Important point
Mere absence, fake or invalid driving licence or disqualification of the driver for driving at the relevant time, are not in themselves defences available to the insurer against either the insured or the third parties and 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.

Headnote:(i) Motor Vehicles Act, 1988-Sections 3, 4, 5, 149(2)(a)(ii) vis-a-vis proviso appended to sub-section (4) and (5)-Accident claim-Liability of insurance company-Defences specified-Where driver of the vehicle did not hold any licence and he was allowed by owner to driver the vehicle-Whether the insurer can avoid its liability.
       Held : Under the Motor Vehicles Act, holding of a valid driving licence is one of the conditions of contract of insurance. Driving of a vehicle without a valid licence is an offence. However, the question herein is whether a third party involved in an accident is entitled to the amount of compensation granted by the Motor Accidents Claims Tribunal although the driver of the vehicle at the relevant time might not have a valid driving licence but would be entitled to recover the same from the owner or driver thereof. It is trite that where the insurers relying upon the provisions of violation of law by the assured takes an exception to pay the assured or a third party, they must prove a wilful violation of the law by the assured. In some cases violation of criminal law, particularly, violation of the provisions of the Motor Vehicles Act may result in absolving the insurers but, the same may not necessarily hold good in the case of a third party. In any event, the exception applies only to acts done intentionally or "so recklessly as to denote that the assured did not care what the consequences of his act might be". (Paras 48 and 49)
       A bare perusal of the provisions of Section 149 of the Act leads to only one conclusion that usual rule is that once the assured proved that the accident is covered by the compulsory insurance clause, it is for the insurer to prove that it comes within an exception. (Para 64)
       In a case, therefore, where the driver of the vehicle admittedly did not hold any licence and the same was allowed consciously to be driven by the owner of the vehicle by such person, the insurer is entitled to succeed in its defence and avoid liability. The matter, however, may be different where a disputed question of fact arises as to whether the driver had a valid licence or where the owner of the vehicle committed a breach of the terms of the contract of insurance as also the provisions of the Act by consciously allowing any person to drive a vehicle who did not have a valid driving licence. In a given case, the driver of the vehicle may not have any hand at all, e.g. a case where an accident takes place owing to a mechanical fault or vis-major. (Para 82)
       (ii) Motor Vehicles Act, 1988-Sections 3, 10, 149(2)-Accident claim -Liability of insurer-When the person has been granted licence for one type of vehicle but at relevant time he was driving another type of vehicle-Whether the insurer can avoid its liability.
       Held : Section 10 of the Act provides for forms and contents of licences to drive. The licence has to be granted in the prescribed form. Thus, a licence to drive a light motor vehicle would entitle the holder there to drive the vehicle falling within that class or description. Section 3 of the Act casts an obligation on a driver to hold an effective driving licence for the type of vehicle which he intends to drive. Section 10 of the Act enables Central Government to prescribe forms of driving licences for various categories of vehicles mentioned in sub-section (2) of said section. The various types of vehicles described for which a driver may obtain a licence for one or more of them are (a) Motorcycle without gear, (b) motorcycle with gear, (c) invalid carriage, (d) light motor vehicle, (e) transport vehicle, (f) road roller and (g) motor vehicle of other specified description. The definition clause in Section 2 of the Act defines various categories of vehicles which are covered in broad types mentioned in sub-section (2) of Section 10. They are ‘goods carriage , heavy-goods vehicle , heavy passenger motor-vehicle , invalid carriage , light motor-vehicle , maxi-cab , medium goods vehicle , medium passenger motor-vehicle , motor-cab , motorcycle , omnibus , private service vehicle , semi-trailer , tourist vehicle , tractor , trailer , and transport vehicle . In claims for compensation for accidents, various kinds of breaches with regard to the conditions of driving licences arise for consideration before the Tribunal. A person possessing a driving licence for motorcycle without gear , for which he has no licence. Cases may also arise where a holder of driving licence for light motor vehicle is found to be driving a maxi-cab , motor-cab or omnibus for which he has no licence. In each case on evidence led before the tribunal, a decision has to be taken whether the fact of the driver possessing licence for one type of vehicle but found driving another type of vehicle, was the main or contributory cause of accident. If on facts, it is found that accident was caused solely because of some other unforeseen or intervening causes like mechanical failures and similar other causes having no nexus with driver not possessing requisite type of licence, the insurer will not be allowed to avoid its liability merely for technical breach of conditions concerning driving licence. We have construed and determined the scope of sub-clause (ii) of sub-section (2) of section 149 of the Act. Minor breaches of licence conditions, such as want of medical fitness certificate, requirement about age of the driver and the like not found to have been the direct cause of the accident, would be treated as minor breaches of inconsequential deviation in the matter of use of vehicles. Such minor and inconsequential deviations with regard to licensing conditions would not constitute, sufficient ground to deny the benefit of coverage of insurance to the third parties. On all pleas of breach of licensing conditions taken by the insurer, it would be open to the tribunal to adjudicate the claim and decide inter se liability of insurer and insured; although where such adjudication is likely to entail undue delay in decision of the claim of the victim, the tribunal in its discretion may relegate the insurer to seek its remedy of reimbursement from the insured in the civil court. (Paras 86 to 89)
       (iii) Motor Vehicles Act, 1988-Section 149(2)-Accident claim-Liability of insurance company-Where driver’s licence found to be fake-Whether insurer must prove that the owner was guilty of wilful breach of conditions of insurance policy or contract of insurance-Held, yes-Question as to whether the owner has taken reasonable care to find out as to whether driving licence produced by driver (a fake one or otherwise) does not fulfil the requirements of law or not will have to be determined in each case. (Para 90)
       (iv) Motor Vehicles Act, 1988-Sections 4(3), 7(2) and 10(3), 14, 149(2)-Learner’s licence-Vehicle at time of accident being driven by a person having a learner’s licence-Whether insurance company would be liable to satisfy the decree-(Yes).
