Holding

Because the driver did not hold a valid licence on the date of the accident, the insurer was entitled to rely on the breach of the policy condition and was not liable to indemnify the insured.

Summary

The case arose from a motor accident on 27 January 1996 in which two relatives of the claimant died or were injured, leading the dependents to claim compensation under Section 166 of the Motor Vehicles Act, 1988. The Motor Accident Claims Tribunal awarded compensation and held United Indian Insurance Co. Ltd. liable to indemnify the insured, but the High Court reversed this, finding that the driver of the tractor did not possess a valid driving licence at the time of the accident, thereby breaching a condition of the insurance policy. The insurer appealed to the Supreme Court, contending that the licence renewal provisions of Section 15 rendered the driver "duly licensed" retroactively. The Court examined Sections 147, 149(2) and the licence renewal rules, concluding that a licence renewed after more than thirty days takes effect only from the date of renewal and does not make the driver duly licensed at the accident date. Consequently, a breach of the policy condition was established and the insurer was not liable to indemnify the insured. The appeal was dismissed.

Issues considered

What is the effect of Section 15 of the Motor Vehicles Act on the validity of a driving licence when renewal is applied for after the expiry period?
Does the insurer have a defence under Section 149(2) of the Motor Vehicles Act when the driver was not duly licensed at the time of the accident?
Is the insurer liable to pay third‑party compensation when the driver of the insured vehicle lacked a valid licence on the date of the accident?

Legislation cited

Motor Vehicles Act, 1988s. 141, s. 147, s. 149, s. 15, s. 166, s. 3, s. 5, s. 9

Subjects

Motor Vehicles Actinsurance contractlicence renewalSection 149 defencethird‑party liabilitydriver licence validitycompensation claimpolicy breach

Judgment

[2008] 11 S.C.R. 725

RAM BABU TIWAR1 A
v.
UNITED' INDIAN INSURANCE CO.· LTD. & ORS.
(Civil Appeal No. 4749 of 2008)
AUGUST 1, 2008
B
(S.B. SINHA AND CYRIAC JOSEPH~ JJ.]

Motor Vehicles Act, 1988; Ss. 15, 147 and 159:
Motor vehicle accident - Death of two persons - Com-
pensation - Contract of insurance - Breach of condition - Li- c
ability of insurer~ Held: On the date of accident, the driver of
the vehicle did not hold any licence - Breach of the contract
of-insurance established - Hence, High Court rightly held that
insurer not liable to indemnify the insured -·Contract...;.. Breach .
o(condition. · D
.,.
Driving Licence - Renewal - Effective date in the con-
text of insurance claim.
Relatives of claimant were travelling in a truck, which
met with an accident. One of the relatives died on the spot E
and the other was admitted to a hospital where he sue-
cumbed to the injuries. Dependants of the deceased per--
sons filed a petition claiming compensation. The Tribu-
nal passed an award holding the respondent-Insurance
company liable to indemnify the insured. The appeal pre- F
~-
ferred thereagainst by the Insurer was allowed by the High
Court holding that since the driver of the vehicle was not
holding a valid licence on the date of the accident, the·
insurer could not be held liable to indemnify the insured.
Hence the. present appeal.
G
Appellant contended that although the driver of the
tractor did not hold any licence for certain period, but
having regard to the provisions contained in S~ction 15
of the Motor Vehicles Act, 1988 and in particular the sec-
725 H
726 SUPREME COURT REPORTS [2008] 11 S.C.R.

