Insurer must pay third-party compensation but can recover it when learner driver violates Rule 3 conditions, Karnataka High Court holds

On 26 December 2020, a four-year-old child, UdayKumar, was struck by a car bearing registration No. KA-23/P-0160 at Chikkodi and died from the injuries sustained in the accident.

The car was being driven by its owner, who held only a learner’s licence.

The police filed a charge-sheet against him under Sections 279 and 304-A of the IPC and Sections 3 read with 181, 134 and 187 of the Motor Vehicles Act, 1988.

The child’s parents instituted MVC No. 263/2021 before the Principal Senior Civil Judge and Additional MACT, Chikodi, claiming compensation.

The owner asserted that he had been accompanied by his friend, who was allegedly instructing him while he drove.

The Insurance Company denied liability, contending that the driver had violated the policy conditions and Rule 3 of the Central Motor Vehicles Rules, 1989 by driving with only a learner’s licence.

The Tribunal relied on National Insurance Co. Ltd. v. Swaran Singh, (2004) 3 SCC 297, and held the Insurance Company liable despite the driver possessing only a learner’s licence.

The Insurance Company challenged that finding under Section 173(1) of the Motor Vehicles Act, 1988.

Whether a person holding a learner’s licence is to be treated as duly licensed for purposes of motor accident insurance liability under the principle laid down in Swaran Singh?

Whether the driver complied with the cumulative requirements of Rule 3 of the Central Motor Vehicles Rules, 1989, particularly accompaniment by a qualified instructor and display of “L” signs?

Whether the Insurance Company was contractually and statutorily liable to indemnify the claimants, or whether it was entitled to recover the compensation from the vehicle owner?

The Court applied Section 3(1) and (2) of the Motor Vehicles Act, 1988, which generally prohibits driving without an effective licence but creates an exception for a learner receiving driving instruction subject to prescribed conditions.

Rule 3 of the Central Motor Vehicles Rules, 1989 requires, cumulatively, that the learner hold an effective learner’s licence, be accompanied by an instructor holding an effective licence and positioned to control or stop the vehicle, and display “L” signs at the front and rear of the vehicle.

Relying on National Insurance Co. Ltd. v. Swaran Singh, (2004) 3 SCC 297, the Court held that a learner’s licence is a valid licence for insurance purposes only when the vehicle is driven subject to the statutory conditions attached to that licence.

The Court also applied the express policy condition extending coverage to a learner’s-licence holder only if Rule 3 was satisfied.

Upon breach of the policy condition, the insurer may nevertheless be directed to satisfy the award and recover the amount from the vehicle owner.

Although Swaran Singh establishes that possession of a learner’s licence does not, by itself, absolve the insurer, it does not create an unconditional equivalence between a learner’s licence and a full driving licence.

The driver had to prove compliance with Rule 3 and the corresponding policy condition.

The alleged instructor was not examined, the complaint and charge-sheet did not mention his presence, and there was no evidence that he possessed an effective licence or was positioned to control the vehicle.

There was also no evidence that “L” signs were displayed on the car.

Since the requirements of Rule 3 were cumulative, failure to establish even one requirement constituted a breach of the statutory conditions and the express insurance contract.

Accordingly, the Insurance Company was not ultimately liable under the policy, though the interests of the third-party claimants warranted an order requiring it to pay first and recover the amount from the owner.

The finding that the Insurance Company was jointly liable was modified.

The Insurance Company was directed to pay the compensation awarded to the claimants, but was granted liberty to recover the amount from the owner of the offending vehicle.

The amount already deposited by the Insurance Company was directed to be transferred to the Tribunal, and there was no order as to costs.