In Special Leave Petition (C) No. 19992 Of 2023 -SC- Supreme Court rules IFFCO Tokio cannot disclaim liability for vehicle owner's failure to verify driver's license; Warns insurance companies against raising frivolous pleas
Justice C.T. Ravikumar & Justice Sanjay Kumar [30-10-2023]

Read Order: IFFCO Tokio General Insurance Co. Ltd v. Geeta Devi and others

Chahat Varma

New Delhi, November 2, 2023: The Supreme Court has held that an insurance company cannot disclaim liability based on the vehicle owner's failure to verify the driver's license.

In this case, IFFCO Tokio General Insurance Co. Ltd. had challenged an order passed by the Delhi High Court, which had reversed the award of the Motor Accident Claims Tribunal. The Tribunal's award had granted the insurance company the right to recover the compensation amount, but the High Court denied this right.

The dispute arose from a fatal accident on 09.05.2010 when a Tempo vehicle, operated recklessly, collided with a motorcycle, causing fatal injuries to Dharambir. Dharambir's dependents, including his parents, widow, and children, sought compensation from the Motor Accident Claims Tribunal. The respondents in the case were Ujay Pal, the Tempo vehicle's driver, Netra Pal Singh, the owner of the vehicle (deceased during the case, represented by legal representatives), and the petitioner-insurance company. The Tribunal, in its Award dated 06.07.2018, ruled in favour of Dharambir's dependents and awarded them Rs.13,70,000 as compensation with interest. However, the Tribunal found that the Tempo driver possessed a fake driving license and, therefore, held that the insurance company was not liable to pay the compensation. The Tribunal directed the insurance company to deposit the awarded amount with the liberty to recover it from the owners of the Tempo. Dissatisfied with this decision, the vehicle's owners filed an appeal before the Delhi High Court, leading to the contested order dated 11.05.2023. The petitioner-insurance company sought to challenge the denial of its right to recover the compensation amount.Top of Form

The division bench of Justice C.T. Ravikumar and Justice Sanjay Kumar emphasized that neither the Motor Vehicles Act, 1988 nor the insurance policy required vehicle owners to verify a driver's license with the transport authorities as a standard practice. Employers typically rely on licenses issued by seemingly competent authorities as long as they are valid. Therefore, the insurance company could not disclaim liability based on the vehicle owner's failure to verify the driver's license with the Regional Transport Office (RTO) because no such mandatory condition was prescribed by the law or the insurance policy.

The bench observed that the petitioner-insurance company failed to raise the plea that the vehicle owner allowed Ujay Pal to drive the vehicle, knowing that his license was fake. The insurance company's argument was that the accident resulted from the victim's negligence. Additionally, the insurance policy did not impose an obligation on the vehicle owner to verify the driver's license with the RTO. As a result, the claim by the insurance company that it had the right to recover compensation from the vehicle owners due to a wilful breach of the insurance policy's condition, which required a licensed driver, lacked proper pleading and proof.

The bench further placed reliance on the judgment rendered in Ram Chandra Singh vs. Rajaram and others [LQ/SC/2018/993], where the issue revolved around whether an insurance company could be relieved of liability due to the insured vehicle being driven by an individual without a valid driver's license at the time of the accident. In this case, the Court emphasized that it is only when the owner was aware of the fake driving license held by the driver but still allowed them to operate the vehicle that the insurer could be absolved of liability. Importantly, the mere fact that the driver's license was fake, in and of itself, would not release the insurer from its obligations.

Thus, the bench held that when a seemingly valid driving license is presented by an individual employed to operate a vehicle, the burden falls on the insurance company to demonstrate that there was a failure on the part of the vehicle owner to conduct due diligence regarding the authenticity of the license. This burden applies unless the license is evidently fake, has already expired, or there are genuine doubts about its validity.

In the present case, it was ruled that,no evidence was presented that could establish that the deceased vehicle owner should have verified Ujay Pal's driving license. As a result, the petitioner-insurance company had no right to recover the compensation amount from the present owners of the vehicle. The Delhi High Court's order, which upheld this principle, was deemed unassailable, both in terms of facts and the law.

As a result, the special leave petition was dismissed. The court also expressed its concern about insurance companies routinely raising such pleas without proper factual and evidentiary support, leading to unnecessary wastage of curial time and effort.