Date of reserved for orders :20.07.2026

Date of pronouncement :20.08.2026

Date of uploading : 20.08.2026

APHC010146032010

IN THE HIGH COURT OF ANDHRA PRADESH

AT AMARAVATI

MOTOR ACCIDENT CIVIL MISCELLANEOUS

APPEAL Nos:1125 AND 1149 OF 2010

[3584]

M.A.C.M.A.No.1125 of 2010:

Sadanala Srinivasa Rao ...Appellant

Vs.

Katta Ramana and Others ...Respondent(s)

**********

CORAM : THE CHIEF JUSTICE LISA GILL

SRI JUSTICE CHALLA GUNARANJAN

DATE : 20

th

August 2026

Present:

Advocate for Appellant: MR. SANKU DURGA

RAMACHANDRA RAO

Advocate(s) for Respondent(s): MR.J. BHASKARA RAO,

REPRESENTING SRI V S R

ANJANEYALU

RAMA MOHAN RAO KOTHA,

***

COMMON JUDGMENT: (per Hon’ble Sri Justice Challa Gunaranjan)

Both these appeals, instituted under Section 173 of the Motor

Vehicles Act, 1988 (for short, “the Act”), since assail the very same

award, dated 22.12.2008, in O.P.No.473 of 2005 passed by the

Chairman, Motor Vehicle Accidents Claims Tribunal-cum-I Additional

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District Judge, East Godavari District at Rajahmundry, the same are

heard together and disposed of by this common judgment.

2. For the sake of convenience, the parties hereinafter are referred

to as they were arrayed in the M.V.O.P. before the Tribunal.

3. M.A.C.M.A.No.1125 of 2010 has been preferred by the claimant

and whereas M.A.C.M.A. No.1149 of 2010 by the owner of the offending

vehicle.

4. By impugned award, the Tribunal, while determining the

compensation of Rs.67,03,854/-, exonerated the insurer from liability

and directed the owner and driver of offending vehicle to pay the same.

Thus, appellants-claimants as well as the owner of the offending vehicle

being dissatisfied with the award to the extent of exonerating the insurer

from liability preferred separate appeals.

5. (a) The present case originates from a motor vehicle accident that

occurred on 04.05.2003 at about 04.00 a.m. near Paleru Bridge toll gate

in Prakasam District. The claimant, a Senior Sales Officer at Nestle India

(P) Ltd., along with several colleagues, had engaged a Toyota Qualis

car bearing registration No.AP16 AF 1099 to travel from Vijayawada to

Bengaluru to attend company meeting. It was alleged that the driver,

drove the vehicle at high speed in a rash negligent manner, eventually

losing control, crashed into a stationary lorry parked on the left side of

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M.A.C.M.A. Nos.1125

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the road margin, as a result of the collision, the claimant sustained

grievous injuries, especially traumatic cervical spinal cord injury, leading

to Quadriplegia (complete paralysis of all four limbs). Following the

collision, a police constable on highway patrol duty arrived at the spot

and sent the injured to the Government General Hospital, Ongole. He

underwent extensive medical treatment for over nine months at various

institutions including Government General Hospital, Ongole, Soumya

Hospital, Vijayawada, Swathantra Hospital, Rajahmundry, and Christian

Medical College, Vellore. Ultimately, the injuries resulted in 100%

permanent functional disability that left the claimant bedridden and

dependent on attendants for the rest of life.

(b) A criminal case in Crime No.14 of 2003 was registered against

the driver of the car at Jarugumalli Police Station for the offence

punishable under Section 338 IPC.

(c) Claimant was aged about 30 years and drawing salary of

₹22,000/- per month, and having regard to the length of remainder of

service, it was claimed that he had greater future prospects in career. In

that background, he made a claim for compensation of ₹1,05,00,000/-.

6. The driver and owner of offending car were arrayed as

respondents 1 and 2 and the insurer of the said vehicle as 3

rd

respondent. 1

st

respondent, driver of the car, died pending the

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proceedings even before summons could be served on him. However,

no steps were taken to bring the legal heirs of 1

st

respondent on record.

Therefore, the claim qua 1

st

respondent got abated by order, dated

23.08.2006.

7. The owner, 2

nd

respondent, filed written statement denying the

avocation, age, earnings of claimant, and quantum of compensation

claimed. Further, it was pleaded that since the subject vehicle was

insured with 3

rd

respondent and that the policy was in force, besides that

the driver had valid driving licence at the time of accident, any liability

would be to the account of the insurer, therefore, sought for dismissal of

claim against the 2

nd

respondent.

