National Insurance Co. Ltd. vs HARJIT KUMAR DABAR

THIS appeal is directed against the order dated 27.11.2002 passed in Case No. 36/97 by the District Consumer Disputes Redressal Forum, Guna (for short the ''District Forum'') whereby the complaint for deficiency in service in not making the payment of own damage claim of passenger bus bearing registration No. MP-08 A-2815 comprehensively insured for the period 13.5.1995 to 12.5.1996 met with an accident on 6.8.1995 was allowed holding that the driver who was driving the vehicle at the time of accident was not holding a valid driving licence which was renewed from the Licensing Authority, Gwalior while the original licence No. A/7548/84 said to have been issued by the RTO, Alwar was not issued and was a fake licence, hence, directed the Insurance Company to treat the claim as non-standard claim and to pay 75% of the payable amount of Rs. 37,077/- as assessed by the Surveyor which comes to Rs. 27,807/- with interest thereon at the rate of 9% from 27.6.1997 alongwith Rs. 500/- as costs of the proceedings.

THE only question arises for our consideration is whether the original driving licence admittedly having been found fake the owner of the vehicle who employed the driver after verification of the driving licence renewed from time to time can be deprived of own damage claim under the contract of insurance ? Learned Counsel for the Insurance Company submitted that the decision of the Hon''ble Supreme Court in United India Insurance Company Limited v. Lehru & Ors., II (2003) SLT 516=I (2003) ACC 611 (SC)=AIR 2003 SC 1695 wherein the driver''s licence was found to be fake deals with the case of statutory liability under Section 149 of the Motor Vehicles Act. The Apex Court after referring to its earlier decisions in Skandia Insurance Company Ltd. v. Kokilaben Chandravadan, I (1987) ACC 413=AIR 1987 SC 1184; Sohanlal Passi v. P. Sesh Reddy, II (1996) ACC 617=AIR 1996 SC 3271; and New India Assurance Company Limited, Shimla v. Kamla, I (2001) SLT 300=I (2001) ACC 151 (SC)=AIR 2001 SC 1340 and after considering the provisions of Chapters X and XI and in particular Section 149 of the Motor Vehicles Act, 1988 corresponding to Section 96(2)(b) of Motor Vehicles Act, 1939 held that insured cannot be expected to make an inquiry in the RTO spread all over the country and ultimately the licence is found to be fake, the Insurance Company cannot absolve from its liability at least in third party insurance which has been made compulsory. The Supreme Court further observed that in a case where a licence is found to be fake the Insurance Company would remain liable to the innocent third party but it may be able to recover from the insured. Therefore, the present case, being a case of own damage claim under the contract of insurance in which question of statutory liability is not involved for the breach of condition of the policy, the Insurance Company would not be liable to pay the amount nor can be ordered to treat the claim as non-standard claim as Insurance Company cannot recover the amount from the insured. Counsel cited decisions of National Commission in The New India Assurance Company Ltd. v. Surnam Singh, 1986-2002 CONSUMER 5685 (NS) and in Iqbal Hussain Quazi v. M/s. New India Assurance Company Limited & Ors., 1986-2002 CONSUMER 6546 (NS).

Ms. Bharti Arora, learned Counsel for the respondent placing reliance on the decision of Supreme Court in Lehru''s case (supra) submitted that even if the licence is found to be fake, the burden lies on the Insurance Company that while engaging the driver the owner/insured had noticed that the licence was fake and still permitted that person to drive the vehicle, therefore, in the absence of such evidence the Insurance Company is liable to indemnify the own damage claim.

