2025 INSC 1270

CA@SLP(C) Nos 7139-7140 of 2023 Page 1 of 11

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. OF 2025

(Arising out of SLP (C) Nos. 7139-7140 of 2023)

K. NAGENDRA … APPELLANT(S)

Versus

THE NEW INDIA INSURANCE

CO. LTD. & ORS. … RESPONDENT (S)

J U D G M E N T

SANJAY KAROL, J.

Leave granted.

1. These appeals are directed against the common

final judgment and order dated 25

th

September 2019 in

Miscellaneous First Appeal No. 2947 of 2017 with

Miscellaneous First Appeal No. 1024 of 2018, passed by

CA@SLP(C) Nos 7139-7140 of 2023 Page 2 of 11

the High Court of Karnataka at Bengaluru, which in turn

were preferred against the judgment and order dated 14

th

December 2016 passed in Claim Petition No. 566/2014 by

the Senior Civil Judge and JMFC and Addl. MACT,

Channapatna.

2. The brief facts giving rise to these appeals are that

on 7

th

October 2014, the deceased, namely Srinivasa alias

Murthy who was riding on his motorcycle and was hit by

the offending vehicle, bearing registration number KA-52-

9099, in a rash and negligent manner, resulting in his death

on the spot.

3. The Appellant(s) (dependents of the deceased)

filed a claim petition before the Tribunal seeking

compensation to the tune of Rs. 50,00,000/- along with an

interest @ 18%, submitting therein that the deceased was

the only earning member of the family, running a business

of Shamiyana Centre and a Ration Shop; and earning up to

Rs. 15,000/- per month.

4. The Tribunal, by its order dated 14

th

December

2016 awarded the Appellant(s) an amount of

Rs. 18,86,000/- along with interest @ 6% p.a, taking the

notional income of the deceased as Rs. 8,000/- per month.

CA@SLP(C) Nos 7139-7140 of 2023 Page 3 of 11

Being aggrieved with the amount of compensation

awarded, the Claimant-Appellant(s) filed an appeal before

the High Court on the ground that the compensation was

not correctly calculated by the Tribunal. The Insurance

Company also challenged the Tribunal’s order on the

ground of violation by the insurer of the conditions

enumerated in the policy; both the appeals were heard and

disposed of vide the common impugned judgment and

order.

5. The High Court, vide the common impugned

judgement and order dated 25

th

September,2019 partly

allowed both the appeals.

5.1 Accepting the contentions of Claimant-

Appellant(s) by reassessing the monthly income of

the deceased at Rs. 15,750/- per month and by giving

40% towards future prospects, and since in the

present case there were 4 dependents of the deceased

1/4

th

of the income was deducted towards personal

expenses and after applying the multiplier of 16 the

compensation payable to the Appellant(s) under the

head ‘loss of dependency’ was assessed at Rs.

30,24,000/- and Rs. 40,000/- was awarded to the

widow towards ‘loss of spousal consortium’ and

CA@SLP(C) Nos 7139-7140 of 2023 Page 4 of 11

Rs. 30,000/- to the deceased's son towards ‘loss of

parental consortium’ and Rs. 30,000/- each to the

parents of the deceased towards ‘loss of filial

consortium’. In addition to this, the Appellant(s) were

awarded Rs. 15,000/- each towards loss of estate and

for funeral expenses totaling to Rs. 31,84,000/-.

5.2 As regards the Appeal filed by the Insurance

Company, it was contended by the counsel for the

Insurance Company that the route which was

undertaken by the bus driver was not covered by the

permit issued and that the driver of the bus was not

authorized to enter Channapatna City and that the

permit only covered the route from Bengaluru to

Mysore, which is admitted by both the parties, goes

on to show that there was a deviation in route and that

it was in violation of the permit. The High Court

relied on the ratio of the judgment of this Court in

Amrit Paul and Anr. v. TATA AIG General

Insurance Company & Ors.

