In a significant decision clarifying the law on “pay and recover” liability and due diligence obligations of vehicle owners, the Supreme Court in Hind Samachar Ltd. v. National Insurance Company Ltd. set aside a High Court order that had permitted an insurer to recover compensation from the vehicle owner on the ground that the driver’s licence was fake.
The Court held that in the absence of evidence proving negligence or collusion on the part of the owner at the time of employing or entrusting the vehicle to the driver, the insurer cannot avoid its liability to indemnify.
The ruling reinforces long-standing principles laid down in United India Insurance Co. Ltd. v. Lehru (2003) 3 SCC 338, National Insurance Co. Ltd. v. Swaran Singh (2004) 3 SCC 297, and PEPSU RTC v. National Insurance Co. Ltd. (2013) 10 SCC 217 — emphasizing that a mere discovery of a fake licence does not by itself constitute a willful breach of policy conditions.
Title of the Case: Hind Samachar Ltd. (Delhi Unit) v. National Insurance Company Ltd. & Ors.
Citation: 2025 INSC 1204
Court: Supreme Court of India
Judges: Justice K. Vinod Chandran and Justice N. V. Anjaria
Date of Judgment: October 8, 2025
Factual Background
The appellant, Hind Samachar Ltd. (Delhi Unit), was the registered owner of a truck involved in a fatal accident on January 26, 1993, at about 2:00 a.m. The truck collided with a Matador van carrying ten passengers, resulting in nine deaths and two injuries.
The claim petitions under Section 166 of the Motor Vehicles Act, 1988, were filed by the legal representatives of the deceased passengers and the injured victims before the Motor Accident Claims Tribunal (MACT). The driver and owner of the truck and its insurer (National Insurance Co. Ltd.) were impleaded as respondents. Later, upon the insurer’s plea of contributory negligence, the owner and insurer of the Matador van were also added as respondents.
The Tribunal found composite negligence of both vehicles — apportioning fault at 75% on the truck and 25% on the Matador van — and awarded compensation accordingly.
Both the insurance companies and the vehicle owners filed appeals challenging the quantum and liability aspects. The High Court upheld the composite negligence but allowed the insurer to recover the compensation amount from the truck owner because the truck driver possessed a fake driving licence, thereby violating the terms of the insurance policy.
Issue Before the Supreme Court
The central question before the Supreme Court was:
- Whether the insurer (National Insurance Co. Ltd.) could validly recover compensation from the owner of the vehicle on the ground that the driver’s licence was fake, even when there was no proof that the owner was aware of or complicit in the fake licence at the time of employing or entrusting the vehicle.
Arguments Advanced
A. Appellant (Hind Samachar Ltd.)
Senior Advocate Mr. Gopal Shankaranarayan argued that:
- The Tribunal had already noticed that two driving licences were produced and, after evaluating the evidence, directed the insurer to indemnify the owner — a conclusion supported by settled precedents.
- The High Court’s assumption of collusion between the owner and driver was based on conjecture.
- The evidence relied upon — including a tampered register from the District Transport Officer (DTO), Gurdaspur — was unreliable.
- The certificate issued by the DTO office validated the authenticity and renewal of the driver’s licence, and there was no reason to disbelieve it.
He relied upon the precedents of:
- United India Insurance Co. Ltd. v. Lehru (2003) 3 SCC 338
- National Insurance Co. Ltd. v. Swaran Singh (2004) 3 SCC 297
- PEPSU RTC v. National Insurance Co. Ltd. (2013) 10 SCC 217
- IFFCO Tokio General Insurance Co. Ltd. v. Geeta Devi 2023 SCC OnLine SC 1398
All these authorities hold that unless the insurer proves that the owner knowingly employed a driver with a fake licence or failed to exercise due diligence, the insurer cannot avoid liability or seek recovery.
B. Respondent (National Insurance Company Ltd.)
Senior Advocate Dr. Manish Singhvi contended that:
- Both the driving licences produced — one seized by police and one produced by the owner — were proven fake, confirmed by the DTO Gurdaspur and RTO Alwar.
- The owner’s representative, not the driver, had produced the licence before the Tribunal, showing collusion.
- The driver was not examined, which further supported the inference that the owner knowingly entrusted the vehicle to an unlicensed driver.
Therefore, the insurer was justified in recovering the amount from the owner following the “pay and recover” order of the High Court.
Legal Background and Precedents
The Court revisited and clarified the law on insurer’s liability in cases of fake licences:
- United India Insurance Co. Ltd. v. Lehru (2003) 3 SCC 338: The Court held that even if a licence turns out to be fake, the insurer cannot escape liability unless it proves that the insured (owner) deliberately committed a breach by employing or allowing a person to drive knowing the licence was fake. The owner is not required to verify the licence with the RTO.
