Holding

A forged driving licence remains invalid despite renewal; under Section 149 the insurer must pay compensation but can recover that amount from the insured if the licence condition is breached.

Summary

An accident on 1 March 1993 involving a truck driven by Liaqat Ali resulted in three deaths. The insurer, New India Assurance Co., claimed it was not liable for third‑party compensation because the driver allegedly held a forged licence, constituting a breach of the insurance policy. The Motor Accident Claims Tribunal held that the insurer had not proved the licence was invalid and therefore was liable to pay compensation. The Himachal Pradesh High Court affirmed that renewal of a licence does not validate a forged document and that the insurer could not escape liability. The Supreme Court held that a forged licence cannot be validated by renewal under Section 15 of the Motor Vehicles Act, and while the insurer must pay compensation under Section 149, it is entitled to recover that amount from the insured if the policy condition of a valid licence was breached. The Court remitted the matter to the Claims Tribunal to determine the insurer's right to recover the paid amount.

Issues considered

Whether renewal of a forged driving licence under Section 15 of the Motor Vehicles Act validates the licence.
Whether the insurer is exempt from liability under Section 149(1)(ii) when the vehicle is driven by a person without a valid licence.
Whether the insurer may recover compensation paid to third parties from the insured when a policy condition is breached.
Whether the insurer was entitled to lead evidence to prove the licence was forged.

Legislation cited

Indian Penal Code, 1860s. 463
Motor Vehicles Act, 1988s. 149, s. 15

Subjects

motor accidentinsurance liabilityforged driving licencesection 15section 149third‑party compensationpolicy breachrecovery from insured

Judgment

NEW INDIA ASSURANCE CO., SHIMLA A
~
v.
KAMLA AND ORS. ETC. ETC.

MARCH 27, 2001

[K.T. THOMAS AND R.P. SETHI, JJ.] B

, Motor Vehicles Act, 1988-Sections 15 & 149--Compensation-Third
pany claim-Liability to pay-Denied on the ground that there was breach of
policy as the driver of the vehicle was not holding valid licence and the licence
produced was forged one-Plea of the insured that renewal of the licence led c
to the presumption that the original licence was genuine-Heid, insurer is not
liable to the insured if there is violaJion of any policy condition-Afake licence
cannot get its forgery outfit stripped off merely on account of some officer
"I renewing the same-What was originally aforgery would remain null and void
forever and it would not acquire legal validity at any time by whatever process
ofsanctijicaJion subsequently done on it-Forgery is antithesis to legality and D
law cannot afford to validate a forgery-Penal Code, 1860-Section 463.

In a motor accident claim proceeding initiated by the respondents,
appellant-insurance company pleaded that the company could not be held
liable to pay compensation since the driver of the vehicle did not have valid
'r E
driving licence and thus there was a breach of policy decision. The insured
and the driver relied on a driving licence issued and further renewed, in
favour of the driver. The company did not admit the licence saying that it
was fabricated one. The company filed an application for permission to
lead evidence in order.to prove that the licence was fake, but the same was
dismissed by the Tribunal, holding that if the licence was validly renewed F
~
by a licencing authority, it cannot be presumed that the licence was a fake
one. The Tribunal ultimately held that the company failed to prove that the
truck driver did not have valid driving licence.

In appeal before High Court, appellant contended thatif the original
G
licence was shown to be forged document, no authority has power to
validate it and even if any validation was made on account of a mistaken
impression about the genuineness of the document, it would not gain any
... legitimacy. The appeal was dismissed holding that renewal of a document
will robe even a forged document with validity on account of Section 15 of
the Motor Vehicles Act. H
797
+

798 SUPREME COURT REPORTS [2001] 2 S.C.R.
A In appeal to this Court, appellant contended that in view of Section
149 of the Act the insurer will get complete exoneration from liability on }
proof of breach of any of the conditions of the policy of insurance. Re·
spondent contended that even if the driving licence of the driver is proved
to be not genuine, it would not be enough for absolving the insurance
company from liability.
B
Disposing of the appeal, the Court

HELD : 1. The insurer and insured are bound by the conditions ~
enumerated in the policy and the insurer is not liable to the insured if there
is violation of any policy condition. But the insurer who is made statutorily
c liable to pay compensaHon to third parties on account of the certificate of
insurance issued shall be entitled to recover from the insured the amount
paid to the third parties, if there was any breach of policy conditions on
account of the vehicle being driven 'vithout a valid driving licence.
(806-B-C]
D Scandia Insurance Co. lld. v. Kokilaben Chandravadan and Ors., (1987]
2 SCC 654 and Sohan Lal Passi v. Sesh Reddy and Ors., (1996] 5 SCC 21,
referred to.

