The Himachal Pradesh High Court has held that an insurance company bears no statutory liability to compensate a gratuitous passenger travelling in a goods vehicle, and a Motor Accident Claims Tribunal lacks jurisdiction to impose a 'pay and recover' direction against the insurer in such cases. The Court allowed the insurer's appeal, modifying the Tribunal's award to fasten liability directly on the vehicle owner.
Background & Facts
The Dispute
The appellant, The Oriental Insurance Company Ltd., challenged an award dated 28.08.2025 passed by the Motor Accident Claims Tribunal in MAC Petition No. 44-MAC/2 of 2021. The claim petition was filed by the family of Abhimanyu @ Pappu (deceased), who died in a motor vehicle accident on 31.05.2017 involving a Mahindra Pick-up bearing registration No. HP-71-4783 (the offending vehicle). The Tribunal awarded compensation of Rs. 14,79,080/- with interest at 6% per annum from the date of filing the petition, directing the insurance company to pay under the 'pay and recover' principle with a right to recover from the vehicle owner.
Key Facts
- 31.05.2017: The deceased hired the offending vehicle for transporting agricultural produce to Dadahu; around 03:15 p.m., near PWD Rest House, Sangrah, the vehicle met with an accident due to alleged rash and negligent driving by respondent No. 3, Ved Parkash (driver). The deceased sustained serious injuries and succumbed.
- The claimants (petitioners below) averred the deceased earned Rs. 25,000/- per month from cash crops and Rs. 10,000/- per month from selling milk; they were dependent on his income.
- The vehicle owner, Shri Atma Ram (respondent No. 1), contended the accident occurred due to mechanical failure, not negligence, and the vehicle was insured with the appellant.
- The insurance company raised preliminary objections: the driver lacked a valid driving licence; the owner breached policy terms; the owner and claimants colluded to substitute the actual driver (Krishan Kumar, who had no licence) with Ved Parkash; the vehicle plied without a valid permit; and the deceased was a gratuitous passenger.
- The driver, Ved Parkash, denied the deceased was in the vehicle and attributed the accident to mechanical failure.
- The Tribunal found the deceased died due to rash and negligent driving, but held he was travelling as an unauthorized/gratuitous passenger. It allowed the claim and directed the insurer to pay with right of recovery against the owner.
Procedural History
- 31.05.2017: Date of accident and death of Abhimanyu @ Pappu.
- 2021: Claim petition filed under Section 166 of the Motor Vehicles Act, 1988 (MAC Petition No. 44-MAC/2 of 2021).
- 28.08.2025: Tribunal passed impugned award allowing compensation of Rs. 14,79,080/- with 6% interest from date of filing petition; directed insurer to pay under 'pay and recover' principle.
- 2025: Appeal (FAO No. 321 of 2025) filed by The Oriental Insurance Company Ltd. under Section 173 of the Act.
- 29.10.2026: Appeal reserved for judgment.
- 05.11.2026: Judgment pronounced; appeal allowed, award modified.
The Parties' Positions
Appellant (Insurance Company): Once the Tribunal found the deceased was a gratuitous passenger in a goods vehicle, it could not direct the insurer to pay under 'pay and recover' because the insurer has no statutory liability for such passengers under Section 147 of the Motor Vehicles Act, 1988 as interpreted by the Supreme Court.
Respondents 1-4 (Claimants) & Respondent 5 (Owner): Supported the impugned award, contending it reflects proper appreciation of law and facts; relied on Supreme Court decisions in Baljit Kaur, Saju P. Paul, and Manuara Khatun where 'pay and recover' directions were issued.
Relief Sought
The appellant sought quashing of the impugned award dated 28.08.2025. The claimants sought confirmation of the award with compensation of Rs. 14,79,080/- and 6% interest from the date of filing the petition.
The Legal Issue
Whether a Motor Accident Claims Tribunal can direct an insurance company to pay compensation for the death of a gratuitous passenger travelling in a goods vehicle under the 'pay and recover' principle, when the Supreme Court has held that Section 147 of the Motor Vehicles Act, 1988 does not impose statutory liability on the insurer for such passengers.
Arguments Presented
For the Appellant
Mr. Jagdish Thakur contended that the Tribunal's finding that the deceased was a gratuitous passenger in a goods vehicle is final and unchallenged. Under the law settled by the Supreme Court in New India Assurance Co. Ltd. vs. Asha Rani (2003) 2 SCC 223 and National Insurance Co. Ltd. vs. Baljit Kaur (2004) 2 SCC 1, the insurer has no liability to indemnify the owner for death or injury to a gratuitous passenger in a goods vehicle. The 'pay and recover' direction exceeds the Tribunal's jurisdiction because such directions by the Supreme Court were exercised under Article 142 of the Constitution, a power not available to the Tribunal.
