The Supreme Court applied the “pay and recover” principle, holding the insurer liable to satisfy the compensation award despite a breach of policy conditions. The insurer was granted the right to subsequently recover the paid amount from the vehicle owner, aligning with established precedent.
Facts Of The Case:
In this case, the appellant, Akula Narayana, was the claimant seeking compensation for a death resulting from a motor accident. The vehicle involved was a five-seater insured with the first respondent, The Oriental Insurance Company Limited, and owned by the second respondent. The Motor Accidents Tribunal held both the insurer and the owner jointly and severally liable, based on evidence that the insurer had collected an additional premium to cover the risk for a driver, conductor, and cleaner. The High Court, however, allowed the insurer’s appeal, absolving it from liability. It ruled that the policy, being a statutory one, did not cover the risk of a gratuitous passenger, and that there was a clear breach as the five-seater vehicle was carrying nine persons at the time of the accident. Aggrieved by the difficulty in recovering compensation from the vehicle owner alone, the claimant appealed to the Supreme Court. The core factual dispute centered on whether the insurer could be completely exempted from paying compensation despite collecting an additional premium for three occupants and the existence of a policy breach
Procedural History:
The claim originated before the Motor Accidents Claims Tribunal, which, in its award dated April 29, 2021, held both the insurer and the vehicle owner jointly and severally liable to pay compensation. The insurer appealed this decision to the High Court for the State of Telangana at Hyderabad. The High Court, in its judgment dated June 8, 2022, allowed the insurer’s appeal, setting aside the Tribunal’s award to the extent it fastened liability on the insurer. Subsequently, the claimant appealed to the Supreme Court by way of a special leave petition, which was granted, leading to the present civil appeal.
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Court Observation:
The Supreme Court observed that while there was a breach of the insurance policy conditions—specifically the carriage of excess passengers in a five-seater vehicle—the contract of insurance itself was not disputed. The Court noted the consistent application of the “pay and recover” principle in jurisprudence, even in cases of such breaches. It emphasized that this principle balances the need to provide immediate relief to victims with the insurer’s contractual rights. Consequently, the Court held it appropriate to direct the insurer to satisfy the award first, while preserving its right to recover the paid amount from the vehicle owner.
Final Decision & Judgement:
The Supreme Court allowed the claimant’s appeal. It set aside the High Court’s order which had completely absolved the insurer of liability. The Court directed the first respondent, The Oriental Insurance Company Limited, to satisfy the compensation award as determined by the Tribunal. However, it concurrently granted the insurer the right to recover the entire amount so paid from the insured vehicle owner, thereby applying the “pay and recover” principle.
Case Details:
Case Title: Akula Narayana vs. The Oriental Insurance Company Limited & Anr. Citation: Civil Appeal No. 013509 of 2025 (Arising out of SLP (C) No. 8434/2023) Appeal Number: Civil Appeal No. 013509 of 2025 Date of Judgment: November 10, 2025 Judges/Justices Name: Justice Manoj Misra and Justice Sanjay Karol