2. A fake licence cannot get its "forgery outfit stripped off merely on
acco<1nt of some officer renewing the same with or without knowing it to be
E Y'
forged. Section 15 of the Act only empowers any licensing authority to
''renew a driving licence issued under the provisions of this Act with effect
from the date of its expiry." No licensing authority has the power to renew
a fake licence, and therefore, a renewal if at all made cannot transform a
fake licence as genuine. Any counterfeit document showing that it contains
F a purported order of a statutory authority would ever remain counterfeit
albeit the fact that other persons including some statutory authorities ~
would have acted on the document unwittingly on the assumption that it is
genuine. What was originally a forgery would remain null and void for·
ever and it would not acquire legal validity at any time by whatever
G process of sanctification subsequently done on it. Forgery is antithesis to
legality and law cannot afford to validate a forgery. (802-F-G; 803-B)

National Insurance Company lld. v. Santro Devi and Ors., (1998) 1
SCC 219; National Insurance Company Lid. v. Santro Devi and Ors., (1997) 1 ""
ACJ 111 and National Insurance Company lld. v. Sucha Singh and Ors.,
H (1994) 1 ACJ 374, referred to.
+
NEW INDIA ASSURANCE CO. v. KAMLA [THOMAS, J.] 799
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2387 of 2001. A

From the Judgment and Order dated 25.8.99 of the Himachal Pradesh
High Court in F.A.O. No. 269 of 1995.

WITH
B
Civil Appeal Nos. 2388 of 2001 and 2389 of 2001.

Jos Chiramel for S.B. Upadhyay for the Appellant.
' L. Nageswara Rao, P.R. Behal, S.K. Bandhoupadhay and M.A.
Chinnaswamy for the Respondents.
c
The Judgment of the Court was delivered by

THOMAS, J. Leave granted.

If a fake driving licence happened to be renewed by the statutory
authorities, would the fakeness of the original document get legally sane- D
tified? If it cannot, would the Insurance Company be liable to pay compen-
sation in respect of a motor accident occurred while the vehicle was driven
by a person holding such a sham licence? These are the main questions
involved in these appeals.
E
An accident occurred on 1.3.1993 when a truck, driven by the 8th
respondent (Liaqat Ali) capsized. Three inmates of the vehicle died in the
accident. Legal heirs of those three deceased persons preferred claims before
the Motor Accident Claims Tribunal concerned (for short the 'Claims Tribu-
nal') as per the provisions of the Motor Vehicles Act, 1988 (for short 'the
Act'). The owner of the vehicle as well as the driver were made part1os, F
besides impleading the insurer (appellant Insurance Company) in the claims
proceedings. It is admitted that the truck was then covered by a valid
insurance policy issued by the appellant company. As we are now concerned
only with the contentions of the appellant Insurance Company, that too
restricted lo the question relating to the driving licence held by the 8th
G
responden~ we do not think it worth referring to the details of other pleadings
set out by the claimants and the contending resistors.

The appellant Insurance Company, in the written statement filed before
the Claims Tribunal, pleaded inter alia that the driver of the vehicle did not
have a valid driving licence and hence there was breach of the policy H
800 SUPREME COURT REPORTS [2001] 2 S.C.R.
A condition and the corollary is that the Insurance Company cannot be fastened
with the liability to pay compensation to any one in respect of the accident
referred to in the claim petitions.

The insured owner of the vehicle as well as the driver 8th respondent
relied on a document purporting to be a driving licence issued by the licensing
B authority (SOM, Paonia, Sirrnaur District in Himachal Pradesh) bearing
No.1874-P/90. The document further shows that it was issued in favour of
Liaqat Ali whose photo affixed thereon is admitted to be. that of 8th
respondent. That licence is claimed to have been renewed by the Licensing
Authority, Rohru (H.P.) on 17.4.1993, for a period of three years. According
c to the insurance company, the said document is a fabricated one as no such
licence was granted by the Licensing Authority (SOM), Paonia.

