Supreme Court clarifies liability of employer in cases of expired driving licenses under the Workmen’s Compensation Act (23 September 2020)

Date of the Judgment: 23 September 2020
Citation: Beli Ram v. Rajinder Kumar & Anr. (2020) INSC 692
Judges: Sanjay Kishan Kaul, J., Aniruddha Bose, J., and Krishna Murari, J. (authored by Sanjay Kishan Kaul, J.)

Can an employer be held liable if their employee causes an accident while driving with an expired license? The Supreme Court recently addressed this crucial question in a case concerning the Workmen’s Compensation Act, clarifying the extent of an employer’s responsibility in ensuring their drivers have valid licenses. This judgment has significant implications for employers and insurance companies alike, particularly in cases involving commercial vehicles.

Case Background

On May 20, 1999, Rajinder Kumar, the first respondent, suffered a serious accident while driving a truck owned by his employer, Beli Ram, the appellant. The accident resulted in a 20% permanent disability for Rajinder Kumar. At the time of the accident, Rajinder Kumar’s driving license had expired on September 6, 1996, and had not been renewed for almost three years. Rajinder Kumar filed a claim for compensation under the Workmen’s Compensation Act, 1923, against his employer and the insurance company.

Timeline

Course of Proceedings

The Commissioner, Sadar, Bilaspur, awarded Rajinder Kumar compensation of ₹94,464 for injuries and ₹67,313 for medical expenses. The insurance company was held liable for the compensation amount, while the employer, Beli Ram, was directed to pay the interest. Aggrieved by the award, all parties filed appeals. The High Court, in its judgment dated March 3, 2009, absolved the insurance company of any liability, finding that Beli Ram had committed a material breach of the insurance policy by allowing Rajinder Kumar to drive with an expired license. The High Court also noted that the Workmen’s Compensation Act did not provide for medical expenses. The High Court further imposed a penalty of 50% and interest on the compensation amount on the appellant, Beli Ram. A review petition was dismissed by the High Court.

Legal Framework

The Supreme Court examined the following legal provisions:

• Section 4 of the Workmen’s Compensation Act, 1923: This section specifies the amount of compensation payable for death or permanent disability resulting from an accident during employment. The relevant part states:

  
  “4. Amount of compensation –
  (1) Subject to the provisions of this Act, the amount of compensation shall be as follows, namely:-
  (a) Where death results from the injuryAn amount equal to fifty per cent of the monthly wages of the deceased workman multiplied by the relevant factor; or An amount of eighty thousand, whichever is more;
  (b) Where permanent total disability results from the injuryAn amount equal to sixty per cent of the monthly wages of the injured workman multiplied by the relevant factor, or An amount of ninety thousand rupees, whichever is more.
  Explanation I.– For the purposes of clause (a) and clause (b), “relevant factor”, in relation to a workman means the factor specified in the second column of Schedule IV against the entry in the first column of that Schedule specifying the number of years which are the same as the completed years of the age of the workman on his last birthday immediately preceding the date on which the compensation fell due.”
  

• Section 149(2)(a)(ii) of the Motor Vehicles Act, 1988: This provision allows an insurance company to avoid liability if the vehicle was driven by a person who was not “duly licensed.”

Arguments

Appellant’s (Beli Ram) Submissions:

• The appellant argued that he had verified the driver’s license at the time of employment and was not aware that it had expired.
• The appellant relied on the Supreme Court’s judgment in Nirmala Kothari v. United India Insurance Company Limited, which held that an employer is only required to verify the license at the time of employment and is not responsible for subsequent renewals unless they are aware of the license being fake or invalid.
• The appellant contended that the responsibility for renewing the license rested with the driver, Rajinder Kumar.

Respondent’s (Insurance Company) Submissions:

• The insurance company argued that the driver, Rajinder Kumar, did not have a valid license at the time of the accident, as it had expired three years prior and had not been renewed.
• The insurance company contended that this constituted a breach of the insurance policy, which required the vehicle to be driven by a “duly licensed” person.
• The insurance company relied on the fact that the license had not been renewed for three years, indicating gross negligence on the part of the employer.

Innovativeness of the Argument:
The appellant’s argument was innovative in that it sought to extend the principle of initial verification of the driving license to absolve the employer of the responsibility of ensuring its renewal. The insurance company’s argument was based on the interpretation of “duly licensed” under the Motor Vehicles Act, 1988, and the employer’s responsibility to ensure compliance with the insurance policy.

