Back
2026 Supreme(Online)(SC) 1623
SUPREME COURT OF INDIA
Ahsanuddin Amanullah, R. Mahadevan, JJ
National Insurance Company Limited – Appellant
Versus
K. Saravanan – Respondent
SPECIAL LEAVE TO APPEAL (C) NO. 1003/2022
For the Appellants/Petitioners: Manu Luv Shahalia, Manjeet Chawla, Usha Pant Kukreti, Jyoti
For the Respondents: Goutham Shivshankar, G. Balaji, Arzu Paul, Shiv Kumar, Vaishnavi, Vipin Sanghi, Amit Anand Tiwari, Sabarish Subramanian, Veshal Tyagi, Muthu Mayan R, Vishnu Unnikrishnan
Fraud vitiates a transaction but mere allegations of fraud without proper investigation, reporting, and fulfillment of the evidentiary burden in accordance with law are insufficient for an insurer to disclaim liability, requiring proactive due diligence by the company.
Headnote:The proceedings arise from a special leave petition concerning a motor vehicle insurance claim where the insurer alleged the policy was forged. The court examined the duty of insurance companies to act with due diligence upon discovering fraud. While the state police authorities clarified the investigative protocols, the court observed that the insurer's failure to report alleged forged policies suggests a lack of institutional responsibility. The court framed the issue regarding the accountability of insurers in addressing fraudulent documents and the necessity of police investigation into such systemic issues. The ratio decidendi emphasizes that while fraud vitiates all transactions, mere allegations of fraud without specific particulars or subsequent reporting to authorities are insufficient to evade liability, and insurers are mandated to act proactively to safeguard public interest. The court directed the registration of a fresh criminal case against parties responsible for the forged policy, including internal personnel of the insurance company, and ordered the insurer to deposit the compensation amount while granting recovery rights against the entity in control of the vehicle.
Key Points: - The Insurance Company is under a duty to act with due diligence once it comes to knowledge of a forged/fabricated policy. (!) - A fresh criminal case should be registered against those responsible for the forged policy, including insurance company officers and other involved persons. (!) - The DGP, Tamil Nadu, is directed to form a Special Investigation Team to expeditiously investigate the matter. (!) - The Insurance Company must deposit the entire amount ordered in the High Court’s order, within four weeks, with the respondent; payment liability may extend to the party in control of the vehicle. (!) - Mere allegations of fraud without specific particulars or proper reporting/investigation do not discharge liability; fraud vitiates, but proof must be provided in accordance with law. (!) (!) - The court referenced a prior judgment stating that an insurer must prove fraud with full particulars and evidence; general allegations are insufficient. (!) (!) - There is an emphasis on systemic accountability and public interest in insurers handling motor vehicle claims involving fraud. (!) (!) - The state authorities are instructed to ensure details of insurance coverage are accessible and that investigating officers are properly directed. (!) - The vehicle involved in the accident is held liable for payment if under the control of the respondent at the relevant time. (!)
How to ensure insurers act with due diligence in cases of alleged forged policies?
What is the obligation of insurers to report forged/fabricated policies to authorities?
What are the consequences for insurers and involved personnel if forged policies are detected?
| Table of Content |
|---|
| 1. procedural overview of police investigation into insurance claims. (Para 1 , 2 , 3 , 4) |
| 2. duty of insurers to report fraud requires evidence beyond mere allegations. (Para 5 , 8 , 9 , 10 , 11 , 12) |
| 3. mandatory investigation of forgery and interim payment directives. (Para 6 , 7 , 13 , 14 , 15 , 16 , 17 , 18) |
O R D E R
Heard learned counsel for the parties.
2. Pursuant to our order dated 25.03.2026, Mr. G.Venkataraman, Director General of Police (DGP), Tamil Nadu, is present and has filed an additional affidavit in which permission is sought from this Court to withdraw certain portions of the earlier affidavit, specifically paragraphs no. 13 and 14 thereof.
3. We have interacted with the DGP, Tamil Nadu. We are satisfied that he is now apprised of the reasons for which his presence was required, as, in our opinion, there was some lack of clarity at the level of the local police station, particularly among the investigating officers dealing with cases such as the present one, with regard to the scope of investigation, especially relating to documents indicating whether the vehicle involved in the accident had a valid insurance cover. He has informed the Court that now there is a system in place whereby details regarding insurance coverage are readily accessible through a centralized portal. It has further been submitted that the concerned police officers, particularly, the investigating officers of such cases would be duly sensitized and clear directions would also be issued throughout the State to ensure that such facts are ascertained at the earliest stage of investigation.
4. At this juncture, we noticed that there is a categorical stand in the first affidavit of the DGP, Tamil Nadu, that the Insurance Company has, till date, not made any complaint with regard to the forged/fabricated insurance policy produced before the police. Upon a query put to learned counsel for the petitioner-Insurance Company, this fact has not been disputed. However, learned counsel submits that he has advised his client to make such a complaint hereafter.
5. We pause here and observe that such a stand taken by the Insurance Company reflects a lack of responsibility and a high degree of casualness on its part. An Insurance Company, which is liable to satisfy claims arising out of motor vehicle accidents under policies issued by it, is under a corresponding obligation to act with due diligence. Once it comes to its knowledge, and it is satisfied, that a policy is forged/fabricated and cannot be acted upon to fasten liability upon it, it is incumbent upon the Insurance Company to inform the appropriate authorities, namely, the police, as the creation and use of such documents constitute an offence. The failure to do so may also give rise to an inference of possible connivance between the parties. Be that as it may, we are of the considered view that the time has come for this Court to adopt stringent measures to ensure that Insurance Companies discharge their obligations with due vigilance, particularly as they deal with public funds contributed by policyholders at large.
6. For the reasons aforesaid, we direct that a fresh case shall be registered on the basis of the facts of the present case. The array of accused shall include the Officers of the Insurance Company, who were aware of the fraud including those posted at the relevant period(s) in the concerned local branch from which the policy is purported to have been issued/renewed as well as other persons, including the owner of the vehicle and any other person(s) found responsible for the creation of the forged/fabricated policy.
7. As indicated above, since this is to be treated as a fresh case, the DGP, Tamil Nadu, shall constitute a Special Investigation Team (SIT) to investigate the matter and ensure that it is taken to its logical conclusion expeditiously, in accordance with law and with due seriousness.
8. We are inclined to refer to a judgment of this Court in the case of the same
