No “Pay and Recover” Without Pleaded and Proved Willful Breach: Owner’s Production of Licence and Driver’s Non‑appearance Do Not Establish Collusion

Introduction

In Hind Samachar Ltd. (Delhi Unit) v. National Insurance Company Ltd., 2025 INSC 1204 (Supreme Court of India, 8 October 2025), a two-judge Bench (K. Vinod Chandran, J. and N. V. Anjaria, J.) addressed a recurring controversy in motor accident claims: when, and on what evidentiary footing, can an insurer successfully invoke a “fake driving licence” defence to secure a pay-and-recover order against the insured?

The case arose from a 1993 collision between a truck and a Matador van carrying ten passengers, resulting in nine deaths and two injuries. The Motor Accident Claims Tribunal (MACT) found composite negligence between the two vehicles in the ratio 75:25 and awarded compensation, which the insurers paid to the claimants. The High Court, however, allowed the truck’s insurer to recover from the owner on the premise that the truck driver held fake licences, drawing inferences of collusion because the owner produced the licence and the driver did not testify.

On appeal, the Supreme Court confined itself to the legality of the pay-and-recover direction. The Court revisited and applied established principles from Lehru, Swaran Singh, PEPSU RTC, and, most recently, IFFCO Tokio v. Geeta Devi, ultimately setting aside the High Court’s recovery order and reaffirming the insurer’s burden to plead and prove a willful breach by the insured.

Summary of the Judgment

The Supreme Court allowed the appeals and set aside the High Court’s pay-and-recover directions in favour of the insurer. It held that:

• The insurer failed to plead and prove a willful breach by the insured (truck owner) concerning entrustment of the vehicle to a driver with a fake licence.
• No collusion could be inferred merely because the owner (a company) produced the driver’s licence or because the driver did not testify in the MACT proceedings.
• On the evidentiary record, the insurer did not establish that the licence seized at the accident site was genuine or seized at all (no seizure mahazar), and the DTO Gurdaspur register used to impugn the licence bore interpolations and date inconsistencies—especially in light of a contemporaneous certificate evidencing issuance and subsequent renewal of the licence.
• Even assuming (arguendo) that a licence was fake, the insurer failed to prove the insured’s lack of due diligence or intentional breach at the time of entrustment; the law does not require owners to verify licences directly with the RTO absent specific reasons for suspicion.

The Court maintained the composite negligence apportionment and the compensation awards (as modified by the High Court) but removed the insurer’s right to recover from the owner.

Analysis

Precedents Cited and Their Influence

The Court’s reasoning is rooted in a consistent doctrinal line that balances third-party protection with limited statutory defences under the Motor Vehicles Act:

• United India Insurance Co. v. Lehru, (2003) 3 SCC 338: The Court reaffirmed that even if a licence is fake, an insurer can avoid liability only if it proves that the insured committed a breach—i.e., knowingly entrusted the vehicle to an unlicensed driver or failed in due diligence in a way amounting to a willful breach. Lehru clarified that the owner is not expected to verify the licence with the issuing authority in routine cases.
• National Insurance Co. Ltd. v. Swaran Singh, (2004) 3 SCC 297 (Three-Judge Bench): This seminal case reconciled earlier decisions (including Kamla and Lehru), holding that the fake-licence defence is available in principle, but the insurer must still establish default or willful breach by the owner on the facts of each case. It preserved the “pay-and-recover” device for situations where breach is proved while protecting third-party claimants.
• PEPSU RTC v. National Insurance Co. Ltd., (2013) 10 SCC 217: On the facts there, the driver had been employed for years, was tested and trained, and the evidence concerning fakery was equivocal. The Court declined to attribute fault to the owner, emphasizing practical due diligence rather than an unrealistic verification burden.
• New India Assurance Co. v. Kamla, (2001) 4 SCC 342: Kamla recognized that even if a policy defence is established, to safeguard third-party rights, courts may direct the insurer to pay the claimant first and then recover from the insured—provided a breach is established. This judgment is the source of “pay-and-recover” as a remedial tool, not as an automatic entitlement for insurers.
• IFFCO Tokio General Insurance Co. Ltd. v. Geeta Devi, 2023 SCC OnLine SC 1398: The Court recently deprecated the insurer’s practice of claiming a right of recovery without requisite pleadings and proof of willful breach, reiterating that policies typically do not impose an RTO-verification obligation on owners and that such an obligation is not found in the statute either.

