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CASE NO.: Appeal (civil)  4883 of 2007

PETITIONER: M/s. United India Insurance Co. Ltd

RESPONDENT: Davinder Singh

DATE OF JUDGMENT: 12/10/2007

BENCH: S.B. Sinha & Harjit Singh Bedi

JUDGMENT: J U D G M E N T  [Arising out of  SLP (Civil) No. 1939 of 2007]

S.B. SINHA, J :          1.      Leave granted.

2.     Whether renewal of a licence granted to drive a motor vehicle which  was originally found to be forged would lead to any liability on the part of  the insurance company is the core question involved in this appeal which  arises out of a judgment and order dated 9.10.2006 passed by National  Consumer Disputes Redressal Commission, New Delhi in R.P. No. 2908 of  2006.

3.      Respondent is the owner of the vehicle bearing No. HR-37A-5521.   He got the said vehicle insured on 10.11.2003 for one year, i.e., upto  9.11.2004.  It met with an accident on 20.04.2004 with a truck.  The said  vehicle was being driven by one Kulbir Singh.  Upon investigation made in  this behalf, it was found that the licence bearing No. 6604/R-91-92 held by  Kulbir Singh was not issued by the Licensing Authority, Solan.

4.      However, a complaint petition was filed under Section 12 of the  Consumer Protection Act, 1986 before the District Consumer Disputes  Redressal Forum complaining deficiency in service for not paying the  amount of damages which was covered by the insurance policy, which the  appellant was allegedly bound to pay.  The said complaint petition was  allowed awarding a sum of Rs. 1,23,412/- towards damages, as also a sum of  Rs. 20,000/- towards other heads,  besides interest at the rate of 9% per  annum, holding :

\0238. A plea has been taken by the opposite parties  that Kulbir Singh, driver was not possessing a  valid driving licence at the time of driving the  vehicle.  However, when Mr. Rajesh Shori  inspected the driving licence, he found that the  driving licence had been issued by the DTO,  Hoshiarpur on 23.11.1998.  The original driving  licence was issued by the Licencing Authority,  Solan in 1991-92.  Learned Counsel for the  opposite parties stated that there is no evidence on  the file to the effect that the original driving  licence had been issued by the Licencing Authority  at Solan (H.P.), however, a report has been  received on the back of the summons to the effect  that, the original driving licence No. 6604/R-91-92  in the name of Kulbir Singh son of Amrik Singh  had not been issued by the Licencing Authority,  Solan (H.P.) as mentioned in the report Ex.R-10.   It has been clearly stated by the complainant in his

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affidavit Ex. C-1 that, when he employed the  driver Kulbir Singh, he was possessing a valid  driving licence issued by the Licencing Authority,  Hoshiarpur.  He also verified this driving licence  issued by Licencing Authority, Hosiarpur and also  took his driving test and found that he was an  efficient driver.  There is no rebuttal evidence from  the side of the opposite parties and hence we hold  that the driver Kulbir Singh was possessing a valid  driving licence when the accident took place and  hence the opposite parties illegally repudiated the  claim of the complainant.  As the opposite parties  failed to make payment of compensation and,  therefore, it is a case of deficiency in service.\024

5.      An appeal preferred thereagainst was also dismissed by the State  Consumer Dispute Redressal Commission.  A revision application filed  before the National Commission met with the same result.

6.      The learned counsel appearing on behalf of the appellant, inter alia,  would submit :  (i)     that a fake licence cannot be renewed and that too by an Authority  which did not originally grant the same;   (ii)    indisputably, the complainant was the owner of the vehicle in  question;   (iii)   it was comprehensibly insured;   (iv)    the vehicle, however, was being driven by Kulbir Singh who did not  have an effective driving licence and in that view of the matter, the  respondent was not entitled to grant of any amount by way of  compensation or otherwise.

7.      The learned counsel appearing on behalf of the respondent, on the  other hand, would submit that :  

(i)     in terms of the insurance policy the owner was required to take only  reasonable care to ascertain as to whether the driver had been  possessing a valid licence or not ;   (ii)    it was not possible for him to ascertain from the original Licensing  Authority as to whether any licence had been issued by it or not;  (iii)   the duty of the owner is merely to take reasonable care in the matter as  it is not expected that he would make a detailed enquiry in this behalf.

8.      The complainant is the owner of the vehicle.  The Motor Vehicles  Act, 1988 was enacted to meet the social obligation in regard to a third party  as a result whereof taking a cover of insurance is mandatory.   9.      In terms of Section 149 of the Motor Vehicles Act, however, taking of  an insurance policy in relation to damages which may be suffered by the  owner of the vehicle was not compulsorily insurable.         10.     It is, thus, axiomatic that whereas an insurance company may be held  to be liable to indemnify the owner for the purpose of meeting the object and  purport of the provisions of the Motor Vehicles Act, the same may not  necessary in a case where an insurance company may refuse to compensate  the owner of the vehicle towards his own loss.  A distinction must be borne  in mind as regard the statutory liability of the insurer vis-‘-vis the purport  and object sought to be achieved by a beneficient legislation before a forum  constituted under the Motor Vehicles Act and enforcement of a contract qua  contract before a Consumer Forum.   

