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This article is written by Debamita Ray of 5th Semester of Amity University, Kolkata, an intern under Legal Vidhiya


The Motor Vehicles Act of 1988 in India is covered in detail in this paper, with a focus on liability without fault in specific circumstances and the needs for insurance against third-party risks. It talks about the effects on claimants and insurance companies of the no-fault liability rules under Sections 140 and 163A of the Act. The 2017 Motor Vehicles (Amendment) Bill’s amendments to compensation and insurance, the granting of temporary relief, and the establishment of a Motor Vehicle Accident Fund are also covered in this document.


Motor Vehicles Act, Liability Without Fault, No-Fault Liability, Compensation, Third-Party Insurance, Motor Vehicle Accidents, Indemnity, Insurer, Claimants, Insolvency, Amendment Bill, Hit-And-Run, Accident Fund, Road Safety, Claim Settlement, Injury, Death, Insurance Premium, Negligence, Victim Compensation, Structured Formula, Vicarious Liability, Legal Heirs, Traffic Regulations, Liability Limits, Negligence, Claimant Burden, Claim Settlement, Solatium Fund, Interim Relief, Golden Hour, Central Government, Motor Vehicle Accident Fund, Road Safety.


Liabilities under the Motor Vehicles Act, 1988

As explained below, Chapter X of the Motor Vehicles Act of 1988 [1](hereafter referred to as the MV Act) addresses “Liability without Fault in Certain Cases.”

 In accordance with Section 140(1)[2] of the Act, the owner(s) shall be jointly and severally liable to pay compensation in respect of such death (Rs. 50,000/-) or disablement (Rs. 25,000/-) resulting from an accident arising out of the use of a motor vehicle(s).

The claimant is not required to allege and prove that the death or permanent disability for which the claim has been made was caused by any wrongdoing, negligence, or failure on the part of the owner(s) of the vehicle(s) in question or of any other person.

In addition, the amount of compensation that may be recovered in connection with a person’s death or permanent disability shall not be diminished because of any wrongdoing, carelessness, or default on the part of the person whose death or permanent disability the claim is made, nor shall it be reduced because of the proportionate share of such person in the cause of such death or permanent disability.

The victim who receives compensation under this section is not prohibited from pursuing compensation under any other active law (aside from Section 163A of the Act itself), but the amount of compensation to be provided under any other law will be lessened by the amount of compensation payable under no fault liability under this section.

In New India Assurance Co. Ltd v. Mehebubanbibi [3]case the deceased was deputed by his employer to carry a damaged transformer in a tractor. A ditch was entered by the tractor. The person who died was crushed beneath the broken transformer, suffered injuries, and passed away at a hospital. The deceased’s death was related to and occurred during his employment. According to the ruling, the heirs of the dead in this case could file claims for compensation under both the Workmen’s Compensation Act of 1923 and the Motor Vehicles Act for death resulting from the tractor driver’s negligence.

 According to Section 142[4] of the Act, an injury or injuries involving: (a) Permanent privation of the sight of one eye, the hearing of one ear, or the privation of any member or joint; (b) Destruction or permanent impairing of the powers of any member or joint; or (c) Permanent disfigurement of the head or face, have manifested themselves because of the accident.

 Insurance against third-party risks is required by law under Chapter XI of the Act, in particular Section 146[5], which deals with “Insurance of Motor Vehicles against Third Party Risks.” The pro-victim aspect of the Act has raised the demand for third party insurance since people are more aware that they will be held responsible for compensating the party who has been injured or whose property has been damaged in the event of an accident. Vehicle owners now choose insurance so that their insurance provider will pay for these damages because of increasing knowledge.

