Supporters of the District of Columbia's embattled no-fault auto insurance law were dealt dual setbacks yesterday, as a City Council committee voted to repeal the measure and Mayor Marion Barry backed off his threat to veto such a move.

The Committee on Consumer and Regulatory Affairs voted 4 to 0, with one abstention, to replace the compulsory no-fault law, now scheduled to go into effect Oct. 1, with a measure that would compel D.C. motorists to carry liability insurance.

The new proposal, authored by committee chairman John Ray (D-At large), would continue the practice of paying personal injury claims based on which driver was at fault in an accident. Under the no-fault law, injury claims would be paid by the motorist's insurer without a determination of fault, and motorists could not sue for mental "pain and suffering" unless medical expenses exceed $5,000.

Currently, auto insurance is not mandatory in the District, and some 100,000 vehicles registered here, about 40 percent of the total, are not insured. For months, the closely divided council has squabbled over the issue. Yesterday's developments set the stage for another battle when the new proposal comes before the full council in two weeks.

In an interview after the vote, Barry denied that he had said at a February press conference that he would veto any effort to repeal the current no-fault measure, and said his only interest was to make sure the city had some type of mandatory insurance law.

However, a transcript of the February remarks, provided by Barry's press secretary, showed that when a reporter asked the mayor, "Would you veto any bill that repeals this law?" Barry replied, "Yes."

Barry said that he has been "working with several council members" on suggested changes to Ray's new mandatory liability insurance proposal. He declined to say what those changes might be.

Supporters of no-fault alleged in February that Barry's administration had delayed implementing the law to give opponents time to kill it in the council. Barry has denied the assertion.

Local trial attorneys have led the fight against no-fault, arguing primarily against the law's limitation on the right to sue.

Attorneys contend the no-fault law is unfair to them and their clients, takes away their leverage to force reluctant insurance companies to settle claims, and would boost revenues for insurance companies.

The insurance companies have lobbied on the other side of the issue, maintaining that no-fault will result in lower insurance rates. Representatives of major insurers assailed the committee's action in approving Ray's bill.

"All that bill benefits is the trial lawyers," said August P. Alegi, a vice president of Government Employees Insurance Co. (GEICO), which writes about 30 percent of the auto policies here. "The committee is taking 250,000 consumers and throwing over their interests in favor of a handful of personal injury lawyers."

Voting to support the bill were Ray, John Wilson (D-Ward 2), Charlene Drew Jarvis (D-Ward 4), and Frank Smith (D-Ward 1). Hilda Mason (Statehood-At Large), a supporter of no-fault, abstained.

On other issues yesterday, the full City Council formally passed a bill that delays the city's Advisory Neighborhood Commission elections until next year and approved the nominations of Edward W. Norton to become chairman of the Board of Elections and Ethics and Valerie K. Burden as a member of the board.

The council, acting for procedural reasons, rejected a proposal by Mayor Marion Barry to state clearly that employes of the new convention center are city workers, and a proposal by U.S. Attorney Stanley S. Harris to make a minor alteration in the city's mandatory sentencing law, which goes into effect June 7.