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Subject: Law of Torts and Consumer Protection Act-II

B.A.LL.B-IInd Sem
Subject Teacher: Akhlaqul Azam
Study Material of Unit-II(C)(ii)
Topic: No Fault Liability under Motor Vehicle Act-1988

No Fault Liability under Motor Vehicle Act

The Motor Vehicles Act, 1939 initially provided for the award of compensation on the principle
of "fault" only. The Supreme Court in Manushri Raha v. Balakrishna.L. Gupta (1977) and the
Law Commission of India recommended the introduction of "no fault" liability.

In the case of Haji Zakaria v Naoshir Cama(1976), there was a contention raised as to whether
liability to pay compensation could be imposed even when there was no rash or negligent actions
on part of the owner. But this was not accepted by the Supreme Court. The apex court opined
that there could be no liability where there was absence of negligence in the part of the owner or
the driver or the motor vehicle.

The 1939 Act was accordingly amended by Motor Vehicles (Amendment) Act, 1982
incorporating Sections 92-A to 92-E to provide, for the first time payment of compensation on
the principle of "no fault". The 1939 Act, as amended by the 1982 Amendment Act, was
however, later repealed. A new Act "Motor Vehicles Act, 1988" (Act 59 of 1988) was enacted. It
came into force from 14th October, 1988. In this Act were enacted Sections 140 to 144
(corresponding to earlier Sections 92-A to 92-E.The Act also provided for award of
compensation resulting from an accident arising out of the use of motor vehicles In case of
award of compensation on the principle of "No Fault" (Chapter X Sections 140 to 144).

Objective of No Fault Liability

The principle of “No Fault Liability” was developed in order to provide some sort of relief to the
victims of ‘hit and run’ cases. For the purposes of social justice, the principle laid out that the
driver or the owner was to be held liable without taking contributory negligence into
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consideration. The denial of compensation to the victim on the grounds that negligence and the
fault of the driver were not established was highly against the principles of a welfare state.

In A. Sridhar v. United India Insurance Company (2011), the Apex Court ruled that where
accident occurred due to oil spill on road, negligence would be attributable only to person
driving the vehicle, neither to the vehicle nor to another vehicle. In such a case, the Ins. Co.
would not, as such, be liable Determination of compensation in such a case, the court ruled,
would be on the no fault basis. Stating the object of Section 140, the Supreme Court in
Ishwarappa v. CS. Gurushanthappa (2010), said that the Section was indeed intended to provide
immediate succour to the injured or the heirs and legal representatives of the deceased. Hence,
normally a claim under Section 140, the Court said, was made at the threshold of the proceeding
and the payment of compensation was directed to be made by an interim award of the tribunal
which might be adjusted if in the final award the claimants were held entitled to any larger
amounts.

Section 140- provides:

Section 140 in the Motor Vehicles Act, 1988

140. Liability to pay compensation in certain cases on the principle of no fault.—

(1) Where death or permanent disablement of any person has resulted from an accident arising
out of the use of a motor vehicle or motor vehicles, the owner of the vehicle shall, or, as the case
may be, the owners of the vehicles shall, jointly and severally, be liable to pay compensation in
respect of such death or disablement in accordance with the provisions of this section.

(2) The amount of compensation which shall be payable under sub-section (1) in respect of the
death of any person shall be a fixed sum of [fifty thousand rupees] and the amount of
compensation payable under that sub-section in respect of the permanent disablement of any
person shall be a fixed sum of2[twenty-five thousand rupees].

(3) In any claim for compensation under sub-section (1), the claimant shall not be required to
plead and establish that the death or permanent disablement in respect of which the claim has
been made was due to any wrongful act, neglect or default of the owner or owners of the vehicle
or vehicles concerned or of any other person.
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(4) A claim for compensation under sub-section (1) shall not be defeated by reason of any
wrongful act, neglect or default of the person in respect of whose death or permanent
disablement the claim has been made nor shall the quantum of compensation recoverable in
respect of such death or permanent disablement be reduced on the basis of the share of such
person in the responsibility for such death or permanent disablement. [(5) Notwithstanding
anything contained in sub-section (2) regarding death or bodily injury to any person, for which
the owner of the vehicle is liable to give compensation for relief, he is also liable to pay
compensation under any other law for the time being in force: Provided that the amount of such
compensation to be given under any other law shall be reduced from the amount of
compensation payable under this section or under section 163A.