For the Respondents
Mr. Arvind Negi (for claimants) and Dr. Rajesh K. Parmar (for owner) supported the award, relying on Baljit Kaur, Saju P. Paul, and Manuara Khatun where the Supreme Court directed insurers to pay and recover. They argued the Tribunal's order was a correct application of law and facts.
The Court's Analysis
The Court examined Section 147 of the Motor Vehicles Act, 1988 as amended in 1994. The provision mandates compulsory insurance coverage for third parties and, post-amendment, for the owner of goods or his authorized representative carried in the vehicle. It does not extend to passengers in a goods carriage. The Court relied on the three-Judge Bench decision in Asha Rani, which held that the 1994 amendment adding "including owner of the goods or his authorized representative carried in the vehicle" demonstrates the legislature did not intend to cover passengers in goods vehicles. The expression "any person" in Section 147(1)(b)(i) must be read in context as "a third party."
"In view of the changes in the relevant provisions in the 1988 Act vis-a-vis the 1939 Act, we are of the opinion that the meaning of the words 'any person' must also be attributed having regard to the context in which they have been used i.e. 'a third party'. Keeping in view the provisions of the 1988 Act, we are of the opinion that as the provisions thereof do not enjoin any statutory liability on the owner of a vehicle to get his vehicle insured for any passenger traveling in a goods vehicle, the insurers would not be liable therefor."
The Court further relied on Baljit Kaur, where the Supreme Court observed that if "any person" already covered gratuitous passengers, the 1994 amendment would have been unnecessary. The Court noted that in Baljit Kaur, Saju P. Paul, and Manuara Khatun, the 'pay and recover' directions were issued by the Supreme Court in exercise of its extraordinary jurisdiction under Article 142 of the Constitution. In National Insurance Co. Ltd. vs. Parvathneni (2018) 9 SCC 657, the Supreme Court kept open the question whether Article 142 powers can be used to direct payment where no statutory liability exists.
The Tribunal, constituted under the Motor Vehicles Act, lacks Article 142 powers. Its direction to the insurer to pay first and recover later is "incongruous" and constitutes an excess of jurisdiction. The owner of the vehicle is directly liable to satisfy the award.
The Verdict
The appeal was allowed. The impugned award dated 28.08.2025 stands modified: the owner of the offending vehicle, Shri Atma Ram, is liable to satisfy the award and pay compensation of Rs. 14,79,080/- to the petitioners-claimants. The direction to the appellant-insurance company to pay under the 'pay and recover' principle is set aside. The remaining terms of the award, including interest at 6% per annum from the date of filing the petition till realization, remain unchanged. The appeal and pending applications are disposed of accordingly.
What This Means For Similar Cases
Tribunal Cannot Invoke Article 142 Powers
- Motor Accident Claims Tribunals are statutory bodies with limited jurisdiction; they cannot exercise the Supreme Court's extraordinary constitutional powers under Article 142 to direct 'pay and recover' where no statutory liability exists.
- Practitioners must challenge 'pay and recover' directions in goods vehicle gratuitous passenger cases at the Tribunal level itself, citing Parvathneni (2018) 9 SCC 657.
Owner Bears Direct Liability For Gratuitous Passengers
- When a goods vehicle carries a gratuitous passenger, the insurance policy does not cover the risk; the owner is personally liable for the full compensation award.
- Claimants should array the owner as a necessary party and press for direct liability; insurers should seek dismissal of claims against them at the earliest stage.
Section 147 Interpretation Is Settled
- The 1994 amendment to Section 147 explicitly added coverage for "owner of the goods or his authorized representative" but not for passengers, confirming legislative intent to exclude passengers in goods carriages.
- No premium is charged for gratuitous passenger risk in goods vehicles; insurers cannot be held liable for risks not contemplated or priced into the policy.
Actionable Takeaways
- For claimants' counsel: Join the vehicle owner as a respondent; argue for direct liability from the outset; do not rely solely on 'pay and recover' against the insurer.
- For insurers' counsel: Raise the gratuitous passenger defence in the written statement; cite Asha Rani, Baljit Kaur, and Parvathneni; seek dismissal of the claim against the insurer at the framing of issues stage.
- For owners' counsel: Be prepared for direct liability; explore settlement or defence on merits (negligence, contributory negligence) rather than relying on insurance indemnity.