11.     In National Insurance Co. Ltd. v. Swaran Singh and Others [(2004) 3  SCC 297], whereupon strong reliance has been placed by the learned  counsel appearing on behalf of the respondent, this Court was dealing with a  question in regard to the claim of a third party vis-‘-vis the role of an  insurance company.  It is in that context, this Court opined:  

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\02489.  Section 3 of the Act casts an obligation on a  driver to hold an effective driving licence for the  type of vehicle which he intends to drive. Section  10 of the Act enables the Central Government to  prescribe forms of driving licences for various  categories of vehicles mentioned in sub-section (2)  of the said section. The various types of vehicles  described for which a driver may obtain a licence  for one or more of them are: ( a ) motorcycle  without gear, ( b ) motorcycle with gear, ( c )  invalid carriage, ( d ) light motor vehicle, ( e )  transport vehicle, ( f ) road roller, and ( g ) motor  vehicle of other specified description. The  definition clause in Section 2 of the Act defines  various categories of vehicles which are covered in  broad types mentioned in sub-section (2) of  Section 10. They are \023goods carriage\024, \023heavy  goods vehicle\024, \023heavy passenger motor vehicle\024,  \023invalid carriage\024, \023light motor vehicle\024, \023maxi- cab\024, \023medium goods vehicle\024, \023medium  passenger motor vehicle\024, \023motor-cab\024,  \023motorcycle\024, \023omnibus\024, \023private service  vehicle\024, \023semi-trailer\024, \023tourist vehicle\024,  \023tractor\024, \023trailer\024 and \023transport vehicle\005  

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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 5 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. We would be dealing in some  detail with this aspect of the matter a little later.  

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110. ( iii ) The breach of policy condition e.g.  disqualification of the driver or invalid driving  licence of the driver, as contained in sub-section  (2)( a )( ii ) of Section 149, has to be proved to  have been committed by the insured for avoiding  liability by the insurer. 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 a duly licensed  driver or one who was not disqualified to drive at

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the relevant time.\024

12.     The said decision has been distinguished by a Bench of this Court in  National Insurance Co. Ltd. v. Laxmi Narain Dhut [(2007) 3 SCC 700] in  the following terms:   \02436. The inevitable conclusion therefore is that the  decision in Swaran Singh case 1 has no application  to own damage cases. The effect of fake licence  has to be considered in the light of what has been  stated by this Court in New India Assurance Co. v.  Kamla. Once the licence is a fake one the renewal  cannot take away the effect of fake licence. It was  observed in Kamla case as follows: (SCC p.   347,  para 12)  

\023 12 . As a point of law we have no manner  of doubt that a fake licence cannot get its  forgery outfit stripped off merely on account  of some officer renewing the same with or  without knowing it to be forged. Section 15  of the Act only empowers any licensing  authority to \021renew a driving licence issued  under the provisions of this Act with effect  from the date of its expiry\022. No licensing  authority has the power to renew a fake  licence and, therefore, a renewal if at all  made cannot transform a fake licence as  genuine. Any counterfeit document showing  that it contains a purported order of a  statutory authority would ever remain  counterfeit albeit the fact that other persons  including some statutory authorities would  have acted on the document unwittingly on  the assumption that it is genuine.\022 \024   13.     Laxmi Narain Dhut (supra) has since been followed by this Court in  The Oriental Insurance Company Limited v. Meena Variyal and Ors. [2007  (5) SCALE 269] wherein this Court referring to Swarn Singh (supra) held:

\023It is difficult to apply the ratio of this decision to  a case not involving a third party. The whole  protection provided by Chapter XI of the Act is  against third party risk. Therefore, in a case where  a person is not a third party within the meaning of  the Act, the insurance company cannot be made  automatically liable merely by resorting to the  Swaran Singh (supra) ratio. This appears to be the  position. This position was expounded recently by  this Court in National Insurance Co. Ltd. v. Laxmi  Narain Dhut 2007 (4) SCALE 36. This Court after  referring to Swaran Singh (supra) and discussing  the law summed up the position thus: In view of the above analysis the following  situations emerge:

1. The decision in Swaran Singh’s case (supra) has  no application to cases other than third party risks.

2. Where originally the licence was a fake one,  renewal cannot cure the inherent fatality.

3. In case of third party risks the insurer has to  indemnify the amount and if so advised, to recover  the same from the insured.

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4. The concept of purposive interpretation has no  application to cases relatable to Section 149 of the  Act.\024

[See also Oriental Insurance Co. Ltd. v. Brij Mohan and Ors., 2007 (7)  SCALE 753].

14.     The decisions of this Court in Laxmi Narain Dhut (supra) as also  Meena Variyal (supra) being directly on the point, we are bound thereby.   

15.     In view of the aforementioned authoritative pronouncements, we are  of the opinion that the court below committed an error in holding the  appellant liable to indemnify the owner of the vehicle in regard to losses  sustained by him.  16.     Different considerations would arise in a case of this nature, as the  consumer forum established under the Consumer Protection Act, 1986 was  concerned only with a question as to whether there was deficiency of service  on the part of the appellant or not.  A right on the part of the Insurance  Company not to pay the amount of insurance would depend upon the facts  and circumstances of each case.  It in certain situation may be bound to pay  the claim made by the third party; if the same is filed before a forum created  under the Motor Vehicles Act.  But defence may be held to be justified  before a different forum where the question raised is required to be  considered in a different manner.   17.     For the reasons aforementioned, the impugned judgment cannot be  sustained which is set aside accordingly.  The appeal is allowed.  However,  in the facts and circumstances of the case, there shall be no order as to costs.