~
A ond proviso appended to sub-section (4) thereof, it must
be held that the renewal of licenc'>~ would take effect from
a retrospective date; and that in any view of the matter in
view of the decision of this Court in National Insurance Co.
Ltd. v. Swaran Singh & Ors., tha respondent cannot escape
B its liability so far as a third party is concerned in view of
Sections 147 and 149 of the Act. +<
Dismissing the appeals, the Court
HELD: 1.1Section147 of tha i'J1otorVehiclesActman-
dates obtaining of compulsory insurance in relation to a
c third party by the own~rs of the motor vehicles. Section
149 of the Act imposes a duty on the insurer to satisfy the
judgments and awards agains~ the· insured in respect of
third party risks. Sub-section (2) o:f Section 149 however
postulates that insurance company would have a right to
D defend the action, inter alia, on a or0und that there has
been a breech of specified condition of the policy as speci- ,,..
fied in various sub-clauses; clause {ii) ~hereof. (Para - 10)
[731-G-HJ
1.2 The question as to wheth!~r the owner of a ve-
E hicle had taken care to inform himself as to whether the
driver entrusted to drive the vehicle was having a licence
or not is essentially a question of fact. However, in the
instant case, it stands admitted that as on the date of ac-
cident the driver did not hold any licence. Furthermore, it
F is beyond dispute that he had a licence only for one year
and for about 3 years thereafter, he failed and neglected ~

to renew his licence. His licence was renewed only on
and from 7.2.1996. (Para - 13) [734-C-DJ
1.3 It is beyond any doubt or dispute that only in the
G event an application for renewal of licence is filed within
a period 30 days from the date of expiry thereof, the same
would be renewed automatically which means that even
if an accident had taken place within the aforementioned
period, the driver may be held to be possessing a valid
H licence. The proviso appended to sub-section (1) of Sec-
RAM BABU TIWARI v. UNITED INDIAN INSURANCE 727
CO. LTD. & ORS

tion 15, however, clearly states that the driving licence A
shall be renewed with effect from the date of its renewal
in the event the application for renewal of a licence is made
more than 30 days after the date of its expiry. It is, there-
fore, evident that as, on renewal of the licence on such
terms, the driver of the vehicle cannot be said to be hold- B
_.,.,. ing a valid licence, the insurer would not be liable to in-
demnify the insured. {Para - 18) [735-E-G]
1.4 The second proviso appended to sub-section (4)
of Section 15 is of no assistance to the appellant. It merely
enables the licensing authority to take a further test of c
competent driving and passing thereof to its satisfaction
within the meaning of Sub-section (3) of Section 9 of the
Act. It does not say that the renewal would be automatic.
It is, therefore, a case where a breach of the contract of
insurance is established. (Para - 18) [735-H; 736-A-B] D
..,. National Insurance Co. Ltd. v. Kusum Rai & Ors. (2006)
4 SCC 250 and lshwar Chandra & Ors. v: Oriental Insurance
Co. Ltd. & Ors. (2007} 10 SCC 650 - relied on.
National Insurance Co. Ltd. vs. Swaran Singh & Ors. E
(2004) 3 sec 297 - distinguished.
2. There is no infirmity in the impugned judgment.
(Para - 20) [737-C]
Case Law Reference F
(200S} 4 sec 2so Relied on. Para - 18
(2007} 1o sec sso Relied on Para - 19
(2004} 3 sec 2s1 Distinguished Para - 8
G
CIVILAPPELLATE JURISDICTION: Ci\:' .:\ppeal No. 4749
of 2008
From the final Judgment and Order dated 28.11.2005 of
the High Court of Judicature of Madhya Pradesh, Jabalpur Bench
at Gwalior in Misc. Appeal No. 4 of 2000 H
-'!'.--

728 . SUPREME COURT REPORTS [2008] 11 S.C.R.

A
C.A. No. 4750 of 2008

'Anish Kumar Gupta, Deep Bhikha Bharti, .Rita Gupta and
Anil Pan~ey for the Appellant. · · ·
s· Vishnu Mehra; .Pramod Dayal, Nikunj Dayal and Sakshi
Mittal for the Respondents. -

