Madhya Pradesh High Court: Borrowed Vehicle Driver Not A ‘Third Party’

The Gwalior Bench of the Madhya Pradesh High Court has reduced compensation awarded in a motor accident claim, holding that a borrower driving the insured vehicle cannot maintain a claim under Section 163-A of the Motor Vehicles Act as a third party and is entitled only to the amount stipulated under the “Personal Accident Cover for Owner-Driver.”

In its order dated February 20, 2026, Justice Hirdesh partly allowed an appeal filed by Future Generali India Insurance Co. Ltd., trimming the compensation from ₹4,05,800 to ₹2,00,000 with interest at 6 per cent per annum from the date of filing of the claim petition until realization.

The appeal arose from an award passed by the Motor Accident Claims Tribunal, Vidisha, in Claim Case No. 05/2020. The Tribunal had granted ₹4,05,800 to claimant Shafiuddin, who suffered injuries in a road accident on September 24, 2018. According to the record, Shafiuddin and his family were travelling in a car when, in an attempt to save an animal near the Kirravada culvert, the vehicle collided with the culvert. He was initially treated at Civil Hospital, Bina, and later referred to Bansal Hospital, Bhopal.

Before the High court, Shri Bal Krishna Agrawal, appearing for the insurer, contended that the Tribunal had erred in fastening liability on the Insurance Company. It was argued that the claimant himself was driving the vehicle at the time of the accident and, therefore, could not be treated as a third party. The insurer further submitted that no additional premium had been paid to cover the risk of a driver beyond the limited personal accident cover.

Opposing the appeal, Shri Dharmendra Kumar Garg, counsel for the claimant, supported the Tribunal’s award and sought dismissal of the appeal.

The court examined whether a person who borrows and drives the insured vehicle can invoke Section 163-A of the Act against the owner and insurer. Relying on precedents including Ramkhiladi v. United India Insurance Co. Ltd. and Ningamma v. United India Insurance Co. Ltd., the Court reiterated the settled principle that a borrower-driver “steps into the shoes of the owner” and cannot claim compensation as a third party under Section 163-A.

Justice Hirdesh observed that it was undisputed that the claimant was driving the offending vehicle at the time of the accident. Therefore, “the claimant stepped into the shoes of the owner and, accordingly, was covered under the insurance policy only to the extent of the premium paid for ‘Personal Accident Cover for Owner-Driver’”.

The court underscored that an insurance policy primarily covers third-party liability, and Section 147 of the Motor Vehicles Act does not mandate coverage for injury or death of the owner unless specifically contracted. Since the claimant was not a third party vis-à-vis the insured vehicle, the insurer’s liability could not exceed the contractual limit.

Taking note of the policy terms, the court accepted the insurer’s submission that the personal accident cover for the owner-driver was limited to ₹2,00,000. Consequently, it held that “the just and proper amount of compensation in the instant case is Rs.2,00,000/- as against the award of the Claims Tribunal of Rs.4,05,800/-”.

The compensation was accordingly reduced to ₹2,00,000 with interest at 6 per cent per annum from the date of filing of the claim petition till realization. All other findings of the Tribunal were left undisturbed, and the Insurance Company was granted liberty to recover any excess amount already deposited in accordance with law.

Case Title: Future Generali India Insurance Co. Ltd. v. Shaifiuddin Through Legal Representative Mother Smt. Ismat Bano and Others

Date of Order: February 20, 2026

Bench: Justice Hirdesh