Supreme Court of India
NATIONAL INSURANCE COMPANY LTD.versusMEENA AGGARWAL
- Citation
- 2009 INSC 58
- Decided
- 23 January 2009
- Disposal
- Appeal(s) allowed
- Bench
- ARIJIT PASAYAT
Holding
The use of a privately insured vehicle as a taxi and the driver’s lack of a valid licence constitute a fundamental breach of the insurance policy, and the owner is liable to verify the driver’s licence.
Summary
The appellant insurer denied a claim for damage to a Maruti van insured for personal use after it was involved in an accident while being used as a taxi and driven by a person without a valid licence. The District Consumer Forum upheld the denial, but the State Consumer Commission reversed it, holding there was no fundamental breach of the policy, a view affirmed by the National Consumer Disputes Redressal Commission. On appeal, the Supreme Court held that the vehicle owner cannot escape the duty to ensure the driver holds a proper licence and that using the vehicle for commercial purposes contrary to the policy terms constitutes a fundamental breach. The Court found the State and National Commissions had not provided reasons for their conclusions and set aside their orders, allowing the insurer's appeal. Consequently, the insurer was not liable to pay the claim.
Issues considered
- Whether using a privately insured vehicle for commercial (taxi) purposes amounts to a fundamental breach of the insurance policy.
- Whether the driver’s lack of a valid driving licence for the vehicle type discharges the insurer from liability.
- Whether the vehicle owner has a duty to verify that the driver possesses a valid licence.
- Whether the State and National Consumer Commissions erred by not furnishing reasons for finding no fundamental breach.
Legislation cited
- Motor Vehicles Act, 1988s. 10, s. 3
Subjects
insurance claimmotor vehicle accidentdriving licencecommercial usefundamental breachconsumer protectionMotor Vehicles Actowner's duty
Judgment
[2009] 1 S.C.R. 492
A NATIONAL INSURANCE COMPANY LTD.
v.
MEENA AGGARWAL
(Civil Appeal No. 396 of 2009)
JANUARY 23, 2009
B
[DR. ARIJIT PASAYAT AND ASOK KUMAR
GANGULY, JJ.]
+
MOTOR VEHICLES ACT, 1988:
c
Motor vehicle accident - Vehicle badly damaged -
Insurance claim - Rejected on the grounds that the driver of
the vehicle did not possess a valid driving licence and though
the private vehicle was insured for personal use, it was used
D
as a taxi when the accident occu"ed - District Consumer
Forum rejected the claim - State Commission allowed the
claim - Upheld by National Commission - On appeal, Held:
State Commission and National Commission in their orders
did not indicate reason for coming to the conclusion that there
was no fundamental breach of the terms of the insurance
E policy - Hence set aside.
The appellant Insurance Company rejected the claim
for damages to an insured vehicle on the grounds that
~
the driver of the vehicle did not possess a valid driving
F licence and that the insured vehicle was a private vehicle
insured for personal use, but was used as a taxi when
the accident occurred.
The District Consumer Forum also rejected the claim
of the insured. The State Commission allowed the appeal
G
and held that even if the vehicle was being used as a taxi,
there was no fundamental breach of the terms of the
insurance policy. On appeal, the National Commission
held that even though the vehicle was being used as a
H 492
NATIONAL INSURANCE COMPANY LTD. v. MEENA 493
AGGARWAL
-• taxi and the driver did not have a valid driving licence, A
there was no fundamental breach of the terms of the
policy. Hence the appeal by the Insurance Company.
Allowing the appeal, the Court
HELD: 1. In a case of this nature, the owner of a 8
vehicle cannot contend that he has no liability to verify
the fact as to whether the driver of the vehicle possessed
a valid licence or not. [Para 6) [497-C]
National Insurance Co. Ltd. v. Swaran Singh 2004(3) c
SCC 297 and National Insurance Corpn. Ltd. v. Kanti Devi
2005 (5) )SCC 789, relied on.
National Insurance Co. Ltd. v. Kusum Rai, 2006(4) SCC
250, distinguished.
