- Bookmark
- Share
- CaseIQ
Ram Babu Tiwari v. United India Insurance Company Limited And Others
Factual and Procedural Background
On 27 January 1996 a truck (Reg. No. MP 06 E 0129) carrying passengers and buffaloes from Agra to Vidisha collided with a tractor-trolley (Reg. No. MP 6 J 7506). Rajendra Singh died on the spot and another passenger, Balaram, later succumbed to injuries in hospital. A First Information Report was lodged and the dependants of the deceased filed compensation claims under Section 166 of the Motor Vehicles Act, 1988 (“the Act”).
The respondent Insurance Company contended in its written statement that the tractor driver, Ram Prakash, lacked a valid and effective driving licence on the accident date. The Additional Motor Accidents Claims Tribunal (Vidisha) rejected that defence, held the insurer liable, and made an award on 6 October 1999.
In appeals under Section 173 of the Act, the Madhya Pradesh High Court (Gwalior Bench) reversed the Tribunal on 28 November 2005, holding that the insurer was not bound to indemnify the owner because the driver had no valid licence between 11-2-1993 and 6-2-1996. The High Court, however, directed that the insurer could first pay the awarded sums and then recover them from the driver and owner.
The present appeal to the Supreme Court was filed by the party aggrieved by the High Court’s decision.
Legal Issues Presented
- Whether renewal of an expired driving licence after more than thirty days operates retrospectively so as to render the driver “duly licensed” on the accident date under Section 149(2)(a)(ii) of the Motor Vehicles Act, 1988.
- Whether, in the circumstances, the insurer is liable to indemnify the insured or entitled to avoid liability for breach of the policy condition requiring a duly licensed driver.
Arguments of the Parties
Appellant's Arguments
- Section 15(4) second proviso of the Act implies that renewal takes effect retrospectively; therefore the driver should be treated as licensed on 27-1-1996.
- Even if there was a breach, National Insurance Co. Ltd. v. Swaran Singh (2004) obliges the insurer to satisfy third-party claims first and then seek recovery, preventing complete exoneration.
Respondent Insurance Company's Arguments
- The statutory proviso relied upon by the appellant does not create retrospective validity; renewal after thirty days is effective only from the date of renewal (7-2-1996), leaving the driver unlicensed on the accident date.
- Consistent with Supreme Court precedent, a proven breach by permitting an unlicensed driver absolves the insurer from indemnifying the insured, though it may still be directed to pay and recover.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| United India Insurance Co. v. Sherali (1999) 1 MPWN 90 (Tri) | If a driver holds a licence that is merely not renewed at the time of accident, the insurer is not automatically exonerated. | Relied upon by the Tribunal; ultimately distinguished by the Supreme Court because the gap in renewal here exceeded thirty days. |
| New India Assurance Co. Ltd. v. Mandar Madhav Tambe (1996) 2 SCC 328 | Insurer liable only when the vehicle is driven by a person holding a valid or permanent driving licence. | Cited by the High Court to support exoneration of the insurer. |
| Manoj v. Samundar Singh 2005 ACJ 520 (MP) | Absence of licence on accident date negates insurer’s liability. | Followed by the High Court; noted by the Supreme Court. |
| National Insurance Co. Ltd. v. Swaran Singh (2004) 3 SCC 297 | Sets out circumstances in which insurer can avoid liability for breach of policy conditions; distinguishes between “effective” and “duly licensed”. | Formed the chief basis for analysing breach; Court held that proved absence of licence allows the insurer to avoid indemnity. |
| Jitendra Kumar (2003) 6 SCC 420 | Illustrates situations where the driver’s fault is irrelevant (e.g., mechanical failure); mentioned in Swaran Singh. | Quoted to clarify that present case involves conscious entrustment to an unlicensed driver, not mechanical failure. |
| National Insurance Co. Ltd. v. Kusum Rai (2006) 4 SCC 250 | Owner’s duty to ensure driver holds appropriate licence; insurer may raise breach defence when driver lacks proper licence. | Reiterated to confirm that entrusting a vehicle to a driver with no appropriate licence constitutes breach. |
| Ishwar Chandra v. Oriental Insurance Co. Ltd. (2007) 10 SCC 650 | Licence renewed after expiry beyond 30 days is valid only from date of renewal; driver unlicensed on earlier date. | Cited to reject the appellant’s retrospective-effect argument. |
Court's Reasoning and Analysis
1. Sections 147 and 149 of the Act impose compulsory third-party insurance and oblige the insurer to satisfy awards, but Section 149(2)(a)(ii) permits the insurer to defend on the ground that the vehicle was driven by a person “not duly licensed”.