1

wherein this Court held

that:-

24. In the case at hand, it is clearly demonstrable

from the materials brought on record that the

vehicle at the time of the accident did not have a

permit. The appellants had taken the stand that

1

(2018) 7 SCC 558

CA@SLP(C) Nos 7139-7140 of 2023 Page 5 of 11

the vehicle was not involved in the accident. That

apart, they had not stated whether the vehicle had

temporary permit or any other kind of permit. The

exceptions that have been carved out under

Section 66 of the Act, needless to emphasise, are

to be pleaded and proved. The exceptions cannot

be taken aid of in the course of an argument to

seek absolution from liability. Use of a vehicle in

a public place without a permit is a fundamental

statutory infraction. We are disposed to think so

in view of the series of exceptions carved out in

Section 66. The said situations cannot be equated

with absence of licence or a fake licence or a

licence for different kind of vehicle, or, for that

matter, violation of a condition of carrying more

number of passengers. Therefore, the principles

laid down in Swaran Singh [National Insurance

Co. Ltd. v. Swaran Singh, (2004) 3 SCC 297 :

2004 SCC (Cri) 733] and Lakhmi Chand [Lakhmi

Chand v. Reliance General Insurance, (2016) 3

SCC 100 : (2016) 2 SCC (Civ) 45] in that regard

would not be applicable to the case at hand. That

apart, the insurer had taken the plea that the

vehicle in question had no permit. It does not

require the wisdom of the “Tripitaka”, that the

existence of a permit of any nature is a matter of

documentary evidence. Nothing has been brought

on record by the insured to prove that he had a

permit of the vehicle. In such a situation, the onus

cannot be cast on the insurer. Therefore, the

Tribunal as well as the High Court had directed

that the insurer was required to pay the

compensation amount to the claimants with

interest with the stipulation that the insurer shall

be entitled to recover the same from the owner

and the driver. The said directions are in

consonance with the principles stated in Swaran

Singh [National Insurance Co. Ltd. v. Swaran

Singh, (2004) 3 SCC 297 : 2004 SCC (Cri) 733]

and other cases pertaining to pay and recover

principle.

CA@SLP(C) Nos 7139-7140 of 2023 Page 6 of 11

5.3 The High Court directed the Insurance

Company to satisfy the award as passed by the

Tribunal and granted the right to recover the amount

from the owner of the bus, i.e, the Appellant herein.

6. The question that comes up for consideration

before this Court in these appeals is whether any deviation

from the prescribed route as per the permit granted by the

state transportation authority, would impact on the liability

of the Insurance Company for any accident which may

take place while the vehicle is on such a deviated route. An

answer to this question would by itself justify the

correctness or lack thereof, of the order of the High Court

which employs the ‘pay and recover’ principle.

7. Before going to the exact issue involved in this

case, it would be appropriate to refer to certain judgments

which will set out the instances in which this Court has

approved the application of the above-mentioned principle.

It is on that benchmark that we will proceed to examine the

correctness of the High Court’s conclusions.

7.1 In National Insurance Co. Ltd. v. Swaran

Singh

2

, a bench of 3 learned Judges of this Court

2

(2004) 3 SCC 297

CA@SLP(C) Nos 7139-7140 of 2023 Page 7 of 11

observed thus:

“83. Sub-section (5) of Section 149 which

imposes a liability on the insurer must also be

given its full effect. The insurance company may

not be liable to satisfy the decree and, therefore,

its liability may be zero but it does not mean that

it did not have initial liability at all. Thus, if the

insurance company is made liable to pay any

amount, it can recover the entire amount paid to

the third party on behalf of the assured. If this

interpretation is not given to the beneficent

provisions of the Act having regard to its purport

and object, we fail to see a situation where

beneficent provisions can be given effect to. Sub-

section (7) of Section 149 of the Act, to which

pointed attention of the Court has been drawn by

the learned counsel for the petitioner, which is in

negative language may now be noticed. The said

provision must be read with sub-section (1)

thereof. The right to avoid liability in terms of

sub-section (2) of Section 149 is restricted as has

been discussed hereinbefore. It is one thing to say

that the insurance companies are entitled to raise

a defence but it is another thing to say that despite

the fact that its defence has been accepted having

regard to the facts and circumstances of the case,

the Tribunal has power to direct them to satisfy

the decree at the first instance and then direct

recovery of the same from the owner. These two

matters stand apart and require contextual

reading.”

