Labh Singh vs National Insurance Company Limited

Headnote:(A) Motor Vehicles Act, 1988 - Sections 50, 157, 149, 170, 173, 168 - Transfer of vehicle - Registered owner remains liable until transfer is registered under Section 50 - Mere sale and delivery of possession does not absolve registered owner from liability to third parties - Driving licence - Fake driving licence - Insurer must prove that insured (owner) knew the licence was fake at the time of engaging driver - Mere proof of fake licence does not constitute breach of policy - Skandia Insurance Co. Ltd. v. Kokilaben Chandravadan (1987) 2 SCC 654 followed - Route permit - Plying vehicle without valid route permit is a fundamental statutory infraction - Insurer is liable to pay compensation with right to recover from owner - National Insurance Co. Ltd. v. Challa Upendra Rao (2004) 8 SCC 517, Amrit Paul Singh v. Tata AIG General Insurance Co. Ltd. (2018) 7 SCC 558, and K. Nagendra v. New India Insurance Co. Ltd. 2025 SCC OnLine 2297 referred - Pay and recover principle applicable.

Facts of the case:
The appellant, registered owner of a truck, was proceeded ex parte before the Motor Accident Claims Tribunal. The claimant sustained injuries in an accident on 15.07.2003. The insurer was permitted to contest under Section 170. The MACT found that the driver's licence was fake and the vehicle lacked a valid route permit for Himachal Pradesh, and directed the insurer to pay compensation with right to recover from the owner and driver. The owner appealed.

Findings of Court:
The High Court held that the appellant remained the 'owner' under Section 2(30) as his name continued in RTO records despite the alleged sale (Prakash Chand Daga). On the fake driving licence, the court set aside the MACT's finding because the insurer failed to prove that the owner knew the licence was fake (Skandia). On the route permit, the court upheld the pay and recover direction as plying without permit is an infraction (Challa Upendra Rao, Amrit Paul Singh, K. Nagendra). The appeal was dismissed on all other aspects.

Issues: (i) Whether the registered owner is liable despite having sold the vehicle without formal transfer? (ii) Whether a fake driving licence automatically leads to breach of insurance policy? (iii) Whether absence of route permit justifies pay and recover?

Ratio Decidendi: The registered owner is liable under Section 2(30) until the transfer is registered under Section 50. For a fake licence, the insurer must show that the insured was aware of the fake nature. Plying without a permit is a fundamental breach, but the insurer must still pay and then recover.

Result: Appeal partly allowed - the finding on driving licence breach set aside; otherwise award upheld.

Legal Category Hierarchy

1. Appeal against Motor Accident Claims Tribunal award – Insurer's pay-and-recover liability for breach of policy – Fake license and no route permit. (Para 1 , 2 , 3 , 4 , 5 )

2. Dispute over owner's liability – Sale of vehicle, fake driving license, and lack of route permit. (Para 20 , 21 , 22 , 23 , 24 , 25 , 26 )

3. Appeal partly allowed – Insurer's pay-and-recover liability on fake license set aside; award otherwise upheld. (Para 34 , 35 )

4. Whether a registered owner remains liable for an accident despite sale of vehicle if transfer is not registered under Section 50 of the Motor Vehicles Act?

Yes, as per Section 2(30) definition of 'owner', the registered owner is liable until transfer is duly reported and registered. (Para 27 , 28 )

5. Does a fake driving license alone constitute a breach of insurance contract without proof that the owner knew it was fake?

No, the insurer must prove that the owner engaged the driver despite knowing the license was fake. (Para 29 , 34 )

6. Is plying a vehicle without a valid route permit a fundamental statutory infraction justifying the pay-and-recover principle?

Yes, absence of a permit is a fundamental infraction; insurer can pay compensation and recover from the owner. (Para 30 , 32 , 33 )

JUDGMENT :

Bipin Chander Negi, J.

By way of the present appeal, the appellant has challenged the impugned award dated 04.03.2014, passed by the learned Motor Accident Claims Tribunal-1, Kangra at Dharamshala, Himachal Pradesh.

2. The appellant in the case at hand is the registered owner of the ill-fated vehicle. The accident in the case at hand is stated to have taken place at Rait, situated in Tehsil Shahpur, District Kangra on 15.07.2003 at about 8:50 a.m. The claimant in the case at hand (respondent No. 4 herein) is stated to have sustained injuries in the said accident, caused by the Driver (respondent No. 3 herein) of the truck bearing registration No.PB-10AE-9991. The claim petition was instituted on 16.11.2004.

