1. Fatal accident – Claim for compensation under Section 166, Motor Vehicles Act, 1988 – Enhancement appeal by insurance company. (Para 2 , 3 , 4 , 5 )
Back
Next 
2025 Supreme(Telangana) 2286
IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
NARSING RAO NANDIKONDA, J.
HDFC ERGO General Insurance Co. Ltd. - Appellant
Versus
Vallabhi Vimala W/o. Hanumantha Rao - Respondent
M.A.C.M.A.No.649 of 2020
Decided On : 22-09-2025
Important Points
A cover note constitutes a 'certificate of insurance' under the Motor Vehicles Act and remains valid until cancelled, binding the insurer to third-party obligations. Notional income may be reasonably estimated based on ground realities in the absence of formal income proof.
Subject
Motor Accident Claims - Insurance Liability
Act Referred
Headnote
(A) Motor Vehicles Act, 1988 - Sections 145, 166 and 173 - Insurance of motor vehicles - Validity of cover note - Under Section 145(1)(b), a cover note complying with prescribed requirements is included within the definition of "certificate of insurance" and consequently within the definition of "policy of insurance" - If a cover note is issued, it remains valid until it is cancelled - An insurer cannot be absolved of its obligations to third parties if the cover note was not cancelled prior to the accident, even if the formal policy was issued later or the premium cheque was encashed subsequently (Paras 17, 18, 21, and 22).
(B) Quantum of Compensation - Determination of notional income - In the absence of concrete proof of income and earnings, the income of the deceased can be reasonably estimated and assessed considering ground realities (Paras 23, 24, and 25).
Facts of the case:
This appeal was filed by an insurance company challenging a Tribunal's award for compensation arising from a fatal accident where a tractor and trailer collided with a motorcycle, resulting in the death of a pillion rider. The appellant contended that the insurance policy commenced after the date of the accident and that the income assigned to the deceased was excessive. Evidence showed that a cover note had been issued prior to the accident, and although the formal policy began later, the premium cheque had been encashed.
Findings of Court:
The insurance company is liable for compensation because the cover note acted as a valid certificate of insurance on the date of the accident. Further, the assessment of the deceased's income at Rs. 1,00,000/- per annum is reasonable and consistent with ground realities and judicial precedents regarding unskilled labor and agriculture work.
Issues: Whether the insurance company is liable to pay compensation when the formal policy commenced after the date of the accident but a cover note existed, and whether the assessed income of the deceased was justified.
Ratio Decidendi: A cover note issued in terms of Section 145(1)(b) of the Act is treated as a certificate of insurance and remains valid until cancelled; therefore, the insurer's liability commences from the date of the cover note's issuance. Additionally, without formal proof of earnings, the court may determine a reasonable notional income based on the avocation of the deceased and current socio-economic realities.
Result: Appeal dismissed.
(B) Quantum of Compensation - Determination of notional income - In the absence of concrete proof of income and earnings, the income of the deceased can be reasonably estimated and assessed considering ground realities (Paras 23, 24, and 25).
Facts of the case:
This appeal was filed by an insurance company challenging a Tribunal's award for compensation arising from a fatal accident where a tractor and trailer collided with a motorcycle, resulting in the death of a pillion rider. The appellant contended that the insurance policy commenced after the date of the accident and that the income assigned to the deceased was excessive. Evidence showed that a cover note had been issued prior to the accident, and although the formal policy began later, the premium cheque had been encashed.
Findings of Court:
The insurance company is liable for compensation because the cover note acted as a valid certificate of insurance on the date of the accident. Further, the assessment of the deceased's income at Rs. 1,00,000/- per annum is reasonable and consistent with ground realities and judicial precedents regarding unskilled labor and agriculture work.
Issues: Whether the insurance company is liable to pay compensation when the formal policy commenced after the date of the accident but a cover note existed, and whether the assessed income of the deceased was justified.
Ratio Decidendi: A cover note issued in terms of Section 145(1)(b) of the Act is treated as a certificate of insurance and remains valid until cancelled; therefore, the insurer's liability commences from the date of the cover note's issuance. Additionally, without formal proof of earnings, the court may determine a reasonable notional income based on the avocation of the deceased and current socio-economic realities.
Result: Appeal dismissed.
Legal Category Hierarchy
- tort
- practice and procedure
-
crime and sentencing
-
offences against the person
- causing death by negligence (Para 4)
-
offences against the person
Advocates Appeared:
For the Appellant : Sri G. Ravi Chandra Sekhar Learned Standing Counsel.
For the Respondent: Sri P. Sanjay Kumar, Learned counsel.
For the Appellant : Sri G. Ravi Chandra Sekhar Learned Standing Counsel.
For the Respondent: Sri P. Sanjay Kumar, Learned counsel.
