Public Transport Undertakings duty-bound to verify driving licenses; driving tests alone do not constitute due diligence.

On 11th February 2011, a pedestrian named Mahavir was struck and killed by a Delhi Transport Corporation (DTC) bus driven by Respondent No. 3.

The Motor Accident Claims Tribunal (MACT) awarded Rs. 9,22,000 to the claimants but denied the Appellant Insurance Company recovery rights against the DTC (Respondent No. 4), despite finding the driver's license was fake.

The DTC contended it exercised due diligence by conducting a driving test and attempting to verify the license via mail.

The licensing authority in Mathura confirmed the license number belonged to a different individual.

The Insurance Company appealed, seeking recovery rights against the DTC for breach of policy terms.

1. Whether the owner of a vehicle (DTC) is entitled to protection from liability if they conduct a driving test but fail to verify the authenticity of a driver’s license that is ex-facie suspicious.

2. Whether the standard of "due diligence" for verifying a driving license differs between a private individual and a public transport undertaking/commercial fleet operator.

Section 149(2)(a)(ii) of the Motor Vehicles Act, 1988, which permits insurers to defend claims on the ground that the driver was not duly licensed.

Principles from United India Insurance Co. Ltd. v. Lehru, National Insurance Co. Ltd. v. Swaran Singh, and National Insurance Co. Ltd. v. Geeta Bhatt which establish that an insurer can recover from the insured if a "wilful breach" or lack of reasonable care in verifying the license is proven.

The distinction between public and private employers established in DTC v. United India Insurance Co. Ltd. (2017), holding that public undertakings have a higher administrative duty of care.

The Court found that the driver's license was "ex-facie" fake because the validity dates (2007–2010) were inconsistent with the issuance date (2003), an irregularity the DTC merged or ignored.

The Court reasoned that a public authority like the DTC, which operates a massive fleet and possesses significant administrative machinery, cannot satisfy its duty of "due diligence" merely by conducting an internal driving test, as such tests have no statutory weight under the Motor Vehicles Act.

While private owners are given leeway due to the difficulty of physical verification pre-2015, the DTC's failure to follow up on a verification letter sent to the Mathura RTO constituted a fundamental dereliction of duty.

The Court concluded that the Insurance Company successfully discharged its burden of proving a breach of policy terms by highlighting the DTC’s failure to ensure statutory authorization.

The Court set aside the MACT’s denial of recovery rights, holding that the DTC was "completely amiss" in its duties. The appeal was allowed, and the Appellant Insurance Company was granted recovery rights against the Delhi Transport Corporation.