In Hind Samachar, these authorities combine to produce a focused result: the insurer must not only raise the fake-licence defence but must plead and prove that the insured knowingly or willfully breached the policy by entrusting the vehicle to an unlicensed driver, or failed in such elementary diligence as to constitute a willful breach. Absent such proof, a pay-and-recover order is unwarranted.

Legal Reasoning

The Court’s reasoning proceeded along two interconnected tracks—evidentiary assessment and allocation of the burden of proof:

1. Evidentiary deficiencies undermine the insurer’s “fake licence” narrative.
   • The licence described as “A2” was said to have been seized at the accident scene. However, no seizure mahazar (seizure memo) was produced. The only witness was a record-room clerk who could not have effected such a seizure. This undermined the provenance and reliability of the very document allegedly proving fakery.
   • A DTO Gurdaspur register shown to discredit another licence (R1W1/1) contained interpolations, and the insurer’s witness referenced a date (21.08.1990) not matching the actual issuance (05.04.1991) or the renewal (11.08.1994) recorded in a contemporaneous DTO certificate (marked R-1). The Court found the register unreliable and the date discrepancy telling.
   • Importantly, the DTO certificate indicated issuance and later renewal. The Court specifically noted the renewal on 11.08.1994 fell beyond 30 days of expiry (04.04.1994), signaling an active, non-automatic renewal step, thereby lending credibility to the authenticity of the licence’s lifecycle.
2. No collusion can be inferred from ordinary litigation conduct.
   • The owner, a company, produced the licence through its representative. The Court held this is consistent with diligence, not misconduct. Owners are vicariously liable and expected to contest claims; producing the driver’s licence supports indemnification rather than suspicious behavior.
   • The driver’s non-appearance is neither unusual nor inculpatory, especially where criminal prosecution may be pending; drivers often avoid self-incrimination. The High Court’s adverse inference was unwarranted.
3. Onus on the insurer to plead and prove willful breach; no case made out.
   • There were no specific pleadings or cross-examination aimed at the core issue—how, when, and under what degree of care the owner engaged the driver and entrusted the vehicle. Absent such proof, the mere allegation of a fake licence does not establish a willful breach by the insured.
   • Consistent with Lehru and Geeta Devi, the Court reiterated that neither the Motor Vehicles Act nor standard policies impose a duty on the insured to verify a licence directly from the RTO in the ordinary course.

Based on these findings, the Supreme Court concluded that the insurer’s defence under Section 149(2)(a)(ii) (fake or invalid licence) was not made out as against the insured, and, in any event, the essential element of willful breach by the insured was unproven. Consequently, the pay-and-recover order could not be sustained.

Impact and Prospective Significance

This decision has practical and doctrinal significance for motor accident litigation:

• Higher evidentiary bar for insurers: Insurers cannot rely on thin inferences (owner produces licence; driver absent) to secure pay-and-recover. They must present cogent documentary evidence (authentic RTO records, seizure memos, forensic examination as needed) and focused oral evidence proving a willful breach by the insured at the point of entrustment.
• Structured pleadings and cross-examination: Insurers must plead specifics of breach and cross-examine owner’s witnesses on employment practices, hiring dates, verification steps, prior incidents, and entrustment decisions. Absent this, recovery will fail even if fakery is suspected.
• Stability for vehicle owners: Owners who inspect and retain a facially valid licence satisfy ordinary diligence. Corporate owners producing licences in litigation will not be penalized with inferences of collusion.
• Protection of third-party claimants remains intact: The decision does not dilute third-party rights; rather, it refines when pay-and-recover should be used—only after a breach is actually proved.
• Incentive for better official record-keeping: The Court’s skepticism toward registers with interpolations and unsupported “seizures” nudges agencies and investigating officers toward robust, traceable documentation.