       Held : Motor Vehicles Act, 1988 provides for grant of learner s licence. [See Section 4(3), Section 7(2), Section 10(3) and Section 14]. A learner s licence is, thus, also a licence within the meaning of the provisions of the said Act. It cannot, therefore, be said that a vehicle when being driven by a learner subject to the conditions mentioned in the licence, he would not be a person who is not duly licensed resulting in conferring a right on the insurer to avoid the claim of the third party. It cannot be said that a person holding a learner s licence is not entitled to drive the vehicle. Even if there exists a condition in the contract of insurance that the vehicle cannot be driven by a person holding a learner s licence, the same would run counter to the provisions of Section 149(2) of the said Act. The provisions contained in the said Act provide also for grant of driving licence which is otherwise a learner s licence. Section 3(2) and 6 of the Act provides for the restriction in the matter of grant of driving licence, Section 7 deals with such restrictions on granting of learner s licence. Section 8 and 9 provide for the manner and conditions for grant of driving licence. Section 15 provides for renewal of driving licence. Learner s licences are granted under the rules framed by the Central Government or the State Governments in exercise of their rule making power. Conditions are attached to the learner s licences granted in terms of the statute. A person holding learner s licence would, thus, also come within the purview of "duly licensed" as such a licence is also granted in terms of the provisions of the Act and the rules framed thereunder. It is now a well-settled principle of law that rules validly framed become part of the statute. Such rules are, therefore, required to be read as a part of main enactment. It is also well-settled principle of law that for the interpretation of statute an attempt must be made to give effect to all provisions under the rule. No provision should be considered as surplusage. (Paras 91 and 92)
       (v) Motor Vehicles Act, 1988-Sections 149(2)(a)(ii), proviso to sub-section (4) and (5), 163A, 166-Accident claim-Liability of insurance company-Breach of policy condition-Disqualification of driver driving the offending vehicle-Whether insurer can avoid its liability.
       Held : (i) Chapter XI of the Motor Vehicles Act, 1988 providing compulsory insurance of vehicles against third party risks is a social welfare legislation to extend relief by compensation to victims of accidents caused by use of motor vehicles. The provisions of compulsory insurance coverage of all vehicles are with this paramount object and the provisions of the Act have to be so interpreted as to effectuate the said object. (ii) Insurer is entitled to raise a defence in a claim petition filed under Section 163 A or Section 166 of the Motor Vehicles Act, 1988 inter alia in terms of Section 149(2)(a)(ii) of the said Act. (iii) The breach of policy condition, e.g,, disqualification of driver or invalid driving licence of the driver, as contained in sub-section (2)(a)(ii) of section 149, have to be proved to have been committed by the insured for avoiding liability by the insurer. Mere absence, fake or invalid driving licence or disqualification of the driver for driving at the relevant time, are not in themselves defences 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. (iv) The insurance companies are, however, with a view to avoid their liability must not only establish the available defence(s) raised in the said proceedings but must also establish breach on the part of the owner of the vehicle; the burden of proof wherefor would be on them. (v) The court cannot lay down any criteria as to how said burden would be discharged, inasmuch as the same would depend upon the facts and circumstance of each case. (vi) Even where the insurer is able to prove breach on the part of the insured concerning the policy condition regarding holding of a valid licence 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 on the condition of driving licence is/are so fundamental as are found to have contributed to the cause of the accident. The Tribunals in interpreting the policy conditions would apply "the rule of main purpose" and the concept of "fundamental breach" to allow defences available to the insured under section 149(2) of the Act. (vii) The question as to whether the owner has taken reasonable care to find out as to whether the driving licence produced by the driver, (a fake one or otherwise), does not fulfil the requirements of law or not will have to be determined in each case. (viii) If a vehicle at the time of accident was driven by a person having a learner s licence, the insurance companies would be liable to satisfy the decree. (ix) The claims tribunal constituted under Section 165 read with Section 168 is empowered to adjudicate all claims in respect of the accidents involving death or of bodily injury or damage to property of third party arising in use of motor vehicle. The said power of the tribunal is not restricted to decide the claims inter se between claimant or claimants on one side and insured, insurer and driver on the other. In the course of adjudicating the claim for compensation and to decide the availability of defence or defences to the insurer, the Tribunal has necessarily the power and jurisdiction to decide disputes inter se between insurer and the insured. The decision rendered on the claims and disputes inter se between the insurer and insured in the course of adjudication of claim for compensation by the claimants and the award made thereon is enforceable and executable in the same manner as provided in Section 174 of the Act for enforcement and execution of the award in favour of the claimants. (x) Where on adjudication of the claim under the Act the tribunal arrives at a conclusion that the insurer has satisfactorily proved its defence in accordance with the provisions of section 149(2) read with sub-section (7), as interpreted by this Court above, the Tribunal can direct that the insurer is liable to be reimbursed by the insured for the compensation and other amounts which it has been compelled to pay to the third party under the award of the tribunal. Such determination of claim by the Tribunal will be enforceable and the money found due to the insurer from the insured will be recoverable on a certificate issued by the tribunal to the Collector in the same manner under Section 174 of the Act as arrears of land revenue. The certificate will be issued for the recovery as arrears of land revenue only it, as required by sub-section (3) of Section 168 of the Act the insured fails to deposit the amount awarded in favour of the insurer within thirty days from the date of announcement of the award by the tribunal. (xi) The provisions contained in sub-section (4) with proviso thereunder and sub-section (5) which are intended to cover specified contingencies mentioned therein to enable the insurer to recover amount paid under the contract of insurance on behalf of the insured can be taken recourse of by the Tribunal and be extended to claims and defences of insurer against insured by relegating them to the remedy before regular court in cases where on given facts and circumstances adjudication of their claims inter se might delay the adjudication of the claims of the victims. (Para 107)

