[MV Act] Kar HC | Will the insurance company be liable for compensation if the vehicle was insured as ‘private vehicle’ but plyed on ‘hire’ at the time of accident? HC decides

Karnataka High Court: Hemant Chandangoudar J., dismissed the appeal and upheld the impugned award and judgment regarding compensation.

The facts of the case are such that the claimants have sustained accidental injuries on 30-03-2010 due to rash and negligent driving of the Toofan Jeep, and thereby filed claim petitions under Section 166 of Motor Vehicle Act to award just and proper compensation. The Tribunal awarded compensation by judgment and award dated 27-04-2013. Aggrieved by the same the instant appeals have been filed by the Insurance Company challenging the impugned judgment and award.

Counsel for the Insurance Company submitted that the Tribunal has committed an error in fastening liability on the insurance company as the vehicle was insured for private purpose whereas during the accident it was plyed on hire and hence was in violation of the comprehensive policy and against the provisions of Section 149 (2) of MV Act.

The Court relied on judgment titled United India Assurance Co. Ltd. v. Kalawathi, ILR 2001 KAR 2328 and observed that

“That apart we do not find any rationale for the insurer as a ‘State’ to discriminate between the paid inmate and the gratuitous inmate when the vehicle is a private vehicle plyed on hire, the owner may be liable for the penal and fiscal consequences under the Motor Vehicle Act for payment of penalty and taxes applicable to the commercial vehicles. But from the standpoint of the insurer, it makes no difference whether the inmate is a paid passenger or gratuitous passenger. When the policy issued is a comprehensive policy covering risk of inmates of private vehicle, the insurer cannot avoid liability on the ground that the inmate is a paid passenger. In that view, we hold that the terms in the policy, which discriminates the liability of the insurer for the paid inmate and gratuitous inmate is discriminatory and illegal.”

The Court held that no discrimination would be made between the paid inmate and gratuitous inmate when the vehicle is covered with a comprehensive policy. If the vehicle is a private vehicle, plyed on hire, the owner may be liable for the penal and fiscal consequences under the provisions of MV Act for payment of penalty and taxes but the insurer cannot avoid liability. Hence, fastening of liability on the Insurance Company to pay compensation cannot be found fault with.

In view of the above, appeals were dismissed.[United India Insurance Co. Ltd. v. Basavaraj, 2020 SCC OnLine Kar 1652, decided on 02-11-2020]


Arunima Bose, Editorial Assistant has put this story together

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