Is Mere Presence Of A Vehicle Enough For Compensation Under The Motor Vehicles Act? SC Clarifies

The Supreme Court has tightened the scope for claiming compensation under the Motor Vehicles Act, ruling that a death or injury must be clearly linked to the use of a vehicle before compensation can be awarded.

The ruling came in the Dilip Agarwal v. Rajshri Agarwal & Ors. (2026) case where a man was found dead three days after he was last seen travelling in a car. While a Motor Accident Claims Tribunal had awarded compensation to his family, the Supreme Court said there was no evidence to show that the vehicle had any role in causing the death. Simply being part of the sequence of events, the court said, does not make a vehicle liable under the Act.

Soumen Mohanty, Partner, AQUILAW, says the judgment reiterates a principle that courts have consistently followed. "The Supreme Court has once again underlined that compensation under the Motor Vehicles Act is payable only when there is a clear connection between the use of a vehicle and the death or injury. In this case, the deceased was last seen in the car, but there was nothing to show that the injuries were caused inside the vehicle or that the vehicle contributed to the death. The court has clarified that such circumstances, by themselves, are not enough to fasten liability under the Act."

The judgment aptly distinguishes Rita Devi v. New India Assurance Co. Ltd., where the murder was intrinsically linked to the theft of the vehicle, thereby satisfying the requirement that the death arose out of its use. “In contrast, Dilip Agarwal lacked any forensic or circumstantial evidence establishing that the fatal injuries were sustained inside the vehicle or that the vehicle contributed to the death. The fact that the deceased was last seen travelling in the car, by itself, did not establish the statutory nexus required for compensation,” adds Mohanty.

The judgment does not depart from the beneficial object of the Motor Vehicles Act. Instead, it reiterates that while MACT proceedings are governed by the civil standard of preponderance of probabilities, claimants must still establish a credible causal connection between the use of the vehicle and the accident. The ruling, therefore, prevents the unwarranted expansion of statutory liability without undermining the remedial purpose of the legislation.

“A notable feature of the decision is the Court's direction that the compensation already disbursed should not be recovered from the claimants. While this reflects equitable and humanitarian considerations, it also creates a degree of judicial inconsistency. Having held that the statutory requirements for compensation were not met, allowing the claimants to retain the award appears difficult to reconcile with the legal principle underpinning the judgment,” says Mohanty.

Explaining further, Deepika Kumari, Partner, King Stubb & Kasiva, Advocates and Attorneys, says that the Supreme Court's ruling setting aside compensation awarded to the family of Anand, found dead three days after he was last seen travelling in the appellant's car, in a case that began as a murder trial ending in acquittal, deserves attention beyond its own facts. It addresses a recurring problem in motor accident jurisprudence: the slow erosion of the causal-nexus requirement under Sections 165 and 166 of the Motor Vehicles Act.

Courts have long read "arising out of the use of a motor vehicle" expansively, extending liability beyond simple collisions, rightly so, since genuine accident victims shouldn't be denied compensation on technicalities. “But liberal interpretation is not the same as no proof at all. Here, the Tribunal and High Court inferred that fatal injuries occurred inside the vehicle simply because the deceased was last seen in it, treating a vehicle's mere presence in the narrative as sufficient to trigger liability, evidence notwithstanding,” she adds.

The Supreme Court's correction stands out for three reasons -

First, it separates "arising out of" from "coinciding with." The Bench of Justices Sanjay Karol and Augustine George Masih held that a death occurring in a sequence that happens to include a vehicle is not the same as a death arising from the vehicle's use, a distinction critical for insurers and owners facing a beneficial, near-no-fault statutory scheme that becomes unworkable if triggered by mere proximity.

Second, “the ruling preserves the lower evidentiary bar without eliminating it. The Court kept the civil standard of preponderance of probabilities intact, and claimants still need not prove the exact manner of injury. But some evidentiary link, forensic or circumstantial, must connect the vehicle to the injury. Here there was none: no blood or trace evidence, no collision alleged, only an assumption built on a "last seen" theory that had already collapsed at the criminal trial,” Kumari informs.

Third, the direction against recovering compensation already paid reflects sound equity, vindicating the legal principle for the future without inflicting further hardship on a family that received the award in good faith years ago.

“The ruling should push tribunals toward greater rigour when murder or unexplained deaths are routed through motor accident claims for their faster, no-fault-style remedy. Claimants will need real evidence linking the vehicle to the injury, not just its presence in the story; insurers gain clearer precedent to resist claims where the vehicle is incidental rather than causative. Protecting this causal-nexus requirement ultimately protects the credibility of a scheme meant for genuine accident victims,” she says.

Overall, the decision is a significant reaffirmation that liability under the Motor Vehicles Act depends not on the mere involvement of a vehicle, but on a demonstrable causal connection between its use and the injury or death. “It provides much-needed clarity on the scope of the expression "arising out of the use of a motor vehicle" while preserving the integrity of the statutory compensation regime,” says Mohanty.