The following terms and expressions used in Chapter XI are defined in Section 145[6]: (a) An insurer currently doing general insurance business in India under the General Insurance Business (Nationalisation) Act, 1972, as well as any Government insurance fund licenced to conduct general insurance business under that Act, are considered “authorised insurers.” (b) A “certificate of insurance” is a document that includes a cover note and is issued by an approved insurer in accordance with subsection (3) of Section 147[7]. c) “liability” includes liability for such under Section 140[8] if it refers to a person’s death or bodily damage; (d) “Certificate of Insurance” is a part of “Policy of Insurance”; (e) “Property” is defined in Section 2(13) of the Act to include cattle and anything else that is transported by a vehicle other than living beings. It also includes highways, bridges, culverts, causeways, trees, posts, and milestones. (f) “reciprocating country” refers to any nation that the Central Government may, based on reciprocity, notify in the Official Gazette as a reciprocating nation for the purposes of this Chapter; The Government is a “third party” under clause (g).

The requirement for insurance against third-party risk is further explained in Section 146[9]. This section states that “No person shall operate a motor vehicle, except as a passenger, or cause or permit any other person to operate a motor vehicle, except as a passenger, in a public place, unless there is in force, with respect to such person’s or that person’s use of the vehicle, as the case may be, a policy of insurance complying with the requirements of this Chapter [Provided that in the case of a vehicle carrying, or intended to carry, dangerous or hazardous goods a policy of insurance pursuant to the Public Liability Insurance Act of 1991 (6 of 1991) shall also exist.

Exceptions include the following:

a person operating a vehicle as a paid employee, unless he knows or has reason to believe that such a policy is not in effect; (ii) vehicles owned by the Central Government or a State Government and used for Government purposes unrelated to any commercial enterprise; (iii) any local authority; and (iv) any State transport undertaking. For Central/State/Local/Transport Authorities, the exception is only valid if a fund has been established and is maintained by that authority to cover any liabilities that that authority or any employee may incur to third parties due to the use of any of its vehicles.

 The policies’ requirements and liability limits for passengers and non-passengers in connection to passenger vehicles and freight carriages are outlined in Section 147[10]. The insurance policy must be one that: (a) is issued by an authorised insurer; and (b) insures the designated person or classes of individuals to the extent permitted by subsection (2). – (i) from any liability he could have for a third party’s death or property damage resulting from or resulting from the use of the products, including the owner of the goods or his authorised agent who is travelling in the vehicle in a public place. ii) against any passenger of a public service vehicle* being killed or suffering physical harm as a result of the usage of the vehicle in a public area; Exception: A policy shall not be required to cover (i) any contractual liability or (ii) in respect of death or bodily injury, arising out of and in the course of this employment (except liability under the Workmen’s Compensation Act, 1923) of the employee of a person insured by the policy who is engaged in driving the vehicle, (a) acting as conductor of the vehicle or in inspecting tickets on the vehicle, (b) if the vehicle is a public service vehicle, engaged in conducting the vehicle.

 Limits of Liability: An insurance policy must provide coverage for any liability incurred as a result of an accident up to the following limits, namely: (a) the amount of liability incurred, except as stated in clause (b). (b) a cap of 6,000 rupees for any damage to the property of a third party. (*) – Section 2(35)[11] of the Act states that a “public service vehicle” is any motor vehicle used or modified to be used for the carrying of passengers for hire or reward, which includes stage carriage, contract carriage, and maxi cabs (#) – If the act or omission that caused the accident occurred in a public place, the death of any person, bodily injury to any person, or damage to any property of a third party shall be deemed to have been caused by or to have arisen out of, the use of a vehicle in a public place, regardless of whether the person who is dead, injured, or the property which is damaged was in a public place at the time of the accident.

 It was determined in New India Assurance Co. v. Satpal Singh[12] that under sub-section (2), the insurer has no upper limit on the amount of compensation given in respect of a victim of the accident’s death or physical injury. Therefore, the old Act’s (1939) limit has been lifted, and the policy should now cover injury to any person, including the owner of the goods or his authorised representative, as well as the liability that has been incurred.

