Supreme Court settles liability for accidents involving tractors and uninsured trailers: Royal Sundaram Alliance Insurance vs. Honnamma (2025) INSC 625 (05 May 2025)

Introduction

Date of the Judgment: May 05, 2025

Citation: (2025) INSC 625

Judges: Sudhanshu Dhulia, J., Ahsanuddin Amanullah, J.

When a tractor pulling an uninsured trailer is involved in an accident, who bears the responsibility? The Supreme Court of India addressed this intricate question in the case of Royal Sundaram Alliance Insurance Company Limited vs. Smt. Honnamma & Ors. The court examined whether an insurance company is liable to pay compensation when an accident occurs due to the movement of a tractor, which is insured, but the trailer attached to it is not. Justices Sudhanshu Dhulia and Ahsanuddin Amanullah delivered the judgment.

Case Background

On February 29, 2012, Nagarajappa was working as a coolie, travelling in a tractor and trailer to unload soil. Due to the rash and negligent driving of Respondent No. 5, the tractor and trailer toppled, causing fatal injuries to Nagarajappa. His wife and two minor daughters (Respondents No. 1, 2, and 3) filed M.V.C. No. 121/2012 before the Motor Accident Claims Tribunal (MACT), seeking compensation of Rs. 10,00,000.

The claimants presented evidence, including the testimony of Nagarajappa’s wife (PW1) and several documents (Exs. P1 to P10). The Appellant, the insurance company, examined two witnesses (RW1 and RW2) and submitted documents (Exs. R1 to R7), including the policy schedule and RC books. The MACT partly allowed the claim on April 2, 2014, awarding Rs. 9,50,000 with 6% interest per annum. The MACT determined that the insurance policy did not cover the risk to employees of the tractor and trailer under Section 147(1)(b) of the Motor Vehicles Act, 1988, holding the owner and driver liable.

The claimants appealed to the High Court of Karnataka, seeking enhanced compensation. The High Court partly allowed the appeal, enhancing the compensation to Rs. 13,28,940 with 6% interest per annum and fastened the liability on the Appellant-insurance company. Aggrieved, the Appellant filed the present appeal before the Supreme Court.

Timeline

Course of Proceedings

The Motor Accident Claims Tribunal (MACT) partly allowed the claim, awarding Rs. 9,50,000 with 6% interest, determining that the insurance policy did not cover the risk to employees under Section 147(1)(b) of the Motor Vehicles Act, 1988, and held the owner and driver liable.

The High Court of Karnataka partly allowed the appeal, enhancing the compensation to Rs. 13,28,940 with 6% interest and fastened the liability on the Appellant-insurance company. This decision led the insurance company to file the present appeal before the Supreme Court.

Legal Framework

The primary legal provision in question is Section 147 of the Motor Vehicles Act, 1988, which specifies the requirements for insurance policies and the limits of liability. It states:

‘147. Requirement of policies and limits of liability .—(1) In order to comply with the requirements of this Chapter, a policy of insurance must be a policy which— (a) is issued by a person who is an authorised insurer; and (b) insures the person or classes of persons specified in the policy to the extent specified in sub-section (2)— (i) against any liability which may be incurred by him in respect of the death of or bodily injury to any person including owner of the goods or his authorised representative carried in the motor vehicle or damage to any property of a third party caused by or arising out of the use of the motor vehicle in a public place; (ii) against the death of or bodily injury to any passenger of a transport vehicle, except gratuitous passengers of a goods vehicle, caused by or arising out of the use of the motor vehicle in a public place.’

This section mandates that an insurance policy must cover liabilities for death or bodily injury to any person, including the owner of goods or their representative, caused by the use of the motor vehicle in a public place.

Arguments

Appellant’s Submissions:

• The MACT had correctly exempted the appellant from liability, a decision erroneously reversed by the High Court.
• The insurance policy did not cover the trailer, employees of the owner, or passengers on the trailer, as these were not subscribed to by the policyholder.
• The High Court oversimplified the matter, ignoring the respondent’s admission of rash driving.
• Respondents No. 4 and 5 accepted the MACT’s decision by not challenging it.
• The compensation awarded by the High Court exceeded the originally claimed amount.
• The award did not align with the principles established in Sarla Verma v Delhi Transport Corporation, (2009) 6 SCC 121.
• Reliance was placed on New India Assurance Co. Ltd. v C M Jaya, (2002) 2 SCC 278, arguing that compensation cannot exceed the insurance policy limits.
• Citing Dhondubai v Hanmantappa Bandappa Gandigude Since Deceased Through His LRs & Ors., Civil Appeals No.5459-5460/2023, the appellant argued that liability cannot be fastened on the insurance company when the deceased was travelling in an uninsured trailer.

Respondents’ Submissions:

Despite due service of notice to Respondents No. 1, 2, 3, and 4, none appeared to represent them.

Issues Framed by the Supreme Court

1. Whether the High Court was correct in fastening the liability of compensation on the Appellant-insurance company.

Treatment of the Issue by the Court

Authorities

Cases Relied Upon:

