Anand Sarup Sharma vs P.P. Khurana and Others

Anand Sarup Sharma vs P.P. Khurana And Others on 28 September 1988 Delhi High Court Anand Sarup Sharma vs P.P. Khurana And Others on 28 September 1988 Equivalent citations: AIR 1989 Delhi 88 1989 65 CompCas 413 Delhi 1989DRJ 27 1988 RLR Author: G Jain Bench: G Jain S Chadha S Bhandare JUDGMENT G.C. Jain J 1. A learned single judge of this court agreeing with the decision of the full Bench of the Andhra Pradesh High Court in Madineni Kondaiah v. Yaseen Fatima60 Comp Case 762 AIR 1986 AP 62 which was in conflict with the Division Bench decision of this court Oriental Fire and General Insurance Co . Ltd. Vimal Roy has referred the following questions of law for decision of the the Full Bench Whether the third party liability of the insurance company comes to an end on transfer of vehicle by the insured to someone else 2. The facts leading t the reference briefly stated are these Shri A. N. Wadhwawas the owner of a two wheels scooter registration No. DLO 7451. It was insured with M s. Vanguard Insurance Co. Ltd.for the period from September 27 1968 to September 26 1969. Wadhwa sold the sector to P. P. Khuranaon November 27 1968 and delivered possession thereof. Final receipt was to be given after getting permission from the Ministry of Rehabilitation where he was employed. Permission was granted on December 7 1968 and find receipt indicating the sale of scooter with delivery of possession for Rs. 2 200 was issued on December 15 1968. The scooter was registered with the registering authority in the name of Wadhwa. This continued even after sale. In other words ownership in the name of Khurana was not transferred in the records of the registering authority under the Motor Vehicles Acttill the date of accident. It was as transferred after the accident. In lieu of the certificate of insurance No. 671183 for the period September 27 1968 to September 26 1969 in favor of Wadhwa another certificate No. 710154 for the period March 1 1969 to September 26 1969 was issued by the insurance company in favor of Khurana 3. On January 3 1969 at about 9.00 a.m. Anand Sarup Sharma the appellant it is stated was going towards Nangal Rai from Gopi Nath Bazar on foot when Khurana driving this scooter came from behind and hit him resulting in fracture of shafts of tibia and fibula 4. On March 1 1969 Sharma brought a petition under section 110A of the Act against Khurana Wadhwa and the insurance company claiming a sum of Rs. 50 000 as compensation. The amount was claimed from Wadhwa and the insurance company on the ground that though Wadhwa had sold the scooter to Khurana he was still a registered owner and was therefore liable to pay compensation. Consequently his insurer was liable to satisfy the award 5. The Motor Accidents Claims Tribunal vide its judgment dated October 27 1975 recorded the following findings Indian Kanoon 1. Sharma was injured as a result of rash and negligent driving of the scooter by Khurana Anand Sarup Sharma vs P.P. Khurana And Others on 28 September 1988 2. Wadhwa had transferred the scooter in question in favor of Khurana before the date of the 3. Wadhwa had no insurable interest in the scooter on the date of the accident. The insurance company therefore was not liable to pay any compensation 4. The petition was not bad for want of notice and 5. The petitioner Sharma was entitled to recover Rs. 3 850 as compensation 6. On these findings he awarded a sum of Rs. 3 850 with costs and future interest if the amount was not paid within two months of the date of the award against Khurana only. The application against Wadhwa and the insurance company was dismissed 7. Feeling aggrieved Sharma filed an appeal praying for enhancement of the compensation and for awarding the compensation and for awarding the compensation against all the respondents 8. At the time of arguments before the learned single judge learned counsel appearing for the appellant relied on the Full Bench decision of the Andhra Pradesh High Court in Kondaiah s case 1986] 60 Comp Case 762 AIR 1986 AP 62 where it was held that the insurance company could not raise the defense that the policy had lapsed because of the sale of the sale of the vehicle and that the insurable interest continued so far as third party risk was concerned so long as the obligation under the statute as stipulated under section 31 read with section 94 of the Act was not fulfillled Agreeing with the decision but observing that a contrary view had been taken by the Division Bench of this court in Vimal Rai s case which was binding on him sitting singly the learned single judge referred the above mentioned question to the Full Bench 9. The scooter was movable property. Its sale was undisputedly governed by the Sale of Goods Act A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price..... Where under a contract of sale the property in the goods is transferred from the seller to the buyer the contract is called a sale. ...."to Khurana buyer) at least on December 15 1968 when the final receipt was executed. The price had been paid Possession had been delivered before the sale. THe