S.149 MV Act | Vehicle Owner Not Liable If He Was Of Bona Fide Belief Regarding Genuineness Of Driver's License: Kerala High Court

The Kerala High Court on Thursday held that when the owner of a vehicle is satisfied that the driver has a license and is driving competently, there would be no breach of Section 149(2)(a)(ii) of the Motor Vehicles Act, and hence the Insurance Company would not be absolved from their liability to compensate the victim.

Justice Sophy Thomas, while holding so, observed, 

"Ultimately, if it is found that the license was fake, the Insurance Company will continue to remain liable, unless they prove that the owner-insured was aware or had noticed that the license was fake and still permitted that person to drive. Even in such a case the Insurance Company would remain liable to the innocent third party, but it may be able to recover from the insured".

As per the factual matrix, the appellant in the instant case was the owner of a stage carrier driven by the 2nd respondent, Santhosh. The vehicle was insured with the National Insurance Co. Ltd.

While the vehicle was driven by the 2nd respondent, it was involved in an accident, which was proved to be rash and negligent before the Motor Accidents Claims Tribunal, Perumbavoor. Before the Tribunal, it was contended by the insurer that the 2nd respondent had no valid and effective driving license and since the owner had entrusted the vehicle to the 2nd respondent, he violated the terms and conditions of the policy, and was thus not liable to be indemnified by the Company.

The Tribunal awarded a compensation of Rs. 5,66,061/- to the injured, and directed the Insurance Company to deposit the same. Additionally, since the driving license of the 2nd respondent was found to be to be fake, the Insurance Company was permitted to recover the compensation amount deposited by them from both the owner as well as the driver of the vehicle. The 2nd respondent was also charged under Section 3(1) read with Section 181 of the Motor Vehicles Act, on the presumption that he had no valid driving license, since he had failed to produce the same.

It was against this decision of the Tribunal that the instant appeal had been preferred. 

It was contended on behalf of the Appellant by Advocate P. Deepak that the 2nd respondent had produced driving license, which was renewed from a local RTO, and the Appellant was satisfied with the competency of the driver to drive the vehicle properly. Hence, she had not enquired as to whether the original license that had been issued by the Regional Transport Office (RTO), Chennai was genuine or not.

It was averred that as the owner of the vehicle, she did not have to go beyond satisfying herself as to the competency of the driver, and checking that he had a license which she had the bona fide belief that it was genuine, and hence could not be held liable. It was submitted that since the accident had occurred due to the rash and negligent driving of the 2nd respondent and since he was the one who had suppressed the fact that his license was a fake one, it was the latter who was liable to compensate the victim.

The counsel brought the attention of the Court to Section 15(6) of the Act, which stipulates that, "where the authority renewing the driving license is not the authority which issued the driving license, it shall intimate the fact of renewal to the authority which issued the driving license". In this regard, the counsel submitted that if Section 15(6) was duly complied with by the renewing authority, the fake license in the name of the 2nd respondent could have been brought to light, and accordingly, in the instant case, the appellant could not be faulted with since there was no scope for any enquiry, as the driving license produced before the appellant, was one renewed from a local authority.

On behalf of the respondents, it was contended by Advocate P.G. Ganappan, that if the owner had verified the competency of the driver and genuineness of his driving license at the time of appointing him as a driver, she would have realized that his driving license was a fake one. It was further submitted by the counsel for the Insurer that there is no privity of contract between the insurer and the driver and hence, they could not recover the amount from the driver.

The Court in this case, accepted the submission of the appellant that she had been under the bona fide belief that the renewed license of the 2nd respondent was a genuine one. The Court relied on the judgment in Rishi Pal Singh vs. New India Assurance Co. Ltd. & Ors., wherein it had been provided that the owner of the vehicle is expected to verify the driving skills of the driver before appointing him, and once he is satisfied that driver is competent to drive, he is not expected to verify the genuineness of his driving license. It added that the Insurance Companies cannot expect owners to make enquiries with RTOs, which are spread all over the country, whether the driving license shown to them is valid or not.

The Court further noted that in the case at hand, the insurer did not have a case that the owner was aware of the fact that the driving license of the 2nd respondent was a fake one, and that there was every reason to believe that the owner was under the genuine belief that the renewed license was genuine, and hence there would not be any breach of Section 150(2)(a)(ii) of the amended Act, 2019. In this light, it was held that the Insurance Company could not be absolved of its liability, and that the appellant could not be mulcted with the liability to restitute the Insurance Company. 

The contention raised by the Insurance Company denying the existence of privity of contract between the insurer and the driver was also rejected by the Court on the ground that by relying on the position in Oriental Insurance Company Ltd. vs. Sivan (2014). In this light, it was observed by the Court that, 

"The driver is not a stranger to the contract of insurance between the Insurance Company and the owner of the vehicle and there is a quasi contract between the driver and the insurer. The person liable in the first instance is the driver himself. The owner becomes liable for the negligence on the part of the driver by applying the principles of vicarious liability in an action for tort. The Insurance Company becomes liable to indemnify the owner of the vehicle because of the contract of insurance entered into between the owner of the vehicle and the Insurance Company. In fact, ultimately what the Insurance Company takes upon themselves by virtue of the contract of insurance is the primary liability of the driver for paying compensation for his negligent act to the party, who suffered because of his negligence".

Accordingly, the Court found that the driver (2nd respondent) was liable to compensate the victim. It was also held that since the vehicle had been insured by the 3rd respondent, as far as an innocent third party is concerned, primarily, the insurer has to compensate him and they can recover the sum from the driver, as there is quasi contract between the driver and the insurer, thereby allowing the appeal. 

Also Read: Vehicle Owners Can't Be Expected To Make Enquiries With RTOs All Over Country To Cross Check Validity Of Driver's License: J&K&L High Court

Case Title: Aisha v. Xavier & Ors. 

Citation: 2022 LiveLaw (Ker) 493

Click Here To Read/Download The Judgment