Supreme Court Upholds “Pay and Recover” Principle Where Bus Deviated From Permit Route

The case arose from a fatal motor accident that occurred on 7 October 2014, when Srinivasa alias Murthy died after his motorcycle was hit by a bus driven rashly and negligently. His dependents, the appellants, filed a claim petition seeking Rs. 50 lakh, stating that the deceased ran a Shamiyana Centre and ration shop, earning about Rs. 15,000 per month.

The Motor Accident Claims Tribunal awarded Rs. 18,86,000 with 6% interest, computing notional income at Rs. 8,000 per month. Both sides appealed to the Apex Court.

The High Court enhanced compensation to Rs. 31,84,000 and applied the pay and recover principle, directing the insurer to satisfy the award and then recover from the owner.

Issue Raised: Whether deviation from the prescribed permit route absolves the insurer from liability, and whether the High Court correctly applied the pay and recover principle.

SC Decided: The Supreme Court held that the bus was operating outside the permitted route when the accident occurred, which is a violation of the permit. The Court emphasised that denying compensation to victims due to such a violation would be unjust, as the accident was not their fault.

The Court clarified that an insurance policy operates within contractual bounds, and making the insurer bear liability for breaches beyond those bounds without recourse would be unfair. The Hon’ble Apex Court approved the High Court’s application of the pay and recover doctrine.

The appeals were dismissed with no order as to costs.

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