Motor Vehicles

Insurance
The Concept and the Law

In India

The M.V. Act, 1939

The need was however felt that this Act should
take into account changes in the road transport
technology, pattern of passengers road transport
technology, development of the network in the
country
and
particularly
the
improved
techniques in the motor vehicles
National transport policy committee
National police commission
Road safety committee
Low powered two wheelers committee
Law
commission
of
India
recommended
updating, simplification and rationalization of
this law.

Contd.

Working group was therefore, constituted

in Jan-1984 to review all the provisions of
the M.V.Act, 1939 and to submit draft
proposals
for
a
comprehensive
legislation to replace the existing Act
Based on various committee suggestions
and recommendations of the LCI, the
new MVAct 1988 came into force
effective from 1st July, 1989
Totally 217 sections with XIII chapters
Chapter-X-XIII (sections 140-176) deals
with Insurance subject

Chapter-X to XIII

Ch.X : Sections 140-144: Liability to

pay compensation in certain cases
on the principle of no fault liability
Ch.XI : Sections 145-164: Insurance
of Motor Vehicles against third party
risks
Ch.XII:165-176:
Motor
vehicles
Claims Tribunal
Ch.XIII: offences, penalties and
procedure, Possibilities of Accidents
and liability

Criminal and Civil Liability

Section 279 and 280 to 289, Section
304A, 336, 337 and 338 of Indian Penal
code deal with the accuseds rash and
negligent conduct endangering the
safety of others.
But section 304A, 337 and 338 are
specific provisions relating to cases in
which rash and negligent driving or
riding result in the death of another
person or in hurt or grievous hurt
caused to another person.

Subject of Insurance
Mechanically propelled vehicles is in
entry-35 of the concurrent list
Hence both parliament and the states can
make laws on the subject and in
consistency between the two has to be
resolved in accordance with the Art-254
of the constitution
But the provisions of chapter-XI i.e.,
Insurance of motor vehicles against third
party risks(145-164) cannot be added to
or altered by the state legislations
because insurance subject is in the Entry47 of the Union List.

Contd.

The main object behind this is protecting

the public from the danger of tort feasors
on the road, that no matter what the parties
agreed in the policy, if the vehicle did an
injury to a third party the insurer should
have to pay.
Sec-148 of Road Traffic Act 1972(English)
having similar provision.
Remedy in England:
In order to assure that third parties who are
injured in motor Accidents do not go
without compensation for want of insurance

Contd.

A motor vehicle Bureau was set up by the

general body of insurers in 1946 after
second world war.
The bureau is agreed with the ministry of
transport to satisfy the Judgments of
awarding compensation to third parties
under the Road Traffic Act
Where there was no insurance or effective
insurance or driver was unidentified and
untraced, the Bureau pays the road victim
or his heirs and gets the Judgments
obtained by him assigned in its favour so
that it may reimburse it self.

Coverage
A person seeking insurance in respect of his
motor vehicle enter into a contract with the
insurance to indemnify him
(a) against loss or damage to the vehicle
(b) against legal liability he may incur to
third parties in respect of death of or bodily
injury caused to them
(c) damage to their property caused by the
use of the vehicle.
Principles like indemnity, utmost most good
faith, insurable interest, subrogation
applicable

Principles Applicable
Indemnity: This principle ensures that the
insured does not make profit beyond his loss.
The insured is placed after loss, as far as
possible, in the same financial position as he
was before the loss.
But in case of theft claims, for repair claims,
insured declared value(IDV) is applied.
IDV does not take into consideration market
value or depreciated price.
It is the sum insured agreed at the beginning
of the policy of the new vehicle. It remains
constant

Subrogation and Contribution

Subrogation usually arises when

there is a collision between two
vehicles, one of, which is responsible
accident. In practice, however,
subrogation
is
modified
by
agreements between insurers,
Egs. Knock for Knock agreements
Contribution arises when there is
double insurance, that is, when the
same vehicle is insured under two
policies. According to policy condition

No fault liability
In common law: Under the original law the basis of
claim for compensation was fault.
The courts awarded compensation
only when the driver was at fault.
Therefore it was necessary for the
claimant to compensation to assert
and establish that the
vehicle involved, at the time of
accident, was being driven rashly
and negligently

Burden of Proof in common law.

The burden lay on the claimant and the
claim failed if the defendant was able to
prove that there was sudden failure of
brake or the vehicle suffered from some
latent defect.
The claimant was hardly in a position to
rebut the defendant's evidence on these
points.
In order to shift the burden, the common
law courts evolved the doctrine of res
ipsa laquitur, meaning of which is that,
thing or event speaks for itself.

