http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 5  

CASE NO.: Appeal (civil)  2257 of 2008

PETITIONER: National Insurance Co. Ltd

RESPONDENT: Geeta Bhat & Ors

DATE OF JUDGMENT: 31/03/2008

BENCH: S.B. Sinha & V.S. Sirpurkar

JUDGMENT: J U D G M E N T

REPORTABLE

CIVIL APPEAL NO  2257 OF 2008 (Arising out of SLP (C) No.18509 of 2004)

S.B. Sinha, J.

1.      Leave granted. 2.      On 14.11.2000, Ishwar Dutt Bhat was traveling in a three wheeler.  It  met with an accident having been hit by a truck bearing registreation No.HR  38 9179.  The said vehicle was insured with the appellant.   Respondents, being the heirs and legal representatives of the said Shri  Ishwar Dutt, filed a claim petition.  Appellant, in its written statement, raised  a contention that the driving licence possessed by the driver of the truck was  a fake one. 3.      In the proceedings before the Motor Vehicles Accident Claims  Tribunal (the Tribunal), it prayed for examination of the concerned clerk of  the Motor Vehicles Department.  The said prayer was allowed.  The  concerned Clerk of the Licencing Authority, Alwar was summoned.  The  said summons were served in the office of the Transport Authority.  The  Transport Authority, however, did not depute any officer to produce the  documents called for.   Appellant, however, brought on records evidence to the effect that on  an investigation made by its own investigator, it was found that no such  licence had been issued in the name of Gopal Singh, the driver of the  vehicle.  In its report dated 20.3.2003, the said investigator stated : "Kindly, note that an application was moved by us  to the LA Alwar to issue the verification certificate  for the DL No. as cited above, along with the  photocopy of the DL received by us.         But our opinion was returned back by the  concerning officer because the above ref. DL has  no relevancy with the records LA Alwar.         However, the record register was shown to  us which shows that DL No.20734/94 was issued  on dated 28.3.94.         Thus, it is confirmed that no such DL  No.3956/Alwar/94 dated 27.3.94 is issued by LA  Alwar. Conclusion : Verification certificate for the above  said DL cannot be obtained from LA Alwar.         This report is issued without prejudice."

4.      The Tribunal, however, on the premise that the said fact was not  proved, held :

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 5  

"The insurance company in spite of availing  several opportunities did not lead any evidence in  support of this assertion that Respondent No.1 was  not holding a valid and effective driving licence.   So the Insurance Company has failed to discharge  the onus of this issue.  Accordingly this issue is  decided against the Insurance Company."

       The appeal preferred by the appellant before the High Court was  dismissed summarily.  5.      Mr. B.K. Satija, learned counsel appearing on behalf of the appellant,  would submit that the licence of the driver having been found to be a fake  one, the High Court committed a serious error in dismissing the appeal of  the appellant summarily.   6.      Liability of an insurer to reimburse the insured, as an owner of the  vehicle not only depends upon the terms and conditions laid down in the  contract of insurance but also the provisions of the Motor Vehicles Act,  1988 (the Act).  The owner of vehicle is statutorily obligated to obtain an  insurance for the vehicle to cover the third party risk.  A distinction has to be  borne in mind in regard to a claim made by the insured in respect of damage  of his vehicle or filed by the owner or any passenger of the vehicle as  contradistinguished from a claim made by a third party.   7.      An owner of the vehicle is bound to make reasonable enquiry as to  whether the person who is authorized to drive the vehicle holds a licence or  not.  Such a licence not only must be an effective one but should also be a  valid one.  It should be issued for driving a category of vehicle as specified  in the Motor Vehicles Act and/or Rules framed thereunder.   8.      Indisputably, in a case where the terms of the contract of insurance are  found to have been violated by the insured, the insurer may not be held to be  liable for reimbursing the insured.  So far as a driving licence of a  professional driver is concerned, the owner of the vehicle, despite taking  reasonable care, might have not been able to find out as to whether the  licence was a fake one or not.  He is not expected to verify the genuineness  thereof from the Transport Offices.   9.      The question in regard to the statutory obligation on the part of an  owner of a vehicle to obtain an insurance policy to cover a third party risk,  vis-‘-vis possession of a fake licence by a driver who had been employed  bona fide by the owner thereof had come up for consideration before this  Court United India Insurance Co. Ld. v. Lehru & Ors. [(2003) 3 SCC 338].   10.     Lehru’s case was noticed in great details by a Three Judge Bench of  this Court in National Insurance Co. Ltd. v. Swaran Singh [(2004) 3 SCC  297], holding : "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. We would be dealing in some  detail with this aspect of the matter a little later."

11.     Swaran Singh had been followed later on in some cases by this Court.   It was, however, distinguished in National Insurance Co. Ltd. v. Laxmi

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 5  

Narain Dhut [(2007) 3 SCC 700] in the following terms : "9. The primary stand of the insurance company is  that the person driving the vehicle did not have a  valid driving licence. In Swaran Singh case the  following situations were noted:  

(i)     the driver had a licence but it was fake; (ii)    the driver had no licence at all;   

(iii)   the driver originally had a valid licence but  it had expired as on the date of the accident  and had not been renewed;  (iv)    the licence was for a class of vehicles other  than that which was the insured vehicle;   

(v)     licence was a learner’s licence.  

