Cross Objection No.20-CII of 2000 in/and FAO No.717 of 1994 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Cross Objection No.20-CII of 2000 in/and FAO No.717 of 1994 Date of decision: 14.10.2010 New India Assurance Company Limited ...Appellant Versus J. Kante Devi and others ....Respondents Present: Mr. L.M. Suri, Senior Advocate, with Mr. Neeraj Khanna, Advocate, for the appellant. Mr. Gopal Mittal, Advocate, for the respondents. ----- CORAM: HON'BLE MR. JUSTICE K. KANNAN ----- 1. Whether reporters of local papers may be allowed to see the judgment ? 2. To be referred to the reporters or not ? 3. Whether the judgment should be reported in the digest ? ---- K.Kannan, J. (Oral) 1. The Insurance Company has preferred this appeal on the ground that on the date of the accident namely, on 16.03.1989, the policy stood in the name of Surjit Singh, but it was claimed that the offending vehicle-truck had been transferred to another person Parminder Singh even earlier and it had not been informed to the insurer. The contention therefore was that there had been no contract of insurance between the subsequent purchaser and the insurer and the liability could not have been therefore fastened on the insurer. 2. The subsequent purchaser wanted to contend that he had Cross Objection No.20-CII of 2000 in/and FAO No.717 of 1994 2 informed the insurer on 03.01.1989 about the transfer and produced a copy of the notice with a certificate of posting. The learned senior counsel points out that this cannot be true at all, for, the policy itself had been taken only on 23.02.1989 and it is inconceivable that a subsequent purchaser could have informed the insurer even before the commencement of the date of the policy. It must be noticed that the insurer's liability subsists for a third party both under the old Act of 1939 and the new Act. Even without reference to Section 157, Courts were always anxious to protect the third party (victim's interest). What was implicit in the old Act is what is made explicit through Section 157 but different High Courts had taken conflicted views. This conflict was resolved from the judgment of the Hon'ble Supreme Court in G.Govindan Versus New India Assurance Company Limited-1999(2) PLR 274. 3. In Rikhi Ram Versus Sukhrania-(2003) 3 SCC 97, at para 5, the Hon'ble Supreme Court had observed with reference to Section 95 (5) of the old Act that provided for the insurer a duty to indemnify the person or classes of persons specified in the policy in respect of liability as follows:- “The aforesaid provision shows that it was intended to cover two legal objectives. Firstly, that no one who was not a party to a contract would bring in action on a contract; and secondly, that a person who has no interest in subject matter of an insurance can claim the benefit of insurance. Thus, once the vehicle is insured, the owner as well as any other person can use the vehicle with the consent of the Cross Objection No.20-CII of 2000 in/and FAO No.717 of 1994 3 owner. Section 24 does not provide that any person who will use the vehicle shall insure the vehicle in respect of a separate use.” Making an analysis of Sections 94 and 95 of the MV Act of 1939, the Hon'ble Supreme Court went on to add, in para 6, “we further find that there are two third parties when a vehicle is transferred by the owner to a purchaser. The purchaser is one of the third parties to the contract and the other third parties is for whose benefit the vehicle was insured. So far, the transferee who is the third party in the contract cannot get any personal benefit under the policy unless there is a compliance with the provisions of the Act. However so far as third party injured or victim is concerned, he can enforce liability undertaken by the insurer.” In para 8 of the same judgment, the Tribunal had directed the Insurance Company to make the payment and recover the same against the insured from the transferee of the vehicle. In the above case in Rikhi Ram, the Hon'ble Supreme Court was actually considering Sections 94 and 95 of the MV Act of 1939. Section 95(5) merely provided for the liability of the insurer to indemnify the person or class of persons specified in the policy. 