NATIONAL INSURANCE CO. LTD v. TULNA DEVI AND ORS INSC 601

NAME OF THE CASE: National Insurance Co. Ltd. v. Tulna Devi & Ors.

FACTS: In this case, a vehicle insured by National Insurance Co. Ltd. was involved in an accident, leading to fatalities. The claimants, including Tulna Devi, sought compensation under the Motor Vehicles Act. At the time of the accident, the driver possessed a license for a light motor vehicle with authorization for goods vehicles but was operating a passenger vehicle. The insurance company contended that this discrepancy constituted a violation of the policy terms, potentially absolving them of liability.

ISSUES: 1. Whether the insurance company is liable to compensate third-party claimants when the driver holds a license for a different category of vehicle than the one involved in the accident. 2. Whether the mismatch between the driver's license and the vehicle type constitutes a fundamental breach of the insurance policy, relieving the insurer from liability.

HOLDINGS: 1. Yes, the insurance company is liable to compensate the third-party claimants even though the driver's license does not match the vehicle category. 2. No, the discrepancy between the driver's license and the vehicle type does not constitute a fundamental breach that would absolve the insurer from liability towards third-party claimants.

RATIONALE: The Supreme Court emphasized that the primary objective of the Motor Vehicles Act is to protect third-party victims of road accidents. While the driver's license did not authorize him to operate a passenger vehicle, this does not absolve the insurer from its statutory liability to third parties. The Court referenced its earlier decision in National Insurance Co. Ltd. v. Swaran Singh, stating that mere absence or invalidity of a driving license is not a defense available to the insurer against third-party claims. To avoid liability, the insurer must prove that the insured was negligent in fulfilling the policy conditions regarding vehicle use by a duly licensed driver. In this case, no evidence was presented to show that the vehicle owner failed to exercise reasonable care in ensuring the driver was appropriately licensed. Therefore, the insurer remains liable to compensate the claimants.

ANALYSIS: This judgment reinforces the protective intent of the Motor Vehicles Act towards third-party victims, ensuring they receive due compensation irrespective of internal breaches between the insurer and the insured. It underscores that insurers cannot evade liability solely based on technical breaches of policy terms without proving negligence on the part of the insured. This approach balances the interests of accident victims by ensuring prompt compensation while allowing insurers to seek recourse against the insured for policy violations, thereby upholding the social welfare objective of motor vehicle insurance laws.