In 1939 Act
Originally there was no concept of no
fault liability
The Honble SC, In Srimati Manjushri Raha
and others v. B.L. Gupta, (1977) 2 SCC
174 observed that
"The time is ripe for serious consideration
of creating no-fault liability"
A reminder was issued again in Motor
Owners Insurance Co. ltd. v. Jadavji
Keshavji Modi and others (1981) 4 SCC
660.

Amendment to 1939 Act

On the recommendation of Honble
S.C. in the case Manushri Raha v. B.L.
Gupta and on the recommendation of
the Law commission of India
The 1939 Act was accordingly
amended
by
Motor
Vehicles
(Amendment) Act, 1982 incorporating
Sections 92-A to 92-E to provide, for
the
first
time
payment
of
compensation on the principle of "no
fault".

Statutory recognition to no fault

By this amendment S. 92-A (3) was added
as follows "In any claim for compensation under
Sub-Section (1) the claimant shall not
be required to plead and establish
that the death or permanent disablement
In respect of which the claim has been
made was due to any wrongful act,
neglect or default of the owner or
owners of the vehicle or vehicles
concerned or of any other person."

No fault liability in 1988 Act

The 1939 Act however, later repealed

and a new Act "Motor Vehicles Act,
1988" (Act 59 of 1988) was enacted.
It came into force from 14th October,
1988.
In this Act also incorporated Sections
140 to 144 (corresponding to earlier
Sections 92-A to 92-E) on the
principle of no-fault liability.

Remedy Under the M.V.Act, 1988

(a) In cases of hit and run motor accidents
cases (Section 161)
(b) In case of right of just compensation on
the principle of "Fault" (Sections 166 and
168)
(c) In case of award of compensation on
the principle of "No Fault" (Chapter X
Sections 140 to 144).
(d) Extended Provision of no fault liabilitycomputation of compensation through
structural formula basis (Sections 163A
and 163B)(incorporated by amendment in
1994)

The M.V (Amendment) Act, 1994

The Motor Vehicles Act, 1988 has been again

amended by the Amendment Act 54 of 1994.
It came into force on November 14, 1994.
By this Amendment Act, Sections 163-A and
163-B have been inserted in Chapter XI
entitled "Insurance of Motor Vehicles against
Third-Party Risks".
These two new sections were inserted to
provide for payment of compensation in
motor accident cases on a "predetermined
structural formula" given in the Second
Schedule of the Act.

No-fault Liability
140. Liability to pay compensation in certain
cases on the principle of no fault.
(1) Where death or permanent disablement of any
person has resulted I from an accident arising out of the
use of a motor vehicle or motor vehicles, the owner of
the vehicle shall, or, as the case may be, the owners of
the vehicles shall, jointly and severally, be liable to
pay compensation in respect of such death or
disablement in accordance with the provisions of this
section.
(2) The amount of compensation which shall be payable
under sub-section (1) in respect of the death of any
person shall be a fixed sum of fifty thousand rupees
and the amount of compensation payable under that
sub-section in respect of the permanent disablement of
any person shall be a fixed sum of twenty-five
thousand rupees.

Contd.

3) In any claim for compensation

under sub-section (1), the claimant
shall not be required to plead
and establish that the death or
permanent disablement in respect of
which the claim has been made was
due to any wrongful act, neglect
or default of the owner or owners of
the vehicle or vehicles concerned or
of any other person.

Contd.
(4) A claim for compensation under sub-section (1) shall
not be defeated by reason of any wrongful act,
neglect or default of the person in respect of whose
death or permanent disablement the claim has been
made nor shall the quantum of compensation recoverable
in respect of such death or permanent disablement be
reduced on the basis of the share of such person in the
responsibility for such death or permanent disablement.
(5) Notwithstanding anything contained in sub-section (2)
regarding death or bodily injury to any person, for which
the owner of the vehicle is liable to give compensation for
relief, he is also liable to pay compensation under any
other law for the time being in force:
Provided that the amount of such compensation to be
given under any other law shall be reduced from the
amount of compensation payable under this
section or under section 163A.

Contd.
Section. 141. Provisions as to other right to claim
compensation for death or permanent disablement.
(1) The right to claim compensation under section 140 in
respect of death or permanent disablement of any person
shall be in addition to [any other right, except the right
to claim under the scheme referred to in section 163A
(such other right hereafter] in this section referred to as the
right on the principle of fault) to claim compensation in
respect thereof under any other provision of this Act or of any
other law for the time being in force].
(2) A claim for compensation under section 140 in respect of
death or permanent disablement of any person shall be
disposed of as expeditiously as possible and where
compensation is claimed in respect of such death or
permanent disablement under section 140 and also in
pursuance of any right on (the principle of fault, the claim for
compensation under section 140 shall be disposed of as
aforesaid in the first place.

