The Supreme Court has ordered that the Chairman and Managing Director (CMD) of the National Insurance Company (NIC) be named an accused in a criminal case involving allegations that a fake insurance policy was relied upon in a motor accident case [National Insurance Company Vs K Saravanan].

It also directed the constitution of a Special Investigation Team (SIT) to probe the case.

A Bench of Justices Ahsanuddin Amanullah and R Mahadevan passed the order after criticising the NIC for failing to file a criminal case despite claiming that the insurance policy attributed to it was forged.

The Court labelled the company's inaction as reflecting a brutal lack of responsibility.

"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 Court termed the matter to be a "test case" with national implications. It proceeded to order an SIT to lodge a fresh case naming NIC's CMD, and other employees down to the local branch manager as the accused.

The owner of the bus involved in the motor accident case, whose insurance policy is under scrutiny, is also to be named an accused.

The investigation team must ensure the matter is taken to its logical conclusion quickly and with all seriousness, the Court said. It added that the probe should specifically target the alleged creation of a false and fabricated insurance document.

Notably, the Court had earlier ordered the personal appearance of the Tamil Nadu Director General of Police (DGP) in the matter.

The DGP had been asked to explain an affidavit which suggested that the police are not required to verify the authenticity of insurance documents while collecting them in the context of motor accident cases.

The Court had taken strong objection to this stance.

The DGP appeared before the Court today and tendered an unconditional apology, which the Bench accepted.

The Court was examining allegations that a forged insurance policy had been relied upon in a motor accident compensation case.

The claimant was a road accident victim named K Saravanan, who had been injured in a bus collision. He had undergone surgeries and prolonged treatment and later resigned from his job due to the injuries. He filed a claim petition before a Motor Accident Claims Tribunal (MACT) seeking compensation from the owner of a bus and its insurer, NIC.

Before the MACT, the insurer disputed the claim in its entirety. It also contended that the insurance policy relied upon by the claimant, namely the third party insurance policy taken by the bus owner, was not valid.

The MACT, however, rejected the insurer’s defences and fastened liability on the NIC.

On appeal, the Madras High Court affirmed the MACT's findings, rejected the insurer’s challenge to the policy, and modified the compensation awarded.

The case then reached the Supreme Court.

On February 9, the top court impleaded the State of Tamil Nadu through the DGP as a party to the case and sought a detailed affidavit explaining whether the alleged fabrication of the insurance policy had been investigated.

In his affidavit, the DGP stated that in motor accident cases, police collect insurance particulars from the parties during investigation and furnish them to claimants, but do not verify their authenticity with the insurer.

The Court took exception to this stand and directed the DGP's personal presence.

The DGP today tendered an unconditional apology and explained that while manual verification was earlier difficult, the system has since changed.

The Court was informed that the E-DAR (Electronic Detailed Accident Report) and Vahan portal now allow for the "automated" and "instant" verification of insurance particulars.

The DGP confirmed that detailed guidelines were issued in 2024 and 2025 to sensitize the force and ensure investigating officers (IOs) discover any discrepancies in insurance policies at the earliest point of time

The Court accepted this explanation and dispensed with the DGP's personal presence.

However, the Bench expressed shock at the conduct of the National Insurance Company. Despite the company's claim that the policy was a forgery, it admitted it had never filed a criminal complaint.

"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 Court also issued directions to ensure that compensation to the bus accident victim in this case is not further delayed. It ordered the insurer to pay the compensation directly to the claimant within four weeks. The insurer was allowed to recover the said amount 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 with advocates Sabarish Subramanian, Veshal Tyagi, Vishnu Unnikrishnan, Jahnavi Taneja, Arpitha Anna Mathew and KS Badhrinathan.

The claimant Saravanan was represented by advocate Goutham Shivshankar.

Vel Tech Engineering (bus owner) was represented by advocates G Balaji, Arzu Paul, Shiv Kumar and Vaishnavi.