CASE NO.: Appeal (civil) 2387 of 2001 Appeal (civil) 2388 of 2001 Appeal (civil) 2389 of 2001 PETITIONER: NEW INDIA ASSURANCE CO., SHIMLA Vs. RESPONDENT: KAMLA AND ORS. DATE OF JUDGMENT: 27/03/2001 BENCH: K.T. Thomas & R.P. Sethi. JUDGMENT:
THOMAS, J.
Leave granted.
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If a fake driving licence happened to be renewed by the
statutory authorities, would the fakeness of the original
document get legally sanctified? If it cannot, would the
Insurance Company be liable to pay compensation in respect
of a motor accident occurred while the vehicle was driven by
a person holding such a sham licence? These are the main
questions involved in these appeals.
An accident occurred on 1.3.1993 when a truck, driven by
the 8th respondent (Liaqat Ali) capsized. Three inmates of
the vehicle died in the accident. Legal heirs of those
three deceased persons preferred claims before the Motor
Accident Claims Tribunal concerned (for short the Claims
Tribunal) as per the provisions of the Motor Vehicles Act,
1988 (for short the Act). The owner of the vehicle as
well as the driver were made parties, besides impleading the
insurer (appellant Insurance Company) in the claims
proceedings. It is admitted that the truck was then covered
by a valid insurance policy issued by the appellant company.
As we are now concerned only with the contentions of the
appellant Insurance Company, that too restricted to the
question relating to the driving licence held by the 8th
respondent, we do not think it worth referring to the
details of other pleadings set out by the claimants and the
contending resistors.
The appellant Insurance Company, in the written
statement filed before the Claims Tribunal, pleaded inter
alia that the driver of the vehicle did not have a valid
driving licence and hence there was breach of the policy
condition and the corollary is that the Insurance Company
cannot be fastened with the liability to pay compensation to
any one in respect of the accident referred to in the claim
petitions.
The insured owner of the vehicle as well as the driver
8th respondent relied on a document purporting to be a
driving licence issued by the licensing authority (SDM,
Paonta, Sirmaur District in Himachal Pradesh) bearing
No.1874-P/90. The document further shows that it was issued
in favour of Liaqat Ali whose photo affixed thereon is
admitted to be that of 8th respondent. That licence is
claimed to have been renewed by the Licensing Authority,
Rohru (H.P.) on 17.4.1993, for a period of three years.
According to the insurance company, the said document is a
fabricated one as no such licence was granted by the
Licensing Authority (SDM), Paonta.
To substantiate the contention appellant insurance
company examined three witnesses. RW-2 was Superintendent
in the office of the SDM, Paonta. He said that no such
licence was issued from that office to a person called
Liaqat Ali. He further said that no intimation whatsoever
was received by the SDM, Paonta, that the licensing
authority of Rohru (SDM) had renewed the licence No.1874-
P/90. But RW-3 a clerk in the office of the SDM, Rohru
has stated that the licence bearing No.1874-P/90 which stood
in the name of Liaqat Ali was renewed by the SDM, Rohru on
17.4.1993, for a period of three years with effect from the
date of its expiry. One Anil Chawla, legal officer of the
appellant insurance company at Shimla, was examined as RW-4
and he said that on enquiry it was found that SDM, Paonta
had not issued any driving licence to Liaqat Ali and hence
the document produced by the 8th respondent as his driving
licence is a forged document.
The driver Liaqat Ali was not examined before the Claims
Tribunal. But the owner of the truck gave evidence to the
effect that he engaged the 8th respondent for driving the
truck only after satisfying himself that R-8 had a valid
licence. He admitted that the said satisfaction is based
entirely on looking at the questioned document.
