Insurance Co. Ltd. Vs. Santro Devi & Ors  INSC 827 (18 November 1997)
PUNCHHI, M. SRINIVASAN
18TH DAY OF NOVEMBER, 1997 Present:
Mr. Justice M.M. Punchhi Hon'ble Mr. Justice M. Srinivasan P.P. Malhotra, Sr. Adv.,
Vineet Malhotra, Shalendra Sharma, Naresh K. Sharma, Advs. with him for the
and Manoj Prasad, Advs. for the Respondents.
following Judgment of the Court was delivered:
SLP(C) No. 6262/97) Leave granted.
is an appeal against the judgment and order dated 17.10.96 passed by a full
Bench of three Hon'ble judges of the High court of Punjab and Haryana in First Appeal From
Order No. 75 of 1994.
minimal facts giving rise to this appeal are these:
was a motor accident which gave rise to a claim for compensation, duly set up
by the claimants/respondents.
the questions which was brought to the fore was whether the offending motor
vehicle was being driven by a driver holding a valid driving licence. The matter
was put to issue and the conclusion arrived at by the Tribunal was that the
driver held a valid licence which had validly been renewed .
finding stood affirmed in appeal before the High Court.
was taken by the High Court that a question of law arose as to whether a forged
or a fake licence, if renewed would get validated or not so as to work out the
liabilities under the Motor Vehicles Act. The question gathered momentum in as
much as when the cause was before a Division Bench of the High Court, it
referred the matter to a full Bench of three Hon'ble judges which in turn
pronounced as follows:
view of the observations made above, I (M.S.Liberhan, J.) answer the questions
posed as under:
forged driving licence though may be validly renewed, would not become a valid
driving licence or a duly issued driving licence in accordance with the Motor
The insured bonafidely believing in the validity of a forged driving licence
employing the holder of a fake driving licence renewed by a competent
authority, would not or of the insurance policy. It would not be violating
either conditions of indemnity or the any statutory provisions. Under these
circumstances, merely employing a driver with a forged driving licence would
not absolve the insurer of its liability.
the absence of Mensrea or knowledge or intention to violate the terms of police
or the provisions of the Act by the insured, the insurance company would not be
discharged of its liability from indemnifying the insurer or of its statutory
liability to third party.
The insurance company cannot refuse to meet its liability quo third party for
any act or omission bonafidely or otherwise committed by the insured or its
liability inasmuch as third party for whose benefit the insurance has been
provided, is not a privity to any breach as being not in control of the act or
conduct of the insured or its employee or insurer. Thus, the insurance company
cannot refuse to meet its liability quo third party.
The insurer is duty bound and liable, statutorily as well as contractually to
reimburse third party claim, for the tortuous act committed by the insured or
his employee as well as the liability incurred by insured or his employee under
the Motor Vehicles Act.
the insurance company can neither refuse to indemnify nor is discharged from
its liability to the insured or the claimants for an act of fraud committed by
the third party quo the insured though it has a right to recover any loss
suffered by it from the person, who committed t he fraud or from any other
authority, as permissible either under tort or any other statute; and (7) The
insurance company would be entitled to recover the amount, which it has paid to
the claimant from the insured or his driver or employee who has perpetuated
fraud and the insurance company was made to reimburse third party who suffered
loss because of the tortuous act of the insured or his employee. The insurer
would not be left without remedy to reimburse tort in accordance with law for the
failure or the State to discharge common duty care as well as the insured for
not observing due care of an ordinary prudent person, expected from the
insured, as a duty towards the insurer as well as the person who has committed
the fraud. Remedy as available to the insurer is not a decision by this Court
while dealing with the question, rather it is left open to be determined as and
rather it is left open to be determined as and when a question arises in the
facts and circumstances of a particular case." We do not approve of the
High Court having gone on to endeavour streamlining the law when its ratio on
the fact situation was likely to be rendered totally obiter. As has been said
above, there was concurrent finding recorded by the Tribunal as well by the
High Court that the offending vehicle was driven by a driver who had held a
valid licence and it stood renewed on the date of the accident. There was thus
no occasion for the High Court to have ruled on suppositions to the contrary in
order to interpret the law and that too on a fact situation not available to
it. Thus, we are constrained to intervene and hold that the entire exercise of
the High Court in that direction was obiter, not at all a binding precedent. In
that sense, we strike off from the impugned order observations and findings
pertaining thereto. Yet at the same time, we are required and do hereby affirm
the substantive part of the order, in holding that the claimanants/respondents
had rightly been granted compensation on account of t he motor accident, on the
basis of the recorded finding of fact. We cannot help remarking that the High
Court instead could have well have spent its time on other priorities.
appeal thus would have to be and is hereby allowed in part to the extent and in
the manner afore-indicated.
(Civil) No.. 6262/97 This Special Leave Petition was tagged on with the above
case on the assumption that the fate of the said case would govern the fate of
this SLP. We find that the question as such was never raised before the High
Court. The finding of fact recorded by the Motor Accidents' Claim Tribunal does
not positively indicate that the licence of the driver of the offending vehicle
was fake or forged. All the same, the licence was got renewed which reinforced
the impression of the High Court that it was not proved substantially that the
said licence to begin, was fake or forged. The Special Leave Petition is,