8. The insurer, 3

rd

respondent, filed written statement, inter alia,

pleading that there was violation of terms and conditions of policy

inasmuch as the policy was issued for non-transport purpose and does

not cover the use of vehicle for hire or reward. It was pleaded that the

subject vehicle was hired by the claimant and others, and when they

were proceeding from Vijayawada to Bangalore, the accident had

occurred. That apart, the insurer also denied that the driver of

vehicle was holding valid and effective driving licence; the accident had

occurred because of rash and negligent driving by the driver of the

vehicle as the accident occurred on account of negligent parking of lorry

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on the road in the midnight without providing sufficient indicators or

signals, besides that, various other pleas were also taken with regard to

the nature of injuries, the expenses incurred, age, and earnings of the

claimant.

9. Based on the aforesaid pleadings, the Tribunal has framed the

following issues:

“1) Whether the accident was occurred due to rash and

negligent act of R.1 driver of Qualis bearing registration No.AP 16 AF

1099?

2) Whether the petitioner is entitled for claims of

compensation?

3) To what relief?”

10. In support of the claim, PW.1 to PW.7 were examined and Exs.A1

to A23 and Exs.X1 to X5 marked. The second respondent did not

adduce any evidence, either oral or documentary. The third respondent

got examined RW.1 and RW.2 and marked Exs.B1 to B9.

11. The Tribunal, upon appreciation of the evidence on record, both

oral and documentary, answered first issue in favour of claimant, holding

that the accident occurred due to rash and negligent act of first

respondent, i.e., driver of the subject vehicle. While answering the

second issue, the Tribunal had marshalled the entire evidence adduced

on behalf of claimant and ultimately awarded compensation under

various heads as follows:

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1. Towards Pain and Sufferance Rs.10,10,000/-

2. Towards loss of earnings Rs. 87,030/-

3. Towards attendant charges Rs.13,68,000/-

4. Towrds extra nourishment charges Rs.13,68,000/-

5. Towards extra hospital and medical expenses Rs.23,80,000/-

6. Towards permanent disability Rs. 4,90,824/-

Total Rs.67,03,854/-

However, in the process of determining the aspect of liability, the

Tribunal has come to conclusion that the claimant was unable to

substantiate that the subject vehicle was provided by one of his

colleagues' relative for travelling from Vijayawada to Bengaluru, rather,

the evidence on record otherwise clearly demonstrated that they had

hired the vehicle from Jahnavi Travels. The subject vehicle, since

was having policy for private use and not for hire and reward, the

Tribunal held that the same amounted to violation of terms and

conditions of policy, thus, exonerated the insurer from the liability.

Ultimately, respondents 1 and 2 were held jointly and severally liable to

pay the compensation along with interest at the rate of 7.5% per annum,

from the date of petition till the date of deposit.

12. Assailing the same, both the claimant as well as the second

respondent, owner of vehicle, preferred these appeals.

13. Heard Mr.Sanku Durga Ramachandra Rao, learned counsel for

the claimant, and Mr.J.Bhaskara Rao, learned counsel, representing

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Sri V.S.R. Anjaneyulu, learned senior counsel, and Mr.Rama Mohan

Rao, learned counsel, appearing for respondents.

14. Learned counsel appearing for the claimant primarily contended

that the Tribunal erred in exonerating the insurance company from

discharging the liability. Since the occurrence of accident because of

involvement of the subject vehicle, insured by the 3

rd

respondent, is

clearly established and demonstrated, the Tribunal ought to have

applied the principle of pay and recover, rather than exonerating the

insurer completely. Thus, it is urged that keeping in view the benevolent

object of the Act and other relevant factors arising in the case, the

insurance company be directed to discharge the awarded sum to the

claimant, and then to recover the same from the insured by extending

the principle of pay and recover. Except for the above, learned counsel

appearing for the claimant has not advanced any other argument

regarding the quantum of compensation. In support thereof, reliance

has been placed on the judgment of the Hon’ble Apex Court in Manuara

Khatun v. Rajesh Kumar Singh

1

and Kaminiben v. The Oriental

Insurance Co. Ltd.

2

15. In the appeal preferred by 2

nd

respondent, owner of the subject

vehicle, while challenging the award, learned counsel for the 2

nd

1

(2017) 4 SCC 796

2

2026 ACJ 447 = 2026(2) Apex Court Judgments (SC) 571

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respondent would contend that the Tribunal's conclusion that the

accident occurred due to rash and negligent driving of subject vehicle

was a presumptuous conclusion reached without proper appreciation of

the material and evidence available on record. It is urged that the

Tribunal committed serious mistake by holding that the insurer was not

liable to indemnify the same, the findings in support of said conclusion,

are without any basis and contrary to the letter and spirit of Ex.B7

insurance policy.

