With the development of civilization, act of negligence have become actionable
wrong. In the English Law any person or the legal representative of deceased
person who expired on account of negligent act of other can besides instituting
criminal proceeding, recover damages under the Law of Torts. Accountable
negligence consist in the neglect of use of ordinary care or skill towards a
person to whom the defendant owes due of observing ordinary care and skill by
which neglect the plaintiff have suffered injury to his person or property.
Thus, negligence accompanied with losses to the other party give rise to an
In order to give
effective rights to the person injured or expired in an accident,
Fatal Accidents Act, 1885 was enacted in India. This Act provided only a
procedure and a right of named legal heirs to claim compensation from the person
committing negligence. This enactment has worked in India for a comfortable long
period. Because of increase in automation and consequential losses of life and
property in accident, it was considered that to give relief to the victims of
accident claims an effective law should be brought in. To facilitate this,
provisions have been inserted for compulsory third party insurance and to
provide a machinery of adjudication of claim in Motor Vehicle Act by amending
Act No.110 of 1956, by which Section 93 to 109 with reference to third party
insurance and Section 110(A) to 110(F) with reference to creation of Motor
Accident Claims Tribunal and procedure for adjudication of claim has been
provided. Initially the liability was restricted to a particular sum but after
1982 the liability of the Insurance Company has been made unlimited and even the
defences of the Insurance Companies have been restricted so as to ensure payment
of compensation to third parties.
In the year 1982 a new
concept of providing interim compensation on ‘No Fault’
basis have been introduced by addition of Section 92(A) to 92(E). By the same
amendment, relief has also been given those persons who expire by hit and run
accidents, where the offending vehicles are not identified.
In 1988 a new Motor
Vehicle Act have been introduced and in new Motor Vehicle Act’s Chapter 10
provides for interim award. Chapter 11 provides for insurance of motor vehicle
against third party risk and Chapter 12 provides for the constitution of Claims
Tribunal and adjudication of claim and related matters. This law is still in an
era of serious changes. Supreme Court has number of times held that this is a
welfare legislation and the interpretation of provision of law is required to be
made so as to help the victim. In this process Supreme Court has passed various
judgments in recent past, which have restricted the statutory defenses to the
Insurance Company to a greater extent as law relating to burden of proof have
been totally changed. Limited defenses as to not holding valid driving license,
use of vehicle for hire and reward, use of transport vehicle for the purpose not
allowed by permit are required to be proved in so stringent manner that insurer
are not getting advantage of these defenses.
Scheme of Chapter 10 and 11 of Motor Vehicle Act:
Chapter 10 with Sections 140 to 144 provides for interim compensation on
‘No Fault’ Basis. According to this provision Rs.
50,000/- is to be given to the kith and kin of the deceased and Rs. 25,000/- to
the grievously injured victim. The compensation under Section 140 is made
payable if prima facie evidence of following is available;
(1) Accident by the offending vehicle;
(2) Offending vehicle being insured;
(3) Death or grievous injuries have been caused.
Unlike to main claim
petition, negligence is not required to be proved and this compensation is not
refundable even if negligence is not proved in the main claim application. Under
Chapter 10 for interim award insurer is not even permitted to raise any defence
relating to negligence of applicant or permitted under Section 149 of Motor
Vehicle Act. But, if ultimately it is held that insurer is not liable to pay
compensation victims can receive it from owner.
Chapter 11 (Section 145
to 164) provides for compulsory third party insurance, which is required to be
taken by every vehicle owner. It has been specified in Section 146(1) that no
person shall use or allow using a motor vehicle in public place unless there is
in force a policy of insurance complying with the requirement of this chapter.
Section 147 provides for the requirement of policy and limit of liability. Every
vehicle owner is required to take a policy covering against any liability which
may be incurred by him in respect of death or bodily injury including owner of
goods or his authorized representative carried in the vehicle or damage to the
property of third party and also death or bodily injury to any passenger of a
public service vehicle. According to this section the policy not require
covering the liability of death or injuries arising to the employees in the
course of employment except to the extent of liability under Workmen
Compensation Act. Under Section 149 the insurer have been statutorily liable to
satisfy the judgment and award against the person insured in respect of third
party risk. Insurance Companies have been allowed no other defence except the
(1) Use of vehicle for hire and reward not permit
to ply such vehicle.
