The Supreme Court has reaffirmed the ‘Pay and Recover’ principle in motor accident cases, holding that the insurance company cannot escape liability merely because the vehicle involved had deviated from the route mentioned in its permit. However, the insurer shall retain the right to recover the compensation amount from the vehicle owner.
A Bench of Justice Sanjay Karol and Justice Prashant Kumar Mishra dismissed the appeals filed by the vehicle owner against a Karnataka High Court judgment that had applied the “pay and recover” principle.
The case arose from an accident that occurred in Channapatna City, where the motorcycle rider died on the spot due to the rash and negligent driving of the offending vehicle. The deceased’s dependents filed a claim under the Motor Vehicles Act seeking ₹50 lakh compensation, contending that the deceased was the family’s sole breadwinner and earned about ₹15,000 per month from his small business.
The Motor Accident Claims Tribunal awarded only ₹18.86 lakh as compensation, computing notional income at ₹8,000 per month. On appeal, the Karnataka High Court enhanced the compensation to ₹31.84 lakh, taking the monthly income at ₹15,750.
On the Insurance Company’s contention that the bus had entered Channapatna city without authorisation, in violation of the route permit, which covered only the Bengaluru–Mysuru corridor, the High Court held that while such deviation constituted a policy violation, the insurer could not avoid payment to third-party victims. The High Court, consequently, directed the insurer to pay the award amount and recover it from the vehicle owner — applying the “pay and recover” principle.
Challenging this before the Supreme Court, the vehicle owner argued that since the bus had gone off its permitted route, the insurer had no liability. Rejecting this contention, the Court observed that to deny victims compensation for such technical deviations would be “offensive to the sense of justice,” as the accident was for no fault of the victim.
At the same time, the Bench emphasised that insurance contracts operate within defined limits and that the insurer cannot be compelled to bear risks beyond those bounds. Striking a balance, the Court upheld the High Court’s application of the “pay and recover” rule, under which the insurance company must first satisfy the award and then recover the amount from the vehicle owner.
The Court thus dismissed the appeals, holding that the High Court’s directions were entirely justified and required no interference.
Cases Referred To
National Insurance Co. Ltd. v. Swaran Singh, (2004) 3 SCC 297
Parminder Singh v. New India Assurance Co. Ltd, (2019) 7 SCC 217
Iyyapan v. United India Insurance Co. Ltd, (2013) 7 SCC 62
M/s Chatha Service Station v. Lalmati Devi & Ors, 2025 SCC OnLine SC 756