Table of Contents
2. Insurance company argued no valid policy on accident date; claimants contended cover note issued before accident was valid. (Para 7 , 10 , 13 , 14 , 15 )
3. Cover note issued before accident is a certificate of insurance; policy valid from cover note date when cheque honoured. (Para 16 , 17 , 18 , 19 , 20 , 21 , 22 )
4. Once a cover note is issued under Section 145(1)(b), it remains valid until cancelled, binding insurer for third-party claims. (Para 18 , 19 , 21 , 22 )
5. Appeal dismissed – Tribunal's compensation award confirmed – No order as to costs. (Para 27 )
6. Is an insurance company liable when a cover note was issued before the accident but the formal policy commenced after the accident?
Yes. A cover note under Section 145(1)(b) of the Motor Vehicles Act is a certificate of insurance and remains valid until cancelled, binding the insurer from its date of issue. (Para 18 , 19 , 21 , 22 )
7. Can a court estimate income for a deceased with no proof of earnings in a motor accident claim?
Yes. Courts may reasonably estimate income considering ground realities and judicial precedents, even without formal proof of earnings. (Para 23 , 24 , 25 )
8. What is the basis for assessing notional income of an unskilled labourer or coolie in accident claims?
Courts use precedents like Ramachandrappa for a base income (e.g., Rs.4,500 in 2004) and apply incremental increases (e.g., Rs.500/month per year) to determine current notional income. (Para 24 , 25 )
JUDGMENT :
Narsing Rao Nandikonda, J.
This appeal is filed by the appellant-Insurance Company under Section 173 of the Motor Vehicles Act, 1988 (for short, ‘the Act, 1988’) aggrieved by the order and decree, dated 13.05.2020 in M.V.O.P.No.171 of 2016 passed by the learned Chairman, Motor Accidents Claims Tribunal-cum-Special Sessions Judge for Fast Tracking the Cases relating to Atrocities Against Women-cum-VIII Additional District Judge, Khammam (for short, ‘the Tribunal’)
2. The brief facts of the case are that the claimants filed claim petition under Section 166 of the Act, 1988 claiming compensation of Rs.5,00,000/- for the death of Vallabhi Hanumantha Rao (hereinafter referred to as ‘the deceased’) in a fatal accident occurred on 26.06.2014.
3. The 1st claimant is wife, 2nd claimant and 3rd claimants are daughters of the deceased. On 26.06.2014 at about 2:00 PM, one Kondabala Ramesh and the deceased were proceeding to Khammam on a motorcycle bearing No.AP-20-N-6863 to purchase cotton seeds and when they reached Venkatagiri X Roads, near Supraja Rice Mill on R&B main Road leading from Mudigonda to Khammam, meanwhile one Tractor & Trailer bearing No.AP-20-TC-2109 & 4767 proceeding in the same direction came at high speed in a rash and negligent manner and dashed against the motorcycle. As a result of it, the deceased (pillion rider) fell down on the road and sustained severe injuries on vital parts of the body and died on the spot.
4. On receipt of complaint, police Khammam Rural registered a case in Crime No.381 of 2014 under Sections 304-A and 338 of I.P.C. against the driver of the crime vehicle.
5. The deceased was aged about 56 years and he was hale and healthy at the time of accident and doing agriculture work and used to earn Rs.1,00,000/- per annum. Apart from agriculture work, he is also doing coolie work and used to earn a sum of Rs.300/- per day and contributing the same for welfare of his family. The claimants are residing in joint family under one roof. Due to sudden death of deceased, the 1st claimant lost her conjugal happiness and other claimants lost their love and affection of the deceased.
6. The appellant is the insurance company and respondent No.2 is insurer of the crime vehicle i.e., tractor and trailer, as such they are jointly and severally liable to pay compensation to the claimants. Respondent No.4 owner of the vehicle did not choose to file counter and finally reported no counter.
7. The appellant-insurance company filed counter-affidavit inter alia contending that the petition is liable to be dismissed in limine. It is also stated that the appellant denied about involvement of tractor and trailer bearing No.AP-20-TC-2109 & AP-20-TA-4767 in the accident. It is also denied about the age, avocation and income of the deceased and also denied the manner of accident as narrated in the petition. It is stated that the driver of Tractor & Trailer was not holding valid and effective driving licence at the time of accident and that the vehicle was not fit and it was not road worthy. It is further contended that the 1st respondent did not inform about the accident to the 2nd respondent and he did not furnish any such information about the policy. It is also contended that the claim made by the claimants is excessive and exorbitant and that the driver of the said tractor and trailer was not holding any valid driving licence. It is stated that the claim petition is liable to be dismissed on the ground of non-joinder of parties, owner and insurer of motorcycle bearing No.AP-20-N6863. The insurance company did not issue any policy cover Note No.00660029292504 which was valid from 25.06.2014 to 24.06.2014 and hence, he prayed to dismiss the petition.
8. Basing on the above pleadings, the following issues have been framed by the Tribunal for trial:
(i) Whether the driver of Tractor & Trailer bearing No.AP-20-TC-2109 & AP-20-TA-4767 drove the tractor in a rash and negligent manner and caused the death of the deceased-Vallab
