Supreme Court Addresses Fake Motor Accident Claims: Safiq Ahmad vs. ICICI Lombard (2021)

Date of the Judgment: 16 December 2021
The Supreme Court of India is grappling with a surge of fraudulent compensation claims filed under both the Motor Vehicles Act and the Workmen Compensation Act. What measures are being taken to combat this growing menace of fake claims? This case highlights the actions taken by a Special Investigating Team (SIT) and the Bar Council of Uttar Pradesh to address this issue. The bench was composed of Justices M.R. Shah and Sanjiv Khanna.

Case Background

The Supreme Court initiated a probe into the matter of fake claim petitions filed to obtain compensation under the Motor Vehicles Act and the Workmen Compensation Act. A Special Investigating Team (SIT) was formed to investigate these suspicious claims. The SIT received a total of 1376 cases of suspicious claims from various districts in Uttar Pradesh.

Timeline

Course of Proceedings

Out of the 1376 suspicious claims, the SIT completed inquiries into 247 cases. They found 198 individuals prima facie guilty of cognizable offenses, leading to the registration of 92 criminal cases across various districts. Some individuals had multiple cases registered against them. The investigation of the remaining suspicious claims is ongoing.

In 36 of the registered criminal cases, investigations were completed. Charge sheets were filed in 32 cases, and final reports were submitted in 4 cases. 28 advocates were named as accused in 55 of the 92 criminal cases. Charge sheets against 11 advocates in 25 cases have been forwarded to the trial court.

The SIT’s headquarters is in Lucknow, and officers have to travel across Uttar Pradesh and sometimes to other states for investigations. The COVID-19 pandemic and related lockdowns had affected the investigation process. The SIT is now working to expedite the process. The SIT also reported that insurance companies are not coming forward as complainants, which is causing delays.

Legal Framework

The judgment refers to the Motor Vehicles Act and the Workmen Compensation Act, under which the fake claims were being filed. The court also discusses the Advocates Act, under which disciplinary action can be taken against advocates involved in unethical practices.

The Bar Council of Uttar Pradesh has taken several actions to address the issue of errant advocates. These include:

• ✓ Calling upon the Workmen Compensation Commissioner and ICICI Lombard General Insurance Company Ltd. for details of complaints.
• ✓ Sending reminders for the same.
• ✓ Seeking reports from the Office Superintendent regarding actions taken.
• ✓ Requesting details of advocates involved in unethical practices.
• ✓ The Bar Council of India suspended 28 advocates and directed the Bar Council of Uttar Pradesh to conclude disciplinary proceedings within three months.
• ✓ The Bar Council of Uttar Pradesh constituted Disciplinary Committees and issued notices to 27 advocates.

Arguments

The court heard arguments from various parties, including the SIT, insurance companies, and the Bar Council of Uttar Pradesh.

The insurance companies and the SIT highlighted the modus operandi of advocates involved in filing fake claims:

• ✓ Converting non-road accident injuries/deaths into road accident claims.
• ✓ Fraudulent vehicle implantation.
• ✓ False driver implantation.
• ✓ Claimant implantation.
• ✓ Filing multiple claims at different locations for the same accident.
• ✓ Using fake or fabricated insurance policies.
• ✓ Submitting fake income and medical documents for exaggerated compensation.

The SIT also provided a detailed note on the modus operandi based on their investigations:

• ✓ Creating false eyewitnesses in hit-and-run cases.
• ✓ Using documents from other cases in false petitions.
• ✓ Purchasing old vehicles and using them in fake accidents.
• ✓ Showing injured persons as drivers to claim compensation.
• ✓ Filing claims with known but uninsured vehicles by showing another insured vehicle.
• ✓ Creating fictional accidents and false petitions.
• ✓ Using real vehicle owners and drivers in connivance with advocates for fake claims.
• ✓ Implanting fake persons in actual accident cases.
• ✓ Filing claims for handicapped/deceased persons due to other reasons.
• ✓ Filing the same case in multiple courts.
• ✓ Affixing the same person’s photograph in multiple compensation registers.
• ✓ Dismissing petitions and re-submitting them at a new location of a favorable Deputy Labour Commissioner.
• ✓ Filing petitions in districts other than the accident spot.
• ✓ Using fake Vakalatnamas.

Insurance companies also pointed out the non-adherence to Section 158(6) (pre-2019 amendment) and Section 159 (post-2019 amendment) of the Motor Vehicles Act, which mandates the reporting of accidents to the tribunal and insurer. They referred to the directions given by the Supreme Court in previous cases, including the requirement for electronic reporting and communication between the police, tribunals, and insurers.

Bajaj Allianz General Insurance Company Limited suggested that implementing the existing directions and using the “VAHAN” and “SARATHI” portals for accident reporting could help prevent multiple claims. They also suggested the formation of SITs in all states.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues but considered the following points:

• ✓ The menace of filing false/fraudulent claim petitions under the Motor Vehicles Act and the Workmen Compensation Act.
• ✓ The actions taken by the SIT and the Bar Council of Uttar Pradesh.
• ✓ The non-adherence to the provisions of Section 158(6) and Section 159 of the Motor Vehicles Act.
• ✓ The suggestions made by the insurance companies and the SIT to curb the menace of fake claims.

