Responsibility of the owner to verify driver’s license of employee and to ensure it is renewed on time

Responsibility of the owner to verify driver’s license of employee and to ensure it is renewed on time written by Isha Sawant student of Government Law College 

Beli Ram v. Rajinder Kumar

Facts:

The first respondent- Rajinder Kumar while driving a truck owned by the appellant- Beli Ram on 20-05-1999, met with an accident, resulting in his 20% permanent disability. Respondent no.1 filed a petition under the Workman’s Compensation Act 1923 (Compensation Act) before the commissioner, Bilaspur on 17-02-1999 seeking a compensation of Rs. 50,000/- against the appellant and respondent no.2- the insurance company which insured the vehicle. The Commissioner on 08-12-2004, granted an award of Rs. 94,464/- in favour of respondent no.1 for the injuries suffered by him and Rs. 67,313/- for his medical expenses with an interest rate of 9% p.a., from the date of filling the appeal till the date of payment. The compensation amount was to be paid by the insurance company while the appellant was to pay the interest. The parties filed an appeal aggrieved by different aspects of the award.

The High Court considered the important issue of validity of the license held by respondent no.1 at the time of the accident, this license had expired on 06-09-1997 and there was no approval for renewal afterwards. Thus, respondent no.1 was driving the vehicle as a driver for the appellant for almost there years without a valid license. The High Court took into consideration this aspect in its judgement dated 03-03-2009, whereby the insurance company was absolved of its liability and the appellant was held liable on the ground of material breach of insurance policy. The High Court held that there was no provision in the Compensation Act for payment of medical expenses incurred by the claimant for treatment, since the accident took place in 1999 when the monthly wages were stated to be Rs. 4,500/-and so the maximum amount payable under the Compensation Act would be Rs. 2000/-, the same was required to be paid within 30 days and that the owner could gave recovered the amount from the insurer it if was later established that the insurer was liable to indemnify the insured. The appellant was found to be in breach of statutory duty of a benevolent legislation i.e. Compensation Act, and so the burden to pay interest as well as maximum penal of 50% was on the appellant. The claimant and insured were allowed appeals and they sought review of the judgement on the basis of National Insurance Company v. Suran Singh and Ors. (2004), however the appeal failed and the application was dismissed on 08-07-2009. 

Issues:

• Whether the insurance company is liable to compensate respondent no.1 though his license had expired and was not valid at the time of the accident.
• Whether the appellant had breached the insurance policy by allowing the driver to drive the vehicle without renewing his license and so is liable to compensate. 

Legal Provisions:

•  3- Employer’s liability for Compensation.
• Workmen’s Compensation Act, 1923 Section 4- Amount of Compensation.
• Motor Vehicles Act, 1988 section 149- Duty of insurers to satisfy judgments and awards against persons insured in respect of third-party risks.

Appellant’s Contention:

The appellant’s referred to the judgement of the apex court in Nirmala Kothari v. United Insurance Company Limited (2020), whereby it was held to what extent the care/diligence of the employer/insurer while employing  a driver is expected- to verify if the driving license of the driver, to check if it is genuine, he is not expected to further investigate into its authenticity unless there is reason to believe otherwise. If the employer finds the driver to be competent and his license to be valid, he will not be in breach of sec-149 (2)(a)(ii) of the Motor Vehicles Act, and the insurance company will be liable.

Observations of the Court:

The case was heard before the Supreme Court Bench of Sanjay Kishan Kaul, Aniruddha Bose and Krishna Murari, JJ. The court noted that it would unreasonable to put a high onus of proof on the insured to enquire with the RTO’s all over the country to check the validity of the license. However, if the insurance company is able to prove that the owner was aware of that the driver’s license was fake/invalid and still allowed him to drive than the insurance company would not be liable to compensate. The court on the expiration of valid license referred to the case of Suran Singh where they noted the difference between the terms ‘duly licensed’ given u/s-149(2) of the Motor Vehicles Act and ‘effective license’ u/s-144 of the Act, they held  that a provision which is penal in nature and a provision beneficial to a third party, must be interpreted differently, and so the word ‘effective license’ used in sec-3 cannot be imported to sec-149(2) of the Motor Vehicles Act.

It was noted that though the license had expired and was not valid at the time of accident, the driver could have obtained a valid license in the prescribed period without having to undergo a test or being declared unqualified thereof. Provision u/s-14 states that a license remains valid for a period of thirty days from the date of expiry. The insurance company has to not only show that the conditions u/s-149 (2)(a)(ii) are satisfied but also have to prove the breach on part of the insured. It was submitted that the appellant as the insured had taken due care to verify the driver’s license at the time of employment and the liability to compensate would fall on the appellant only if he was aware that the license was fake or invalid and still permitted the employee to drive. This was stated not be the factual position in the present case as the issuance of license is not doubted rather non-renewal of expired license by respondent no.1 is pleaded to be his own responsibility.

The court noted that once the employer had verified the driving license, he would be aware of the validity period given in the license itself. The present case was not one in which the renewal was delayed by a week  or month as was the case of Swaran Singh whereby, the third party was given the benefit of burdening the insurance company, rather in the present case the driver had not renewed his license for three years that too in respect of a commercial vehicle like a truck and the appellant too had shown gross negligence in verifying the same. The court observed that the beneficiary in the present case is the driver who himself was negligent, but as this was not a claim under the Motor Vehicles Act, rather one under the Compensation Act which provides for immediate relief (not based on fault theory) of limited compensation as specified to be paid.

The court was not to decide the share of burden between the appellant as the owner and the respondent no.1 as the driver as would be required for a proceeding under the Motor Vehicles Act. The court then referred to the cases of different High Court in Tata AIG Life Insurance Co. Ltd. V. Akansha and Ors (2015), Oriental Insurance Co. Ltd v. Manoj Kumar and Ors. (2015) and National Insurance Co. Ltd v. Hem Raj and Ors (2012), whereby it was held that it was the owner/insurer’s duty to ensure that the driver had a valid driver’s license and the same was renewed within time. The burden of proof rests on the owner to prove that the conditions of the insurance company were complied with and in event of breach the insurance company would not be liable.

The court agreed with the view taken by the High Courts in this matter. The court held that the present case is of lack of reasonable care as the appellant allowed the driver to drive a commercial vehicle without renewing his license for a period of three years and thus the appellant has to bear the responsibility and liability for the same. The court noted that though there was no accident with a third-party claimant, the person causing the sufferance and sufferer are the same person i.e. respondent no.1. The court observed that the present case being dealt under the Compensation Act which benefits the workmen even though they maybe at fault, by determining a small amount payable to provide relief at a relevant stage, while the larger issue can be dealt with in other proceedings.

Judgement:

The court held that in the present case the issue of lack of care on part of respondent no.1- the driver will arise along with the issue of lack of care on part of the appellant- the owner. The present case being under the Compensation Act, the consequences would not flow to respondent no.1 as the negligent party. The appeal was thus dismissed.