2. The Supreme Court examined Section 15 governing renewal of driving licences. Under the first proviso to Section 15(1), if renewal is sought after more than 30 days of expiry, the licence “shall be renewed with effect from the date of its renewal”, eliminating retrospective effect.
3. Because Ram Prakash’s licence had lapsed on 10-2-1993 and was renewed only on 7-2-1996 (well beyond the 30-day window), he lacked a valid licence on 27-1-1996. The second proviso to Section 15(4) merely allows the licensing authority to order a competence test when five years have elapsed; it does not confer retrospective validity.
4. Relying on the detailed principles in Swaran Singh, the Court reiterated that when an owner consciously permits an unlicensed driver to drive, the insurer is entitled to avoid indemnity. The factual matrix showed admitted absence of licence; therefore breach of policy conditions was established.
5. Kusum Rai and Ishwar Chandra were cited to reinforce the owner’s duty to verify the driver’s licence and the prospective nature of renewal made after thirty days.
6. Accordingly, the argument that the renewal related back in time was rejected, and the High Court’s conclusion that the insurer could avoid liability was upheld.
Holding and Implications
DISMISSED – The Supreme Court affirmed the High Court’s judgment, leaving the insurer free to deny indemnity to the insured because the tractor driver lacked a valid licence on the accident date. No order as to costs.
Implications: The decision reinforces that renewal of a driving licence after more than thirty days operates prospectively, and owners who knowingly allow unlicensed drivers to operate their vehicles breach policy conditions, enabling insurers to avoid indemnifying them. The ruling follows existing precedent and sets no new doctrinal departure.
S.B Sinha, J.— Leave granted.
2. The appellant is aggrieved by and dissatisfied with the judgment and order dated 28-11-2005 passed by the High Court of Madhya Pradesh at Gwalior in Misc. Appeal No. 5 of 2000 (sic 4 of 2000) whereby and whereunder the appeals preferred by the respondent herein against an award dated 6-10-1999 passed by the Additional Motor Accidents Claims Tribunal, Vidisha, in Claims Cases Nos. 57 and 52 of 1998 were allowed opining that the respondent Insurance Company was not liable to indemnify the insured.
3. Bereft of all unnecessary details, the fact of the matter is that on 27-1-1996 the deceased Rajendra Singh and Balaram along with others were travelling by a truck bearing Registration No. MP 06 E 0129 with their buffaloes from Agra to Vidisha. It met with an accident having been hit by a tractor-trolley bearing Registration No. MP 6 J 7506. Rajendra Singh died on the spot whereas Balaram was seriously injured in the said accident. He was admitted in a hospital at Gwalior where he succumbed to his injuries.
4. A first information report was also lodged with regard to the said incident.
5. Having been served with a notice in the proceedings claiming compensation by the dependants of the said deceased in terms of Section 166 of the Motor Vehicles Act, 1988, the respondent, in his written statement, inter alia, raised a contention that the driver of the tractor, Respondent 6, did not have any valid and effective driving licence to drive the said vehicle on the said date of accident.
6. The learned Tribunal, having regard to the pleadings of the parties, inter alia, framed the following issue:
Issues Findings 1. to 5. ** * 6. Whether the terms of the insurance policy have been violated in this case? No
7. By reason of an award dated 6-10-1999, the learned Tribunal held that the driver Ram Prakash was having valid licence only for the period 11-2-1990 to 10-2-1993 and again from 7-2-1996 to 7-2-1999. Indisputably, therefore, the driver Ram Prakash did not hold any licence during the period 11-2-1993 to 6-2-1996. The learned Tribunal held:
“Therefore, in United India Insurance Co. v. Sherali (1999) 1 MPW N. 90 (Tri) it was laid down that if the driver was having driving licence but the same was not got renewed at the time of the accident, then insurance company cannot be exonerated from its liability. In this case as well, Non-applicant 1 was having licence and for this reason driving of the tractor in violation of the terms of the insurance policy is not proved and Non-applicant 2 cannot escape from its liability. Therefore, Issue 6 is being decided negatively.”