(2) For organizing racing and speed testing;
(3) Use of transport vehicle not allowed by permit.
(4) Driver not holding valid driving license or
have been disqualified for holding such license.
(5) Policy taken is void as the same is obtained by
non-disclosure of material fact.
Section 163A has been added in this Chapter by amending Act 54 of 1994 w.e.f.
14.11.94 whereby special provision as to payment of compensation on structural
formula basis has been provided. This provision is being introduced to provide
compensation to the third party victims without proving negligence or tortious
act. Schedule-II has been appended to the Act to give such structural formula.
Hon'ble Supreme Court has held that award under Section 163A is final,
independent and not in addition of award in claim petition under Section 166
where claim is sought on negligence basis. Thus, one can claim compensation in
either of the Section.
Claim application can be filed under Section 163A for claim to be determined on
structural formula basis provided in Schedule-II. Schedule-II has been adjudged
as suffering from severe mistakes and the Supreme Court has held that total
reliance cannot be placed on this schedule. Further the Schedule do not provide
any computation chart for the persons having more than Rs.40,000/- annual
income. Claim petition can also be filed under Section 166 of Motor Vehicle Act
pleading negligence where the claim shall be assessed by the Judge not on the
basis of structural formula but on the basis of evidence led.
The injured or the
legal representatives of deceased can file claim application in a prescribed
format making driver, owner and insurer as party. Driver is not a necessary
party in some states. For e.g. in the Rajasthan Motor Accident Claims Tribunal
Rules only owner and insurer are required to be party. No limitation has been
prescribed for filing of the claim application. Initially when the law has come
into force the limitation was 6 months which was later increased to one year and
ultimately in the garb of welfare legislation the provision of limitation has
been deleted. In my humble view when there is limitation prescribed for all type
of causes, some limitation of 2 or 3 years must be prescribed for filing of
claim application. It should not be made indefinite, as it will cause serious
problems to the defendant. The procedure has been prescribed as a summary
procedure for determining the compensation.
Accidents arising out of use of Motor Vehicle:
Section 165 provides the form of constitution of Claim Tribunal in adjudging
claims of compensation in respect of accidents involving the death of bodily
injury to persons "arising out of the use of Motor
Vehicle". Being welfare legislation the scope of this term have been
widened which includes accident by a stationery vehicle, injuries suffered by
passengers in bomb blast, injuries due to fire in petrol tanker. Murder in a
motor vehicle has also been covered as a motor accident.
Assessment of Claim:
The assessment of compensation, however, be made good but cannot be said to be
foolproof. In every such assessment certain assumptions are to be made and there
is all possibility of variance from Judge to Judge in applying the various
principles enunciated by the Courts from time to time. Lord Viscount Simon has
evolved a method of assessment known as "Nance's method" more popularly as
"discounting method". The another popular method, which is known as Davis Method
was evolved by Lord Wright.
Hon'ble Supreme Court
while dealing with a matter evolved a formula. Yearly Income Yearly
expenditure on Deceased gives the sum expended on legal representatives. If this
amount is capitalized subject to certain deductions, pecuniary loss to the
family can be assessed. While improving the above formula Supreme Court in
CKS Iyer’s case has stated that there is no exact
uniform rule for measuring the value of human life and measure of damages can
not be arrived at by a mathematical calculation but the amount recoverable
depends upon life expectancy of legal representative beneficiaries. In the same
period Lord Diploc has evolved Interest Capitalization method by calculating net
pecuniary loss on annual basis and multiplied with number of years purchase. The
Hon'ble Supreme Court of India with the development of accident claims has
decided the landmark case of Susamma Thomas has
started giving appreciation to the annual income of deceased. This appreciation
ranges to the double of income depending upon the nature of job, age, future
prospects etc. Supreme Court has held that after determining and doubling annual
income, 1/3 should be deducted towards the expenses to be incurred on the
deceased and the remaining amount should be multiplied by a multiplier depending
on the age of deceased and beneficiary. The maximum multiplier approved by
Supreme Court in this case was 16. Later, Supreme Court's 3 Judges bench have
approved the Davis formula along with determination of dependency on unit basis
in which the adults have been taken as 2 units and the minors has been taken as
1 unit. The multiplier, which was approved as 16 in Sushma Thomas case, was
increased to maximum of 18. In this case the court did not allow double of the
amount except that a premium may be given looking to the future prospects. But,
in a recent Supreme Court judgment, in order to make compensation just and to
take consideration of overall factors multiplier was reduced from 16 to 12 in
case of deceased of 38 years. In same facts and circumstances, in another case
Supreme Court has said for determination of multiplier depends upon (1) age
of deceased (2) age of claimants (3) marital status (4) education and employment
of the claimants; and (5) loss of pecuniary benefits. The Supreme Court has
also held that criteria of awarding compensation include some guess work, some
hypothetical consideration and some amount of sympathy linked with the nature of
disability caused are all involved. But, all such elements are required to be
viewed with the objective standard.
