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Tuesday, August 27, 2013

Motor Vehicles Act Section 149(2)(a)(ii) = Breach of conditions under Section 149(2)(a) of the Motor Vehicles Act, 1988 absolves the insurer of its liability to the insured. - NO = even after it is proved that the licence possessed by the driver was a fake one, - whether there is liability on the insurer is the moot question. As far as the owner of the vehicle is concerned, when he hires a driver, he has to check whether the driver has a valid driving licence. Thereafter he has to satisfy himself as to the competence of the driver. If satisfied in that regard also, it can be said that the owner had taken reasonable care in employing a person who is qualified and competent to drive the vehicle. The owner cannot be expected to go beyond that, to the extent of verifying the genuineness of the driving licence with the licensing authority before hiring the services of the driver. However, the situation would be different if at the time of insurance of the vehicle or thereafter the insurance company requires the owner of the vehicle to have the licence duly verified from the licensing authority or if the attention of the owner of the vehicle is otherwise invited to the allegation that the licence issued to the driver employed by him is a fake one and yet the owner does not take appropriate action for verification of the matter regarding the genuineness of the licence from the licensing authority. That is what is explained in Swaran Singh’s case (supra). If despite such information with the owner that the licence possessed by his driver is fake, no action is taken by the insured for appropriate verification, then the insured will be at fault and, in such circumstances, the insurance company is not liable for the compensation.= On facts, in the instant case, the appellant employer had employed the third respondent Nirmal Singh as driver in 1994. In the process of employment, he had been put to a driving test and he had been imparted training also. The accident took place only after six years of his service in PRTC as driver. In such circumstances, it cannot be said that the insured is at fault in having employed a person whose licence has been proved to be fake by the insurance company before the Tribunal. As we have already noted above, on scanning the evidence of the licensing authority before the Tribunal, it cannot also be absolutely held that the licence to the driver had not been issued by the said authority and that the licence was fake. = In the above circumstances, the appeal is allowed. The fourth respondent - insurance company is liable to indemnify the appellant and, hence, there can be no recovery of the compensation already paid to the claimants. 11. There is no order as to costs.

                      published in  http://judis.nic.in/supremecourt/imgst.aspx?filename=40695
 IN THE SUPREME COURT OF INDIA

                       CIVIL  APPELLATE  JURISDICTION

                        CIVIL APPEAL NO. 8276 OF 2009


Pepsu  Road Transport Corporation       … Appellant (s)

                                   Versus

National Insurance Company              … Respondent (s)





                               J U D G M E N T

KURIAN, J.:





1.    Breach of conditions under Section 149(2)(a)  of  the  Motor  Vehicles
Act, 1988 absolves the insurer of its  liability  to  the  insured.
Section
149(2)(a)(ii) deals with the conditions regarding driving licence.  
In  case
the vehicle at the time of accident is driven by a person who  is  not  duly
licensed or by a person who has been disqualified from holding or  obtaining
a driving licence during the period of disqualification, the insurer is  not
liable for the compensation.
 In the instant case, we  are  called  upon  to
deal with a situation where the driver  allegedly  possessing  only  a  fake
driving licence.



   2. Widow and two minor sons of late Gurjinder Singh  Modi  are  claimants
      before the Motor Accidents Claims Tribunal, Chandigarh in M.A.C.T. No.
      63/481 filed in the year 2002. The  allegation  was  that    Gurjinder
      Singh Modi died out of a motor accident on 04.10.2001  on  account  of
      the negligent driving of  bus  no.  PB-11-K-8512  of  the  Pepsu  Road
      Transport Corporation (for  short,  ‘PRTC’),  Patiala,  the  appellant
      herein. Rs.30,00,000/- was claimed  as  compensation.  Negligence  was
      proved. The Tribunal awarded Rs.11,03,404/- as compensation.  However,
      the insurance company was absolved of its liability since the  licence
      issued to the driver was found to be fake. The insurance company  took
      the Local Commissioner to licensing authority, Darjeeling, West-Bengal
      and, on verification of the available records, it was reported that no
      such licence as possessed by the driver has been issued  by  the  said
      licensing Authority at Darjeeling. Thus, aggrieved, the owner  of  the
      vehicle, viz., PRTC, Patiala has come up in appeal.

