Court case(1977) 2 SCC 441

A claim for compensation was made before a Motor Accidents Claims Tribunal under the Motor Vehicles Act 1939 for an accident caused by a motor car owned by the appellant and insured against third-party risks. The question that reached the Supreme Court was the basis of the owner's liability. The High Court had taken the view that the provisions of the Act relating to compulsory insurance and to the Claims Tribunal had created a liability on the owner (and so on the insurer) to compensate the victim of an accident caused by the use of his vehicle, without the claimant having to prove that the accident was due to the negligence of the driver. The owner appealed, contending that the Act had changed only the forum and the machinery for recovery, not the substantive law of torts on which a claim for damages rests.

The Supreme Court allowed the appeal. It held that the Claims Tribunal provisions (ss. 110-110B of the 1939 Act) only provide a forum in place of the civil court for the adjudication of claims; they do not create any new liability. The liability of the owner to pay compensation arises under the law of torts: the owner is liable only if the driver was negligent and was acting in the course of the owner's employment, on the principle of vicarious liability. The insurance provisions (ss. 95 and 96) require the owner to be insured against the liability he may incur and oblige the insurer to satisfy a judgment against the insured; the insurer's liability is therefore co-extensive with, and dependent upon, the owner's liability and does not arise independently of the negligence of the driver. A claimant must accordingly prove negligence before the Tribunal.