D
2. The State Commission and the National
Commission have not practically indicated any reason for
coming to the conclusion that there was no fundamental
breach of the terms of the policy. Both the State
Commission and the National Commission observed that E
the vehicle was being driven by a person who did not
have a valid driving licence. In addition to that the vehicle
which was insured for personal use was used for
" commercial purposes. [Para 9) [497-F]
F
3. Looked at from any angle the impugned orders of
the State Commission and the National Commission are
unsustainable, deserve to be set aside. [Para 10) [497-G]
Case Law Reference:
G
2004(3) sec 297 relied on Para 4
2005(5) sec 789 relied on Para 5
2006(4) sec 250 distinguished Para 7
H
494 SUPREME COURT REPORTS [2009] 1 S.C.R.
A CIVIL APPELLATE JURISDICTION: Civil Appeal No. 396 -.,.
of 2009.
From the Judgment and final Order dated 3.07.2006 of the
National Consumer Disputes Redressal Commission, New
Delhi in Revision Petition No. 145 of 2006.
8
S.L. Gupta, Ram Lal Kadamb, Goodwill lndeevar and A.V.
Sharma for the Appellant.
The Judgement of the Court was delivered by
c DR. ARIJIT PASAYAT, J.1. Leave granted.
2. Challenge in this appeal is to the order passed by the
National Consumer Disputes Redressal Commission, New
Delhi, (in short the 'National Commission').
D
3. Background facts in a nutshell are as follows:
Respondent was the owner of a vehicle- a Maruti van which
was the subject matter of insurance with the present appellant
for a period from 27.1.2003 to 26.1.2004. The Vehicle in
E question met with an accident on 12.6.2003 and was badly
damaged. The estimate of the cost of repair was prepared by
Automobiles Satya of Bilaspur. According to him the estimated
expenditure on total repair of the vehicle was Rs.2,00,000/-.
y
Intimation of the same was given by the complainant to the
F present appellant and claim was made. The same was
rejected on the ground that the driver of the vehicle did not
possess a valid driving licence and the vehicle which was a
private vehicle was insured for personal use, but was being
used as a taxi for carrying marriage parties. a marriage party
G was being transported in the vehicle after charging rent of
Rs.2100/- when the accident occurred. The driver did not
possess a valid licence and, therefore, the vehicle was being
plied against the .terms of the insurance policy. The District
Consumer Disputes Redressal Forum Sarguja, Ambikapur
H Chhattisgarh, rejected the claim petition. An appeal was
NATIONAL INSURANCE COMPANY LTD. v. MEENA 495
AGGARWAL [DR. ARIJIT PASAYAT, J.)
.... preferred before the State Consumer Dispute Redressal A
Commission, Rajpur (in short the 'State Commission'). By order
dated 17.10.2005, the appeal was allowed. It was held that it
would be proper to declare the claim of complainant as "Non-
standard" consequent to the violation and breach. Therefore,
the present appellant was directed to pay Rs.90,000/- i.e. 75% B
of Rs.1,20,000/- i.e. the amount assessed by the surveyor of
the insurance company along with 9% interest. The only reason
given by the State Commission was that even if the vehicle was
being used as a taxi, there was no fundamental breach of the
terms of the policy. A revision petition was filed before the c
National Commission which came to be dismissed by the
impugned order. The National Commission held that even
though the vehicle was being used as a commercial vehicle and
the driver did not have a valid driving licence, there was no
. fundamental breach of the terms of the policy.
D
According to the appellant the insured vehicle was being
used as a commercial vehicle, and the driver of the vehicle is
required to hold an appropriate licence. If the driver who was
driving the vehicle at a relevant point of time did not possess
any licence to drive a commercial vehicle, there is a breach of E
the conditions of the policy and such plea was available to be
raised as a defence.
