Expired Driving License and Employer Liability: Supreme Court’s Verdict on Compensation Claims

The case of Beli Ram vs. Rajinder Kumar & Anr. addresses a significant legal issue—whether an insured employer is absolved of liability if a driver’s valid driving license has expired at the time of an accident. The Supreme Court had to decide if an insurance company could be held liable when a commercial vehicle was driven without a renewed license for three years.

The case arose from an accident involving a truck owned by the appellant, Beli Ram, and driven by the first respondent, Rajinder Kumar. The driver suffered injuries, leading to a 20% permanent disability. He filed a claim under the Workmen’s Compensation Act, 1923, seeking compensation from both the employer and the insurance company.

The Commissioner awarded compensation to the driver, placing the liability on the insurance company. However, the High Court overturned this decision, ruling that the insurance company was not liable due to a material breach of the policy—specifically, that the driver’s license had expired three years before the accident.

Background of the Case

The accident occurred on May 20, 1999. The driver, Rajinder Kumar, was employed by Beli Ram and was operating a truck covered under an insurance policy issued by the second respondent, an insurance company. Following the accident, the driver sustained serious injuries leading to permanent disability.

The driver sought compensation of Rs. 5,00,000 under the Workmen’s Compensation Act. The Commissioner granted an award of Rs. 94,464 for the injuries and Rs. 67,313 for medical expenses, directing the insurance company to pay the compensation while placing the burden of interest on the employer.

Petitioner’s Arguments

The appellant, Beli Ram, argued:

• The insurance company was liable under the policy, as the driver initially held a valid license, and its non-renewal should not amount to a material breach.
• The driver’s skills and competence to drive the truck were unaffected by the expiry of the license.
• The insurer failed to establish that the employer knowingly allowed an unlicensed driver to operate the vehicle.
• Reliance was placed on the Supreme Court’s decision in National Insurance Co. Ltd. vs. Swaran Singh, which held that an expired license does not automatically absolve an insurance company from liability.

Respondent’s Arguments

The insurance company contended:

• The driver’s license had expired on September 6, 1996, and was never renewed, making him unqualified to drive at the time of the accident.
• The insurer was entitled to deny liability due to a material breach of the insurance policy.
• The employer failed to exercise due diligence in verifying the validity of the driver’s license, allowing him to operate the vehicle for three years without renewal.
• The High Court correctly applied the law, holding that the insurance company was not liable.

Supreme Court’s Key Observations

The Supreme Court considered the legal framework, past judgments, and employer obligations before delivering its verdict. Key observations included:

“When an employer employs a driver, it is his duty to check that the driver is duly licensed to drive the vehicle. The owner must also take reasonable care to see that his employee gets his license renewed within time.”

The Court further emphasized:

• Driving a vehicle with an expired license for three years is not a minor lapse but a serious breach of legal obligations.
• An employer must periodically check the validity of an employee’s driving license, particularly for commercial vehicles.
• The insurance company is not automatically liable unless it can be proven that the employer took all reasonable steps to ensure compliance.
• In this case, the employer’s failure to verify the license over three years amounted to gross negligence.

Application of Legal Precedents

The Court reviewed past rulings to determine the liability framework:

• National Insurance Co. Ltd. vs. Swaran Singh (2004) 3 SCC 297: Held that an expired license does not automatically exempt an insurance company from liability.
• Nirmala Kothari vs. United India Insurance Co. Ltd. (2020) 4 SCC 49: Affirmed that an employer must verify a driver’s license at the time of hiring.
• Delhi High Court in Tata AIG General Insurance Co. Ltd. vs. Akansha & Ors.: Ruled that a driving license expiration creates a material breach.
• Himachal Pradesh High Court in National Insurance Co. Ltd. vs. Hem Raj & Ors.: Stated that allowing an employee to drive without a valid license for an extended period constitutes negligence.

Final Judgment

The Supreme Court dismissed the appeal, upholding the High Court’s ruling:

“The appellant failed in his duty as an employer by allowing a driver to operate a commercial vehicle without a valid license for three years. This constitutes a material breach of the insurance policy, absolving the insurer of liability.”

The employer was held solely liable for compensation, including interest and penalties.

Implications of the Judgment

This ruling has important implications for employers, insurers, and compensation claims:

• Employers must ensure drivers renew their licenses to avoid liability.
• Insurance companies can deny claims if a material breach is proven.
• Courts will distinguish between minor lapses and gross negligence.
• Compensation claims under the Workmen’s Compensation Act will prioritize employee relief but may shift liability based on employer negligence.

With this judgment, the Supreme Court reinforced the principle that employers bear the responsibility of ensuring regulatory compliance, particularly in commercial transportation.

Petitioner Name: Beli Ram.
Respondent Name: Rajinder Kumar & Anr..
Judgment By: Justice Sanjay Kishan Kaul, Justice Aniruddha Bose, Justice Krishna Murari.
Place Of Incident: Bilaspur, Himachal Pradesh.
Judgment Date: 23-09-2020.

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