Case: Hdfc Bank Ltd Vs. Kumari Reshma

the facts which are requisite to be stated are that on 20.12.2002 about 12.30 p.m. the claimant was going on a scooter bearing registration No. MP09Q92 from Shastri Bridge to Yashwant Square and at that time the Motor Cycle belonging to 2nd respondent and driven by the respondent No.3 herein, in a rash and negligent manner dashed against the scooter as a consequence of which she sustained a fracture in the right hand superacondylar fracture and humerus bone fracture and certain other injuries. She availed treatment at various hospitals as she had to undergo an operation and thereafter advised to take physiotherapy regularly. Keeping in view, the injuries suffered and the amount she had spent in availing the treatment, she filed a claim petition putting forth the claim for Rs.4,50,000/-. The tribunal as stated earlier awarded a sum of Rs.1,75,000/- with 6% interest and opined that all the non-applicants to the claim petition were jointly and severally liable to pay the compensation amount. It is apt to state here the stand and stance put forth by the predecessor-in-interest the appellant bank that it had only advanced a loan and the hypothecation agreement was executed on 1.11.2002 by it. As per the terms of the agreement, the owner of the vehicle was responsible to insure the vehicle at his own costs. Reliance was placed on Clause 16 and 17 of the loan agreement which stipulated that the bank was required to get the vehicle insured if the borrower failed to or neglected to get the vehicle insuredThe accident as stated earlier had taken place on 20.12.2002 and the vehicle was insured by the owner on 16.1.2003. It was further put forth by the bank that the owner deposited Rs.6,444/- with the dealer of the motor cycle i.e. Patwa Abhikaran Pvt. Ltd., whereas it was required to pay Rs.9,444/-. Despite the same, he obtained the possession of the vehicle on the same day itself which was not permissible4. It was urged before the tribunal the financer was not liable to pay the compensation and it was the exclusive liability of the borrower. The tribunal on scrutiny of the clauses opined that as the financer had a duty to see that borrower does not neglect to get the vehicle insured, it was also liable along with the owner and accordingly fastened the liability both jointly and severally5. In appeal, it was contended that the financer could not have been fastened with the liability to pay the compensation. The High Court referred to the definition clause in Section 2 (30) of the Motor Vehicles Act, 1988 (for brevity the Act), took note of the language employed in Clause 16 of the agreement that if the owner neglects to get the vehicle insured the bank was required to get it insured, and the fact that the financer and the borrower were the registered owners and, accordingly opined that the bank was liable to pay. Being of this view the learned Judge dismissed the appeal preferred by the bank and partly allowed the appeal preferred by the claimants. Be it stated, the application for review filed by the Bank did not meet with success.

Court's reasoning:
In the present case, as the facts have been unfurled, the appellant bank had financed the owner for purchase of the vehicle and the owner had entered into a hypothecation agreement with the bank. The borrower had the initial obligation to insure the vehicle, but without insurance he plied the vehicle on the road and the accident took place. Had the vehicle been insured, the insurance company would have been liable and not the owner. There is no cavil over the fact that the vehicle was subject of an agreement of hypothecation and was in possession and control under the respondent no.2. The High Court has proceeded both in the main judgment as well as in the review that the financier steps into the shoes of the owner. Reliance placed on Kachraji Rayamalji (supra), in our considered opinion, was inappropriate because in the instant case all the documents were filed by the bank. In the said case, two-Judge Bench of this Court had doubted the relationship between the appellant and the respondent therein from the hire-purchase agreement. Be that as it may, the said case rested on its own facts. The decision in Kailash Nath Kothari (supra), the Court fastened the liability on the Corporation regard being had to the definition of the owner who was in control and possession of the vehicle. Similar to the effect is the judgment in Deepa Devi (supra). Be it stated, in the said case the Court ruled that the State shall be liable to pay the amount of compensation to the claimant and not the registered owner of the vehicle and the insurance company. In the case of Degala Satyanarayanamma (supra), the learned Judges distinguished the ratio in Deepa Devi (supra) on the ground that it hinged on its special facts and fastened the liability on the insurer. In Kulsum (supra), the principle stated in Kailash Nath Kothari (supra) was distinguished and taking note of the fact that at the relevant time, the vehicle in question was insured with it and the policy was very much in force and hence, the insurer was liable to indemnify the ownerOn a careful analysis of the principles stated in the foregoing cases, it is found that there is a common thread that the person in possession of the vehicle under the hypothecation agreement has been treated as the owner. Needless to emphasise, if the vehicle is insured, the insurer is bound to indemnify unless there is violation of the terms of the policy under which the insurer can seek exonerationIn Purnya Kala Devi (supra), a three-Judge Bench has categorically held that the person in control and possession of the vehicle under an agreement of hypothecation should be construed as the owner and not alone the registered owner and thereafter the Court has adverted to the legislative intention, and ruled that the registered owner of the vehicle should not be held liable if the vehicle is not in his possession and control. There is reference to Section 146 of the Act that no person shall use or cause or allow any other person to use a motor vehicle in a public place without insurance as that is the mandatory statutory requirement under the 1988 Act. In the instant case, the predecessor-in-interest of the appellant, Centurion Bank, was the registered owner along with respondent no.2. The respondent no. 2 was in control and possession of the vehicle. He had taken the vehicle from the dealer without paying the full premium to the insurance company and thereby getting the vehicle insured. The High Court has erroneously opined that the financier had the responsibility to get the vehicle insured, if the borrower failed to insure it. The said term in the hypothecation agreement does not convey that the appellant financier had become the owner and was in control and possession of the vehicle. It was the absolute