1. Motor accident claim — Death of passenger in goods vehicle — Dispute over insurance company's liability to indemnify owner due to carriage of passengers for fare. (Para 1 , 2 )
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2025 Supreme(SC) 1803
SUPREME COURT OF INDIA
K. VINOD CHANDRAN, N.V. ANJARIA, JJ.
Amudhavalli & Ors. – Petitioners
Versus
HDFC Ergo General Insurance Company Ltd. & Ors. – Respondents
Special Leave Petition (C) No.6117 of 2020
Decided On : 26-09-2025
Advocates appeared:
For the Petitioner(s): Mr. Mohan Raj, Adv. Ms. Charulata Chaudhary, AOR
For the Respondent(s): Mr. Joy Basu, Sr. Adv. Mr. Rajeev Maheshwaranand Roy, AOR Mr. Nilesh Kumar, Adv. Mr. Anoop George, Adv.
For the Petitioner(s): Mr. Mohan Raj, Adv. Ms. Charulata Chaudhary, AOR
For the Respondent(s): Mr. Joy Basu, Sr. Adv. Mr. Rajeev Maheshwaranand Roy, AOR Mr. Nilesh Kumar, Adv. Mr. Anoop George, Adv.
Gratuitous passengers in goods vehicles cannot be indemnified under insurance policies if fare payment results in a breach of conditions, reaffirming liability rests with the vehicle owner.
Headnote:(A) Motor Vehicles Act, 1988 - Issues of liability and compensation for passengers travelling in goods vehicles - The Tribunal awarded compensation for the death of the claimant's husband, attributing liability to the insurance company, which was contested based on policy breach - The High Court upheld compensation but set aside the pay and recover directive. (Paras 1, 2, 10)
(B) Insurance Coverage - Goods vehicles are not permitted to carry passengers unless under certain conditions - The court reaffirmed that gratuitous passengers cannot be indemnified by the insurer in case of policy violations. (Paras 5, 9)
Facts of the case:
The claimants, having not received the awarded compensation, challenged the High Court's ruling which confirmed compensation but denied the insurance company's obligation for pay and recover based on liability issues regarding fare-paying passengers in a goods vehicle.
Findings of Court:
The court found no reason to interfere with the High Court's decision, as the insurance company was not liable to indemnify the claimant due to the fact that the deceased was a fare-paying passenger in a goods vehicle, which breached policy conditions.
Issues: The primary issues revolved around the nature of liability of the insurance company regarding indemnification for passengers traveling in a goods vehicle and the implications of policy breaches.
Ratio Decidendi: The court ruled that damages for the claimant's death were not indemnifiable by the insurer as the deceased was a fare-paying passenger in a goods vehicle, invalidating the insurance coverage due to policy violations.
Result: Special Leave Petition dismissed.
Legal Category Hierarchy
Table of Contents
2. Claimants seek 'pay and recover' directions; Insurance company contends breach of policy conditions as goods vehicle carried passengers for fare. (Para 3 , 4 )
3. Goods vehicles are prohibited from carrying passengers for fare; such carriage constitutes a fundamental breach of insurance policy, absolving the insurer of liability to indemnify. (Para 5 , 10 )
4. Insurance companies are not liable to indemnify owners of goods vehicles when such vehicles are used to carry passengers for fare, constituting a fundamental breach. (Para 5 , 10 )
5. Special Leave Petition dismissed; High Court order setting aside 'pay and recover' directions upheld. (Para 11 )
6. Is an insurance company liable to indemnify the owner of a goods vehicle if the vehicle carries passengers for fare?
No. A goods vehicle is not permitted to carry passengers unless they are the owner of the goods or an authorized representative. Carrying passengers for fare constitutes a fundamental breach of the insurance policy, absolving the insurer of liability to indemnify the owner. (Para 5 , 10 )
