Full Judgment Text
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PETITIONER:
M/S. COMPLETE INSULATIONS (P) LTD.
Vs.
RESPONDENT:
NEW INDIA ASSURANCE COMPANY LTD.
DATE OF JUDGMENT21/11/1995
BENCH:
AHMADI A.M. (CJ)
BENCH:
AHMADI A.M. (CJ)
AGRAWAL, S.C. (J)
MANOHAR SUJATA V. (J)
CITATION:
1996 AIR 586 1996 SCC (1) 221
1995 SCALE (6)629
ACT:
HEADNOTE:
JUDGMENT:
J U D G M E N T
Ahmadi, CJI
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 two letters.
On 17.9.1989 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.
The moot question involved in the case is whether on
the above facts, without the insurance policy being
transferred in the name of the appellant, it was entitled to
be indemnified by the insurer. The National Consumer
Disputes Redressal Commission held that under Section 157 of
the Motor Vehicle Act, 1988, (hereinafter called ’the New
Act’) a certificate of insurance is deemed to have been
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transferred in favour of the person to whom the vehicle is
transferred but that the said provision applied only in
relation to third party risk and did not apply to a policy
covering risk of damage to the vehicle or person of the
insured. The National Commission placed reliance on a
judgment of the High Court of Andhra Pradesh in Madinani
Kondaiah & Ors. etc. v. Yaseen Fatima & Ors. etc. [AIR 1986
Andhra Pradesh 62].
Before proceeding further it is necessary to examine
the provisions of Section 103-A of the Motor Vehicle Act,
1939, hereinafter called the ’Old Act’ and Section 157 of
the New Act, in juxtaposition:
Old Act
103-A : TRANSFER OF CERTIFICATE OF
INSURANCE
(1) Where a person in whose favour the
certificate of insurance has been issued
in accordance with the provisions of
this Chapter proposes to transfer to
another person the ownership of the
motor vehicle in respect of which such
insurance was taken together with the
policy of insurance relating thereto, he
may apply in the prescribed form to the
insurer for the transfer of the
certificate of insurance and the policy
described in the certificate in favour
of the person to whom the motor vehicle
is proposed to be transferred, and if
within fifteen days of the receipt of
such application by the insurer, the
insurer has not intimated the insured
and such other person his refusal to
transfer the certificate and the policy
to the other person, the certificate of
insurance and the policy described in
the certificate shall be deemed to have
been transferred in favour of the person
to whom the motor vehicle is transferred
with effect from the date of its
transfer.
(2) The insurer to whom any application
has been made under sub-section (1) may
refuse to transfer to the other person
the certificate of insurance and the
policy described in that certificate, if
he considers it necessary so to do,
having regard to -
a) the previous conduct of the other
persons, -
(i) as a driver of motor vehicles; or
(ii) as a holder of the policy of
insurance in respect of any motor
vehicle; or
b) any conditions which may have been
imposed in relation to any such policy
held by the applicant; or
c) the rejection of any proposal made by
such other person for the issue of a
policy of insurance in respect of any
motor vehicle owned or possessed by him.
(3) Where the insurer has refused to
transfer, in favour of the person to
whom the motor vehicle has been
transferred, the certificate of
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insurance and the policy described in
that certificate, he shall refund to
such transferee the amount, if any,
which, under the terms of the policy, he
would have had to refund to the insured
for the unexpired term of such policy."
New Act
"157 : TRANSFER OF CERTIFICATE OF
INSURANCE
(1) Where a person in whose favour the
certificate of insurance has been issued
in accordance with the provisions of
this Chapter transfers to another person
the ownership of the motor vehicle in
respect of which such insurance was
taken together with the policy of
insurance relating thereto, the
certificate of insurance and the policy
described in the certificate shall be
deemed to have been transferred in
favour of the person to whom the motor
vehicle is transferred with effect from
the date of its transfer.
(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 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."
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 days 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
insurer’s right of refusal which was granted under the Old
Act.