[This judgment was followed in

Shamanna v. Oriental Insurance Co.

Ltd.

3

]

(emphasis supplied)

7.2 K.T Thomas J., in New India Assurance

3

(2018) 9 SCC 650]

CA@SLP(C) Nos 7139-7140 of 2023 Page 8 of 11

Co. v. Kamla

4

, stated the position of law succinctly,

thus:

“25…. The insurer and the insured are bound by

the conditions enumerated in the policy and the

insurer is not liable to the insured if there is

violation of any policy condition. But the

insurer who is made statutorily liable to pay

compensation to third parties on account of the

certificate of insurance issued shall be entitled

to recover from the insured the amount paid to

the third parties, if there was any breach of

policy conditions on account of the vehicle

being driven without a valid driving licence.

Learned counsel for the insured contended that

it is enough if he establishes that he made all

due enquiries and believed bona fide that the

driver employed by him had a valid driving

licence, in which case there was no breach of

the policy condition. As we have not decided on

that contention it is open to the insured to raise

it before the Claims Tribunal. In the present

case, if the Insurance Company succeeds in

establishing that there was breach of the policy

condition, the Claims Tribunal shall direct the

insured to pay that amount to the insurer. In

default the insurer shall be allowed to recover

that amount (which the insurer is directed to pay

to the claimant third parties) from the insured

person.

7.3 In Parminder Singh v. New India

Assurance Co. Ltd.

5

, this Court approved the

application of this principle in cases where the driver

of the offending vehicle does not possess a valid

driving license.

4

(2001) 4 SCC 342

5

(2019) 7 SCC 217

CA@SLP(C) Nos 7139-7140 of 2023 Page 9 of 11

7.4 In S. Iyyapan v. United India Insurance

Co. Ltd.

6

, it was held that if at the time of accident,

there is a discrepancy in the vehicle being dofven by

the driver and the endorsement on the driver’s license

(i.e., the kind of vehicle said driver is permitted to

operate) then, in such a case, pay and recover shall be

permitted.

7.5 In M/s Chatha Service Station v. Lalmati Devi

& Ors

7

it was held that when a vehicle involved in an

accident is found to be carrying certain goods which it

was not authorized to as per law (in the instant case

hazardous goods within the meaning of Rule 9 of

Central Motor Vehicles Rules, 1989) the insurance

company while would be required to compensate the

victim of the accident, it shall be entitled to recover

the amount so paid from the holder of the insurance

policy.

8. Now, let us consider the instant case. The record

reveals that the offending vehicle did not have the permit

to enter Channapatna City, where the accident took place.

This position is not in dispute. Unquestionably, therefore,

6

(2013) 7 SCC 62

7

2025 SCC OnLine SC 756

CA@SLP(C) Nos 7139-7140 of 2023 Page 10 of 11

the terms of the permit have been deviated.

9. The purpose of an insurance policy in the present

context is to shield the owner/operator from direct liability

when such an unforeseen/unfortunate incident takes place.

To deny the victim/dependents of the victim compensation

simply because the accident took place outside the bounds

of the permit and, therefore, is outside the purview of the

insurance policy, would be offensive to the sense of

justice, for the accident itself is for no fault of his. Then,

the Insurance Company most certainly ought to pay.

10. At the same time though, when an Insurance

Company takes on a policy and accepts payments of

premium in pursuance thereto, it agrees to do so within

certain bounds. The contract lays down the four corners

within which such an insurance policy would operate. If

that is the case, to expect the insurer to pay compensation

to a third party, which is clearly outside the bounds of the

said agreement would be unfair. Balancing the need for

payment of compensation to the victim vis-à-vis the

interests of the insurer, the order of the High Court

applying the pay and recover principle, in our considered

view, is entirely justified and requires no interference.

CA@SLP(C) Nos 7139-7140 of 2023 Page 11 of 11

11. The appeals are dismissed; however, there shall be

no order as to costs. Pending application(s), if any, shall

stand disposed of.

……………………… ………..…J.

(SANJAY KAROL)

………………………… …….…..J.

(PRASHANT KUMAR MISHRA)

New Delhi;

October 29, 2025