The Judgment of the Court was delivered by

S ..B. SINHA, J. 1. Leave granted.
c
2. Appellant is aggrjeved by and dissatisfied with the judg-
ment and order. dated 28.11.2005 passed by the High Court of
Madhya Pradesh at Gwalior in Misc. Appeal No.5/2000 whereby
and whereunder the appeals preferred by the respondent herein ·
D against an award dat~d 6.10 ..1'999 passed by the Additional
Motor Accident Claims Tribunal, Vidisha, in Claim Case Nos.57
of 1998 and 52 of 1998 were· allowed opining that the respon-
dent-insurance company was not lia~le to indemnify the insured.·
3. Bereft of all unnecessary details, the fact of the matter
E is that on 27.1.1996 the deceased Rajendra Singh and Balaram
along with others were travelling by a truck bearing registration
No.MP-06/E/0129 with the.ir buffalos on 27.1.1996 from Agra
to Vidisha. It met with an accident having been hit by a tractor
trolly bearing registration No.MP-6/J/7506. Rajendra Singh died
F on the spot whereas Balaram was seriously injured in the said
accident. He was admitted in a hospital at Gwalior where he
succumbed to his injuries.
4. A First Information Report was also lodged with regard
to the said incident.
G
5. Having been served with a notice in the proceedings
claiming compensation by the dependents of the said deceased
in terms of Section 166 of the Motor Vehicles Act, 1988, the
respondent, in his written statement, inter alia, raised a conten-
H tion that the driver of the tractor, the respondent No.6, did not
RAM BABU TIWARI v. UNITED INDIAN INSURANCE 729
CO. LTD. & ORS [S.B. SINHA, J.]

have any valid and effective driving 1.icence to drive the said A
vehicle on the said date of accident.
6. The learned Tribunal, having regard to the pleadings of
the parties, inter alia, framed the following issue :

Issues Findings B
..
1 to 5 .... ...
6. Whether the terms of the insur- No
ance policy has been violated.in
this case?
c
7. By reason of an award dated 6.10.1999, the learned
Tribunal held that the driver Ram Prakash was having valid li-
cence only for the period 11.i 1990 and t0.2.1993 and again
from 7.2.1996 to 7.2.1999.
D
Indisputably, therefore, the driver Ram Prakash did not hold
any licence during the period 11.2.19S3 to 6.2.1996.
The learned Tribunal held:
"Therefore, in United India Insurance Co. v. Sherali [1999 (1) E
MPW N. 90], it was laid down that if the driver was having
driving license but the same was not got renewed at the time
of the accident, then insurance company can not be
exonerated from its liability. In this case as well, non-applicant
No.1 was having license and for this reason driving of the
tractor in violation of the. terms of the insurance policy is not ·F
~ proved and non-applicant no.2 cannot escape from i~s liability.
Therefore, issue No.6 is being decided negatively."
8. In the appe.als preferred by the respondents herein in
terms of Section 173 of the Motor Vehicles Act, the High Court, G
on the other hand, held : ·

"Learned Counsel for the ·appellant drew my attention to
the decision of the Ap~x Court in the case of New India
Assurance Co. LtrJ. vs. Mandar Madhav Tambe and others
reported in 1996 ACJ 253. In which it has been held that H
•
I
730 SUPREME COLJ,~T REPORTS [2008] 11 S.C.R.
r
"i~

A the insurance company would be liable only if the vehicle ,.
was being driven by a person holding a valid driving licence
or a permanent driving licence other than learners licence
and if the driver was holding no licence on the date of
accident than the insurance company is not liable to
8 indemnify the insured. In the case of Manoj Vs. Samundar
Singh and others reported in 2005 ACJ 520, the Division +-
Bench of this Court has held that if the driver of the offending
vehicle has no licence on the date of accident then the
insurance company is not liable to indemnify the insured
c as the vehicle was being drivern in contravention of the
terms.and conditions of the insurance policy. In the case
of National Insurance Co. Ltd. Vs. Swaran Singh and
others, reported in Al R 2004 SC 1531, the Apex Court
has held that the owner of the motor vehicle in terms of
Section 5 of the Act has a responsibility to see that no
D
vehicle is driven except by a person who does not satisfy
the provisions of Section 3 or 4 of the Act. In a case, ~

therefore, where the driver of the vehicle admittedly did
not hold any licence and the same was allowed consciously
to be driven by the owner of the vehicle by such person,
E the insurer is entitled to succeed in its defence and avoid
liability. Th~ Apex: Court further held that the breach of
policy.·· condition e .. g .. disqualification of driver or invalid
driving Jicenc:e of the driver, ~s conta.fned in sub~section
· 2(a)(ii) of Section 149, have to be proved to have .been
F· committed by the insured for avoiding the liability by the
insurer. 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 duly licensed driver or one who was
G disqualified to driver at relevant time.
9. In the present case it is duly proved that on the date of
accident i.e. 27.1.1996 the driver was not having valid
,..
driving licence for the period from 11.2.1993 to 6.2.1996
and his licence had expired and tractor driver wr.s not
H
RAM BA3U TIWARI v. UNITED ;;;JIA~l INSURANCE T'
.j •

