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of <h1>Supreme Court: Insurance obligations to third parties are statutory. Fake licenses invalid even if renewed.</h1> <h3>National Insurance Co. Ltd. Versus Laxmi Narain Dhut</h3> The Supreme Court clarified that the principles in National Insurance Co. Ltd. v. Swaran Singh apply only to third-party claims, not to claims involving ... Insurance claim - whether prudent insurer will take the risk and, if so, at what premium and on what conditions? Whether the owner has taken reasonable care to find out as to whether the driving licence produced by the driver (a fake one or otherwise)? Whether the plaintiff is entitled to have that sum paid over to him or whether it constitutes assets available for the general body of the company’s creditors? Held that:- Appeal allowed. Where originally the license was a fake one, renewal cannot cure the inherent fatality. In case of third party risks the insurer has to indemnify the amount and if so advised to recover the same from the insured.The concept of purposive interpretation has no application to cases relatable to Section 149 of the Act. The High Courts/Commissions shall now consider the matter afresh in the light of the position in law as delineated above. Issues Involved:1. Applicability of National Insurance Co. Ltd. v. Swaran Singh to non-third party claims.2. Interpretation of Section 149 of the Motor Vehicles Act, 1988.3. The validity of driving licenses in insurance claims.4. Differentiation between third-party claims and own damage claims.5. Concept of purposive interpretation in the context of insurance claims.Issue-wise Detailed Analysis:1. Applicability of National Insurance Co. Ltd. v. Swaran Singh to non-third party claims:The Supreme Court clarified that the principles laid down in National Insurance Co. Ltd. v. Swaran Singh are applicable only to third-party claims and not to claims involving only the insurance company and the owner of the vehicle. The Court emphasized that Swaran Singh's case was rendered in the context of Section 149 of the Motor Vehicles Act, 1988, which pertains specifically to third-party risks.2. Interpretation of Section 149 of the Motor Vehicles Act, 1988:Section 149 of the Act deals with the duty of insurers to satisfy judgments and awards against persons insured in respect of third-party risks. The Court noted that the language of Section 149 is clear and relates solely to third-party risks. The corresponding provision in the old Act was Section 96. The Court highlighted that there is no contractual relationship between the insurance company and the third party; the obligations towards third parties are created by statutory provisions.3. The validity of driving licenses in insurance claims:The Court discussed various scenarios involving driving licenses, such as fake licenses, expired licenses, and licenses for different classes of vehicles. It was emphasized that if a license is found to be fake, any subsequent renewal does not cure the inherent defect. The Court referred to its earlier decision in New India Assurance Co., Shimla v. Kamla, stating that a fake license remains fake despite renewal.4. Differentiation between third-party claims and own damage claims:The Court differentiated between third-party claims and own damage claims. It was noted that own damage claims cannot be adjudicated by the insurance company but must be decided by forums created under the Consumer Protection Act, 1985. In own damage claims, there is no third party involved, and the logic of the insurer paying and recovering from the insured does not apply.5. Concept of purposive interpretation in the context of insurance claims:The Court discussed the principle of purposive interpretation, which seeks to give effect to the legislative purpose. However, it was held that this principle has no application to cases related to Section 149 of the Act. The Court emphasized that statutes must be interpreted according to their grammatical and ordinary sense unless the language is ambiguous or imprecise.Conclusion:1. The decision in Swaran Singh's case does not apply to cases other than third-party risks.2. A fake license remains invalid even if renewed.3. In third-party risk cases, the insurer must indemnify the amount and may recover it from the insured.4. Purposive interpretation does not apply to Section 149 of the Act.The High Courts and Commissions were directed to reconsider the matters afresh in light of the clarified legal position. The appeals were allowed with no order as to costs.
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