NIRMALA KOTHARI versus UNITED INDIA INSURANCE CO. LTD.

[2020] 3 S.C.R. 1189

NIRMALA KOTHARI

UNITED INDIA INSURANCE CO. LTD.

(Civil Appeal Nos. 1999-2000 of 2020)

MARCH 04, 2020

[NAVIN SINHA AND KRISHNA MURARI, JJ.]

Motor Vehicles Act, 1988 – s.149(2)(a)(ii) – Fatal accident –Insurance claim – Repudiation of claim on the ground that driverdid not possess proper driving licence at the time of accident whichamounted to breach of conditions under s.149(2)(a) – Plea ofinsurance company that the driving licence purported to have beenissued by the licencing authority, Sheikh Sarai, Delhi could not beverified as the concerned officer of the licencing authority deposedthat the record of the licence was not available with them – Held:While hiring driver, an employer is expected to verify if the driverhas driving licence – If the driver produces licence which onthe face of it looks genuine, the employer is not expected to furtherinvestigate into the authenticity of the licence unless there is causeto believe otherwise – If the employer finds the driver to be competentto drive the vehicle and has satisfied himself that the driver has adriving licence, there would be no breach of s.149(2)(a)(ii) and theInsurance Company would be liable under the policy – It would beunreasonable to place high onus on the insured to make enquirieswith RTOs all over the country to ascertain the veracity of the drivinglicence – If, however, Insurance Company is able to prove that theowner/insured was aware or had notice that the licence was fakeor invalid and still permitted the person to drive, the insurancecompany would no longer continue to be liable – In the instantcase, complainant employed the driver after checking his drivinglicence – It was not the contention of the Insurance Company thatthe complainant is guilty of wilful negligence while employing thedriver – The driver had been driving competently and there was noreason for the complainant to doubt the veracity of the driver’slicence – Insurance company is liable to indemnify the appellant-owner of vehicle.

CDEF

1190SUPREME COURT REPORTS

AAllowing the appeals, the Court

HELD: 1.1 Breach of conditions under Section 149(2)(a)of the Motor Vehicles Act, 1988 absolves the insurer of its liabilityto the insured. Section 149(2)(a)(ii) deals with the conditionsregarding driving licence. In case the vehicle at the time ofBaccident is driven by person who is not duly licenced or by aperson who has been disqualified from holding or obtaining adriving licence during the period of disqualification, the insureris not liable for compensation. In the instant case it is matter offact that no record of the licence bearing no. P03041288753070was found with the licensing authority. [Para 7][1192-H;C1193-A-B]

1.2 While the insurer can certainly take the defence thatthe licence of the driver of the car at the time of accident wasinvalid/fake however the onus of proving that the insured did nottake adequate care and caution to verify the genuineness of theDlicence or was guilty of willful breach of the conditions of theinsurance policy or the contract of insurance lies on the insurer.[Para 9][1194-D-E]

National Insurance Co. Ltd. v. Swaran Singh & Ors.(2004) 3 SCC 297 : [2004] 1 SCR 180 – relied on.EPepsu RTC v. National Insurance Co. (2013) 10 SCC217 : [2013] 9 SCR 266 – held inapplicable.

United India Insurance Co. Ltd. v. Lehru & Ors. (2003)3 SCC 338 : [2003] 2 SCR 495 – referred to.

FCase Law Reference

From the Judgment and Order dated 06.02.2018 of NationalConsumer Dispute Redressal Commission in Revision Petition No. 2835of 2015 and Revision Petition No. 3053 of 2016.H

NIRMALA KOTHARI v. UNITED INDIAINSURANCE CO. LTD.

Jasmeet Singh, Ms. Rusheet Saluja, Saif Ali, Satyendra ManiTripathi and Pushpendra Singh Bhadoriya, Advs. for the Appellant.

Ms. Suman Bagga, Ms. Manjeet Chawla and Karri Venkata Reddy,Advs. for the Respondent.

The Judgment of the Court was delivered by

KRISHNA MURARI, J.

1. Leave granted.

2. The Appellant/Complainant, Nirmala Kothari’s husband, VinodRay Kothari was owner of Hyundai Elantra vehicle, registration no.RJ36CA 0111, which was insured with the Insurance Company for asum of Rs.5,00,000/- .