The Claims Tribunal repelled the contention of the
insurance company for which the following observations have
been made:
Evidently, it was for the New India Assurance Company
to prove that the truck driver did not have valid driving
licence on the date of accident. Apparently, the truck
driver had a valid driving licence on the date of accident
because the same had been issued in his favour by the SDM,
Rohru. Admittedly, whenever a licence is renewed, the
Licensing Authority is required to satisfy itself about the
genuineness of the earlier licence. Thus, there is a
presumption to the effect that while renewing the licence of
Shri Liaqat Ali, the Licensing Authority, i.e. SDM, Rohru
had satisfied himself about the genuineness of the earlier
licence. Therefore, I am of the view that the statement of
Shri Anil Chawla (RW-4) is not sufficient to prove that the
earlier licence of the truck driver which was renewed by
SDM, Rohru was a fake licence. As such, I hold that the New
India Assurance Company has failed to prove that truck
driver did not have valid driving licence on the date of
accident.
When the matter was taken up before the High Court the
counsel for the insurance company contended that if the
original licence was shown to be a forged document no
authority has the power to validate it and even if any
validation was made on account of a mistaken impression
about the genuineness of the document it would not gain any
legitimacy. The counsel in the High Court relied on the
decision of a Full Bench of the Punjab and Haryana High
Court in National Insurance Co. Ltd. vs. Santro Devi and
ors. {1997(1) ACJ 111} which held that a forged driving
licence though may be validly renewed, would not become a
valid driving licence or a duly issued driving licence in
accordance with the Motor Vehicles Act. In spite of the
said decision the Division Bench of the High Court did not
accept the contention of the insurance company for which
learned judges adopted the following reasoning:
From the perusal of the record we have noticed that
licence No.1874-P/90 was issued by Registering and Licensing
Authority, Paonta Sahib, District Sirmaur, which was valid
from 20.3.1990 to 19.3.1993 and the said licence has been
marked as X by the Tribunal below. Thereafter, the
Licensing Authority, Rohru, District Shimla, renewed the
licence of the respondent-driver from 17.4.1993 to
16.4.1996. From the entire evidence on record we find that
at the time of the accident i.e. on 1.3.1993 respondent-
driver of the vehicle was in possession of the valid driving
licence and the appellant- Assurance Company has not adduced
sufficient evidence to discharge the burden which was cast
on it under the Act.
In this context learned counsel for the Insurance
Company invited our attention to a fact which occurred
before the Claims Tribunal. The insurer filed an
application for permission to lead evidence for proving that
the licence produced by the 8th respondent was a fake one.
But that application was rejected by the Claims Tribunal
basing on the decision of a Division Bench of the High Court
of Punjab and Haryana (which is reported in National
Insurance Co. Ltd. vs. Sucha Singh and ors. {1994 (1)
ACJ 374}. As per the said decision if a licence is renewed
it gets validated in view of the provisions of Section 15 of
the Motor Vehicles Act and the Insurance Company would be
liable to reimburse the insured the compensation amount paid
to the victims. The Claims Tribunal thereupon held that if
the licence was validly renewed by a licensing authority
then it cannot be presumed that the licence was a fake one.
On the said reasoning the Claims Tribunal dismissed the
application of the Insurance Company for leading evidence to
show that the document produced by the 8th respondent was
forged.
Learned counsel submitted that the aforesaid decision of
the Division Bench (National Insurance Co. Ltd. vs. Sucha
Singh) was overruled by the Full Bench of the same High
Court in National Insurance Co. Ltd. vs. Santro Devi
(supra). Incidentally, we may refer to a decision rendered
by a two-Judge Bench of this Court in National Insurance Co.
Ltd. vs. Santro Devi and ors. {1998(1) SCC 219} which
pointed out that the observations made by the Full Bench in
National Insurance Co. Ltd. vs. Santro Devi were obiter
dicta because the facts in that case did not warrant any
such observation.
As a point of law we have no manner of doubt that a fake
licence cannot get its forgery outfit stripped off merely on
account of some officer renewing the same with or without
knowing it to be forged. Section 15 of the Act only
empowers any licensing authority to renew a driving licence
issued under the provisions of this Act with effect from the
date of its expiry. No licensing authority has the power to
renew a fake licence and, therefore, a renewal if at all
made cannot transform a fake licence as genuine. Any
counterfeit document showing that it contains a purported
order of a statutory authority would ever remain counterfeit
albeit the fact that other persons including some statutory
authorities would have acted on the document unwittingly on
the assumption that it is genuine.
