Deviation from Permit and the ‘Pay and Recover’ Doctrine: A Judicial Balance Between Victim Compensation and Insurer Liability.


29 October 2025 Civil Appeals >> Civil & Consumer Law   |   Motor Accident >> Family Law  

In a recent judgment, the Supreme Court of India has reiterated the "pay and recover" principle in cases involving statutory violations of conditions of insurance permits. The decision, arising from appeals against a 2019 judgment of the Karnataka High Court, examined whether a vehicle operating beyond the authorized route as per its permit could still render the insurer liable to compensate victims of an accident.

A fatal accident took place in Channapatna City with a bus whose permit did not extend to that area. The claimants approached for compensation, and their claim was assessed for an award of Rs. 18.86 lakh by the MACT. On appeal, the High Court recalculated the compensation and enhanced the amount awarded to Rs. 31.84 lakh apart from dealing with the plea of the insurer that the route deviation was in violation of the terms of the policy.

 

 

The High Court invoked the "pay and recover" principle, holding that the insurer would have to pay the award first and then recover the amount from the owner of the vehicle. This judgment was appealed against before the Supreme Court, which took the opportunity to detail the contours of the insurance liability arising under the Motor Vehicles Act.

The Court noticed that although driving a vehicle without a valid route permit is a statutory violation, it cannot deny the victims of an accident their rightful compensation. An insurance policy, while delimiting its area of operation, operates in a welfare scheme in which the ultimate objective of the legislation is to safeguard third-party victims and not absolutely to protect the insurers. The Court thus observed that weighing all interests on both sides requires the principle of “pay and recover” to be invoked.

The Court, thus, relying on precedents such as Swaran Singh, Kamla and Amrit Paul explained that once the insurer has successfully proved a policy breach-when a vehicle plies without a valid permit-it shall remain entitled to recover the compensation amount from the insured upon discharging the immediate liability to the claimants. The basis lies in the social justice intent of the Motor Vehicles Act: swift compensation to victims, while keeping contractual rights between insurer and insured enforceable. The Court, therefore, confirmed the High Court order and dismissed the appeals filed by the owner. 

This further reiterates that even regarding route deviation, the insurer is first liable to pay to third parties and afterward recover it from the policyholder. This decision strengthens consistency in the judicial application of the "pay and recover" principle and underscores the judiciary's continuing effort to strike a balance between humanitarian concerns and commercial fairness.


Motor Vehicles Act, 1988