8. In the appeals preferred by the respondents herein in terms of Section 173 of the Motor Vehicles Act, the High Court, on the other hand, held:
“Learned counsel for the appellant drew my attention to the decision of the Apex Court in New India Assurance Co. Ltd. v. Mandar Madhav Tambe (1996) 2 SCC 328, 1996 ACJ 253 in which it has been held that the insurance company would be liable only if the vehicle was being driven by a person holding a valid driving licence or a permanent driving licence other than learners licence and if the driver was holding no licence on the date of accident then the insurance company is not liable to indemnify the insured. In Manoj v. Samundar Singh 2005 ACJ 520 (MP) the Division Bench of this Court has held that if the driver of the offending vehicle has no licence on the date of accident then the insurance company is not liable to indemnify the insured as the vehicle was being driven in contravention of the terms and conditions of the insurance policy. In National Insurance Co. Ltd. v. Swaran Singh (2004) 3 SCC 297, AIR 2004 SC 1531, the Apex Court has held that the owner of the motor vehicle in terms of Section 5 of the Act has a responsibility to see that no vehicle is driven except by a person who does not satisfy the provisions of Section 3 or 4 of the Act. In a case, therefore, where the driver of the vehicle, admittedly, did not hold any licence and the same was allowed consciously to be driven by the owner of the vehicle by such person, the insurer is entitled to succeed in its defence and avoid liability. The Apex Court further held that the breach of policy condition e.g disqualification of driver or invalid driving licence of the driver, as contained in sub-section 2(a)(ii) of Section 149, have to be proved to have been committed by the insured for avoiding the liability by the insurer. 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 duly licensed driver or one who was disqualified to drive at the relevant time.
9. In the present case it is duly proved that on the date of accident i.e 27-1-1996 the driver was not having valid driving licence for the period from 11-2-1993 to 6-2-1996 and his licence had expired and (sic if) tractor driver was not having valid driving licence the insurer cannot be absolved of its liability to indemnify the insured. The learned Claims Tribunal committed an error in holding that the Insurance Company is liable to indemnify the insured. In view of the law laid down by the Apex Court in Swaran Singh (2004) 3 SCC 297, AIR 2004 SC 1531, I hold that the amount of compensation shall be paid by the appellant Insurance Company and the same shall be recovered from the driver and the owner of the vehicle. The Claims Tribunal has erred in not giving the direction that the insurer can recover the amount of compensation paid to the claimants from the insured.”
9. Mr Anish Kumar Gupta, learned counsel appearing on behalf of the appellant, would submit that although the driver of the tractor did not hold any licence for the period 11-2-1993 to 6-2-1996, but having regard to the provisions contained in Section 15 of the Motor Vehicles Act, 1988 and in particular the second proviso appended to sub-section (4) thereof, it must be held that the renewal of licence would take effect from a retrospective date. It was furthermore contended that in any view of the matter in view of the decision of this Court in National Insurance Co. Ltd. v. Swaran Singh (2004) 3 SCC 297, AIR 2004 SC 1531, the respondent cannot escape its liability so far as a third party is concerned in view of Sections 147 and 149 of the Act.
10. Mr Vishnu Mehra, learned counsel appearing on behalf of the respondent, on the other hand, would support the impugned judgment.
11. Section 147 of the Act mandates obtaining of compulsory insurance in relation to a third party by the owners of the motor vehicles. Section 149 imposes a duty on the insurer to satisfy the judgments and awards against the insured in respect of third-party risks. Sub-section (2) of Section 149 however postulates that insurance company would have a right to defend the action, inter alia, on a ground that there has been a breach of specified condition of the policy as specified in various sub-clauses; sub-clause (ii) thereof being as under:
“149. (2)(a)(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
12. In view of the aforementioned provisions, in the event a defence on the part of the insurance company that the vehicle involved in the accident was not being driven by a driver having a valid driving licence would be a valid one.
