Victims Should Not Chase Vehicle Owners For Compensation: Calcutta High Court Applies ‘Pay And Recover’ Principle

“Insurer Must First Pay Compensation To Victims Even If Policy Dispute Exists”, Calcutta High Court has reiterated that motor accident compensation law is a beneficial welfare legislation, and victims should not be forced to chase vehicle owners for compensation merely because of disputes regarding insurance policy coverage.

Justice Biswaroop Chowdhury,  on 11 March 2026, held that even where the insurer disputes liability on the ground that passengers were not covered under the policy, the Insurance Company must first pay compensation to the claimants and may later recover the amount from the vehicle owner.

The Court emphasized: “If victims are compelled to recover compensation directly from vehicle owners, realization may become difficult and the object of the welfare legislation would be frustrated.”

Background of the Case

The case arose from a motor accident that occurred on 6 December 2007 when a Tata Sumo vehicle (WB-20G/0635) travelling along the Krishnanagar–Karimpur road lost control, collided with a roadside tree and overturned.

As a result of the accident, Dipali Halder died at the spot, while other passengers sustained injuries.

The deceased’s family filed a claim petition under Section 166 of the Motor Vehicles Act, 1988, seeking compensation on the ground that the accident occurred due to rash and negligent driving by the driver of the vehicle.

Tribunal Exonerated Insurance Company

The Motor Accident Claims Tribunal allowed the claim but exonerated the Insurance Company, directing only the vehicle owner to pay compensation of ₹8,20,500, along with interest.

The Tribunal accepted the insurer’s argument that the vehicle had allegedly been used for hire contrary to policy terms, and therefore the Insurance Company was not liable.

Aggrieved by the decision, the claimants approached the Calcutta High Court seeking enhancement of compensation and challenging the insurer’s exoneration.

High Court On Liability Of Insurance Company

The High Court noted that the existence of the insurance policy was admitted, and the rash and negligent driving of the vehicle had already been established.

Importantly, the Court observed that no issue had been framed by the Tribunal regarding whether passengers were excluded under the insurance policy, and no evidence was produced to establish such exclusion.

Justice Chowdhury held that the Tribunal erred in completely absolving the insurer.

The Court relied on the Supreme Court decision in Manuara Khatun v. Rajesh Kumar Singh, which recognised the “pay and recover” principle.

Under this principle, the insurer must first pay compensation to the victims and may subsequently recover the amount from the vehicle owner through execution proceedings.

Welfare Nature Of Motor Accident Compensation Law

The Court strongly emphasized the beneficial nature of the Motor Vehicles Act, noting that the legislation is intended to ensure timely and effective compensation to accident victims and their families.

The Court observed: “If victims or their families are forced to pursue recovery proceedings against vehicle owners after obtaining an award, the object of the welfare legislation will be frustrated.”

The Court noted that insurance companies are better equipped to pursue recovery proceedings from vehicle owners, whereas accident victims often lack the resources to do so.

Recalculation Of Compensation

The High Court also reconsidered the quantum of compensation.

The Tribunal had assessed the monthly income of the deceased at ₹6,000, but failed to add future prospects.

The Court held that an addition of 40% towards future prospects was appropriate.

After applying the multiplier of 17 and deducting one-third towards personal expenses, the Court recalculated the dependency loss and awarded a consolidated compensation amount.

Ultimately, the Court held that ₹11,00,000 would be a just and reasonable compensation for the claimants.

Awareness On Insurance Coverage

While concluding the judgment, the Court made an important observation regarding frequent disputes about insurance coverage of passengers.

The Court noted that many accidents involve passengers travelling in vehicles not meant for passenger transport, which leads to complications in insurance liability.

Justice Chowdhury therefore directed that awareness programmes be conducted for vehicle owners and the general public regarding insurance coverage and risks of travelling in improperly insured vehicles.

The Court requested the West Bengal State Legal Services Authority to undertake such awareness initiatives.

Final Directions

The High Court modified the Tribunal’s award and held that:

• The claimants are entitled to ₹11,00,000 as compensation.
• Interest will be payable at 6% per annum from the date of filing of the claim petition.

• The Insurance Company must deposit the compensation within eight weeks.

• The insurer is granted liberty to recover the amount from the vehicle owner through appropriate proceedings.

The ruling reinforces the “pay and recover” principle in motor accident claims, ensuring that victims receive compensation promptly even when disputes arise regarding insurance policy coverage.

By emphasizing the welfare objective of the Motor Vehicles Act, the Calcutta High Court underscored that procedural or contractual disputes between insurers and vehicle owners should not delay or defeat compensation for accident victims.

Date of Decision: 11 March 2026