Fake Driving License and Insurer’s Liability: Supreme Court Clarifies Legal Position

The case of Ram Chandra Singh vs. Rajaram and Others revolves around the question of whether an insurer can be absolved from liability when the driver of an insured vehicle possesses a fake driving license. The Supreme Court was called upon to decide whether the Motor Accident Claims Tribunal (MACT) and the High Court of Judicature at Allahabad had erred in holding that the insurance company was not liable in a motor accident claim due to the driver’s invalid license.

Background of the Case

The case originated from a tragic motor accident that took place on May 10, 2012, at 6:30 AM. The deceased, Sanoj Kumar, was on his morning walk when he was hit from behind by a Bolero loader vehicle (Registration No. UP-71/0084), which was allegedly driven at high speed in a rash and negligent manner.

The respondents, who were the legal heirs of the deceased, filed a claim before the Motor Accident Claims Tribunal (MACT) in Firozabad, Uttar Pradesh. The Tribunal awarded compensation of Rs.6,27,000 but absolved the insurance company, Oriental Insurance Co. Ltd., from liability on the ground that the driver, Shivgyani, did not have a valid driving license.

The owner of the vehicle, Ram Chandra Singh, challenged this ruling before the High Court, which dismissed the appeal, affirming that the driver had a fake license and that no evidence was provided to show its authenticity. Aggrieved by this decision, the appellant approached the Supreme Court.

Petitioner’s (Ram Chandra Singh) Arguments

• The owner of the vehicle contended that even if the driver had a fake license, the insurer could not be absolved of its liability unless it was proven that the owner had knowledge of the fake license.
• The Tribunal and the High Court failed to consider that the owner had taken reasonable precautions by verifying the license before employing the driver.
• The owner had seen a photocopy of the driver’s license and was satisfied with his driving skills before hiring him.
• The insurance company must first pay the compensation and later recover the amount from the owner if the license is proven to be fake.

Respondents’ (Oriental Insurance Co. Ltd.) Arguments

• The insurer had conducted an independent investigation and found that the driving license was fake.
• The Tribunal had correctly absolved the insurer based on the finding that the license was fraudulent.
• The owner failed to verify the authenticity of the license before hiring the driver, which constituted negligence.
• Under Section 149(2)(a)(ii) of the Motor Vehicles Act, the insurer was not liable when the driver was unauthorized.

Supreme Court’s Observations

The Supreme Court reviewed the evidence and analyzed the liability of the insurer in cases where the driver holds a fake license. The Court referred to previous judgments, including:

• PEPSU Road Transport Corporation vs. National Insurance Co. – Held that an insurer can avoid liability only if it proves that the owner knowingly employed a driver with a fake license.
• United India Insurance Co. Ltd. vs. Lehru – Stated that an owner must exercise reasonable diligence but is not required to investigate the validity of the license beyond the apparent authenticity.
• National Insurance Co. Ltd. vs. Swaran Singh – Clarified that the insurer is liable unless it is proven that the owner knowingly employed an unlicensed driver.

The Court noted:

• “The owner stated that he had seen the photocopy of the license and was satisfied with the driver’s competence.”
• “There is no finding that the owner had knowledge of the fake nature of the license.”
• “The insurance company must first pay the compensation and then recover the amount from the owner.”

Supreme Court’s Judgment

The Court ruled:

• The insurer could not be absolved of liability merely because the license was fake.
• The insurance company was directed to pay the compensation amount and recover it from the vehicle owner.
• The High Court’s judgment was set aside, and the case was remanded for fresh consideration on the liability aspect.
• The compensation awarded by the MACT was upheld.

Impact of the Judgment

The ruling sets a significant precedent in motor accident claims and insurance liability. The judgment clarifies that:

• Fake licenses do not automatically absolve insurers of liability.
• Owners must exercise reasonable diligence but are not required to conduct forensic checks on licenses.
• The insurance company must first compensate the victim and then seek recovery from the owner if the license is proven to be fake.

Conclusion

The Supreme Court’s decision in Ram Chandra Singh vs. Rajaram and Others reinforces the protection of victims in motor accident claims. The judgment ensures that insurers cannot escape liability on technical grounds, thereby providing much-needed financial relief to accident victims.

Petitioner Name: Ram Chandra Singh.
Respondent Name: Rajaram and Others.
Judgment By: Justice Dipak Misra, Justice A.M. Khanwilkar.
Place Of Incident: Firozabad, Uttar Pradesh.
Judgment Date: 14-08-2018.

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