The Supreme Court of India has referred a critical question to a larger bench regarding the scope of liability under Section 163A of the Motor Vehicles Act—specifically, whether an insurer is obliged to pay compensation when the policyholder or vehicle owner dies or suffers permanent disability in an accident, even where no third party is involved. This referral follows recognition of conflicting judgments from different two‑judge benches concerning the nature and extent of “no‑fault” compensation under Section 163A. A division bench comprising Justices Sudhanshu Dhulia and K. Vinod Chandran highlighted this inconsistency and stated that an authoritative pronouncement is needed to clarify whether Section 163A’s coverage extends beyond third‑party injury to include loss suffered by the insured or their legal heirs in accidents not involving another vehicle.
The bench examined a case where a minor sought compensation for the death of her father and mother, resulting from their vehicle crashing into a wall after a tyre burst. No other vehicle was involved, and the minor, as legal heir, pressed a claim under Section 163A. The insurance company opposed this, arguing that since no third-party involvement occurred, Section 163A did not apply and thus no liability arose. The Orissa High Court had accepted that argument and set aside the award granted earlier by a Motor Accident Claims Tribunal. However, the Supreme Court overturned that view, holding that Section 155 of the Motor Vehicles Act clarifies that even if the insured dies after the accident-causing event, it does not extinguish the cause of action against the insurer. Consequently, the Supreme Court restored the compensation award of roughly ₹4 lakh for the minor’s mother’s death, and clarified that Section 163A may well apply even in cases where the owner‑policyholder is the victim and no third-party risk arises.
The Court reasoned that Section 163A imposes direct liability on the insurer for death or permanent disability arising from use of a motor vehicle, irrespective of negligence or third‑party involvement, provided a valid policy covers the vehicle. The decision challenged prior interpretations limiting Section 163A to third-party accidents only. Given the divergence in judicial viewpoints, the bench emphasized that a larger bench must resolve the legal tension and articulate a uniform rule regarding the insurer’s liability under Section 163A to the owner or his legal heirs in no-third-party situations.
As a result, the case has been referred to a larger bench to undertake authoritative review. The bench underscored that this question affects numerous pending claims across tribunals and courts, mandating unified guidance on the ambit of no‑fault compensation for insured‑owner death or disability without third-party involvement. The Supreme Court’s interim restoration of the award means that the minor will receive the compensation previously granted under Section 163A, while the referred question awaits deeper legal examination.
This development signals a potentially significant expansion of motor insurance coverage in India. If the larger bench holds that Section 163A is not confined to third-party risk, families of deceased or permanently disabled insured persons may routinely claim compensation even absent liability on part of any other party. The larger bench’s forthcoming decision is expected to set the legal standard for interpreting statutory insurance liability and shaping claims by insured‑owners or their heirs when accidents lack external culpability.
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