   3. It is the contention of the appellant  that  they  had  appointed  the
      third respondent - Nirmal Singh as driver with PRTC in  1994,  he  was
      given proper training from the driving school at  Patiala  and,  thus,
      having taken reasonable steps in verifying the  driving  licence  and,
      thereafter, having trained the driver  by  the  employer  himself,  it
      cannot be said that the insurance company is not liable. There  is  no
      breach of any conditions  by  the  insured.  In  other  words,  it  is
      contended that even if the licence is fake, the owner having taken all
      reasonable steps, the insurer  is  liable.  The  other  contention  on
      merits is that the insurer had not  established  before  the  Tribunal
      that the licence issued to Nirmal Singh was fake. In this context, our
      reference has been invited to  Annexure-2-evidence  of  the  licensing
      authority before the Tribunal. It is stated that as per the  available
      office records, no driving licence  was  issued  to  Nirmal  Singh  on
      12.06.1985 with no.12385 of 1985.  Licence  numbers  of  1985  as  per
      record start from 22579 of 1985. Photocopy of the register  maintained
      for issuing the licences was marked  as  R-1.  However,  it  was  also
      stated that: -
      “…It can be possible that other licence register  pertaining  to  year
      1985 are not available today as  it  might  be  misplaced  during  the
      shifting of our office…”



      Still further, it was stated:
      “… It is possible that the registers which are misplaced might contain
      the name of Nirmal Singh.”




   4. Though the appellant is entitled to succeed on  the  ground  that  the
      insurer had not proved beyond doubt that driver Nirmal Singh  did  not
      possess a valid driving licence, we shall also  advert  to  the  legal
      position regarding the liability of the  insurance  company  when  the
      driver of the offending vehicle possessed a fake driving licence.

   5. In United India Insurance Company Limited vs. Lehru and  Others[1],  a
      two-Judge Bench of this Court has taken the view  that  the  insurance
      company cannot be permitted to avoid its liability only on the  ground
      that the person driving the vehicle at the time of  accident  was  not
      duly licensed. It was further held  that  the  wilful  breach  of  the
      conditions of the policy should be established. Still further  it  was
      held  that  it  was  not  expected  of  the  employer  to  verify  the
      genuineness of a driving licence from the  issuing  authority  at  the
      time of employment. The employer needs to only test  the  capacity  of
      the driver and if after such test, he has been appointed, there cannot
      be any liability on the employer. The  situation  would  be  different
      when the employer was told that the driving licence of its employee is
      fake or false and yet the employer not taking  appropriate  action  to
      get the same duly verified from the issuing authority. We may  extract
      the relevant paragraphs from the judgment:
           “18. Now let us  consider  Section  149(2).  Reliance  has  been
      placed on Section 149(2)(a)(ii). As seen in order to  avoid  liability
      under this provision it must be shown that there  is  a  "breach".  As
      held in Skandia and Sohan Lal Passi cases the breach must be  on  part
      of the insured. We are in full agreement with that. To hold  otherwise
      would lead to absurd results. Just  to  take  an  example,  suppose  a
      vehicle is stolen. Whilst it is being driven by the thief there is  an
      accident. The thief is caught and it is ascertained  that  he  had  no
      licence. Can the Insurance Company disown liability? The answer has to
      be an emphatic "No". To hold otherwise would be  to  negate  the  very
      purpose of compulsory insurance.  The  injured  or  relatives  of  the
      person killed in the accident may find that  the  decree  obtained  by
      them is only a paper decree as the owner is a man of straw. The  owner
      himself would be an innocent sufferer. It is for this reason that  the
      Legislature, in its wisdom, has made insurance, at least  third  party
      insurance, compulsory. The aim and purpose  being  that  an  insurance
      company would be available to pay. The  business  of  the  company  is
      insurance. In all businesses there is an element of risk. All  persons
      carrying on business must take risks associated  with  that  business.
      Thus it is equitable that the business which is run for making profits
      also bears the risk associated with it.  At  the  same  time  innocent
      parties must not be made to suffer  or  loss.  These  provisions  meet
      these requirements. We are thus in agreement with what is laid down in
      aforementioned cases viz that in order to avoid liability  it  is  not
      sufficient to show that the person driving at the time of accident was
      not duly licensed. The  insurance  company  must  establish  that  the
      breach was on the part of the insured.”
           “20. When an owner is hiring a driver he will therefore have  to
      check whether the driver has a driving licence. If the driver produces
      a driving licence which on the face of it looks genuine, the owner  is
      not expected to find out whether the licence has in fact  been  issued
      by a competent authority or not. The owner would then take the test of
      the driver. If he finds that the driver  is  competent  to  drive  the
      vehicle, he will hire the driver.  We  find  it  rather  strange  that
      insurance companies expect owners to make enquiries with  RTOs,  which
      are spread all over the country, whether the driving licence shown  to
      them is valid or not. Thus where the owner has satisfied himself  that
      the driver has a licence and is driving competently there would be  no
      breach of Section 149(2)(a)(ii). The Insurance Company would not  then
      be absolved of liability. If it ultimately turns out that the  licence
      was fake, the insurance company would continue to remain liable unless
      they prove that the owner/insured was aware or had  noticed  that  the
      licence was fake and  still  permitted  that  person  to  drive.  More
      importantly, even in such a case the insurance  company  would  remain
      liable to the innocent third party, but it may be able to recover from
      the insured. This is the law which has  been  laid  down  in  Skandia,
      Sohan Lal Passi and Kamla cases. We are in  full  agreement  with  the
      views expressed therein and see no reason to take a different view.”