sale in all respects was thus complete on December 15 1968 i.e. before the date of accident. The property in the scooter had passed to the 11. Is there any provision in the Motor Vehicles Act 1939 to postpone the transfer of the property from the seller to the buyer though the transfer is complete under the Sale of Goods Act till some Indian Kanoon Anand Sarup Sharma vs P.P. Khurana And Others on 28 September 1988 other event take place 12. Section 2(19) of the Act defines "owner" as under owner means where the person in possession of a motor vehicle is a monor the guardian of such minor and in relation to a motor vehicle which is the subject of a hire purchase agreement the person in possession of the vehicle under that agreement 13. This definition does not include a registered owner in its ambit. It does not indicate at all that a registered owner would continue to be owner of the vehicle even after he has sold it till it was registered in the vehicle even after he has sold it till it was registered in the name of the transferee 14. The contention of learned counsel for the appellant is that the seller would remain owner till the time the ownership of the scooter was transferred in the name of the buyer in the records of the registering authority. The Seller would cease to be the owner only after the vehicle was registered in the buyer s name. In support of his contention he relied on sections 22 and 31 of the Act. Section 22 and the relevant portion of section 31 reads 22. Necessity for registration. No person shall drive any motor vehicle and no owner of a motor vehicle shall cause or permit the vehicle to be driven in any public place or in any other place or in any other place for the purpose of carrying passengers or goods unless the vehicle is registered in accordance with this Chapter and the certificate of registration of the vehicle has not been suspended or cancelled and the vehicle carries a registration marks displayed in the prescribed 31. Transfer of ownership. Where the ownership of any motor vehicle registered under this Chapter is transferred a) the transferor shall i) within fourteen days of the transfer report the fact of transfer to the registering authority within whose jurisdiction the transfer is to be effected and shall simultaneously send a copy of the said report to the transferee ii) within forty five days of the transfer forward to the registering authority referred to in sub clauseA) a no objection certificate obtained under section 29A orin a case where no such certificate has been obtained I) a receipt obtained under sub sectionof section 29A ora postal acknowledgment received by the transferor if he has sent an application in this behalf by registered post acknowledgment due to the registering authority to in section 29A together with a declaration that he has not received any communication from such authority refusing to grant such certificate or requiring him to Indian Kanoon comply with any declaration subject to which such certificate may be granted Anand Sarup Sharma vs P.P. Khurana And Others on 28 September 1988 b) the transferee shall within thirty days of the transfer report the transfer to the registering authority within whose jurisdiction he resides and shall forward the certificate of registration to that registering authority together with the prescribed fee and a copy of the report received by him from the transferor in order that particulars of the transfer of ownership may be entered in the certificate of registration 15. We have carefully examined the above provisions. In our considered opinion these provisions do not have the effect of postponing the transfer of property from the seller to the buyer till the transferor and transferee make the requisite report and the vehicle is registered in the name of the transferee. Section 22 simply imposes a statutory obligation. It prohibits the driving of any vehicle by any person unless the vehicle is registered. Non compliance with these provisions does not have the effect of postponing the transfer of property in the vehicle from buyer to seller. To take a contrary view would result in an absurd result. If a buyer after purchase does not use the vehicle he is the owner. But if after one year he uses it he ceases to be owner. It is not and cannot be the law 16. The opening words of section 31 "where the ownership of any motor vehicle registered under this Chapter is transferred" make it clear that transfer of ownership has to precede the reports required to be made under section 31. Section 31 does not prohibit the transfer of a motor vehicle till the reports are made. These provisions only cast an obligation on the transferor and the transferee to report to the registering authority concerned regarding the transfer of the vehicle after the vehicle after the transfer has already taken place. These provisions have to do with the ownership of the vehicle as such. They merely provide for regulations for use motor vehicles in public places. Their non compliance attracts penalties 17. In Vimal Rai s case44 Comp Case 316 a Division Bench of this court held as underThe