According to Section 149[13], insurers must pay judgements rendered against covered parties for third-party risk. Additionally, it includes a list of the defences that the insurer may use (after getting notice from the Tribunal and becoming a party thereto): (a) That one of the following policy conditions has been broken, specifically one of the following ones: When a vehicle is not covered by a permit to operate for hire or reward on the date of the insurance contract, there is a restriction that prevents it from being used for any of those purposes: (a) for hire or reward; or (b) for organised racing and speed testing. If the vehicle is a transport vehicle, (c) for a purpose that is not permitted by the permit under which it is used, or (d), without a sidecar attached, if the vehicle is a motorbike; (ii) a condition that prohibits driving by a named person or persons, by anyone who is not properly licenced, by anyone who has been disqualified for holding or obtaining a driving licence during the period of disqualification; or (iii) a condition that excludes liability for injury caused or contributed to by conditions of war, civil war, riot or civil commotion; (b) that the policy is invalid because it was obtained by the withholding of a significant fact or through a factual representation that was materially misleading in one or more respects.

 In a recent case involving the Motor Vehicle Act’s provisions, the Supreme Court held that even if the insurance company has pleaded and proven a defence, they are still liable for paying the third party but may be able to collect that money from the owner insured. The courts have consistently ruled that the insurer has the burden of demonstrating the availability of defence, and the insurance company must not only present evidence of a policy condition breach or a violation of Section 149(2)[14], but also demonstrate that the owner knew or had knowledge of the act in question.

In the case of United India Insurance Co. Ltd. v. Bodali Bai[15] where the owner had allowed the truck to be used to transport a dead body for cremation and on the way back, the driver had allowed two passengers, the insurer was not held responsible because the deceased were gratuitous passengers, but the owner was held vicariously liable. According to a Supreme Court Division Bench ruling, the insurance company is responsible for a passenger in a goods truck. This ruling has been reaffirmed in several additional cases with the instruction that the Insurance Company pay the claimant’s compensation before recovering it from the owner.

(*) – Section 149(6)[16]: A material fact or is one that would have a significant impact on a sensible insurer’s decision about whether to accept the risk, the premium to charge, and the terms under which to do so.

 Section 161[17] mandates that the Central Government develop a plan for the payment of compensation in “hit and run” situations. Additionally, it specifies the amounts of compensation for both fatalities and severe injuries as follows: (a) for fatalities resulting from hit-and-run motor vehicle accidents, a fixed sum of [twenty-five thousand rupees]; (b) for severe injuries resulting from hit-and-run motor vehicle accidents, a fixed sum of [twelve thousand and five hundred rupees].

 Section 163[18] – A. Special requirements regarding compensation payments made using a structured formula. – (1) The owner of the motor vehicle of the authorised insurer shall be liable to pay in the event of death or permanent disability due to accident arising out of the use of motor vehicle compensation, as indicated in the Second Schedule, to the legal heirs or the victim, as the case may be, notwithstanding anything contained in this Act or in any other law currently in force or instrument having the force of law. (2) The claimant is not required to allege or prove that the death or permanent disability for which the claim has been made was caused by any wrongdoing, negligence, or default on the part of the owner of the vehicle or owners in question, or of any other person, to be granted compensation under subsection (1). According to Section 163B, a person who is eligible to file a claim for compensation under both Sections 140 and 163-A must do so under only one of the two, not both.

The High Court ruled in Ram Singh v. Anil that it is not essential to allege or establish carelessness of the vehicle’s driver to use Section 163A when an accident is established to have resulted from the usage of a motor vehicle.

 On October 25, 2018, at 4:00 pm, a policy that had expired was renewed in National Insurance Co. Ltd vs. J.N. Dhabi. On the same day at 11:14 am, the car had been in an accident. The Supreme Court ruled that the insurance company could not be held responsible for the accident because it happened before the renewal of the policy.

