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CASE NO.: Appeal (civil) 2387  of  2001 Appeal (civil)  2388     of  2001 Appeal (civil)  2389     of  2001

PETITIONER: NEW INDIA ASSURANCE CO., SHIMLA

       Vs.

RESPONDENT: KAMLA AND ORS.

DATE OF JUDGMENT:       27/03/2001

BENCH: K.T. Thomas & R.P. Sethi.

JUDGMENT:

THOMAS, J.

       Leave granted. L...I...T.......T.......T.......T.......T.......T.......T..J

   If  a fake driving licence happened to be renewed by the statutory  authorities,  would the fakeness of the  original document  get  legally sanctified?  If it cannot, would  the Insurance  Company be liable to pay compensation in  respect of a motor accident occurred while the vehicle was driven by a  person  holding such a sham licence?  These are the  main questions involved in these appeals.

   An accident occurred on 1.3.1993 when a truck, driven by the  8th respondent (Liaqat Ali) capsized.  Three inmates of the  vehicle  died  in the accident.  Legal heirs  of  those three  deceased  persons preferred claims before  the  Motor Accident  Claims  Tribunal concerned (for short the  Claims Tribunal)  as per the provisions of the Motor Vehicles Act, 1988  (for  short the Act).  The owner of the  vehicle  as well as the driver were made parties, besides impleading the insurer   (appellant  Insurance  Company)   in  the   claims proceedings.  It is admitted that the truck was then covered by a valid insurance policy issued by the appellant company. As  we  are now concerned only with the contentions  of  the appellant  Insurance  Company,  that too restricted  to  the question  relating  to the driving licence held by  the  8th respondent,  we  do  not  think it worth  referring  to  the details  of other pleadings set out by the claimants and the contending resistors.

   The   appellant  Insurance  Company,   in  the   written statement  filed  before the Claims Tribunal, pleaded  inter alia  that  the driver of the vehicle did not have  a  valid driving  licence  and hence there was breach of  the  policy condition  and  the corollary is that the Insurance  Company cannot be fastened with the liability to pay compensation to any  one in respect of the accident referred to in the claim petitions.

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   The  insured owner of the vehicle as well as the  driver 8th  respondent  relied  on a document purporting  to  be  a driving  licence  issued  by the licensing  authority  (SDM, Paonta,  Sirmaur  District  in   Himachal  Pradesh)  bearing No.1874-P/90.  The document further shows that it was issued in  favour  of  Liaqat Ali whose photo  affixed  thereon  is admitted  to  be  that of 8th respondent.  That  licence  is claimed  to  have been renewed by the  Licensing  Authority, Rohru  (H.P.)  on  17.4.1993, for a period of  three  years. According  to the insurance company, the said document is  a fabricated  one  as  no  such licence  was  granted  by  the Licensing Authority (SDM), Paonta.

   To  substantiate  the   contention  appellant  insurance company  examined three witnesses.  RW-2 was  Superintendent in  the  office  of the SDM, Paonta.  He said that  no  such licence  was  issued  from that office to  a  person  called Liaqat  Ali.  He further said that no intimation  whatsoever was  received  by  the  SDM,   Paonta,  that  the  licensing authority  of  Rohru (SDM) had renewed the licence  No.1874- P/90.   But  RW-3  a clerk in the office of the SDM,  Rohru has stated that the licence bearing No.1874-P/90 which stood in  the name of Liaqat Ali was renewed by the SDM, Rohru  on 17.4.1993,  for a period of three years with effect from the date  of its expiry.  One Anil Chawla, legal officer of  the appellant  insurance company at Shimla, was examined as RW-4 and  he  said that on enquiry it was found that SDM,  Paonta had  not issued any driving licence to Liaqat Ali and  hence the  document produced by the 8th respondent as his  driving licence is a forged document.

   The driver Liaqat Ali was not examined before the Claims Tribunal.   But the owner of the truck gave evidence to  the effect  that  he engaged the 8th respondent for driving  the truck  only  after satisfying himself that R-8 had  a  valid licence.   He  admitted that the said satisfaction is  based entirely on looking at the questioned document.

