The Madhya Pradesh High Court has clarified that compensation under Section 163A of the Motor Vehicles Act, 1988 must reflect contemporary economic realities, not outdated schedules. The judgment enhances compensation for accident victims by revising income assessments to account for inflation and directs insurance companies to adopt a 'pay and recover' approach where drivers hold learner’s licences or vehicles lack valid permits.
Background & Facts
The Accident
On 08 April 2008, two individuals - Kalu (25) and Sanjeep (13) - died in a road accident near Anas river culvert in Jhabua, Madhya Pradesh. The autorickshaw they were travelling in, bearing registration No. 45-K-0225, collided with another vehicle due to the driver’s rash and negligent driving. The deceased were the sole earning members of their families, prompting their legal representatives to file claims under Section 163A of the Motor Vehicles Act, 1988 for no-fault liability.
Procedural History
The case progressed through the following stages:
- 2008: Claim petitions filed before the Motor Accident Claims Tribunal (MACT), Jhabua.
- 2010: MACT awarded compensation of Rs. 3,52,000 for Kalu and Rs. 1,57,000 for Sanjeep, relying on the structured formula under Schedule II of the MV Act.
- 2010-2011: Appeals filed by the vehicle owner (M.A. Nos. 3320/2010 and 3321/2010) and the claimants (M.A. Nos. 42/2011 and 122/2011) challenging the quantum of compensation and the exoneration of the insurance company.
Relief Sought
The claimants sought enhancement of compensation, arguing that the income assessments (Rs. 25,000 per annum for Kalu and Rs. 15,000 for Sanjeep) were inadequate given inflation. They also contested the insurance company’s complete exoneration, citing the driver’s possession of a learner’s licence and the vehicle’s lack of a valid permit. The vehicle owner, though absent during proceedings, implicitly challenged the Tribunal’s findings on liability.
The Legal Issue
The Court addressed two critical questions:
- Whether the income assessment under Section 163A of the MV Act should be revised to account for inflation, deviating from the fixed amounts in Schedule II.
- Whether the insurance company could be completely exonerated from liability where the driver held a learner’s licence or the vehicle lacked a valid permit, or if a 'pay and recover' approach should apply.
Arguments Presented
For the Claimants
The claimants relied on two Supreme Court judgments to argue for enhanced compensation:
- Kurvan Ansari Alias Kurvan Ali v. Shyam Kishore Murmu & Another [(2022) 1 SCC 317], where the Court revised the income of a deceased to Rs. 36,000 per annum for an accident in 2004.
- Laxmi Devi & Others v. Mohammad Tabbar & Another [2008 (12) SCC 165], which held that Schedule II amounts were outdated and required inflation adjustments.
They further contended that the insurance company’s exoneration was unjustified, as the driver’s learner’s licence and the vehicle’s lack of permit did not warrant complete absolution. Instead, the 'pay and recover' principle, as established in National Insurance Co. Ltd. v. Challa Bharathamma & Ors. [2004 ACJ 2094], should apply.
For the Insurance Company
The insurance company defended the Tribunal’s findings, arguing:
- The structured formula under Section 163A and Schedule II was binding and could not be disregarded.
- The driver’s learner’s licence violated Section 3 of the Central Motor Vehicles Rules, 1989, which mandates supervision by a licensed driver. The absence of a valid permit further justified exoneration.
- The vehicle owner failed to demonstrate any perversity in the Tribunal’s findings or produce evidence of a valid permit or licence.
The Court's Analysis
The Court conducted a two-pronged analysis, addressing both the quantum of compensation and the insurance company’s liability.
Income Assessment and Inflation Adjustment
The Court observed that Schedule II of the MV Act, which prescribes fixed income amounts for compensation, was formulated in 1994 and had become outdated. Relying on Kurvan Ansari and Laxmi Devi, the Court held that income assessments must reflect contemporary economic conditions:
"The structured formula under Section 163A is not cast in stone. The Hon’ble Supreme Court has consistently held that the amounts prescribed in Schedule II must be revised to account for inflation and the rising cost of living."
For Kalu (25), the Court revised the income from Rs. 30,000 to Rs. 36,000 per annum, applying a multiplier of 18 (instead of 17). For Sanjeep (13), the income was increased from Rs. 15,000 to Rs. 25,000 per annum. Additionally, the Court awarded Rs. 40,000 each to the claimants for loss of consortium, Rs. 15,000 for loss of estate, and Rs. 15,000 for funeral expenses, aligning with the principles in Kurvan Ansari.
Insurance Company’s Liability
The Court examined the Tribunal’s findings on the driver’s learner’s licence and the vehicle’s lack of permit. While it upheld the finding that the driver violated Section 3 of the Central Motor Vehicles Rules, 1989 by driving unsupervised, it rejected the insurance company’s complete exoneration:
"The absence of a valid permit or a learner’s licence does not automatically absolve the insurance company of liability. The 'pay and recover' principle, as enunciated in National Insurance Co. Ltd. v. Challa Bharathamma, must apply where the driver holds a learner’s licence or the vehicle lacks a permit."
The Court directed the insurance company to first pay the enhanced compensation to the claimants and then recover the amount from the vehicle owner and driver.
The Verdict
The Court disposed of the appeals as follows:
- M.A. Nos. 3320/2010 and 3321/2010 (filed by the vehicle owner) were dismissed.
- M.A. Nos. 42/2011 and 122/2011 (filed by the claimants) were allowed, enhancing the compensation to Rs. 7,02,000 for Kalu’s family and Rs. 4,45,000 for Sanjeep’s family.
- The insurance company was directed to adopt a 'pay and recover' approach, first compensating the claimants and then recovering the amount from the owner and driver.
What This Means For Similar Cases
Compensation Must Reflect Economic Realities
Practitioners should note that income assessments under Section 163A of the MV Act are no longer bound by the rigid amounts in Schedule II. Courts are increasingly inclined to revise these amounts to account for inflation, particularly where the accident occurred years after the schedule’s formulation. Key takeaways include:
- Precedent Reliance: Cite Kurvan Ansari and Laxmi Devi to argue for inflation-adjusted income assessments.
- Multiplier Adjustment: Ensure the correct multiplier is applied based on the deceased’s age, as the Court revised the multiplier from 17 to 18 for Kalu.
- Non-Pecuniary Heads: Claimants can seek enhanced compensation for loss of consortium, estate, and funeral expenses, as the Court awarded Rs. 40,000 and Rs. 15,000 respectively.
'Pay and Recover' Principle Applies to Learner’s Licences and Permit Violations
The judgment clarifies that insurance companies cannot be completely exonerated in cases involving learner’s licences or lack of permits. Instead, the 'pay and recover' principle applies:
- Learner’s Licence: Where the driver holds a learner’s licence but drives unsupervised, the insurance company must pay compensation and recover it from the owner/driver.
- Permit Violations: The absence of a valid permit does not absolve the insurance company of liability. The Court relied on National Insurance Co. Ltd. v. Challa Bharathamma to direct payment followed by recovery.
- Burden of Proof: Vehicle owners must produce evidence of valid permits or licences to avoid liability. Failure to do so, as in this case, will result in the insurance company bearing the initial burden of payment.
