Supreme Court Upholds 'Pay and Recover' in Motor Accident Case Involving Invalid License

The case of Singh Ram vs. Nirmala and Others addresses a critical issue in motor accident claims – the liability of insurance companies when the insured driver does not hold a valid driving license. The Supreme Court had to decide whether the insurer should pay the compensation and recover it from the vehicle owner or be absolved of liability altogether.

The case involved a fatal motor accident where the driver was found to be holding a fake driving license. The Court upheld the ‘pay and recover’ principle, directing the insurance company to compensate the victim’s family and recover the amount from the vehicle owner.

Background of the Case

The accident occurred on March 22, 2010. The deceased, Sunil Kumar, was riding a motorcycle when he was fatally hit by a vehicle driven by the appellant, Singh Ram. The Motor Accident Claims Tribunal (MACT) found that the accident was due to the rash and negligent driving of the appellant.

The victim was employed with Haryana Roadways and earned Rs. 11,928 per month. The Tribunal calculated the compensation at Rs. 24,15,420 but deducted financial assistance received by the victim’s family, reducing the amount to Rs. 8,19,500.

The insurance company was initially held not liable since the driver had a fake license, but the Tribunal directed it to pay and recover the amount from the vehicle owner.

Petitioner’s Arguments

The petitioner (vehicle owner) argued:

The insurance company should not have been absolved of liability.
Since the vehicle was insured, the insurer should bear full responsibility.
The Tribunal and High Court erred in allowing the insurer to recover the amount from him.

Respondent’s Arguments

The insurance company countered:

The driver did not possess a valid driving license at the time of the accident.
The vehicle owner failed to verify the authenticity of the license.
As per precedents, the insurance company could be directed to pay compensation but was entitled to recover the amount from the vehicle owner.

Supreme Court’s Observations

The Supreme Court emphasized that the vehicle owner had produced a fake license and did not take reasonable care to verify its validity. The Court observed:

“The appellant as owner had evidently failed to take reasonable care since he could not have been unmindful of facts which were within his knowledge.”

The Court relied on the precedent set in National Insurance Co. Ltd. vs. Swaran Singh, which stated:

“Mere absence, fake, or invalid driving license or disqualification of the driver does not automatically absolve the insurer of liability.”
“The insurer must prove that the insured was negligent in ensuring that the driver had a valid license.”
“The insurer may still be directed to pay compensation but with the right to recover from the insured.”

Final Judgment

The Supreme Court upheld the Tribunal and High Court’s decision, stating:

The insurance company must pay the compensation to the victim’s family.
The insurer has the right to recover the amount from the vehicle owner.
The vehicle owner’s negligence in verifying the license justified the recovery.
The appeal was dismissed with no costs awarded.

Key Takeaways from the Judgment

Importance of Valid Driving License: Vehicle owners must ensure that their drivers hold a valid license.
‘Pay and Recover’ Principle: Insurance companies may be directed to pay compensation but can recover it from the vehicle owner in case of a fake license.
Liability of the Insurer: Mere absence of a license does not absolve the insurer; it must establish negligence by the vehicle owner.

This ruling reinforces the principle that insurance companies cannot outright deny compensation but can recover it from negligent vehicle owners.

Petitioner Name: Singh Ram
Respondent Name: Nirmala and Others
Judgment By: Justice Dipak Misra, Justice A M Khanwilkar, Justice D Y Chandrachud
Place Of Incident: Yamunanagar, Haryana
Judgment Date: 06-03-2018

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