DELHI HIGH COURT DECLARES THAT OWNER CANNOT BE LIABLE FOR ACCIDENT OF HIS VEHICLE INVOLVING FAKE LICENSES OF THE DRIVER

INTRODUCTION

A Single Judge Bench of the High Court of Delhi comprising of Justice Dharmesh Sharma passed an Order dated 20.05.2024 in MAC. Appl. 39/2022& CM Appl 7486/2022 in Sandeep Yadav Vs. New India Assurance Co. Ltd. and held that the registered owner is not supposed to rush to the respective RTO and ascertain the genuineness of the driving license produced by the driver.

FACTS

i) One Mr. Brajanand (Deceased) was going on a bicycle and when he reached near Mayawati Bus Stand, Baghpat, UP, suddenly a truck/tempo bearing no. DL-1M-5990 driven in rash and negligent manner by Rajesh Kumar, Respondent No. 1, came at high speed and hit the bicycle of the Deceased.

ii) Consequently, the Deceased suffered fatal injuries and was taken to a District Hospital but was declared brought Dead.

iii) An FIR no. 574/13 Criminal Complaint No. 1065/13 was lodged against the Respondent No. 1 before the Police Station Baraut under Section 279 of the Indian Penal Code, 1860 (IPC) (Rash driving or riding on a public way), Section 304A of IPC (Causing death by negligence) and Section 427 of IPC (Mischief causing damage to the amount of fifty rupees).

iv) The Respondent No. 1, the driver and Respondent No. 2, Sandeep Yadav, the registered owner of the vehicle, were served but failed to contest the case and were proceeded ex-parte vide Order dated 06.06.2014.

v) Respondent No. 3, the Insurance Company, denied all the allegations by challenging the territorial jurisdiction of the Court as also the fact that the driver was possessing a Driver’s License to drive the vehicle.

vi) It was contested that the vehicle had no valid permit and other relevant documents and thus, the Insurance Company is not liable to pay any amount.

vii) The claim Petition was allowed by the Ld. Tribunal vide Order dated 17.02.2018 and the claimants of the Deceased were granted a total compensation of Rs. 16,14,000/- with interest of 9 % per annum from the date of filing of the Petition till realization. However, the Tribunal granted recovery rights to the Insurance Company, allowing them to recover the compensation amount from the Respondent No.2, Sandeep Yadav.

viii) Aggrieved by the Order dated 17.02.2018, the Respondent No. 2, (Appellant herein) filed MAC. Appl. 39/2022& CM Appl 7486/2022 before the High Court of Delhi.

HIGH COURT ANALYSIS

The Hon’ble High Court vide Order dated 20.05.2024, made the following observations:

(1) The Ld. Single Judge observed that there was no substantial evidence proving that Sandeep Yadav knew about the fake license. The Insurance Company did not provide any proof of the Appellant having any prior knowledge or that he intentionally allowed the driver to operate the vehicle with fake license.

(2) Further, the High Court also highlighted that the registered owner is not expected to verify the authenticity of the license beyond its face value. The Court relied on a case of United India Insurance Co. Ltd. v. Lehru (2003) 3 SCC 338 wherein it had been observed by the Supreme Court as follows:

“20. 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 test 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 enquiries 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 in Skandia [(1987) 2 SCC 654], Sohan Lal Passi [(1996) 5 SCC 2: 1996 SCC (Cri) 871] and Kamla [(2001) 4 SCC 342: 2001 SCC (Cri) 701] cases. We are in full agreement with the views expressed therein and see no reason to take a different view.”

ORDER

The Court reiterated that the Insurance Company remains liable to compensate third parties in accidents, even if the driver’s license was later found to be fake, unless the insurer can prove the owner’s complicity in the fraud. The High Court allowed the Appeal, setting aside the Tribunal’s Order dated 17.02.2018 granting recovery rights to the Insurance Company against Sandeep Yadav. However, the Insurance Company retained the right to seek recovery from the driver, Rajesh Kumar.

 

Kartik Khandekar

Senior Legal Associate

The Indian Lawyer & Allied Services

 

Editor’s Comments

This is another classic case of the insurance company trying to wriggle out of its liability to pay insurance in case of an accident in a insured vehicle. The excuse given by the insurance company is neither logical nor legally tenable as no person hiring a driver can be expected to know the authenticity of the license produced by the driver. The Apex Court in the judgment of United India Insurance Co. Ltd. v. Lehru (supra) has made it clear that an owner while hiring a driver can only be prima facie satisfied with the license given by the driver and cannot be expected to make enquires to see the genuineness of the license.

 

Sushila Ram Varma

Chief Legal Consultant