The Bombay High Court’s Nagpur Bench has held that an insurance company must pay compensation to third-party claimants even where the premium cheque for the motor insurance policy was dishonoured, if the insurer failed to inform the Regional Transport Authority (RTA) about cancellation of the policy before the accident.
Justice Pravin S. Patil dismissed the appeal filed by HDFC ERGO General Insurance Co. Ltd. and directed it to pay the compensation, while permitting recovery of the amount from the vehicle owner.
Background of the Case
The case arose from the death of Kishor Shende, who was working as a driver on a goods carrier mini truck bearing registration number MH-29-AM-3330. He met with an accident on July 27, 2021, while driving towards Nagpur near Bhidi in Wardha district. He later died from his injuries at AVBR Hospital, Sawangi Meghe, on August 1, 2021.
His family members sought compensation of Rs. 13,60,275 under the Employee’s Compensation Act, 1923. The Commissioner awarded the amount with 12% annual interest.
HDFC ERGO challenged the award, arguing that the vehicle owner had paid the insurance premium through cheque, but the cheque was dishonoured on June 8, 2021. The insurer said the owner was informed about the dishonour before the accident and that the policy therefore stood cancelled from the beginning.
Court’s Observation
The High Court examined the competing Supreme Court decisions, including Inderjit Kaur, Deddappa, Laxmamma and Rula, concerning an insurer’s statutory responsibility towards third parties.
The Court noted that the Supreme Court in Laxmamma had rejected the argument that the earlier decision in Inderjit Kaur had been diluted. It also observed that Deddappa concerned a situation where the policy had already been cancelled before the accident.
The Court found that although HDFC ERGO had informed the vehicle owner that the policy stood void, it had not informed the concerned Regional Transport Authority about the cancellation.
Justice Patil observed:
“Once the policy of insurance was issued upon which Authorities and third parties are held entitled to act, the Insurance Company is duty-bound to inform its cancellation to the Authority, particularly, the Road Transport Authority of the region where the vehicle is registered.”
The Court further relied on GR. 24 of the Motor Tariff Rules, which requires an insurer to inform the concerned RTA about cancellation of an insurance policy.
Pay and Recover Principle Applied
The High Court also found that the vehicle owner had received the insurer’s communication regarding the dishonoured cheque but had failed to take appropriate action. The Court therefore applied the “pay and recover” principle.
Under this approach, the insurer first satisfies the compensation award in favour of the claimants and may subsequently recover the amount from the vehicle owner.
Decision
The High Court dismissed First Appeal No. 129 of 2026. It modified the Commissioner’s order to the extent that HDFC ERGO General Insurance Co. Ltd. must pay the compensation to the claimants and is entitled to recover the amount in accordance with the Supreme Court’s guidelines in National Insurance Co. Ltd. v. Challa Upendra Rao.
The remaining part of the Commissioner’s order was confirmed, with no order as to costs.
Case Details
Case Title: HDFC ERGO General Insurance Co. Ltd. v. Dipali wd/o Kishor Shende & Others
Case Number: First Appeal No. 129 of 2026
Judge: Justice Pravin S. Patil
Decision Date: July 20, 2026