The Motor Accident Claims Tribunal may begin a proceeding for the award of damages related to a motor vehicle accident either on the basis of a claim for damages submitted by the parties who were injured (the claimants) under Section 166(1)[19] or Section 163A[20] of the Act, or suo moto by the Tribunal, by treating any report of the accident (forwarded to the Tribunal under Section 158(6)[21] of the Act) as a claim for damages under Section 166(4) of the Act. The insurer must receive a notice under section 149(2) of the Act even though it is not a respondent.

Types of Liability Under the Act, III

 Because the MV Act mandates that vehicles be insured against third-party risks, under the theory of vicarious liability, an injured party or the legal heirs of a deceased person may seek compensation from one of the following parties: (i) the owner of the vehicle; (ii) the driver of the vehicle; (iii) the insurance company; or (iv) from both of them jointly.

 It is thought that the possibility of a claimant receiving the required damages is higher if arrangements, in the form of insurance, are made in advance by a car owner for the injuries he or she may cause to a third party. It has been decided that the owner will be responsible for the reckless behaviour of the individuals who he allows to drive his car.

The claims for compensation resulting from obligations to make compensation under the MV Act can be divided into the following categories: (i) Compensation claim under Section 140 based on the ‘no fault’ basis. (ii) A claim for compensation under Section 163A based on the ‘no fault’ theory and a structured formula as per Schedule 2 of the Act (iii) A claim for compensation under Section 166 of the Act based on the No fault/Strict/Absolute liability.

 The Act’s Sections 140 and 163A provide for the payment of compensation in circumstances of death or permanent disability based on no-fault liability, i.e., without the need to establish fault on the part of any party. Therefore, the defendant cannot claim that the plaintiff was negligent and evade responsibility by reducing his liability.

In Gujarat State Road Transport Corporation v. Ramanbhai Prabhatbhai [22], where the Supreme Court ruled that “Where a pedestrian, without his negligence, is injured or killed by a motorist whether negligently or not, he or his legal representatives, as the case may be, should be entitled to recover damages if the principle of social justice should have any meaning at each,” the principle of no fault liability was first established. Second Schedule Amendment Pursuant to Section 163A:

The Second Schedule previously included a structured formula depending on the victim’s age range and his yearly salary. The base salary was established at Rs. 50,000. Courts took into account costs including burial costs, loss of consortium for the spouse, and estate loss, among others. However, the Schedule has lately undergone the following changes:

Liability for fault

 The Motor Vehicles Act of 1988 establishes specific care obligations for drivers of motor vehicles. These include the following: Obeying traffic laws; Driving regulations; Driving with the left hand; Observing safety precautions for drivers and pillion riders; Producing a licence or certificate of registration; Stopping in Certain Circumstances; Duty of Driver in Case of Accident and Injuring Person; Duty to Allow Inspection of Vehicle Involved in Accident.

The case might be classified as one involving negligence or fault liability if any of the responsibilities are breached, and the claimant sustains losses because of the breach. The nature of the injury is not a factor in the preference of a claim under Section 166[23] of the Act, and the amount of damages is decided based on normal tort law and what seems to be “just.” The same remedy may not be sought under Sections 166 and 163A at the same time.

Sarala Verma & Ors. Vs. DTC & Anr[24] decided that the Second Schedule to the Act (i.e., the structured formula under Section 163A) has no effect in determining the amount of compensation in a claim for compensation for death submitted under Section 166 of the Act. In this instance, the court developed a unique multiplier formula.

 To file a claim under Section 166, the claimant must demonstrate that the owner or driver of the vehicle was negligent. The res ipsa loquitor doctrine, which states that an object speaks for itself, may occasionally be used by the Tribunal to discharge the claimant’s burden of proof on the respondent driver’s carelessness. The defence of the claimant’s contributory negligence may be brought up by the respondent.

 IV. Amount of the Insurance Company’s Liability to the Insured and Third Parties

 According to Section 150[25], any liability incurred by the insured and his rights against the insurer will be transferred to and vest in the third party to whom the liability was so incurred if the insured becomes insolvent.

