Supreme Court on Insurer’s Liability and “Pay and Recover” Principle for Route Permit Violation.

The Supreme Court upheld the Karnataka High Court’s application of the “pay and recover” principle, directing the Insurance Company to first compensate the victims of a fatal road accident and then recover the amount from the vehicle owner. The Court held that a deviation from the permitted route constitutes a violation of the terms of the insurance policy but does not absolve the insurer from its initial statutory obligation to compensate third parties. Balancing the rights of victims and insurers, the Court ruled that compensation must be paid by the insurer and recoverable from the owner due to the permit breach.

• On 7 October 2014, Srinivasa alias Murthy died in an accident when his motorcycle was hit by a bus (KA-52-9099) driven rashly and negligently.

• His dependents filed a claim seeking ₹50,00,000 compensation, asserting he earned ₹15,000 per month through his Shamiyana Centre and ration shop business.

• The Tribunal awarded ₹18,86,000 with 6% interest, assessing the income at ₹8,000 per month.

• On appeal, the High Court reassessed the deceased’s income at ₹15,750 per month, added 40% for future prospects, deducted ¼ for personal expenses, and applied a multiplier of 16—awarding ₹31,84,000 in total, including consortium and funeral expenses.

• The Insurance Company appealed, arguing the vehicle violated its route permit by entering Channapatna City, where the accident occurred—beyond the authorized Bengaluru–Mysore route.

• The Court reiterated that using a vehicle beyond the scope of its permit constitutes a statutory violation under Section 66 of the Motor Vehicles Act, 1988.

• Relying on precedents including National Insurance Co. Ltd. v. Swaran Singh (2004) 3 SCC 297, Amrit Paul v. TATA AIG (2018) 7 SCC 558, and New India Assurance Co. v. Kamla (2001) 4 SCC 342, the Court affirmed that insurers must pay third-party victims even when policy terms are breached, but can later recover the amount from the insured.

• The Court observed that victims should not suffer due to technical route deviations beyond their control, while insurers cannot be forced to bear unlimited liability outside policy terms.

• The “pay and recover” doctrine ensures fairness between victims’ rights to compensation and insurers’ contractual limitations.

• Section 66, Motor Vehicles Act, 1988 – Necessity of permit for transport vehicles.

• Section 149, Motor Vehicles Act, 1988 – Duty of insurers to satisfy judgments against persons insured.

• Doctrine of “Pay and Recover” – Judicially evolved principle balancing compensation to victims with insurer’s right to reimbursement from the vehicle owner.

The Supreme Court dismissed the appeals and upheld the High Court’s order. The Insurance Company must pay the awarded compensation to the claimants and may recover the amount from the vehicle owner. No order as to costs.

Citation: 2025 INSC 1270

Case: K. Nagendra v. The New India Insurance Co. Ltd. & Ors.

Court: Supreme Court of India

Coram: Justice Sanjay Karol & Justice Prashant Kumar Mishra

Date of Decision: 29 October 2025

Civil Appeal Nos.: Arising out of SLP (C) Nos. 7139–7140 of 2023