Section-141. Provisions as to other right to claim compensation for death or permanent

disablement.—

(1) The right to claim compensation under section 140 in respect of death or permanent
disablement of any person shall be in addition to 1[any other right, except the right to claim
under the scheme referred to in section 163A (such other right hereafter] in this section referred
to as the right on the principle of fault) to claim compensation in respect thereof under any other
provision of this Act or of any other law for the time being in force.

(2) A claim for compensation under section 140 in respect of death or permanent disablement of
any person shall be disposed of as expeditiously as possible and where compensation is claimed
in respect of such death or permanent disablement under section 140 and also in pursuance of
any right on the principle of fault, the claim for compensation under section 140 shall be
disposed of as aforesaid in the first place.

(3) Notwithstanding anything contained in sub-section (1), where in respect of the death or
permanent disablement of any person, the person liable to pay compensation under section 140 is
also liable to pay compensation in accordance with the right on the principle of fault, the person
so liable shall pay the first-mentioned compensation and—

(a) if the amount of the first-mentioned compensation is less than the amount of the second-
mentioned compensation, he shall be liable to pay (in addition to the first-mentioned
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compensation) only so much of the second-mentioned compensation as is equal to the amount by

which it exceeds the first mentioned compensation;

(b) if the amount of the first-mentioned compensation is equal to or more than the amount of the
second-mentioned compensation, he shall not be liable to pay the second-mentioned
compensation.

Section142- Permanent disablement.—For the purposes of this Chapter, permanent disablement

of a person shall be deemed to have resulted from an accident of the nature referred to in sub-
section

(1) of section 140 if such person has suffered by reason of the accident, any injury or injuries
involving:—

(a) permanent privation of the sight of either eye or the hearing of either ear, or privation of any
member or joint; or

(b) destruction or permanent impairing of the powers of any member or joint; or

(c) permanent disfiguration of the head or face.

Analysis of Section-140

According to Section 140, no fault liability has been recognized when death or permanent
disablement has resulted from an accident arising out of the use of a motor vehicle. The amount
of compensation payable shall be as under: (i) in respect of the death of a person, a fixed sum of
Rs. 50,000/-, and (ii) in respect of permanent disablement of any person, a fixed sum of Rs.
25,000/ Sub-section (3) of Section 140, it is held, reveals that the burden of pleading and
establishing whether or not "wrongful e et", "neglect" or default was committed by the person
(for on whose behalf) :compensation is claimed under Section 140 would not rest on the
shoulders of the claimant. The compensation claimed under Section 140 is governed by the ‘no
fault’ liability principle.

Whether section 140 will be applied Retrospectively (Whether it will be applicable from back
date or not)?
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The limit of no fault liability was increased from 25000/ to Rs. 50,000/- in 1994 which took
effect from 14/11/1994.

In Manjit Singh v. Rattan Singh(1997), the Court has held that the amended Section 140 wef. 14-
11-94 which raises the compensation amount for no fault liability from Rs. 25,000/- to Rs.
50,000/- is applicable retrospectively. Hence, for an accident leading to death before 14-11-94,
the amount of compensation payable assessed by the Tribunal to Rs. 30,000/- was raised by the
High Court to Rs. 50,000/

By an amendment of the Motor Vehicles Act we.f. 14-11-1994, a new provision has been made
whereby the claimant's right to compensation under any other law for the time being in force, in
addition to the above mentioned compensation has been spelled out. The provision is as under:
"Notwithstanding anything contained in sub-section (2) regarding death or bodily injury to any
person, for which the owner of the vehicle is liable to give compensation for relief, he is also
liable to pay compensation under any other law for the time being in force Provided that the
amount of such compensation to be given under any other law shall be reduced from the amount
of compensation payable under this section or under section 163A."

The claimant shall not be required to prove any fault of the owner of the vehicle or any other
person, for claiming compensation as mentioned above. It means that the claimant shall not be
required to plead and establish that the death or permanent disablement in respect of which the
claim has been made was due to any wrongful act, neglect or default of the owner or owners of
the vehicle or vehicles concemed or of any other person.