Contd.
(3) Notwithstanding anything contained in sub-section (1),
where in respect of the death or permanent disablement of
any person, the person liable to pay compensation
under section 140 is also liable to pay compensation
in accordance with the right on the principle of
fault, the person so liable shall pay the first- mentioned
compensation and(a) if the amount of the first-mentioned compensation is
less than the amount of the second-mentioned
compensation, he shall be liable to pay (in addition to the
first-mentioned compensation) only so much of the
second-mentioned compensation as is equal to the amount
by which it exceeds the first mentioned compensation
(b) if the amount of the first-mentioned compensation is
equal to or more than the amount of the secondmentioned compensation, he shall not be liable to pay
the second-mentioned compensation.

Death Claim U/s.140 of the

M.V. Act

Eshwarappa @ Maheshwarappa v.
C.S.
Gurushanthappa & anr
Basavaraj was the driver of a privately owned
car. In the night of October 28, 1992 he took out
the car for a joyride and along with five persons,
who were his neighbours, proceeded for the
nearby Anjaneya temple for offering pooja
On way to the temple the car met with a fatal
accident in which Basavaraj and four other
occupants of the car died; the fifth passenger
sustained injuries but escaped death.
One of the persons died in that motor accident
was Nagaraj, whose parents are the appellants
before this Court.

Contd.
The heirs and legal representatives of the deceased
driver, Basavaraj filed a claim for compensation under
the Workmen's Compensation Act, 1923. They got
nothing.
The Commissioner under the Workmen's Compensation
Act , 1923 and held that the accident did not take place
in the course of employment and rejected the claim for
compensation.
The other claimats filed a claim petition MACT,
Chitrandurga under section 166 of the Motor Vehicles
Act seeking compensation for the death of Nagaraj and
I.A.s were filed seeking interim compensation of
rupees twenty five thousand Rs.25,000.00 only as the
law stood at that time in terms of section 140 of the Act
The tribunal disposed the application by common order
as follows:-

Cond.

It was held that neither the owner of the car nor the
insurance company was liable to pay anything to any of
the claimants, including the appellants, because
Basavaraj had taken out the car of his employer
unauthorized and against his express instructions and
had caused the accident by driving the car very rashly
after consuming liquor.
At the time of accident the car had been taken
completely away from the control of its owner. In a
sense it was stolen by the driver, even though
temporarily. The accident was, thus, completely outside
the insurance policy.
No compensation was, therefore, payable to any of the
claimants under section 166 of Act. The tribunal
rejected the claim even u/s.140 and High court also
upheld the order of tribunal.

Contd.

Hence an appeal before Honble

Supreme court Issue: The counsel
appearing on behalf of the appellants
raised a very limited issue.
He submitted that in any event the
appellants were entitled to the `no
fault compensation' as provided under
section 140 of the Motor Vehicles Act,
1988 but they were denied even that
by the Tribunal for reasons that are
totally unsustainable in law.

Contd.

From the order of the Tribunal, it

appears that in four of the five cases
before it, No order was passed on I.As
and started examining the claimants'
claim on merits under section 166 of
the Act.
The Honble S.C held that, the
provisions of section 140 are indeed
intended
to
provide
immediate
remedy to the injured or the heirs and
legal representatives of the deceased.

Contd.

Hence, normally a claim under section 140 is made at

the threshold of the proceeding and the payment of
compensation under section 140 is directed to be
made by an interim award of the Tribunal which may
be adjusted if in the final award the claimants are held
entitled to any larger amounts.
But that does not mean, that in case a claim under
section 140 was not made at the beginning of the
proceedings due to the ignorance of the claimant or no
direction to make payment of the compensation under
section 140 was issued due to the over-sight of the
Tribunal, the door would be permanently closed. Such
a view would be contrary to the legal provisions and
would be opposed to the public policy.
The Honble SC directed Insurance company to pay
u/s.140

Indra devi v. Bagada Ram

On March 31, 1999, one Ramni was while

going on a motorcycle dashed against the rear
side of a truck that was headed in the same
direction as the motorcycle. Ramni was died in
the accident.
His heirs and legal representatives, the
appellants before this Court, moved the MACT,
Sojat, against the owner of the truck and its
insurer, for compensation in terms of section
166 of the Motor Vehicles Act, 1988.
In course of the proceedings, the appellants
claimed no fault compensation under section
140 of the Motor Vehicles Act which was
granted to them.

Contd.

