Liability arising out of accidents -Relevant provisions of the Motor Vehicles Act

Legal provision

• Motor Vehicles Act, 1988, section 164: no-fault liability. The owner or the insurer pays Rs 5 lakh for death and Rs 2.5 lakh for grievous hurt, without proof of fault.
• Section 161: compensation for hit and run accidents, paid under a scheme of the Central Government. Rs 2 lakh for death and Rs 50,000 for grievous hurt, or higher if prescribed.
• Section 165: the State Government may constitute Motor Accident Claims Tribunals.
• Section 166: application for compensation by the injured person, the owner of damaged property or the legal representatives.
• Section 168: the Tribunal makes an award of just compensation and states who must pay.
• Sections 146 and 147: compulsory insurance against third-party risks.
• Sections 140 to 144 (omitted from 1 April 2022): the earlier no-fault scheme with smaller fixed sums. The Motor Vehicles (Amendment) Act, 2019 replaced it with section 164.

Meaning and definition

Accident liability means the duty of the driver, the owner and the insurer to pay for death, injury and property damage caused by a motor vehicle. Its root is the tort of negligence. The Motor Vehicles Act has added a faster statutory scheme, special tribunals and compulsory insurance, so that a victim does not have to depend on the driver's ability to pay.

Detailed explanation

Step 1: Fault liability in negligence

• The claimant shows a duty of care, breach by driving below the standard of a reasonable driver, and resulting damage.
• Where the cause cannot be seen, the rule of res ipsa loquitur (the thing speaks for itself) may raise an inference of negligence. In Pushpabai Purshottam Udeshi v. Ranjit Ginning & Pressing Co. (P) Ltd., a car driven by a company's manager hit a tree and a passenger died. No eyewitness saw the driving, and the Supreme Court inferred negligence from the wreckage.
• The owner is vicariously liable for a driver employed by him in the course of employment.
• Contributory negligence of the victim reduces the compensation.

Step 2: No-fault liability under section 164

• The amounts are Rs 5 lakh for death and Rs 2.5 lakh for grievous hurt. The owner, or the insurer, pays to the legal heirs or the victim.
• The claimant need not plead or prove that the death or hurt was due to a wrongful act, neglect or default.
• Compensation paid under any other law is deducted. Ex gratia payments are not deducted.
• Grievous hurt has the meaning in section 116 of the Bharatiya Nyaya Sanhita, 2023.
• If a claimant accepts the section 164 amount through the settlement procedure, the claim before the Tribunal lapses.
• The section is a form of no-fault liability.

Step 3: Claims Tribunals and the claim

• Section 165 allows the State Government to constitute Claims Tribunals for death, bodily injury and property damage from motor accidents.
• Once a Tribunal is constituted for an area, civil courts cannot hear such claims.
• Section 166 allows the injured person, the owner of damaged property, or the legal representatives of a deceased person to apply.
• The Tribunal inquires and makes an award stating the amount and the persons to whom it is payable.

Step 4: Just compensation and its heads

• Just compensation is an amount that fairly makes up the loss. It is neither too low nor a windfall.
• In a death claim: loss of dependency, loss of consortium, loss of estate and funeral expenses.
• In an injury claim: medical expenses, loss of earnings during treatment, pain and suffering, and loss of future earning capacity for permanent disability.

Step 5: The multiplier method

1. Take the deceased's annual income.
2. Add future prospects, which is the likely rise in his income.
3. Deduct the amount that he would have spent on himself.
4. Multiply the result by the multiplier chosen by the age of the deceased, as in Sarla Verma v. Delhi Transport Corporation (2009).
5. Add the fixed sums under the conventional heads.

National Insurance Co. Ltd. v. Pranay Sethi settled the rules for the future prospects and the fixed heads.

• For a person with a permanent job, add 50 per cent, 30 per cent or 15 per cent by age band.
• For a self-employed person or one on a fixed salary, add 40 per cent, 25 per cent or 10 per cent by age band.
• The fixed heads are Rs 15,000 for loss of estate, Rs 40,000 for loss of consortium and Rs 15,000 for funeral expenses. These sums rise by 10 per cent every three years.

Step 6: Compulsory third-party insurance

• Every motor vehicle used in a public place must have a policy of insurance against third-party risks.
• The purpose is that the victim's right is not lost because the owner cannot pay.
• The insurer is usually joined as a party and pays the award, within the policy terms and limits.

Don't confuse: no-fault compensation and just compensation

Common mistakes

• Saying that fault must always be proved. Section 164 needs no proof.
• Quoting the old sections 140 to 144. They were omitted from 1 April 2022.
• Giving one future prospects rate for all. The rates differ for permanent job holders and the self-employed.
• Forgetting that civil courts cannot hear claims once a Tribunal is constituted.
• Forgetting that the insurer is usually the party that pays.

Apply it

Leading case laws

• National Insurance Co. Ltd. v. Pranay Sethi (2017)

  Facts. Different three-Judge decisions gave different answers on compensation for a person killed in a road accident, and the conflict was referred to a five-Judge Bench.

  Principle. Fixed the future prospects addition for the self-employed at 40, 25 and 10 per cent by age band, and the fixed heads at Rs 15,000, Rs 40,000 and Rs 15,000.

  Significance. The controlling authority on computation of motor accident compensation.

• Pushpabai Purshottam Udeshi v. Ranjit Ginning & Pressing Co. (P) Ltd. (1977)

  Facts. A car driven by a company's manager left the road and hit a tree. A passenger died. No one saw how it happened.

  Principle. The Supreme Court inferred negligence from the physical facts, under res ipsa loquitur.

  Significance. Proof of negligence in road accidents.

How to write this answer in the exam

Key points to remember

• Section 164: Rs 5 lakh for death and Rs 2.5 lakh for grievous hurt, no fault proof.
• Claims Tribunals under sections 165 and 166 bar civil courts.
• Pranay Sethi: 50, 30, 15 per cent for permanent jobs; 40, 25, 10 per cent for the self-employed.
• Fixed heads: Rs 15,000, Rs 40,000, Rs 15,000, raised 10 per cent every three years.
• Third-party insurance is compulsory.

Quick self-test

Related topics

• Negligence
• Vicarious Liability
• Negligence