Punjab and Haryana high court has ruled that if a vehicle registered and insured in India meets with an accident in another country, the insurance company would be liable to pay the claim.

The order pertained to compensation to the kin of 54 pilgrims from Kurukshetra who lost their lives in an accident in Nepal on June 18, 1995. The driver of the bus had lost control and the vehicle had fallen into Nepal’s Trishuli Nadi.

Court was of the view that the provisions of the Motor Vehicles Act make it clear that the insurance policy is “attached to the vehicle in question and not to geographical expanse of the area of operation of the vehicle.”

“Once insured, the vehicle is insured to cover all geographical areas where the vehicle is authorized by the authorities to travel. The insurance company cannot avoid its liability to pay the compensation only on the ground that the vehicle was used in any particular city, state or a particular geographical area. The company cannot even avoid its liability qua third party...,” observed Justice Rajbir Sehrawat.

HC sets aside tribunal order for bus owners to pay.

Justice Sehrawat had observed that one can come across a thought that the Motor Vehicles Act extends only to ‘whole of India’ as per its Section 1, so it does not cover the area outside India.

“However, this rationale also does not exempt the insurance company from liability arising from the usage of the vehicle outside the geographical area of the Union of India. This section also implies that the Act would be applicable to all the citizens and subjects of India...,” court has held.

The matter had reached before the HC in the wake of an appeal filed by owners of the bus before the HC after the Motor Accident Claim Tribunal directed them to pay compensation of Rs 4.34  lakh to the relatives of one of the victims. The tribunal had absolved the insurance company on the grounds that the accident occurred in Nepal so the insurance company was not liable.

The insurance company argued before the HC that since the policy is limited to cover the vehicle to be used only in India, they are not liable for payment of compensation for any accident occurring outside India. However, setting aside the tribunal’s order, the high court held that the payment of the awarded amount shall be made by insurance company.