Insurance policies classified as 'Act Only Policy' can still invoke 'Pay and Recover' under applicable legal precedents, establishing liability for compensation despite non-payment of premium for occupants.

JUDGMENT :

Sanjay K. Agrawal, J.

1.Since no one is appearing on behalf of the respondents though served, this Court deems it appropriate to appoint Mr. A.L. Singroul, learned counsel, as amicus curiae to assist the Court in the present case.

2.This appeal under Section 173 of the Motor Vehicles Act, 1988 (for short “Act of 1988”) has been preferred by the appellant/Insurance Company challenging the impugned award dated 05.07.2022 passed by the 1^st Motor Accident Claims Tribunal, Durg, Chhattisgarh (for short “Claims Tribunal”) in Claim Case No. 59/2021, whereby learned Claims Tribunal has allowed the claimants’ application and awarded a total sum of Rs.12,28,165/- as compensation along with interest by fastening the liability upon the appellant herein on the basis of principle to first pay the compensation to the claimants and thereafter, recover the same from the owner and driver of the offending vehicle.

3.Mr. Dashrath Gupta, learned counsel for the appellant/Insurance Company, would submit that the Claims Tribunal has erred in fastening liability by applying the principle of pay and recover as the vehicle in question was insured with “Act Only Policy/Liability Only Policy” and no premium was paid to cover the risk of the occupant/deceased and, therefore, the Claims Tribunal ought not to have invoked principle to pay and recover and, as such, to that extent the appeal deserves to be allowed by exonerating the Insurance Company from the aforesaid liability.

4.None for the respondents though served.

5.Mr. A.L. Singroul, learned counsel appearing as amicus curiae, would submit that the issue involved in the present case has already been decided by the Supreme Court in the matter of Sunita & Ors. v. United India Insurance Co. Ltd. & Ors., 2025 INSC 867 in which it has been held that the principle of “Pay and Recover” be applied in the “Act Only Policy/Liability Only Policy”.

6.I have heard learned counsel for the parties, considered the submissions made herein above and gone through the records precisely.

7.The Supreme Court in the matter of Sunita (supra) has considered the issue whether the principle of pay and recover can be invoked in respect of the vehicle insured with the “Act Only Policy/Liability Only Policy” and no premium was paid to cover the driver, owner or a gratuitous passenger travelling therein, and held as under:-

“13.Adverting to the facts in hand, from a bare perusal of the record, it is borne that the vehicle in question was insured with “Liability Only Policy” and no premium was paid to cover the driver, owner, or a gratuitous passenger travelling therein. However, even then, in our view, the Courts below erred in holding that the Insurance Company is not liable to pay the compensation to the claimant-appellants, for the principle of “Pay and Recover” ought to have been invoked. As such, we are inclined to interfere with the above findings of the Courts below.

14.We must advert to the exposition of this Court in National Insurance Co. Ltd. v. Baljit Kaur , (2004) 2 SCC 1 . The deceased therein was travelling as a gratuitous passenger, and due to the rash and negligent driving of the offending vehicle, lost his life. The Insurance Company was directed to satisfy the amount awarded by the Courts below and recover the same from the owner of the vehicle, as the premium was not paid by the owner of the vehicle towards gratuitous passenger.

15. The above position has been followed by this Court in Anu Bhanvara v. IFFC O Tokio General Insurance Co. Ltd. , (2020) 20 SCC 632 , wherein the injured person was travelling as a gratuitous passenger and was not covered under the Insurance Policy, the driver and owner of the vehicle was held liable for payment