16. (a) Conversely, learned counsel for 3

rd

respondent, insurer,

sought to maintain the Tribunal's decision in exonerating it from liability.

It is urged that the subject vehicle, as was insured under a private car

package policy, meant only for personal use of owner and family, the

same was hired out for commercial gain to transport the claimant and

his colleagues to Bangalore, thus, it clearly amounted to fundamental

breach of the insurance policy terms. Therefore, the Tribunal was

justified in holding that the subject vehicle, since it was used for hire or

reward, fell outside the scope of policy coverage, therefore, no liability

could be fastened on the insurer. It is further contended that when there

is a clear breach of policy conditions, question of even applying the

principle of pay and recover also does not arise.

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(b) It is also contended that even otherwise, since 1

st

respondent,

driver of the subject vehicle, died, and claim against him stood abated,

the aspect of negligence stands unproved, so question of insurer being

vicariously liable nor indemnifying the compensation would arise. At

any rate, the owner of vehicle, since contested the proceedings and

even filed appeal before this Court, extending the principle of pay

and recover does not arise, hence, the judgment of Hon’ble Apex Court

in Manuara Khatun

1

, sought to be relied on by the claimant, would have

no application to the present case. Alternatively, it is also contended that

under Ex.B7 policy, as premium was paid for 9 persons with a cap of

maximum liability of ₹88,000/-, the insurer cannot be fastened with

liability more than the said sum, even to apply principle of pay and

recover.

17. We have given our anxious consideration to the submissions

made by learned counsels for parties and perused the record.

18. Given the facts and circumstances and contentions raised, the

following questions arise for consideration in these appeals:

1. Whether the award passed by the Tribunal

exonerating the insurer from liability is justified? and

2. Whether claimant is entitled for an order against the

insurer of offending vehicle to pay the awarded sum to

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the claimant and then recover the same from the

insured by extending the principle of pay and recover?

19. There is no dispute with regard to occurrence of accident and the

involvement of offending vehicle. The claimant sustained various

injuries. On appreciation of evidence, the Tribunal has assessed the

functional disability to be 100%. Resultantly, compensation for

₹67,03,854/- has been awarded. Neither the claimant nor the owner of

offending vehicle, laid challenge to the quantum of compensation. The

owner of offending vehicle sought to wriggle out of the liability by

contending that as the vehicle has been insured under Ex.B7 policy, that

the occurrence of accident and involvement of the vehicle has been

sufficiently demonstrated in view of the evidence of RW.2, none other

than Surveyor-cum-Claim Investigator, as a natural corollary the insurer

ought to be held liable for compensation, but not the insured.

20. In this regard, there is no dispute that the offending vehicle was

insured under Ex.B7 policy. The proposal form submitted for insuring the

vehicle under Ex.B6 and as well as the policy issued later under Ex.B7

was for private use, i.e., private car package policy. Even the evidence

of PW.7, Senior Assistant in R.T.A. Office, examined at the instance of

the claimant also deposed that as per Ex.B5 certificate of registration,

the vehicle was meant to be used for private purpose only and not for

commercial purpose. Therefore, aforesaid evidence on record clearly

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HCJ & CGR, J.

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demonstrates that the subject vehicle is a private vehicle both in terms

of certificate of registration and as well as the insurance policy.

21. Having said that, it is required to be now seen whether the vehicle

was used for private purpose or for hire and reward. It is the case of

claimant that when he, along with colleagues, working in Nestlé India

(P) Ltd., wanted to attend meeting at Bangalore, the offending vehicle

was provided by one of his colleagues' friend, therefore, it was only

meant for private use and cannot be construed as hired, thus, violating

the terms and conditions of Ex.B7 policy. In the Original Petition filed,

the claimant's stand was that he , along with other

colleagues, engaged a Qualis car to go to Bangalore to attend their

company meeting. Later, in the chief-affidavit, the stand pleaded was

that the Qualis vehicle was provided by one of his colleagues' relation.

There is clearly a divergent stand from initial version. The chief-affidavit

conspicuously does not refer to the name of colleague nor the person

related, who provided the offending vehicle. The 2

nd

respondent, owner

of the vehicle, nowhere in the written statement, stated that the

offending vehicle was provided on the request made by one of the

colleagues’ relative of the claimant.

