An insurer may avoid indemnity for an invalid licence only by proving a fundamental, causally relevant breach.

On 26 February 2004, a bus owned by the appellant allegedly struck and killed Chakradhara Jena.

The Tribunal awarded compensation of Rs. 79,880 with interest at 7.5% per annum to the deceased’s dependants, and directed the insurer to pay first and recover the amount from the owner on the ground that the driver held a fake driving licence.

The insurer satisfied the award.

The owner appealed only against the insurer’s recovery right; neither the claimants nor the insurer challenged the award.

Whether the insurer proved that the driver’s licence was invalid or fake so as to establish a breach of the policy condition by the insured owner.

Whether the insurer established a fundamental breach of the policy condition, connected to the cause of the accident, sufficient to avoid indemnifying the owner.

Section 149(2)(a)(ii) of the Motor Vehicles Act, 1988 permits an insurer to raise a defence concerning a driver’s disqualification or invalid licence.

Under National Insurance Co. Ltd. v. Swaran Singh, (2004) 3 SCC 297, however, the insurer must prove not merely the licence defect but also a breach by the insured owner, including failure to exercise reasonable care; the burden rests on the insurer.

Even where breach is proved, the insurer may avoid liability only if the breach is fundamental and contributed to the accident.

Whether the owner took reasonable care is determined on the facts of each case.

The insurer relied on documentary evidence, including licensing-authority letters stating that DL No. 143/74 had not been issued or issued to the driver.

But the seizure list recorded a different licence number, DL No. 257/79-78, as issued by the Cuttack Licensing Authority and valid on the accident date.

The insurer did not produce evidence connecting that licence to DL No. 143/74, nor did it lead oral evidence establishing the alleged fraud or the owner’s failure to exercise reasonable care.

It also failed to show that any licence-related breach contributed to the accident.

The insurer therefore did not discharge the burden required by Swaran Singh.

The insurer remained liable to indemnify the owner; the statutory deposit and accrued interest were ordered to be refunded to the appellant.

No costs were awarded.