Liability without Fault

Interim relief is a loan against the eventual award, not a gift: the section requires the recovery machinery to be built into the scheme.

Section 164B: the Motor Vehicle Accident Fund

Constituted by the Central Government, and credited with payments notified and approved by the Central Government, grants or loans from the Central Government, the balance of the old fund created under the scheme framed under the former section 163, and any other prescribed source.

Purpose, sub-section (2). Providing compulsory insurance cover to all road users in the territory of India.

Utilisation, sub-section (3). Treatment of persons injured in road accidents under the section 162 scheme; compensation to the representatives of a person who died in a hit and run motor accident, and to a person grievously hurt in one, under the section 161 schemes; and compensation to such other persons as may be prescribed.

Set-off, sub-section (5). Where an amount has been paid out of the Fund for treatment, the same amount is deductible from the claim the person receives from the insurance company.

Accountability, sub-sections (6) to (10). Managed by an authority or agency specified by the Central Government having regard to its knowledge of insurance business and its capability to manage funds; accounts maintained in the prescribed form in consultation with the Comptroller and Auditor-General; audited by the Comptroller and Auditor-General; and the certified accounts with the audit report laid before each House of Parliament.

Sub-section (11). Any scheme framed under the old section 163(3) stands discontinued, and all rights and liabilities accruing under it are met out of the Fund.

And in the rules. The Central Motor Vehicles (Motor Vehicle Accident Fund) Rules 2022, G.S.R. 162(E) of 25 February 2022, in force from 1 April 2022, constitute the Fund in three accounts, the Account for Insured Vehicles, the Account for Uninsured Vehicles or Hit and Run Motor Accident, and the Hit and Run Compensation Account, and vest its administration in a Motor Vehicle Accident Fund Trust whose trustees are officers of the Ministry of Road Transport and Highways, the Ministry of Finance, the Ministry of Health and Family Welfare and the General Insurance Council.

The old law, which the syllabus and the papers still name

Section 140, Chapter X. Where death or permanent disablement resulted from an accident arising out of the use of a motor vehicle, the owner, or owners jointly and severally, were liable to a fixed sum of fifty thousand rupees for death and twenty-five thousand for permanent disablement; the claimant did not have to plead and establish wrongful act, neglect or default, sub-section (3); and the claim was not to be defeated by any wrongful act, neglect or default of the victim, nor the quantum reduced by the victim's share in the responsibility, sub-section (4).

Section 141. The right under section 140 was in addition to any other right to claim on the principle of fault; the no-fault claim was to be disposed of first; and where the same person was liable on both, he paid the no-fault sum and only so much of the fault compensation as exceeded it.

Section 142. Defined permanent disablement: permanent privation of the sight of either eye or the hearing of either ear, or privation of any member or joint; destruction or permanent impairing of the powers of any member or joint; or permanent disfiguration of the head or face.

Section 143. Applied the Chapter to claims for the same death or permanent disablement under the Workmen's Compensation Act 1923.

Section 144. Gave the Chapter overriding effect over any other provision of the Act or any other law.

Section 163A. Compensation on a structured formula basis, as indicated in the Second Schedule, payable by the owner or the authorised insurer, again with no need to plead or establish fault, and with power in the Central Government to amend the Schedule for the cost of living.

Section 163B. A person entitled to claim under both section 140 and section 163A had to file under one and not both.

All of these, and the Second Schedule, went on 1 April 2022. A student who cites section 140 for the current no-fault liability, or the Second Schedule for the figures, is citing repealed law.

What the courts made of no-fault liability

Facts. Minu B. Mehta v. Balkrishna Ramchandra Nayan, AIR 1977 SC 1248, decided on 28 January 1977, before any no-fault provision existed. It was argued that an owner should be liable without proof of negligence.

Held. Proof of negligence is necessary before the owner or the insurer can be held liable, and liability without proof of negligence was for Parliament, not the courts, to create.

Facts. Gujarat State Road Transport Corporation v. Ramanbhai Prabhatbhai, AIR 1987 SC 1690. Brothers of a boy killed by a bus claimed as legal representatives.

Held. Besides settling who may claim, the Court held that the no-fault provision then in force was a departure from the common law rule that negligence must be established, and that a pedestrian injured or killed without negligence on his part should recover.