The observation of the Division Bench of the Punjab and
Haryana High Court in National Insurance Co. Ltd. vs.
Sucha Singh (supra) that renewal of a document which
purports to be a driving licence, will robe even a forged
document with validity on account of Section 15 of the Act,
propounds a very dangerous proposition. If that proposition
is allowed to stand as a legal principle, it may, no doubt,
thrill counterfeiters the world over as they would be
encouraged to manufacture fake documents in a legion. What
was originally a forgery would remain null and void for ever
and it would not acquire legal validity at any time by
whatever process of sanctification subsequently done on it.
Forgery is antithesis to legality and law cannot afford to
validate a forgery.
We are not considering the question whether the insured
exhausted the enquiry expected of him for satisfying himself
about the genuineness of the document produced by the 8th
respondent as his driving licence. The Insurance Company
must have, under law, the opportunity to substantiate its
contention that the document is a fabricated one. The
Claims Tribunal went wrong in denying such an opportunity to
the appellant Insurance Company.
Learned counsel for the respondents next contended that
even if the driving licence of 8th respondent is proved to
be not genuine it would not be enough for absolving the
Insurance Company from liability. On the other hand,
learned counsel for the appellant Insurance Company, banking
on the provisions contained in Section 149 of the Act,
submitted that the insurer will get complete exoneration
from liability on proof of breach of any one of the
conditions of the policy of insurance. We have to examine
this contention as a decision on the same is necessary
before deciding whether the appellant Insurance Company must
be given a further opportunity to substantiate that the
document is a forged one.
Chapter XI of the Act contains provisions for insurance
of motor vehicles against third party risk. Sections 145 to
164 are subsumed in the said chapter. Section 146 of the
Act imposes a prohibition against use of a motor vehicle in
public place unless the vehicle is covered by a policy of
insurance complying with the requirements enumerated in the
Chapter. Some categories of vehicles are exempted from the
aforesaid compulsion, but we are not concerned with any such
category now.
The details regarding the requirements of the policy
including the limits of liability to be insured are
enumerated in Section 147. Sub-section (3) of it states
that a policy shall be of no effect for the purposes of that
Chapter unless and until a certificate of insurance is
issued by the insurer in the prescribed form in favour of
the insured. It is in Section 149 that provisions, relating
to the duty of the insurer for satisfying the judgments and
awards in respect of third party claims, are incorporated.
Sub-section (1) says that the insurer shall pay to the
person entitled to the benefit of a judgment or award as if
the insurer were the judgment debtor in respect of the
liability, when any such judgment or award is obtained
against the insured in whose favour a certificate of
insurance has been issued. Of course, the said liability of
the insurer is subject to the maximum sum assured payable
under the policy.
Section 149(2) of the Act says that notice regarding the
suit or other legal proceedings shall be given to the
insurer if such insurer is to be fastened with such
liability. The purpose of giving such notice is to afford
the insurer to be made a party in the proceedings for
defending the action on any one of the grounds mentioned in
the sub-section. Among the multiplicity of such grounds the
one which is relevant in this case is extracted below:
(a) That there has been a breach of a specified
condition of the policy, being one of the following
conditions, namely:-
(ii) a condition excluding driving by a named person or
persons or by any person who is not duly licensed, or by any
person who has been disqualified for holding or obtaining a
driving licence during the period of disqualification.
Sub-section (4) of Section 149 of the Act says that so
much of the policy as purports to restrict the insurance of
the person insured by reference to any condition shall as
respects such liabilities as are required to be covered by a
policy, be of no effect. The proviso to the said sub-
section is important for the purpose of considering the
question involved in this case and hence that proviso is
extracted below:
Provided that any sum paid by the insurer in or towards
the discharge of any liability of any person which is
covered by the policy by virtue only of this sub-section
shall be recoverable by the insurer form that person.