Judgement Key Points

Certainly. Based on the provided legal document, the key points are as follows:

The primary objective of the legislation is to provide social welfare by ensuring that victims of road accidents receive compensation, and the provisions of the Motor Vehicles Act, 1988, are to be interpreted in a manner that promotes this purpose (!) (!) .
An insurer has the right to raise defenses under Section 149(2)(a)(ii) of the Act, which include claims that the driver was not duly licensed, held a fake license, or was driving without any license at the time of the accident (!) (!) .
The burden of proving that the driver was not duly licensed or that a breach of policy conditions occurred lies on the insurer. If the insurer establishes such a breach, it can potentially avoid liability, but only if the breach is fundamental and contributed to the cause of the accident (!) (!) (!) .
A valid driving license, including a learner’s license, is considered a "duly licensed" status under the Act. Therefore, even a driver holding a learner’s license can be deemed duly licensed, and the insurer's liability may still be invoked unless there is a breach that significantly contributed to the accident (!) (!) .
The presence of a fake or invalid license does not automatically absolve the insurer of liability unless it is proven that the breach was wilful and contributed to the cause of the accident. The insurer must also demonstrate that the owner was negligent in verifying the license’s authenticity (!) (!) .
Minor breaches, such as not renewing a license within the prescribed period or possessing a license for a different class of vehicle, generally do not constitute sufficient grounds to deny insurance coverage unless such breaches directly contributed to the accident (!) (!) .
The law recognizes that driving a vehicle with a learner’s license does not necessarily exempt the insurer from liability, especially if the license was valid at the time of driving and the breach was not fundamental or contributory to the accident (!) (!) .
The Claims Tribunal has the authority to adjudicate all claims arising from accidents involving third-party injuries, including disputes between the insurer and the insured. If the insurer successfully proves its defense, it can recover the paid amounts from the insured (!) (!) (!) .
The insurer's right to recover amounts paid under the policy from the insured is supported by statutory provisions, and such recovery can be enforced as a decree or as arrears of land revenue through appropriate procedures (!) (!) .
The interpretation of policy conditions should align with the main purpose of the legislation, which is to ensure compensation to victims, and technical breaches that do not contribute to the cause of the accident generally do not absolve the insurer of liability (!) (!) .
The law emphasizes that the insurer must establish a breach of policy conditions with cogent evidence and that the breach must be significant and directly related to the cause of the accident for the insurer to avoid liability (!) (!) .
Overall, the legal framework favors a broad interpretation that promotes the compensation of victims, with strict adherence to the conditions of the policy and the burden of proof on the insurer to establish any breach that would exempt it from liability (!) (!) (!) .