7. Under what circumstances is the 'pay and recover' direction applied in motor insurance claims?
The court may adopt 'pay and recover' to avoid hardship to claimants in cases of policy breach, but it is not applicable where a fundamental breach exists and no amount has been deposited by the insurer. (Para 6 , 8 , 10 )
8. What is the legal status of passengers carried in a goods carriage vehicle regarding insurance coverage?
Passengers are generally not allowed in goods vehicles unless they are the owner of the goods or an authorized representative; carrying passengers for fare is a fundamental breach of policy, and even gratuitous passengers may result in the insurer being absolved of liability. (Para 5 , 9 , 10 )
ORDER :
1. The issue agitated here is that which comes up frequently before this Court; on the question of ‘pay and recover’, the appellants before this Court being either the claimants or the owner of the offending vehicle, depending upon whether the amounts were paid by the insurance company or not. In the instant case, the claimants who have not received the award amounts are before this Court.
2. The Tribunal made the award after computing the compensation for the death of the husband of the first petitioner and mulcted the liability on the insurance company, brushing aside the contention that the insured vehicle is a goods vehicle, and the deceased was a travelling passenger on fare. An appeal was filed before the High Court by the insurance company which resulted in the impugned judgment, which assailed both the quantum and the liability to indemnify the insured, the latter ground raised on the breach of conditions of policy, when the goods vehicle carried passengers on fare. The quantum as awarded by the Tribunal was confirmed by the High Court. However, the pay and recovery directed by the Tribunal was set aside.
3. Mr. Mohan Raj, learned counsel for the petitioners relied on two decisions of this Court in Manager, National Insurance Company Ltd. v. Saju P. Paul and Anr. , (2013) 2 SCC 41 and Shamanna and Another Vs. Divisional Manager, Oriental. Insurance Company Limited and Others , (2018) 9 SCC 650.
4. Mr. Joy Basu, learned Senior Counsel appearing for the insurance company, however, pointed out that the earlier view regarding a third-party coverage to a goods vehicle, including the gratuitous passengers has been reversed by this Court in New India Assurance Co. Ltd. v. Asha Rani , (2003) 2 SCC 223. In the present case, there is a clear admission that the deceased had travelled in a vehicle on payment of fare.
5. We cannot but observe that the witness of the claimants, PW-2, who was also an eye-witness stated unequivocally before the Tribunal that while the deceased and others were standing at the bus stand, the offending vehicle which was a three wheeler, came to the spot and the deceased and others travelled in it as passengers after paying fare. The deposition clearly absolves the liability of the insurance company to indemnify the owner. The goods vehicle is not allowed to carry passengers, unless he is the owner of the goods carried therein or his authorised representative.
6. Now the only issue is as to whether, the insurance company should be directed to pay the amounts and then recover it from the owner, which measure this Court adopted in various cases to avoid hardship to the claimants.
7. A reading of Saju P. Paul (supra) would indicate that therein the injured/claimant was travelling in a vehicle as a spare driver, as contended by the claimant himself. The claimant was stated to be the driver of another vehicle of the owner, and a spare driver was not covered under a third-party insurance policy which along with the third-party coverage included only the driver and cleaner of the vehicle.
8. In considering the measure of pay and recover, this Court in Saju P. Paul (supra) noticed a number of decisions where such measure was employed. National Insurance Co. Ltd. v. Baljit Kaur and Others , (2004) 2 SCC 1 was a case in which the Tribunal and the High Court proceeded in terms of the decisions of this Court in New India Assurance Company v. Satpal Singh and Others , (2000) 1 SCC 237 which was overruled in Asha Rani (supra). Since the Tribunal and the High Court had allowed the compensation based on Satpal Singh (supra), the measure of pay and recover was adopted in the said case. National Insurance Co. Ltd. v. Challa Bharathamma & Ors., (2004) 8 SCC 517 is yet another case in which ‘pay and recover’ was ordered. Therein the breach of condition of policy was projected insofar as the vehicle having not been covered by a permit to ply for hire or reward. The finding of the High Court as to the absence of permit not l
