Case Summary: K. Nagendra v. The New India Insurance Co. Ltd. & Ors. (2025) | Deviation from Route Permit Doesn’t Exempt Insurer from Liability

This case concerns the liability of an insurance company in motor accident claims when the offending vehicle operates outside the area specified in its route permit. The Supreme Court of India in K. Nagendra v. The New India Insurance Co. Ltd. examined whether a deviation from a prescribed route — in violation of permit conditions — absolves the insurer of its obligation to indemnify third parties or whether the “pay and recover” principle applies.

The Court upheld the High Court’s decision to direct the insurance company to pay the compensation to the claimants and then recover the amount from the owner of the vehicle.

This judgment reinforces the humanitarian balance between compensating accident victims and protecting insurers from contractual breaches.

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

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

Court: Supreme Court of India

Judges: Justice Sanjay Karol and Justice Prashant Kumar Mishra

Date of Judgment: 29 October 2025

Background of the Case

Facts of the Case

On 7 October 2014, one Srinivasa alias Murthy, while riding his motorcycle, met with a fatal accident when his vehicle was hit by a bus (registration number KA-52-9099) driven in a rash and negligent manner near Channapatna, Karnataka.

The deceased died on the spot. His dependents — including his wife, son, and parents — filed a claim petition under Section 166 of the Motor Vehicles Act, 1988, before the Motor Accident Claims Tribunal (MACT), Channapatna, seeking compensation of ₹50,00,000 with 18% interest.

The claimants asserted that the deceased was self-employed, operating a Shamiyana Centre and a Ration Shop, earning around ₹15,000 per month, and was the sole breadwinner of the family.

Proceedings before the MACT

The MACT, by its judgment dated 14 December 2016, partly allowed the claim and awarded a total compensation of ₹18,86,000 with interest at 6% per annum.

The Tribunal calculated compensation by taking the notional monthly income as ₹8,000, applied a multiplier of 16, and made deductions for personal expenses and other statutory heads.

Both sides appealed:

• The claimants challenged the quantum of compensation as being too low.
• The insurance company (New India Assurance Co. Ltd.) challenged the liability, contending that the bus had violated the conditions of the route permit.

Decision of the Karnataka High Court

The High Court of Karnataka at Bengaluru, through a common judgment disposing of both appeals, enhanced the compensation and also allowed the insurer’s appeal in part.

(a) Enhancement of Compensation

The Court reassessed:

• Monthly income: ₹15,750
• Future prospects: +40% (as per Pranay Sethi)
• Dependents: 4, so deduction for personal expenses: ¼
• Multiplier: 16 (as per Sarla Verma v. DTC)

Accordingly, the High Court calculated the loss of dependency = ₹30,24,000.

In addition:

• ₹40,000 for loss of spousal consortium (widow)
• ₹30,000 for loss of parental consortium (son)
• ₹30,000 each for loss of filial consortium (parents)
• ₹15,000 each for loss of estate and funeral expenses

Total Compensation: ₹31,84,000 with interest.

(b) Findings on Route Permit Violation

The High Court found that:

• The bus driver had taken a route deviation; the vehicle was not authorised to enter Channapatna City.
• The permit covered only Bengaluru to Mysore, not internal city routes.
• This amounted to a violation of permit conditions, a statutory infraction under Section 66 of the Motor Vehicles Act.

Relying on Amrit Paul Singh v. TATA AIG General Insurance Co. Ltd. (2018) 7 SCC 558, the High Court held that using a vehicle outside its permit jurisdiction is a fundamental statutory infraction. However, the insurer cannot escape liability to third-party victims. Instead, the Court applied the “pay and recover” principle, directing the insurer to satisfy the award and then recover the amount from the vehicle owner (the appellant).

Issue

• Whether deviation from the prescribed route as per the permit absolves the insurance company of liability for an accident occurring on such a deviated route?

This question directly impacts the extent of an insurer’s liability and whether the pay and recover rule can be extended to cases of permit violations, similar to its application in license-related breaches.

Judicial Precedents

The Supreme Court, before analysing the facts, referred to several precedents that define the contours of insurer liability and the pay-and-recover doctrine under Section 149 of the Motor Vehicles Act, 1988.

