Summary
| Category | Data |
|---|---|
| Court | Supreme Court of India |
| Case Number | C.A. No.-012442-012446 – 2024 |
| Diary Number | 27489/2016 |
| Judge Name | HON’BLE THE CHIEF JUSTICE |
| Bench | HON’BLE THE CHIEF JUSTICE; HON’BLE MR. JUSTICE K. VINOD CHANDRAN |
| Precedent Value | Binding authority |
| Overrules / Affirms | Affirms existing precedents; overrules High Court’s recovery direction |
| Type of Law | Motor Accident Insurance / Civil |
| Questions of Law | Whether an insurer invoking “pay and recover” under Section 149(2) MVA must prove that the insured owner breached the condition of entrustment by failing due diligence when the driver held a fake licence? |
| Ratio Decidendi | The Supreme Court held that under Section 149(2) of the Motor Vehicles Act an insurer is prima facie liable to pay compensation to third-party victims, even if the driver’s licence is fake. To exercise its right of recovery against the insured owner, the insurer must prove breach on the part of the owner—specifically, that the owner failed to employ due diligence or colluded with the driver. Mere production of a licence by the owner does not establish collusion or breach, and there is no statutory obligation on an employer to verify licence authenticity with the RTO. |
| Judgments Relied Upon | United India Insurance Co. v. Lehru (2003 3 SCC 338); National Insurance Co. Ltd. v. Swaran Singh (2004 3 SCC 297); PEPSU RTC v. National Insurance Co. Ltd. (2013 10 SCC 217); IFFCO Tokio General Insurance Co. Ltd. v. Geeta Devi (2023 SCC OnLine SC 1398) |
| Logic / Jurisprudence / Authorities Relied Upon by Court |
|
| Facts as Summarised by the Court |
|
Practical Impact
| Category | Impact |
|---|---|
| Binding On | All subordinate courts |
| Persuasive For | High Courts and civil tribunals |
| Overrules | High Court’s pay and recover direction in this batch of appeals |
| Follows | United India Ins. Co. v. Lehru; National Ins. Co. v. Swaran Singh; PEPSU RTC v. National Ins. Co.; IFFCO Tokio v. Geeta Devi |
What’s New / What Lawyers Should Note
- Insurer’s right of recovery under Section 149(2) MVA requires proof of the insured owner’s breach of due diligence or collusion.
- Mere production of a driver’s licence by the owner does not create a presumption of collusion.
- There is no statutory or policy requirement for an employer to verify licence authenticity with the licensing authority.
- Delayed renewal of a licence, without more, is not evidence of the owner’s breach.
- Insurers must lead evidence on entrustment and due diligence; failure to do so mandates indemnification and bars recovery.
Summary of Legal Reasoning
-
Tribunal’s Findings
- Composite negligence (75% truck; 25% Matador van).
- Licences produced by police and owner’s representative deemed fake by RTO clerks.
-
High Court’s Inference
- Found interpolations in DL register and licence production by owner as collusion proof; issued pay-and-recover directions.
-
Precedent Review
- Lehru and Kamla: insurer liable unless owner’s breach proved.
- Swaran Singh: fake licence defence available, but breach inquiry is fact-specific.
- PEPSU RTC: absence of breach when driver employed and trained long before accident.
- Geeta Devi: deplored insurer claims of due diligence failure without pleading or proof.
-
Supreme Court’s Application
- No evidence of seizure record or due diligence failure.
- Owner (a company) vicariously liable for driver’s negligence but not collusive.
- Owner’s limited duty: accept licence presented, no RTO verification required.
- Set aside High Court’s recovery order; insurers remain compensated; owner’s indemnity obligation erased.
Arguments by the Parties
Appellant (Truck Owner)
- Tribunal correctly followed binding precedents in directing indemnity despite fake licence.
- High Court erred in inferring collusion from interpolated register and licence production.
- Owner produced licence to demonstrate due diligence; no seizure or mahazar proved.
Respondent (Insurer of Truck)
- Both licences were proved fake by RTO and DTO clerks.
- Owner’s representative producing licence indicates collusion.
- Driver not examined, but license irregularities justified recovery order.
Factual Background
On January 26, 1993 at about 2 am, a truck collided with a Matador van carrying passengers, resulting in nine deaths and two injuries. Claim petitions were filed before the Motor Accident Claims Tribunal against the truck’s driver, owner, and insurer; later the van’s owner and insurer were impleaded. The Tribunal found composite negligence (75% truck; 25% van) and awarded compensation. Insurers paid the awards. The High Court modified quantum and granted pay-and-recover relief to the truck insurer, inferring collusion from the driver’s fake licence produced by the owner. The truck owner appealed to the Supreme Court.
Statutory Analysis
- Section 149(2), Motor Vehicles Act, 1988: insurer’s statutory liability to third-party claimants is subject to a right of recovery from the insured if a policy condition is breached.
- Insurance policy condition: vehicle must be driven by a duly licensed driver.
- No statutory or policy mandate for an employer to verify licence authenticity with the RTO.
- Motor Vehicles Rules prescribe licence renewal within 30 days of expiry; delayed renewal alone insufficient to prove breach.
Alert Indicators
- ✔ Precedent Followed – Affirms established law on insurer’s recovery rights under Section 149(2) MVA.