The Supreme Court emphasised that if the owner of a motor vehicle knowingly appoints a driver with a fake license, the insurance company will not be liable to pay compensation in case of an accident. But the mere fact that the license was fake would not absolve the insurer. The court restated the law in the Judgment, Ram Chandra vs Rajaram. The Motor Accident Claims Tribunal had let off Oriental insurance as the license was found to be fake and asked the owner to pay the compensation.
The owner appealed to the Allahabad High Court arguing that he was not aware of the genuineness of the license and the insurer can be absolved only if the owner was aware of the fake license and still did not take corrective action. The high court did not respond to this issue but dismissed the appeal. The owner moved the Supreme Court which remitted the matter to the high court to answer the question raised by the owner.
