Case: Rikhi Ram  Vs. Smt. Sukhrania

On 1.3.1984, one Chinku, S/o Sukhrania and Ram Dhan aged about 20 years, a rickshaw puller by profession was hit by a motorcycle bearing Registration No. PUT 3504, driven negligently by Ashok Kumar and Pawan Kumar, s/o Rikhi Ram. As a result of the aforesaid accident, Chinku died in the hospital. The deceaseds parents filed a petition before the Motor Accident Claims Tribunal, Bhatinda claiming a sum of Rs. 3,60,000/alongwith interest under Sectionof the Motor Vehicles Act, 1939 (hereinafter referred to as the Act) Rikhi Ram and Pawan Kumar, appellants herein, while jointly denying the accident, pleaded that the motorcycle did not belong to them rather it belongs to M/s. Azad Engineering Works, Bhatinda who have been its owners. Ashok Kumar also filed a separate written statement taking identical objections. M/s. Azad Engineering Company was also added as a party to the claim petition. It was admitted that the motorcycle was got insured by M/s. Bhagwan Rai Amrit Lal, commission agents, agents, Bhatinda. They were the registered owners of the vehicle. Subsequently, Rikhi Ram and M/s. Azad Engineering Works, appellants herein, purchased the motorcycle from its owners M/s. Bhagwan Rai Amrit Lal who did not give any intimation of the aforesaid transaction to the insurance company. It is also admitted that Ashok Kumar was an employee of M/s. Azad Engineering Works. The Tribunal found inter alia that the driver of the motorcycle was negligence and that the motorcycle was owned by M/s. Bhagwan Rai Amrit Lal, Commission Agents who subsequently transferred the same in favour of the appellants but did not give any intimation to the insurance company about the said transfer, that, consequently in absence of any intimation, the appellant were liable to pay the amount of compensation which was determined at Rs. 64,000/and that the insurance company was not liable to pay the amount of compensation. Aggrieved, the appellants filed an appeal before the Division Bench of the High Court of Punjab and Haryana which was dismissed. It is in this way the appellants have filed the petition.

Court's reasoning:
4. A perusal of Sections 94 and 95 would further show that the said provisions do not make compulsory insurance to the vehicle or to the owners. Thus, it is manifest that compulsory insurance is for the benefit of third parties. The scheme of the Act shows that n insurance policy can cover three kinds of risks, i.e. owner of the vehicle: property (vehicle) and third party. The liability of the owner to have compulsory insurance is only in regard to the third party and not to the property. Section 95(5) of the Act runs asanything elsewhere contained in any law, a person issuing a policy of insurance under this section shall be liable to indemnify the person or classes of person specified in the policy in respect of any liability which the policy purports to cover in the case of that person or those classes or person.The aforesaid provision shows that it was intended to cover two legal objectives. Firstly, that no one who was not party to a contract would bring an action on a contract; and secondly, that a person who has no interest in the subject matter of an insurance can claim the benefit of an insurance. Thus, once the vehicle is insured, the owner as well as any other person can use the can use the vehicle with the consent of the owner. Section 94 does not provide that any person who will use the vehicle shall insure the vehicle in respect of his separate use.6. On an analysis of Sections 94 and 95, 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 other third party 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 of the provisions of the Act. However, so far as third party injured or victim is concerned, he can enforce liability undertaken by the insurer.7. For the aforesaid reasons, we hold that whenever a vehicle which is covered by the insurance policy is transferred to a transferee, the liability of insurer does not ceases so far as the third party/victim is concerned, even if the owner or purchaser does not give any intimation as required under the provisions of the Act.