   The  Claims  Tribunal  repelled the  contention  of  the insurance  company for which the following observations have been made:

   Evidently,  it was for the New India Assurance  Company to  prove  that the truck driver did not have valid  driving licence  on  the  date of accident.  Apparently,  the  truck driver  had a valid driving licence on the date of  accident because  the same had been issued in his favour by the  SDM, Rohru.   Admittedly,  whenever  a licence  is  renewed,  the Licensing  Authority is required to satisfy itself about the genuineness  of  the  earlier  licence.  Thus,  there  is  a presumption to the effect that while renewing the licence of Shri  Liaqat Ali, the Licensing Authority, i.e.  SDM,  Rohru had  satisfied himself about the genuineness of the  earlier licence.   Therefore, I am of the view that the statement of Shri  Anil Chawla (RW-4) is not sufficient to prove that the earlier  licence  of the truck driver which was  renewed  by SDM, Rohru was a fake licence.  As such, I hold that the New India  Assurance  Company  has failed to  prove  that  truck driver  did  not have valid driving licence on the  date  of accident.

   When  the matter was taken up before the High Court  the counsel  for  the  insurance company contended that  if  the original  licence  was  shown  to be a  forged  document  no

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authority  has  the  power to validate it and  even  if  any validation  was  made  on account of a  mistaken  impression about  the genuineness of the document it would not gain any legitimacy.   The  counsel in the High Court relied  on  the decision  of  a  Full Bench of the Punjab and  Haryana  High Court  in National Insurance Co.  Ltd.  vs.  Santro Devi and ors.   {1997(1)  ACJ 111} which held that a forged  driving licence  though  may be validly renewed, would not become  a valid  driving  licence or a duly issued driving licence  in accordance  with  the Motor Vehicles Act. In spite  of  the said  decision the Division Bench of the High Court did  not accept  the  contention of the insurance company  for  which learned judges adopted the following reasoning:

   From  the  perusal of the record we have  noticed  that licence No.1874-P/90 was issued by Registering and Licensing Authority,  Paonta Sahib, District Sirmaur, which was  valid from  20.3.1990  to 19.3.1993 and the said licence has  been marked  as  X  by  the Tribunal  below.   Thereafter,  the Licensing  Authority,  Rohru, District Shimla,  renewed  the licence   of  the  respondent-driver   from   17.4.1993   to 16.4.1996.   From the entire evidence on record we find that at  the  time of the accident i.e.  on 1.3.1993  respondent- driver of the vehicle was in possession of the valid driving licence and the appellant- Assurance Company has not adduced sufficient  evidence to discharge the burden which was  cast on it under the Act.

   In  this  context  learned  counsel  for  the  Insurance Company  invited  our  attention to a  fact  which  occurred before   the   Claims  Tribunal.    The  insurer  filed   an application for permission to lead evidence for proving that the  licence produced by the 8th respondent was a fake  one. But  that  application was rejected by the  Claims  Tribunal basing on the decision of a Division Bench of the High Court of  Punjab  and  Haryana  (which  is  reported  in  National Insurance  Co.   Ltd.  vs.  Sucha Singh and ors.  {1994  (1) ACJ 374}.  As per the said decision if a licence is renewed it gets validated in view of the provisions of Section 15 of the  Motor  Vehicles Act and the Insurance Company would  be liable to reimburse the insured the compensation amount paid to the victims.  The Claims Tribunal thereupon held that if the  licence  was validly renewed by a  licensing  authority then  it cannot be presumed that the licence was a fake one. On  the  said  reasoning the Claims Tribunal  dismissed  the application of the Insurance Company for leading evidence to show  that  the document produced by the 8th respondent  was forged.

   Learned counsel submitted that the aforesaid decision of the Division Bench (National Insurance Co.  Ltd.  vs.  Sucha Singh)  was  overruled  by the Full Bench of the  same  High Court  in  National  Insurance Co.  Ltd.  vs.   Santro  Devi (supra).   Incidentally, we may refer to a decision rendered by a two-Judge Bench of this Court in National Insurance Co. Ltd.   vs.   Santro Devi and ors.  {1998(1) SCC  219}  which pointed  out that the observations made by the Full Bench in National  Insurance Co.  Ltd.  vs.  Santro Devi were  obiter dicta  because  the facts in that case did not  warrant  any such observation.

   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

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empowers any licensing authority to renew a driving licence issued under the provisions of this Act with effect from the date of its expiry. 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.

