Motor Accident Claims | Fake Licence By Driver Not Enough For Insurer To Recover Compensation From Vehicle Owner Without Proving Lack Of Due Diligence In Driver Engagement : Supreme Court
Sanchayita Lahkar
The Supreme Court Division Bench of Justice K Vinod Chandran and Justice N.V. Anjaria on October 8 decided that the insurer cannot recover compensation from the vehicle owner only on the ground that the driver held a fake licence. The dispute related to an accident caused by a truck striking a passenger van, resulting in multiple deaths and injuries to third parties. The insurance company, which had paid part of the compensation due to composite negligence, argued that the owner failed to verify the licence or acted in collusion. The Court held that an employer is not expected to confirm licence credentials with the issuing authority, and liability shifts to the insured owner only if the insurer proves lack of diligence at the time of driver engagement or vehicle entrustment. Compensation already paid to third parties remains unaffected.
The dispute concerns whether a vehicle insurer could shift financial liability to the insured owner after a driver produced a fake licence. The events originate from a road collision between a goods truck owned by a corporate insured entity and a passenger van carrying third parties. The collision occurred at an intersection at approximately 2:00 a.m. when the truck and van collided, causing the death of nine van occupants and injuries to others, including the van driver.
Compensation petitions were filed before a motor accident claims tribunal by injured persons or legal representatives of deceased occupants, seeking damages from the truck driver, the truck owner, and its insurer. After the truck insurer alleged that the van driver was also negligent, the van owner and its insurer were added as parties. The insurers relied on statutory conditions requiring that insured vehicles be driven by licensed drivers under the Motor Vehicles Act.
During tribunal proceedings, the truck owner’s employee, an advertising in-charge representative, produced a driving licence showing issuance by the District Transport Office, Gurdaspur, supported by a certificate from the same office indicating later renewal after the original licence expired in 1994. A tribunal insurance witness, a clerk from the transport office, stated that the licence was not issued from that office and that no fee was deposited in the driver’s name on 21 August 1990, a date that did not match the documented issuance period.
A second licence was exhibited by a Delhi court record-room clerk with an accompanying statement claiming police seizure. The tribunal recorded that court staff lacked seizure authority and that no seizure mahazar or contemporaneous police record was produced to verify retrieval of the licence from the accident spot or subsequently. The transport register produced from Gurdaspur contained interpolations, deletions, and mismatched names against photographs. The insurer asserted that the truck owner had failed in diligence at the point of driver engagement or vehicle entrustment, but no hiring records, engagement timeline, or witness account of conditions of employment or entrustment steps were filed.
The compensation had already been paid to third-party claimants by both insurers, with composite negligence apportioned between the truck and van drivers.
The Court stated, “There can be no suspicion raised merely because the owner had produced the driving licence before Court. It only indicates that the owner had been diligent enough to procure the driving licence from the driver and produce it before the Tribunal.”
The Court identified the governing legal principle through precedent, including IFFCO Tokio General Insurance Co. Ltd. v. Geeta Devi, integrating the standard applied to insurer claims of owner-side diligence. Referring to the legal threshold for recovery, it stated, “In order to avoid liability it is not sufficient to show that the person driving at the time of accident was not duly licensed.”
On the obligations of an employer engaging a driver, the Court noted the settled position on the scope of duty, and said, “As has been rightly held by the precedents above noticed, the owner of a vehicle employing a driver can only look at the licence produced by the person seeking employment and is not expected to verify from the licence issuing authority whether the licence is fake or not.”
On insurer liability despite a fake licence and the requirement of proving deliberate breach at entrustment, it also stated, “The trite law was noticed that even if the licence is fake, the insurance company is liable to pay compensation, if they fail to prove that the insured had deliberately committed breach in entrusting the vehicle to a driver who had a fake licence.”
The Court examined the credibility of record evidence from the Gurdaspur transport office, noting register irregularities where “a colour photograph of 1st respondent was found in the register but the name shown was different,” coupled with “many interpolations, deletions and entries where the photographs did not align with the names shown.”
On the claim that another licence was seized by police, the Court found no supporting police documentation, stating that “there is no evidence to substantiate the seizure having been made, nor even the seizure mahazar produced, which the police would have recorded if such seizure had been made…”
Assessing the adequacy of owner-side witness evidence for diligence at engagement or entrustment, the Court recorded the absence of material questioning on key facts, and said, “There were no questions put to the witness… as to the actual entrustment of the vehicle” and further noted gaps on whether the driver “was employed regularly or temporarily and when such employment commenced,” which were material to determining diligence at the time of engagement.
The Court placed the burden on the insurer to show breach by the insured from circumstances at the point of employment or entrustment. It recorded that “the insurance company from the totality of the circumstances has to bring out the absence of due diligence… to prove breach by the insured, which is totally absent in the present case.”
The Court directed: “We find absolutely no reason to sustain the order of the High Court, mulcting the liability on the owner of the truck. We set aside the order of the High Court, insofar as the rights of recovery of the award amounts granted to the insurer. The other directions, as issued by the Tribunal and modified by the High Court, including determination of the award amounts would stand undisturbed. The appeals stand allowed. Pending application, if any, shall stand disposed of.”
Advocates Representing the Parties
For the Petitioners: Mr.Gopal Shankaranarayan, Sr. Adv.
For the Respondents: Dr. Manish Singhvi, Sr. Adv.
Case Title: Hind Samachar Ltd. (Delhi Unit) v. National Insurance Company Ltd. & Ors.
Neutral Citation: 2025 INSC 1204
Case Number: Civil Appeal Nos.12442-12446 of 2024
Bench: Justice K. Vinod Chandran, Justice N. V. Anjaria
