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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 1999-2000 OF 2020  (ARISING     OUT     OF     SPECIAL     LEAVE     PETITION     (  C  ) NOS  .   14739-14740 OF 2018)

NIRMALA KOTHARI …..     APPELLANT(S)

VERSUS

UNITED INDIA INSURANCE CO. LTD. …..     RESPONDENT(S)

J U D G M E N T

KRISHNA MURARI, J.

Leave granted.

2. The  Appellant/Complainant,  Nirmala  Kothari’s  husband,  Vinod

Ray Kothari was owner of a Hyundai Elantra vehicle, registration no.

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RJ36CA 0111, which was insured with the Insurance Company for a

sum of Rs.5,00,000/- .

3. The said vehicle met with an accident with a tractor  bearing no.

HR38K  3216, on  06.06.2010  as  a  result  of  which  the  Appellant’s

husband, Vinod Ray Kothari, who was the owner of the car, and his

daughter died and the vehicle was damaged. The driver of the vehicle,

Dharmendra Singh Chauhan got an FIR registered with the police.  The

Respondent/ Insurance Company, on intimation having been given to

them, appointed a spot surveyor, and also a regular surveyor to carry

out survey in the matter, but the claim was rejected by them vide their

letter dated 28.03.2011. The Respondent/ Insurance Company stated in

the repudiation letter that the driver Dharmendra Singh Chauhan did not

have a proper driving licence at the time of the accident.  The licence

produced by him, alleged to have been procured from the office of the

licencing authority,  Sheikh Sarai,  Delhi  could  not  be verified,  as  the

concerned officer of the transport department returned their letter with

the endorsement that the record pertaining to the said licence was not

available.  Alleging deficiency on the part of the Respondent/ Insurance

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Company,  the  complainant  filed  a  consumer  complaint,  seeking

directions to the Respondent/Insurance Company to pay the Insured

declared value (IDV) i.e. a sum of Rs. 5,00,000/- alongwith interest @

9% per annum from the date of filing the complaint till payment and also

to pay a sum of Rs. 50,000/- as compensation for mental agony and

Rs. 11,000/- as litigation cost. The District Forum vide their order dated

30.05.2012,  allowed  the  said  consumer  complaint  and  directed

payment  of  an  amount  of  Rs.  3,57,500/-  to  the  complainant,  as

assessed by the surveyor alongwith interest  @ 9% p.a.  and cost  of

litigation of Rs. 2,500/-.  Being aggrieved against the said order of the

District  Forum,  the  Respondent/  Insurance  Company challenged the

same by  way of  appeal  before  the  State  Commission,  but  the  said

appeal having been dismissed vide impugned order dated 18.09.2015,

the  Respondent/  Insurance  Company  came  before  National

Commission by way of the Revision Petition No. 2835/2015.

4. The  complaint  no.  227/2012  had  been  filed  by  the  same

complainant  Nirmala  Kothari,  against  the  Respondent/  Insurance

Company, requesting for compensation of Rs. 2,00,000/- as accident

claim with interest @ 9% per annum and compensation of Rs. 20,000/-

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for  mental  agony  and  Rs.  11,000/-  for  cost  of  litigation.   The

Respondent/ Insurance Company repudiated the said claim also vide

their  letter  dated  14.02.2012  on  the  same ground  that  Dharmendra

Singh Chauhan, the driver of the vehicle did not possess a valid and

effective driving licence at the time of the accident in question.

5. The consumer complaint no. 227/2012 was also allowed by the

District  Forum,  vide  order  dated  28.02.2013  and  the

Respondent/Insurance Company was directed to pay an amount of Rs.

2,00,000/-  for  personal  accident  claim along with interest  @ 9% per

annum from the date of filing the complaint and the cost of litigation of

Rs.  2,500/-.   Being  aggrieved  against  the  said  order  of  the  District

Forum, the Respondent/ Insurance Company challenged the same by

way of appeal no. 366/2013 before the State Commission. The said

appeal having been dismissed vide impugned order dated 01.08.2016,

the  Respondent/  Insurance  Company  came  before  the  National

Commission  by  way  of  the  Revision  Petition  No.  3053/2016.   The

National Commission absolved the Respondent/ Insurance Comapany

of its liability since no record of the licence of the Driver was found with

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the licencing authority. Thus, aggrieved the Appellant/Complainant has

come up in appeal.

