In a major ruling on accident cases, the Supreme Court has held that an insurance company cannot forego its liability to pay third party insurance on the ground that driver of the insured vehicle did not possess valid licence if the accident was caused by mechanical faults.

"If it is found that the accident was caused solely because some other unforeseen or intervening causes like mechanical failures and similar other causes having no nexus with driver not possessing requisite type of licence, the insurer will not be allowed to avoid its liability merely for technical breach of conditions concerning driving licence," it said.

Deciding appeals filed by National Insurance Company, a Bench comprising Chief Justice V N Khare, Justice D M Dharmadhikari and Justice S B Sinha said minor breaches of licence conditions such as want of certificate for medical fitness, requirement about age of the driver and like not found to have been the direct causes of the accident, would be treated as minor breached of inconsequential deviation in the matter of use of vehicle.

Moreover, it said that if the vehicle driven by a person holding a learner's licence met with an accident, the insurance company could not avoid its liability to pay third party insurance as the learner's licence was a licence granted in terms of the Motor Vehicles Act.

However, the bench said that if the driver of a vehicle did not have a licence or possessed a fake licence at the time of accident, then though the insurance company would have to pay third party compensation, it was entitled to recover the same from the owner of the vehicle.