Can an Insurance Company Avoid Liability on Grounds of Breach of Policy When Evidence Fails to Prove Policy Violation or Lack of Valid Licence? – Precedent Affirmed by Chhattisgarh High Court

The Chhattisgarh High Court reaffirmed that unless the insurer conclusively proves breach of policy conditions—such as commercial use of vehicle insured as private, or absence of valid driving licence—liability cannot be avoided. The judgment upholds existing precedent and serves as binding authority for claims arising under the Motor Vehicles Act.

 

Summary

Category Data
Case Name MAC/949/2018 of THE ORIENTAL INSURANCE COMPANY LIMITED Vs SHANTIBAI CHOUDHARY
CNR CGHC010175932018
Date of Registration 21-06-2018
Decision Date 02-09-2025
Disposal Nature DISMISSED
Judgment Author HON’BLE SHRI JUSTICE AMITENDRA KISHORE PRASAD
Court High Court Of Chhattisgarh
Bench Single Bench – Justice Amitendra Kishore Prasad
Precedent Value Binding on subordinate courts of Chhattisgarh; persuasive elsewhere
Overrules / Affirms Affirms award of the Motor Accident Claims Tribunal; follows prior Supreme Court precedent
Type of Law Motor Accident Claims, Insurance Law, Appellate Jurisdiction
Questions of Law
  • Whether insurer can escape liability for breach of policy or lack of valid licence without cogent evidence?
  • Whether income calculations and grant of future prospects must conform to evidence and binding precedent?
Ratio Decidendi The insurer bears the burden to prove breach of policy, such as use of vehicle contrary to insurance terms or absence of valid licence. In this case, the insurer failed to establish that the insured vehicle was being used in violation of policy conditions or that the driver did not hold a valid and effective driving licence. The findings of the Motor Accident Claims Tribunal, based on due appreciation of evidence, were not shown to be perverse or illegal. The appellate court refused to interfere and reaffirmed the liability of the insurer.
Judgments Relied Upon
  • Surender Kumar Arora & Ors. v. Manoj Bisla & Ors. (2012 (3) TAC 353 SC)
  • Anil & Ors. v. New India Assurance Co. Ltd. (2018 ACJ 729)
  • Nepal Singh v. Upendra (2008 (3) TAC 668 SC)
  • National Insurance Co. Ltd. v. Indira Srivastava (2008 (2) SCC 763)
  • National Insurance Co. Ltd. v. Keshav Bahadur (2004 (2) SCC 370)
Logic / Jurisprudence / Authorities Relied Upon by the Court Precedents establishing burden of proof for breach of policy on insurer; assessment of income for compensation calculation; treatment of allegations of hit-and-run or false implication; exclusion of certain allowances while computing income.
Facts as Summarised by the Court Deceased died in a road accident; FIR initially lodged against unknown vehicle. Insurer alleged false implication of insured vehicle, breach of policy by using private vehicle commercially, and lack of valid licence. Tribunal awarded compensation against insurer, which filed appeal.
Citations 2025:CGHC:44959

Practical Impact

Category Impact
Binding On All subordinate courts in Chhattisgarh
Persuasive For Other High Courts and, potentially, the Supreme Court on similar questions of insurer’s liability
Follows
  • Surender Kumar Arora & Ors. v. Manoj Bisla & Ors. (2012 (3) TAC 353 SC)
  • Anil & Ors. v. New India Assurance Co. Ltd. (2018 ACJ 729)
  • Nepal Singh v. Upendra (2008 (3) TAC 668 SC)

What’s New / What Lawyers Should Note

  • Reinforces that the insurer’s mere allegation is insufficient; insurer must conclusively prove policy breach or lack of licence to escape liability.
  • Where documentary and oral evidence supports the Tribunal’s findings, appellate interference is unwarranted.
  • Absence of cross-appeal by claimants precludes enhancement of compensation by appellate court.
  • The judgment restates that income calculations for compensation must be grounded in the actual salary slips and exclude non-permissible allowances as per Supreme Court precedent.
  • Courts are to strictly follow precedents in assessment of income, award of interest, and determination of breach.

Summary of Legal Reasoning

  • The Court addressed appellant’s contentions regarding non-involvement of insured vehicle, breach of policy (commercial use, lack of permit and valid driving licence), improper computation of deceased’s income, and penal interest.
  • Relied on binding Supreme Court precedents for burden of proof on insurer to establish policy breach or absence of valid licence.
  • Found that neither the record nor Tribunal’s findings indicated any perversity or illegality.
  • Tribunal’s appreciation of evidence was upheld; insurer failed to demonstrate effective policy breach or absence of licence.
  • Addressed claim for enhancement but found no maintainability due to absence of cross-appeal/cross-objection by claimants.
  • Appellate court dismissed the insurer’s appeal as wholly devoid of substance.

Arguments by the Parties

Petitioner (Insurance Company):

  • Insured vehicle was not involved; FIR lodged against unknown vehicle.
  • Alleged contradictions in claimant and eyewitness statements; delay in seizure of vehicle raises suspicion.
  • Driver lacked valid and effective driving licence; owner and driver failed to produce same.
  • Vehicle registered as private but allegedly used commercially, constituting breach.
  • Tribunal erred in income assessment, wrongly included bonus and future prospects, contrary to evidence and precedent.
  • Impugned award imposed penal interest contrary to Supreme Court authority.
  • Sought reliance on Supreme Court and High Court decisions supporting insurer’s defenses.

Respondent (Claimant):

  • Tribunal correctly appreciated evidence and passed the award.
  • Vehicle was duly insured under valid policy; liability fixed correctly upon insurer.
  • No merit in insurer’s appeal; prayed for dismissal.
  • Though eligible for enhancement of compensation, not pressing the issue for want of cross-appeal, but left open for court’s consideration if deemed fit.

Factual Background

The deceased, Munnalal Choudhary, died in a road accident on 24.10.2012 while riding his motorcycle; FIR was initially lodged against an unknown vehicle. Subsequently, the claimants alleged involvement of the insured Mahindra Max vehicle. Insurance Company contested its involvement, breach of policy conditions, and absence of valid permit and driving licence. The Motor Accident Claims Tribunal awarded compensation, holding insurer liable. The insurer appealed the award.

Statutory Analysis

  • Examined Section 134 of the Motor Vehicles Act regarding owner’s/driver’s obligations to produce information/documents after accident.
  • Considered Tribunal’s application of binding Supreme Court judgments regarding computation of income and interest awards under Motor Vehicles Act.
  • Addressed procedural necessity of proving policy breach and licence validity as per established legal standards.

Alert Indicators

  • ✔ Precedent Followed – The judgment affirms established principles regarding insurer’s liability under the Motor Vehicles Act.

Citations

  • 2025:CGHC:44959
  • Surender Kumar Arora & Ors. v. Manoj Bisla & Ors., 2012 (3) TAC 353 (SC)
  • Anil & Ors. v. New India Assurance Co. Ltd., 2018 ACJ 729
  • Nepal Singh v. Upendra, 2008 (3) TAC 668 SC
  • National Insurance Co. Ltd. v. Indira Srivastava, (2008) 2 SCC 763
  • National Insurance Co. Ltd. v. Keshav Bahadur, (2004) 2 SCC 370

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