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National Insurance Co. Ltd. vs Abdul Gaffar Pandith on 11 August, 2004
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1. This civil miscellaneous appeal is directed against the order of the State Consumers Protection Commission, Srinagar (hereinafter referred to as the Commission) dated 11-7-2001 in Complaint No. 90 of 1998 whereby and whereunder the respondent was held entitled to compensation of Rs. 3,08,500/- for the tanker and Rs. 1,25,211/- for the diesel kept inside with 9% interest per annum. The facts of the case are as follows:

On 23-10-1997, respondent's tanker bearing registration No. JK01-5592 containing diesel met with an accident on Jammu-Srinagar Highway at Khuninalla. The tanker was completely damaged and the diesel wasted. Both the tanker and stock of diesel had insurance cover to the tune of Rs. 4.50 lakhs and Rs. 1,25,221/- respectively. The respondent informed the Divisional Office of the Insurance Company i.e. National Insurance Co. (hereinafter referred to as the appellant). On intimation, the appellant appointed surveyor to verify the incident. Later Surveyors were appointed to assess the quantum of loss. The loss was assessed at Rs. 3,08,500/- and Rs. 1,25,221/- for the diesel. The Divisional Office approved the claim as assessed by the surveyors and sent it to the Regional Office. The Regional Office made certain queries relating to validity of the driving license of the driver about which survey report was silent. The claim was later forwarded to the Head Office. According to the appellant, the surveyors could not verify the validity of the driving license as relevant records of the Jammu Regional Transport Office had been seized by the Vigilance Organization in connection with some investigation. It may be mentioned that the driver of the tanker Gull Mohammad had died in the accident on the spot. As the claim remained pending, the respondent filed complaint before the Commission.

4. Mr. Javid Ahmad Kawoosa, counsel for the appellant submitted that as held by the Apex Court in New India Insurance Co. v. Kamla and Ors., AIR 2001 SC 1419, the renewal of a fake driving license can not make it genuine and where the owner of the vehicle allows a person not holding a valid driving license to drive the vehicle, he commits a breach of contract which disentitles him to indemnity and compensation from the insurance company. On behalf of respondent, it was submitted that even in the case of a. fake license, the insurance company is statutorily liable to pay compensation as held in New India Insurance Company v. Kamla (supra) itself. Mr. Kawoosa on behalf of the appellant submitted that the decisions of the Supreme Court have been rendered in the context of Section 149(2) of tile Motor Vehicles Act, 1988, and they deal with the cases of third party claim. The question in the instant case relates to 'own damage' claim and therefore the principle laid down in those decisions of the Apex Court is not applicable.

6. In the recent case of National Insurance Company Ltd. v. Swaran Singh and Ors., AIR 2004 SC 1531, a three-Judge Bench of the Apex Court has held that breach of policy condition, for example, disqualification of driver or invalid driving license of the driver has to be proved to have been committed by the insured for avoiding liability by the insurer. Mere absence, fake or invalid driving license or disqualification of the driver for driving at the relevant time, are not in themselves defence available to the insurer against either the insured or the third parties. To avoid its liability towards insured, the insurer has to prove that the insured was guilty of negligence and failed to exercise reasonable care in the matter of fulfilling the condition of the policy regarding use of vehicles by duly licensed driver or one who was not disqualified to drive at the relevant time. Thus the Insurance Company must not only prove, as a part of its defence, that the person driving the vehicle was disqualified or that he did not hold a valid driving license, it is also required to establish that the insured i.e. the owner of the vehicle had made positive breach of the condition. As a matter of fact, the Supreme Court went to the extent of holding that where the insurer is able to prove breach on the part of the insured concerning the policy condition regarding holding of a valid license by the driver or his qualification to drive during the relevant period, "the insurer would not be allowed to avoid its liability towards insured unless the said breach or breaches of the condition of driving license is/are so fundamental and bound to have contributed to the cause of the accident."

8. Coming to the instant case, it is an admitted position that Gull Mohammad had obtained a license from the Licensing Authority, Jammu on 10-6-1983. May be that it was renewal of a fake license but the question is whether allowing him to drive the vehicle amounted to breach of condition on the part of the respondent. Taking the case of the appellant to its logical conclusion, the respondent should have verified from the concerned authorities of Hyderabad about the genuineness and validity of the license purportedly issued to Gull Mohammad. It would, indeed, be a far fetched argument which can not be accepted. In United India Insurance Co. Ltd. v. Lehru, AIR 2003 SC 1292, the Supreme Court observed that when an owner is hiring a driver he is to check whether the driver has a driving license. If the driver produces a driving license which on the face of it looks genuine, the owner is not expected to find out whether the license has in fact been issued by the competent authority or not. The owner may then test his driving skill. If he finds that the driver is competent to drive the vehicle, he is not expected to doubt that the license was not issued by the competent authority. The insurance companies can not expect owners to make enquiries with RTO's spread all over the country, whether the particular driving license shown to them is valid or not. Thus where the owner has satisfied himself that the driver has a license and is driving vehicle competently, even if the license is later found to be fake, the insurance company would remain liable unless it proves that the owner/insured was aware or had noticed that the license was fake but still permitted that person to drive.