National Insurance Company CMD be made party in criminal case, orders SC

Supreme Court directs impleadment of National Insurance CMD in forged policy case, orders SIT probe and flags insurer's failure to act despite alleging fraud

The Supreme Court on Thursday directed that the chairman and managing director of National Insurance Company, a state-run entity, be named as an accused in a criminal case on the alleged use of a forged insurance policy in a motor-accident claim.

The court also ordered the formation of a Special Investigation Team (SIT) to investigate the matter. 

Taking exception to the insurer’s failure to initiate criminal proceedings despite asserting that the policy in question was fabricated, a Bench comprising Justice Ahsanuddin Amanullah and Justice R Mahadevan described the lapse as a serious abdication of responsibility. 

“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,” the court observed. The Bench expressed concern that, despite alleging fraud, the insurer had not lodged any criminal complaint. It also observed that once an insurer concluded that a policy was invalid, it was legally obligated to inform the appropriate authorities.  The court said stronger steps were necessary to ensure insurers remained vigilant, particularly since claim payouts were from public funds. 

 

“The 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,” the court added. 

The case arises from a compensation claim filed by K Saravanan, who was injured in a bus accident, had multiple surgeries, and eventually had to quit his job. He had approached the Motor Accident Claims Tribunal (MACT), seeking compensation from the vehicle owner and its insurer. The insurer contested the claim, disputing both liability and the validity of the policy relied upon by the claimant. 

However, the tribunal rejected these objections and held the insurer liable. The Madras High Court upheld this finding, with some modification to the compensation amount. Calling the case one with wider national ramifications, the Supreme Court directed the SIT (yet to be formed) to register a fresh first information report (FIR) naming the company’s CMD, along with officials across levels, including the branch manager concerned. 

The court ordered that the owner of the bus be included as an accused. The probe, the court said, must be expeditiously pursued and focus on the alleged fabrication of the insurance document. 

The Tamil Nadu director general of police (DGP) had personally attended the proceedings and had earlier filed an affidavit stating that the police did not verify the authenticity of insurance documents collected during motor-accident investigation.  

The court had strongly objected to this position. 

Appearing before the Bench, the DGP tendered an unconditional apology, which was accepted. During the proceedings, the court was also informed that technological systems such as the Electronic Detailed Accident Report (E-DAR) and the Vahan portal now enabled real-time verification of insurance details. 

The DGP submitted that the guidelines issued in 2024 and 2025 had been put in place to ensure that investigating officers detect discrepancies at an early stage.