The Supreme Court has held that an insurance company cannot be saddled with liability where the driver of the offending vehicle did not possess a valid and effective driving licence on the date of the accident.
Setting aside the Punjab and Haryana High Court’s judgment, the bench of Justice Sanjay Karol and Justice Nongmeikapam Kotiswar Singh restored the finding that there had been a breach of the insurance policy, while directing that the principle of “pay and recover” would apply to protect the accident victims.
The litigation arose from a motor vehicle accident that occurred on 14 October 2009, when the offending vehicle struck a two-wheeler driven by the claimant. Rash and negligent driving was never in dispute. The controversy centred entirely on whether the driver of the offending vehicle possessed a valid driving licence on the date of the accident.
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The Motor Accident Claims Tribunal (MACT) awarded compensation of ₹86.95 lakh with interest, but held that the insurer was not liable because the driver lacked a valid licence. Consequently, liability was fastened on the driver and the owner of the vehicle.
On appeal, however, the Punjab and Haryana High Court reversed that finding after accepting the driver’s contention that the licence had in fact been renewed. The High Court consequently held the insurer liable and enhanced the compensation to ₹1.08 crore with 8% interest. Aggrieved by this reversal, the insurance company approached the Supreme Court.
Before the Tribunal, officials from the Transport Department produced official licensing records. Two witnesses categorically stated that the driver’s licence did not cover the period when the accident occurred.
Although another Motor Licensing Officer stated that the licence had been renewed between 2007 and 2010, the Tribunal found that his oral testimony contradicted the official extracts produced from departmental records. Accordingly, the Tribunal declined to rely upon his statement.
The High Court, however, accepted the Licensing Officer’s testimony and relied heavily upon a departmental communication stating that certain licence data had been lost because of technical issues during migration between outsourced computer systems. On that basis, it concluded that the driver possessed a valid licence on the relevant date.
The Supreme Court observed that when the validity of an official document such as a driving licence is questioned, the issue must ordinarily be proved through primary official records in accordance with the law of evidence.
The Bench reiterated that secondary evidence is permissible only after satisfying the statutory requirements under the Evidence Act. Unless the non-production of primary records is properly explained and legally established, courts cannot rely upon secondary material or oral testimony alone.
Referring to earlier Constitution Bench and subsequent precedents governing documentary evidence, the Court stressed that primary evidence remains the best evidence and that secondary evidence is merely an exception subject to strict statutory conditions.
The Court carefully examined the Transport Department’s letter relied upon by the High Court.
It observed that the communication merely stated that licence data for the period between 2007 and 2010 was unavailable due to technical migration issues. Importantly, the department never produced any official records demonstrating the alleged data loss, the steps taken to recover the records, or evidence showing that similar gaps existed for other licence holders.
The Bench noted that if the Licensing Officer could retrieve certain records relating to the driver, there was no reason why official evidence regarding the alleged missing data itself could not also have been produced.
According to the Court, the departmental letter did not establish that the licence was actually valid on the date of the accident. Instead, it merely acknowledged that records for that period were unavailable. Such material was insufficient to override the absence of primary official records.
Another factor that weighed heavily with the Supreme Court was the payment of a penalty for delayed renewal.
Evidence showed that the licensing authority had recovered a penalty covering the intervening period between 21 June 2007 and 25 August 2010.
The Court questioned why such penalty would have been imposed if the licence had remained continuously valid throughout that period. While the Tribunal had drawn an adverse inference from this circumstance, the High Court merely noted the fact without addressing its legal significance.
The Bench held that this unexplained payment further weakened the claim that the licence had remained valid without interruption.
The Supreme Court also found that the vehicle owner had failed to establish compliance with the statutory obligation imposed under the Motor Vehicles Act.
The owner neither entered the witness box nor produced any evidence showing that he had verified whether the driver’s licence had been renewed before permitting him to operate the vehicle.
Relying upon earlier judgments including Beli Ram v. Rajinder Kumar, the Court reiterated that vehicle owners must not only verify the licence at the time of employment but must also exercise reasonable care to ensure that it remains valid during the driver’s employment.
Failure to do so amounts to breach of policy conditions and disentitles the insured from claiming indemnification against the insurer.
While holding that the insurer could not ultimately be made liable because of the breach of policy conditions, the Supreme Court recognised that the accident victims should not be deprived of compensation.
Accordingly, it invoked the well-established “pay and recover” doctrine. Since compensation had already been directed to be released to the claimants during the pendency of proceedings, the insurer was granted liberty to recover the amount from the vehicle owner and driver in accordance with law.
The Court observed that although imposing such financial liability upon the owner and driver may be burdensome, the consequence flowed directly from their failure to ensure uninterrupted validity of the driving licence.
Beyond deciding the dispute, the Bench made broader observations on road safety and regulatory compliance.
The Court urged the Ministry of Road Transport and Highways and State Governments to undertake awareness campaigns highlighting the importance of timely renewal of driving licences. It also recommended improvements in licensing procedures, stricter compliance mechanisms, regulation of driving schools, greater affordability, and better accessibility, including regional language support for licence applications and tests.
According to the Court, ensuring that every driver possesses a valid licence is not merely a statutory requirement but a critical safeguard for public safety on Indian roads.
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