Category ( i ) may cover two types of situations.  First, the licence itself was fake and the second is  where originally that licence is fake but there has  been a renewal subsequently in accordance with  law.  

XXX                     XXX                     XXX 37. As noted above, the conceptual difference  between third-party right and own damage cases  has to be kept in view. Initially, the burden is on  the insurer to prove that the licence was a fake one.  Once it is established the natural consequences  have to flow. XXX                     XXX                     XXX 38. In view of the above analysis the following  situations emerge :  1.      The decision in Swaran Singh case 1 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. 4.      The concept of purposive interpretation has  no application to cases relatable to Section  149 of the Act.  The High Courts/Commission shall now consider  the matter afresh in the light of the position in law  as delineated above."

12.     The said principle was reiterated in The Oriental Insurance Co. Ltd. v.  Meena Variyal & Ors. [2007 (5) SCALE 269] stating : "It was argued by learned counsel for the appellant  that since on the finding that the deceased was  himself driving the vehicle at the time of the  accident, the accident arose due to the negligence  of the deceased himself and hence the insurer is  not liable for the compensation.  Even if the case  of the claimant that the car was driven by  Mahmood Hasan was true, then also, the claimant  had to establish the negligence of the driver before  the insured could be asked to indemnify the  insured.  The decision in Minu B. Mehta & Anr. v.  Balkrishna Ramchandra Nayan & Anr. [(1977) 2  SCR 886], of a three Judge Bench of this Court  was relied on in support.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 5  

XXX                     XXX                     XXX Learned counsel for the respondent contended that  there was no obligation on the claimant to prove  negligence on the part of the driver.  Learned  counsel relied on Gujarat State Road Transport  Corporation, Ahmedabad v. Ramanbhai  Prabhatbhai & Anr. [(1987) 3 SCC 234] in  support.  In that decision, this Court clarified that  the observations in Minu B. Mehta’s case (supra)  are in the nature of obiter dicta.  But, this Court  only proceeded to notice that departures had been  made from the law of strict liability and the Fatal  Accidents Act by introduction of Chapter VIIA of  the 1939 Act and the introduction of Section 92A  providing for compensation and the expansion of  the provision as to who could make a claim,  noticing that the application under Section 110A of  the Act had to be made on behalf of or for the  benefit of all the legal representatives of the  deceased.  This Court has not stated that on a claim  based on negligence there is no obligation to  establish negligence.  This Court was dealing with  no-fault liability and the departure made from the  Fatal Accidents Act and the theory of strict  liability in the scheme of the Act of 1939 as  amended.  This Court did not have the occasion to  construe a provision like Section 163A of the Act  of 1988 providing for compensation without proof  of negligence in contradistinction to Section 166 of  the Act.  We may notice that Minu B. Mehta’s case  was decided by three learned Judges and the  Gujarat State Road Transport Corporation case  was decided only by two learned Judges.  An  obiter dictum of this Court may be binding only on  the High Courts in the absence of a direct  pronouncement on that question elsewhere by this  Court.  But as far as this Court is concerned,  though not binding, it does have clear persuasive  authority."

       [See also Oriental Insurance Co. Ltd. v. Brij Mohan & Ors. [2007) 7  SCALE 753 and United India Insurance Co. Ltd. v. Davinder Singh [(2007)  8 SCC 698].         In Smt. Yallawwa & Ors. v. National Insurance Co. Ltd. & Anr. [2007  (8) SCALE 77], this Court opined : "The recent decisions of this Court are authorities  for the proposition that the insurance company  would not be liable in cases where passengers of a  vehicle are not third parties."

       {See also Prem Kumar & Ors. v. Prahlad Dev & Ors. [2008 (1)  SCALE 531] and Oriental Insurance Co. Ltd. v. Prithvi Raj [2008 (1)  SCALE 727]}.         Thus, whereas in a case where a third party has raised a claim, Swaran  Singh (supra) would apply, in a claim made by the owner of the vehicle or  other passengers of a vehicle, it would not. 13.     We would, therefore, assume that the licence possessed by the 6th  respondent, Gopal Singh was a fake one. Only because the same was fake,  the same, having regard to the settled legal position, as noticed hereinbefore,  would not absolve the insurer to reimburse the owner of a vehicle in respect  of the amount awarded in favour of a third party by the Tribunal in exercise  of its jurisdiction under Section 166 of the Motor Vehicles Act, 1988.  14.     Nobody has appeared on behalf of the respondents despite service of  notice. 15.     We, therefore, are of the opinion that interest of justice shall be

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 5  

subserved if the appellant is directed to pay the awarded amount in favour of  respondent Nos.1 to 5 with liberty to recover the same from the owner and  the driver of the vehicle, respondent Nos.6 and 7 in an appropriate  proceeding in accordance with law.  16.     The appeal is dismissed with the aforementioned observations.  No  costs.