To substantiate the contention appellant Insurance Company examined
three witnesses. RW-2 was Superintendent in the office of the SOM, Paonta.
He said that no such licence was issued from that office to a person
D called Uaqat Ali. He further said that no intimation whatsoever was received
by the SOM, Paonia, that the licensing authority of Rohru (SOM) had
renewed the licence No.1874-P/90. But RW-3 - a clerk in the office of the
SOM, Rohru has stated that the licence bearing No.1874-P/90 which stood
in the name of Liaqat Ali was renewed by the SOM, Rohru on 17.4.1993,
E for a period of three years with effect from the date of its expiry. One Anil
Chawla, legal officer of the appellant Insurance Company at Shimla, was
examined as RW-4 and he said that on enquiry it was found that SOM,
Paonia had not issued any driving licence to Liaqat Ali and hence the
document produced by the 8th respondent as his driving licence is a forged
document.
F
The driver Liaqat Ali was not examined before the Claims Tribunal.
But the owner of the truck gave evidence to the effect that he engaged the
8th respondent for driving the truck only after satisfying himself that R-8 had
a valid licence. He admitted that the said satisfaction is based entirely on
G looking at the questioned document.

The Claims Tribunal repelled the contention of the insurance company
for which ,\he following observations have been made:
\

"E~idently, it was for the New India Assurance Company to prove
H that the truck driver did not have valid driving licence on the date of
+
NEW INDIA ASSURANCE CO. v. KAMLA [THOMAS, J.] 801
accident. Apparently, the truck driver had a valid driving licence on A
the date of accident because the same had been issued in his favour
by the SDM, Rohru. Admittedly, whenever a licence is renewed, the
Licensing Authority is required to satisfy itself about the genuineness
of the earlier licence. Thus, there is a presumption to the effect that
while renewing the licence of Shri Liaqat Ali, the Licensing Author-
B
ity, i.e. SDM, Rohru had satisfied himself about the genuineness of
the earlier licence. Therefore, I am of the view that the statement of
Shri Anil Chawla (RW-4) is not sufficient to prove that the earlier
licence of the truck driver which was renewed by SDM, Rohru was
a fake licence. As such, I hold that the New India Assurance Company
has failed to prove that truck driver did not have valid driving licence c
on the date of accident."

When the matter was taken up before the High Court the counsel for
the iiisurance company contended that if the original licence was shown to
be a forged document no authority has the power to validate it and even if
D
any validation was made on account of a mistaken impression about the
genuineness of the document it would not gain any legitimacy. The counsel
in the High Court relied on the decision of a Full Bench of the Punjab and
Haryana High Court in National Insurance Co. Ltd. v. Santro Devi and Ors.,
[1997] 1 ACJ Ill, which held that "a forged driving licence though may be
.. validly renewed, would not become a valid driving licence or a duly issurd E
' driving licence in accordance with the Motor Vehicles Act." In spite of the
said decision the Division Bench of the High Court did not accept the
contention of the insurance company for which learned judges adopted the
following reasoning:
F
"From the perusal of the record we have noticed that licence N~.1874-
P/90 was issued by Registering and Licensing Authority, Paonia
Saltib, District Sirmaur, which was valid from 20.3.1990 to 19.3.1993
and the said licence has been marked as 'X' by the Tribunal below.
Thereafter, the Licensing Authority, Rohru, District Shimla, renewed
the licence of the respondent-driver from 17.4.1993 to 16.4.1996. G
From the entire evidence on record we find that at the time of the
accident i.e. on 1.3.1993 respondent-driver of the vehicle was in
possession of the valid driving licence and the appellant· Assurance
JI. Company has not adduced sufficient evidence to discharge the burden
which was cast on it under the Act." H
+
802 SUPREME COURT REPORTS [2001] 2 S.C.R.
A In this context learned counsel for the Insurance Company invited
our attention to a fact which occurred before the Claims Tribunal. The insurer
filed an application for permission to lead evidence for proving that
the licence produced by the 8th respondent was a fake one. But that
application was rejected by the Claims Tribunal basing on the decision
of a Division Bench of the High Court of Punjab and Haryana (which
B
is reported in National Insurance Co. ltd. v. Sucha Singh and Ors., [1994]
1 ACJ 374. As per the said decision "if a licence is renewed it gets
validated in view of the provisions of Section 15 of the Motor Vehicles Act
and the Insurance Company would be liable to reimburse the insured the
compensation amount paid to the victims". The Claims Tribunal thereupon
c held that if the licence was validly renewed by a licensing authority
then it cannot be presumed that the licence was a fake one. On the said
reasoning the Claims Tribunal dismissed the application of the Insurance
Company for leading evidence to show that the document produced by the
8th respondent was forged.
D Learned counsel submitted that the aforesaid decision of the Division
Bench (NaJional Insurance Co. ltd. v. Sucha Singh) was overruled by the
Full Bench of the same High Court in National Insu.rance Co. ltd v. Santro
Devi (supra). Incidentally, we may refer to a decision rendered by a two-Judge
Bench of this Court in National Insurance Co. ltd. v. Santro Devi and Ors.,
E [1998] l SCC 219, which pointed out that the observations made by the Full
Bench in Na!ional Insurance Co. ltd. v. Santro Devi, were obiter dicta
because the facts in that case did not warrant any such obs~rvation.

