The Delhi High Court dismissed National Insurance Company’s appeal against a MACT award, holding that even where the insured vehicle was driven without a valid permit and licence, the insurer cannot be fully exonerated. Reaffirming the settled “pay and recover” doctrine, the Court ruled that the insurer must first pay compensation to the accident victim and may thereafter recover the amount from the vehicle owner or driver responsible for the policy breach.

Legal Issue

Whether the insurance company can be completely exonerated from liability to pay compensation under the Motor Vehicles Act, 1988, when the insured vehicle was driven in breach of policy conditions (without permit and without valid licence), or whether the doctrine of “pay and recover” applies, obligating the insurer to first satisfy the award and then recover the amount from the owner/driver.

Facts 

The case arose from a road accident on 13 June 2010, when the claimant, employed as a conductor/helper in bus BR-45-P-0541, sustained grievous injuries after the driver suddenly reversed the vehicle while passengers were alighting. An FIR was registered against the driver under Sections 279, 338, 420, 468, and 471 of the IPC, and a chargesheet was filed. The claimant sought compensation under Sections 166 and 140 of the Motor Vehicles Act, 1988. The Motor Accident Claims Tribunal (MACT) found the driver negligent and awarded ?4,11,000 with 7.5% interest to the claimant. Importantly, the Tribunal granted recovery rights to the insurer, National Insurance Company Ltd., against the driver and owner, noting that the bus was operated without a valid permit and the driver lacked the appropriate licence, constituting breach of policy conditions. Aggrieved, the insurer appealed to the Delhi High Court, contending that it should have been completely absolved of liability rather than directed to pay and recover.

Judgment 

Justice Prateek Jalan dismissed the insurer’s appeal, holding that the issue of “pay and recover” is conclusively settled against insurance companies by binding precedents. The Court reviewed the jurisprudence: the Supreme Court in Parvathneni (2009) had doubted the doctrine but left the question open, while the Karnataka High Court’s Division Bench ruling in KC Subramanium (2012) rejecting “pay and recover” was expressly overruled by its Full Bench in Yallavva (2020). More recently, the Supreme Court in Rama Bai v. Amit Minerals (2025) and Akula Narayana v. Oriental Insurance (2025) reaffirmed that even in cases of fundamental breach, such as absence of permit or valid licence, the insurer must first satisfy the award to protect third-party victims, with liberty to recover from the insured. Applying these rulings, the Court held that the insurer cannot be exonerated from liability altogether; its statutory duty under Section 149 of the Motor Vehicles Act requires it to pay compensation to victims and then pursue recovery. The appeal was therefore dismissed, with the clarification that if the insurer has already satisfied the award, it retains the right to recover the amount from the driver and owner in accordance with the law.

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Case Name

National Insurance Company Ltd. v. Jawahar Prasad Keshri @ Jawahar Shah & Ors.

Neutral Citation

2025:DHC:11320

Date

12 December 2025

Bench

Hon’ble Mr. Justice Prateek Jalan, High Court of Delhi