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SC Abides by the Doctrine of 'Pay and Recover' in Motor Accident Claims

When a Karnataka High Court Order exempted the insurance company, The Oriental Insurance Co. Ltd. from its liability, directing the plaintiffs to recover the compensation from the owner of the vehicle, this made waves. Read how the Justice Bench looked into this matter of "Pay and Recover".

On 8th August 2018, Wednesday, observations were made by the Supreme Court about Shamanna vs. Divisional Manager, The Oriental Insurance Co. Ltd.), by the bench of Justice Ranjan Gogoi and Justice R. Banumathi. The apex court in the above-mentioned case has set aside the order of the Karnataka High Court that released the insurance company from fulfilling its liability to pay the claimant the amount of compensation from the owner of the vehicle. While passing such an order, the High Court of Karnataka referred to the judgment passed by the Supreme Court about National Insurance Co. Ltd. vs. Parvathneni and another. In lieu of this, The bench of the Supreme Court also referred to many cases and stated the observation made in the case of National Insurance Company Ltd. vs Swaran Singh.

In this particular case, the court held that it is the duty or obligation of the insurance company to prove that the driver had no valid driving license and such things lead to the breach of terms and conditions of the policy “pay and recover”  which can be ordered in cases of third-party risks. 

Further, order passed  by a Two- Judge bench of Supreme Court in the Parvathneni Case was taken for reference, in which the Court clearly stated that, if it is already proved by the insurance company that it has no obligation to pay compensation to the claimants, they  cannot be forced to pay and later recover the amount of payment from the owner of the vehicle. The court referred to the Article 142 of the Constitution and stated that such types of cases are not covered under the Indian Constitution. Also, the case of Parvathneni, heard by the three-judge bench was also referred.

Holding on to the decision of Laxmi Narain Dhut, the apex court directed the insurance company to pay the amount of compensation to the claimant accordingly and also said, “So far as the recovery of the amount from the owner of the vehicle, the insurance company shall recover as held in the decision in Oriental Insurance Co. Ltd. vs. Nanjappan and others (2004) 9 13 SCC 224 where this court was held. Also, said, "…that for the purpose of recovering the same from the insured, the insurer shall not be required to file a suit." It may initiate a proceeding before the concerned Executing Court as if the dispute between the insurer and the owner was the subject matter of determination before the Tribunal and the issue is decided against the owner and in favour of the insurer”. 


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Reviewed by:
Jyoti Yadav
Published on 09-Aug-18

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