New Delhi, March 14: The Supreme Court has ruled that if a driver in an accident is found to have a fake licence, the vehicle’s owner will have to pay.
Insurance companies cannot escape paying third party compensation on the ground that the driver has a fake licence, the court said.
But the money could later be recovered from the insured if it was proved the owner knew the licence was fake.
A division bench of Justices S.N. Variava and B.N. Agrawal, in an order dated February 28, iterated that “insurance companies would continue to remain liable unless they prove that the owner/insured was aware or had noticed that the licence (of the driver) was fake and still permitted that person to drive”.
The judges, however, did not agree with the contention of the United India Insurance Company, in this case, that it was the responsibility of the owner to find out from the regional transport office (RTO) whether the licence was fake or genuine.
“When an owner is hiring a driver he will have to check whether the driver has a driving licence,” the judges said.
However, “we find it strange that insurance companies expect owners to make enquiries with RTOs whether the driving licence is valid or not”.
Even if the licence was fake “the insurance company would remain liable to the innocent third party, but it may be able to recover from the insured”.
This means, after paying compensation to the victim of an accident (known as third party compensation or insurance), the insurance company concerned “may recover” the money from the owner of the vehicle.
In the case in question, after an accident, United India Insurance Company had declined to pay compensation to the victim on the ground that the driver had fake licence. The owner of the vehicle was insured with the company.
The lower courts ruled that compensation should be paid. On appeal, the Supreme Court said that “even in such a case (where the licence of the driver of the vehicle was fake), the insurance company would remain liable to the innocent third party”.
The court also clarified that the offence of having a fake licence would be covered under the Motor Vehicles Act.
The owner, under the same Act, would be liable only when he had permitted a person to drive the vehicle knowing that the licence was fake or the person was “not duly licensed”, the court said.