   6. The matter was subsequently considered by a three-Judge Bench of  this
      Court in National Insurance Company  Limited  vs.   Swaran  Singh  and
      Others[2]. The said Bench was of the view that in case the insured did
      not take reasonable and  adequate  care  and  caution  to  verify  the
      genuineness or otherwise of the licence, the liability would still  be
      open-ended and will have to be determined on the  basis  of  facts  of
      each case. The relevant discussions are available  at  paragraphs  92,
      99, 100 and 101, which are extracted below:

           “92. It may be true as has  been  contended  on  behalf  of  the
      petitioner that a fake or forged licence is as good as no licence  but
      the question herein, as noticed hereinbefore, is whether  the  insurer
      must prove that the owner was guilty  of  the  wilful  breach  of  the
      conditions of the insurance policy or the contract  of  insurance.  In
      Lehru case, the matter has been considered in some detail. We  are  in
      general agreement with the approach of the  Bench  but  we  intend  to
      point out that the observations made therein  must  be  understood  to
      have been made in the light of the requirements of the  law  in  terms
      whereof the insurer is to establish wilful breach on the part  of  the
      insured and not for the purpose of its disentitlement from raising any
      defence  or  for  the  owners  to  be  absolved  from  any   liability
      whatsoever.”
           “99. So far as the purported conflict in the judgments of  Kamla
      and Lehru is concerned, we may wish to point out that the  defence  to
      the effect that the licence held by the person driving the vehicle was
      a fake one, would be available to the insurance companies, but whether
      despite the same, the plea of default on the part  of  the  owner  has
      been established or not would be a question  which  will  have  to  be
      determined in each case.”
           “100. This Court, however, in Lehru must not  be  read  to  mean
      that an owner of a vehicle can under no circumstances have any duty to
      make any enquiry in this respect. The same, however, would again be  a
      question which would arise for consideration in each individual case.”
           “101. The submission of Mr. Salve that in Lehru case, this Court
      has, for all intent and purport, taken away the right  of  insurer  to
      raise a defence that the  licence  is  fake  does  not  appear  to  be
      correct. Such defence can certainly be raised but it will be  for  the
      insurer to prove that the insured  did  not  take  adequate  care  and
      caution to verify the genuineness or otherwise of the licence held  by
      the driver.”