It may be noted that the claim for compensation for the above stated fixed sum shall not be
defeated by reason of any wrongful act, neglect or default of the accident victim, nor shall the
compensation payable be reduced on account of any responsibility in the accident of the accident
victim. It implies that the defence of contributory negligence is not allowed to be pleaded when
the fixed sum of compensation, as stated above, is claimed.

If the claimant's claim exceeds the fixed sum of compensation as mentioned above, he has to
establish fault on the part of the owner or the driver of the vehicle, as the case may be. It may be
noted that the right to claim compensation under section 140 in respect of death or permanent
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disablement of any person shall be in addition to any other right to claim compensation in respect
thereof under any other provision of this Act or any other law for the time being in force.

In Oriental F. &G. Ins. Co v. Shantibhai (1987)

There was an accident on 9/8/1982 resulting in death of two persons. In its order dated 5/8/1983
the Claim Tribunal allowed compensation without going into the question of negligence of the
driver or the owner of the vehicle, under Section 92-A of the (1939) Act which came into force
on 1-10-1982, ie, after the date of the accident. The Bombay High Court affirmed the decision.

In K. Nandkumar v. M.D. Thantai Periyar Transport Corporation (1996), there was an accident
on 15-1-87 between the motor cycle on which the appellant was riding, and a bus belonging to
the respondent. The accident occurred due to the sole negligence of the motor cyclist in which he
suffered permanent disablement. It was held by the Supreme Court that the injured claimant
could not be denied compensation under Section 92-A(4) of the Motor Vehicles Act. 1939 on no
fault liability basis on the ground that the accident occurred due to his sole negligence. He was
awarded compensation of Rs. 7,500/- for the permanent disablement.

Liability When the Vehicle Not Insured

If a vehicle is not insured against third party risk, the claimant still has a right to claim
compensation. In such a case the responsibility will be fixed on the negligent driver or the owner
of the vehicle, and such a person will have to pay the claim out of his own pocket. Similar is the
position where a vehicle, belonging to the Central or State Government or a Corporation is
exempted from being insured under Section 146(2) and (3) (1988 Act). Thus, if a vehicle
belonging to a corporation is not insured, the corporation itself will be liable to pay
compensation, because exemption from the requirement of getting the vehicle insured does not
imply exemption from liability to pay compensation under Section 110(1939 Act)

Strict Liability & No Fault Liability

There was a contention as to how the principle of “No fault liability” differed from that of “Strict
liability”. In the case of the former, the compensation was fixed while in the case of the latter, it
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is not. This principle which guides “No Fault Liability” is quite different from that of the basic
common law principle which states that the claimant should establish negligence on the part of
the driver or the owner of the vehicle in order to claim compensation. This departure was
accommodated, however, in Sections 140-144 of the Motor Vehicles Act, 1988.

Under Section 140, it was determined that compensation was to be paid in the case of death or of
permanent injuries arising out of the use of a motor vehicle. A person was to be awarded a fixed
amount of Rs 50,000 in the case of death and an amount of Rs 25,000 in the case of permanent
disablement.

The claimant was not required to establish the presence of negligence on the part of the owner or
the driver of the motor vehicle under Section 140 based on the principle of “No Fault Liability”.
The contributory negligence of the claimant was not to be taken into consideration to determine
the liability on the owner or the driver of the motor vehicle.

It was also interpreted under this section that the claimant was entitled to compensation under
any other sections of the same act or any other provisions that would provide relief in addition to
the fixed amount prescribed under Section 140 of the Motor Vehicles Act, 1988. The means of
this interim compensation under Section 140 came into force in the year 1994 and was said to
have no retrospective effect.

The liability of the owners of the vehicle was fixed to be joint and several under Section
140(1)(3) of the act and no fault was to be established on the part of the owner or the driver
under the same provision.

The phrase “accident arising out of the use of a vehicle” was used instead of “accident caused by
the use of a motor vehicle”. This only went on to reinforce MVA, 1988 stance as a welfare
legislation thus enabling the aggrieved to make better and efficient claims. By the inclusion of
the use instead of cause, the scope was expanded quite widely. The test was to check whether the
accident caused was in proximate distance to the motor vehicle and this was irrespective of the
motor vehicle being stationary or otherwise.