Facts. Shivaji Dayanu Patil v. Vatschala Uttam More, (1991) 3 SCC 530. A petrol tanker overturned and, about four hours later, the leaked petrol exploded.

Held. "Arising out of the use of a motor vehicle" is wider than "caused by" the vehicle, and the no-fault provision applied to the explosion.

Facts. Manjuri Bera v. Oriental Insurance Co. Ltd, (2007) 10 SCC 643. A married daughter, not dependent on her father, claimed the fixed no-fault amount for his death.

Held. A legal representative who is not a dependant may still be a beneficiary: the statutory liability is for a fixed and crystallised amount which forms part of the estate of the deceased, and the legal representative who inherits the estate takes it.

Facts. Kaushnuma Begum v. New India Assurance Co. Ltd, (2001) 2 SCC 9. The Tribunal found no negligence and dismissed the claim while directing payment of the fixed no-fault amount.

Held. A Tribunal may award on the rule of strict liability in Rylands v. Fletcher even where negligence is not proved, subject to the recognised exceptions; the Court distinguished statutory no-fault liability, a fixed amount payable even where an exception to the rule applies, from strict liability at common law, and noted that the no-fault amount is deducted from the final award.

Put the last two together and the character of no-fault liability appears. It is not a species of tort: it is a fixed statutory sum, part of the estate, payable without inquiry into anyone's conduct, and set off against whatever the fault jurisdiction eventually gives.

A worked example

A motorcyclist is killed in 2026 in a collision with a truck. The truck driver was not negligent; the motorcyclist himself misjudged a turn. He leaves a widow and a married sister.

Is anything payable without proof of fault? Yes. Section 164: five lakh rupees for death, payable by the owner of the truck or its authorised insurer, and by sub-section (2) the claimant need not plead or establish any wrongful act, neglect or default.

Does the deceased's own carelessness defeat it? No. Section 164 makes no inquiry into fault at all, on either side.

May the married sister claim? If she is a legal representative, yes, on the reasoning of Manjuri Bera: the fixed amount is part of the estate, and dependency is not the test.

The widow also sues for just compensation and is awarded thirty lakh. The five lakh already paid is set off; that is how Kaushnuma Begum treated the no-fault payment.

The family had already received a sum under another statute. Section 164(3) requires that amount to be reduced from what is payable under section 164.

What if the same accident had happened in 2019? Section 140: fifty thousand rupees for death, and only for death or permanent disablement, with the option of a structured claim under section 163A on the Second Schedule.

What it does NOT mean

It is not a claim in tort. No duty, no breach, no causation of fault.

It is not confined to dependants. Manjuri Bera.

It is not additional to the award. It is set off.

It is not section 140. That section, the whole of Chapter X, sections 163A and 163B and the Second Schedule were repealed with effect from 1 April 2022.

It is not the only route to compensation without proving negligence. Kaushnuma Begum keeps the common law rule of strict liability available before a Tribunal.

Quick revision

1. Section 164(1): five lakh rupees for death, two and a half lakh for grievous hurt, payable by the owner or the authorised insurer.
2. Section 164(2): no need to plead or establish wrongful act, neglect or default. Section 164(3): compensation paid under any other law is reduced from it.
3. Section 164A: Central Government schemes for interim relief, with recovery from the owner built in.
4. Section 164B: the Motor Vehicle Accident Fund, for compulsory insurance cover to all road users, used for treatment under section 162 and hit and run compensation under section 161, audited by the Comptroller and Auditor-General and laid before Parliament; the Fund Rules of 2022 divide it into three accounts under a Trust.
5. The old law: sections 140 to 144 with fifty thousand and twenty-five thousand rupees for death and permanent disablement, section 142's definition of permanent disablement, section 141's priority and set-off, section 144's overriding effect, and sections 163A and 163B with the Second Schedule. All repealed with effect from 1 April 2022.
6. Minu B. Mehta: at common law negligence had to be proved. Gujarat State Road Transport Corporation v. Ramanbhai Prabhatbhai: the no-fault provision departs from that rule. Manjuri Bera: a fixed and crystallised amount forming part of the estate. Kaushnuma Begum: strict liability survives alongside it, and the no-fault sum is deducted from the final award.