MR. Deepesh Joshi submitted that the law declared by the Supreme Court is law of the land and is binding on all under Article 141 of the Constitution of India, hence, the Insurance Company cannot be permitted to say that the decision in Lehru''s case and in Kamla''s case relate to only, third party insurance, wherein, the question of own damage claim was not considered, therefore, Insurance Company is not bound to indemnify the insured for own damage claim. It was further submitted that the Tariff Advisory Committeee had framed guidelines are binding on the Insurance Companies which did not make any distinction in respect of breach of the conditions of the policy, which, hence, the District Forum rightly ordered to pay 75% of the payable amount. After hearing learned Counsel, it would be appropriate to refer paras 18 and 20 from Lehru''s case (supra), which we quote : "18. Now let us consider Section 149(2). Reliance has been placed on Sections 149 (2)(a)(ii). As seen in order to avoid liability under this provision it must be shown that there is a "breach". As held in Skandia''s and Sohan Lal Passi''s cases (supra) the breach must be on part of the insured. We are in full agreement with that. To hold otherwise would lead to absurd results. Just to take an example, suppose a vehicle is stolen. Whilst it is being driven by the thief there is an accident. The thief is caught and it is ascertained that he had no licence. Can the Insurance Company disown liability ? The answer has to be an emphatic "No". To hold otherwise would be to negate the very purpose of compulsory insurance. The injured or relatives of person killed in the accident may find that the decree obtained by them is only a paper decree as the owner is a man of straw. The owner himself would be an innocent sufferer. It is for this reason that the Legislature, in its wisdom, has made insurance, at least third party insurance, compulsory. The aim and purpose being that an Insurance Company would be available to pay. The business of the Company is to insurance. In all businesses there is an element of risk. All persons carrying on business must take risks associated with that business. Thus, it is equitable that the business which is run for making profits also bears the risk associated with it. At same time innocent parties must not be made to suffer or lose. These provisions meet these requirements. We are thus in agreement with what is laid down in aforementioned cases viz., that in order to avoid liability it is not sufficient to show that the person driving at the time of accident was not duly licensed. The Insurance Company must establish that the breach was on the part of the insured.

When an owner is hiring a driver he will,therefore, have to check whether the driver has a driving licence. If the driver produces a driving licence which on the face of it looks genuine, the owner is not expected to find out whether the licence has in fact been issued by a Competent Authority or not. The owner would then take the tests of the driver. If he finds that the driver is competent to drive the vehicle, he will hire the driver. We find it rather strange that Insurance Companies expect owners to make inquiries with RTOs, which are spread all over the country, whether the driving licence shown to them is valid or not. Thus, where the owner has satisfied himself that the driver has a licence and is driving competently there would be no breach of Section 149(2)(a)(ii). The Insurance Company would not then be absolved of liability. If, it ultimately turns out that the licence was fake the Insurance Company would continue to remain liable unless they prove that the owner/insured was aware or had noticed that the licence was fake and still permitted that person to drive. More importantly even in such a case the Insurance Company would remain liable to the innocent third party, but it may be able to recover from the insured. This is the law which has been laid down is Skandia''s, Sohan Lal Passi''s and Kamla''s cases. We are in full agreement with the views expressed therein and see no reason to take a different view."

IT is evidently clear that the Supreme Court in para 20 has observed that when an owner is hiring a driver, he will have to check whether the driver has a driving licence. If the driver produces a driving licence which on the face of it looks genuine, the owner is not expected to find out whether the licence has in fact been issued by a Competent Authority or not. The owner then would take the test of the driver. If, he finds that the driver is competent to drive the vehicle, he will hire the driver. The Supreme Court further observed that it is strange that Insurance Companies expect owners to make inquiries with RTOs which are spread all over the country, whether the driving licence shown to them is valid or not. Thus, where an owner has satisfied himself that the driver has a licence and is driving competently, there would be no breach of Section 149(2)(a)(ii) and the Insurance Company would not then be absolved of liability. However, in this para the Supreme Court has also observed that if it ultimately, turns out that the licence was fake the Insurance Company would continue to remain liable unless they prove that the owner/insured was aware or had noticed that the licence was fake and still permitted that person to drive. More importantly even in such a case the Insurance Company would remain liable to the innocent third party, but it may be able to recover from the insured (emphasis supplied). This is the law which has been laid down in Skandia''s, Sohanlal Passi''s and Kamla''s cases and the Supreme Court was in full agreement with the views expressed therein and did not take a different view. In a case of own damage claim if licence is found to be fake from whom Insurance Company for breach of condition, if the insured failed in its duty and the amount of own damage claim is paid to the owner under the contract of insurance and not under the statutory liability like a third party to an innocent person. In such a case the right of recovery of the amount cannot be exercised as it is the owner to whom the amount is paid then in turn how the amount can be recovered from the owner. In the case in hand the licence admittedly, having been found fake which will not give a life to the non est licence in a case own damage claim, hence, in our humble opinion, the Insurance Company would not be liable to pay the amount to the insured where right of recovery cannot be exercised, even if the amount is ordered to be paid treating the claim as non-standard claim.

BEFORE parting with the case we placed on record our appreciation to Mr. Deepesh Joshi, who assisted this Commission by making his legal submissions.

IN the result, the appeal is allowed. The order of the District Forum is set-aside and the complaint is dismissed with no order as to costs. A copy of this order be conveyed to the parties and a copy be sent to the District Forum alongwith the record of the case. Appeal allowed.