Motor Vehicles Act: SC Says Technical Error In Seating Capacity Cannot Let Insurer Avoid Compensation

The Supreme Court has held that an insurance company cannot avoid liability to pay compensation under the Motor Vehicles Act merely because the seating capacity of a vehicle was incorrectly recorded in the insurance policy, particularly when the policy stated that the figure was based on the Registration Certificate, which correctly recorded the vehicle's seating capacity.

A Bench of Justices Ahsanuddin Amanullah and Manmohan held that such a technical discrepancy cannot be used to deny insurance coverage when the actual seating capacity is established by the Registration Certificate and the error was not attributable to the insured owner.

Court observed that beneficial insurance legislation must be interpreted in a manner that protects the insured from being unfairly burdened by such discrepancies, and that protects the common man from adverse circumstances.

Where a chain of events establishes that an accident was caused by the vehicle itself, liability should not be fastened on the owner on the basis of an overly technical interpretation of policy stipulations, Court said.

Court accordingly held the insurance company liable to pay the compensation, finding that the accident had a direct nexus with the vehicle and that the deceased passenger was deemed to be covered under the insurance policy.

What was the dispute over the insurance policy?

The appeal arose out of an order dated March 11, 2025 passed by the Madhya Pradesh High Court.

The high court had dismissed an appeal filed by the appellant, who was the owner and driver of the offending vehicle, against the award dated September 15, 2023 passed by the Motor Accident Claims Tribunal, Khandwa.

The tribunal had fastened liability on the appellant while exonerating the respondent-insurance company from paying compensation of Rs. 9,94,056 to the respondent no.1-claimant, along with interest at the rate of 6% per annum.

Before the Supreme Court, it was contended that the deceased was travelling on the tractor and, after falling from it, his head came under the wheels of the same tractor.

The appellant submitted that the chain of events was complete: the accident was caused by the vehicle, the deceased was travelling on the vehicle and his death also occurred due to the vehicle itself.

The core issue before the Court was whether the insurance policy covered a person other than the driver who was travelling on the vehicle and met with an accident.

It was contended that the Registration Certificate Book clearly showed the seating capacity of the tractor as 1+1. Therefore, the insurance company’s contention that the policy covered only one person, which would mean the driver alone, and that liability should consequently be fastened on the appellant, was not sustainable.

It was further submitted that although the insurance policy recorded the seating capacity as one, the same column stated that the figure was based on the Registration Certificate Book. This was factually incorrect since the Registration Certificate Book indisputably recorded the seating capacity as 1+1.

The appellant also argued that even if the seating capacity had been incorrectly recorded as one, the resulting liability could not be fastened on him, as he had acted in good faith and produced the Registration Certificate Book before the insurance company while getting the vehicle insured.

It was therefore submitted that the Court should not adopt a technical approach while interpreting beneficial insurance legislation intended to protect a common man from adverse circumstances, particularly when the technicality was not supported by the actual facts.

The insurance company, however, submitted that the policy was not intended to cover the deceased as he was neither a conductor nor a driver and the vehicle was not a commercial vehicle.

What did the Supreme Court hold?

Having heard the parties, the Bench rejected the insurance company’s contention.

“This court is of the view that the issue of the deceased not being a conductor or driver does not arise, as it was never in dispute that the tractor is not a commercial vehicle in the sense that it will have a conductor on it. Be that as it may, we have considered the matter from various angles and find that a case for interference has been made out,” the Bench said.

The Bench emphasised that there cannot be a very strict or technical interpretation of various stipulations in an insurance policy, particularly with regard to what has actually been recorded in the insurance document.

Court pointed out that the Registration Certificate Book relating to the vehicle indicated that its seating capacity was 1+1. Therefore, the mere fact that the insurance policy recorded the seating capacity as one could not be treated as correct, particularly since the policy itself stated that the figure was based on the Registration Certificate Book.

“Further, we find that there being a direct nexus of the deceased being seated on the tractor and falling from it and then his head coming under the wheels of the tractor itself, the chain of events is complete to indicate that the accident was caused by the vehicle,” the Bench said.

Court also noted that the insurance was required to cover at least the number of persons indicated in the Registration Certificate Book, particularly since the vehicle in question was a tractor and not a private transport or commercial vehicle where the owner may take a considered view regarding the number of persons to be insured.

“We find in the present case, the deceased would be deemed to be covered under the insurance policy in the facts and circumstances of the present case,” the Bench said.

Court accordingly allowed the appeal and modified the September 15, 2023 award passed by the Motor Accident Claims Tribunal, Khandwa, as affirmed by the high court.

While maintaining the compensation amount of Rs. 9,94,056 along with interest at the rate of 6% per annum payable to the respondent no.1-claimant, Court set aside the fastening of liability on the appellant.

The Bench directed the respondent-insurance company to pay the compensation amount to the respondent no.1-claimant.

Case Title: Manoj Vs Sushmabai & Anr

Bench: Justices Ahsanuddin Amanullah and Manmohan 

Date of Judgment: October 09, 2026