The Supreme Court on Thursday delivered a landmark ruling stating that insurance companies are not liable to bear the final compensation in motor accident claims if the vehicle was being driven by someone without a valid driving licence. According to reports from Business Standard, a Bench of Justices Sanjay Karol and N Kotiswar Singh held that an insurance company cannot be saddled with the ultimate liability for compensation if the offending vehicle was driven without a valid driving licence. The court emphasized that driving with an expired or invalid licence amounts to a breach of the insurance policy's terms and conditions, allowing the insurer to recover the compensation from the vehicle owner and the driver. The ruling specifically applied the 'pay and recover' principle, under which the insurance company must first pay the compensation awarded to the victim or their family, then recover the amount from the vehicle owner and the driver who violated the policy conditions. As per the latest Supreme Court judgment in Beli Ram v. Rajinder Kumar, (2022) 15 SCC 572, the court found that since the driver lacked a valid driving license at the time of the accident, the liability of the insurer abated, and the vehicle owner cannot wash his hands of the responsibility of checking whether the driver has renewed it.
Despite the ruling, accident victims will continue to receive compensation under the 'pay and recover' principle, as reported by Business Standard. The Supreme Court invoked this principle, under which the insurance company must first pay the compensation awarded to the victim or their family. It can then recover the amount from the vehicle owner and the driver who violated the policy conditions. This ensures that accident victims are not left waiting for compensation because of disputes between insurers and vehicle owners, with the primary objective being to protect victims from delays in justice. The court noted that the burden of such awards falling upon drivers and owners for want of a renewed license could 'throw into disarray their entire lives', emphasizing the severity of the consequences for unlicensed driving. The latest ruling specifically highlighted the hardship that vehicle owners and drivers would face in being required to pay substantial amounts due to their failure to take adequate steps to ensure that the driving licence remained valid. The court acknowledged that asking a driver or an owner to pay such a large amount is a 'humongous burden' upon them, stating that it may throw into disarray their entire lives all because the driver and the owner did not take adequate precaution to ensure there was no break in the validity of the driving licence.
The case originated from a 2009 road accident in Punjab involving a vehicle driven by Om Parkash, which collided with a two-wheeler. According to Business Standard, the accident occurred on 14th October 2009 when the offending vehicle hit a two-wheeler being driven by the claimant, with rash and negligent driving not in dispute. The Motor Accidents Claims Tribunal (MACT) had held that the insurer, Reliance General Insurance Co. Ltd., was not liable because the driver's licence had expired well before the accident and was renewed only much later. However, the Punjab and Haryana High Court overturned this finding after relying on a letter from the licensing authority stating that records between 2007 and 2010 had been lost during a data migration exercise. The High Court directed the insurer to pay compensation of ₹1.08 crore with 8% interest, but the Supreme Court disagreed with this approach. The latest judgment found that the driver's license had expired, and the renewal was made only in 2010 after payment of a penalty of ₹200 for the intervening period, with the Motor Accidents Claims Tribunal directing the owner and driver to pay compensation of ₹86,95,947. The Supreme Court scrutinized the evidence and found the high court's reliance on the 'missing data' theory to be flawed.
Justice Karol, who authored the judgment, urged the Centre and states to launch comprehensive reforms in the licensing system. As reported by Business Standard, the court recommended that the Ministry of Road, Transport and Highways (MoRTH) and state transport departments should undertake nationwide awareness campaigns through all mediums including social media to educate motorists about the importance of valid driving licences. The recommendations also include streamlining the process of issuing and renewing licences, improving regulation and affordability of driving schools, and making licence applications and driving tests more accessible in regional languages. The court noted that many people may not realize that failing to renew a licence could expose them to severe financial liabilities running into crores of rupees, as they may become personally liable for compensation. The latest ruling specifically asked MoRTH to spread awareness about the importance of driving licenses, introducing measures to ensure strict compliance, and streamline the process of issuance/renewal of license so that owners and drivers would regularly check the expiry date of the driving license, and seek timely renewal of the same to avoid liability. Justice Karol emphasized that 'other issues such as regulation of driving schools, the affordability thereof, and accessibility in terms of regional languages, when it comes to applications and tests, etc also need urgent attention'.
The judgment serves as a crucial reminder for vehicle owners about their responsibilities regarding driving licences. According to Business Standard, the ruling emphasizes that vehicle owners must ensure anyone driving their vehicle has a valid and effective driving licence, and should renew their driving licence before it expires. The court noted that the owner, Rajinder Singh, had not entered the witness box to depose either that the driver held a valid license on the date of the accident or that he had taken steps to ensure the license was renewed after expiry. The judgment makes clear that insurance alone will not protect owners from financial liability if accidents occur with unlicensed drivers, with the final burden resting on the driver and owner. The latest ruling specifically stated that the vehicle owner cannot wash his hands of the responsibility of checking whether the driver has renewed it, emphasizing the owner's active role in ensuring compliance with licensing requirements. The court acknowledged that recovering such a large amount from an owner or driver would impose a 'humongous burden', but said the situation highlighted the importance of ensuring that driving licences remain valid. The court emphasized that 'it is a document that certifies the ability to drive on the road, and so it stands to reason that all drivers should have it'.