As a point of law we have no manner of doubt that a fake licence
cannot get its forgery outfit stripped off merely on account of some officer
F renewing the same with or without knowing it to be forged. Section 15 of
the Act only empowers any licensing authority to "renew a driving licence
issued under the provisions of this Act with effect from the date of its expiry."
No licensing authority has the power to renew a fake licence and, therefore,
a renewal if at all made cannot transform a fake licence as genuine. Any
G counterfeit document showing that it contains a purported order of a statutory
authority would ever remain counterfeit albeit the fact that other persons
including some statutory authorities would have acted on the document
unwittingly on the assumption that it is genuine.

The observation of the Division Bench of the Punjab and Haryana High
H Court in Naiional Insurance Co. ltd v. Sucha Singh, (supra) that renewal of
NEW INDIA ASSURANCE CO. v. KAMLA [THOMAS, J.] 803
a document which purports to be a driving licence, will robe even a forged A
document with validity on account of Section 15 of the Act, propounds a very
dangerous proposition. If that proposition is allowed to stand as a legal
principle, it may, no doubt, thrill counterfeiters the world over as they would
be encouraged to manufacture fake documents in a legion. What was origi-
nally a forgery would remain null and void for ever and it would not acquire
B
legal validity at any time by whatever process of sanctification subsequently
done on it. Forgery is antithesis to legality and law cannot afford to validate
a forgery.

We are not considering the question whether the insured exhausted the
enquiry expected of him for satisfying himself about the genuineness of c
the document produced by the 8th respondent as his driving licence. The
Insurance Company must have, under law, the opportunity to substantiate
its contention that the document is a fabricated one. The Claims Tribunal
went wrong in denying such an opportunity to the appellant Insurance
Company.
D
Learned counsel for the respondents next contended that even if the
driving licence of 8th respondent is proved to be not genuine it would not
be enough for absolving the Insurance Company from liability. On the other
hand, learned counsel for the appellant Insurance Company, banking on the
provisions contained in Section 149 of the Act, submitted that the insurer will E
get complete exoneration from liability on proof of breach of any one of the
conditions of the policy of insurance. We have to examine this contention as
a decision on the same is necessary before deciding whether the appellant
Insurance Company must be given a further opportunity to substantiate that
the document is a forged one.
F
Chapter XI of the Act contains provisions for insurance of motor
vehicles against third party risk. Sections 145 to 164 are subsumed in the said
chapter. Section 146 of the Act imposes a prohibition against use of a motor
vehicle in public place unless the vehicle is covered by a policy of insurance
complying with the requirements enumerated in the Chapter. Some categories
G
of vehicles are exempted from the aforesaid compulsion, but we are not
concerned with any such category now.

The details regarding the requirements of the policy including the limits
of liability to be insured are enumerated in Section 147. Sub-section (3) of
it states that a policy shall be of no effect for the purposes of that Chapter H
+

804 SUPREME COURT REPORTS [2001] 2 S.C.R.
A unless and until a certificate of insurance is issued by the insurer in the
prescribed fonn in favour of the insured. It is in Section 149 that provisions,
relating to the duty of the in•urer for satisfying the judgments and awards
in respect of third party claims, are incorporated. Sub-section (I) says that
the insurer shall pay to the person entitled to the benefit of a judgment or
award as if the insurer were the judgment debtor in respect of the liability,
B
when any such judgment or award is obtained against the insured in whose
favour a certificate of insurance has been issued. Of course, the said liability
of the insurer is subject to the maximum sum assured payable under the
policy.

Section 149(2) of the Act says that notice regarding the suit or other
c legal proceedings shall be given to the insurer if such insurer is to be fastened
with such liability. The purpose of giving such notice is to afford the insurer
to be made a party in the proceedings for defending the action on any one
of the grounds mentioned in the sub-section. Among the multiplicity of such
grounds the one which is relevant in this case is extracted below:
D
"(a) That there has been a breach of a specified condition of the
policy, being one of the following conditions, namely:-

(ii) a condition excluding driving by a named person or persons or
E by any person who is not duly licensed, or by any person who bas
) been disqualified for holding or obtaining a driving licence during the
period of disqualification."