   The  observation of the Division Bench of the Punjab and Haryana  High  Court  in National Insurance Co.   Ltd.   vs. Sucha  Singh  (supra)  that  renewal  of  a  document  which purports  to  be a driving licence, will robe even a  forged document  with validity on account of Section 15 of the Act, propounds a very dangerous proposition.  If that proposition is  allowed to stand as a legal principle, it may, no doubt, thrill  counterfeiters  the  world  over as  they  would  be encouraged  to manufacture fake documents in a legion.  What was originally a forgery would remain null and void for ever and  it  would  not acquire legal validity at  any  time  by whatever  process of sanctification subsequently done on it. Forgery  is antithesis to legality and law cannot afford  to validate a forgery.

   We  are not considering the question whether the insured exhausted the enquiry expected of him for satisfying himself about  the  genuineness of the document produced by the  8th respondent  as  his driving licence.  The Insurance  Company must  have,  under law, the opportunity to substantiate  its contention  that  the  document is a  fabricated  one.   The Claims Tribunal went wrong in denying such an opportunity to the appellant Insurance Company.

   Learned  counsel for the respondents next contended that even  if the driving licence of 8th respondent is proved  to be  not  genuine  it would not be enough for  absolving  the Insurance  Company  from  liability.   On  the  other  hand, learned counsel for the appellant Insurance Company, banking on  the  provisions  contained in Section 149  of  the  Act, submitted  that  the insurer will get  complete  exoneration from  liability  on  proof  of  breach of  any  one  of  the conditions  of the policy of insurance.  We have to  examine this  contention  as  a decision on the  same  is  necessary before deciding whether the appellant Insurance Company must be  given  a  further opportunity to substantiate  that  the document is a forged one.

   Chapter  XI of the Act contains provisions for insurance of motor vehicles against third party risk.  Sections 145 to 164  are  subsumed in the said chapter.  Section 146 of  the Act  imposes a prohibition against use of a motor vehicle in public  place  unless the vehicle is covered by a policy  of insurance  complying with the requirements enumerated in the Chapter.   Some categories of vehicles are exempted from the aforesaid compulsion, but we are not concerned with any such category now.

   The  details  regarding the requirements of  the  policy including  the  limits  of  liability   to  be  insured  are enumerated  in  Section 147.  Sub-section (3) of  it  states that a policy shall be of no effect for the purposes of that Chapter  unless  and  until a certificate  of  insurance  is issued  by  the insurer in the prescribed form in favour  of

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the insured.  It is in Section 149 that provisions, relating to  the duty of the insurer for satisfying the judgments and awards  in respect of third party claims, are  incorporated. Sub-section  (1)  says  that the insurer shall  pay  to  the person  entitled to the benefit of a judgment or award as if the  insurer  were  the judgment debtor in  respect  of  the liability,  when  any  such judgment or  award  is  obtained against  the  insured  in  whose  favour  a  certificate  of insurance has been issued.  Of course, the said liability of the  insurer  is subject to the maximum sum assured  payable under the policy.

   Section 149(2) of the Act says that notice regarding the suit  or  other  legal  proceedings shall be  given  to  the insurer  if  such  insurer  is  to  be  fastened  with  such liability.   The purpose of giving such notice is to  afford the  insurer  to  be  made a party in  the  proceedings  for defending  the action on any one of the grounds mentioned in the sub-section.  Among the multiplicity of such grounds the one which is relevant in this case is extracted below:

   (a)  That  there  has  been a  breach  of  a  specified condition  of  the  policy,  being   one  of  the  following conditions, namely:-

   (ii)  a condition excluding driving by a named person or persons or by any person who is not duly licensed, or by any person  who has been disqualified for holding or obtaining a driving licence during the period of disqualification.

   Sub-section  (4) of Section 149 of the Act says that  so much  of the policy as purports to restrict the insurance of the  person insured by reference to any condition shall  as respects such liabilities as are required to be covered by a policy,  be  of  no effect. The proviso to  the  said  sub- section  is  important  for the purpose of  considering  the question  involved  in this case and hence that  proviso  is extracted below:

   Provided that any sum paid by the insurer in or towards the  discharge  of  any  liability of any  person  which  is covered  by  the policy by virtue only of  this  sub-section shall be recoverable by the insurer form that person.