CO. LTD. & ORS [S.B. Sl~~rlA, J.]
" -,., having valid driving licence insurer cannot be absolved of A
its liability to indemnify the insured. The learned Claims
Tribunal committed an error in holding that the insurance
company is liable to indemnify the insured. In view of the
law laid down by the Apex Court in the case of Swaran
Singh (supra), I hold that the amount of compensation B
shall be paid by the appellant/insurance company and the
-~
same shall be recovered from the driver and the owner of
the vehicle. The Claims Tribunal has erred in not giving
the direction that insurer can recover the amount of
compensation paid to the claimants from the insured." c
8. Mr. Anish Kumar Gupta, learned counsel appearing on
behalf of the appellant, would submit that although the driver of
the tractor did not hold any licence for tr.e period 11.2.1993 to
6.2.1996, but having regard to the provisions contained in Sec-
tion 15 of the Motor Vehicles Act, 1988 and in particular the D

.. second proviso appended to sub-section (4) thereof, it must be
held that the renewal of licence would take ef'ect from a retro-
spective date. It was furthermore contended that in any view of
the matter in view of the decision of this Court in National Insur-
ance Co. Ltd. v. Swaran Singh & Ors. [(2004) 3 SCC 297]. the E
respondent cannot escape its liability so far as a third party is
concerned in view of Sections 147 and 149 of the Act.

9. Mr. Vishnu Mehra. learned counsel appearing on behalf
of the respondent, on the other hand, would support the im-
pugried judgment. F
-> 10. Section 147 of the Act mandates obtaining of compul-
sory insurance in relation to a third party by the owners of the
motor vehicles. Section 149 imposes a duty on the insurer to
satisfy the judgments and awards against the insured in respect
G
of third party risks. Sub-section (2) of Section 149 however
postulates that insurance company would have a right lo de-
fend the action, inter alia. on a ground that there has been a
~

breech of specified condition of the policy as specified in vari-
ous sub-clauses; clau~e (ii) thereof being as under :
H
732 SUPREME COURT REPORTS [2008) 11 S.C.R.

A "(ii) a condition excluding driving by a named person or
persons or by any person who is not duly licensed, or by I
)r
,
any person who has been disqualified for holding or I

obtaining a driving licence during the period of I
. disqualification; or" '
~

B 11. In view of the aforementioned provisions, in the event
a defence on the part of the insurance company that the vehicle
invO'lved in the ac'Cident was n9t being driven by a driver having
I
r
. a valid driving licence would be a yalid one. '

c The question as to what would constitute a breach of con-
ditions of the contract of insurance came up for consideration
before this Court in -.::.;waran Singh (supra). Our attention has
been drawn to p·aragraph 39 to 44 of the said decision which
· read as under : '
D "39. The question as to whether an insurer can avoid its
liability in the event it raises- a .defence as envisaged .in
sub:-section· (2) of Section 149 of.the Act corresponding to
.. syb,-section (2) of '5eGtion. 96 of ~he Motor Vehicles Act,
1939 had .been the subject-matter of decisions jr.i a .large
number of oases.
40. Ii is beyond- any d_oubt or ·dispute that under ·section
149(2) of the Act, an insurer, t6 whom notice of the bringing
ofany proce.eding for compensation has been given, can
. defend .the action on any of the grounds mention~d therein.
41. However, clause (a) opens with the words "that there
has been a breach of a specified condition of the policy",
implying that the insurer's defence of the -action wo:uld
. depend upon the terms of the poli.cy,The said sub-clause
- contains three conditions.of disjunctive-cnaracter, name.ly,
G ·,.
the-insurer can get away from the liability wh~n (a) a named
person drives the vehicle; (b) it was being driven· QY a
person who·did not have a duly granted licence;. and (c)
driver is a person qisqualified for holding or obtainir:ig .a
driving licence. ·
H
RAM BABU TIWARI v. UNITED INDIAN INSURANCE 733
CO. LTD. & ORS [S.S. SINHA, J.]