Similarly, in this context sub-section (5) is equally
important and hence that is also extracted below: If the
amount which an insurer becomes liable under this section to
pay in respect of a liability incurred by a person insured
by a policy, exceeds the amount for which the insurer would
apart from the provisions of this section be liable under
the policy in respect of that liability, the insurer shall
be entitled to recover the excess from that person.
A reading of the proviso to sub-section (4) as well as
the language employed in sub-section (5) would indicate that
they are intended to safeguard the interest of an insurer
who otherwise has no liability to pay any amount to the
insured but for the provisions contained in Chapter XI of
the Act. This means, the insurer has to pay to the third
parties only on account of the fact that a policy of
insurance has been issued in respect of the vehicle, but the
insurer is entitled to recover any such sum from the insured
if the insurer were not otherwise liable to pay such sum to
the insured by virtue of the conditions of the contract of
insurance indicated by the policy.
To repeat, the effect of the above provisions is this:
When a valid insurance policy has been issued in respect of
a vehicle as evidenced by a certificate of insurance the
burden is on the insurer to pay to third parties, whether or
not there has been any breach or violation of the policy
conditions. But the amount so paid by the insurer to third
parties can be allowed to be recovered from the insured if
as per the policy conditions the insurer had no liability to
pay such sum to the insured.
It is advantageous to refer to a two-Judge Bench of this
Court in Skandia Insurance Co. Ltd. vs. Kokilaben
Chandravadan and ors. {1987 (2) SCC 654}. Though the said
decision related to the corresponding provisions of the
predecessor Act (Motor Vehicles Act, 1939) the observations
made in the judgment are quite germane now as the
corresponding provisions are materially the same as in the
Act. Learned Judges pointed out that the insistence of the
legislature that a motor vehicle can be used in a public
place only if that vehicle is covered by a policy of
insurance is not for the purpose of promoting the business
of the Insurance Company but to protect the members of the
community who become sufferers on account of accidents
arising from use of motor vehicles. It is pointed out in
the decision that such protection would have remained only a
paper protection if the compensation awarded by the courts
were not recoverable by the victims (or dependents of the
victims) of the accident. This is the raison detre for the
legislature making it prohibitory for motor vehicles being
used in public places without covering third party risks by
a policy of insurance.
The principle laid down in the said decision has been
followed by a three-Judge Bench of this Court with approval
in Sohan Lal Passi vs. P. Sesh Reddy and ors. {1996 (5)
SCC 21}.
The position can be summed up thus: The insurer and
insured are bound by the conditions enumerated in the policy
and the insurer is not liable to the insured if there is
violation of any policy condition. But the insurer who is
made statutorily liable to pay compensation to third parties
on account of the certificate of insurance issued shall be
entitled to recover from the insured the amount paid to the
third parties, if there was any breach of policy conditions
on account of the vehicle being driven without a valid
driving licence. Learned counsel for the insured contended
that it is enough if he establishes that he made all due
enquiries and believed bona fide that the driver employed by
him had a valid driving licence, in which case there was no
breach of the policy condition. As we have not decided on
that contention it is open to the insured to raise it before
the Claims Tribunal. In the present case, if the Insurance
Company succeeds in establishing that there was breach of
the policy condition, the Claims Tribunal shall direct the
insured to pay that amount to the insurer. In default the
insurer shall be allowed to recover that amount (which the
insurer is directed to pay to the claimants – third parties)
from the insured person.
We may point out that as per the order passed by this
Court on 6.3.2000, the appellant Insurance Company was
directed to pay the award amount to the claimants. We are
told that the amount was paid by the appellant to the
claimants. Now the Claims Tribunal has to decide the next
question whether the insurance company is entitled to
recover that amount from the owner of the vehicle on account
of the vehicle being driven by a person who had no valid
licence to drive the vehicle. For that purpose we remit the
case to the Claims Tribunal. An opportunity shall be
afforded to the parties concerned for adducing evidence in
that regard. We make it clear that the claimants shall not
be bothered during the remaining part of the proceedings.
The appeals are disposed of in the above terms.