Depends, if your mate has kept the car then it's likely they didnt bother with the V5 as they know he was keeping it for salvage etc..

If the insurance company actually has the car in their posession, i.e insurance compound or salvage yard...thats when they normally get sent away to dvla.

I could be wrong but there seems to be nothing to worry about...other than it being cat C not cat B like you thought

What car is it?

Dan