LAL CHAND versus ORIENTAL INSURANCE CO. LTD.

Citation: [2006] SUPP. 5 S.C.R. 210 · Decided: 22-08-2006 · Supreme Court of India · Bench: AR. LAKSHMANAN · Disposal: Appeal(s) allowed
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Judgment (excerpt)

A 
B 
LAL CHAND 
ORIENTAL INSURANCE CO. LTD. 
AUGUST 22, 2006 
[DR. AR. LAKSHMANAN AND TAR UN CHATTERJEE, JJ.] 
Motor Vehicles Act, 1988-Section 149(2)(a)(ii)-Liability of insurer-
Defence of fake licence of driver-Effect of-Held: Insurer has to prove that 
C the insured-vehicle owner erred in verifYing the genuineness of the licence 
held by the driver-Where owner is satisfied himself that the driver has a 
licence and is driving competently, there would be no breach of section 
149(2)(a)(ii)-lnsurer would not be absolved of its liability. 
Vehicle owner employed a driver. Vehicle met with an accident. It was 
D insured with the respondent-insurance company. Tribunal awarded 
compensation to the claimants making insurance company liable to pay 
compensation. Insurance Company challenged the award. High Court held that 
since the driving licence was not issued by the licensing Authority, appellant-
vehicle owner contravened the terms and conditions of the insurance policy. 
It directed that th~ respondent would be entitled to recover amount from the 
E owner of the offending truck. Hence the present appeal. 
Appellant-vehicle owner contended that he took adequate care and 
caution to verify the genuineness of the !icence held by the driver; that the 
Insurance Company did not lead any evidence to show that due and adequate 
F care was not taken by the owner; and that the High Court has failed to 
appreciate the same. 
G 
H 
Respondent-Insurance Company contended that the High Court gave 
categorical finding that the driver was not holding a valid driving licence and 
the appellant committed breach of terms and conditions of the insurance policy. 
Allowing the appeal, the Court 
HELD: I.I. The insurer-Insurance Company has to prove that the 
insured-owner of the vehicle was guilty of negligence and failed to exercise 
reasonable care in the matter offulfilling the condition of the policy regarding 
210 
LALCHANDv.ORIENTALINSURANCECO.LTD. [LAKSHMANAN,l.] 
2) J 
use of vehicles by a duly licensed driver. or one who was not disqualified to A 
drive at the relevant point of time. [214-Fl 
1.2. In the instant case, the owner has not only seen and examined the 
driving licence produced by the driver but also took the driving test of the 
driver and found that the driver was competent to drive the vehicle and 
thereafter appointed him as driver of the vehicle. Thus, the owner was satisfied B 
himself that the driver has a licence and is driving competently. There would 
be no breach of section 149(2)(a)(ii) of the Motor Vehicles Act, 1988 and the 
Insurance Company would not then be absolved of its liability. Owner of the 
vehicle is absolved from any liability. (213-H; 214-A, GI 
United India Insurance Co. Ltd. v. Lehru and Ors., (2003) 3 SCC 338 C 
and National Insurance Co. Ltd. vs. Swaran Singh and Ors., (2004] 3 SCC 
297, relied on. 
New India Assurance Co. Ltd. v. Kani/a and Ors. etc., (20041 4 SCC 
342, referred to. 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3623 of2006. 
From the Judgment and Order dated 6.5.2003 of the High Court of 
Punjab and Haryana at Chandigarh in F.A.O. No. 1587/2002. 
D 
Mahabir Singh, Madhusmita Bora, Nikhil Jain and Rani Chhabra for the E 
Appellant. 
M.K. Dua and Kishore Rawat for the Respondent. 
The Judgment of the Court was delivered by 
DR. AR. LAKSHMANAN, J. Delay condoned. Leave granted. 
F 
Heard learned counsel appearing on either side. 
This appeal is directed against the final judgment and order dated 
6.5.2003 passed by the High Court of Punjab & Haryana at Chandigarh in . G 
F.A.O. No.1587 of2002. The appellant before us is the owner of the vehicle,' 
a truck. The respondent is the insurer of the vehicle. The vehicle met with 
an accident on I I.I 0.1998. The claim petition was filed by the claimants before 
the Tribunal. Accepting their claim, the Tribunal awarded compensation of 
Rs.2. 70 lakhs along with interest. The Tribunal held that the accident took 
place due to rash and negligent driving of the driver Mam Chand and that H 
212 
SUPREME COURf REPORTS [2006) SUPP. 5 S.C.R. 
A the appellant-owner had not committed any breach of the terms and condition 
of the insurance policy and that the. Insurance Company is liable to make the 
payment of compensation amount to the claimants as insurer of the truck. 
The Insurance Company. being aggrieved with the award passed by the 
Tribunal, filed an appeal before the High Court. The High Court modified the 
B order passed by
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