4. In this case, the accident has taken place on 16.03.1989 when the policy was to be still considered under the Motor Vehicles Act of 1939. The issue of liability of the Insurance Company even in cases where they obtained no specific information about the transfer was also dealt with by this Court in two decisions one in Ram Chander versus Naresh Kumar(1999) 2 ACC 586 and the second in Baldev Raj versus Dharmo Rani and others(1990) ACJ 601(P&H). In both the decisions, Cross Objection No.20-CII of 2000 in/and FAO No.717 of 1994 4 the Court held that if a transfer is not informed to the insurer, the Insurance Company would not be liable. These are not good law in view of the judgment in G.Govindan's case(supra). G.Govindan's case(supra) specifically held that the Insurance Company would be liable even in the absence of specific intimation. While so holding, it over ruled the decision of Full Bench of the Hon'ble Delhi High Court reported in (1989) ACJ 577 and a decision of Karnataka High Court AIR 1990 166. Both the decisions of the Delhi High Court and the Karnataka High Court were the decisions under the 1939 Act when Section similar to Section 157 was not in place. While over ruling the above decisions the Hon'ble Supreme Court approved the Full Bench ruling of the Andhra Pardesh High Court in Madinenikondaialyh versus Yaseen Fatima AIR (1986) AP62. G.Govindan's case(supra) also refers to M/s Complete Insulations reported in (1996) 1 SCC 221 and the decision in New Kriatic Insurance Co. Ltd. vs. Pessumal (1964) AIR SC 1736. While dealing with the liabilty of the insurer vis a vis transferee, the court held in Govindan's case in the following words: “15. Undoubtedly the Full Bench decision of the Delhi High Court in Anand Sarup Sharma v. P.P.Khurana and others,(1989-1)95 P.L.R.D. 83, and also the Full bench decision of the Karnataka High Court in National Insurance Co. Ltd. v. Mallikarajun and others, A.I.R. 1990 Karnataka 166, differed from the view taken by the Andhra Pradesh High Court in Kondaiah's case and held that the third party liability Cross Objection No.20-CII of 2000 in/and FAO No.717 of 1994 5 of the insurer comes to an end on transfer of vehicle by the insured to someone else unless the procedure prescribed for transfer of policy was fulfilled. As noticed earlier, learned counsels on both sides brought to our notice a number of judgments of different High Courts taking divergent views. We do not feel it necessary to refer to all those decisions in view of the Full Bench judgments of three High Courts noticed earlier.” This decision was cited and followed in United India Insurance Co. Ltd. Vs. Tilak Singh(2006) 4 SCC 404 and United India Insurance Co. Ltd. v. Santro Devi(2009) 1 SCC 588. 5. The issue whether the insurer will have a right to recover the amount against a subsequent transferee, who had not informed the insurer will have to be considered in the light of the provision in the old Act and the new Act. If the claim is by the Insured for own damage, the liability of the insurer will arise only under the contract. Therefore, if the fact of transfer is not notified to the insurer and the policy is not transferred, both under the old Act and New Act, the insured's transferor can not claim recovery. This situation arose in Complete Insulations(P) Ltd. v. New India Assurance Co. Ltd.(1996) 1 SCC 221. The right to claim under a contract for own damage is however different from a right of the insurer to seek for recovery against the transferor after satisfying the award to the 3rd party. Section 157 that refers to a deemed transfer contains additional expressions which were not found in Sections 94 and Cross Objection No.20-CII of 2000 in/and FAO No.717 of 1994 6 95. The explanation to Section 157 reads as follows:- “For the removal of doubts, it is hereby declared that such deemed transfer shall include transfer of rights and liabilities and the said certificate of insurance and policy of insurance. Therefore, if an accident takes place subsequent to the amendment, the effect of the subsequent transferee did not inform the insurer will have no consequence. It is not merely the liability of insurance that gets transferred. It is also a right of the insured that gets transferred. The right of an insured through a policy of insurance is the right to be indemnified. Such a right must also enure to the benefit of the subsequent transferee. Section 157(2) no doubt contains a provision setting out a particular procedure for effecting the transfer of the policy. Section reads as follows:- “157. (2) The transferee shall apply within fourteen days from the date of transfer in the prescribed form to the insurer for making necessary changes in regard to the fact of transfer in the certificate of insurance and the policy described in the certificate in his favour and the insurer shall make the necessary changes in the certificate and the policy of insurance in regard to the transfer of insurance” 6. Dealing