Insurance Company is not liable to indemnify where the policy is proved to be forged or fabricated.

In brief

The question

1. Whether the insurance policy (Ex.R.2) covering the offending vehicle at the time of the accident was genuine or fabricated.

The court held

The Court allowed the appeal and set aside the judgment against the Insurance Company.

It also directed

It held that when a policy is proven to be fake through criminal investigation, the insurer is exonerated from all liability, including "pay and recover".

The 5th Respondent (Owner) was held solely liable to pay the ₹16,82,000 with 7.5% interest to the claimants.

The Insurance Company was permitted to withdraw any amount previously deposited, and claimants were directed to refund any withdrawn sums to the Company.

01Facts

On April 16, 2013, Kannan died following a collision between his two-wheeler and a vehicle driven by the 5th Respondent.

p. 3

The claimants (wife and children) filed a claim petition under the Motor Vehicles Act, seeking ₹25,00,000.

p. 3

The Motor Accident Claims Tribunal, Tenkasi, awarded ₹16,82,000, holding the 2nd Respondent (Insurance Company) liable based on an insurance policy (Ex.R.2) produced by the owner.

pp. 4-5

The Insurance Company appealed, contending that Ex.R.2 was a forged document and that the policy number actually corresponded to a different vehicle (TN 36 M 6466).

p. 5

They had already initiated criminal proceedings regarding this forgery.

p. 5

02Issues

i.1. Whether the insurance policy (Ex.R.2) covering the offending vehicle at the time of the accident was genuine or fabricated.

p. 8

ii.2. Whether the Insurance Company can be held liable to indemnify the owner and pay compensation to third parties when the contract of insurance is based on a forged document.

p. 11

03Law Applied

The court applied Section 173 of the Motor Vehicles Act regarding appeals against tribunal awards.

p. 2

The court relied on the principle that an insurance company’s liability is contractual; in the absence of a valid contract/policy, the insurer is not liable to indemnify the owner.

p. 6, 11

The court applied the Supreme Court’s direction in National Insurance Company vs. K. Saravanan (2026), which dictates that Insurance Companies must lodge police complaints to prove fraud and avoid liability for forged policies.

p. 10

Provisions in the judgment · 1 · Linked ones open on LawLens

Motor Vehicles Act, 1988 Section 173

04Reasoning

Evidence from the District Crime Branch (R.W.1) confirmed that a charge sheet was filed against an agent for issuing forgeries and that the owner was exonerated from criminal intent but was using a non-existent policy.

p. 9

The Insurance Company’s manager (R.W.2) testified without cross-examination that the policy format did not match company standards and the policy number belonged to a vehicle in a different district.

pp. 8-9

The claimants only produced a policy (Ex.P.6) for the year after the accident.

p. 8, 11

Since the Appellant took proactive criminal action—meeting the "stringent measures" cited by the Supreme Court—the Court held that no contractual obligation existed to satisfy the award.

pp. 10-12

05Holding

The Court allowed the appeal and set aside the judgment against the Insurance Company.

p. 12

It held that when a policy is proven to be fake through criminal investigation, the insurer is exonerated from all liability, including "pay and recover".

p. 12

The 5th Respondent (Owner) was held solely liable to pay the ₹16,82,000 with 7.5% interest to the claimants.

p. 13

The Insurance Company was permitted to withdraw any amount previously deposited, and claimants were directed to refund any withdrawn sums to the Company.

p. 13

LawLens.Madras High Court

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