August 10, 2018
In this recent case, the two-Judge Bench elaborated on the Doctrine of Pay and Recover in Motor Vehicle Compensation cases. The Doctrine was considered by the Supreme Court in the case of National Insurance Company Ltd. v. Swaran Singh and others.
Case name: Shamanna v. The Divisional Manager, Oriental Insurance Co. Ltd.
Date of Judgment: August 08, 2018
In the present case, appeal has been lodged against High Court of Karnataka’s order, whereby the Court had reversed the order passed by the Tribunal for “pay and recover”.
In the case, the driver of the offending vehicle had no valid driving licence at the time of the accident and as there was violation of the terms of the insurance policy, the Tribunal had directed the insurance company to pay the compensation to the claimants and granted liberty to the insurance company to recover the same from the owner of the offending vehicle.
The High Court in appeal however held that only the owner of the offending vehicle was liable to make the payment of the compensation amount and that the Tribunal had no power to order for “pay and recover”.
The Supreme Court however held that the High Court could not interfere with the Tribunal’s order and that there was nothing in law or precedents which mandated that the power to order for pay and recover could be made by the Supreme Court only under Article 142 of the Constitution of India. Other observations made by the Supreme Court in the case are as under:
That as per the decision in National Insurance Company Ltd. v. Swaran Singh and others, the insurer had to indemnify the compensation amount payable to the third party and the insurance company may recover the same from the insured.
- What is the Doctrine of Pay and Recover?
- That the Doctrine of “pay and recover” implies the liability of the insurance company in cases of breach of policy condition due to disqualifications of the driver or invalid driving licence of the driver and in case of third party risks, the insurer has to indemnify the compensation amount to the third party and the insurance company may recover the same from the insured.
- Referring to the Swaran Singh’s case, the Supreme Court observed that the onus is always upon the insurance company to prove that the driver had no valid driving licence and that there was breach of policy conditions. Where the driver did not possess the valid driving licence and there are breach of policy conditions, “pay and recover” can be ordered in case of third party risks.
- The Apex Court also observed that in such case, the Tribunal is required to consider as to whether the owner has taken reasonable care to find out as to whether the driving licence produced by the driver, does not fulfill the requirements of law or not will have to be determined in each case.
In view of the aforesaid, the Supreme Court held that the award passed by the Tribunal directing the insurance company to pay the compensation amount awarded to the claimants and thereafter, recover the same from the owner of the vehicle in question was in accordance with law and the Tribunal’s award was also restored.
The entire case can be accessed here.