The accident was caused due to the

careless and negligent driving of the
deceased himself. On that finding, the
Tribunal naturally rejected the claim of
compensation on the principle of fault.
But it did not stop there and went on to
hold that the insurance company was
entitled to the refund of the amount of no
fault compensation along with interest @
9% p.a.
The High court upheld the order of the
tribunal. Hence an appeal before Honble
SC

Contd.
The Honble SC held that, the impugned direction is
clearly erroneous and unsustainable in law
The Tribunal has completely failed to realize the true
nature and character of the compensation in terms of
section 140 of the Act. The marginal heading to section
140 describes it as based on the principle of no fault.
As the expression no fault suggests the compensation
under section 140 is regardless of any wrongful
act, neglect or default of the person in respect of
whose death the claim is made.
The High Court was equally in error in missing out this
grave mistake in the judgment and order passed by the
Tribunal and not setting it right. Order of the Tribunal
insofar as it permits the insurance company to recover
the amount of interim compensation along with the
interest from the claimants/appellants is set aside.

Permanent disablement
142. Permanent disablement.
For the purposes of this Chapter, permanent
disablement of a person shall be deemed to
have resulted from an accident of the nature
referred to in sub-section (1) of section 140 if
such person has suffered by reason of the
accident, any injury or injuries involving:-
(a) permanent privation of the sight of either
eye or the hearing of either ear, or privation of
any member or joint; or
(b) destruction or permanent impairing of the
powers of any member or joint; or
(c) permanent disfiguration of the head or face.

WCC vs.MACT
Section -143: Applicability of Chapter to
certain claims under Act 8 of 1923.
The provisions of this Chapter shall also
apply in relation to any claim for
compensation in respect of death or
permanent disablement of any person under
the Workmen's Compensation Act, 1923
resulting from an accident of the nature
referred to in sub-section (1) of section 140
and for this purpose, the said provisions
shall, with necessary modifications, be
deemed to form part of that Act.

Suresh P v.
M/S. Nidish Trading Company anr.

The appellant was employed as a cleaner in a

lorry which met with an accident on 6-12-1998.
He applied to the Commissioner under Workmen's
Compensation Act, 1923 claiming compensation
under Section 22 of that Act. The Commissioner
held that the applicant has 5% loss of earning
capacity and passed the impugned order.
That the accident arose out of the use of a motor
vehicle is not in dispute. The fact that the
workman suffered the injury referable to the entry
at SI.No.37 in Part II of Schedule I of the W.C. Act,
is also not disputed.

Cond.
But substantial question of law raised in this
appeal is as to whether the appellant was
entitled to the benefit of Section 140 of the
Motor
Vehicles
act
and
entitled
to
compensation for permanent disablement in
terms of that provision?
Section 143 lays down that the provisions of that
Chapter shall also apply in relation to any claims
under W.C. Act. By virtue of this section in the MV
Act, the provisions of Chapter X of that Act gets
incorporated, by reference, into the W.C. Act.
Section 140 of the MV Act provides for liability to
pay compensation for death or permanent
disablement, on the principle of no fault

Cond.

In view of Section 143 of the M.V. Act, to apply

Section 140 of that Act to cases falling under the
W.C. Act, all that is necessary is that the situation
should be one that it would fall under the provisions
of Section 142 of the M.V. Act.
Section 142 of the MV Act enumerates the types of
injuries, which are deemed to result in permanent
disablement for the purpose of Section 140 of that
Act.
Section 140 of the M.V. Act applies to any claim for
compensation in respect of permanent disablement
under the W.C. Act provided, the disablement is one
that would fall within the term "permanent
disablement", as defined in Section 142 of the M.V.
Act.

Cond.
Now, on to the facts of this case. Loss of
one phalanx of the ring or little finger,
little finger in this case, is an injury which
is deemed to result in permanent partial
disablement, going by he entry at
SI.No.37 under Part II of Schedule I of the
W.C. Act.
Clause (b) of Section 142 provides that
the destruction or permanent impairing
of the power of any member or joint shall
be a permanent disablement of the
person.

Cond.

Having suffered from permanent

disablement
resulting
in
the
destruction of a member of his right
little finger by amputation through
distal interphalangeal joint,
Hence, the petitioner has suffered
such permanent disablement as is
referable to Section 142 of the M.V.
Act and is therefore entitled to such
compensation as is available to him
under Section 140 of the M.V. Act.

Whether application under Section 140 can lie

independently ?
Whether application under Section
140 can lie independently or has to
be filed with application under
Section 166. In other words, whether
in absence of application under
Section
166,
application
under
Section 140 is maintainable ?
United India Insurance Co. Ltd. v.
Kadviben Udabhai Rathwa And Anr.
on 21 March, 2006

Cond.
Section 140 (Chapter X)) provides for fixed sum
of compensation in cases of no fault liability. It is
independent of Section 161 (payment of
compensation in cases of hit and run motor
accidents),
Section
163-A
(payment
of
compensation on structured formula basis/fault
liability " Chapter XI) and Section 166 (fault
liability " Chapter XII).
Application for compensation under Section 140
is maintainable without there being application
for compensation under Section 163-A or under
Section 166 and disposable accordingly, and
compensation awarded shall be final.