1. National Insurance Co. Ltd. v. Swaran Singh (2004) 3 SCC 297

A three-judge bench held that even when the insurer successfully proves a policy breach, the Tribunal can still direct the insurer to pay the compensation to the claimant first, with liberty to recover it from the insured.

This ensures victims are not left uncompensated due to contractual disputes between the insurer and insured. The Court emphasised reading Section 149(1), (2), (5), and (7) harmoniously to protect the third-party rights.

2. New India Assurance Co. Ltd. v. Kamla (2001) 4 SCC 342

Justice K.T. Thomas clarified that while insurers and insured are contractually bound, insurers are statutorily liable to compensate third parties. If the insurer later establishes a policy breach (e.g., invalid license), it can recover the amount from the insured.

3. Parminder Singh v. New India Assurance Co. Ltd. (2019) 7 SCC 217

This judgment reaffirmed the pay-and-recover principle where the driver lacked a valid driving license. It reinforced that insurers must first compensate the victim and then seek reimbursement from the owner.

4. S. Iyyapan v. United India Insurance Co. Ltd. (2013) 7 SCC 62

Held that discrepancies between the vehicle type and license endorsement justify the application of the pay-and-recover rule. The insurer must pay the third-party claimant and can later recover from the policyholder.

5. Amrit Paul Singh v. TATA AIG General Insurance Co. Ltd. (2018) 7 SCC 558

In this case, the Court held that driving a vehicle without a valid permit constitutes a statutory infraction, not a mere policy breach. It distinguished it from minor infractions like overloading or carrying unauthorised passengers. The insurer, however, was directed to pay and recover, balancing both statutory violation and victim compensation.

6. M/s Chatha Service Station v. Lalmati Devi (2025 SCC OnLine SC 756)

Recently decided, it held that when a vehicle carries unauthorised hazardous goods, the insurer must still compensate third-party victims but can recover the amount from the owner for policy breach.

Supreme Court’s Analysis and Findings

1. Route Deviation as a Statutory Infraction

The Court noted that the offending vehicle lacked authorisation to enter Channapatna City. This fact was undisputed. Therefore, there was a clear deviation from permit terms, constituting a violation under Section 66 of the Motor Vehicles Act.

2. Purpose of Motor Insurance

Justice Sanjay Karol emphasised that the primary purpose of motor insurance is to protect victims of road accidents and shield the owner from direct liability in unforeseen incidents.

To deny compensation merely because of a technical permit violation would offend the sense of justice, since the victim’s family suffers through no fault of their own. Thus, the insurer must first pay the compensation.

3. Contractual Limits of Insurer Liability

However, the Court also observed that insurance contracts operate within defined boundaries. When the owner violates a fundamental term like route limitation, the insurer cannot be forced to bear a liability beyond the scope of its agreement.

The Court balanced both aspects:

• Social justice for victims, and
• Commercial fairness for insurers.

Hence, the High Court’s application of pay and recover was deemed justified.

4. Balancing of Interests

The Supreme Court reiterated that compensation to victims cannot be withheld due to disputes between the insurer and insured. Still, the insured cannot profit from his own wrong, especially when breaching a statutory condition like operating outside a permit zone.

Therefore:

• The insurance company must first pay the awarded amount to the claimants (the victims’ family).
• It will then have the right to recover the same from the vehicle owner (appellant).

Judgment

The Supreme Court dismissed the appeal filed by K. Nagendra (vehicle owner).

It upheld the Karnataka High Court’s order, confirming:

• The insurer’s liability to pay first,
• The insurer’s right to recover from the owner, and
• The total compensation of ₹31,84,000 was awarded to the claimants.

There was no order as to costs.

Conclusion

In K. Nagendra v. New India Insurance Co. Ltd., the Supreme Court reaffirmed that compassion towards accident victims must remain paramount, even when the insured commits statutory violations like route deviation without a permit.

The insurance company’s liability under Section 149(1) is statutory and primary, while its right to recover from the insured under Section 149(5) preserves contractual fairness.

This dual mechanism — “Pay first, recover later” — ensures that:

• Victims are not denied justice due to procedural or contractual breaches.
• Insurers are not permanently burdened for violations beyond their contractual scope.

The Court, balancing social welfare and contractual sanctity, dismissed the appeals, making it clear that equity demands immediate relief for the victim while holding the violator financially accountable.

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