Owner was not aware

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
SPECIAL LEAVE PETITION (C) No. 19992 OF 2023
IFFCO Tokio General Insurance Co. Ltd.  Petitioner
Versus
Geeta Devi and others.  Respondents4. It would be apposite at this stage to note the statutory milieu
pertinent to this case. Section 149 of the Act of 1988, to the extent relevant,
reads as under: -
149. Duty of insurers to satisfy judgments and awards against
persons insured in respect of third party risks. -
(1) ..
(2) No sum shall be payable by an insurer under sub-section (1)
in respect of any judgment or award unless, before the
commencement of the proceedings in which the judgment or
award is given the insurer had notice through the Court or, as
the case may be, the Claims Tribunal of the bringing of the
proceedings,; and an insurer to whom notice of the bringing
of any such proceedings is so given shall be entitled to be made
a party thereto and to defend the action on any of the following
grounds, namely:-
(a) that there has been a breach of a specified condition of
the policy, being one of the following conditions, namely: -
(i) ...; or
(ii) a condition excluding driving by a named person or
persons or by any person who is not duly licensed, or by
any person who has been disqualified for holding or
obtaining a driving licence during the period of
disqualification; or.
5. On behalf of the petitioner-insurance company, it was argued that
the hearsay evidence of the widow of the vehicle owner was accepted as
the biblical truth by the High Court without any corroboration thereof. This
argument was advanced in the context of the deceased vehicle owner
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having taken a driving skill test of Ujay Pal prior to his employment as a
driver. It is pointed out that his widow admitted that she had not seen any
such test being taken and that her late husband had merely told her so
and, further, the inescapable fact also remains that the driving licence of
Ujay Pal, the driver of the vehicle, was a fake one.
6. The argument with respect to the driving skill test does not merit
acceptance as the insurance policy in question admittedly did not postulate
that a driving skill test should compulsorily be taken before employing a
chauffeur to drive the insured vehicle. The relevant condition in the
insurance policy, titled Driver Clause, reads as follows:
Any person including insured: provided that the person
driving holds an effective driving licence at the time of the
accident and is not disqualified from holding or obtaining
such a licence.
There is, thus, no mandate in the statutory provision or the above
clause that a driving skill test should be undertaken without fail before
employing a driver. Therefore, it is not open to the petitioner-insurance
company to cite the same as a breach of the terms and conditions of the
policy. In fact, there was no such term or condition in the policy.
7. As regards the contention that the driver of the vehicle was not
duly licensed as he possessed a fake license, it may be noted that neither
Section 149(2)(a)(ii) of the Act of 1988 nor the Driver Clause in the subject
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insurance policy provide that the owner of the insured vehicle must, as a
rule, get the driving licence of the person employed as a driver for the said
vehicle verified and checked with the concerned transport authorities.
Generally, and as a matter of course, no person employing a driver would
undertake such a verification exercise and would be satisfied with the
production of a licence issued by a seemingly competent authority, the
validity of which has not expired. It would be wholly impracticable for every
person employing a driver to expect the transport authority concerned to
verify and confirm whether the driving licence produced by that driver is a
valid and genuine one, subject to just exceptions. In fact, no such
mandatory condition is provided in any car insurance policy and it is not
open to the petitioner-insurance company, which also did not prescribe
such a stringent condition, to cite the failure of the deceased vehicle owner
to get Ujay Pals driving licence checked with the RTO as a reason to
disclaim liability under the insurance policy.
8. In effect and in consequence, the petitioner-insurance company
cannot blithely claim that the deceased vehicle owner did not conduct due
diligence while employing Ujay Pal as a driver, by now insisting upon a
condition which was neither prescribed in the statute nor in the insurance
policy. More so, an unrealistic condition that every person employing a
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driver must get the driving licence of such driver verified and confirmed by
the RTO concerned, irrespective of the actual necessity to do so.
9. Useful reference in this regard may be made to Skandia
Insurance Co. Ltd. vs. Kokilaben Chandravadan and others1
, wherein
this Court, in the context of Section 96(2)(b)(ii) of the Motor Vehicles Act,
1939, which is in pari materia with Section 149(2)(a)(ii) of the Act of 1988,
observed as under: -
14. Section 96(2)(b)(ii) extends immunity to the insurance
company if a breach is committed of the condition excluding
driving by a named person or persons or by any person who is not
duly licensed, or by any person who has been disqualified from
holding or obtaining a driving licence during the period of
disqualification. The expression breach is of great significance.