penalty for contravention of the provisions of the Act or the rules made there under is contained in section 112 and other provisions occurring in Chapter IX of the Act. It is however significant that there is in particular no provision of law stating that the registration of a motor vehicle is a condition precedent for any transfer of the vehicle or that in the absence of registration the sale would be void or ineffective. On the other hand an analysis of section 31 of the Act shows that it presupposes a valid and subsisting transferred by the registered owner of the vehicle to another person and the transferor is enjoyed a duty within 14 days after the transfer to report the transfer to the transfer to the authority and the transferee is within 30 days required to report the transfer to the authority. The endorsement of the transfer in the records of the registering authority is therefore not a condition precedent to the transfer nor does it deal with the legality or validity of the transfer which must be determined by other provisions of the law. Should any person in disregard of the provisions of law fail to intimate the transfer to the authority or drive the vehicle in a public place without a certificate of registration he runs the risk of incurring the penalties provided by the Act but his title to the purchase to the purchase of the vehicle undoubtedly remains unaffected nor does the title remain in suspense during the grace period allowed for affecting Indian Kanoon endorsements of registration Anand Sarup Sharma vs P.P. Khurana And Others on 28 September 1988 On a perusal of the Motor Vehicles Act it cannot be denied that the registration certificate is a very important piece of evidence to show the ownership of the vehicle particularly as the person making an application is required to produce the vehicle before the authority for inspection and without a registration certificate a person would normally find it unless to own the vehicle if he cannot drive it in any public place and so in his own interest the transferred will take stamps to have the particulars of the transfer endorsed on the certificate of registration. However failure to do so cannot deemed to militate against the validity and legality of the passing of the title in the vehicle so transferred or to expose the innocent seller who may have done his all to complete the transfer to legal liabilities for acts and omissions in respect of the vehicle subsequent to the transfer. Moreover the certificate of registration is not a document of title it is issued to the owner of the vehicle that is to the person by whom the vehicle is kept and used and although provision is made for change of ownership to be recorded in the book the name appearing in it may not be of the legal owner of the vehicle the registration book is evidence of title and its absence at the time of sale should put a purchaser on enquiry 18. This decision was followed by Division Bench of the Madhya Pradesh High Court in Balwant Singh v. JhannubaiACJ 126. The same view was taken by the Orissa High Court in A. N Choudhry v. Debahuti Patnaik455. Even the Full Bench of the Andhra Pradesh High Court accepted this view Kondaiah s case60 Comp Case 762. In any case this question stands settled by the decision of the Supreme Court in Panna Lal v. Chand Mal . It was held that section 31 permits the transfer of ownership but the statute casts an obligation on the transferee to report to the registering authority concerned regarding the transfer. It is thus clear that transfer of ownership in the records of the registering authority is not a condition precedent for sale 19. What the is the effect of the sale of the motor vehicle before the date of accident on the liability of the insurance company Does the insurable interest survive even after the sale 20. A contract of motor insurance is a contract whereby the insurer undertakes to indemnify the insured on the happening of an uncertain event by the use of the motor vehicle subject matter of the insurance which makes the insured legally liable to pay compensation. Like any other contract it is basically governed by the rules which form part of the general law of contract. It also is formed by the making of an offer by one party and communicating of the acceptance by the other 21. The insurance policy in this case was issued on March 18 1969. The insured was Amar Nath wadhwa. The insurer was Vanguard Insurance Company Limited. The vehicle subject matter of insurance was a two wheeler scooter bearing registration No. DLO 7451. The relevant portion of the clause relating to the liability to third parties reads Section II Liability to third parties. Subject to the limits of liability the company will indemnify the insured in the event of accident caused by or arising out of the use of the motor cycle against all sums including claimant s costs and expenses which the insured shall become legally liable to pay in respect of Indian Kanoon Anand Sarup Sharma vs P.P. Khurana And Others on 28 September 1988 a) death of or bodily injury to any person but except so far as is necessary to