with the liability of the insurer to indemnify even a subsequent purchaser notwithstanding the fact that the transferee did not inform the insurer, the Andhra Pradesh High Court held in National Insurance Company Limited Versus K. Yadamma-2007 ACJ 1343 that the insurer shall be liable to indemnify the transferee as well. The same Court in Oriental Insurance Company Limited Versus S.Babaiah-1998 Cross Objection No.20-CII of 2000 in/and FAO No.717 of 1994 7 AIHC 3596 held that the said section provides only a procedure to intimate the fact of transfer of vehicle to the insurer in order to make necessary changes in the certificate of insurance and the policy to bring it in conflict with the deemed transfer as contemplated under Section 157 (1) of the Act for the purpose of indemnify the transferee relating to the risk covered under the policy and that the non-compliance with this procedure does not automatically invalidate deemed transfer that has taken place by virtue of the operation of law as contemplated by sub- section (1) of Section 157. While the position of law was the same for the third party victim against the insurer both under the MV Act of 1939 and the MV Act of 1988, the effect of Section 157 of deemed transfer and the explanation given makes the position clear for the subsequent transferee in that it protects him and assures to him a right of indemnity irrespective of the fact whether the transfer is informed to the insurer or not. It is an obvious corollory to the operation of deemed transfer. It ought not to be taken in a same way as the transferee seeking for enforcement of policy for own damage. This chapter of Motor Vehicles Act itself does not apply in such a case. 7. The cross appellants in FAO No.717 of 1994 is with reference to the claim for death of one Nasib Chand, who was working in the Electricity Board. He was 37 years of age and it was brought out in evidence that he was earning Rs.1,500/-. The Tribunal took the deduction of Rs.500/- for his personal expenses and took the contribution to the family as Rs.1,000/- and applying multiplier of 18 provided for compensation of Rs.2,16,000/-. The grievance of the cross objector is Cross Objection No.20-CII of 2000 in/and FAO No.717 of 1994 8 that the Court did not provide for even medical expenses that had been incurred during a period of hospitalization before his death and the conventional heads of claim for loss of consortium etc. It is further contended that the Tribunal did not provide for prospects of future increase in salary for a person, who was employed in a Government organization. 8. I would accept the contention in so far as the need to make the provision for future increases in salary for a person, who had a reasonably protected 10 years of service. I would allow for 50% of the salary that he was drawing as an additional amount that he would have earned over his span of his career and would take the income to be Rs.2,250/-. Having regard to the size of the family of his wife, three minor children and mother, I would provide for 1/4th deduction for his personal expenses and I would take the monthly dependence to Rs.1,688/-. The appropriate multiplier should have been 16 and the amount of compensation would be Rs.3,24,096/-. I would provide for an additional amount of Rs.10,000/- towards loss of consortium to the wife and also provide for Rs.5,000/- each to the minor children. The additional amount of Rs.5,000/- could be provided for a loss of estate and for funeral expenses. Although no evidence is available with reference to the medical expenses, I would provide for Rs.2,500/- for his hospitalization before his death. In all, the amount that would become payable would be Rs.3,56,596/- and I round it off to Rs.3,56,600/-. This amount shall be divided into five parts. The widow will be entitled to 1/5th and each minor children will be entitled to 1/5th and 1/5th would be Cross Objection No.20-CII of 2000 in/and FAO No.717 of 1994 9 taken by the mother. Having regard to the fact that the accident had taken place in the year 1988, I would not direct any deposit with the bank of Court and the entire amount would be distributed in the share for each of the claimants. This will attract interest at 6% from the date of the petition till the date of the payment. The liability shall be on the Insurance Company which will have again a right of recovery as referred to above by applying the position of law under Motor Vehicles Act, 1939. 9. The appeal and the cross-appeal are disposed of on the above terms. (K.KANNAN) JUDGE 14.10.2010 sanjeev/Shivani Kaushik