fault of the respondent no.2 to take the vehicle from the dealer without full payment of the insurance. Nothing has been brought on record that this fact was known to the appellant financier or it was done in collusion with the financier. When the intention of the legislature is quite clear to the effect, a registered owner of the vehicle should not be held liable if the vehicle is not in his possession and control and there is evidence on record that the respondent no.2, without the insurance plied the vehicle in violation of the statutory provision contained in Section 146 of the 1988 Act, the High Court could not have mulcted the liability on the financier. The appreciation by the learned Single Judge in appeal, both in fact and law, is wholly unsustainable10. On a plain reading of the aforesaid definition, it is demonstrable that a person in whose name a motor vehicle stands registered is the owner of the vehicle and, where motor vehicle is the subject ofor an agreement of hypothecation, the person in possession of the vehicle under that agreement is the owner. It also stipulates that in case of a minor, the guardian of such a minor shall be treated as the owner. Thus, the intention of the legislature in case of a minor is mandated to treat the guardian of such a minor as the owner. This is the first exception to the definition of the term owner. The second exception that has been carved out is that in relation to a motor vehicle, which is the subject ofor an agreement of lease or an agreement of hypothecation, the person in possession of vehicle under that agreement is the owner. Be it noted, the legislature has deliberately carved out these exceptions from registered owners thereby making the guardian of a minor liable, and the person in possession of the vehicle under the agreements mentioned in the dictionary clause to be the owners for the purposes of this Act12. After so holding, the Court repelled the submission of the counsel for the appellant that there was no evidence to show the appellant had any right to control the driver of the truck. The Court opined that in the circumstances of the case, the logical inference must be that, had the documents that set out the true relationship between the appellant and the second respondent been produced, they would have shown that the appellant had a right to exercise control in the matter of the plying of the truck and the driver thereofIn the present case, as the facts have been unfurled, the appellant bank had financed the owner for purchase of the vehicle and the owner had entered into a hypothecation agreement with the bank. The borrower had the initial obligation to insure the vehicle, but without insurance he plied the vehicle on the road and the accident took place. Had the vehicle been insured, the insurance company would have been liable and not the owner. There is no cavil over the fact that the vehicle was subject of an agreement of hypothecation and was in possession and control under the respondent no.2. The High Court has proceeded both in the main judgment as well as in the review that the financier steps into the shoes of the owner. Reliance placed on Kachraji Rayamalji (supra), in our considered opinion, was inappropriate because in the instant case all the documents were filed by the bank. In the said case,e Bench of this Court had doubted the relationship between the appellant and the respondent therein from theagreement. Be that as it may, the said case rested on its own facts. The decision in Kailash Nath Kothari (supra), the Court fastened the liability on the Corporation regard being had to the definition of the owner who was in control and possession of the vehicle. Similar to the effect is the judgment in Deepa Devi (supra). Be it stated, in the said case the Court ruled that the State shall be liable to pay the amount of compensation to the claimant and not the registered owner of the vehicle and the insurance company. In the case of Degala Satyanarayanamma (supra), the learned Judges distinguished the ratio in Deepa Devi (supra) on the ground that it hinged on its special facts and fastened the liability on the insurer. In Kulsum (supra), the principle stated in Kailash Nath Kothari (supra) was distinguished and taking note of the fact that at the relevant time, the vehicle in question was insured with it and the policy was very much in force and hence, the insurer was liable to indemnify the ownerOn a careful analysis of the principles stated in the foregoing cases, it is found that there is a common thread that the person in possession of the vehicle under the hypothecation agreement has been treated as the owner. Needless to emphasise, if the vehicle is insured, the insurer is bound to indemnify unless there is violation of the terms of the policy under which the insurer can seek exonerationIn Purnya Kala Devi (supra), ae Bench has categorically held that the person in control and possession of the vehicle under an agreement of hypothecation should be construed as the owner and not alone the registered owner and thereafter the Court has adverted to the legislative intention, and ruled that the registered owner of the vehicle should not be held liable if the vehicle is not in his possession and control. There is reference to Section 146 of the Act that no person shall use or cause or allow any other person to use a motor vehicle in a public place without insurance as that is the mandatory statutory requirement under the 1988 Act. In the instant case, thet of the appellant, Centurion Bank, was the registered owner along with respondent no.2. The respondent no. 2 was in control and possession of the vehicle. He had taken the vehicle from the dealer without paying the full premium to the insurance company and thereby getting the vehicle insured. The High Court has erroneously opined that the financier had the responsibility to get the vehicle insured, if the borrower failed to insure it. The said term in the hypothecation agreement does not convey that the appellant financier had become the owner and was in control and possession of the vehicle. It was the absolute fault of the respondent no.2 to take the vehicle from the dealer without full payment of the insurance. Nothing has been brought on record that this fact was known to the appellant financier or it was done in collusion with the financier. When the intention of the legislature is quite clear to the effect, a registered owner of the vehicle should not be held liable if the vehicle is not in his possession and control and there is evidence on record that the respondent no.2, without the insurance plied the vehicle in violation of the statutory provision contained in Section 146 of the 1988 Act, the High Court could not have mulcted the liability on the financier. The appreciation by the learned Single Judge in appeal, both in fact and law, is wholly