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Legal Case Shots

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Legal Case Shots is a searchable database of Supreme Court of India judgments, each broken down into the case type, the court's key holding, and a practical lesson learnt, with the full judgment available as a PDF for citation or deeper reading.

Motor Accident Compensation LawSupreme Court of India

U.P. State Road Transport Corporation v. Rajendri Devi & Ors.

Civil Appeal · 2020 INSC 417Decided 8 Jun 2020
Civil Appeal No. 2526 of 2020
Justice Rohinton Fali Nariman

Background

A 45-year-old cyclist was killed in 2001 after being hit by a bus that was owned privately but hired by U.P. State Road Transport Corporation (UPSRTC) under an agreement. The Motor Accident Claims Tribunal and the High Court, relying on an earlier Supreme Court decision (Kailash Nath Kothari), held that UPSRTC alone (not the insurance company) was liable to pay the full compensation because it controlled the bus's operation. UPSRTC appealed, arguing the insurer should bear the liability instead.

Decision Breakdown

The Supreme Court held that Kailash Nath Kothari was decided under the old, narrower definition of "owner" in the 1939 Motor Vehicles Act, and was later distinguished by this Court's own ruling in UPSRTC v. Kulsum (2011), which applied the broader 1988 Act definition. Under the 1988 Act, when a vehicle is insured and used by a hirer like the Corporation under an agreement, the insurer cannot escape liability merely because of a private indemnity clause between the Corporation and the bus owner: such clauses bind only the contracting parties, not the accident victim's family. The Court ruled that the insurance company must pay the full MACT-awarded compensation with interest within three months, reversing the High Court and Tribunal.

Lesson Learnt

An accident victim's right to compensation from an insurer cannot be defeated by a private contractual clause between a transport corporation and a vehicle owner shifting liability onto the corporation: insurance liability for a properly insured vehicle generally follows the vehicle, regardless of who is operationally controlling it.

U.P. State Road Transport Corporation v. Rajendri Devi & Ors. – Legal Case Shots | LegalAware