   Similarly,  in  this context sub-section (5) is  equally important  and hence that is also extracted below:  If  the amount which an insurer becomes liable under this section to pay  in respect of a liability incurred by a person  insured by  a policy, exceeds the amount for which the insurer would apart  from  the provisions of this section be liable  under the  policy in respect of that liability, the insurer  shall be entitled to recover the excess from that person.

   A  reading of the proviso to sub-section (4) as well  as the language employed in sub-section (5) would indicate that they  are  intended to safeguard the interest of an  insurer who  otherwise  has  no liability to pay any amount  to  the insured  but  for the provisions contained in Chapter XI  of the  Act.   This means, the insurer has to pay to the  third parties  only  on  account  of the fact  that  a  policy  of insurance has been issued in respect of the vehicle, but the insurer is entitled to recover any such sum from the insured if  the insurer were not otherwise liable to pay such sum to the  insured by virtue of the conditions of the contract  of

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insurance indicated by the policy.

   To  repeat, the effect of the above provisions is  this: When  a valid insurance policy has been issued in respect of a  vehicle  as evidenced by a certificate of  insurance  the burden is on the insurer to pay to third parties, whether or not  there  has been any breach or violation of  the  policy conditions.   But the amount so paid by the insurer to third parties  can be allowed to be recovered from the insured  if as per the policy conditions the insurer had no liability to pay such sum to the insured.

   It is advantageous to refer to a two-Judge Bench of this Court  in  Skandia  Insurance   Co.   Ltd.   vs.   Kokilaben Chandravadan  and ors.  {1987 (2) SCC 654}.  Though the said decision  related  to  the corresponding provisions  of  the predecessor  Act (Motor Vehicles Act, 1939) the observations made   in  the  judgment  are   quite  germane  now  as  the corresponding  provisions are materially the same as in  the Act.   Learned Judges pointed out that the insistence of the legislature  that  a motor vehicle can be used in  a  public place  only  if  that  vehicle is covered  by  a  policy  of insurance  is not for the purpose of promoting the  business of  the Insurance Company but to protect the members of  the community  who  become  sufferers on  account  of  accidents arising  from  use of motor vehicles.  It is pointed out  in the decision that such protection would have remained only a paper  protection if the compensation awarded by the  courts were  not  recoverable by the victims (or dependents of  the victims) of the accident.  This is the raison detre for the legislature  making it prohibitory for motor vehicles  being used  in public places without covering third party risks by a policy of insurance.

   The  principle  laid down in the said decision has  been followed  by a three-Judge Bench of this Court with approval in  Sohan Lal Passi vs.  P.  Sesh Reddy and ors.  {1996  (5) SCC 21}.

   The  position  can be summed up thus:  The  insurer  and insured are bound by the conditions enumerated in the policy and  the  insurer is not liable to the insured if  there  is violation  of any policy condition.  But the insurer who  is made statutorily liable to pay compensation to third parties on  account of the certificate of insurance issued shall  be entitled  to recover from the insured the amount paid to the third  parties, if there was any breach of policy conditions on  account  of  the vehicle being driven  without  a  valid driving  licence.  Learned counsel for the insured contended that  it  is enough if he establishes that he made  all  due enquiries and believed bona fide that the driver employed by him  had a valid driving licence, in which case there was no breach  of the policy condition.  As we have not decided  on that contention it is open to the insured to raise it before the  Claims Tribunal.  In the present case, if the Insurance Company  succeeds  in establishing that there was breach  of the  policy condition, the Claims Tribunal shall direct  the insured  to pay that amount to the insurer.  In default  the insurer  shall be allowed to recover that amount (which  the insurer is directed to pay to the claimants - third parties) from the insured person.

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   We  may  point out that as per the order passed by  this Court  on  6.3.2000,  the appellant  Insurance  Company  was directed  to pay the award amount to the claimants.  We  are told  that  the  amount  was paid by the  appellant  to  the claimants.   Now the Claims Tribunal has to decide the  next question  whether  the  insurance  company  is  entitled  to recover that amount from the owner of the vehicle on account of  the  vehicle being driven by a person who had  no  valid licence to drive the vehicle.  For that purpose we remit the case  to  the  Claims  Tribunal.  An  opportunity  shall  be afforded  to the parties concerned for adducing evidence  in that  regard.  We make it clear that the claimants shall not be bothered during the remaining part of the proceedings.

   The appeals are disposed of in the above terms.