3. Response to the claim petition was filed by the Insurance Company, and the same is dated 31.05.2007. In the response so filed, an objection has been taken at the very outset, as a preliminary objection qua the non-supply of the documents like Insurance Policy, Registration Certificate, Route Permit, and Fitness Certificate of the vehicle involved in the accident, i.e., vehicle bearing No. PB-10AE-9991, and also the Driving Licence of the Driver (respondent No. 3). Further, the petition was stated to be bad for non-joinder of necessary parties, as the registered owner had not been impleaded.

4. Besides the aforesaid, preliminary objections were taken to the effect that the Driver in question (respondent No. 3 both before the Tribunal as well as in the present appeal) was not holding a valid Driving Licence, and the vehicle did not have a valid Registration Certificate, Fitness Certificate, and Route Permit at the time of the accident in the case at hand.

5. From a perusal of the record of the Motor Accident Claims Tribunal, it is evident that vide order dated 20.09.2007, the present appellant/registered owner had been impleaded as respondent No. 4 therein. Subsequent thereto, vide order dated 12.03.2008, the present appellant had been proceeded against ex-parte.

6. In the aforesaid facts and attending circumstances, the Insurance Company, in the case at hand, had preferred an application under Section 170 of the Motor Vehicles Act, seeking permission to contest the petition on the grounds available to the owner of the offending vehicle, since the owner of the offending vehicle had been proceeded against ex-parte vide order dated 12.03.2008.

7. Response thereto was filed both by the claimant and by respondents No. 2 & 3. In the response filed to the application by respondents No. 2 & 3, it has categorically been admitted that the vehicle was purchased by respondent No. 2, however, the same could not be transferred in the name of respondent No. 2.

8. To the response so filed, replication was filed by the Insurance Company, wherein it was categorically asserted that respondent No. 4 before the MACT was the registered owner as per the Registration Certificate, and the insurance had also been taken out in the name of Labh Singh (present appellant/ respondent No. 4 before the MACT). It was further mentioned in the application that despite being served, the said individual had been proceeded against ex-parte on 12.03.2008.

9. The said application was allowed vide order dated 05.07.2008, and the Insurance Company had been permitted to contest the claim petition on grounds available to the owner of the offending vehicle.

10. Besides the Insurance Company, respondent Nos. 2 and 3 (respondent Nos. 2 and 3 before the MACT, and before this Court in the appeal) had filed a separate reply. The reply in terms of order dated 08.12.2006 was taken on record by the MACT. In terms of the order dated 08.12.2006, the matter was posted for supply of documents on 11.01.2007. On 05.04.2007, copies of Insurance Certificate and Route Permit were supplied to the Insurance Company by respondents No. 2 and 3.

11. In the reply so filed, an objection was taken with respect to the maintainability of the claim petition. Other than the aforesaid, locus stand

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2026 Supreme(HP) 646

IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA
BIPIN CHANDER NEGI, J.
Labh Singh - Appellant
Versus
National Insurance Company Limited and others – Respondents
FAO No.62 of 2022
Decided On : 24-07-2026

Registered owner liable until transfer registered. Fake driving licence: insurer must prove owner's knowledge. Absence of route permit: pay and recover applies.

Legal Category Hierarchy

Table of Contents

4. Whether a registered owner remains liable for an accident despite sale of vehicle if transfer is not registered under Section 50 of the Motor Vehicles Act?

5. Does a fake driving license alone constitute a breach of insurance contract without proof that the owner knew it was fake?

6. Is plying a vehicle without a valid route permit a fundamental statutory infraction justifying the pay-and-recover principle?

2026 Supreme(HP) 646

IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLABIPIN CHANDER NEGI, J.Labh Singh - Appellant Versus National Insurance Company Limited and others – RespondentsFAO No.62 of 2022Decided On : 24-07-2026

Registered owner liable until transfer registered. Fake driving licence: insurer must prove owner's knowledge. Absence of route permit: pay and recover applies.

Legal Category Hierarchy

Table of Contents

4. Whether a registered owner remains liable for an accident despite sale of vehicle if transfer is not registered under Section 50 of the Motor Vehicles Act?

5. Does a fake driving license alone constitute a breach of insurance contract without proof that the owner knew it was fake?

6. Is plying a vehicle without a valid route permit a fundamental statutory infraction justifying the pay-and-recover principle?

Cases Referred (4)

IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA
BIPIN CHANDER NEGI, J.
Labh Singh - Appellant
Versus
National Insurance Company Limited and others – Respondents
FAO No.62 of 2022
Decided On : 24-07-2026