According to Section 152[26], any settlement reached by the insurer regarding a potential third-party claim will not be valid until the potential third-party is a party to the claim.

According to Section 154[27], the insured’s insolvency will not have an impact on the insured’s liability, the claims of third parties, or the insured’s rights against the insurer.

 According to Section 155[28], third parties’ rights against the insured or his excise are not precluded if the insured passes away following the occurrence of an accident in which his motor vehicle was involved.

 According to Section 157[29], the policy of insurance for the vehicle is also deemed to have been transferred to the new owner as of the date on which the certificate of registration for the vehicle is transferred. The transferee must apply to the insurer in the specified form within 14 days of the transfer date in order for the insurer to make the necessary changes.

The 1994 revision to the Act removed the provision for a 12-month total limitation period. The sum awarded may be collected by the District Collector from the insurer as unpaid land revenue under Section 174[30]. Insurance Company’s Responsibility for Gratuitous Passengers

 The owner/driver of the vehicle is responsible for making compensation payments; a gratuitous passenger is not entitled to reimbursement from the insurance company. The insurance provider should be ordered to reimburse the owner for the cost.

 After considering its prior judgements in Oriental Insurance Co. Ltd. vs. Sudhakaran K.V.[31] the Supreme Court summarised the law pertaining to the pillion passenger on a two-wheeler as follows: “25. The law that results from the aforementioned decisions is that (i) the insurance company’s liability in a situation of this nature is not extended to a motor vehicle pillion rider unless the necessary premium payment is made to cover his or her risk, and (ii) the legal obligation arising under Section 147 of the Act cannot be extended to an injury or death of the vehicle owner or the pillion rider; (iii) When an accident occurs because of hasty and careless scooter riding and not on the part of the driver of another vehicle, the pillion passenger on a two-wheeler was not to be treated as a third party.

V. Modifications to the 2017 Motor Vehicles (Amendment) Bill

 The Bill included a proposal for 68 revisions to 233 provisions of the 1988 Motor Vehicles Act as well as the addition of 28 new sections. The main Act’s Chapter X (Liability without Fault in Certain Cases) has been left out.

The following changes have been made to Chapter XI:

Insurance and Reimbursement

The compensation and insurance in cases involving motor vehicle accidents have been significantly amended by the Bill:

Section 161 Hit and Run: According to the Motor Vehicles Act of 1988, a Solatium Fund provides compensation for hit-and-run victims. According to instructions from the Central Government, the compensation in the Motor Vehicles (Amendment) Bill 2016 has been increased to Rs 50,000 for severe injury and Rs 2 lakh or more.

 All motor vehicles must carry mandatory third-party insurance, and under the Act, the third-party insurer’s responsibility for motor vehicle accidents is uncapped. According to Section 164, no-fault compensation increased to a total of Rs. 5 lakhs in cases of death or Rs. 2.5 lakh in cases of severe injury to the legal heirs or the victim. The second schedule of the fundamental Act has been left out.

Provision of Interim Relief to Claimants Pursuing Compensation Under Third Party Insurance: The Bill permits the Central Government to develop a plan for giving interim relief to claimants pursing Compensation for Motor Vehicle Accidents Under Third Party Insurance. The compensation provided to the victim by the insurance company must be resolved before the Claims Tribunal within thirty days of the accident, according to Section 149 of the Bill. The settlement will be documented by the Claims Tribunal, and the matter will be regarded as resolved amicably. Compensation on a no-fault basis would be paid under Section 164 of the Bill, and this compensation is a stopgap measure. In accordance with Section 166 of the Motor Vehicles Tribunal Act, the victim has the choice to accept the compensation and settle or accept the money and pursue his claim.

 Motor Vehicle Accident Fund: The Bill emphasises the creation of a Motor Vehicle Accident Fund by the Central Government under Section 164B. All Indian drivers will receive required insurance coverage thanks to the Fund. A grant or loan from the Central Government, the remaining Solatium Funds, a payment of nature that has been reported to and approved by the Central Government, or any other source that the Central Government specifies will credit the Fund.