- National Insurance Co. Ltd. v. Swaran Singh (2004) 3 SCC 297: A three-Judge Bench clarified that even when a licence is found to be fake, the question of the owner’s default or negligence must be examined case by case. The insurer must prove the owner’s conscious breach of the policy terms.
- PEPSU RTC v. National Insurance Co. Ltd. (2013) 10 SCC 217: The Court held that where the driver had been employed long-term after tests and training, the employer could not be said to have been negligent merely because the licence later turned out to be fake.
- IFFCO Tokio General Insurance Co. Ltd. v. Geeta Devi (2023 SCC OnLine SC 1398): The Court deprecated the routine plea of insurers alleging lack of due diligence, observing that neither the Motor Vehicles Act nor standard policy conditions require the owner to verify the licence from the issuing authority. Mere absence of verification cannot constitute a “willful breach.”
Supreme Court’s Analysis
1. Question of Collusion
The Court categorically rejected the High Court’s finding that the owner colluded with the driver.
Hind Samachar Ltd. was a company, not an individual, and the act of its representative producing the licence before the Tribunal showed diligence, not collusion.
“There can be no suspicion raised merely because the owner had produced the driving licence before Court. It only indicates that the owner had been diligent enough to procure the licence from the driver and produce it before the Tribunal.”
The absence of the driver’s testimony could not be held against the owner, since the driver might have refrained from testifying to avoid self-incrimination in pending criminal proceedings.
2. Examination of the Evidence
- The accident occurred on 26 January 1993.
- The FIR, site plan, and injured witness testimony (PW-3) supported the finding of composite negligence at 75:25.
- The Tribunal found that the insurer failed to prove the driver’s licence was fake or that the owner was complicit.
- The DTO Gurdaspur had certified that the licence (No. 5288) was issued on 5 April 1991, valid until 4 April 1994, and renewed from 11 August 1994 to 10 August 1997.
However, the High Court erroneously relied on a tampered register containing interpolations and a colour photograph allegedly from 1990, an impossibility. The Supreme Court found the High Court’s inference baseless and speculative.
3. Onus of Proving Breach
The Court reiterated that the burden lies on the insurer to prove that the insured committed a willful breach of the policy condition. The insurer must establish both:
- that the licence was fake; and
- that the owner knowingly permitted the driver to operate the vehicle without a valid licence or failed to exercise reasonable diligence.
In the present case, the insurer failed on both counts.
The Court emphasised that an owner’s duty is limited to checking the licence presented by the driver. There is no statutory or contractual duty to verify its genuineness from the issuing authority.
4. Applicability of “Pay and Recover” Principle
The High Court had invoked the “pay and recover” principle — directing the insurer to pay compensation to victims and then recover it from the owner.
The Supreme Court clarified that such a direction is permissible only when the owner is proven to have committed a breach (e.g., knowingly employing an unlicensed driver). Since no such breach was proved, the insurer had no right of recovery.
“The insurance company, from the totality of the circumstances, has to bring out the absence of due diligence in the employment of the driver or the entrustment of the vehicle, to prove breach by the insured, which is totally absent in the present case.”
Observations on Renewal of Licence
The Court also noted that the renewal certificate produced by the owner further supported the licence’s authenticity.
The licence, originally valid till 4 April 1994, was renewed on 11 August 1994 — beyond the 30-day window for automatic renewal — showing an active process by the DTO, not a fabricated entry. This corroborated the genuineness of the record rather than its falsity.
Findings
- The insurer did not produce the seizure mahazar or any authentic record showing the licence was seized or proved fake.
- The High Court erred in drawing adverse inferences merely because the driver did not testify.
- The owner’s act of producing the licence before the Tribunal cannot be construed as collusion.
- The insurer’s failure to plead or prove lack of due diligence was fatal to its case.
- Precedents consistently protect the insured unless deliberate breach is established.
Ratio Decidendi
The Supreme Court’s core ratio can be summarised as follows:
A vehicle owner cannot be held liable to reimburse the insurer merely because the driver’s licence is later found to be fake. Unless it is proved that the owner knowingly employed or allowed a driver with a fake licence to drive, or failed to exercise reasonable diligence, there is no willful breach of the policy condition, and the insurer’s right of recovery cannot arise.
Holding
The Supreme Court allowed the appeals and set aside the High Court’s order granting recovery rights to the insurer.
All other directions regarding compensation amounts and apportionment of negligence remained undisturbed.
“We find absolutely no reason to sustain the order of the High Court mulcting the liability on the owner of the truck. We set aside the order… insofar as the rights of recovery of the award amounts granted to the insurer.”
Conclusion
The Supreme Court in Hind Samachar Ltd. v. National Insurance Co. Ltd. has once again underscored that “fake licence” cases must not become a convenient escape route for insurers. The insurer’s right of recovery is exceptional, not automatic.
Unless evidence clearly demonstrates that the owner knowingly or recklessly permitted an unlicensed driver to operate the vehicle, the insurer remains bound to indemnify.
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