NATIONAL INSURANCE CO. LTD.versusSANTRO DEVI AND ORS. ETC.

                    NA TI ON AL INSURANCE CO. LTD.                                   A
                                        v.
                      SANTRO DEVI AND ORS. ETC.

                            NOVEMBER 18, 1997

              [M.M. PUNCHHI AND M. SRINIVASAN, JJ.]                                  B


      Motor Vehicles Act, 1988: accident-Compensation claimed-Tribunal
held that driver was holding valid licence-Held, claimants were rightly
granted compensa1ion-Observations and findings of High Court on a                    C
presumed question of law regarding renewal of a forged driving licence
struck down.

       A motor accident took place and a claim for compensation was raised
by the respondent. Before the Tribunal a question was raised whether the
driver of the motor vehicle was holding a valid driving licence. The Tribunal        D
held that the licence was valid and had been validly renewed. On appeal, the
High Court affirmed the findings of the Tribunal. Before the Division Bench
of the High court a question arose as to whether a forged or a fake licence,
if renewed, would get validated or not for the purpose of liabilities under the
Motor Vehicles Act, 1989 and the matter was referred to a full Bench of the          E
High Court. The Insurance Company filed the present appeal, challenging
the observations and findings recorded by full Bench in answer to the
question referred to it.

      Allowing the appeal in part, this Court
                                                                                     F
    HELD : I. I. The claimants/respondents had rightly been granted
compensation on account of the motor accident.1220-DI

      1.2. The observations and findings of the High Court on the question
whether a forged or a fake licence if renewed would get validated under the
Motor Vehicles Act is struck down because there was a concurrent finding             G
recorded by the Tribunal as well as by the High Court that the offending
vehicle was driven by a driver who had held a valid licence and it stood
renewed on the date of the accident. There was thus no occasion for the High
Court to have ruled on suppositions to the contrary in order to interpret the
law and that too on a fact situation not available to it. Thus the entire exercise   H
                                      217
    218                      SUPREME COURT REPORTS [1997] SUPP. 5 S.C.R.

A of the High Court was obiter, not a binding precedent. 1220-B-Cf                      l-
           CIVIL APPELLATE JURISDICTION : Civil Appeal No. 7749 of 1997
    Etc.

           From the Judgment and Order dated 17.10.96 of the Punjab & Haryana
B High Court in F.A.F. 0. No. 725of1994.
          P.P. Malhotra, Vineet Malhotra, Shailendra Sharma and Naresh K. Sharma
    for the Appellant.

           Prem Malhotra and Manoj Prasad for the Respondents.
c          The Judgment of the Court was delivered

             Leave granted. This is an appeal against the judgment and order dated
    I 7. I 0.96 passed by a full Bench of three Hon'ble Judges of the High Court
    of Punjab and Haryana in First Appeal from order No. 75 of I 994.
D
           The minimal facts giving rise to this appeal are these :

          There was a motor accident which gave rise to a claim for compensation,
    duly set up the claimants/respondents. One of the questions which was
    brought to the fore was whether the offending motor vehicle was being driven
E   by a driver holding a valid driving licence. The matter was put to issue and ,
    the conclusion arrived at by the Tribunal was that the driver held a valid
    licence which had validly been renewed. This finding stood affirmed in appeal
    before the High Court. Yet it was taken by the High Court that a question of
    law arose as to whether a forged or a fake licence, if renewed would get
    validated or not so as to work out the liabilities under the Motor Vehicles Act.
F   The question gathered momentum in as much as when the cause was before
    a Division Bench of the High Court, it referred the matter to full Bench of three
    Hon 'ble Judges which in tum pronounced as follows :

             "In view of the observations made above, 1 (M. S. Liberhan, J.)
             answer the questions posed as under :
G
             (I) 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.