Cond.
But, where two applications are filed under
Section 140 and 163-A or under Section 140 and
under Section 166, compensation awarded under
Section 140 shall be reduced from the amount of
compensation awarded under Section 163-A or
under Section 166 provided the compensation
awarded under the latter provisions are higher,
otherwise, compensation paid under Section 140
would be final. Further, where claim is preferred
only under Section 140 and not any other
provision, compensation awarded under Section
140 shall be final. Section 140 does not provide
for
interim/ad-hoc
compensation
because
compensation paid under this Section is final.

Cond.

`Interim/ad-hoc compensation' is used

when apart from application under
Section 140 there is also application
under Section 163-A or under Section
166, since the amount of compensation
paid under Section 140 is made
deductible. Where in addition to
application for compensation under
Section 140 there is application under
other provisions on principle of fault
liability, application under Section 140
shall be disposed of in the first place,

Cond.

since
expeditious
disposal
of
application under Section 140 is the
basic theme of this beneficial piece
of legislation. But, where claimant
has filed application under Section
140, but not under any other
provision claiming compensation on
fault liability principle, application is
maintainable
and
compensation
awardable, but not recoverable from
the claimant.

Cond.

The insurance company is not

entitled to seek trial on merit of any
legal defences available to it under
Section 149(2) of the Act. Remedy of
insurance company is against the
owner of the vehicle invoking
defences available to it, but not
against the claimant.

Whether the liability of insurer u/s.140 is subject

to terms insurance contract
The Manager, Hdfc Ergo General v. Kalpana
Wd./O Shahajirao Bhoyar ... on 20 August,
2015.(Bombay High Court)
Facts: Brief facts are that, on 6.3.2011,
Shahajirao Bhonduji Bhoyar proceeding on a
bicycle was dashed by offending motor
vehicle. In the accident, Shahajirao died in
the hospital on 8.3.2011. The motor cycle
belonged to respondent no.5 Pocham Rajlingu
and it was driven by respondent no.6 Mohan
Raymalu Mithuwar at the time of accident.

Cond.

Interim compensation claim was resisted on

the ground that the driver was driving the
motor vehicle under the influence of liquor and
that the owner of the offending motor cycle
had relied upon fake and bogus policy.
It is contended by the appellant that no
Insurance Policy, as produced, was issued by
the appellant and furthermore that it was fake
and bogus.
It is, thus, submitted that the learned
Chairman of the Tribunal committed an error of
law to award interim compensation holding the
appellant jointly responsible along with the
owner and driver of the offending motor cycle.

Cond.
Some important Cases referred on behalf of the Insurance
co. is as follows: New India Assurance Co. Ltd. v. Babasaheb Anna Mali and
Others
when extra premium was not paid in the Insurance policy
to cover pillion rider, the expression "third party" in the
policy would not cover the pillion rider of the motor vehicle
and therefore, the Insurer could not have been saddled
with no fault liability under Section 92-A of the Motor
Vehicles Act (4 of 1939).
This ruling appears under the old Act, u/s.92-A of the Old
Act of 1939 and the Division Bench of the Bombay High
Court has considered Section 95 of the Act of 1939, also
requirement of policy contract and after considering the
legal position then prevailing, the Judgment of the Single
Bench directing the Insurer to deposit sum of Rs.3,500/was held as legally not sustainable and was set aside.

Cond.

Yallawwa and Others .v. National Insurance

Company Ltd and another, (2007) 6 SCC 657
It is observed by the Apex Court that "one of the
defences available to the Insurer is breach of
conditions specified in the policy. When such
defence is raised the Tribunal is required to go into
the said question. Section 140 of the Act does not
contemplate that an Insurance Company shall also
be liable to deposit the amount while it has no fault
(obligation) whatsoever in terms of sub-section (2)
of Section 147 of the Act. The amount paid can be
deducted from the final amount awarded by the
Tribunal. It was held in that Award u/s.140 of the
Act was appealable u/s.173 as it amounts to the
Award.

Cond.
Oriental Insurance Co. Ltd. v. Nargis Premlal
Janghade and Others, 2010 (2) Bom.C.R. 140
In relation to settled legal position at interim stage
of compensation claim u/s.140 r/w.166 of the Motor
Vehicles Act, 1988, it was held that, at ad interim
stage, the victim need not prove negligence or
default of the owner or any other person.
Once it is shown that the driver is involved in the
accident caused by an insured motor vehicle, relief
against Insurer or owner has to be allowed to
provide expeditious relief to victim.
Therefore, both owners and Insurers are made
jointly liable to pay interim on no fault
compensation u/s.140 of the Act.