In view of the above
case laws, one can say that the assessment of compensation is to be guided by
way of applying precedents on the facts and circumstances of a particular case.
It should not be misunderstood that an injured or legal representatives of the
deceased should be given exorbitant claim, but the law restrict them to be "just
compensation" so as to save the injured or legal representatives of deceased
from possible pecuniary and non-pecuniary losses guided by the above judgments.
Legal defence available to the Insurance Companies towards
The Insurance Company cannot avoid the liability except on the grounds and not
any other ground, which have been provided in Section 149(2). In recent time,
Supreme Court while dealing with the provisions of Motor Vehicle Act has held
that even if the defence has been pleaded and proved by the Insurance Company,
they are not absolve from liability to make payment to the third party but can
receive such amount from the owner insured. The courts one after one have held
that the burden of proving availability of defence is on Insurance Company and
Insurance Company has not only to lead evidence as to breach of condition of
policy or violation of provisions of Section 149(2) but has to prove also that
such act happens with the connivance or knowledge of the owner. If knowledge or
connivance has not been proved, the Insurance Company shall remain liable even
if defence is available.
Earlier not holding a valid driving license was a good defence to the Insurance
Company to avoid liability. It was been held by the Supreme Court that the
Insurance Company is not liable for claim if driver is not holding effective &
valid driving licence. It has also been held that the learner's licence absolves
the insurance Company from liability, but later Supreme Court in order to give
purposeful meaning to the Act have made this defence very difficult. In
Sohan Lal Pasi's case it has been held for the
first time by the Supreme Court that the breach of condition should be with the
knowledge of the owner. If owner's knowledge with reference to fake driving
licence held by driver is not proved by the Insurance Company, such defence,
which was otherwise available, can not absolve insurer from the liability.
Recently in a dynamic judgment in case of Swaran Singh,
the Supreme Court has almost taken away the said right by holding;
(i) Proving breach of condition or not holding driving licence or holding
fake licence or carrying gratuitous passenger would not absolve the Insurance
Company until it is proved that the said breach was with the knowledge of owner.
(ii) Learner's licence is a licence and will not absolve Insurance
Company from liability.
(iii) The breach of the conditions of the policy even within the scope of
Section 149(2) should be material one which must have been effect cause of
accident and thereby absolving requirement of driving licence to those accidents
with standing vehicle, fire or murder during the course of use of vehicle.
This judgment has
created a landmark history and is a message to the Government to remove such
defence from the legislation as the victim has to be given compensation.
A gratuitous or fare paying passenger in a goods vehicle or fare paying
passenger in private vehicle has been proved to be a good defence. In Motor
Vehicle Act 1939 the gratuitous passenger was not covered under the insurance
policy but a fare passenger in a goods vehicle was considered to be covered by 5
Judges Bench judgment of Rajasthan High Court. In new Motor Vehicle Act, a
Division Bench of Supreme Court held that Insurance Company is liable for a
passenger in goods vehicle. In another judgment of 3 Judges Bench of Supreme
Court it was held that the Insurance Company is not liable for the gratuitous
passenger traveling in the goods vehicle. In number of other cases this judgment
has been reiterated with a direction that the Insurance Company shall first make
payment of the compensation to the claimant and then recover it from the owner.
Dishonour of cheque of insurance premium:
It has been held by the Supreme Court that once the Cover Note is issued the
Insurance Company is bound to make payment to a third party and can recover
amount from owner. This judgment deserves to be reviewed else Section 64 VB of
Insurance Act will become non-existent. This judgment can give momentum to those
persons who will get the insurance and will get their cheque been bounced as the
liability of Insurance Company will run for another one year without there being
a premium. This may be oppose to public policy also. Further there will be clash
between the two provisions.
