SBI General Insurance's defense of fabricated policy dismissed for lack of cogent evidence; Court endorses pay-and-recover mechanism safeguarding insurer's interests.
In a significant ruling dated 23rd October 2026, the Gujarat High Court dismissed the appeal filed by SBI General Insurance Company Ltd. challenging the Motor Accident Claims Tribunal's (MACT) order directing the insurer to pay compensation to the legal heirs of Babubhai Govabhai Desai, who died in a road accident. The judgment underscores the evidentiary burden on insurance companies to conclusively prove the fabrication of an insurance policy before denying liability to third-party claimants.
The case arose out of a fatal accident on 9th March 2015, where the deceased, Babubhai Govabhai Desai, was a pillion rider on a motorcycle driven by Nizambhai. The motorcycle was struck by a car driven rashly and negligently by the owner's driver, insured by SBI General Insurance. The claimants sought Rs.65 lakhs in compensation citing the deceased's government teacher's salary and additional income from agriculture.
SBI General Insurance contested liability on two grounds: that the insurance policy produced by claimants was fake and fabricated, and that the driver lacked a valid license at the time of the accident. The Tribunal, however, found the insurer's defense unsubstantiated due to lack of reliable, admissible evidence and granted compensation of Rs.37,00,420 with 9% interest, directing the insurer to pay with liberty to recover from the vehicle owner.
The High Court affirmed the Tribunal's findings after a detailed review of the evidence. The insurer's key witness, an officer from the Ahmedabad branch, failed to provide personal knowledge or relevant records from the policy-issuing office in Mumbai. The witness admitted limited tenure at the company, inability to identify digital signatures on policies, and absence of complaints or FIRs against the vehicle owner or company officials. The insurer's reliance on a different "long-term home insurance policy" bearing the same policy number as the disputed motor policy was insufficient to establish forgery.
Importantly, the Court highlighted that mere denial by an insurer that a policy was issued does not amount to proof of forgery. It emphasized that insurers must produce cogent and legally admissible evidence such as original policy issuance registers, premium payment records, competent witnesses from the issuing office, and investigation reports. The insurer's failure to diligently pursue the alleged forgery, including filing FIRs or departmental actions, weakened its defense.
Citing precedent from the Supreme Court and coordinate High Courts, the Court reiterated that the rights of third-party claimants cannot be defeated due to disputes between an insurer and vehicle owner regarding the authenticity of an insurance policy. The judgment endorsed the `pay and recover' principle, whereby the insurer pays compensation upfront but retains the right to recover the amount from the owner if the policy is proved fake later.
The Court also criticized the insurer's procedural lapses, noting the delayed filing of the written statement and lack of defense during earlier cross-examinations, which undermined its credibility.
In conclusion, the Gujarat High Court dismissed the insurer's appeal, reinforcing the protective stance for victims and their families in motor accident claims, while balancing the insurer's right to recover from the insured in genuine cases of fraud.
Bottom Line:
Motor Vehicles Act - Fake or fabricated insurance policy - Mere denial by insurer is not enough - Insurer must prove defence by cogent and admissible evidence such as policy issuance records, premium records and competent witness - Where insurer fails to prove fake policy, Tribunal can direct insurer to pay compensation to third party claimants with liberty to recover from owner.
Statutory provision(s): Motor Vehicles Act, 1988 - Sections 166, 173