Issues Framed by the Supreme Court

The sole issue framed by the Supreme Court was:

1. Whether in the case of a valid driving license, if the license has expired, the insured is absolved of its liability?

Treatment of the Issue by the Court

The following table demonstrates how the Court addressed the issue:

Authorities

The Supreme Court considered the following authorities:

Judgment

The Supreme Court held that the employer, Beli Ram, was liable for the compensation because he had failed to ensure that his driver, Rajinder Kumar, had a valid driving license. The Court emphasized that an employer has a responsibility to check not only the initial validity of the license but also to ensure its periodic renewal. The Court upheld the High Court’s decision to absolve the insurance company of liability.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the principle that an employer has a duty of care to ensure that their employees, especially drivers of commercial vehicles, possess valid driving licenses. The Court emphasized that this duty extends beyond the initial verification of the license to include ensuring its periodic renewal. The Court was also influenced by the fact that the license had not been renewed for three years, indicating gross negligence on the part of the employer. The Court also emphasized that the Workmen’s Compensation Act is a benevolent legislation intended to provide succor to workmen, even if they may be at fault.

Logical Reasoning:

The Court considered the argument that the employer had verified the license at the time of employment but rejected it, stating that the employer cannot absolve himself of the responsibility of ensuring that the license is kept renewed. The Court noted that the license had not been renewed for three years, which was a significant period of time. The Court also considered the fact that the Workmen’s Compensation Act is a beneficial legislation and that the driver was entitled to compensation, even if he was negligent.

The Court reasoned that:

• “We are of the view that once the basic care of verifying the driving licence has to be taken by the employer, though a detailed enquiry may not be necessary, the owner of the vehicle would know the validity of the driving licence as is set out in the licence itself. It cannot be said that thereafter he can wash his hands off the responsibility of not checking up whether the driver has renewed the licence.”
• “It is not a case where a licence has not been renewed for a short period of time, say a month, as was considered in the case of Swaran Singh where the benefit was given to a third party by burdening the insurance company. The licence in the instant case, has not been renewed for a period of three years and that too in respect of commercial vehicle like a truck. The appellant showed gross negligence in verifying the same.”
• “When an employer employees a driver, it is his duty to check that the driver is duly licensed to drive the vehicle… The owner must show that he has verified the licence. He must also take reasonable care to see that his employee gets his licence renewed within time.”

The Court did not find any dissenting opinions.

Key Takeaways

• Employers must ensure that their drivers possess valid driving licenses, not only at the time of employment but also through periodic renewals.
• Failure to ensure the renewal of a driving license, especially for commercial vehicles, can result in the employer being held liable for compensation under the Workmen’s Compensation Act.
• Insurance companies can avoid liability if the vehicle was driven by a person who did not have a valid driving license at the time of the accident.

Directions

No specific directions were given by the Supreme Court in this case.

Development of Law

The ratio decidendi of this case is that an employer’s responsibility to ensure that a driver has a valid driving license extends beyond the initial verification to include ensuring periodic renewals. This judgment clarifies the position of law that employers cannot absolve themselves of liability by claiming that they were unaware of the expiry of the driving license. This is a change from the previous position of law where the employer’s duty was limited to initial verification of the driving license.

Conclusion

The Supreme Court dismissed the appeals, holding that the employer was liable for compensation under the Workmen’s Compensation Act due to the driver’s expired license. The Court emphasized the employer’s duty to ensure the validity of the driving license, not only initially but also through periodic renewals. This judgment clarifies the legal position and has significant implications for employers and insurance companies.

Category

• Workmen’s Compensation Act, 1923
  • Section 4, Workmen’s Compensation Act, 1923
  • Employer Liability
  • Employee Compensation
  • Motor Vehicle Accident
  • Driving License
  • Expiry of Driving License
• Motor Vehicles Act, 1988
  • Section 149(2)(a)(ii), Motor Vehicles Act, 1988
  • Duly Licensed Driver
  • Validity of Driving License

FAQ

Q: What is the main issue in this Supreme Court judgment?
A: The main issue is whether an employer is liable for compensation under the Workmen’s Compensation Act if their employee causes an accident while driving with an expired driving license.

Q: What did the Supreme Court decide?
A: The Supreme Court held that the employer is liable for compensation because they failed to ensure that the driver’s license was valid at the time of the accident, as it had expired three years prior.

Q: What is the employer’s responsibility regarding driving licenses?
A: The employer must ensure that the driver has a valid driving license, not only at the time of employment but also through periodic renewals.

Q: Can an insurance company avoid liability in such cases?
A: Yes, the insurance company can avoid liability if the vehicle was driven by a person who did not have a valid driving license at the time of the accident.

Q: What is the significance of this judgment?
A: This judgment clarifies the legal position that employers cannot absolve themselves of liability by claiming that they were unaware of the expiry of their driver’s license.