13. The question as to what would constitute a breach of conditions of the contract of insurance came up for consideration before this Court in Swaran Singh (2004) 3 SCC 297, AIR 2004 SC 1531. Our attention has been drawn to paras 39 to 44 of the said decision which read as under:
“39. The question as to whether an insurer can avoid its liability in the event it raises a defence as envisaged in sub-section (2) of Section 149 of the Act corresponding to sub-section (2) of Section 96 of the Motor Vehicles Act, 1939 had been the subject-matter of decisions in a large number of cases.
40. It is beyond any doubt or dispute that under Section 149(2) of the Act, an insurer, to whom notice of the bringing of any proceeding for compensation has been given, can defend the action on any of the grounds mentioned therein.
41. However, clause (a) opens with the words ‘that there has been a breach of a specified condition of the policy’, implying that the insurer's defence of the action would depend upon the terms of the policy. The said sub-clause contains three conditions of disjunctive character, namely, the insurer can get away from the liability when (a) a named person drives the vehicle; (b) it was being driven by a person who did not have a duly granted licence; and (c) driver is a person disqualified for holding or obtaining a driving licence.
42. We may also take note of the fact that whereas in Section 3 the words used are ‘effective licence’, it has been differently worded in Section 149(2) i.e ‘duly licensed’. If a person does not hold an effective licence as on the date of the accident, he may be liable for prosecution in terms of Section 141 of the Act but Section 149 pertains to insurance as regards third-party risks.
43. A provision of a statute which is penal in nature vis-à-vis a provision which is beneficent to a third party must be interpreted differently. It is also well known that the provisions contained in different expressions are ordinarily construed differently.
44. The words ‘effective licence’ used in Section 3, therefore, in our opinion, cannot be imported for sub-section (2) of Section 149 of the Motor Vehicles Act. We must also notice that the words ‘duly licensed’ used in sub-section (2) of Section 149 are used in the past tense.”
14. This Court, no doubt, laid down general principles in the aforementioned paragraphs but a bare perusal of the said judgment would clearly show that the Court considered the effect of various fact situations therein separately. While considering the question as regards the liability of the insurer when, admittedly, no licence was obtained by a driver, it was held: (Swaran Singh case (2004) 3 SCC 297, AIR 2004 SC 1531)
“84. We have analysed the relevant provisions of the said Act in terms whereof a motor vehicle must be driven by a person having a driving licence. The owner of a motor vehicle in terms of Section 5 of the Act has a responsibility to see that no vehicle is driven except by a person who does not satisfy the provisions of Section 3 or 4 of the Act. In a case, therefore, where the driver of the vehicle, admittedly, did not hold any licence and the same was allowed consciously to be driven by the owner of the vehicle by such person, the insurer is entitled to succeed in its defence and avoid liability. The matter, however, may be different where a disputed question of fact arises as to whether the driver had a valid licence or where the owner of the vehicle committed a breach of the terms of the contract of insurance as also the provisions of the Act by consciously allowing any person to drive a vehicle who did not have a valid driving licence. In a given case, the driver of the vehicle may not have any hand in it at all e.g a case where an accident takes place owing to a mechanical fault or vis major. (See Jitendra Kumar (2003) 6 SCC 420.)”
15. The question as to whether the owner of a vehicle had taken care to inform himself as to whether the driver entrusted to drive the vehicle was having a licence or not is essentially a question of fact. However, in this case, it stands admitted that as on the date of accident, namely, on 27-1-1996, the driver did not hold any licence. Furthermore, it is beyond dispute that he had a licence only for one year and for about 3 years thereafter, he failed and neglected to renew his licence. His licence was renewed only on and from 7-2-1996. What would be the effect of not having a licence for such a long period is the question.