Treatment of the Issue by the Court

Authorities

The Court considered the following authorities:

Cases:

• ✓ General Insurance Council v. State of Andhra Pradesh [(2007) 12 SCC 354] – Supreme Court of India
• ✓ General Insurance Council v. State of Andhra Pradesh [(2010) 6 SCC 768] – Supreme Court of India
• ✓ Jai Prakash v. National Insurance Company Ltd. [(2010) 2 SCC 607] – Supreme Court of India
• ✓ Writ Petition (Civil) No. 534/2020 (2021 SCC OnLine SC 418) – Supreme Court of India

Legal Provisions:

• ✓ Section 158(6) of the Motor Vehicles Act (pre-2019 amendment) – Requires police to report accidents to the tribunal and insurer.
• ✓ Section 159 of the Motor Vehicles Act (post-2019 amendment) – Requires police to report accidents to the tribunal and insurer.

Judgment

How each authority was viewed by the Court?

The Supreme Court relied on its previous decisions in General Insurance Council v. State of Andhra Pradesh [(2007) 12 SCC 354]*, General Insurance Council v. State of Andhra Pradesh [(2010) 6 SCC 768]*, and Jai Prakash v. National Insurance Company Ltd. [(2010) 2 SCC 607]* to emphasize the importance of compliance with the provisions of the Motor Vehicles Act. The court also referred to its recent decision in Writ Petition (Civil) No. 534/2020 (2021 SCC OnLine SC 418)*, which provided detailed directions for reporting accidents and processing claims electronically. These authorities were used to highlight the existing legal framework and the need for its proper implementation to prevent fraudulent claims.

What weighed in the mind of the Court?

The Supreme Court was primarily concerned with the increasing number of fraudulent claims being filed under the Motor Vehicles Act and the Workmen Compensation Act. The Court emphasized the need to maintain the purity of the legal profession and to ensure that genuine claimants receive compensation without undue delay. The Court also highlighted the importance of adhering to the legal provisions and directions issued in previous judgments.

Fact:Law Ratio

The court’s decision was influenced by a combination of factual aspects (the evidence of widespread fraud) and legal considerations (the need to enforce existing laws and directions).

Logical Reasoning:

The Court considered the evidence of widespread fraudulent claims, the actions taken by the SIT and the Bar Council, the non-adherence to existing legal provisions, and the need for remedial measures. The court sought the response of the Ministry of Transport to devise a comprehensive plan to curb the menace of fake claims.

The court did not consider any alternative interpretations. The court’s reasoning was based on the need to address the issue of fake claims and to ensure that the existing legal framework is followed.

The Supreme Court’s decision is to seek further input from the Ministry of Transport, Government of India, before issuing further directions to be applied pan India. The Court acknowledged the seriousness of the issue and the need for a comprehensive and coordinated approach to address it.

The court stated, “We impress upon the investigating officer of the SIT to expedite the enquiry/investigation with respect to complaints already received from various insurance companies with respect to suspicious fake claims.”

The court also stated, “We also impress upon the Bar Council of India/Bar Council of Uttar Pradesh to conclude the disciplinary proceedings in accordance with law as early as possible.”

The court further stated, “We accordingly direct the Registry to implead the Ministry of Transport, Government of India as a party-respondent and issue notice.”

Key Takeaways

• ✓ The Supreme Court is actively addressing the issue of fraudulent claims under the Motor Vehicles Act and the Workmen Compensation Act.
• ✓ The SIT and the Bar Council of Uttar Pradesh are taking steps to investigate and take action against those involved in filing fake claims.
• ✓ There is a need for better adherence to the provisions of the Motor Vehicles Act, particularly regarding the reporting of accidents.
• ✓ The Ministry of Transport, Government of India, is being brought in to provide suggestions for remedial and preventive measures.
• ✓ The judgment highlights the importance of maintaining the integrity of the legal profession and ensuring that genuine claimants receive compensation without delay.

The potential future impact of this case is that it may lead to more stringent measures to prevent fraudulent claims and ensure that the legal framework is followed. It may also lead to better coordination between different agencies, such as the police, tribunals, and insurance companies, to address the issue of fake claims.

Directions

The Supreme Court directed the following:

• ✓ The SIT to expedite the enquiry/investigation of suspicious fake claims.
• ✓ The SIT to file a further affidavit detailing the progress of the investigation.
• ✓ The Bar Council of India/Bar Council of Uttar Pradesh to conclude disciplinary proceedings against errant advocates as early as possible.
• ✓ The Registry to implead the Ministry of Transport, Government of India, as a party-respondent.

Specific Amendments Analysis

This judgment does not discuss any specific amendment.

Development of Law

The ratio decidendi of this case is that the Supreme Court is actively addressing the issue of fraudulent claims under the Motor Vehicles Act and the Workmen Compensation Act. The court emphasized the need for better adherence to the existing legal framework and for more stringent measures to prevent fraudulent claims. There is no change in the previous position of law, but the court has sought to enforce the existing legal provisions and directions.

Conclusion

The Supreme Court is actively addressing the issue of fraudulent claims under the Motor Vehicles Act and the Workmen Compensation Act. The court has taken note of the actions taken by the SIT and the Bar Council of Uttar Pradesh, and has directed them to expedite their investigations and disciplinary proceedings. The court has also impleaded the Ministry of Transport, Government of India, to seek their suggestions for remedial and preventive measures. This case highlights the need for better adherence to the existing legal framework and for a coordinated approach to address the issue of fake claims.