Sub-section (4) of Section 149 of the Act says that so much of the
policy as purports to restrict the insurance of the person insured by reference
F
to any condition shall "as respects such liabilities as are required to be
covered by a policy, be of no effect." The proviso to the said sub-section is
important for the purpose of considering the question involved in this case
and hence that proviso is extracted below:

G "Provided that any sum paid by the insurer in or towards the discharge
of any liability of any person which is covered by the policy by virtue
only of this sub-section shall be recoverable by the insurer fonn that
11
person.
Similarly, in this context sub-section (5) is equally important and hence
H that is also extracted below:
NEW INDIA ASSURANCE CO. v. KAMLA [THOMAS, J.] 805
"If the amount which an insurer becomes liable under this section to A
pay in respect of a liability incurred by a person insured by a policy,
exceeds the amount for which the insurer would apart from the
provisions of this section be liable under the policy in respect of that
liability, the insurer shall be entitled to recover the excess from that
person."
B
A reading of the proviso to sub-section (4) as well as the language
. employed in sub-section (5) would indicate that they are intended to
safeguard the interest of an insurer who otherwise has no liability to pay any
amount to the insured but for the provisions contained in Chapter XI of
the Act. This means, the insurer has to pay to the third parties only on account c
of the fact that a policy of insurance has been issued in respect of the vehicle,
but the insurer is entitled to recover any such sum from the insured if the
insurer were not otherwise liable to pay such sum to the insured by virtue
of the conditions of the contract of insurance indicated by the policy.

To repeat, the effect of the above provisions is this: When a valid D
insurance policy has been issued in respect of a vehicle as evidenced by a
certificate of insurance the burden is on the insmer to pay to third parties,
whether or not there has been any breach or violation of the policy conditions.
But the amount so paid by the insurer to third parties can be allowed to be
recovered from the insured if as per the policy conditions the insurer had no E
liability to pay such sum to the insured.

It is advantageous to refer to a two-Judge Bench of this Court in
Skandia Insurance Co. lld v. Kokilaben Chandravadan and Ors., [1987] 2
sec 654. Though the said decision related to the corresponding provisions
of the predecessor Act (Motor Vehicles Act, 1939) the observations made in F
the judgment are quite germane now as the corresponding provisions are
materially the same as in the Act. Learned Judges pointed out that the
insistence of the legislature that a motor vehicle can be used in a public
place only if that vehicle is covered by a policy of insurance is not for the
purpose of promoting the business of the Insurance Company but to protect
G
the members of the community who become sufferers on account of accidents
arising from use of motor vehicles. It is pointed out in the decision that such
protection would have remained only a paper protection if the compensation
awarded by the courts were not recoverable by the victims (or dependents
of the victims) of the accident. This is the raison d'etre for the legislature
making it prohibitory for motor vehicles being used in public places without H
806 SUPREME COURT REPORTS [2001] 2 S.C.R.
A covering third party risks by a policy of insurance.

The principle laid down in the said decision has been followed by a
three-Judge Bench of this Court with approval in Sohan Lal Passi v. P. Sesh
Reddy and Ors., [1996] 5 SCC 21.

B The position can be summed up thus: The insurer and insured are
bound by the conditions enumerated in the policy and the insurer is not liable
to the insured if there is violation of any policy condition. But the insurer
who is made statutorily liable to pay compensation to third parties on account
of the certificate of insurance issued shall be entitled to recover from the
insured the amount paid to the third parties, if there was any breach of policy
c conditions on account of the vehicle being driven without a valid driving
licence. Learned counsel for the insured contended that it is enough if he
establishes that he made all due enquiries and believed bona fide that the
driver employed by him had a valid driving licence, in which case there was
no breach of the policy condition. As we have not decided on that contention
p it is open to the insured to raise it before the Claims Tribunal. In the present
case, if the Insurance Company succeeds in establishing that there was breach
of the policy condition, the Claims Tribunal shall direct the insured to pay
that amount to the insurer. In default the insurer shall be allowed to recover
that amount (which the insurer is directed to pay to the claimants - third
E parties) from the insured person. (

We may point out that as per the order passed by this Court on
6.3.2000, the appellant Insurance. Company was directed to pay the award
amount to the claimants. We are told that the amount was paid by the
appellant to the claimants. Now the Claims Tribunal has to decide the next
F question whether the insurance company is ~11titled to recover that amount
from the owner of the vehicle on account of the vehicle being driven by a
person who had no valid licence to drive the vehicle. For that purpose we
remit the case to the Claims Tribunal. An opportunity shall be afforded to
the parties concerned for adducing evidence in that regard. We make it clear
that the claimants shall not be bothered during the remaining part of the
G proceedings.

The appeals are disposed of in the above terms.

K.K.T. Appeals disposed of.