22. Further, surprisingly, owner of the vehicle, who has direct

knowledge and acquaintance with the aforesaid information, was not at

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all examined. On the other hand, the claimant himself admitted

execution of Ex.B2 letter, in which it was specifically confirmed that the

offending vehicle was hired by contracting Jahnavi Travels for their

onward journey. RW.2, Surveyor-cum-Claim Investigator, examined by

the insurer, deposed that his investigation revealed hiring of

offending vehicle. In the conspectus of all the above, the Tribunal has

come to conclusion that offending vehicle was hired by the claimant and

others and en-route the accident had occurred. Since the offending

vehicle was insured under a private car package policy meant for only

personal use by owner and family, the same, therefore, would not cover

the inmates, who engaged it for hire, as it amounted to fundamental

breach of terms and conditions of policy. The Tribunal, therefore, was

absolutely justified in construing that it was a case of breach of terms

and conditions of policy.

23. Having said that, we would now proceed to examine whether the

Tribunal was further justified in completely exonerating the insurer from

the liability to indemnify the compensation.

24. We would first refer to the judgment of the Hon'ble Apex Court

Manuara Khatun

1

. It was a case where husband of the first claimant

and the other passengers were proceeding in Tata Sumo and on

account of head-on-collision between Tata Sumo and a truck coming in

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opposite direction, the passengers in Tata Sumo died on spot. The

Tribunal held that as the deceased were travelling in Tata Sumo, a

private car, for hire, they were to be treated as gratuitous passengers,

and thus, the insurer was not liable, hence, it was exonerated from the

liability. The owner of Tata Sumo was held liable. This view of the

Tribunal was affirmed by the High Court. The Hon'ble Apex Court, while

allowing the appeal held as under:

“14. The aforesaid question, in our opinion, remains no more

res integra. As we notice, it was the subject-matter of several

decisions of this Court rendered by three-Judge Bench and two-

Judge Bench in the past viz. National Insurance Co. Ltd. v. Baljit

Kaur [National Insurance Co. Ltd. v. Baljit Kaur, (2004) 2 SCC 1

: 2004 SCC (Cri) 370] , National Insurance Co. Ltd. v. Challa

Upendra Rao [National Insurance Co. Ltd. v. Challa Upendra

Rao, (2004) 8 SCC 517 : 2005 SCC (Cri) 357] , National

Insurance Co. Ltd. v. Kaushalaya Devi [National Insurance Co.

Ltd. v. Kaushalaya Devi, (2008) 8 SCC 246 : (2008) 3 SCC (Cri)

467] , National Insurance Co. v. Roshan Lal [National Insurance

Co. Ltd. v. Roshan Lal, (2017) 4 SCC 803] and National

Insurance Co. Ltd. v. Parvathneni [National Insurance Co.

Ltd. v. Parvathneni, (2009) 8 SCC 785 : (2009) 3 SCC (Civ) 568

: (2009) 3 SCC (Cri) 943] .

15. This question also fell for consideration recently

in National Insurance Co. Ltd. v. Saju P. Paul [National

Insurance Co. Ltd. v. Saju P. Paul, (2013) 2 SCC 41 : (2013) 1

SCC (Civ) 968 : (2013) 1 SCC (Cri) 812 : (2013) 1 SCC (L&S)

399] wherein this Court took note of entire previous case law on

the subject mentioned above and examined the question in the

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context of Section 147 of the Act. While allowing the appeal filed

by the insurance company by reversing the judgment [Saju P.

Paul v. National Insurance Co., 2011 SCC OnLine Ker 3791 :

2012 ACJ 1852] of the High Court, it was held on facts that since

the victim was travelling in offending vehicle as “gratuitous

passenger” and hence, the insurance company cannot be held

liable to suffer the liability arising out of accident on the strength

of the insurance policy. However, this Court keeping in view the

benevolent object of the Act and other relevant factors arising in

the case, issued the directions against the insurance company

to pay the awarded sum to the claimants and then to recover the

said sum from the insured in the same proceedings by applying

the principle of “pay and recover”.

16. R.M. Lodha, J. (as his Lordship then was and later

became CJI) speaking for the Bench held in paras 20 and 26 as

under : (Saju P. Paul case [National Insurance Co. Ltd. v. Saju

P. Paul, (2013) 2 SCC 41 : (2013) 1 SCC (Civ) 968 : (2013) 1

SCC (Cri) 812 : (2013) 1 SCC (L&S) 399] , SCC pp. 52 & 55)

“20. The next question that arises for consideration is

whether in the peculiar facts of this case a direction could be

issued to the Insurance Company to first satisfy the awarded

amount in favour of the claimant and recover the same from

the owner of the vehicle (Respondent 2 herein).

***

26. The pendency of consideration of the above

questions by a larger Bench does not mean that the course

that was followed in Baljit Kaur [National Insurance Co.

Ltd. v. Baljit Kaur, (2004) 2 SCC 1 : 2004 SCC (Cri) 370]

and Challa Upendra Rao [National Insurance Co.