In this case, the court held that

The owner of the offending motor vehicle shall

be primarily liable to pay compensation if the
vehicle is insured as on the date of accident.
According to the owner of the offending motor
vehicle, as on the date of accident, insurer
does have joint and several liability along with
the owner/driver of the offending motor
vehicle to pay compensation in the sum of
Rs.50,000/- in case death has resulted from
the motor vehicle accident and in the sum of
Rs.25,000/- if permanent disablement has
resulted arising from the motor vehicle
accident.

Cond.

In such cases, it is not necessary for the claimant

to plead and establish that death or permanent
disablement has resulted due to any wrongful act,
negligent or default of the owner of the offending
motor vehicle.
Ultimately, it is possible for the Insurer to plead
that Insurance contract was not binding upon it or
on the ground that it was fake or bogus or on any
such ground. It is for the Insurer to establish the
pleading at final hearing of the motor accident
claim petition filed u/s.166 of the Motor Vehicles
Act, 1988 so that the amount paid by way of
interim compensation can be recovered from the
owner and/or driver of the offending motor vehicle.

Cond.

It was held that although liability of

Insurer u/s.140 of the Act is not direct, it
may arise vicariously if owner of the
insured
vehicle
is
liable
to
pay
compensation. Assuming for the sake of
argument that ultimately in the claim
petition even if it is held that the Insurer is
not liable to compensate the claimant, it is
possible for the Insurer to recover amount
paid by way of compensation at an interim
stage from the owner or/and driver of
offending motor vehicle in view of settled
position of law.

Cond.

The fact of breach of terms and

conditions of the insurance policy
and the fact of fake and bogus policy
need not be considered at the
interim stage and shall be decided at
the time of final decision of the Claim
Petition.

Whether the Interest can be granted u/s.140 ?

Oriental Insurance Co. Ltd. v. Mohiuddin Kureshi Alias
Md. Moya
The order passed under Section 140 of the Act is also
an 'award' within the meaning of Section 173 thereof
and thus an appeal is maintainable.
So far as the question of grant of interest is concerned,
the matter is covered under Section 171 of the said Act,
from a perusal of which it is evident that the decision of
the Tribunal is not limited to grant of interest only at
the time of passing of a final award, but it has also the
jurisdiction to grant interest when it allows a claim for
compensation made under Section 166 of the Act which
evidently includes an order passed under Section 140
thereof.

Principles of Law of Torts in deciding the

claims u/s.166 of M.V Act
Smt. Kaushnuma Begum & Ors. v. The New India
Assurance Co. Ltd. and Ors.
The accident which gave rise to the claim occurred at
about 7.00 P.M. on 20.3.1986. The vehicle involved in
the accident was a jeep. It capsized while it was in
motion.
The cause of the capsize was attributed to bursting
of the front tyre of the jeep.
In the process of capsizing the vehicle hit against one
Haji Mohammad Hanif who was walking on the road
at that ill-fated moment and consequently that
pedestrian
was
crushed
and
subsequently
succumbed to the injuries sustained in that accident.

Cond.
The owner of the jeep disclaimed the liability by
denying even the fact of the accident in which his jeep
was involved.
Alternatively, he contended that any liability found
against him in respect of the said jeep the same
should be realized from the insurance company as the
vehicle was covered by valid insurance policy. The
Tribunal repelled the above contentions of the jeep
owner. However, the Tribunal found as follows: "It appears that the front wheel of the jeep suddenly
got burst resulting in the misbalanced and occurrence
of this accident as it is mentioned in Ex-2 the report of
the Police Station "Whatever is the circumstance, the
rash and negligence of the alleged jeep is not
established

Contd.

The Tribunal dismissed a claim made before it

solely on the ground that there was neither
rashness nor negligence in driving the vehicle and
hence the driver has no liability, and the corollary
of which is that the owner has no vicarious
liability to pay compensation to the dependents of
the victim of a motor accident.
Consequently, the Tribunal dismissed the claim for
compensation. However, the Tribunal directed the
insurance company to pay Rs.50,000/- to the
claimants by way of no fault liability envisaged in
Section-140 of the Motor Vehicles Act, 1988.
Aggrieved by the said rejection of the claim, the
appellants moved the High Court of Allahabad.
Division Bench of the High Court dismissed the
appeal.

Cond.

The appeal for which a very short

order has been passed. It reads thus:
"Heard learned counsel for the
appellant. Finding has been recorded
that the tempo overturned and there
were no negligence or rashness of
the driver. Hence Rs.50,000/- has
been awarded as compensation
which is the minimum amount. There
is no error in the order. Dismissed.
Hence an appeal before Honble S.C.

Contd.