The dictionary meaning of breach is infringement or violation of a
promise or obligation (see Collins English Dictionary). It is
therefore abundantly clear that the insurer will have to establish
that the insured is guilty of an infringement or violation of a
promise that a person who is duly licensed will have to be in
charge of the vehicle. The very concept of infringement or violation
of the promise that the expression breach carries within itself
induces an inference that the violation or infringement on the part
of the promisor must be a wilful infringement or violation. If the
insured is not at all at fault and has not done anything he should
not have done or is not amiss in any respect how can it be
conscientiously posited that he has committed a breach? It is only
when the insured himself places the vehicle in charge of a person
1
(1987) 2 SCC 654
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who does not hold a driving licence, that it can be said that he is
guilty of the breach of the promise that the vehicle will be driven
by a licensed Driver. It must be established by the insurance
company that the breach was on the part of the insured and that it
was the insured who was guilty of violating the promise or
infringement of the contract. Unless the insured is at fault and is
guilty of a breach the insurer cannot escape from the obligation to
indemnify the insured and successfully contend that he is
exonerated having regard to the fact that the promisor (the
insured) committed a breach of his promise. Not when some
mishap occurs by some mischance. When the insured has done
everything within his power inasmuch as he has engaged a
licensed Driver and has placed the vehicle in charge of a licensed
Driver, with the express or implied mandate to drive himself, it
cannot be said that the insured is guilty of any breach.
10. The correctness of the aforesaid decision was considered by a
3-Judge Bench of this Court in Sohan Lal Passi vs. P. Sesh Reddy and
others2
 and it was duly approved, with the following observations: -
In other words, once there has been a contravention of the
condition prescribed in sub-section (2)(b)(ii) of Section 96, the
person insured shall not be entitled to the benefit of sub-section
(1) of Section 96. According to us, Section 96(2)(b)(ii) should not
be interpreted in a technical manner. Sub-section (2) of Section 96
only enables the insurance company to defend itself in respect of
the liability to pay compensation on any of the grounds mentioned
in sub-section (2) including that there has been a contravention of
the condition excluding the vehicle being driven by any person
2
(1996) 5 SCC 21
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who is not duly licensed. This bar on the face of it operates on the
person insured. If the person who has got the vehicle insured has
allowed the vehicle to be driven by a person who is not duly
licensed then only that clause shall be attracted. In a case where
the person who has got insured the vehicle with the insurance
company, has appointed a duly licensed Driver and if the accident
takes place when the vehicle is being driven by a person not duly
licensed on the basis of the authority of the Driver duly authorised
to drive the vehicle whether the insurance company in that event
shall be absolved from its liability? The expression breach
occurring in Section 96(2)(b) means infringement or violation of a
promise or obligation. As such the insurance company will have to
establish that the insured was guilty of an infringement or violation
of a promise. The insurer has also to satisfy the Tribunal or the
court that such violation or infringement on the part of the insured
was wilful. If the insured has taken all precautions by appointing a
duly licensed Driver to drive the vehicle in question and it has not
been established that it was the insured who allowed the vehicle to
be driven by a person not duly licensed, then the insurance
company cannot repudiate its statutory liability under sub-section
(1) of Section 96.
11. Thereafter, in National Insurance Co. Ltd. vs. Swaran Singh
and others3
, a 3-Judge Bench of this Court dealt with the interpretation of
Section 149 of the Act of 1988. The cases before the Bench involved,
amongst others, instances where the driving licence produced by the driver
or owner of the vehicle was a fake one. The Bench noted that Section
3
(2004) 3 SCC 297
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149(2)(a) opened with the words: that there has been a breach of a
specified condition of the policy, which would imply that the insurers
defence of the action would depend upon the terms of the policy. It was
observed that an insurance company which wished to avoid its liability is
not only required to show that the conditions laid down in Section 149 (2)(a)
or (b) are satisfied but is further required to establish that there has been a
breach on the part of the insured. Such a breach on the part of the insured
must be established by the insurer to show that the insured used or caused
or permitted to be used the insured vehicle in breach of the provisions. The
Bench went on to state that where the insurer, relying upon the violation of
law by the assured, takes exception to pay the assured or a third party, it
must prove a willful violation of the law by the assured. Noting that the
proposition of law is no longer res integra that the person who alleges
breach must prove the same, the Bench observed that an insurance
company would be required to establish the said breach by cogent
evidence and in the event an insurance company fails to prove that there
has been breach of the conditions of the policy on the part of the insured,
such an insurance company cannot be absolved of its liability.
12. Further, in the context of cases where the drivers licence was
found to be fake, the Bench observed that the question would be whether
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the insurer could prove that the owner was guilty of willful breach of the
conditions of the insurance policy. It was pointed out that the defence to the
effect that the licence held by the person driving the vehicle was a fake one
would be available to the insurance company but whether, despite the
same, the plea of default on the part of the owner has been established or
not would be a question which would have to be determined in each case.
