Expanding “No-Fault” Liability: Supreme Court Questions Owner-Driver Exclusion under Section 163A

Introduction

Case: Wakia Afrin (Minor) v. M/s National Insurance Co. Ltd. (2025 INSC 919)
Court: Supreme Court of India, Civil Appellate Jurisdiction
Date of Order: 1 August 2025
Bench: Sudhanshu Dhulia J. & K. Vinod Chandran J.

Two-year-old Wakia Afrin lost both parents in a single-vehicle accident when her father’s car suffered a tyre burst and crashed into a roadside building, killing four occupants. Represented by her aunt, she sought compensation under Section 163A of the Motor Vehicles Act, 1988 (“MV Act”) before the Motor Accident Claims Tribunal (MACT), Cuttack. The MACT awarded a total of ₹8,61,339 — ₹4,08,000 for her mother’s death and ₹4,53,339 for her father’s. On appeal, the Orissa High Court dismissed the claim altogether, holding that a dead person (the father/owner) could not be arrayed as respondent and, therefore, the petitions were “not maintainable.”

In Special Leave Petitions to the Supreme Court, the following issues emerged:

Whether the claim abates because the vehicle owner (who would normally be a respondent) is himself deceased.
Whether, where the deceased is the owner-driver, his legal heir can recover compensation under the “no-fault” scheme in Section 163A or is limited to the personal accident cover of ₹2 lakh contained in the policy.
Whether previous two-Judge Bench authorities confining Section 163A to third-party risks remain good law.

Summary of the Judgment / Order

Section 155 invoked: The Supreme Court held that a claim survives the death of the insured; therefore, the presence of a “dead defendant” does not defeat maintainability.
Mother’s claim restored: The award of ₹4,08,000 for the mother’s death (she was not the vehicle owner) under Section 163A was reinstated.
Owner-driver controversy: The Bench doubted earlier rulings which held that Section 163A benefits only third parties and not the owner/driver. Observing the wide non-obstante clause in Section 163A, the Court signalled that the provision may override the usual third-party limitation and policy caps.
Reference to larger Bench: Given the conflict among co-ordinate Bench decisions, the matter concerning liability for the owner’s death under Section 163A was referred for authoritative resolution by a larger Bench. Meanwhile, the quantum for the father’s death was kept open.

Analysis

A. Precedents Cited & Their Influence

Dhanraj v. New India Assurance Co. (2004) 8 SCC 553 – held owner-driver not covered under policy for personal injury in a Section 166 claim.
Oriental Ins. v. Sunita Rathi (1998) 1 SCC 365 – emphasised that insurer’s liability arises only when owner’s liability to third party is proved.
Oriental Ins. v. Jhuma Saha (2007) 9 SCC 263 – reiterated Dhanraj for Section 166.
Oriental Ins. v. Rajni Devi (2008) 5 SCC 736 – extended owner-driver exclusion to Section 163A claims.
New India Assurance v. Sadanand Mukhi (2009) 2 SCC 417 – refused Section 166 claim; noted Section 163A not invoked.
Meena Variyal (2007) 5 SCC 428 – clarified employer’s liability and statutory coverage.
Ningamma (2009) 13 SCC 710 – rejected Section 163A claim for borrower rider; asked Tribunal to test under Section 166.
Ramkhiladi (2020) 2 SCC 550 – held owner cannot be both claimant and tortfeasor under Section 163A.
Minu B. Mehta (1977) 2 SCC 441 – foundational decision on need to prove negligence in Section 166; genesis for introducing no-fault provisions later.

These cases shaped an exclusionary doctrine—that Section 163A is meant purely for third-party victims. The present Bench, however, finds that these authorities may have overlooked the statutory design of Section 163A and its sweeping non-obstante clause.

B. Court’s Legal Reasoning

Section 155 (Survival of claims): A claim is maintainable even after the insured dies. The insurer stands in the shoes of the deceased owner to defend or satisfy the award.
Construction of Section 163A:
- Begins with “Notwithstanding anything contained in this Act or in any other law for the time being in force…” placing it hierarchically above other MV Act provisions (including Sections 147 & 149) and policy terms.
- Makes both “the owner of the vehicle or the authorised insurer” liable to pay compensation on a structured formula without proof of fault.
Beneficial / Social-Security Interpretation: The legislative intent was to create a quick, fault-free remedy considering the surge in accidents and the hurdles of proving negligence.
Policy Limitations Superseded: The statutory scheme, being beneficial, may override contractual caps such as the ₹2 lakh “owner-driver” personal accident limit.
Need for Larger Bench: Conflicting two-Judge rulings have created uncertainty; an authoritative pronouncement is required to reconcile Section 163A with insurance law and prior precedent.

C. Potential Impact

Wider Coverage: If a larger Bench affirms the present view, owner-drivers and their legal heirs could secure structured-formula compensation even where no third party is involved, sharply expanding the scope of “no-fault” liability.
Insurance Industry Recalibration: Insurers may need to revise premium structures because risk pools would now cover owner-drivers beyond nominal personal accident limits.
Litigation Strategy: Claimants may prefer Section 163A over Section 166 to avoid proving negligence, especially in single-vehicle accidents.
Statutory v. Contractual Tension: The decision emphasises legislative supremacy over private contracts, a principle likely to resonate in other insurance and consumer-protection contexts.
Precedential Clarity: Referral signals imminent harmonisation of case law; once resolved, lower courts will have clearer guidance, reducing inconsistent awards.

Complex Concepts Simplified

No-Fault Liability (Section 163A): Compensation payable without having to prove that anyone was negligent.
Structured Formula (Second Schedule): A statutory table fixing compensation based on age and income, designed to speed up awards and avoid disputes over quantum.
Non-Obstante Clause: A legislative device stating that the provision overrides anything inconsistent in the same Act or other laws/contracts.
Tortfeasor: The party whose wrongful act caused injury; in vehicle cases, usually the driver or owner.
Vicarious Liability: Legal responsibility of one person for the acts of another; e.g., owner liable for driver’s negligence.
Personal Accident Cover: Additional contract clause covering specified sums for the owner-driver’s death or disability, usually capped (e.g., ₹2 lakh).

Conclusion

The order in Wakia Afrin marks a pivotal juncture in Indian motor-accident jurisprudence. While immediately reinstating compensation for the mother’s death, the Supreme Court has set the stage for a larger Bench to reconsider whether Section 163A’s social-welfare design extends to owner-drivers, notwithstanding policy caps or prior narrow readings.

The forthcoming authoritative ruling could transform the compensation landscape by:

Breaking the “third-party only” barrier for no-fault claims.
Aligning insurance practice with the legislature’s intent to offer swift, uniform relief.
Rebalancing contractual autonomy of insurers against statutory welfare mandates.

Until then, practitioners should track the reference closely, advise clients on both Section 166 and Section 163A possibilities, and anticipate consequential shifts in policy drafting and premium calculation.