Last Updated :
No Fault Liability under Motor Vehicles Act, 1988 | Overview
- Background of the laws relating to Motor Vehicles
- Judicial History of No Fault Liability
- No Fault Liability under the Motor Vehicle Act, 1988
No fault liability under the Motor Vehicles Act, 1988 is laid down under Chapter X (Sections 140-144), Sections 163A-163B and the Second Schedule. The no fault liability principle aims to compensate the victims of accidents arising out of the use of motor vehicles. These provisions were introduced for the welfare of the general public.
As observed by the Apex Court in the case of Gujarat State Road Transport v. Ramanbhai Prabhatbhai, “in order to meet to some extent the responsibility of the society to the deaths and injuries caused in road accidents there has been a continuous agitation throughout the world to make the liability for damages arising out of motor vehicles accidents as a liability without fault.”
Keeping in mind the need of the society and the observations and recommendations of the Supreme Court and the Law Commission, these provisions were inserted by the Parliament in 1988 and 1994.
Background of the laws relating to Motor Vehicles
The Indian Motor Vehicles Act, 1914 was the first legislation relating to motor vehicles that were introduced in India. This enactment was later replaced by the Motor Vehicle Act, 1939. Even after several amendments in the Act of 1939, a need was felt to introduce more comprehensive legislation that dealt with the rapidly changing road transport industry in a much better way. Various committees were set up to look into this matter.
The Law Commission of India also looked into the various aspects of road transport. Therefore, to look into and review all the provisions of the Motor Vehicle Act, 1939, a working group was constituted in 1984. Based on the recommendations of this working group and the comments gathered from the meeting of Transport Ministers of all states and union territories, the Motor Vehicle Bill was introduced in the Parliament. The Bill then became an act of the Parliament and came into being as the Motor Vehicle Act, 1988.
Judicial History of No Fault Liability
Initially, the Motor Vehicle Act, 1939 provided only for “fault liability” principle. It was in the case of Manushri Raha v. B.L. Gupta that the Supreme Court recommended the introduction of the no-fault liability principle. The Law Commission of India also recommended the same, and accordingly, the Act of 1939 was amended to introduce Sections 92-A to 92-E. These sections provided for payment of compensation on the basis of no-fault liability principle.
In the case of Manjusri Raha v. B.L. Gupta, Justice Fazal Ali had emphasized the need to introduce no-fault liability owing to the increase in vehicular traffic. He observed that:
“At a time when we are on the way to progress and prosperity, our country can ill-afford to lose so ‘many precious lives every year, for though the percentage of deaths caused by motor accidents in other countries is high, in our own country the same is not by any means negligible, but is a factor to be reckoned with.
Our lawmakers being fully conscious of the expanding needs of our nation have passed laws and statutes to minimize motor accidents and to provide for adequate compensation to the families who face serious socio-economic problems if the main bread-earner loses his life in the motor accident. The time is ripe for serious consideration of creating no fault liability.”
Similarly, it was observed by Justice V.R. Krishnayyar in the case of Concord of India Insurance Co. v. Nirmala that, “the jurisprudence of compensation for motor accidents must develop in the direction of no-fault liability and the determination of the quantum must be liberal, not niggardly since the law values life and limb in a free country in generous scales.”
In order to meet to some extent, the responsibility of the society to the deaths and injuries caused in road accidents there has been a continuous agitation throughout the world to make the liability for damages arising out of motor vehicle accidents as a liability without fault.
The Act of 1939 was later repealed by the Amendment Act of 1982, and to replace it, the Motor Vehicle Act, 1988 was introduced by the Parliament in 1988. The Act came into effect on 14th October 1988. Corresponding to Sections 92-A to 92-E of the Act of 1939, Sections 140 to 144 were added under Chapter X of the Act. According to the common law principle, in order to claim compensation negligence has to be proved on the part of the vehicle owner or the driver. The no-fault liability rule is guided by a different principle and is accommodated to compensate the victims of hit and run cases.
No Fault Liability under the Motor Vehicle Act, 1988
No-fault liability has been incorporated under Chapter X in Sections 140-144 of the Motor Vehicle Act, 1988. Section 140 deals with liability without fault. It talks about death or permanent disability of any person arising out of the use of the motor vehicle(s).