The earlier decision in United India Insurance Co. Ltd. vs. Lehru and
others4
 was considered and the Bench observed that the ratio therein must
not be read to mean that an owner of a vehicle can, under no
circumstances, have any duty to make an inquiry with regard to the
genuineness of the driving licence and the same would again be a question
which would arise for consideration in each individual case. The argument
that the decision in Lehru (supra) meant that, for all intent and purport, the
right of the insurer to raise a defence that the licence was fake was taken
away was, however, rejected as not being correct and it was held that such
a defence can certainly be raised, but it will be for the insurer to prove that
the insured did not take adequate care and caution to verify the
genuineness or otherwise of the licence held by the driver. The findings
summed up by the Bench, to the extent presently relevant, are as under:
4
(2003) 3 SCC 338
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(iii) The breach of policy condition e.g. disqualification of the driver
or invalid driving licence of the driver, as contained in sub-section
(2)(a)(ii) of Section 149, has to be proved to have been committed
by the insured for avoiding liability by the insurer. Mere absence,
fake or invalid driving licence or disqualification of the driver for
driving at the relevant time, are not in themselves defences
available to the insurer against either the insured or the third
parties. To avoid its liability towards the insured, the insurer has to
prove that the insured was guilty of negligence and failed to
exercise reasonable care in the matter of fulfilling the condition of
the policy regarding use of vehicles by a duly licensed driver or
one who was not disqualified to drive at the relevant time.
(iv) Insurance companies, however, with a view to avoid their
liability must not only establish the available defence(s) raised in
the said proceedings but must also establish breach on the part
of the owner of the vehicle; the burden of proof wherefor would be
on them.
(v) The court cannot lay down any criteria as to how the said
burden would be discharged, inasmuch as the same would
depend upon the facts and circumstances of each case.
(vi) Even where the insurer is able to prove breach on the part of
the insured concerning the policy condition regarding holding of a
valid licence by the driver or his qualification to drive during the
relevant period, the insurer would not be allowed to avoid its
liability towards the insured unless the said breach or breaches on
the condition of driving licence is/are so fundamental as are found
to have contributed to the cause of the accident. The Tribunals in
interpreting the policy conditions would apply the rule of main
purpose and the concept of fundamental breach to allow
defences available to the insurer under Section 149(2) of the Act.
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(vii) The question, as to whether the owner has taken reasonable
care to find out as to whether the driving licence produced by the
driver (a fake one or otherwise), does not fulfil the requirements of
law or not will have to be determined in each case.
13. More recently, in Ram Chandra Singh vs. Rajaram and others5
,
the issue before this Court was whether an insurance company could be
absolved of liability on the ground that the insured vehicle was being driven
by a person who did not have a valid driving licence at the time of the
accident. This Court found that no attempt was made to ascertain whether
the owner was aware of the fake driving licence possessed by the driver
and held that it is only if the owner was aware of the fact that the licence
was fake but still permitted such driver to drive the vehicle that the insurer
would stand absolved. It was unequivocally held that the mere fact that the
driving licence was fake, per se, would not absolve the insurer.
14. Applying the aforestated edicts to the case on hand, it may be
noted that the petitioner-insurance company did not even raise the plea
that the owner of the vehicle allowed Ujay Pal to drive the vehicle knowing
that his licence was fake. Its stand was that the accident had occurred due
to the negligence of the victim himself. Further, the insurance policy did not
require the vehicle owner to undertake verification of the driving licence of
5
(2018) 8 SCC 799
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the driver of the vehicle by getting the same confirmed with the RTO.
Therefore, the claim of the petitioner-insurance company that it has the
right to recover the compensation from the owners of the vehicle, owing to
a willful breach of the condition of the insurance policy, viz., to ensure that
the vehicle was driven by a licenced driver, is without pleading and proof.
15. As already pointed out supra, once a seemingly valid driving
licence is produced by a person employed to drive a vehicle, unless such
licence is demonstrably fake on the face of it, warranting any sensible
employer to make inquiries as to its genuineness, or when the period of the
licence has already expired, or there is some other reason to entertain a
genuine doubt as to its validity, the burden is upon the insurance company
to prove that there was a failure on the part of the vehicle owner in carrying
out due diligence apropos such driving licence before employing that
person to drive the vehicle. Presently, no evidence has been placed on
record whereby an inference could be drawn that the deceased vehicle
owner ought to have gotten verified Ujay Pals driving licence. Therefore, it
was for the petitioner-insurance company to prove willful breach on the part
of the said vehicle owner. As no such exercise was undertaken, the
petitioner-insurance company would have no right to recover the
compensation amount from the present owners of the vehicle. The
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impugned order passed by the Delhi High Court holding to that effect,
therefore, does not brook interference either on facts or in law.
16. These legal propositions being so well settled, it is indeed
shocking that insurance companies deem it appropriate to raise such pleas
as a matter of course, without reference to the facts of the given case
and/or the evidence available therein, and also consider it necessary to
carry such matters in appeal till the last forum, unmindful of the wastage of
valuable curial time and effort!