The Punjab and Haryana High Court has reaffirmed a long-standing principle that a person driving a borrowed vehicle cannot claim compensation under Section 163-A of the Motor Vehicles Act, 1988, even in the event of death. This ruling clarifies the boundaries of statutory no-fault liability and reinforces the distinction between third-party coverage and contractual insurance benefits.
Background & Facts
The Dispute
The appellants, parents of the deceased Amit, filed a claim under Section 163-A of the Motor Vehicles Act, 1988, seeking compensation for the death of their son in a motor accident. Amit, aged 22, was riding a motorcycle bearing registration No. HR-14Q-2322, which he had borrowed from respondent No.1, the vehicle’s owner. The accident occurred on 10.06.2020, allegedly due to a collision with an unidentified vehicle. An FIR No.343 was registered on 11.06.2020.
Key Facts
- The deceased Amit was not the registered owner of the motorcycle
- He had borrowed the vehicle from respondent No.1 on the day of the accident
- The motorcycle was insured under a policy issued by respondent No.2, the insurance company
- The policy included a personal accident cover of ₹1,00,000/- for the owner-driver
- No third-party liability coverage was claimed as the deceased was not a third party
- The claimants sought compensation under Section 163-A on a structured formula basis, seeking ₹5,00,000/-
Procedural History
- 10.06.2020: Motor accident resulting in death of Amit
- 11.06.2020: FIR No.343 registered at police station
- [Date unspecified]: Claim petition filed before Motor Accident Claims Tribunal, Gurugram
- 19.05.2023: Tribunal awarded ₹1,00,000/- under personal accident cover but rejected claim under Section 163-A
- 02.04.2026: Appeal heard by Punjab and Haryana High Court
- 06.04.2026: Judgment pronounced
The Parties' Positions
Appellants (Claimants): Argued that Section 164 of the Motor Vehicles (Amendment) Act, 2019, introduced a no-fault compensation scheme of ₹5,00,000/- for death, which should apply irrespective of whether the deceased was the owner or borrower of the vehicle. They contended that the provision was beneficial and should be applied retroactively or expansively.
Respondents (Insurance Company): Maintained that Section 163-A applies only to third parties, and a borrower-driver is legally equivalent to the owner. They further argued that Section 164 does not expand the scope of third-party liability under Section 147 and that the insurer’s liability beyond third-party coverage is strictly contractual.
Relief Sought
The appellants sought: (1) Setting aside the Tribunal’s order dated 19.05.2023; (2) Award of ₹5,00,000/- under Section 164; (3) Alternatively, enhancement of compensation beyond ₹1,00,000/-; and (4) Costs of litigation.
The Legal Issue
The central question was whether the legal representatives of a person who was driving a borrowed vehicle can maintain a claim under Section 163-A of the Motor Vehicles Act, 1988, and whether Section 164 of the 2019 Amendment extends statutory compensation to owner-drivers or borrower-drivers.
Arguments Presented
For the Appellant
Learned counsel for the appellants relied on the introduction of Section 164 by the Motor Vehicles (Amendment) Act, 2019, which mandates a fixed compensation of ₹5,00,000/- for death arising from motor accidents, irrespective of fault. They argued that this provision was enacted to provide swift, no-fault relief to victims’ families and should be interpreted broadly to include all persons involved in the accident, including borrower-drivers. They contended that denying compensation under Section 164 to the deceased’s parents would defeat the legislative intent of social justice and victim-centric relief.
For the Respondent
Counsel for the insurance company submitted that Section 164 does not alter the foundational principle of the Motor Vehicles Act that insurer liability under Section 147 is confined to third-party risk. The liability of the insurer towards the owner or driver is purely contractual, as per the policy terms. The personal accident cover of ₹1,00,000/- was already paid, and there was no breach of policy conditions. They cited Ningamma v. United India Insurance Co. Ltd. and Ramkhiladi v. United India Insurance Co. Ltd. to establish that a borrower-driver is not a third party and cannot claim under Section 163-A.
The Court's Analysis
The Court examined the legislative framework of the Motor Vehicles Act, particularly the interplay between Section 147 (third-party insurance), Section 163-A (no-fault compensation for third parties), and Section 164 (fixed compensation for death or grievous hurt). It noted that while Section 164 provides a no-fault compensation scheme, it does not expand the definition of "third party" under Section 147 or Section 163-A.
"The statutory liability of the insurer under Section 147 continues to be confined to third-party risk only, and the said provision cannot be invoked to fasten liability upon the insurer in respect of the owner or a person stepping into the shoes of the owner."
The Court emphasized that the Supreme Court in Ningamma v. United India Insurance Co. Ltd. (2009) and Ramkhiladi v. United India Insurance Co. Ltd. (2020) had uniformly held that a borrower-driver steps into the shoes of the owner and cannot be treated as a third party. This principle remains binding.
The Court further observed that Section 164 operates as an additional layer of compensation, but only for those who qualify as third parties under the Act. It does not create a new category of claimants. The insurer’s obligation to pay under Section 164 arises only when the victim is a third party. Where the victim is the owner or a borrower-driver, the insurer’s liability is limited to the contractual terms of the policy.
The Tribunal correctly awarded ₹1,00,000/- under the personal accident cover, as this was a contractual benefit explicitly provided in the policy (Ex. R1). There was no evidence of any policy breach or misrepresentation. The Court found no perversity or illegality in the Tribunal’s reasoning.
The Verdict
The appeal was dismissed. The Award dated 19.05.2023 of the Motor Accident Claims Tribunal, Gurugram, was affirmed. The claimants are entitled to the sum of ₹1,00,000/- under the personal accident cover of the insurance policy, and no further compensation is payable under Section 163-A or Section 164. No costs were awarded.
What This Means For Similar Cases
Borrower-Drivers Are Not Third Parties
- Practitioners must advise claimants that compensation under Section 163-A or Section 164 is unavailable if the deceased was driving a borrowed vehicle
- Claims must be framed under contractual insurance benefits (e.g., personal accident cover) rather than statutory third-party schemes
- Legal heirs should be informed early that Section 164 does not override the owner-borrower distinction
Section 164 Does Not Override Policy Limits
- The introduction of Section 164 does not convert owner-drivers into third parties for insurance purposes
- Insurers are not liable beyond the policy terms for owner-driver claims, even if death occurs in a no-fault accident
- Claims for higher compensation under Section 164 must be rejected at the Tribunal level if the deceased was not a third party
Contractual Coverage Remains Critical
- Policyholders should be advised to opt for higher personal accident cover limits for owner-drivers
- Insurance agents must clearly explain the distinction between third-party liability and personal accident benefits
- In cases involving borrowed vehicles, the absence of third-party coverage means compensation is limited to the policy’s personal accident clause