Now, under the Old Act although the insurer could
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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 the accident. The protection was
available by virtue of Section 94 and 95 of the Old Act. The
relevant part of these two provisions was as under :-
"Section 94 - Necessity for insurance
against third-party risk - (1) 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."
The other subsections permitted the appropriate government
to grant exemption from the operation of the aforesaid
section to vehicles owned by the Central or State Government
or any local authority or State Transport Authority under
certain circumstances.
"95. Requirements of policies and limits
of liability - (1) In order to comply
with the requirements of this Chapter, a
policy of insurance must be a policy
which -
(a) is issued by a person who is an
authorised insurer [or by a co-operative
society allowed under Section 108 to
transact the business of an insurer],
and
[(b) insures the person or classes of
persons specified in the policy to the
extent specified in sub-section (2) -
(i) against any liability which may be
incurred by him in respect of the death
of or bodily injury to any person or
damage to any property of a third party
caused by or arising out of the use of
the vehicle in a public place;
(ii) against the death of or bodily
injury to any passenger of a public
service vehicle caused by or arising out
of the use of the vehicle in a public
place:]
(5) Notwithstanding anything 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 of
person."
In Kondaiah’s case (supra) the vehicle in question was
transferred but not the insurance policy. The policy or the
certificate was not transferred to the vendee. The victims
of the accident filed a claim before the Motor Accident
Claims Tribunal. Broadly four contentions were considered,
namely, (i) whether the transfer of the vehicle to the
purchaser is not complete till the vehicle is registered in
the name of the transferee (ii) whether on transfer in the
absence of the transfer of the insurance policy, the policy
lapses (iii) whether it lapses even against the third party
(iv) whether the Insurance Company can validly contend that
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the insurance policy had lapsed. The Full Bench held that
under the Sale of Goods Act the sale is complete on payment
of the consideration and delivery of the vehicle, regardless
of transfer of registration in the name of the transferee.
On the second and third contentions it was held that
notwithstanding the nontransfer of the insurance policy, the
liability qua third party subsists in view of Section 94 and
95 of the Old Act. The last point regarding right of
insurance company to raise the plea of the policy having
lapsed is not of any relevance to us. In the separate
judgment of Kodandaramayya, J. relied upon by the National
Commission, it was pointed out that the ’third party’
referred to in Section 95 did not include a transferee who
was not a party to the original contract of insurance and,
therefore, the transferee or vendee could not claim any
benefit from the insurance company for damage to his person
or the vehicle.
The New Act came into force with effect from lst July,
1989. Since the vehicle in question was sold on 15.6.1989
and the letter of intimation of transfer and request to
transfer the Certificate of insurance and the policy
described therein was sent on 26.6.1989 the Old Act applied.
Admittedly the request was not refused under Section 103A of
the Old Act till the New Act came into force. Thereafter on
24.7.1989 the Insurance Company was once again requested to
effect the transfer of the Certificate of Insurance as well
as the policy but to no avail. By that day the New Act had
come into force. Actually the application dated 26.6.1989
was pending when the New Act had come into force. That
application had to be processed under Section 157 of the New
Act and hence the Certificate as well as the policy must be
deemed to have been transferred in the name of the
transferee. Even it is assumed that the Old Act applied to
pending cases, the certificate and policy must be deemed to
have been transferred since no refusal was communicated by
the Insurance Company to the transferor or the transferee.
Therefore, in either case the transfer of the Certificate of
Insurance and policy described therein must be taken as
complete in view of the language of Section 103A of the Old
Act and Section 157 of the New Act.
Section 157 appears in Chapter XI entitled ’Insurance
of Motor Vehicles against Third Party Risks’ and comprises
sections 145 to 164. Section 145 defines certain expressions
used in the various provisions of that chapter. The
expression ’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
classes 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
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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 insurer’s 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 the
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
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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 Kondaih’s
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. In the present case since
there was no such agreement and since the insurer had not
transferred the policy of insurance in relation thereto to
the transferee, the insurer was not liable to make good the
damage to the vehicle. The view taken by the National
Commission is therefore correct.
For the above reasons, we see no merit in this appeal
and dismiss the same but with no order as to costs.