   7.  Swaran Singh’s case (supra) was subsequently  considered  by  a  two-
      Judge Bench of this Court in National Insurance  Company  Limited  vs.
      Laxmi Narain Dhut[3]. It was explained that:
      “Mere absence, fake or invalid driving licence or disqualification  of
      the driver for driving at the relevant  time  are  not  in  themselves
      defences available to the insurer against either the  insured  or  the
      third parties. To avoid its liability towards the insured the  insurer
      has to prove that the insured was guilty of negligence and  failed  to
      exercise reasonable care in the matter of fulfilling the condition  of
      the policy regarding use of vehicles by duly licensed  driver  or  one
      who was not disqualified to drive at the relevant time…”



   8. In a claim for compensation, 
it is certainly open to the insurer under
      Section 149(2)(a)(ii) to take a defence that the driver of the vehicle
      involved in the accident was not duly licensed. 
Once such a defence is
      taken, the onus is on the insurer.
But
even after it  is  proved  that
      the licence possessed by the driver was a fake one, 
whether  there  is
      liability on the insurer is the moot question.
As far as the owner  of
      the vehicle is concerned, when he hires a  driver,  he  has  to  check
      whether the driver has a valid driving licence. Thereafter he  has  to
      satisfy himself as to the competence of the driver.  
If  satisfied  in
      that regard also, it can be said that the owner had  taken  reasonable
      care in employing a person who is qualified and competent to drive the
      vehicle. 
The owner cannot be expected to go beyond that, to the extent
      of verifying the genuineness of the driving licence with the licensing
      authority before hiring the  services  of  the  driver.  
However,  the
      situation would be different if  at  the  time  of  insurance  of  the  vehicle or thereafter the insurance company requires the owner of  the vehicle to have the licence duly verified from the licensing authority  or if the attention of the owner of the vehicle is  otherwise  invited   to the allegation that the licence issued to the  driver  employed  by   him is a fake one and yet the owner does not take  appropriate  action   for verification of  the  matter  regarding  the  genuineness  of  the  licence from the licensing authority. 
That is  what  is  explained  in
      Swaran Singh’s case (supra). If  despite  such  information  with  the  owner that the licence possessed by his driver is fake, no  action  is   taken by the insured for appropriate verification,  then  the  insured  will be at fault and, in such circumstances, the insurance company  is   not liable for the compensation.

   9. On facts, in the instant case, 
the appellant employer had employed the
      third respondent Nirmal Singh as driver in 1994.  
In  the  process  of
      employment, he had been put to a driving test and he had been imparted
      training also. 
The accident took place only after  six  years  of  his
      service in PRTC as driver. In such circumstances, it  cannot  be  said
      that the insured is at fault in having employed a person whose licence
      has been proved to  be  fake  by  the  insurance  company  before  the
      Tribunal.
As we have already noted above, on scanning the evidence  of
      the licensing  authority  before  the  Tribunal,  it  cannot  also  be
      absolutely held that the licence to the driver had not been issued  by
      the said  authority  and  that  the  licence  was  fake.  
Though  the
      appellant had also taken a contention that the compensation is on  the
      higher side, no serious attempt has been  made  and  according  to  us
      justifiably, to canvas that position.

  10. In  the  above  circumstances,  the  appeal  is  allowed.  The  fourth
      respondent - insurance company is liable to  indemnify  the  appellant
      and, hence, there can be no recovery of the compensation already  paid
      to the claimants.

  11. There is no order as to costs.


                                                             …………….…..…………J.
                                              (GYAN SUDHA MISRA)



                                                             .……..……………………J.
                                              (KURIAN JOSEPH)
New Delhi;
August 26, 2013.





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[1]    (2003) 3 SCC 338
[2]    (2004) 3 SCC 297
[3]    (2007) 3 SCC 700

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                                                                  REPORTABLE


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