meet the requirements of section 95 of the Motor Vehicles Act 1939 the company shall not be liable where such death or injury arises out of and in the course of employment of such person by the insured and excluding the liability to any person being conveyed in or on the motor cycle unless such person is being conveyed by reason of or in pursuance of a contract of employment 22. It is clear from this clause that the insurance company undertook to indemnify the insured against all sums which the insured becomes legally liable to pay in respect of death of or bodily injury to any person caused by or arising out of the use of the scooter in question. In other words the contract between the insurance company and the insured was to indemnify the insured in respect of third party liability. Without any doubt it was a contract of personal indemnity. There is nothing in the insurance policy to indicate that the insurance company had undertaken to indemnify the person to whom the insured has sold the vehicle prior to the accident. The insurance company could not be compelled to indemnify a person with whom it had no contract and who was rather unknown to it. After the sale the insured was left with no insured was left with no insurable interest in the vehicle. Therefore under the terms of the contract of insurance the insurance company was not liable to indemnify the transferee 23. Has any liability been imposed on the insurance company by the statute i.e. the Act Section 94 of the Act on which reliance has been placed by learned counsel for the appellant simply prohibits the use of a motor vehicle by any person except as a passenger unless it was insured as required in Chapter VIII which deals with insurance of motor vehicle against third party risks. These provisions in our considered judgment do not make the ex owner who was duly insured or the insurance company with whom the ex owner was insured liable. It simply imposes a statutory obligation to get the vehicle insured before putting it into use. Non compliance is punishable under section 112 of the Act. Non compliance in any case is by the purchaser and not by the seller. These provisions do not make the insurer of the ex owner liable to indemnify the purchaser who had purchased the vehicle from the ex owner. These provisions do not have the effect of modifying the contract of insurance by adding the buyer of the vehicle as an insured person 24. Section 96(1) of the Act reads as under Duty of insurers to satisfy judgments against persons insured is respect of third party risks. If after a certificate of insurance has been issued under sub sectionof section 95 in favor of the person by whom a policy has been effected judgment in respect of any such liability as is required to be covered by a policy under clauseof sub sectionof section 95is obtained against any person insured by the policy then notwithstanding that the insurer may be entitled to avoid or cancel or may avoided or cancelled the policy the insurer shall subject to the provisions of this section pay to the person entitled to the benefit of the decree any sun not exceeding the sum assured payable there under as if he were the judgment debtor in respect of the liability together with any amount payable in respect of costs and any sum payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any enactment relating to interest on judgments Indian Kanoon Anand Sarup Sharma vs P.P. Khurana And Others on 28 September 1988 25. Under these provisions the insurance company is liable to pay to the person entitled to the benefit of the decree the sum not exceeding the sum insured under the policy provided a certificate of insurance has been issued in favor of the person by whom the policy has been effected andjudgment in respect of liability covered by the policy has been obtained against the person insured. In short the statutory liability of the insurance company under section 96 is only to meet the decree against the insured with whom it has entered into a contract. In other words the insurance company is liable to meet the decree or award if the said decree or award is against the person insured by it 26. A decree or award in our opinion can never be made against a person who has sold the vehicle prior to the date of accident. A driver is always liable if the death or bodily injury is caused due to his rash and negligent driving. It is also the rule that an employer though guilty of no fault of himself is liable for damage done by a fault or negligence of his servant acting in the course of his employment on the principle that an owner is victoriously liable for the argument be termed as the servant of the seller. The seller therefore cannot be held liable for the tortious act of the purchaser or his servant committed during the course of thisemployment. The purchaser in view of the provisions of section 94 no doubt is barred by statute from using the vehicle without getting it insured. Non compliance with the statutory obligation can lead to two consequences namely tortious liability. However the seller in no case would be liable either under tort or under