Ltd. v. Challa Upendra Rao, (2004) 8 SCC 517 : 2005 SCC

(Cri) 357] should not be followed, more so in a peculiar fact

situation of this case. In the present case, the accident

occurred in 1993. At that time, the claimant was 28 years old.

He is now about 48 years. The claimant was a driver on

heavy vehicle and due to the accident he has been rendered

permanently disabled. He has not been able to get

compensation so far due to the stay order passed by this

Court. He cannot be compelled to struggle further for

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recovery of the amount. The Insurance Company has

already deposited the entire awarded amount pursuant to the

order of this Court passed on 1-8-2011 [National Insurance

Co. Ltd. v. Saju P. Paul [National Insurance Co. Ltd. v. Saju

P. Paul, (2013) 2 SCC 41, 55 (footnote 14)] ] and the said

amount has been invested in a fixed deposit account. Having

regard to these peculiar facts of the case in hand, we are

satisfied that the claimant (Respondent 1) may be allowed to

withdraw the amount deposited by the Insurance Company

before this Court along with accrued interest. The Insurance

Company (the appellant) thereafter may recover the amount

so paid from the owner (Respondent 2 herein). The recovery

of the amount by the Insurance Company from the owner

shall be made by following the procedure as laid down by

this Court in Challa Upendra Rao [National Insurance Co.

Ltd. v. Challa Upendra Rao, (2004) 8 SCC 517 : 2005 SCC

(Cri) 357] .”

17. The facts of the case at hand are somewhat identical to

the facts of the case mentioned supra because here also we find

that the deceased were found travelling as “gratuitous

passengers” in the offending vehicle and it was for this reason,

the insurance companies were exonerated. In Saju P. Paul

case [National Insurance Co. Ltd. v. Saju P. Paul, (2013) 2 SCC

41 : (2013) 1 SCC (Civ) 968 : (2013) 1 SCC (Cri) 812 : (2013) 1

SCC (L&S) 399] also having held that the victim was “gratuitous

passenger”, this Court issued directions against the insurer of

the offending vehicle to first satisfy the awarded sum and then

to recover the same from the insured in the same proceedings.”

25. The view expressed above, later has been followed by the

Hon'ble Apex Court in Kaminiben case

2

.

26. Even the facts of the present case are somewhat more or less

identical to the facts of the case mentioned supra. In the case referred

to above, the deceased was travelling as a gratuitous passenger in the

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offending vehicle and therefore, the insurance company was

exonerated. In the case on hand, though the claimant was not a

gratuitous passenger, he was found to be travelling by hiring the vehicle.

In either of the cases, be a gratuitous passenger or a passenger

travelling on hire, fundamentally there has been breach of conditions of

policy. In Manuara Khatun

1

, the deceased were found to be travelling

in Tata Sumo by hiring, and hence, they were held to be gratuitous

passengers. By following the same analogy, even in the present case,

though it is found that terms and conditions of policy have been violated,

nevertheless, in the facts and circumstances of the case, the principle

of pay and recover has to be extended.

27. Though learned counsel for the insurer contended that even if the

said principle had to be extended, as the policy limited the liability for

maximum of ₹88,000/-, it cannot be fastened with the further liability

over and above the same.

28. This argument is fallacious for the reason that when the policy

excluded the liability in entirety, still having regard to the facts and

circumstances, the principle of pay and recover is being applied, any

limitation on the liability would be of no consequence. Therefore, for the

reasons mentioned above, we find no good reason to take a different

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view than one consistently being followed by the Hon'ble Apex Court, as

referred supra.

29. We, therefore, are of the view that the insurer of offending vehicle,

which was found involved in causing accident due to negligence of its

driver, needs to first pay the awarded sum to the claimant and then to

recover the same from the owner of the offending vehicle i.e., 2nd

respondent.

30. Accordingly, M.A.C.M.A. No.1125 of 2010 filed by the claimant

has to succeed, and is, therefore, allowed and M.A.C.M.A. No.1149 of

2010 preferred by the 2

nd

respondent, owner of the vehicle, is

dismissed. The impugned award passed by the Tribunal stands modified

to the extent that the 3

rd

respondent insurer shall pay the awarded sum

to the claimant and thereafter be entitled to recover the amounts so

paid by them from the owner of the offending vehicle i.e., 2

nd

respondent, by filing execution application without resorting to any other

proceedings in this respect. No order as to costs.

As a sequel, miscellaneous petitions pending in these appeals, if

any, shall stand closed.

LISA GILL, CJ CHALLA GUNARANJAN, J.

cs