42. We may also take note of the fact that whereas in A
Section 3 the words used are "effective licence", it has
been differently worded in Section 149(2) i.e. "duly
licensed". If a person does not hold an effective licence as
on the date of the accident, he may be liable for prosecution
in terms of Section 141 of the Act but Section 149 pertains B
...--+
to insurance as regards third-party risks .
43. A provision of a statute which is penal in nature vis-a-
vis a provision which is beneficent to a-third party must be
interpreted differently. It is also well known that the
provisions contained in different expressions are ordinarily c
construed differently.
44. The words "effective licence" used in Section 3,
therefore, in our opinion, cannot be 'imported for sub-
section (2) of Section 149 of the Motor Vehicles Act. We
D
must also notice that the words "duly licensed" used in
sub-section (2) of Section 149 are used in the past tense."
'>'
12. This Court, no doubt, laid down general principles in
the aforementioned paragraphs but a bare perusal of the said
judgment would clearly show that the court considered the ef- E
fectof various fact situations therein separately. While consid-
ering the question as regards the liability of the insurer when,
admittedly, no licence was obtained by a driver, it was held :
"84. We have analysed the relevant provisions of the said
Act in terms whereof a motor vehicle must be driven by a F
·-t person having a driving licence. The owner of a motor
vehicle in terms of Section 5 of the Act has a responsibility
to see that no vehicle is driven except by a person who
does not satisfy the provisions of Section 3 or 4 of the Act.
In a case, therefore, wher·e the driver of the vehicle, G
admittedly, did not hold any licence and the same was
allowed consciously to be driven by the owner of the vehicle
~ by such person, the insurer is entitled to succeed in its
defence and avoid liability. The matter, however, may be
different where a disputed question of fact arises as to H
734 SUPREME COURT REPORTS [2008] 11 S.C.R.

~
A whether the driver had a valid licence or where the owner
of the vehicle committed a breach of the terms of the·
contract of insurance as also the provisions of the Act by
consciously allowing any person to drive a vehicle who
did not have a valid driving licence. In a given case, the
B driver of the vehicle may not have any hand in it at all e.g.
a case where an accident takes place owing to a
-+',
mechanical fault or vis major. (See Jitendra Kumar.)"

13. The question as to whether the owner of a vehicle had
taken care to inform himself as to whether the driver entrusted
c to drive the vehicle was having a licence or not is essentially a
question fact. However, in this case, it stands admitted ·that as
on the date of accident, namely, on 27.1.1996, the driver did
not hold any licence. Furthermore, it is beyond dispute that he
had a licence only for one year and for about 3 years thereafter,
D he failed and neglected to renew his licence. His licence was
renewed only on and from 7 .2.1996.
14. What would be the effect of not having a licence for )t_·
I
such a long period is the question. .,..
t
E 15. Section 15 of the Motor Vehicles Act provides for re-
newal of a driving licence. Sub-section (1) of Section 15 and ,l
the first proviso appended thereto read as under :
,.
.,_
Jr.
"Section 15.-Renewal of driving licences-(1) Any
licensing authority may, on application made to it, renew
F a driving licence issued under the provisions of this Act
with effect from the date of its expiry:
+
Provided that in any case where the application for the
renewal of a licence is made more than thirty days after
the date of its expiry, the driving licence shall be renewed
G
with effect from the date of its renewal:
Provided further that where the application is for the }--

renewal of a licence to drive a transport vehicle or where ~
'
in any other case the applicant has attained the age of
H forty years, the same shall be accompanied by a medical
r
RAM BABU TIWARI v. UNITED INDIAN INSURANCE 735
CO. LTD. & ORS [S.B. SINHA, J.]