3. The said vehicle met with an accident with tractor bearingno. HR38K 3216, on 06.06.2010 as result of which the Appellant’shusband, Vinod Ray Kothari, who was the owner of the car, and hisdaughter died and the vehicle was damaged. The driver of the vehicle,Dharmendra Singh Chauhan got an FIR registered with the police. TheRespondent/ Insurance Company, on intimation having been given tothem, appointed spot surveyor, and also regular surveyor to carry outsurvey in the matter, but the claim was rejected by them vide their letterdated 28.03.2011. The Respondent/ Insurance Company stated in therepudiation letter that the driver Dharmendra Singh Chauhan did nothave proper driving licence at the time of the accident. The licenceproduced by him, alleged to have been procured from the office of thelicencing authority, Sheikh Sarai, Delhi could not be verified, as theconcerned officer of the transport department returned their letter withthe endorsement that the record pertaining to the said licence was notavailable. Alleging deficiency on the part of the Respondent/ InsuranceCompany, the complainant filed consumer complaint, seeking directionsto the Respondent/Insurance Company to pay the Insured declared value(IDV) i.e. sum of Rs. 5,00,000/- alongwith interest @ 9% per annumfrom the date of filing the complaint till payment and also to pay sum ofRs. 50,000/- as compensation for mental agony and Rs. 11,000/- aslitigation cost. The District Forum vide their order dated 30.05.2012,allowed the said consumer complaint and directed payment of an amountof Rs. 3,57,500/- to the complainant, as assessed by the surveyoralongwith interest @ 9% p.a. and cost of litigation of Rs. 2,500/-. Beingaggrieved against the said order of the District Forum, the Respondent/

AInsurance Company challenged the same by way of appeal before theState Commission, but the said appeal having been dismissed videimpugned order dated 18.09.2015, the Respondent/ Insurance Companycame before National Commission by way of the Revision Petition No.2835/2015.B4. The complaint no. 227/2012 had been filed by the samecomplainant Nirmala Kothari, against the Respondent/InsuranceCompany, requesting for compensation of Rs. 2,00,000/- as accidentclaim with interest @ 9% per annum and compensation of Rs. 20,000/-for mental agony and Rs. 11,000/- for cost of litigation. The Respondent/Insurance Company repudiated the said claim also vide their letter datedC14.02.2012 on the same ground that Dharmendra Singh Chauhan, thedriver of the vehicle did not possess valid and effective driving licenceat the time of the accident in question.5. The consumer complaint no. 227/2012 was also allowed by theDistrict Forum, vide order dated 28.02.2013 and the Respondent/DInsurance Company was directed to pay an amount of Rs. 2,00,000/-for personal accident claim along with interest @ 9% per annum fromthe date of filing the complaint and the cost of litigation of Rs. 2,500/-.Being aggrieved against the said order of the District Forum, theRespondent/ Insurance Company challenged the same by way of appealEno. 366/2013 before the State Commission. The said appeal having beendismissed vide impugned order dated 01.08.2016, the Respondent/Insurance Company came before the National Commission by way ofthe Revision Petition No. 3053/2016. The National Commission absolvedthe Respondent/ Insurance Comapany of its liability since no record ofthe licence of the Driver was found with the licencing authority. Thus,Faggrieved the Appellant/Complainant has come up in appeal.

6. It is the case of the Respondent/ Insurance Company that inthe absence of valid and effective driving licence with the driver, therewas fundamental breach of the terms and conditions of the insurancepolicy in question and hence, the claim made by the Appellant/GComplainant was not payable. Whereas, it is argued by the Appellant/Complainant that at the time of employing the driver, the documents likedriving licence etc. are generally checked but no one usually verifies thegenuineness of the same.

7. Breach of conditions under Section 149(2)(a) of the MotorHVehicles 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 person who isnot duly licenced or by person who has been disqualified from holdingor obtaining driving licence during the period of disqualification, theinsurer is not liable for compensation. In the instant case it is matter offact that no record of the licence bearing no. P03041288753070 wasfound with the licensing authority.

