Sikkim HC Grants No-Fault Compensation Under Section 140 Despite Tribunal's Finding of Brake Failure, Not Rash Driving

The High Court of Sikkim held that a Tribunal's rejection of a fault-based claim under Section 166 does not bar it from awarding no-fault compensation under Section 140 of the Motor Vehicles Act, and directed TATA AIG to pay Rs.5 lakh to the family of a man who died in a 2019 road accident.

The family of Deepen Mukhia, who died in a motor vehicle accident on 12 November 2019 in Sikkim, had their compensation claim dismissed by the Motor Accidents Claims Tribunal (MACT) at Gangtok on the ground that the accident was caused by brake failure — not rash or negligent driving by the driver. Justice Bhaskar Raj Pradhan, sitting singly at the High Court of Sikkim, allowed the family's appeal on 1 September 2026 and held that the Tribunal was still obliged to consider no-fault liability under Section 140 of the Motor Vehicles Act, 1988, regardless of its finding on negligence. The insurer's argument that the deceased's own heirs could not claim compensation because he was the tortfeasor was specifically rejected.

The Accident, the Claim, and the Tribunal's Dismissal

Deepen Mukhia died in the accident on 12 November 2019. An FIR was registered at Nayabazar Police Station as Case No. 18/2019 dated 12.11.2019 under Sections 279, 337 and 304A of the Indian Penal Code, 1860. The post mortem report confirmed his death. The accident vehicle was owned by Mani Kumar Chettri (respondent no.3) and driven by Rajendra Chettri (respondent no.2).

Four family members filed a compensation claim under Section 166 of the Motor Vehicles Act before the MACT, Gangtok, in M.A.C.T. Case No. 06 of 2023, seeking Rs.19,07,560/-. The four claimants were Deepen Mukhia's wife, Rekha Chettri; his minor son, Master Dishant Sunwar (represented by his mother); his father, Bhakta Bahadur Sunwar; and his mother, Parbati Sunwar.

The Tribunal dismissed the claim on 31 May 2024. It accepted that the accident and the death occurred, and that the driver held a valid driving licence and the vehicle was validly insured. However, it concluded that the accident was caused by brake failure and that there was therefore no rash or negligent driving. On that basis alone, it dismissed the claim in its entirety without considering no-fault liability under Section 140.

TATA AIG General Insurance Company (respondent no.1), the insurer of the accident vehicle, had been proceeded against ex parte before the Tribunal despite having been served by publication. It chose to appear in the High Court appeal.

The Single Issue Before the High Court

Before the High Court, the appellants' counsel, Mr. Sishir Mothay, confined the argument to a narrow point: even after the rejection of the Section 166 claim, the Tribunal could and should have granted no-fault liability compensation under Section 140 of the Motor Vehicles Act. He argued that the deceased, as an occupant of the accident vehicle, was covered under the package insurance policy taken by the vehicle owner.

TATA AIG's counsel, Mr. Rahul Rathi and Ms. Khushboo Rathi, resisted on a single ground: that the deceased was himself the tortfeasor, and therefore his heirs were not entitled to compensation. Counsel for respondents no.2 and 3, Mr. Bhim Shankar Pradhan, appeared through video conference.

On the Insurance Certificate: A Labyrinth of Terms

Before addressing the Section 140 question, the Court examined the insurance certificate closely. Exhibit-4, the insurance certificate, described the policy as an “Auto Secure Commercial Vehicle Package Policy.” The certificate's limits of liability clause stated that indemnity would be provided for death or bodily injury in such amount “as is necessary to meet the requirements of the Motor Vehicles Act, 1988,” but did not clearly identify what the underlying policy section covered.

The certificate directed the insured to the company's official website for “detailed benefits, terms and conditions and exclusions of the policy.” Justice Pradhan traced through the website to the relevant policy wordings, which confirmed that Section II of the policy covered liability to third parties, including death of or bodily injury to any person caused by or arising out of the use of the vehicle, subject to certain provisos.

The Court was direct in its criticism of this arrangement. It observed that requiring an insured to navigate the “labyrinth of pages and pages” on a company website to understand the extent of coverage was wholly unsatisfactory. The judgment states that every certificate of insurance should clearly set out the extent of insurance, the extent of indemnity undertaken, and any obligations arising from IRDA circulars or notices — all within the certificate itself, without requiring the insured to visit external web pages.

