The Chhattisgarh High Court has clarified a critical ambiguity in motor insurance law: an insurer cannot escape liability merely because the policy was issued minutes after an accident occurred, if both events transpired on the same calendar day. This ruling reinforces the protective intent of the Motor Vehicle Act and places the burden of administrative delay on the insurer, not the victim.
Background & Facts
The Dispute
The deceased, Hariram Sahu, was killed on 30 December 2017 at approximately 9:45 a.m. when his scooty collided with a tractor bearing registration No. CG 07 AN 3862. His widow and two children filed a claim under Section 166 of the Motor Vehicles Act, 1988, seeking compensation. The insurer, Iffco-Tokio General Insurance Company Ltd., contended that its policy for the tractor was not in force at the time of the accident, as it was issued at 5:38:29 p.m. on the same day - nearly eight hours after the incident.
Procedural History
- 30 December 2017: Accident occurred at 9:45 a.m.
- 30 December 2017: Insurance policy issued at 17:38:29 hours
- 2018: Claim petition filed before the Motor Accident Claims Tribunal, Balod
- 30 October 2018: Tribunal awarded Rs. 5,38,000/- with 10% interest, holding insurer liable to indemnify first and recover from owner/driver
- 2019: Insurance Company filed appeal before the Chhattisgarh High Court
Relief Sought
The appellant sought to set aside the Tribunal’s award, arguing that no valid insurance contract existed at the time of the accident and therefore no liability could attach. The respondents sought affirmation of the award, emphasizing statutory protection for victims under the Motor Vehicles Act.
The Legal Issue
The central question was whether an insurer is liable to indemnify a third-party victim under Section 166 of the Motor Vehicles Act when the insurance policy is issued on the same day as the accident, but after the accident has occurred.
Arguments Presented
For the Appellant
The insurer relied on HDFC ERGO General Insurance Company Ltd. v. Zeenath & Ors. (Kerala High Court), arguing that where a policy is void ab initio due to dishonored premium payment or non-existence at the time of accident, liability cannot be imposed. It contended that the policy was not effective until 12:00 midnight on 30.12.2017, and since the accident occurred before issuance, no contract existed. It further argued that the Tribunal’s direction to indemnify first and recover later was legally unsustainable without an extant policy.
For the Respondents
The claimants argued that the policy was issued on the same day as the accident, and the insurer’s internal administrative delay should not prejudice the victim. They emphasized that Section 147 of the Motor Vehicles Act mandates compulsory insurance, and Section 166 creates a statutory right to compensation. The Tribunal’s approach, they submitted, was consistent with the Act’s humanitarian purpose.
The Court's Analysis
The Court distinguished Zeenath on factual grounds. In that case, the policy was cancelled due to dishonored cheque, rendering it void from inception. Here, the policy was validly issued on the same day, albeit after the accident. The Court held that the statutory obligation under Section 147 is not contingent on the precise hour of issuance, but on the existence of a valid policy on the date of the accident.
"The liability of the insurer arises not from the temporal sequence of events within a single day, but from the fact that a valid policy was in existence on the date of the accident."
The Court emphasized that the Motor Vehicles Act is a social welfare legislation designed to ensure prompt compensation to victims. To allow insurers to evade liability based on minor administrative delays - especially when the policy was issued and active on the same day - would defeat the legislative intent. The Tribunal’s direction to indemnify first and recover from the owner/driver was not a finding of direct liability against the insurer, but a procedural mechanism to ensure victims are not left uncompensated while recovery proceedings are initiated.
The Court further noted that the insurer had not demonstrated any fraud or misrepresentation by the policyholder. The policy was issued, premium paid, and coverage active within hours of the accident. The insurer’s internal processing timeline cannot override statutory rights.
The Verdict
The appeal was dismissed. The Court held that an insurer is liable to indemnify third-party victims under Section 166 of the Motor Vehicles Act when a valid policy is issued on the same day as the accident, regardless of the time of issuance, provided no fraud or cancellation is established. The Tribunal’s direction to indemnify first and recover from the owner/driver was upheld as a lawful procedural mechanism.
What This Means For Similar Cases
Policy Issuance on Same Day Triggers Liability
- Practitioners must now argue that Section 147 creates a continuous statutory obligation, not a time-bound contractual one
- Insurers cannot rely on internal timestamps to deny claims if the policy was active on the date of accident
- Claimants should insist on production of policy issuance records, not merely policy start dates
Indemnify First, Recover Later Is Valid Procedure
- Tribunals may direct insurers to pay compensation even if ultimate liability rests with the owner/driver
- This mechanism ensures victims receive timely relief without waiting for recovery litigation
- Insurers must treat such directions as binding, not optional
Administrative Delay Is Not a Defense
- Delays in policy issuance due to back-office processing are attributable to the insurer
- Courts will not permit insurers to benefit from their own inefficiency
- Practitioners should highlight this principle in all cases involving same-day policy issuance