statute. This non compliance by the buyer would not make the seller liable for damages. The fact that the continues to be the registered owner would not make any difference so far as his liability to pay compensation under tort or statute is concerned 27. Similarly section 103A of the Act does not impose any liability on the insurer to indemnify the person who has purchased the vehicle from the insured. It simply allows the insured to apply to the insurer for the transfer of the certificate of insurance in favor of the buyer. The insurer shall be deemed to have transferred the certificate in favor of the buyer if it does not inform the buyer and the sellerabout its refusal to transfer the certificate of insurance within 15 days of receipt of the application. These conditions must be fulfillled to attract the provisions of section 103A of the Act of deemed transfer of the certificate of insurance 28. In Rogerson v. Socttish Automobile and General Insurance Co. Ltd.All ER Rep 606a policy of motor insurance which covered claims against the assured for bodily injury further covered the legal liability of the assured in respect of the use by the assured of a car other than the insured car. The assured claimed indemnity against claims by an injured person by his new car. At the time of accident he had sold the car subject matter of the insurance. It was held by the House of Lords that "the policy depended on the hypotheses that there was in fact an insured car and the asured s rights in respect of the car described in the schedule to the policy having ceased when he sold it the subsequent use of the new car was not covered by policy 29. In Peters v. General Accident and Life Assurance Corporation Ltd.4 All ER 628it was held that "when the vendor sold the car the insurance policy automatically lapsed Indian Kanoon Anand Sarup Sharma vs P.P. Khurana And Others on 28 September 1988 30. Besides the Division Bench decision of this court in Vimal Rai s cases44 Comp Case 316 the Punjab and Haryana High Court in Precto Pipe v. National Insurance Co. Ltd.ACJ 218 and Labh Singh v. Sunehri DeviACJ 170 65 Comp 273the Calcutta High Court in National Insurance Company Ltd. v. Labanya RayACJ 720 the Orissa High Court in South India Insurance Co. Ltd. v. Purna Chandra Misra the Full Bench of the Gujarat High Court in Shantilal Mohanlal v. Aher Bawanji Maldev the Madras High Court in Govind Singh v. A. S KailasamACJ 215 the Mysore High Court in B. P. Venkatappa Setty v. B. N. Lakshmisah 1973] ACJ 306 the Bombay High Court in Smt. Gulab Bai Damodar Tapse v. Peter K. Sunder 1975] ACJ 100 and the Rajasthan High Court in Automobiles TransportPvt. Ltd. v Dewalal had taken the same view 31. A contrary view was taken by a learned single judge of the Madhya Pradesh High Court in Mohammad Ramzan v. SharyfanabiACJ 445. But it is clear from the judgment that the earlier decision of the Division Bench of the said High Court was not brought to the notice of the court. A Full Bench of the Andhra Pradesh High Court took a contrary view in Kondaiah s case 1986] 60 Comp Case 762 as noted earlier. The Rajasthan High Court also took a contrary view in Santosh Rani v. Sheela RaniACJ 299 and New India Assurance Co. Ltd. v. Avinash65 Comp0 Case 404 and the Madhya Pradesh High Court in Sama v. YusuAll ER Rep 112 the policy contained an extension clause. It covered the insured while he was temporarily assign another car. During the continuance of the policy the insured sold the car the subject matter of insurance. It was held that the policy indemnified the insured in respect of the ownership and user of the specified car and when he divested himself of his interest in that car the extension clause ceased to have effect 34. Lastly it was argued by learned counsel for the appellant that the plea that the insured had sold the vehicle and had no insurable right and consequently the insurance company was not liable to Indian Kanoon Anand Sarup Sharma vs P.P. Khurana And Others on 28 September 1988 pay the award amount was not available to the insurance company. The insurance company argued the learned counsel could raise defenses provided under section 96(2) only. This is not one of the defenses and could not be raised 35. Section 96(2) of the Motor Vehicles Act no doubt provides that the insurer shall be entitled to defend the action on the grounds mentioned in clausestoit will have to be first proved that the insurer against whom the amount is being claimed had insured the person liable under the decree or the award and that the said insurance certificate was subsisting 37. In British India General Insurance Co. Ltd. v. Caplain Itbar Singh29 Comp Case60 it was held that sub sectionof section 96 gives the insurer the right to be made a party to the suit and to defend it. Sub sectionclearly provides that such as insurer is not entitled to take any defense which is not specified in it. It can raise those defenses which are provided in that section However section 96(2) in our opinion proceeds on the premise that there is a valid subsisting insurance policy. The insurer in our view could raise defense that the policy comes to an end on the transfer of the vehicle subject matter of insurance 38. For the reasons recorded above our answer to the question referred to the Full Bench is that the change of ownership of a vehicle puts at end to the contract of the insurance policy. The third party liability of the insurance company comes to an end on the transfer of the vehicle by the insured to 39. Reference is accordingly answered Indian Kanoon 

