of the appellant was that the High Court ought to have applied the doctrine of “pay and recover” requiring the Insurance Company to satisfy the amount of compensation to the claimant and subsequently allow the Insurance Company to recover the amount in accordance with law. To support its contentions, the appellant pressed into service several decisions of the Apex Court.
The Hon’ble Supreme Court observed that in a later judgment, referring to the previous judgment (relied upon by the High Court) reiterated that the insurer has to pay the compensation amount payable to the third party and the insurance company may recover the same thereafter from the insured.
It was noted that in the later judgment in which the doctrine of “pay and recover” was considered, the driver had no valid licence and the insurance policy was violated. Similar principle, as applied in another judgment in which the driver of the offending vehicle was found driving the vehicle in breach of the policy conditions, the insurance company was absolved and the principle of ‘pay and recover’ was applied.
The Insurance company submitted that in a decision subsequent to the judgment relied upon by the High Court, the Hon’ble Supreme Court had doubted the justification of applying the principle of pay and recover on the ground that if the Insurance Company was found not liable in law to pay the compensation, the direction regarding pay and recover can be said to be beyond the legal propriety.
The Hon’ble Supreme Court noted that the Court in its earlier decisions had applied the very principle, about the correctness of which, reservations were expressed in a later decision. However, in a later case (relied upon by the appellant) the reference was not answered and the case was disposed of, keeping the question of law open to be decided in an appropriate case.
The Hon’ble Supreme Court observed that in the present case as stated above, on the date of accident, the driver had no valid license and the licence was not renewed. The insurance company was entitled to take a valid defence in that regard under Section 149 (2)(a)(ii) as the driver of the offending vehicle was not duly licensed, to avoid its liability to pay the compensation. The conditions in law were satisfied to absolve the insurance company from the payment of compensation.
The Hon’ble Supreme Court further noted that the Hon’ble High Court in the impugned order had relied upon an earlier judgment that as per the specific provisions of the Motor Vehicles Act, if the driver does not possess a valid and effective driving licence, it results in a breach of conditions of the insurance policy, exonerating the insurer from its liability. But in the said case, the Supreme Court while affirming the order of the High Court, absolving the liability for breach of conditions in the policy, refused to interfere with orders of ‘pay and recover’ as directed by the High Court.
Accordingly, following its own decisions the Hon’ble Supreme Court held that the insurer be directed to satisfy the award, which however can be recovered by the insurer from the insured-owner of the vehicle.
In result, the appeal was allowed.
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