y 4. This Court in National Insurance Co. Ltd. v. Swaran
Singh [2004(3) SCC 297) clearly laid down that the liability of
the Insurance Company vis-a-vis the owner would depend upon F
several factors. The owner would be liable for payment of
compensation in a case where the driver was not having a
licence at all. It was the obligation on the part of the owner to
take adequate care to see that the driver had an appropriate
licence to drive the vehicle. The question as regards the liability G
of the owner vis-.a-vis the driver being not possessed of a valid
licence was considered in Swaran Singh's case stating:
"89. Section 3 of the Act casts an obligation on a
driver to hold an effective driving licence for the type of
vehicle which he intends to drive. Section 10 of the Act H
496 SUPREME COURT REPORTS [2009] 1 S.C.R.
A enables the Central Government to prescribe forms of ...
driving licences for various categories of vehicles
mentioned in sub-section (2) of the said section. The
various types of vehicles described for which a driver may
obtain a licence for one or more of them are: (a)
B motprcycle without gear, (b) motorcycle with gear, (c) invalid
car(iage, (d) light motor vehicle, (e) transport vehicle, (f)
road roller, and (g) motor vehicle of other specified
description, The definition clause in Section 2 of the Act
defines various categories of vehicles which are covered
c in broad types mentioned in sub-section (2) of Section 10.
They are 'goods carriage', 'heavy goods vehicle', 'heavy
passenger motor vehicle', 'invalid carriage', 'light motor
vehicle', 'maxi-cab', 'medium goods vehicle', 'medium
passenger motor vehicle', 'motor-cab', 'motorcycle',
'omnibus', 'private service vehicle', 'semi-trailer', 'tourist
D
vehicle', 'tractor', 'trailer' and 'transport vehicle'. In claims
.
for compensation for accidents, various kinds of breaches
with regard to the conditions of driving licences arise for
consideration before the Tribunal as a person possessing
a driving licence for 'motorcycle without gear', [sic may be
E driving a vehicle] for which he has no licence. Cases may
also arise where a holder of driving licence for 'light motor
vehicle' is found to be driving a 'maxi-cab', 'motor-cab' or
'omnibus' for which he has no licence. In each case, on
evidence led before the Tribunal, a deci::iion has to be "
F taken whether the fact of the driver possessing licence for
one type of vehicle but found driving another type of vehicle,
was the main or contributory cause of accident. If on facts,
it is found that the accident was caused solely because of
some other unforeseen or intervening causes like
G mechanical failures and similar other causes having no
nexus with the driver not possessing requisite type of
licence, the insurer will not be allowed to avoid its liability
merely for technical breach of conditions concerning
driving licence."
H 5. The matter came up for consideration again before this
NATIONAL INSURANCE COMPANY LTD. v. MEENA 497
AGGARWAL [DR. ARIJIT PASAYAT, J.]
• Court in National Insurance Corpn. Ltd. v. Kanti Devi (2005 A
(5) )SCC 789) wherein this Court upon consideration of the
observations made in Swaran Singh's case opined:
"12. The decision in Swaran Singh case was not
before either MACT or the High Court when the respective
orders were passed. Therefore, we think it proper to remit B
the matter to MACT for fresh consideration. It shall permit
the parties to lead such further evidence as they may intend
to lead. The matter shall be decided keeping in view the
principle enunciated by this Court in Swaran Singh case."
6. In a case of this nature, therefore, the owner of a vehicle C
cannot contend that he has no liatility to verify the fact as to
whether the driver of the vehicle possessed a valid licence or
not.
7. The aforesaid aspect was thereafter highlighted in
National Insurance Co. Ltd. v. Kusum Rai [2006(4) SCC 250).
o·
The said case related to the liability in the case of a third party.
In the instant case, no such claim is involved and the claim is
related to the damage of a vehicle.
8. The respondent has not appeared in spite of service of E
notice.
9. We find that the State Commission and the National
Commission have not practically indicated any reason for
coming to the conclusion that there was no fundamental breach
of the terms of the policy. Both the State Commission and the F
National Commission observed that the vehicle was being
driven by a person who did not have a valid driving licence. In
addition to that the vehicle which was insured for personal use
was used for commercial purposes.
10. Looked at from any angle the impugned orders of the . G
State Commission and the National Commission are
unsustainable, deserve to be set aside, which we direct. No
costs.
G.N. Appeal allowed.
H
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