Supreme Court Questions Insurance Company For Not Filing Complaint Over Forged Policy; Orders SIT Probe

While dealing with a case of insurance policy fabrication, the Supreme Court recently ordered Director General of Police, Tamil Nadu to constitute a Special Investigation Team to probe the matter.

A bench of Justices Ahsanuddin Amanullah and R Mahadevan passed the order with a view to ensure that Insurance Companies, which deal with substantial amount of public funds contributed by policyholders, discharge their obligations with due vigilance.

The bench noted that the issue seemed to be widespread across the country. It further opined that when it comes to the knowledge of an Insurance Company that a policy has been fraudulently obtained and cannot be acted upon, it is incumbent upon it to take action and make a complaint to the police, as policy fabrication constitutes an offense.

The development took place as the DGP, Tamil Nadu informed the Court that till date, the Insurance Company had not made any complaint to the police regarding the forged/fabricated policy. The same was conceded by the National Insurance Company's counsel, who submitted that the Company would be advised to make the appropriate complaint.

The bench however remarked that the stance showed a lack of responsibility and sheer casualness on part of the Company. "An Insurance Company, which is liable to satisfy claims arising out of motor vehicle accidents under policies issued by it, is under a corresponding obligation to act with due diligence. Once it comes to its knowledge, and it is satisfied, that a policy is forged/fabricated and cannot be acted upon to fasten liability upon it, it is incumbent upon the Insurance Company to inform the appropriate authorities, namely, the police, as the creation and use of such documents constitute an offence."

The bench also opined that failure to make the requisite complaint may suggest connivance between the parties. Accordingly, it directed registration of a fresh case, based on facts of the instant case. Among others, officers of the Insurance Company who were aware of the fraud and posted at the relevant time in the concerned branch from where the forged/fabricated policy was purportedly issued, were directed to be arrayed as accused.

The case pertains to respondent-K Saravanan who, while travelling on a bike in 2004, met with a tragic accident, allegedly due to a bus being driven in a rash and negligent manner. As a result of the accident, Saravanan obtained multiple injuries, underwent surgeries of his thighs and legs, but was declared 70% disabled.

As per material on record, the subject forged/fabricated insurance policy was given to the claimants by the police, and based on that, they filed a claim petition. However, upon verification, the Insurance Company found that the policy was not renewed for the period during which the accident occurred.

Against the Award passed by the Motor Accident Claims Tribunal in favor of the claimants, awarding a compensation of over Rs. 8 lakhs, the Insurance Company approached the Madras High Court.

The High Court, on hearing the parties, enhanced the compensation amount by about three times and rejected the Company's fake insurance policy claim, noting that no complaint was lodged in that regard.

"If the Insurance Company had lodged a criminal complaint and invoked the criminal law in motion to find out the culprits who were involved in fake insurance policy, thereby collecting the insurance subscription from innocent and gullible people, then the contention of the learned counsel for the second respondent/Insurance Company that the policy referred by the claimant is fake one can be accepted...Even if the case of the Insurance Company is to be accepted, without filing any criminal complaint for causing loss to the Insurance Company and seeking the claimant to examine those culprits is found to be unjustified and unreasonable. Without any criminal complaint against the unknown culprits, the contentions of the learned counsel for the Insurance Company cannot at all be accepted", the High Court observed.

Appearance: AoR Manjeet Chawla, Advocates Manu Luv Shahalia, Usha Pant Kukreti and Jyoti (for petitioner-Insurance Company); Senior Advocate Vipin Sanghi, Sr AAG Amit Anand Tiwari, AoRs Goutham Shivshankar, G Balaji and Sabarish Subramanian, Advocates Arzu Paul, Shiv Kumar, Vaishnavi, Veshal Tyagi, Muthu Mayan R, and Vishnu Unnikrishnan (for respondents)

Case Title: NATIONAL INSURANCE COMPANY LIMITED v. K. SARAVANAN, SLP (C) NO. 1003/2022

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