Court case(1987) 2 SCC 654

A truck insured with the appellant was being driven by its licensed driver. He stopped the truck, left it with the engine running and the ignition key in it, and went away for a short time. The cleaner of the truck, who held no driving licence, meddled with the vehicle and set it in motion; the truck went out of control and caused an accident in which a person was killed. The legal representatives of the deceased claimed compensation, and the insurer denied liability relying on the exclusion clause in the policy, which excluded liability while the vehicle was being driven by a person who did not hold a driving licence, and on the corresponding statutory defence in s. 96(2)(b)(ii) of the Motor Vehicles Act 1939.

The Supreme Court held the insurer liable. M.P. Thakkar J. said that an exclusion clause in an insurance policy must be read down so as to serve the main purpose of the policy, and must not be allowed to defeat the very object of compulsory insurance, which is to protect third parties. The insurer can avoid liability only if the insured himself is guilty of a breach of the promise contained in the policy, that is, if he has deliberately allowed or permitted an unlicensed person to drive. Where the insured had entrusted the vehicle to a duly licensed driver and the vehicle was set in motion by an unauthorised person through some negligence of the driver, the insured could not be said to have committed a breach. The exclusion did not apply and the insurer had to satisfy the award.