The expression “arising out of the” was used in order to widen and expand the scope of what had
to be covered. In the case of Shivaji Dayanu Patil v Vatschala Uttam More (1991) and in the
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case of Samir Chandra v Assam State Transport Corporation(1996) the distinction was well laid
out and the significance was properly analysed.

In the case of Shivaji Dayanu, a collision occurred between a petrol tanker and a truck. It was
almost after 4 hours that an explosion took place resulting in the death of the son of the
respondent. It was also found that villagers tried to steal and pilfer oil from the site of accident in
those 4 hours, leading to friction which caused the explosion. The claim was allowed by the High
Court.

It was later contested by the owners and the insurers (the petitioners) that there was no causal
relationship between the collision and the explosion that took place hours later. It was here that
the Supreme Court interpreted the phrase “arising out of” to have a wider connotation.

It was ruled that causal relationship need not be direct and proximate but it was enough even if it
was less immediate. This interpretation and usage of the phrase allowed the accessibility of this
provision to a larger group of victims and stood true to the label of being called a ‘welfare
legislation’. It was found that the collision and the explosion were related events and there could
be no proper inference that there was no causal relationship.

It was also said that this phrase could be expanded enough to include the time even when the
vehicle is not moving or has been rendered immobile due to some defect. The fact matrix of that
of Shivaji Dayanu adhered to this expansion and was followed in a lot of cases since then.

In the Samir Chandra case, a bomb-blast occurred at the time when the passengers were
alighting after the bus was parked and was not moving no more. The negligence of the owner
was evaluated in this incident and hence it was declared that the accident arose out of the use of
the motor vehicle.

In the case of Varalakshmi v APSRTC (2005), stones were hurled at a moving bus when the
passengers were inside. The window screen was smashed in the process and a passenger was
injured.

Since the accident arose out of the use of a motor vehicle, the owner and the insurer were to be
held liable. Interpretation of the legislation was widened enough to include the motor vehicle
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even when it was in motion and otherwise. Even if a trailer connected to a motor vehicle were to
get detached and cause an accident, the owner of the motor vehicle was to pay compensation.

This scope was expanded in order to provide the victim with an opportunity for maximum
compensation. If the compensation were to exceed the amount prescribed as in Section 140 and
if it were to go beyond the interim compensation, there was a provision provided under the act to
receive compensation under Section 163(A) and it was to be permanent. This provision was also
based on the principle of “No Fault Liability”.

This was beneficial for the heirs of the deceased as it would have been difficult for them to prove
the negligence on the part of the defendant and then claim damages, otherwise. The
compensation, under this section, was to be sought as provided in Schedule 2 of the act which
was recently amended in the year 2018.

The notification of May 2018 has now amended the Second Schedule and removes the formula
system that had existed without amendment since 1994.

As per the substituted Second Schedule, compensation will now payable be as follows:

• For accidents resulting in minor injury: fixed compensation of Rs.20,000.

• For accidents resulting in permanent disability: compensation payable will be calculated

based on the 'disability percentage' specified in Schedule I of the Employee's
Compensation Act 1923, where the minimum compensation payable shall be not less
than Rs.50,000 and the maximum compensation payable shall be Rs.5 lakhs.

• For fatal accidents: fixed compensation of Rs.5 lakhs.

The notification further provides that the amounts payable in case of death, permanent disability
and minor injury will be increased at the rate of 5% annually, effective from 1 January 2019.

No fault liability is cast on owner and not directly on insurer. –

In National Insurance Co. Ltd. v. Sasilatha (2000)

It was held that a reading of S. 140 would make it clear that no fault liability is cast on the
owner of the vehicle and not directly on the insurer. If the owner of the vehicle is found liable
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under S. 140, naturally, the liability of the insured also would arise. Where the owner herself has
come forward for compensation under S. 140 against the insurer of her own vehicle which was
held to be the offending vehicle, such a claim cannot be maintained under S. 140.

Probable Questions

1. Explain in detail the concept of ‘No Fault Liability’.

2. Critically evaluate the historical background of ‘No Fault Liability’.
3. Discuss in detail relevance of ‘No Fault Liability’ with help of decided cases.