Summary: Introduction: The court in the present case dealt with the third-party liability, where the insured had sold his scooter while the scooter was still registered in his name. It also dealt with the question of who would have to pay compensation in cases like these and whether the appellant could claim compensation from the insurance company or the seller of the scooter. Provisions discussed: Section 110A of the Motor Vehicles Act, 1988 (hereafter referred to as the ‘Act’). Section 2(19) of the Sale of Goods Act, 1930. Facts: Wadhwa was an owner of a two wheels scooter that was insured with the insurance company (M/s. Vanguard Insurance Co. Ltd) from the duration of September 27th, 1968, to September 26th, 1969. Wadhwa sold the scooter to P.P Khurana on December 15th, 1968. Ownership in the name of Khurana was not transferred in the records of the registering authority under the Motor Vehicles Act and subsequently, the scooter was registered with the registering authority in the name of Wadhwa and the same continued after the sale. Khurana was granted a certificate of insurance from the period March 1st, 1969, to September 26, 1969. On January 3rd, 1969, the appellant, Anand Sarup Sharma sustained injuries when the scooter in question hit him as he was going towards Nangal Rai. Subsequently, he brought a petition under section 110A of the Act against Khurana, Wadhwa, and the insurance company claiming a sum of Rs. 50,000 as compensation on the ground that though Wadhwa had sold the scooter to Khurana, he was still a registered owner and was, therefore, liable to pay compensation. The Motor Accidents Claims Tribunal in its judgment awarded a sum of Rs. 3,850 solely against Khurana. It dismissed the application against Wadhwa and the insurance company. Aggrieved by the decision, Sharma filed an appeal praying for enhancement of the compensation and for awarding the compensation against all the respondents. Issues: Arguments: Contentions put forth by the appellant: Judgment: The court stated that the scooter being the property of Khurana was an indisputable fact, as the sale was complete on December 15th, 1968. The scooter is a movable property its sale would be governed under the Sale of Goods Act. Referring to section 2(19) of the sales of a good act, the court observed that section nowhere indicated that a registered owner would continue to be the owner of the vehicle even after he had sold such vehicle. Relying on various legal precedents the court held that the transfer of ownership in the records of the registering authority was not a prerequisite condition for sale. Pertaining to the third-party liability the court perused Section 95 of the Act and held that the insurance policy nowhere states that the company would be liable to indemnify the person to whom the insured had sold the vehicle prior to such accident and that the company couldn’t be compelled to indemnify a person with whom it had no contract and who was rather unknown to it. After the sale of the vehicle, the insured couldn’t claim any insurable interest in the vehicle. Thus, it was held that the insurance company was not liable to indemnify the appellant. It further held that “the statutory liability of the insurance company under section 96 is only to meet the decree against the insured with whom it has entered into a contract. In other words, the insurance company is liable to meet the decree or award, if the said decree or award is against the person insured by it.” Regarding whether Wadhwa was liable to pay the appellant, the court held that the ‘seller cannot be held liable for the tortious act of the purchaser or his servant, committed during the course of this (purchaser’s) employment.’ The purchaser by the provision of Section 94 is barred from using the vehicle without getting it insured and non-compliance thereof, will not make the seller liable. The mere fact that the seller continues to be a registered owner wouldn’t make the seller liable for compensation. The court rejected the contention of the appellant and stated that the extending clause of insurance comes to an end the moment the vehicle is sold. Thus, the court held that the change of ownership of a vehicle would put an end to the contract of the insurance policy and the third-party liability of the insurance company would thus, come to an end on the transfer of the vehicle by the insured to another person. Conclusion: Thus, the court held that the appellant would not be entitled to compensation from the insurer or the seller of the scooter and thus, elucidated that third-party liability would come to an end if the ownership of a vehicle of the insured is vested to someone else.