• Ningamma v United India Insurance Co. Ltd., (2009) 13 SCC 710: Cited to emphasize the beneficial and welfare-oriented nature of the Motor Vehicles Act.
• K Ramya v National Insurance Co. Ltd., 2022 SCC OnLine SC 1338: Cited to emphasize the beneficial and welfare-oriented nature of the Motor Vehicles Act.
• Shivaleela v Divisional Manager, United India Insurance Co. Ltd., 2025 SCC OnLine SC 563: Cited to emphasize the beneficial and welfare-oriented nature of the Motor Vehicles Act.
• Oriental Insurance Co. Limited v Brij Mohan, (2007) 7 SCC 56: Noted in the context of Dhondubai, where the insurance company was directed to pay compensation and recover it from the vehicle owner.
• United India Insurance Co. Ltd., Kadapa District v Koduru Bhagyamma, 2007 SCC OnLine AP 830: Relied upon to support the view that no separate insurance is required for a trailer attached to an insured tractor.
• New India Assurance Co. Ltd. v C M Jaya, (2002) 2 SCC 278: A 5-Judge Bench decision harmonizing the extent of liability that could be fastened on the insurer.
• New India Assurance Co. Ltd. v Shantibai, (1995) 2 SCC 539: Referred to in C M Jaya, stating that a comprehensive policy does not automatically cover third-party risk for an amount higher than the statutory limit.
• Amrit Lal Sood v Kaushalya Thapar, (1998) 3 SCC 744: Referred to in C M Jaya, clarifying that the insurer’s liability depends on the policy terms and that there is no prohibition against covering a risk wider than the statutory requirement.
• Dhondubai v Hanmantappa Bandappa Gandigude Since Deceased Through His LRs & Ors., Civil Appeals No.5459-5460/2023: Discussed in the context of whether the insurance company can be held liable when the deceased was travelling in an uninsured trailer.

Legal Provisions Considered:

• Section 147 of the Motor Vehicles Act, 1988: Specifies the requirements for insurance policies and limits of liability.

Authority Treatment Table:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• Ningamma v United India Insurance Co. Ltd. , (2009) 13 SCC 710; K Ramya v National Insurance Co. Ltd. , 2022 SCC OnLine SC 1338 , and; Shivaleela v Divisional Manager, United India Insurance Co. Ltd. , 2025 SCC OnLine SC 563: The court used these authorities to reinforce the principle that the Motor Vehicles Act is beneficial and welfare-oriented in nature.
• Oriental Insurance Co. Limited v Brij Mohan , (2007) 7 SCC 56: The court referred to this case in the context of Dhondubhai, noting that the insurance company was directed to pay compensation and recover it from the vehicle owner.
• United India Insurance Co. Ltd., Kadapa District v Koduru Bhagyamma , 2007 SCC OnLine AP 830: The court relied on this case to support the view that no separate insurance is required for a trailer attached to an insured tractor, emphasizing that when a trailer is attached to the tractor, it becomes part of the tractor.
• New India Assurance Co. Ltd. v C M Jaya , (2002) 2 SCC 278: The court harmonized the decisions of earlier benches to clarify the extent of liability that could be fastened on the insurer.
• Dhondubai v Hanmantappa Bandappa Gandigude Since Deceased Through His LRs & Ors. , Civil Appeals No.5459-5460/2023: The court distinguished the facts of the present case from this case, emphasizing that in the present case, the accident was caused by the insured tractor pulling the trailer.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• The fact that the tractor, which was insured, was the primary cause of the accident.
• The beneficial and welfare-oriented nature of the Motor Vehicles Act.
• The need to balance technicalities with the ground realities of the case.

Sentiment Analysis Ranking of Reasons:

Fact:Law Ratio Analysis:

Key Takeaways

• Insurance companies may be held liable for accidents involving insured tractors pulling uninsured trailers, especially if the tractor’s movement is the primary cause of the accident.
• The Motor Vehicles Act is interpreted in a way that favors providing compensation to victims, balancing legal technicalities with the practical realities of the situation.
• This judgment may influence future cases involving similar circumstances, reinforcing the importance of considering the root cause of accidents when determining liability.

Directions

The Supreme Court directed that the compensation be paid within two months from the date of the judgment, after adjusting any payments made earlier. The Appellant was granted liberty to recover the differential amount from the Respondent No. 4-owner, if the total compensation awarded exceeds the maximum amount payable by the Appellant, contractually or as per law.

Development of Law

The ratio decidendi of the case is that when an insured tractor is the primary cause of an accident involving an uninsured trailer, the insurance company can be held liable for compensation, emphasizing the beneficial interpretation of the Motor Vehicles Act.

Conclusion

In conclusion, the Supreme Court dismissed the appeal, upholding the High Court’s decision to hold the insurance company liable for compensation. The Court emphasized that the insured tractor was the primary cause of the accident and that the Motor Vehicles Act should be interpreted to provide compensation to victims, balancing legal technicalities with practical realities.

Category

• Motor Vehicle Act, 1988
  • Section 147, Motor Vehicle Act, 1988
  • Insurance Law
  • Accident Compensation
  • Tractor Accidents
  • Trailer Accidents

FAQ

Frequently Asked Questions:

1. Q: If a tractor I own, which is insured, causes an accident while pulling an uninsured trailer, will my insurance cover the damages?
   
   A: According to the Supreme Court’s judgment in Royal Sundaram Alliance Insurance vs. Honnamma, your insurance company may be held liable if the tractor’s movement was the primary cause of the accident.
2. Q: What does the Motor Vehicles Act say about insurance coverage for trailers?
   
   A: The Motor Vehicles Act requires insurance policies to cover liabilities for death or bodily injury caused by the use of the motor vehicle. The Supreme Court has interpreted this to include situations where an insured tractor causes an accident while pulling an uninsured trailer.
3. Q: What factors will a court consider when determining liability in accidents involving tractors and trailers?
   
   A: The court will consider whether the tractor’s movement was the primary cause of the accident, the beneficial nature of the Motor Vehicles Act, and the need to balance legal technicalities with the practical realities of the situation.
4. Q: How does this judgment affect future accident claims involving tractors and trailers?
   
   A: This judgment may influence future cases by reinforcing the importance of considering the root cause of accidents when determining liability and by highlighting the beneficial interpretation of the Motor Vehicles Act to provide compensation to victims.