8. Having set forth the facts of the present case, the question oflaw that arises for consideration is what is the extent of care/diligenceexpected of the employer/insured while employing driver? To answerthis question, we shall advert to the legal position regarding the liabilityof the Insurance Company when the driver of the offending vehiclepossessed an invalid/fake driving licence. In the case of United IndiaInsurance Co. Ltd. vs. Lehru & Ors.[1 ]a two Judge Bench of this courthas taken the view that the Insurance Company cannot be permitted toavoid its liability on the ground that the person driving the vehicle at thetime of the accident was not duly licenced. It was further held that thewillful breach of the conditions of the policy should be established. Thelaw with this respect has been discussed in detail in the case of PepsuRTC vs. National Insurance Co.[2 ]We may extract the relevantparagraph from the Judgment: (Pepsu case, SCC pp. 223-24, para10)

“In claim for compensation, it is certainly open to the insurerunder Section 149(2)(a)(ii) to take defence that the driverof the vehicle involved in the accident was not duly licensed.Once such defence is taken, the onus is on the insurer. Buteven after it is proved that the licence possessed by the driverwas fake one, whether there is liability on the insurer is themoot question. As far as the owner of the vehicle is concerned,when he hires driver, he has to check whether the driverhas valid driving licence. Thereafter he has to satisfy himselfas to the competence of the driver. If satisfied in that regardalso, it can be said that the owner had taken reasonable carein employing person who is qualified and competent to drivethe vehicle. The owner cannot be expected to go beyond that,to the extent of verifying the genuineness of the driving licencewith the licensing authority before hiring the services of the

1 (2003) 3 SCC 338 : 2003 SCC (Cri) 641

2 (2013) 10 SCC 217

Adriver. However, the situation would be different if at the timeof insurance of the vehicle or thereafter the insurancecompany requires the owner of the vehicle to have the licenceduly verified from the licensing authority or if the attentionof the owner of the vehicle is otherwise invited to theallegation that the licence issued to the driver employed byBhim is fake one and yet the owner does not take appropriateaction for verification of the matter regarding the genuinenessof the licence from the licensing authority. That is what isexplained in Swaran Singh’s case (supra). If despite suchinformation with the owner that the licence possessed by hisCdriver is fake, no action is taken by the insured for appropriateverification, then the insured will be at fault and, in suchcircumstances, the insurance company is not liable for thecompensation.”

9. While the insurer can certainly take the defence that the licenceDof the driver of the car at the time of accident was invalid/fake howeverthe onus of proving that the insured did not take adequate care andcaution to verify the genuineness of the licence or was guilty of willfulbreach of the conditions of the insurance policy or the contract ofinsurance lies on the insurer.

E10. The view taken by the National Commission that the law assettled in the Pepsu case (Supra) is not applicable in the present matteras it related to third-party claim is erroneous. It has been categoricallyheld in the case of National Insurance Co. Ltd. vs. Swaran Singh &Ors.[3](SCC pp.341, para 110) that,

F“110. (iii)…Mere absence, fake or invalid driving licence ordisqualification of the driver for driving at the relevant time,are not in themselves defences available to the insurer againsteither the insured or the third parties. To avoid its liabilitytowards the insured, the insurer has to prove that the insuredwas guilty of negligence and failed to exercise reasonableGcare in the matter of fulfilling the condition of the policyregarding use of vehicles by duly licenced driver or onewho was not disqualified to drive at the relevant time.”

11. While hiring driver the employer is expected to verify if thedriver has driving licence. If the driver produces licence which on

H3 (2004) 3 SCC 297 : 2004 SCC (Cri) 733

the face of it looks genuine, the employer is not expected to furtherinvestigate into the authenticity of the licence unless there is cause tobelieve otherwise. If the employer finds the driver to be competent todrive the vehicle and has satisfied himself that the driver has drivinglicence there would be no breach of Section 149(2)(a)(ii) and theInsurance Company would be liable under the policy. It would beunreasonable to place such high onus on the insured to make enquirieswith RTOs all over the country to ascertain the veracity of the drivinglicence. However, if the Insurance Company is able to prove that theowner/insured was aware or had notice that the licence was fake orinvalid and still permitted the person to drive, the insurance companywould no longer continue to be liable.12. On facts, in the instant case, the Appellant/Complainant hademployed the Driver, Dharmendra Singh as driver after checking hisdriving licence. The driving licence was purported to have been issuedby the licencing authority, Sheikh Sarai, Delhi, however, the same couldnot be verified as the concerned officer of the licencing authority deposedthat the record of the licence was not available with them. It is not thecontention 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 forthe Appellant/Complainant to doubt the veracity of the driver’s licence.In view of above facts and circumstances, the impugned judgment is notliable to be sustained and is hereby set aside. The appeals accordinglystand allowed. The respondent/ Insurance Company is held liable toindemnify the appellant.

Devika Gujral

Appeals allowed.