             (2) The insured bonafidely believing in the validity of a forged driving
H            licence employing the holder of a fake driving licence renewed by a
                N.l.C. LTD. v. SANTRO DEVI                          219
competent authority, would not amount to violation of the conditions       A
of contract or of the insurance policy. It would not be violating either
conditions of indemnity or the insurance policy or the contract or
violation of any statutory provisions. Under these circumstances,
merely employing a driver with a forged driving licence would not
absolve the insurer of its liability.
                                                                           B
(3) In the absence of mens rea or knowledge or intention to violate
the terms of policy or the provisions of the Act by the insured, the
insurance company would not be discharged of its liability from
indemnifying the insurer or of its statutory liability to third party.

(4) The insurance company cannot refuse to meet its liability qua third    C
party for any act or omission bonafidely or otherwise committed by
the insured or its liability inasmuch as third party for whose benefit
the insurance had been provided is not a privity to any breach as
being not in control of the act or conduct of the insured or its
employee or insurer. Thus, the insurance company cannot refuse to          D
meet its liability quo third party.

(5) The insurer is duty bound and liable, statutorily as well as
contractually to reimburse third party claim, for the tortuous act
committed by the insured or his employee as well as the liability
incurred by insured or his employee under the Motor Vehicles Act.
                                                                           E
(6) The insurance company can neither refuse to indemnify nor is
discharged from its liability to the insured or the claimants for an act
of fraud committed by the third party qua the insured though it has
a right to recover any loss suffered by it from the person, who
committed the fraud or from any other authority, as permissible either     F
under tort or any other statute; and

(7) The insurance company would be entitled to recover the amount,
which it has paid to the claimant from the insured or his driver or
employee who has perpetuated fraud and the insurance company was
made to reimburse third party who suffered loss because of the G
tortuous act of the insured or his employee. The insurer wc!!ld not
be left without remedy to reimburse itself. It would be at liberty to
approach under tort in accordance with law for the failure or the state
to discharge common duty care as well as the insured for not observing
due care of an ordinary prudent person, expected from the insured, as
a duty towards the insurer as weil as the person who has committed H
    220                      SUPREME COURT REPORTS [1997] SUPP. 5 S.C.R.

A           the fraud. Remedy as available to the insurer is not a decision by this
            Court while dealing with the question, rather it is left open to be
            determined as and when a question arises in the facts and circumstances
            of a particular case."

           We do· not approve of the High Court having gone on to endeavour
B   streamlining the law when its ratio on the fact situation was 1ikely to be
    rendered totally obiter. As has been said above, there was a concurrent
    finding recorded by the Tribunal as well by the High Court that the offending
    vehicle was driven by a driver who had held a valid licence and it stood
    renewed on the date of the accident. There was thus no occasion for the High
C   Court to have ruled on suppositions to the contrary in order to interpret the
    law and that too on a fact situation not available to it. Thus, we are constrained
    to intervene and hold that the entire exercise of the High Court in that
    direction was obiter, not at all a binding precedent. In that sense, we strike
    off from the impugned order observations and findings pertaining thereto. Yet
    at the same time, we are required and do hereby affirm the substantive part
D   of the order, in holding that the claimanants/respondents had rightly been
    granted compensation on account of the motor accident, on the basis of the
    recorded finding of fact. We cannot help remarking that the High Court
    instead could have well spent its time on other priorities.

          The appeal thus would have to be and is hereby allowed in part to the
E   extent and in the manner afore-indicated.

    SLP (Civil) No. 6262197

        This special Leave Petition was tagged on with the above case on the
  assumption that the fate of the said case would govern the fate of this SLP.
F We find that the question as such was never raised before the High Court.
  The finding of fact recorded by the Motor Accidents' claim Tribunal does not
  positively indicate that the licence of the driver of the offending vehicle was
  fake or forged. All the same, the licence was got renewed which reinforced
  the impression of the High Court that it was not proved substantially that the
G said licence to begin, was fake or forged. The special Leave Petition is,
  therefore, dismissed.

    S.V.K.I.                                    Appeal allowed/Petition dismissed.