Case: Complete Insulations Vs. New India Assurance Company

A Maruti Car with registration No. CHK-9253 was purchased in the name of Mrs. Archana Wadhwa for which the respondent, M/s. New India Assurance Company Ltd., had issued a comprehensive insurance policy. The premium for the insurance was paid by the appellant company in whose favour the car was transferred. The registration of the car was transferred to the appellant on 15.6.1989. On 26.6.1989, the appellant intimated the transfer of registration and asked for transfer of the insurance policy. A reminder was sent on 24.7.1989. The respondent did not reply to the two17.9.1989 the car met with a serious accident in which the Managing Director of the appellant suffered serious injuries and his sister died. On 11.10.1989 the appellant asked for the assessment of the damage as the car was a total loss. The respondent did not respond. A reminder dated 26.12.1989 met the same fate. The appellant got a notice issued to which the respondent replied that the appellant had no insurable interest in the car. The appellant filed the complaint before Consumer Disputes Redressal Commission, Chandigarh, which directed the respondent to pay Rs. 83, 000/- i.e. the insured value of the vehicle, as the vehicle was a total loss, along with costs and interest. The National Consumer Disputes Redressal Commission set aside the order of the Commission at Chandigarh, dismissed the complaint and granted cost of the appeal. Hence the appeal.

Court's reasoning:
On a plain reading of Section 103-A it is obvious that the insurer could in a given case refuse to transfer the certificate of insurance and the policy described therein. It is only if the insurer fails to convey the refusal within fifteen day s that the deeming clause comes into operation. However, Section 157 of the New Act makes the transfer of the Certificate of Insurance along with the insurance policy described therein automatic along with the transfer of the motor vehicle together with the policy of insurance to the purchaser. This is clearly an improvement over the previous provision on the subject.Thus under the Old Act the insured was required to apply in the prescribed form to the insurer for transfer of the certificate of insurance and the policy described therein. Once such an application was made the insurer had to communicate its refusal within fifteen days of the receipt of the application for transfer failing which the certificate of insurance and the policy described therein "shall be deemed to have been transferred" in favour of the transferee. This shows that the insurer had the right to refuse transfer of the certificate of insurance and the policy described therein provided the right was exercised within the stipulated time of fifteen days. Section 157 of the New Act introduces a deeming provision whereby the transfer of the certificate of insurance and the policy of insurance are deemed to have been made where the vehicle along with the insurance policy is transferred by the owner to another person. This provision has withdrawn the insurers right of refusal which was granted under the Oldunder the Old Act although the insurer could refuse to transfer the certificate of insurance in certain circumstances and the transfer was not automatic as under the New Act, there was under the Old law protection to third parties, that is victims of theexpression Certificate of Insurance means a certificate issued by the authorised insurer under section 147(3). Policy of Insurance includes a certificate of insurance. Section 146(1) posits that no person shall use, except as a passenger, or cause or allow any other person to use, a motor vehicle in a public place, unless there is in force in relation to the use of the vehicle by that person or that other person, as the case may be, a policy of insurance complying with the requirements of this chapter. Of course this provision does not apply to vehicles owned by the Central or State Government and used for Government purposes not connected with any commercial enterprise. This provision corresponds to section 94 of the Old Act. Section 147 provides that the policy of insurance to be issued by the authorised insurer must insure the specified person or c lasses of persons against any liability incurred in respect of death of or bodily injury to any person or damage to any property of a third party as well as against the death of or bodily injury caused to any passenger of a public service vehicle caused by or arising out of the use of the vehicle in a public place. This provision is akin to section 95 of the Old Act. It will be seen that the liability extends to damage to any property of a third party and not damage to the property of the owner of the vehicle, i.e. the insured.Sub-section (2) stipulates the extent of liability and in the case of property of a third party the limit of liability is rupees six thousand only. The proviso to that sub-section continues the liability fixed under the policy for four months or till the date of its actual expiry, whichever is earlier. Sub-section (3) next provides that the policy of insurance shall be of no effect unless and until the insurer has issued a certificate of insurance in the prescribed form. The next important provision which we may notice of is Section 156 which sets out the effect of the certificate of insurance. It says that when the insurer issues the certificate of insurance, then even if the policy of insurance has not as yet been issued, the insurer shall, as between himself and any other person except the insured, be deemed to have issued to the insured a policy of insurance conforming in all respects with the description and particulars stated in the certificate. It is obvious on a plain reading of this provision that the legislature was anxious to protect third party interest. Then comes Section 157 which we have extracted earlier. This provision lays down that when the owner of the vehicle in relation whereto a certificate of insurance is issued transfers to another person the ownership of the motor vehicle, the certificate of insurance together with the policy described therein shall be deemed to have been transferred in favour of the new owner of the vehicle with effect from the date of transfer. Sub-section (2) requires the transferee to apply within fourteen days from the date of transfer to the insurer for making necessary changes in the certificate of insurance and the policy described therein in his favour. These are the relevant provisions of Chapter XI which have a bearing on the question of insurers liability in the present case.There can be no doubt that the said chapter provides for compulsory insurance of vehicles to cover third party risks. Section 146 forbids the use of a vehicle in a public place unless there is in force in relation to the use of that vehicle a policy of insurance complying with t he requirements of that chapter. Any breach of this provision may attract penal action. In the case of property, the coverage extends to property of a third party i.e. a person other than the insured. This is clear from Section 147(1)(b) (i) which clearly refers to damage to any property of a third party and not damage to the property of the insured himself. And the limit of liability fixed for damage to property of a third party is rupees six thousand only as pointed out earlier. That is why even the claims Tribunal constituted under Section 165 is invested with jurisdiction to adjudicate upon claims for compensation in respect of accidents involving death of or bodily injury to persons arising out of the use of motor vehicles, or damage to any property of a third party so arising, or both. Here also it is restricted to damage to third party property and not the property of the insured. Thus, the entire chapter XI of the New Act concerns third party risks only. It is, therefore, obvious that insurance is compulsory only in respect of third party risks since Section 146 prohibits the use of a motor vehicle in a public place unless there is in relation thereto a policy of insurance complying with the requirements of Chapter XI. Thus, the requirements of that chapter are in relation to third party risks only and hence the fiction of Section 157 of the New Act must be limited thereto. The certificate of insurance to be issued in the prescribed form (See Form 51 prescribed under Rule 141 of the Central Motor Vehicles Rules, 1989) must, therefore, relate to third party risks. Since the provisions under the New Act and the Old Act in this behalf are substantially the same in relation to liability in regard to third parties, the National Consumer Disputes Redressal Commission was right in the view it took based on the decision in Kondaihs case because the transferee-insured could not be said to be a third party qua the vehicle in question. It is only in respect of third party risks that Section 157 of the New Act provides that the certificate of insurance together with the policy of insurance described therein "shall be deemed to have been transferred in favour of the person to whom the motor vehicle is transferred". If the policy of insurance covers other risks as well, e.g., damage caused to the vehicle of the insured himself, that would be a matter falling outside Chapter XI of the New Act and in the realm of contract for which there must be an agreement between the insurer and the transferee, the former undertaking to cover the risk or damage to the vehicle.