Complex Concepts Simplified

• Pay and Recover: A remedial device where the court directs the insurer to first pay compensation to third-party victims and then recover that amount from the insured if a policy breach by the insured is proved. It is not automatic—it depends on proof of breach.
• Willful Breach by the Insured: Conduct showing the owner knowingly allowed an unlicensed driver to operate the vehicle or deliberately flouted policy conditions. Mere negligence in checking documents is usually insufficient unless it amounts to willful disregard.
• Composite Negligence: When more than one vehicle driver contributes to the accident. Here, liability was apportioned 75:25 between the truck and the Matador van—unchanged by the Supreme Court’s ruling on recovery.
• Vicarious Liability: The legal responsibility of the vehicle owner for the negligence of the driver acting in the course of employment. Owners defend and are indemnified subject to policy terms and statutory defences.
• Seizure Mahazar (Seizure Memo): A formal document prepared by police at the time of seizure of items (e.g., a driving licence) detailing the circumstances and authenticity of the seizure. Its absence weakens claims about what was seized and from whom.
• Renewal Beyond 30 Days: Under motor vehicle norms, renewal after 30 days is not automatic; it requires a conscious administrative act. Evidence of such renewal can add weight to the licence’s credibility and lifecycle history.

Practical Guidance Emanating from the Ruling

• For insurers:
  • Plead specific facts constituting willful breach (who hired, when, what checks were done, red flags ignored).
  • Lead primary evidence from licensing authorities with untainted registers, traceable fee receipts, and certified records; avoid reliance on interpolated registers or mismatched dates.
  • Produce seizure memos and examining officers to establish chain of custody for seized licences.
  • Cross-examine the owner’s representatives on entrustment and verification practices; generic suggestions of “fake licence” are inadequate.
• For vehicle owners:
  • Retain copies of driver licences and renewal records in employment files; record basic verification steps (e.g., visual inspection, matching photo, expiry date).
  • Have HR or fleet policies that require prompt re-verification upon licence expiry or after accidents.
  • Produce the licence in MACT proceedings without apprehension; this is seen as diligence, not collusion.
• For tribunals and appellate courts:
  • Insist on foundational proof for “fake licence” claims (authentic records, seizure proof, credible witnesses).
  • Resist drawing adverse inferences from a driver’s non-appearance where criminal liability may arise.
  • Reserve pay-and-recover for cases with proved willful breach by the insured, in line with Swaran Singh and Kamla.

Conclusion

Hind Samachar Ltd. (Delhi Unit) v. National Insurance Co. Ltd. reaffirms and sharpens the controlling principle in fake-licence defences: insurers carry the burden not merely to show alleged fakery but to plead and prove a willful breach by the insured in entrusting the vehicle. The Supreme Court’s refusal to infer collusion from the owner’s production of the licence or the driver’s absence is a significant evidentiary correction, ensuring that recovery orders rest on solid proof rather than conjecture.

By aligning with Lehru, Swaran Singh, PEPSU RTC, and Geeta Devi, the decision underscores a coherent standard: owners are expected to exercise ordinary prudence (e.g., inspect a facially valid licence) but are not tasked with verifying authenticity with licensing authorities absent specific cause. Pay-and-recover remains available—but only when breach is established. In doing so, the judgment fortifies third-party protection while curbing overbroad insurer defences, and it provides clear procedural and evidentiary guidance for future motor accident litigation.

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Case: Hind Samachar Ltd. (Delhi Unit) v. National Insurance Company Ltd. & Ors., Civil Appeal Nos. 12442–12446 of 2024 (with connected appeals), decided on 08-10-2025 by the Supreme Court of India (2025 INSC 1204). Bench: K. Vinod Chandran, J.; N. V. Anjaria, J.