Transfer of Vehicle:
Transfer of a vehicle prior to accident has been held to be not valid defence
for the purpose of third party liability. It can be a defence for own damage but
as far as third party liability, even the vehicle has been transferred and
policy has not been transferred, liability of Insurance Company shall remain
Right of recovery from owner to Insurance Company:
With the development of law, liability of the insurance Company has been made
strict to the third party even if there is no negligence or defence to the
Insurance Company are available. A right has been given to the Insurance Company
by way of legal precedents incorporating various provisions to recover the said
amount paid to third party from owner. This recovery can be made by mere filing
of an execution application and not by a separate civil suit.
Provision of appeal has been provided under Section 173 of Motor Vehicle Act.
But the courts have held that the right to appeal is available only to the
driver and owner against whom the award is passed. The right of Insurance
Company to file appeal is not permitted on the ground of quantum or negligence.
Insurance Company can file appeal only on the ground of statutory defences
In circumstances where
the application under Section 170 has been rejected, the insurance Company has
got right of one judicial review on the reasons of rejection either by filing
writ petition or to agitate the matter in appeal. Similarly, in all other
circumstances where no order has been passed by the court or no reasons have
been recorded by the Tribunal. Such act cannot be accountable to the insurer and
the insurer must get an opportunity to challenge the same. I am impressed by a
judgment passed by Himachal Pradesh High Court in which the court has referred
the 3 Judges Bench Supreme Court judgment of Nicolletta
Rohtagi and has held that in these circumstances the insurer can file
appeal and agitate these issues in appeal before the Court and if the court
found it proper will permit to continue the appeal and to decide the appeal on
In my humble opinion
this provision (section 173) is not of benefit to anybody because it do not
provide the right to appeal to one of the litigating party who has to make
payment of compensation i.e. insurer. If the owners are not participating or
presenting themselves in order to help the claimants, the insurer would not be
in a position to control the high awards in want of cross examination of income
and other issues. Legislature has already restricted the right of defense but a
further restriction of not participating in the trial would not be just. There
is imminent need of amendment to permit the insurer to contest the claims as
they are the persons who have to make payment of the compensation. Once the
insurance cover is available, the owner feels safe and do not help the Insurance
Company in the process of contesting the claim.
Further, now a days, if
seriously quantified, a good number of cases are coming as a flood in the courts
of law for compensation. This is because of huge sum of compensation are allowed
to the claimants and for that purpose fake accidents, fake drivers are planned
with the connivance of the police. The police in connivance do not investigate
the mater of delay in lodging of F.I.R., delay in recording of statements. In
these circumstances, a right to contest on merit and quantum should be provided
to the Insurance Company in order to make the contest just and equitable.
The law of accident claims is fast growing and the amendments to suit the
requirement of the object are necessitated but at the same time interest of
those should be watched who are disbursing the compensation i.e. Insurance
Companies. Without affording them right to contest, imposing liability to make
payment cannot be approved by law. Section 170 provides for seeking permission
but this provision can be misused by the owners and claimants in collusion.
Presently because of increasing scale of compensations almost 10 to 15% or even
more cases presented to the Claim Tribunals are fake or the other accidents have
been converted into road accidents with connivance of the police authorities. It
is necessary that while increasing the burden of the Insurance Companies they
must get a right of proper contest to mitigate fake cases and also the quantum.
The time is matured for
bringing legislation for award of the fixed compensations as in case of rail or
airways. A person dieing in rail accident can not get beyond Rs. 4 lakh but a
person dieing in road accident can get Rs.4 crore. The payment of compensation
based on the vehicle is not reasonable and a structural basis compensation
formula without reference to income or age may be brought in so that each and
everybody can get compensation of their life irrespective of his poverty or
richness. A Scheme should be formulated with the State Police Authorities and
the Insurance Companies by which the Insurance Company must know immediately
after happening of accident and can make necessary investigations. Insurance
Company comes in picture when the claim petition is filed and by that time the
evidence can be created to convert the non-accident into accident and also on
quantum. The intention of legislation is to provide just compensation and not
exorbitant compensation. This should always be kept in mind.
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