Test yourself

1. Explain the principle of liability without fault under the Motor Vehicles Act 1988 as it stands today. Section 164, in force from 1 April 2022, provides that notwithstanding anything in the Act or any other law, the owner of the motor vehicle or the authorised insurer shall be liable to pay, in the case of death or grievous hurt due to an accident arising out of the use of a motor vehicle, a fixed compensation of five lakh rupees for death and two and a half lakh rupees for grievous hurt, to the legal heirs or to the victim as the case may be. By sub-section (2) the claimant is not required to plead or establish that the death or grievous hurt was due to any wrongful act, neglect or default of the owner, of the vehicle or of any other person; the liability therefore attaches on proof of the accident, the use of the vehicle and the consequence alone. By sub-section (3) compensation already paid under any other law is reduced from the amount payable. The character of such liability was explained in Manjuri Bera v. Oriental Insurance Co. Ltd, (2007) 10 SCC 643, as a statutory liability for a fixed and crystallised amount which forms part of the estate of the deceased, so that a legal representative who is not a dependant may receive it, and in Kaushnuma Begum v. New India Assurance Co. Ltd, (2001) 2 SCC 9, as distinct from strict liability at common law and as deductible from the final award.

2. Trace the history of no-fault liability under the Act. Until 1988 the position was that stated in Minu B. Mehta v. Balkrishna Ramchandra Nayan, AIR 1977 SC 1248, that proof of negligence was necessary before an owner or insurer could be made liable, and that liability without fault was for Parliament to create. Parliament created it in Chapter X of the Act of 1988. Section 140 made the owner liable for a fixed sum on death or permanent disablement arising out of the use of a motor vehicle, raised in 1994 to fifty thousand and twenty-five thousand rupees; sub-section (3) dispensed with pleading and proof of fault and sub-section (4) prevented the claim being defeated or reduced by the victim's own fault. Section 141 made the right additional to the fault claim, required it to be disposed of first, and set it off against the fault award; section 142 defined permanent disablement; section 143 extended the Chapter to claims under the Workmen's Compensation Act 1923; and section 144 gave the Chapter overriding effect. In 1994 section 163A added compensation on a structured formula basis under the Second Schedule, again without proof of fault, and section 163B required a claimant entitled under both to choose one.

The Supreme Court described the departure from the common law in Gujarat State Road Transport Corporation v. Ramanbhai Prabhatbhai, AIR 1987 SC 1690, and gave the trigger a wide reading in Shivaji Dayanu Patil v. Vatschala Uttam More, (1991) 3 SCC 530. The whole of Chapter X, sections 163A and 163B and the Second Schedule were repealed with effect from 1 April 2022 by the Motor Vehicles (Amendment) Act 2019 as brought into force by S.O. 859(E) of 25 February 2022, and section 164 took their place.

3. What is the Motor Vehicle Accident Fund? It is a fund constituted by the Central Government under section 164B, credited with payments notified and approved by the Central Government, grants and loans from it, the balance of the fund created under the scheme framed under the former section 163, and any other prescribed source. Sub-section (2) states its purpose as providing compulsory insurance cover to all road users in the territory of India.

By sub-section (3) it is utilised for the treatment of persons injured in road accidents under the scheme framed under section 162, for compensation to the representatives of a person who died in a hit and run motor accident and to a person grievously hurt in one under the schemes framed under section 161, and for compensation to such other persons as may be prescribed; and by sub-section (5) an amount paid out of the Fund for treatment is deducted from the claim the person receives from the insurance company. The Fund is managed by an agency specified by the Central Government, its accounts are audited by the Comptroller and Auditor-General and laid, with the audit report, before each House of Parliament, and the old scheme under section 163 stands discontinued with its rights and liabilities met out of the Fund.

The Central Motor Vehicles (Motor Vehicle Accident Fund) Rules 2022, in force from 1 April 2022, divide the Fund into an Account for Insured Vehicles, an Account for Uninsured Vehicles or Hit and Run Motor Accident and a Hit and Run Compensation Account, administered by a Trust of officers of the concerned Ministries and the General Insurance Council.