Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2025 Supreme(Online)(Tel) 24690

IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
Gadi Praveen Kumar, J
United India Insurance Co. Ltd. – Appellant
Versus
T. Bhavani – Respondent
M.A.C.M.A. Nos.604 and 608 of 2024|Cross Objections Nos.91 and 95 of 2024

Advocates:
For the Appellants/Petitioners: A. Ramakrishna Reddy
For the Respondents: Bajrang Singh Thakur

An insurance company cannot be held liable for compensation under the 'pay and recover' principle when the underlying insurance policy is proven to be a fraudulent or fake document, as there is no privity of contract to indemnify the vehicle owner.

Headnote:(A) Motor Vehicles Act, 1988 - Insurance Policy - Fake and fraudulent documents - Liability of insurer - Where an insurance policy produced as evidence is proven to be a fake or fabricated document, the insurance company cannot be held liable to indemnify the owner or pay compensation to the claimants. The principle of 'pay and recover' is inapplicable when the foundation of the claim (the insurance contract) is non-existent due to fraud. (Paras 44, 46, 48)

(B) Evidence - Burden of Proof - Indian Evidence Act, 1872 - Sections 101, 102 and 106 - The burden of proof to establish the genuineness of a document relied upon lies with the party producing it. Mere failure of the insurance company to file a police complaint regarding a fake policy does not absolve the claimants of their responsibility to prove that a valid contract of insurance existed. (Paras 21, 44, 46)

Facts of the case:
The claimants were legal heirs of two deceased victims of a motor vehicle accident involving a Swaraj Mazda Mini bus. The Tribunal, after trial, held the insurance company liable to pay compensation under the 'pay and recover' principle, despite noting serious discrepancies in the insurance policy (Ex. A-9) presented by the claimants, including its status as a photocopied, unverified, and allegedly fake document. The Insurance Company appealed, challenging the liability.

Findings of Court:
The court found that the insurance policy produced was a fabricated document, unsupported by the insurer's records, and characterized by blatant discrepancies in branch details and coverage. It held that fraud unravels everything and the Tribunal erred in fixing liability on the insurer purely on the ground that the insurer did not lodge a police complaint against the fraudulent party.

Issues: Whether an insurance company can be held liable under the 'pay and recover' principle when the insurance policy relied upon by the claimants is found to be a fraudulent and fake document.

Ratio Decidendi: Where no privity of contract exists between the insurer and the insured due to a fraudulent/fake insurance document, the insurance company cannot be forced to act as a guarantor or be held liable. The insurer is not required to engage in charity; liability is contingent upon a valid contract of indemnity.

Result: Appeals allowed; awards set aside. Claimants granted liberty to initiate recovery against the vehicle owner.

Table of Content
1. background and factual matrix of the accident and claim petitions. (Para 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12 , 13)
2. arguments challenging validity of insurance based on fraud and lack of privity. (Para 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38)
3. arguments favoring the maintenance of tribunal decision based on burden of proof and welfare. (Para 39 , 40 , 41)
4. court's analysis on fraudulent documents and absence of indemnity liability. (Para 42 , 43 , 44 , 45 , 46 , 47 , 48)
5. final order setting aside tribunal awards and granting leave to proceed against the owner. (Para 49 , 50 , 51)

COMMON JUDGMENT:

Heard Sri A.Ramakrishna Reddy, learned counsel for the appellants and Sri Bajrang Singh Thakur, learned counsel for claimants/respondents at length.

2. M.A.C.M.A.No.604 of 2024 is filed by the Appellant-United India Insurance Company Limited being aggrieved by the Award and decree dated 04.10.2023 passed in M.V.O.P.No.349 of 2017 on the file of the Motor Accidents Claims Tribunal –cum-Judge, Family Court-cum-III Additional District Judge, Mahabubnagar in partly allowing the claim granting compensation of Rs.14,75,200/- with proportionate costs and interest @ 7.5 p.a. from the date of petition till date of realization, out of the claim of Rs.25,00,000/-.

3. M.A.C.M.A.No.608 of 2024 is also filed by the Appellant-United India Insurance Company Limited being aggrieved by the Award and decree dated 04.10.2023 passed in M.V.O.P.No.350 of 2017 on the file of the Motor Accidents Claims Tribunal –cum-Judge, Family Court-cum-III Additional District Judge, Mahabubnagar (for short ‘the Tribunal’) in partly allowing the claim granting compensation of Rs.11,75,000/- with proportionate costs and interest @ 7.5 p.a. from the date of petition till date of realization, out of the claim of Rs.20,00,000/-.

4. Cross Objections No.91 of 2024 is filed against M.A.C.M.A.No.608 of 2024 while Cross Objections Nos.95 of 2024 is filed against M.A.C.M.A.No.604 of 2024 by the claimants seeking enhancement of compensation granted by the learned Tribunal.

5. Since, the crime vehicle involved in the accident i.e. Swaraj Mazda Mini bus bearing No.AP-29U-7933 (for short ‘the crime vehicle’) on 01.05.2017 and travelers/passengers to the incidents as well as the owner of the crime vehicle is one and the same, these Appeals and Cross Objections are being disposed of by this common Judgment.

6. The facts leading to filing of M.V.O.P.No.349 of 2017 and M.V.O.P.No.350 of 2017 are that on 01.05.2017, when the deceased Thakur Anil Singh and his cousin deceased Thakur Bheem Singh were proceeding towards Thellapur village from Gandipet on motor cycle bearing No.TS-15EC-7107 and reached near Coca-Cola Company, outskirts of Khanapur village, the crime vehicle said to have been driven by the driver, who is respondent No.1 in the said OPs, at high speed in a rash and negligent manner came in opposite direction on extremely right side of the road, dashed against the motor cycle resulting the death of the deceased.

7. Basing on the report, a case in Crime No.319/2017 was registered under Section 304-A IPC by Narsingi Police against the driver of the crime vehicle and investigated into.

8. It was contended in MACMA 604 of 2024 that at the time of death of the deceased Thakur Anil Singh, was hale and healthy, aged about 20 years and said to have been working as driver to vehicle bearing No.AP-28DU-9186, thereby used to earn Rs.12,500/- p.m. besides Rs.100/- towards batta every day and used to contribute to the family. On account of the sudden death of Thakur Anil Singh, his family was under deep depression and as such, parents of the deceased, wife and two minor children filed claim petition before the learned Tribunal claiming compensation of Rs.25,00,000/- against respondents therein jointly and severally.

9. In respect of M.A.C.M.A.No.608 of 2024, the same was filed by the claimants of deceased Thakur Bheem Singh claiming compe

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2025 Supreme(Online)(Tel) 24690

IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABADGadi Praveen Kumar, JUnited India Insurance Co. Ltd. – AppellantVersusT. Bhavani – RespondentM.A.C.M.A. Nos.604 and 608 of 2024|Cross Objections Nos.91 and 95 of 2024

An insurance company cannot be held liable for compensation under the 'pay and recover' principle when the underlying insurance policy is proven to be a fraudulent or fake document, as there is no privity of contract to indemnify the vehicle owner.

Cases Referred (2)

IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
Gadi Praveen Kumar, J
United India Insurance Co. Ltd. – Appellant
Versus
T. Bhavani – Respondent
M.A.C.M.A. Nos.604 and 608 of 2024|Cross Objections Nos.91 and 95 of 2024