The owner(s) shall be jointly and severally liable to pay the compensation. In case of death, the liability is fixed at Rs. 50,000, while in the case of permanent disability, the owner(s) are liable to pay Rs. 25,000. Under this section, the claimant is not required to plead negligence on part of the owner or driver. The claim for compensation by the claimant is not defeated by “wrongful act, neglect or default” on part of the person who suffered death or permanent disability.
This section also provides for claiming compensation under other provisions of the same act or any other provisions, except Section 163A of the Motor Vehicle Act,1988, that would provide relief in addition to the fixed amount provided under Section 140. The amount of compensation to be given under any other law is deducted reduced from the amount of compensation payable under this section. The provision that deals with interim compensation were added in 1994.
The phrase “accident arising out the use of a motor vehicle(s)” has been used to widen the applicability of the Section. The word “use” has a wider connotation to cover the period when the vehicle is not moving and is stationary and the use of a vehicle does not cease on account of the vehicle having been rendered immobile on account of a break-down or mechanical defect or accident.
The accident should be connected with the use of the motor vehicle. The connection need not be direct and immediate. The expression used enlarges the field of protection made available to the victims and is in consonance with the beneficial object underlying the enactment.
There are certain defences available for the claims under section 140 to the insurance company. In the case of National Insurance Co. v. Tumu Guruva Reddy, it was held that
“The burden is upon the insurer to prove that (1) the owner of the vehicle has committed not mere breach, but a willful breach of the conditions embodied in the policy (2) the insurer is liable under Section 149 of the Motor Vehicles Act to indemnify the owner of the vehicle involved in the accident who suffered a decree for both fault liability as well as no-fault liability, and (3) the insurer can validly take the defence available under Section 149 of the Act not only in respect of fault liability but also in respect of no fault liability.”
The same was upheld by the Supreme Court in the case of Yellawwa v. National Insurance Co..
Section 141 contains provisions as to other rights to claim compensation for death or permanent disablement, while Section 142 defines the term “permanent disability” for the purpose of Section 140. Section 142(a) discusses “permanent privation of the sight of either eye or the hearing of either ear or privation of any member or joint.” Section 142(b) contains provision relating to “destruction or permanent impairing of the powers of any member or joint”, and 142(c) discusses “permanent disfiguration of the head or face.”
Section 163A and 163B were inserted in the Motor Vehicle Act, 1988 by an amendment of 1994, in view of the observations that were being by the Supreme Court in regard to no-fault liability. Through this amendment, the Second Schedule was inserted in the Act which introduced a structured formula. The schedule provides for compensation for third party fatal accident/injury cases claims. The scope of no-fault liability was expanded in order to provide the aggrieved with an opportunity to claim maximum compensation.
According to Section 163A, the owner or insurer shall be liable to pay compensation according to the Second Schedule in case of “death or permanent disablement due to accident arising out of the use of motor vehicle, compensation.”
Permanent disability for the purpose of this provision has the same meaning and extent as in the Workmen’s Compensation Act, 1923. Under this provision, it is not necessary to establish or plead “wrongful act or neglect or default” on part of the owner(s). Section 163B bars a person from claiming compensation under both Section 140 and 163A.
The Second Schedule provides a structured formula that is applicable to both fatal accidents and permanent disability cases. The victims are classified as per age and multipliers are prescribed. Victims of death cases are classified on the basis of annual income.
The amount prescribed in cases of fatal accidents is not to be less than Rs. 50, 000. Under the schedule, in addition to prescribed compensation, general damages such as funeral expenses, loss of consortium in case the claimant is the spouse, loss of estate and medical expenses incurred prior to the death by the victim are also prescribed.
The Motor Vehicle Act, 1988 was introduced to consolidate and amend the law relating to motor vehicles. It was enacted and brought into effect as welfare legislation. With the introduction of the principle of no-fault liability under Section 140 and 163A, the objective has been achieved to an extent. But there have been numerous judgments over the years which show that there still exists a need to widen the scope in order to benefit the victims and the claimants.
 1987 AIR 1690
 AIR 1977 SC 1158
 AIR 1979 SC 1666
 Gujarat State Road Transport Corporation v. Ramanbhat Bhai, 1987 ACJ 561
 Sivaji Dayanu Patil v. Smt. Vatschala Uttam More, 1991 ACJ 777
 Smt. Rita Devi v. New India Assurance Co., (2000) 5 SCC 113
 2001 ACJ 542 (A.P)
 AIR 2007 S.C.2582