Commercial vehicle owners must strictly verify driving license authenticity with licensing authorities to avoid liability for fake licenses.

On December 30, 2012, Respondent No. 1 was hit by an Innova car owned by Respondent No. 3 (a commercial tour operator) and driven by Respondent No. 2, resulting in grievous injuries.

The Motor Accident Claims Tribunal (MACT) awarded compensation but denied the appellant Insurance Company ‘recovery rights’.

The Insurance Company appealed, alleging that the driver held a fake license.

Evidence showed the license was never issued by the Faridabad RTO.

Respondent No. 3 claimed he conducted a driving test and verified the driver's ability through a previous employer.

1. Whether the owner of a commercial vehicle is entitled to protection from liability if the driver possesses a fake license, provided a driving test was conducted.

2. Whether the Insurance Company is entitled to 'recovery rights' against the owner for breach of policy conditions regarding a valid driving license.

The Court applied the principles from United India Insurance Co. Ltd. v. Lehru & Ors. [(2003) 3 SCC 338] and National Insurance Co. Ltd. v. Swaran Singh [(2004) 3 SCC 297], which establish that for an insurer to avoid liability or seek recovery, it must prove the license was fake and the owner failed to exercise due diligence.

It further relied on United India Insurance Company v. Sarjo & Ors. [2026:DHC:5182], which distinguishes the standard of "due diligence" for commercial fleet operators from private owners, requiring a higher degree of verification beyond a mere driving test.

The Court reasoned that while a private owner might lack the machinery for verification, a commercial operator with a fleet (Respondent No. 3 owned 15-16 vehicles) has a greater responsibility to ensure public safety.

The Court found that merely conducting a physical driving test is insufficient for commercial entities; they must verify the authenticity of the license with the competent licensing authority.

Since the owner failed to provide proof of actual verification from the RTO before entrusting a passenger-carrying vehicle to the driver, and the RTO confirmed the license was fake, a breach of policy conditions was established.

The Court set aside the MACT’s finding on liability and directed that while the insurer remains liable to pay the claimant, it may recover the amount from the owner. The balance compensation was ordered to be released to the claimant as per the revised assessment.