The Bill makes plain the purpose of the fund, which will cover:

i. The “Golden Hour” plans for the treatment of those hurt in car accidents,

ii. Payment of damages to the family members of a victim of a hit-and-run in accordance with the Central Government’s formulated plans.

iii. Compensation to individuals in accordance with Central Government guidelines, and

iv. Payment of damages to a victim of a hit-and-run accident in accordance with plans created by the national government.

 A proviso has been added to Section 166 that reads, “(3) No application for compensation shall be entertained unless it is made within six months of the occurrence of the accident.”


India’s Motor Vehicles Act of 1988 is essential in addressing liability without fault in motor vehicle accident situations. Victims and their families gain from the provision of ways for claimants to pursue compensation without having to prove responsibility under Sections 140 and 163A. The law requires third-party risk insurance, ensuring that victims are compensated even if the owner or operator of the vehicle is bankrupt. Significant modifications were made by the 2017 Motor Vehicles (Amendment) Bill, which raised compensation payments, added clauses for temporary relief, and created a fund for motor vehicle accidents. These changes are intended to increase road safety in India and offer accident victims more thorough assistance.

[1] Motor Vehicles Act, 1988, ch. X,


[2] Motor Vehicles Act, 1988, § 140(1),


[3] New India Assurance Co. Ltd v. Mahebubanbibi Wd/O Mahemudbeg, II (2001) ACC 85 (Guj), 2002 ACJ 1017, (2001) 4 GLR 2950 https://indiankanoon.org/doc/1869243/

[4] Motor Vehicles Act, 1988, § 142,


[5] Motor Vehicles Act, 1988, § 146,


[6] Motor Vehicles Act, 1988, § 145


[7] Motor Vehicles Act, 1988, § 147,


[8] Motor Vehicles Act, 1988, § 140,


[9] Motor Vehicles Act, 1988, § 146,


[10]Motor Vehicles Act, 1988, § 147


[11] Motor Vehicles Act, 1988, § 2(35)


[12] New India Assurance Company vs. Shri Satpal Singh and Others, (1999) 1 ACC 237 (P&H), Indian Kanoon, https://indiankanoon.org/doc/887114/

[13] Motor Vehicles Act, 1988, § 149


[14] Motor Vehicles Act, 1988, § 149(2)


[15] United India Insurance Co. Ltd. v. Bodali Bai and Others, Chhattisgarh High Court, Feb 19, 2008, CaseMine, https://www.casemine.com/judgement/in/56b48fee607dba348fff8d0d\

[16] Motor Vehicles Act, 1988, § 149(6)


[17] Motor Vehicles Act, 1988, § 161


[18] Motor Vehicles Act, 1988, § 163


[19] Motor Vehicles Act, 1988, § 166(1)


[20] Motor Vehicles Act, 1988, § 163A


[21] Motor Vehicles Act, 1988, § 158(6)


[22] Gujarat State Road Transport vs. Ramanbhai Prabhatbhai & Another, 1987 AIR 1690, 1987 SCR (3) 404, Indian Kanoon, https://indiankanoon.org/doc/1541798/

[23] Motor Vehicles Act, 1988, § 166


[24] Sarla Verma & Ors vs Delhi Transport Corp. & Anr, April 15, 2009, Indian Kanoon, https://indiankanoon.org/doc/837924/

[25] Motor Vehicles Act, 1988, § 150


[26] Motor Vehicles Act, 1988, § 152


[27] Motor Vehicles Act, 1988, § 154


[28] Motor Vehicles Act, 1988, § 155


[29] Motor Vehicles Act, 1988, § 157


[30] Motor Vehicles Act, 1988, § 174


[31] Oriental Insurance Co. Ltd vs Sudhakaran K.V. & Ors, May 16, 2008, Indian Kanoon, https://indiankanoon.org/doc/1223139/


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