6. It is the case of the Respondent/ Insurance Company that in the

absence of a valid and effective driving licence with the driver, there

was fundamental breach of the terms and conditions of the insurance

policy  in  question  and  hence,  the  claim  made  by  the  Appellant/

Complainant was not payable.  Whereas, it is argued by the Appellant/

Complainant that at the time of employing the driver, the documents like

driving licence etc. are generally checked but no one usually verifies the

genuineness of the same.  

7. 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 licenced 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 compensation. In the instant case it is a matter of

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fact that no record of the licence bearing no. P03041288753070 was

found with the licensing authority.  

8. Having set forth the facts of the present case, the question of law

that  arises  for  consideration  is  what  is  the  extent  of  care/diligence

expected of the employer/insured while employing a driver? To answer

this question, we shall advert to the legal position regarding the liability

of  the  Insurance  Company when the  driver  of  the  offending  vehicle

possessed an invalid/fake driving licence. In the case of  United India

Insurance Co. Ltd. vs. Lehru & Ors.1 a two Judge Bench of this court

has taken the view that the Insurance Company cannot be permitted to

avoid its liability on the ground that the person driving the vehicle at the

time of the accident was not duly licenced.  It was further held that the

willful breach of the conditions of the policy should be established.  The

law with this respect has been discussed in detail in the case of Pepsu

RTC  vs.  National  Insurance  Co.2  We  may  extract  the  relevant

paragraph from the Judgment: (Pepsu case, SCC pp. 223-24, para10)

1 (2003) 3 SCC 338 : 2003 SCC (Cri) 641 2 (2013) 10 SCC 217

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“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. While the insurer can certainly take the defence that the licence of

the driver of the car at the time of accident was invalid/fake however the

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onus of proving that the insured did not take adequate care and caution to

verify the genuineness of the licence or was guilty of willful breach of the

conditions of the insurance policy or the contract of insurance lies on the

insurer.  

10. The view taken by the National Commission that the law as settled in

the Pepsu case (Supra) is not applicable in the present matter as it related

to third-party claim is erroneous. It has been categorically held in the case

of National Insurance Co. Ltd. vs. Swaran Singh & Ors.3 (SCC pp.341,

para 110) that,

“110. (iii)…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 licenced driver or one who was not disqualified to drive at the relevant time.”

3  (2004) 3 SCC 297 : 2004 SCC (Cri) 733

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11. While hiring a driver the employer is expected to verify if the driver

has a driving licence. If the driver produces a licence which on the face of

it looks genuine, the employer is not expected to further investigate into

the authenticity of the licence unless there is cause to believe otherwise. If

the employer finds the driver to be competent to drive the vehicle and has

satisfied himself that the driver has a driving licence there would be no

breach of Section 149(2)(a)(ii) and the Insurance Company would be liable

under the policy. It would be unreasonable to place such a high onus on

the insured to make enquiries with RTOs all over the country to ascertain

the veracity of the driving licence. However, if the Insurance Company is

able to prove that  the owner/insured was aware or had notice that  the

licence  was fake or  invalid  and still  permitted  the  person  to  drive,  the

insurance company would no longer continue to be liable.

12. On  facts,  in  the  instant  case,  the  Appellant/Complainant  had

employed  the  Driver,  Dharmendra  Singh  as  driver  after  checking  his

driving licence. The driving licence was purported to have been issued by

the licencing authority, Sheikh Sarai, Delhi, however, the same could not

be verified as the concerned officer of the licencing authority deposed that

the  record  of  the  licence  was  not  available  with  them.  It  is  not  the

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contention  of  the  Respondent/  Insurance  Company  that  the

Appellant/complainant is  guilty of  willful  negligence while employing the

driver. The driver had been driving competently and there was no reason

for the Appellant/Complainant to doubt the veracity of the driver’s licence.

In view of above facts and circumstances, the impugned judgment is not

liable to be sustained and is hereby set aside. The appeals accordingly

stand  allowed.  The  respondent/  Insurance  Company  is  held  liable  to

indemnify the appellant.

……………………… J. (Navin Sinha)

……………………… J. (Krishna Murari)

NEW DELHI; 04TH MARCH, 2020