2026 INSC 722 | 20 July 2026
What the case was about
This case concerned whether an Indian motor insurer must compensate victims of a fatal bus accident that occurred in Nepal. The appellant, The Oriental Insurance Co. Ltd., argued that its policy was limited to the “Geographical Area: India” and that the vehicle’s owner had not paid an additional premium required by the India Motor Tariff 2002 for cross-border extension. It also raised doubts about whether the driver’s Indian licence was valid in Nepal. The claimants—family members of deceased passenger Harish Yadav—sought to enforce a compensation award against the insurer.
The key facts
The offending bus, bearing registration number CG/07-LP/03442, was owned by Durg Roadways Private Limited and insured by Oriental Insurance. Before the journey, the owner obtained a special permit under Section 88(8) of the Motor Vehicles Act, 1988, which expressly authorised a religious tour from Durg to destinations in Nepal (para 5). After crossing into Nepal, the bus collided with a hill, killing three persons, including the driver and Harish Yadav. When the vehicle reached the India–Nepal border, all relevant documents, including the driver’s licence, were properly verified by the competent authorities (para 5). The claimants filed a claim before the IVth Additional Motor Accident Claims Tribunal, Durg, which awarded Rs. 32,67,000 with interest against the owner. The High Court of Chhattisgarh set aside the award and fastened liability on the insurer, leading to the present appeal.
The questions before the Court
The Supreme Court framed two issues for determination: first, whether an accident that occurred outside India is covered by an insurance policy issued under the Motor Vehicles Act, 1988, in the absence of payment of additional premium under the India Motor Tariff 2002; and second, whether the driver’s Indian licence authorised him to drive the vehicle in Nepal at the time of the incident.
What the Court decided and why
A bench of Justices Sanjay Karol and Nongmeikapam Kotiswar Singh dismissed the insurer’s appeal and held it liable for the compensation.
Harmonious reading of the policy clauses
The Court rejected the insurer’s reliance on the “Geographical Area: India” clause in isolation. It held that this clause must be read harmoniously with the “Limitation as to Use” clause, which provided coverage for use under a valid permit within the meaning of the Motor Vehicles Act (para 12). Because the bus possessed a special permit that specifically authorised travel to Nepal, the policy covered the accident; the geographical limitation would have applied only where no such permit existed (para 13). The Court observed that the insurer, having unilaterally drafted the standard-form contract, should have expressly excluded foreign coverage if that was its intention. It cautioned: “Cover what you want. Exclude what you want. But make sure you do it clearly. Sloppy drafting could cost you something” (para 14).
Statutory override of tariff regulations
The insurer contended that General Regulation 4 of the India Motor Tariff 2002 required an additional premium to extend coverage to Nepal. The Court held that Section 147(5) of the Motor Vehicles Act is a non-obstante clause that overrides contrary regulatory requirements. Consequently, the non-payment of additional premium did not defeat coverage where the policy otherwise purported to cover the liability (para 20).
Extra-territorial operation of the Motor Vehicles Act
The Court ruled that the Motor Vehicles Act has extra-territorial application. Citing Article 245 of the Constitution and specific statutory provisions—Sections 139 (power to make rules for vehicles taken temporarily outside India) and 149 (duty to satisfy judgments from reciprocating countries)—the bench concluded that the statute applies regardless of whether the accident took place in India or Nepal (para 21).
Validity of the driving licence in Nepal
The Court found that the driver held a valid Indian licence that was verified by the authorities at the border (para 5). It further relied on Article 7 of the 1950 Treaty of Peace and Friendship between India and Nepal, which grants nationals reciprocal privileges in matters of movement, to hold that the licence was recognised for cross-border travel and that there was no breach of the policy (para 25).
Interpretation against the drafter
Reiterating that any ambiguity in a standard-form policy must be construed against the insurer and in favour of coverage, the judgment applied the principle of contra proferentem to ensure the beneficial purpose of the Motor Vehicles Act was not defeated by unclear wording (para 14).
In the result, the Court dismissed the appeal and held the appellant-insurer liable to pay Rs. 32,67,000 along with 6% interest from 22nd October 2011, to be deposited within four weeks (para 30).
Why it matters
The ruling is significant for motor accident victims and insurers alike. First, it clarifies that a standard Indian motor policy covering “use under a permit” cannot be mechanically denied for accidents occurring outside India when the vehicle holds a valid special permit for that foreign route. Insurers cannot rely on a general “Geographical Area: India” clause to defeat claims if they failed to draft an explicit cross-border exclusion (paras 12–14).
Second, the decision affirms that Section 147(5) of the Motor Vehicles Act is a robust, non-obstante shield for victims: tariff regulations requiring extra premium for neighbouring countries cannot override the insurer’s statutory liability when the policy otherwise purports to cover the risk (para 20).
Third, the Court recognised that the Motor Vehicles Act has extra-territorial application and that Indian driving licences are recognised for cross-border movement under the India-Nepal Treaty of Peace and Friendship (paras 21 and 25). For accident victims, the judgment reinforces that courts will read ambiguous insurance contracts against the drafter to ensure the beneficent objectives of motor accident compensation law are not frustrated by fine print.