Issues for consideration:

The firstly, is there any negligence or
rashness on the part of the driver of the
jeep?
Secondly, whether the deceased was
knocked down by the jeep when its front
tyre burst and consequently the vehicle
became misbalanced and turned turtle?
Whether the necessarily be negligence
should be there by the person who
drove the vehicle to claim for
compensation to be sustained?

Relevant sections in Old Act(1939)

Section 165(1) of the MV Act confers power
on the Sate Government to constitute one
or more Motor Accidents Claims Tribunals
by notification in the Official Gazette for
such area as may be specified in the
notification.
Such Tribunals are constituted for the
purpose of adjudicating upon claims for
compensation in respect of accidents
involving the death of or bodily injury to
persons arising out of the use of motor
vehicles, or damages to any property of a
third party so arising, or both

Contd.

Section 175 of the MV Act contains a

prohibition that "no civil court shall have
jurisdiction to entertain any question relating
to any claim for compensation which may be
adjudicated upon by the Claims Tribunal
It must be noted that the jurisdiction of the
Tribunal is not restricted to decide
claims arising out of negligence in the
use of motor vehicles. Negligence is only
one of the species of the causes of action for
making a claim for compensation in respect
of accidents arising out of the use of motor
vehicles. There are other premises for
such cause of action.

Contd.

Even if there is no negligence on the

part of the driver or owner of the
motor vehicle, but accident happens
while the vehicle was in use, whether
the owner can be made liable for
damages to the person who suffered
on account of such accident?
This question depends upon how
far the Rule in Rylands v.
Fletcher can apply in motor
accident cases ?

In Rylands, House of Lords held that

"We think that the true rule of law is that the
person who, for his own purposes, brings on
his land and collects and keeps there anything
likely to do mischief if it escapes, must keep it
in at his peril, and, if he does not do so, he is
prima facie answerable for all the damage
which is the natural consequence of its escape.
He can excuse himself by showing that the
escape was owing to the plaintiff's default, or,
perhaps, that the escape was the consequence
of vis major or the act of God; but, as nothing
of this sort exists, here, it is unnecessary to
inquire what excuse would be sufficient."

Contd.

The above Rule eventually gained approval in

a large number of decisions rendered by
courts in
England and abroad.
Winfield on Tort has brought out even a
chapter on the "Rule in Rylands v.Fletcher". At
page 543 of the 15th Ed. of the calibrated
work the learned author has pointed out that
"over the years Rylands v. Fletcher has been
applied to a remarkable variety of things: fire,
gas, explosions, electricity, oil, noxious fumes,
colliery spoil, rusty wire from a decayed fence,
vibrations, poisonous vegetation....".

Contd.
He has elaborated seven defences recognised in common law
against action brought on the strength of the rule in Rylands vs.
Fletcher. They are:
(1) Consent of the plaintiff i.e. violent non fit injuria.
(2) Common benefit i.e. where the source of the danger is
maintained for the common benefit of the plaintiff and the
defendant, the defendant is not liable for its escape.
(3) Act of stranger i.e. if the escape was caused by the
unforeseeable act of a stranger, the rule does not apply.
(4) Exercise of statutory authority i.e. the rule will stand excluded
either when the act was done under a statutory duty or when a
statute provides otherwise.
(5) Act of God or vis major i.e. circumstances which no human
foresight can provide against and of which human prudence is not
bound to recognise the possibility.
(6) Default of the plaintiff i.e. if the damage is caused solely by
the act or default of the plaintiff himself, the rule will not apply.
(7) Remoteness of consequences i.e. the rule cannot be applied
ad infinitum

Contd.
The Rule in Rylands v. Fletcher has been referred to
by this Court in a number of decisions.
While dealing with the liability of industries engaged
in hazardous or dangerous activities P.N. Bhagwati, CJ,
speaking for the Constitution Bench in M.C. Mehta &
anr. v. Union of India and ors. expressed the view that
there is no necessity to bank on the Rule in Rylands v.
Fletcher. What the learned Judge observed is this:
"We have to evolve new principles and lay down new
norms which would adequately deal with the new
problems which arise in a highly industrialized
economy. We cannot allow our judicial thinking to be
constricted by reference to the law as it prevails in
England or for the matter of that in any other foreign
country. We no longer need the crutches of a foreign
legal order."

Honble S.C also referred..

Gujarat State Road Transport Corporation,

Ahmedabad v. Ramanbhai Prabhatbhai and
anr.
The observation made by E.S. Venkataramiah,
J. "Today, thanks to the modern civilization,
thousands of motor vehicles are put on the
road and the largest number of injuries and
deaths are taking place on the roads on
account of the motor vehicles accidents.
In view of the fast and constantly increasing
volume of traffic, the motor vehicles upon the
roads may be regarded to some extent as
coming within the principle of liability defined
in Rylands v. Fletcher.