The Court also recorded a specific direction regarding the conduct of insurers before the MACT. It held that when a claim is made under an insurance certificate and the insurer appears after notice, the insurer is under a duty to: first, verify whether the certificate is genuine and issued by it; second, file the full insurance policy with all terms and conditions and inform the Tribunal of the extent of indemnification; and third, inform the Tribunal of any relevant IRDA directions applicable to the policy. The Court linked this to the observation of the Supreme Court in National Insurance Company Limited, New Delhi v. Jugal Kishore & Ors. (1988) 1 SCC 626, where it was held that an insurance company seeking to limit its liability must file a copy of the policy before the Tribunal, and should not be permitted to shelter behind the claimants' lack of access to the policy document.

In the present case, because TATA AIG had been proceeded ex parte before the Tribunal, and the certificate was placed on record by the claimants who had no personal knowledge of its full terms, the Tribunal was left entirely in the dark as to the extent of the insurer's liability.

Section 140: No-Fault Liability and the Tortfeasor Argument

Section 140(1) of the Motor Vehicles Act provides that where death or permanent disablement results from an accident arising out of the use of a motor vehicle, the owner of the vehicle is liable to pay compensation regardless of fault. Section 140(3) expressly states that the claimant need not plead or establish any wrongful act, neglect or default of the owner, driver or any other person. Section 140(4) goes further: a claim under Section 140 shall not be defeated by reason of any wrongful act, neglect or default of the person in respect of whose death or disablement the claim is made.

TATA AIG's argument — that because the deceased may have been the tortfeasor, his heirs cannot claim compensation — was rejected directly by reference to Section 140(4). The Court held the argument was not tenable.

The Court also held that the issue was no longer open to debate, relying on a line of Supreme Court decisions: Eshwarappa Alias Maheshwarappa & Anr. v. C.S. Gurushanthappa & Anr. (2010) 8 SCC 620; Indra Devi & Ors. v. Bagada Ram & Anr. (2010) 13 SCC 249; Nishan Singh & Ors. v. Oriental Insurance Company Limited (2018) 6 SCC 765; and Ram Murti & Ors. v. Punjab State Electricity Board, Civil Appeal No. 7143 of 2022. These decisions collectively establish that liability under Section 140 attaches to the owner of the vehicle regardless of whether the vehicle was driven rashly or negligently, and that a Tribunal which has found no rash driving is still obliged to consider Section 140 compensation. It was also noted from these decisions that under a comprehensive or package policy, insurance companies are liable to compensate for any occupant of the vehicle, in accordance with the IRDA circular dated 16 October 2009.

Applying these principles, the Court held that respondent no.3, as the registered owner of the accident vehicle, was liable to pay compensation under Section 140, and that TATA AIG, as the insurer under a package policy, was liable to indemnify the owner for that liability.

Quantum: From Rs.50,000 to Rs.5 Lakh

Section 140(2) as it stood at the time of the accident fixed the no-fault compensation for death at Rs.50,000/-. However, the Court considered the Supreme Court's analysis in Ram Murti, where it was held that a claimant entitled to compensation under Section 140 could be granted the higher amount under Section 164 of the MV Act — which was amended by Parliament to increase the no-fault compensation for death to Rs.5 lakhs — as a more beneficial provision.

Justice Pradhan applied this reasoning given that the Court was granting compensation in 2026 for a death that had occurred on 12 November 2019, with the claim petition having been filed on 14 February 2023. The Court directed TATA AIG to pay Rs.5 lakhs to the appellants, with interest at 7% per annum from the date of the claim petition, i.e., 14 February 2023, until actual payment.

Order

MAC App. No. 20 of 2024 was allowed to the extent described above and disposed of on 1 September 2026. TATA AIG General Insurance Company was directed to pay Rs.5 lakhs to the appellants with interest at 7% per annum from 14 February 2023 until actual payment. The Trial Court records were directed to be remitted to the Motor Accidents Claims Tribunal, Gangtok. The judgment was approved for reporting.