Holding

The insurer is liable to pay the third‑party compensation despite the driver’s fake licence, and may recover the amount from the vehicle owner and driver.

Summary

On 14 November 2000, Ishwar Dutt Bhat died in a road accident caused by a truck insured by National Insurance Co. Ltd. The driver, Gopal Singh, was later found to be holding a fake driving licence. The claimants, Bhat's legal heirs, filed a claim under Section 166 of the Motor Vehicles Act, 1988, and the Motor Vehicles Accident Claims Tribunal awarded compensation. The insurer contended that the fake licence discharged its liability, but the Supreme Court held that the existence of a fake licence does not absolve the insurer from paying third‑party compensation. The Court directed the insurer to pay the awarded amount, with liberty to recover it from the vehicle owner and driver, and dismissed the appeal.

Issues considered

Whether an insurer is liable to pay third‑party compensation under Section 166 of the Motor Vehicles Act when the driver of the insured vehicle holds a fake driving licence.
Whether the insurer must prove a wilful breach of the insurance contract to escape liability in such cases.

Legislation cited

Motor Vehicles Act, 1988s. 166

Subjects

Motor Vehicles ActSection 166third‑party liabilityinsurance indemnityfake driving licenceinsurer liabilitycontract breach

Judgment

[2008] 5 S.C.R. 734

A NATIONAL INSURANCE COMPANY LTD.
II.
GEETA BHAT & ORS.
(Civil Appeal No. 2257 of 2008)
MARCH 31, 2008
B
[S.B. SINHA AND V.S. SIRPURKAR, JJ.]

Motor Vehicles Act, 1988 - s. 166 - Motor accident -
Death caused - Third party claim - Driver of offending vehicle
c holding fake driving licence - Liability of insurance company
to pay compensation amount - Held: Where third party claim
is concerned, factum of holding of fake licence by the driver,
would not absolve the insurer to reimburse the insured - In
the interest of justice insurance company directed to pay the
compensation amount, with liberty to recover the same from
D
the insured and the driver of the vehicle.
One person died in an motor accident. Respondents-
his legal heirs filed claim petition. Insurance company
took the plea that the driver of the offending vehicle did
E not hold a valid licence and therefore the Company was
not liable to pay the compensation. Motor Accident Claims
Tribunal awarded the compensation discarding the plea
of the insurer. High Court dismissed the appeal. Hence
the present appeal.
F Dismissing the appeal, the Court
HELD: 1. 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
G 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 ~-

H 734
NATIONAL INSURANCE COMPANY LTD. v. GEETA 735
BHAT & ORS .
... Transport Offices. It is, therefore, assumed that the licence A
possessed by the driver was a fake one.[Paras 8 and 13)
[738-8-C; 742-C-D]
1.2 Only because the licence held by the driver of
the offending vehicle was fake, the same; would not
absolve the insurer to reimburse the owner of a vehicle in B
.. 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. [Para 13) [742-D]
1.3 Interest of justice shall be subserved if the 't
appellant is directed to pay the awarded amount .in favour
of the claimants with liberty to recover the same from the
owner and the driver of the vehicle, in an appropriate ·
proceeding in accordance with law. [Para 15) [742-F].
National Insurance Co. Ltd. v. Swaran Singh 2004 (3) D
sec 297- relied on.
J.
, National Insurance Co. Ltd. v. Laxmi Narain Dhut 2007 .
(3) SCC 700; The Oriental Insurance Co. Ltd. v. Meena Variyal
and Ors. 2007 (5) SCALE 269; Smt. Yallawwa and Ors. v.
National Insurance Co. Ltd. and Anr. 2007 (8) SCALE 77 - E·
distinguished.
United India Insurance Co. Ld. v. Lehru and Ors. 2003
(3) SCC 338; Oriental Insurance Co. Ltd. v. Brij Mohan and
Ors. 2007 (7) SCALE 753; United India Insurance Co. Ltd. v. F
Davinder Singh 2007 (8) SCC 698; Prem Kumar and Ors. v.
,. Prahlad Dev and Ors. 2008 (1) SCALE 531; Oriental
Insurance Co. Ltd. v. Prithvi Raj 2008 (1) SCALE 727 - referred
to.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. G
2257 of 2008
From the final Judgment and Order dated 30.10.2003 of
·-~ the High Court of Punjab and Haryana at Chandigarh in F.A.O.
No. 4413 of 2003.
H
736 SUPREME COURT REPORTS [2008] 5 S.C.R.

A B.K. Satija and Dr. Sushi Balwada for the Appellant.
K.S. Rana for the Respondents.
The Judgment of the Court was delivered by
S.B. SINHA, J. 1. Leave granted.
B
2. On 14.11.2000, lshwar 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.
c Respondents, being the heirs and legal representatives
of the said Shri lshwar 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
D
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
E 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 investigat9r, it
F 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
LAAlwar to issue the verification certificate for the DL No.
G 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.
H
738 SUPREME COURT REPORTS [2008] 5 S.C.R.

A 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 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
c 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
D
cover a third party risk, vis-a-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].

E 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
F 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
G 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
H for the purpose of its disentitlement from raising any
NATIONAL INSURANCE COMPANY LTD. v. GEETA 739
BHAT & ORS. [S.B. SINHA, J.]

defence or for the owners to be absolved from any liability A
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 Narain Dhut [(2007) 3 SCC 700] B
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 c
noted:

(i) the driver had a licence but it was fake;

(ii) the driver had no licence at all;
D
(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; E

(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 F
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 G
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 H
740 SUPREME COURT REPORTS [2008] 5 S.C.R.

A 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.
- i

B 2. Where originally the licence was a fake one, renewal
cannot cure the inherent fatality.
./A
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.
c
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
D matter afresh in the light of the positioh 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 :
E
"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
F 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
G
((1977) 2 SCR 886], of a three Judge Bench of this Court
was relied on in support.
xxx xxx xxx .... -t •

Learned counsel for the respondent contended that ·there
H
NATIONAL INSURANCE COMPANY LTD. v. GEETA 741
BHAT & ORS. [S.B. SINHA, J.)

was no.obligation on the claimant to prove negligence on A
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 8. Mehta's C?se (supra) are in the B
..-' 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 VllA of the 1939 Act and the introduction of
Section 92A providing for compensation and the c
expansion of the provision as to who could make a claim,
noticing that the application under Section 11 OA 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
obiigation to establish negligence. This Court was dealing
D

).·
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 E
of negligence in contradistinction to Section 166 of the
Act. We may notice that Minu 8. 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 F
binding only on the High Courts in the absence of a direct
.y
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."
G
[See also Oriental Insurance Co. Ltd. v. 8rij Mohan &
Ors. [2007) 7 SCALE 753 and United India Insurance Co. Ltd.
v. Davinder Singh [(2007) 8 SCC 698J.
,.. ,,.
In Smt. Yallawwa & Ors. v. National Insurance Co. Ltd. &
Anr. [2007 (8) SCALE 77], this Court opined : H
742 SUPREME COURT REPORTS [2008] 5 S.C.R.

A "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.
B [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
c 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 5th respondent, Gopal Singh was a fake one.
Only because the same was fake, the same, having regard to
D 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.
E 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 subserved if the appellant is directed to pay the awarded
F 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
G observations. No costs.
K.K.T. Appeal dismissed.
,ii' ,,,

H