Rajasthan High Court applies ‘Pay and Recover’ rule in goods vehicle death claim, directs insurer to pay compensation first

Jaipur: Reiterating settled law on motor accident compensation, the Rajasthan High Court has held that even where an insurance company disputes its liability on the ground of breach of policy conditions relating to a goods vehicle, the principle of “pay and recover” must ordinarily be applied. In such cases, the insurer is required to first satisfy the award in favour of claimants and may thereafter recover the amount from the vehicle owner or driver, in accordance with law.

The Court relied upon authoritative Supreme Court precedents, including Shamanna v. Oriental Insurance Co. Ltd., Swaran Singh, Laxmi Narain Dhut, and Anu Bhanvara v. IFFCO Tokio General Insurance Co. Ltd., holding that exoneration of the insurer at the first instance is impermissible where third-party rights are involved and compensation has been awarded by the Tribunal.

Facts of the Case

The appeal arose out of a motor accident claim relating to the death of Lalidevi in an accident involving a tempo bearing registration number RJ-01-GA-7376 on 28 November 2011. The deceased was travelling in the said vehicle when the accident occurred.

The claimants, being the husband, daughter and mother-in-law of the deceased, filed a claim petition before the Motor Accident Claims Tribunal, Ajmer, seeking compensation of Rs. 24,75,000.

By an award dated 28 October 2014, the Tribunal granted compensation of Rs. 5,34,860 with interest at six percent per annum. The award was partially modified by the High Court in an earlier appeal and the matter was remanded to the Tribunal for reconsideration on a specific issue.

Upon reconsideration, the Tribunal, by its judgment dated 18 March 2017, held that the insurance company was not liable to satisfy the compensation award, on the ground that the vehicle involved was a goods vehicle and the deceased was travelling as an unauthorised passenger. Liability to pay compensation was fastened solely upon the vehicle owner-driver.

Aggrieved by the exoneration of the insurer, the claimants approached the High Court contending that, even assuming a breach of policy conditions, the Tribunal ought to have applied the “pay and recover” principle.

After examining the record, the First Information Report, and the nature of the vehicle, the High Court noted that the Tribunal had proceeded on the premise that the deceased was not a covered passenger under the policy. However, the Court held that this by itself did not justify absolving the insurance company from its obligation to satisfy the award at the first instance.

Referring extensively to Supreme Court judgments, the Court observed that the law governing third-party claims under the Motor Vehicles Act mandates that the insurer must first pay the awarded compensation and then recover the same from the vehicle owner, if policy conditions were violated.

The Court specifically relied upon the principle affirmed in Shamanna and Anu Bhanvara, wherein the Supreme Court had restored awards directing insurers to pay compensation first and recover later, even in cases involving goods vehicles and alleged unauthorised passengers.

Holding that the Tribunal had erred in completely exonerating the insurance company, the High Court modified the impugned award.

The appeal was partly allowed. The High Court directed the insurance company to pay the entire compensation amount awarded by the Tribunal to the claimants forthwith. The insurer was granted liberty to recover the paid amount from the vehicle owner-driver in accordance with law.

All pending applications were disposed of accordingly.

Sardara & Others v. Kanaram Gurjar & Another
S.B. Civil Miscellaneous Appeal No. 1646/2021

Court:
Rajasthan High Court, Jaipur Bench

Bench:
Justice Ashutosh Kumar

Date of Decision:
24 January 2026

Advocates:
For the appellants: Rahul Agarwal
For the respondents: Gaurav Jain, Aayush Agarwal