Motor vehicle insurance liability limited to covered occupants, with insurer permitted to pay first and recover excess from owner.

An insurer's substantive liability under the Motor Vehicles Act, 1988 is confined to the risk covered by the policy and the vehicle permit, so passengers travelling beyond the insured capacity are not within the contractual cover. The insurer is therefore not directly liable for compensation beyond the persons covered under the policy. However, to give effect to the Act's beneficial purpose, the insurer may still be directed to satisfy the award in the first instance and then recover the excess paid from the vehicle owner in execution proceedings, to the extent the payment exceeds its contractual liability.

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Issues: Whether the insurer was liable to satisfy compensation claims arising from an accident involving carriage of passengers in excess of the number permitted under the insurance policy and vehicle permit, and whether the insurer could be directed to pay the award amount and recover the excess from the owner.

Analysis: A valid policy under Chapter XI of the Motor Vehicles Act, 1988 must comply with the requirements relating to third party risks. Reading Sections 146, 147 and 149 together, the insurer's liability is confined to the persons covered by the policy, here six occupants including the driver. Passengers travelling beyond that limit were not covered by premium and the insurer was not directly liable for their compensation as against the insured owner. At the same time, in line with the beneficial object of the Act and the approach adopted in earlier decisions, the insurer could be directed to satisfy the award in the first instance and then recover the excess from the owner in execution proceedings.

Conclusion: The insurer's liability was restricted to the number of persons covered by the policy, but it was required to deposit the entire award amount and was granted liberty to recover the excess paid beyond its contractual liability from the vehicle owner.

Ratio Decidendi: Under Sections 146, 147 and 149 of the Motor Vehicles Act, 1988, an insurer's substantive liability is limited to the risk covered by the policy, but the award may be satisfied by the insurer in the first instance with a right of recovery against the insured for amounts paid beyond that liability.

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