In a brief but consequential order delivered on Monday, the Supreme Court directed Oriental Insurance Company to first compensate the claimant in a Telangana road accident case and later recover the amount from the vehicle owner. The Court leaned heavily on the 'pay and recover' doctrine, signalling once again that accident victims should not be left stranded midway in long legal corridors. The bench, headed by Justice Manoj Misra, seemed keen on ensuring that compensation reaches those who need it without further delay.
Background
The case originated from a tragic accident involving a five-seater vehicle that was carrying nine persons at the time of the mishap. The Motor Accidents Tribunal had earlier held both the owner and the insurer jointly liable, pointing out that the insurer’s own manager admitted during cross-examination that additional premium had been collected for carrying a driver, conductor and cleaner. Relying on this, the Tribunal decided that the deceased passenger could be treated as a third party entitled to compensation under the policy.
However, the Telangana High Court later overturned this finding. The High Court reasoned that even if additional premium was collected, the coverage extended only to the driver, conductor and cleaner - not other passengers. More importantly, the vehicle carried almost double its permitted capacity, amounting to a 'clear breach' of the policy terms according to the High Court’s assessment.
Finding it difficult to recover compensation from the vehicle owner alone, the claimant knocked on the Supreme Court’s doors.
Court's Observations
The hearing on Monday moved briskly, with both sides sticking firmly to their arguments. Counsel for the appellant insisted that since the insurer had collected additional premium, it could not completely escape responsibility. 'It is a clear case,' counsel said,
"where additional premium was collected… therefore the insurer cannot simply walk away when the accident involves only one deceased passenger." The counsel leaned on earlier Supreme Court rulings, including Mata Ram and the long-standing principle that even where policy violations exist, insurers may be asked to pay first and recover later.
The insurer, on the other hand, countered that the policy was merely a statutory policy and did not extend coverage to gratuitous passengers - those who travel without being covered under category-specific premium.
"A five-seater carrying nine passengers is a serious violation," counsel emphasised, almost repeating the High Court’s logic. Under such circumstances, the insurer argued, it should not bear liability at all.
But the Supreme Court was more concerned with the practical reality. Justice Misra noted that the owner of the vehicle had not even appealed against the finding that he was not entitled to insurance coverage. This left the Court with a narrower issue: whether the insurer could be fully absolved or whether it must first satisfy the award and later recover it from the owner.
The bench observed,
"Where the contract of insurance is not disputed, even on breach of insurance conditions, this Court has allowed recovery from the insurer by giving right to recover from the vehicle owner." The judges signalled that earlier rulings such as Swaran Singh and the more recent Rama Bai v. Amit Minerals supported this approach.
Decision
After reviewing the submissions and cross-checking the precedents, the Court concluded that the High Court should not have completely absolved the insurer. Instead, it revived the Tribunal's approach - with a modification.
"The insurer shall satisfy the award," the bench ordered calmly, "though it shall have the liberty to recover the amount so paid from the owner of the vehicle."
With that, the appeal was allowed to this extent, and the pending applications were disposed of. The Court ended proceedings without further elaboration, leaving no ambiguity about its intention.
Case Title: Akula Narayana vs. The Oriental Insurance Company Limited & Anr.