Contd.
From the point of view of the pedestrian the roads of
this country have been rendered by the use of the
motor vehicles highly dangerous. 'Hit and run' cases
where the drivers of the motor vehicles who have
caused the accidents are not known are increasing in
number. Where a pedestrian without negligence on his
part is injured or killed by a motorist whether
negligently or not, he or his legal representatives as the
case may be should be entitled to recover damages if
the principle of social justice should have any meaning
at all.
In order to meet to some extent the responsibility of
the society to the deaths and injuries caused in road
accidents there has been a continuous agitation
throughout the world to make the liability for damages
arising out of motor vehicles accidents as a liability
without fault."

Contd.

Like any other common law principle, which is

acceptable to our jurisprudence, the Rule in
Rylands v. Fletcher can be followed at least
until any other new principle which excels the
former can be evolved, or until legislation
provides differently. Hence, we are disposed
to adopt the Rule in claims for compensation
made in respect of motor accidents.
"No Fault Liability" envisaged in Section 140
of the M.V. Act is distinguishable from the rule
of strict liability.
In the former the compensation amount is
fixed and is payable even if any one of the
exceptions to the Rule can be applied.

Contd.

The provisions of the M.V. Act permits that

compensation paid under 'no fault liability' can
be deducted from the final amount awarded by
the Tribunal. Therefore, these two are resting on
two different premises.
We are, therefore, of the opinion that even
apart from Section 140 of the MV Act, a victim
in an accident which occurred while using a
motor vehicle, is entitled to get compensation
from a Tribunal unless any one of the
exceptions would apply.
The Tribunal and the High Court have, therefore,
gone into error in divesting the claimants of the
compensation payable to them.

Cond.
The court held that Appellants claimed a sum of
Rs.2,36,000/-. But PW-1 widow of the deceased
said that her husbands income was Rs.1,500/per month. PW-4 brother of the deceased also
supported the same version.
In calculating the amount of compensation in
this case we lean ourselves to adopt the
structured formula provided in the Second
Schedule to the M.V. Act, though it was
formulated for the purpose of Section 163A of
the MV Act, we find it a safer guidance for
arriving at the amount of compensation than
any other method so far as the present case is
concerned.

Cond.

The age of the deceased at the time of

accident was said to be 35 years plus.
But when that is taken along with the
annual income of Rs.18,000/- figure
indicated in the structured formula is
Rs.2,70,000/-. When 1/3 therefore is
deducted the balance would be
Rs.1,80,000/-. Interest at the rate of 9%
per annum from the date of the claim
made by the appellants. The amount of
Rs.50,000/- paid u/s. 140 shall be
deducted from the principal amount.

New India Assurance Co.Ltd v. Kalabhai Maganbhai Koli

17 November, 2014
Issues: "1. If at the stage of a proceeding under section 140 of the Motor
Vehicles Act, no plea is taken either by the insurance company
or by the owner of the errant vehicle that either the vehicle was not
involved in the accident or that the vehicle was not covered by the
insurance policy or that there has been any breach of the
conditions of insurance disentitling the insured to claim the benefit
of insurance, or in spite of taking such plea, if they suffer an award
making the owner and the insurance company jointly liable for
payment, whether in the subsequent proceeding under section 166
of the Act, the Tribunal will be precluded from deciding such issue by
operation of the doctrine of res judicata or constructive res judicata.
2. If a plea as to non involvement of the vehicle or invalidity of policy or
breach of condition in the policy is taken by the insurance
company, whether it is the duty of the Tribunal below to decide such issue
by taking evidence in a proceeding under section 140 of the Act."

Summary of the Judgment

(i) At the stage of proceedings under section 140 of

the MV Act, the Claims Tribunal has to verify
only following three aspects :
(a) the accident has arisen out of use of motor
vehicle,
(b) the said accident resulted in permanent
disablement of a person filing the claim or in
case of death his legal representatives.
(c) the claim is made against the owner and the
insurer of the motor vehicle involved in the accident.
(ii) If the insurance company has raised dispute with
any of these aspects, the Claims Tribunal
would give its findings through a summary inquiry.

Cond.

(iii) If the insurance company has not raised any dispute

with respect to any of these aspects or if raised, is decided
against the insurance company by the Claims Tribunal, the
same would bind the insurance company at the later stage
of deciding the Claim Petition under section 166 of the MV
Act.
(iv) No other defences including those referred to in
section 149(2) of the MV Act would be available
to
the insurance
company
at
the
stage
of
application under section 140 of the MV Act.
It would therefore, not be necessary, in fact, not
permissible
for the insurance company to raise such
defences at this stage and if raised the Tribunal shall not
decide the same at that stage. There would therefore, be
no question of any res judicata with respect to
such issues at the stage when the Claims Tribunal
proceeds to decide the Claim Petition under section
166 of the MV Act.