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MVA 1988 (Amended 2019)ORIGINALChapter VII

Section 162-164

Refund to Insurer; Scheme for Reporting Accidents; Scheme for Third-Party Compensation

Insurance of Motor Vehicles Against Third-Party Risks
Fine: N/ACompoundable: N/AEndorsement: No
BARE ACT PROVISION

Legal Text

Section 162: If after payment of compensation under section 161, the person who was responsible for the accident is identified, the amount paid under that section shall be reimbursed to the insurer from the amount of compensation recoverable from the person responsible. Section 163A: Notwithstanding anything contained in this Act or in any other law for the time being in force or instrument having the force of law, the owner of the motor vehicle or the authorised insurer shall be liable to pay in the case of death or permanent disablement due to accident arising out of the use of motor vehicle, compensation, as indicated in the Second Schedule, to the legal heirs or victim, as the case may be.

Simplified Explanation

Section 162 creates the refund mechanism for hit-and-run compensation — if the offending vehicle is identified after compensation has been paid, the amount is recovered from the responsible party and returned to the scheme fund. This prevents double compensation and ensures the fund remains solvent for future claims. Section 163A (the Structured Formula scheme) provides an alternative compensation pathway to Sections 140 (no-fault fixed amounts) and 166 (full fault-based claims): it uses the Second Schedule multiplier table to calculate compensation based on the victim's age and income class, without requiring proof of fault. The Second Schedule provides standardised compensation amounts for different age groups and income levels — a rough but fast alternative to the full evidentiary MACT hearing. Section 163A is particularly used for faster resolution of cases where detailed income evidence is difficult to obtain.

Historical Context

Section 163A was added specifically to provide a structured alternative to lengthy MACT proceedings — a faster, more certain compensation pathway using standardised tables. However, the Pranay Sethi (2017) constitution bench has largely overtaken it by establishing comprehensive guidelines for full MACT awards.

Critical Changes

Section 163A structured formula table (Second Schedule) updated periodically.

Post-Pranay Sethi (2017), most claimants prefer full Section 166 claims over Section 163A structured formula.

Practical Scenarios

"A hit-and-run victim who received ₹2 lakh; the offending driver later identified — Section 162 recovery from driver's insurer."

Common Queries

Section 163 enables the Central Government to frame a scheme requiring insurers and others to report accidents to specified authorities. The scheme aims to create a national accident database to improve road safety policy and expedite compensation processing.
An insurer that has paid compensation to a third party under a policy may recover (refund) that amount from the insured if the insured was in breach of a policy condition — for example, if the driver had no valid licence or the vehicle was being used outside its permitted purpose.
Section 164 provides a no-fault, structured compensation scheme for accident victims. It fixes compensation at ₹5 lakh for death and ₹2.5 lakh for grievous hurt, payable by the insurer regardless of fault. Claimants under this scheme cannot also claim under Section 163A (structured formula).