The Supreme Court of India ordered the CMD of National Insurance Company be made an accused in a forged policy probe and directed SIT formation. The Court termed the insurer’s inaction a “brutal lack of responsibility,” urging stricter vigilance and accountability in public money matters.
NEW DELHI: The Supreme Court has ordered that the Chairman and Managing Director (CMD) of National Insurance Company (NIC) be made an accused in a criminal probe concerning allegations that a forged insurance policy was relied upon in a motor accident claim. The Court also directed the formation of a Special Investigation Team (SIT) to investigate the matter.
A Bench comprising Justices Ahsanuddin Amanullah and R. Mahadevan issued the order after sharply criticizing NIC for not initiating criminal proceedings despite asserting that the policy in question was fabricated. The Court described the insurer’s failure to act as demonstrating a “brutal lack of responsibility.”
The Bench said,
“Time has come when this Court has to take some drastic measures… to ensure that the insurance companies discharge their onus and also their responsibility of being vigilant… because ultimately they are paying money from the coffers to which the general public contributes,”
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Calling the case a “test case” with national ramifications, the Court instructed the SIT to file a fresh FIR naming NIC’s CMD and other employees, down to the local branch manager, as accused. The bus owner involved in the accident whose insurance policy is under scrutiny must also be named as an accused.
The Court stressed that the investigation should be conducted promptly and seriously, specifically probing the alleged fabrication of the insurance document.
Earlier, the Court had summoned the Tamil Nadu Director General of Police (DGP) to appear personally after an affidavit indicated that police do not verify the authenticity of insurance documents collected in motor accident cases. The Court strongly objected to that position. The DGP appeared and tendered an unconditional apology, which the Bench accepted.
The case concerns allegations that a forged insurance policy was used in a motor accident compensation claim by K. Saravanan, who was injured in a bus collision. Saravanan underwent surgeries, required prolonged treatment, and later resigned from his job because of his injuries. He brought a petition before the Motor Accident Claims Tribunal (MACT) seeking compensation from the bus owner and NIC.
Before the MACT, the insurer denied liability and argued that the third-party policy relied on by the claimant was invalid. The MACT rejected those defenses and held NIC liable. The Madras High Court upheld the MACT’s findings on appeal, dismissed the insurer’s challenge to the policy’s validity, and adjusted the compensation award. The matter then proceeded to the Supreme Court.
On February 9, the Supreme Court added the State of Tamil Nadu, through the DGP, as a party and sought a detailed affidavit on whether the alleged fabrication had been investigated. The DGP’s affidavit stated that police gather insurance details from parties during motor accident investigations and provide them to claimants, but do not verify authenticity with insurers. The Court took strong exception and summoned the DGP.
The DGP apologized in court, explaining that while manual verification was previously difficult, systems have since improved. The Court was told that the E-DAR (Electronic Detailed Accident Report) and the Vahan portal now allow for “automated” and “instant” verification of insurance details. The DGP said that detailed guidelines were issued in 2024 and 2025 to sensitize police officers and ensure investigating officers identify discrepancies in insurance records at the earliest opportunity. The Court accepted this explanation and excused the DGP from appearing further.
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Nonetheless, the Bench expressed astonishment at NIC’s conduct. Although the insurer maintains the policy is forged, it admitted it never lodged a criminal complaint.
The Court observed,
“An insurance company… once it comes to their knowledge and they are convinced that the policy itself is void… they are bound in law to inform the proper authority,”
To prevent further delay in compensation, the Court directed that the insurer must pay the awarded amount to the claimant within four weeks. NIC may later recover that sum from the person who was in control of the vehicle at the time of the accident (the lessee).
NIC was represented by advocates Manu Luv Shahalia, Manjeet Chawla, Usha Pant Kukreti and Jyoti. The State of Tamil Nadu was represented by Senior Advocate Vipin Sanghi along with Sabarish Subramanian, Veshal Tyagi, Vishnu Unnikrishnan, Jahnavi Taneja, Arpitha Anna Mathew and K.S. Badhrinathan. The claimant Saravanan was represented by Goutham Shivshankar. Vel Tech Engineering (the bus owner) was represented by G. Balaji, Arzu Paul, Shiv Kumar and Vaishnavi.
Case Title: National Insurance Company vs. K. Saravanan