16. Section 15 of the Motor Vehicles Act provides for renewal of a driving licence. Sub-section (1) of Section 15 and the first proviso appended thereto read as under:
“15. Renewal of driving licences.—(1) Any licensing authority may, on application made to it, renew a driving licence issued under the provisions of this Act with effect from the date of its expiry:
Provided that in any case where the application for the renewal of a licence is made more than thirty days after the date of its expiry, the driving licence shall be renewed with effect from the date of its renewal:
Provided further that where the application is for the renewal of a licence to drive a transport vehicle or where in any other case the applicant has attained the age of forty years, the same shall be accompanied by a medical certificate in the same form and in the same manner as is referred to in sub-section (3) of Section 8, and the provisions of sub-section (4) of Section 8 shall, so far as may be, apply in relation to every such case as they apply in relation to a learner's licence.”
17. Sub-section (4) of Section 15 of the Act provides that where an application for the renewal of a driving licence is made more than 30 days after the date of its expiry, the fee payable for such renewal shall be such amount as may be prescribed by the Central Government. The second proviso appended thereto whereupon strong reliance has been placed by Mr Gupta reads as under:
“Provided further that if the application is made more than five years after the driving licence has ceased to be effective, the licensing authority may refuse to renew the driving licence, unless the applicant undergoes and passes to its satisfaction the test of competence to drive referred to in sub-section (3) of Section 9.”
18. It is beyond any doubt or dispute that only in the event an application for renewal of licence is filed within a period of 30 days from the date of expiry thereof, the same would be renewed automatically which means that even if an accident had taken place within the aforementioned period, the driver may be held to be possessing a valid licence. The proviso appended to sub-section (1) of Section 15, however, clearly states that the driving licence shall be renewed with effect from the date of its renewal in the event the application for renewal of a licence is made more than 30 days after the date of its expiry. It is, therefore, evident that as on renewal of the licence on such terms the driver of the vehicle cannot be said to be holding a valid licence, the insurer would not be liable to indemnify the insured.
19. The second proviso appended to sub-section (4) of Section 15 is of no assistance to the appellant. It merely enables the licensing authority to take a further test of competent driving and passing thereof to its satisfaction within the meaning of sub-section (3) of Section 9. It does not say that the renewal would be automatic. It is, therefore, a case where a breach of the contract of insurance is established. This aspect of the matter has been considered by this Court in National Insurance Co. Ltd. v. Kusum Rai (2006) 4 SCC 250 holding:
“11. It has not been disputed before us that the vehicle was being used as a taxi. It was, therefore, a commercial vehicle. The driver of the said vehicle, thus, was required to hold an appropriate licence therefor. Ram Lal who allegedly was driving the said vehicle at the relevant time, as noticed hereinbefore, was holder of a licence to drive a light motor vehicle only. He did not possess any licence to drive a commercial vehicle. Evidently, therefore, there was a breach of condition of the contract of insurance. The appellant, therefore, could raise the said defence.”
It was furthermore held:
“14. This Court in Swaran Singh (2004) 3 SCC 297, AIR 2004 SC 1531 clearly laid down that the liability of the insurance company vis-à-vis the owner would depend upon several factors. The owner would be liable for payment of compensation in a case where the driver was not having a licence at all. It was the obligation on the part of the owner to take adequate care to see that the driver had an appropriate licence to drive the vehicle.”
It was opined:
“16. In a case of this nature, therefore, the owner of a vehicle cannot contend that he has no liability to verify the fact as to whether the driver of the vehicle possessed a valid licence or not.”
20. The principle laid down in Kusum Rai (2006) 4 SCC 250 has been reiterated in Ishwar Chandra v. Oriental Insurance Co. Ltd. (2007) 10 SCC 650 Referring to sub-section (1) of Section 15 of the Act, this Court stated the law, thus:
“9. From a bare perusal of the said provision, it would appear that the licence is renewed in terms of the said Act and the rules framed thereunder. The proviso appended to Section 15(1) of the Act in no uncertain terms states that whereas the original licence granted despite expiry remains valid for a period of 30 days from the date of expiry, if any application for renewal thereof is filed thereafter, the same would be renewed from the date of its renewal. The accident took place 28-4-1995. As on the said date, the renewal application had not been filed, the driver did not have a valid licence on the date when the vehicle met with the accident.”
21. For the reasons aforementioned, there is no infirmity in the impugned judgment. The appeals are, therefore, dismissed. However, in the facts and circumstances of the case, there shall be no order as to costs.
Alert