certificate in the same form and in the same manner as is A
referred to in sub-section (3) of section 8, and the provisions
of sub-section (4) of section 8 shall, so far as may be,
apply in relation to every such case as they apply in relation
to a learner's licence."
16. Sub-section (4) of Section 15 of the Act provides that 8
,;i-
' where an application for the renewal of a driving licence is made
more than 30 days after the date of its expiry, the fee payable
for such renewal shall be such amount as may be prescribed by
the Central Government. The second proviso appended thereto
whereupon strong reliance has been placed by Mr. Gupta reads c
as under:
"Provided further that if the application is made more than
five years after the driving licence has ceased to be
effective the licensing authority may refuse to renew the
D
driving licence unless the applicant, undergoes and
-~
passes to its satisfaction the test of competence to drive
referred to in sub-section (3) of section 9."
18. It is beyond any doubt or dispute that only in the event
an application for renewal of licence is filed within a period 30 E
days from the date of expiry thereof, the same would be re-
n~wed automatically which means that even if an accident had
taken place within the aforementioned period, the driver may
be held to be possessing a valid licence. The proviso appended
to sub-section (1) of Section 15, however, clearly states that the F
driving licence shall be renewed with effect from the date of its
--t
renewal in the event the application for renewal of a licence is
made more than 30 days after the date of its expiry. It is, there-
fore, evident that as, on renewal of the licence on such terms,
the driver of the vehicle cannot be said to be holding a valid
G
~ licence, the insurer would not be liable to indemnify the insured.
The second proviso appended to sub-section (4) of Sec-
~
tion 15 is of ·no assistance to the appellant. It merely enables
the licensing authority to take a further test of competent driving
and passing thereof to its satisfaction within the meaning of Sub.. H
....
736 SUPREME COURT REPORTS [2008] 11 S.C.R. l
'i-
A section (3) of Section 9. It does not say that the renewal would
be automatic. It is, therefore, a case where a breach.of the con-
tract of insurance is established. This aspect of the matter has
been considered by this Court in National Insurance Co. Ltd.
v Kusum Rai& Ors. ((2006) 4 SCC 250] holding :
B "11 ..It has not been disputed before us that the ·vehide -r--,
was being used as a taxL It was, therefore, a commercial
vehicle." The driver of the said vehicle, thus, was reql.iired
to h·old an appropriate licence therefor. Ram Lal who 1--
allegedly was driving the said vehicle at the relevanttlme, t

c as noticed hereinbefore, was holder of a licence to drive
1--

a light motor vehicle only. He did not possess any licence \
to drive a commercial vehicle. Evidently, therefore; there ~

was a breach of condition of the contract of insurance. r
The appellant, therefore, could raise the said defence." I
D
It was furthermore held : ~
,._.
"14. T~is Court in Swarf!n Singh 4 clearly laid down that the
liability of the Insurance Company vis-a-vis the owner would
depend upon several factors. The owner would be liable
E 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 licen~e to drive the vehicle."
I.._
It was opined : ·
F
"16. In a case of this nature, therefore, the owrn?r of a +- I
. vehicle can_not contend that h~ ha·s no liability to verify the (

fact as to whether the. driver of the vehicle possessed a
valid licence or not."
'·
r
G 19. The. pri_nciple laid down in Kusum Rai (supra) has been ;I
reiterated in lshwar Chandra & Ors. v. Oriental Insurance Co. I
f.
Ltd. & Ors. [(2007) 10 SCC 650], referring fo sub-section (1) of ....,_
Section 15 of the Act, this Court stated the law, thus :
"9. From a bare perusal of the said provision, it would
H
RAM BABU TIWARI v. UNITED INDIAN INSURANCE 737
CO. LTD. & ORS [S.B. SINHA, J.]

appear that the licence is renewed in terms of the said Act A
and the rules framed thereunder. The proviso appended
to Section 15(1) of the Act in no uncertain terms states
that whereas the original licence granted despite expiry
remains valid for a period of 30 days from the date of
expiry, if any application for renewal thereof is filed B
thereafter, the same would be renewed from the date of
its renewal. The. accident took place 28-4-1995. As on the
said date, the renewal application had not been filed, the
driver did not have a valid licence on the date when the
vehicle met with the accident." c
20. For the reasons aforementioned, there is no 1nfirmity
in the impugned judgment. The appeals are, therefore, dis-
missed. However, in the facts and circumstances of the case,
there shall be no order as to costs.
S.K.S. Appeals dismissed .

•