Please let me know if you need a more detailed analysis or specific legal advice based on these key points.

Judgment

By V.N. Khare, CJI & D.M. Dharmadhikari, S.B. Sinha, JJ.-Interpretation of Section 149(2)(a)(ii) vis-a-vis the proviso appended to sub-sections (4) and (5) of the Motor Vehicles Act, 1988 is involved in this batch of special leave petitions filed by the National Insurance Company Limited (hereinafter referred to as Insurer) assailing various awards of the Motor Vehicle Claims Tribunal and judgments of the High Courts.

2. In view of the fact that these petitions involve pure questions of law, it is not necessary to advert to the individual fact pertaining to each matter.

3. Suffice, however, is to point out that the vehicles insured with the petitioners were involved in accidents resulting in filing of claim applications by the respective legal representatives of the deceased(s) or the injured person(s), as the case may be.

4. Defences raised by the Petitioner company in the claim petitions purported to be in terms of Section 149(2)(a)(ii) of the Motor Vehicles Act, 1988 (hereinafter referred to as the Act ) were : (a) driving licence produced by the driver or owner of the vehicle was a fake one; (b) driver did not have any licence whatsoever; (c) licence, although was granted to the concerned driver but on expiry thereof, the same had not been renewed; (d) licence granted to the drivers being for one class or description of vehicle but the vehicle involved in the accident was of different class or description; and (e) the vehicle in question was driven by a person having a learner s licence.

5. Before we proceed further in the matter it is relevant to notice certain relevant statutory provisions which are :

"2(10) "driving licence" means the licence issued by a competent authority under Chapter II authorising the person specified therein to drive, otherwise than as a learner, a motor vehicle or a motor vehicle of any specified class or description;

3. Necessity for driving licence.-(1) No person shall drive a, motor vehicle in any public place unless he holds an effective driving licence issued to him authorising him to drive the vehicle; and no person shall so drive a transport vehicle other than [a motor cab or motor cycle hired for his own use or rented under any scheme made under sub-section (2) of section 75 unless his driving licence specifically entitles him so to do.

(2) The conditions subject to which sub-section (1) shall not apply to a person receiving instructions in driving a motor vehicle shall be such as may be prescribed by the Central Government.

4. Age limit in connection with driving of motor vehicles.-(1) No person under the age of eighteen years shall drive a motor vehicle in any public place:

Provided that a motor cycle with engine capacity not exceeding 50cc may be driven in a public place by a person after attaining the age of sixteen years.

(2) Subject to the provisions of section 18, no person under the age of twenty years shall drive a transport vehicle in any public place.

(3) No learner s licence or driving licence shall be issued to any person to drive a vehicle of the class to which he has made an application unless he is eligible to drive that class of vehicle under this section.

5. Responsibility of owners of motor vehicles for contravention of sections 3 and 4.-No owner or person in charge of a motor vehicle shall cause or permit any person who does not satisfy the provisions of section 3 or section 4 to drive the vehicle.

6. Restrictions on the holding of driving licences.-(1) No person shall, while he holds any driving licence for the time being in force, hold any other driving licence except a learner s licence or a driving licence issued in accordance with the provisions of section 18 or a document authorising, in accordance with the rules made under section 139, the person specified therein to drive a motor vehicle.

(2) No holder of a driving licence or a learner s licence shall permit it to be used by any other person.

(3) Nothing in this section shall prevent a licensing authority having the

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2004 Supreme(SC) 1

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