In this appeal, the Supreme Court of India examined whether an insurance company is liable to indemnify an insured for an accident occurring in Nepal, despite the insurer’s argument that the policy was geographically limited to India and that no additional premium had been paid to extend coverage. The Court held that because the vehicle held a valid “special permit” issued under the Motor Vehicles Act (MVA) authorizing travel to Nepal, the “Limitations as to Use” clause in the insurance policy provided the necessary coverage. The Court affirmed that the non-obstante clause in Section 147(5) of the MVA imposes a mandatory duty on insurers to indemnify the insured for liabilities the policy purports to cover, regardless of regulatory constraints like the India Motor Tariff (IMT), and directed the immediate disbursement of compensation to the accident victims.
- Case Background: The appellant-insurer challenged a Chhattisgarh High Court judgment that shifted liability for compensation from the vehicle owner to the insurer following a fatal accident involving a bus traveling from India to Nepal.
- Permit Validity: The Supreme Court found that the vehicle was operating under a valid special permit issued by the Additional Regional Transport Authority, Durg, which specifically authorized the Durg-Nepal route.
- Interpretation of Insurance Contract:
- The Court held that insurance contracts must be read as a whole rather than isolating specific clauses.
- The “Limitations as to Use” clause in the policy, which required the vehicle to operate under a valid permit, did not contain geographical restrictions and therefore provided coverage for the transit to Nepal.
- The existence of this permit meant the insurer could not rely on the “Geographical Area” clause to deny coverage.
- Legal Standing of MVA:
- Section 147(5) of the MVA contains a non-obstante clause that overrides internal regulatory instruments, such as the India Motor Tariff (IMT), regarding the requirement of additional premiums for international travel.
- The MVA possesses extra-territorial reach, as evidenced by Sections 139 and 149, which facilitate and regulate motor vehicle services operating between India and other countries.
- Regulatory Status: The Court noted that the IMT 2002 was de-notified effective April 1, 2024, and urged the Insurance Regulatory and Development Authority of India (IRDAI) to address the lack of clear regulatory frameworks regarding cross-border insurance coverage to prevent future litigation.
- Final Order: The Court ordered the appellant to deposit the compensation amount (if not already paid) within four weeks for direct remittance to the claimants’ bank accounts.
2026 INSC 722
The Oriental Insurance Co. Ltd. v. Durg Roadways Private Limited & Ors.-(D.O.J. 20.07.2026)
