SC: Owner Not Liable When Fake Licence Not Proven to Be Entrusted Knowingly:

SC holds that insurance companies must prove owner’s negligence or collusion before denying indemnity for fake licence cases

Supreme Court sets aside High Court’s “pay and recover” direction

Meetu Kumari

Oct 14, 2025

Last update on Oct 14, 2025

SC: Owner Not Liable When Fake Licence Not Proven to Be Entrusted Knowingly The case arose from a fatal road accident involving a truck owned by Hind Samachar Ltd. and a Matador van in which nine people lost their lives and two others were injured. The truck was insured with National Insurance Company Ltd. The Motor Accident Claims Tribunal found both vehicles responsible for combined negligence in a 75:25 ratio and directed both insurers to pay compensation. HC's Judgment: The High Court in appeal allowed the insurer to recover the paid amount from the truck owner, holding that the driver’s licence was fake and suspecting collusion between the owner and driver. Aggrieved by this finding, the owner approached the Supreme Court. Issue Raised: Whether the insurance company can recover compensation from the vehicle owner under a “pay and recover” direction when the driver’s licence was allegedly fake, without proving that the owner knowingly allowed an unlicensed driver to operate the vehicle. SC's Judgment: The Supreme Court allowed the appeals and set aside the HC’s recovery order, observing that the insurer had failed to prove that the owner had knowledge of the fake licence or was negligent in employing the driver. The Court held that the insurer’s liability to indemnify the insured under Section 149(2) of the Motor Vehicles Act continues unless a willful breach of policy terms is proved. The Court held that a fake or invalid licence by itself does not absolve the insurer. Proof of a willful and conscious breach by the owner is required. Hind Samachar Ltd. had produced the driver’s licence and renewal certificate issued by the DTO, Gurdaspur. The so-called fake licence register was unreliable, and there was no evidence that the company knowingly violated the policy. The Court reaffirmed principles laid down in United India Insurance Co. v. Lehru and National Insurance Co. v. Swaran Singh, holding that insurers cannot avoid liability in the absence of proof of deliberate breach of policy. Therefore, the Court reinstated the Motor Accident Claims Tribunal’s order and held that the insurer cannot recover compensation from the owner. To Read Full Judgment, Download PDF Given Below

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Meetu Kumari

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Meetu Kumari is an Experienced Advocate and Content Writer with 4+ years of demonstrated history of working in the law practice industry. Skilled in Developing Content, Researching, and Drafting. Strong professional with a Bachelor of Science (B.Sc.) focused on Law from Gujarat National Law University.