NEW INDIA ASSURANCE CO. LTD. vs COMPLETE INSULATIONS (P) LTD.

THIS is an appeal against the Order dated the 13th February, 1992 passed by the State Consumer Disputes Redressal Commission, Chandigarh in complaint Case No. 169 of 1991. The facts as appear from the record are that a Maurti Car had been purchased in the name of Mrs. Archana Wadhwa. Its Registration No. is CHK-9253. A Comprehensive Insurance Policy was issued in respect of that car by the present appellant. New India Assurance Company Ltd. The policy was valid from 24.10.1988 to 23.10.1989. The complainant, M/s. Complete Insulations (P) Ltd. (for short the Company) now Respondent had paid the premium amount to the Insurance Company. On 15th June, 1989, the registration of the car in question was got transferred from the name of Mrs. Archana Wadhwa to that of the complainant. The complainant sent a letter dated the 26th June, 1989to the Insurance Company under Certificate of Posting informing that the registration of the Car had been transferred in his name and requested that the Insurance Policy be transferred in its name. No reply of that letter was received by the Complainant from the Insurance Company. A reminder was issued by the Complainant on 24th July, 1989 again under Certificate of Posting. This was also not replied to by the Insurance Company. The Car met with a serious accident on 17th September, 1989 in which the sister of the Managing Director of the Company died and he himself suffered serious injuries for which he was hospitalised for two months. On 11th October, 1989 the Complainant informed the Appellant about the accident and requested for assessment of damage as the Car was a total loss. There was no response from the insurer. The Complainant sent a reminder on 26th December, 1989 for settlement of the claim but with no effect. The Complainant also got issued a notice to the insurer in reply to which the insurer repudiated the claim on the ground that the Complainant did not have any insurable interest in the Car, With the above allegations the Complainant claimed a sum of Rs. 83,000/- for insured value of the Car which was a total loss plus Rs. 50,000/- for the loss suffered in business and also claimed interest on these amounts.

THE claim was resisted by the Appellant-Insurance Company whose contention, apart from the denial of other facts, was that the insurance policy was in the name of Mrs. Archana Wadhwa and, the re fore, no compensation for the damage/loss of the car could be claimed by the Complainant. It was further contended that Mrs. Archana Wadhwa was not the owner of the vehicle at the time of the accident so the insurance policy had lapsed. It appears that before the State Commission, on behalf of the Insurance Company it was urged that the request for the transfer of the insurance policy was made by the Complainant and not by the insured whose name appeared in original policy and therefore the insurer was entitled to repudiate the claim. This plea was overruled by the State Commission on the ground that it did not benefit the insurer to raise such technical objection as all the facts regarding the coverage of the vehicle, its accident etc. were proved. The State Commission allowed the claim and directed the insured to pay Rs. 83,000/- to the Complainant plus Rs. 500/- on account of litigation expenses for the proceedings. It was further ordered that the said amounts would carry interest at the rate of 12% per annum w.e.f. 10th March, 1990 on which date the calim was repudiated till payment. The insurer was directed to pay the said amounts within one month from the date of the Order.

THE insurer, feeling aggrieved of the said Order has filed this appeal.

THROUGH various grounds have been raised in the memorandum of appeal but the only one that was strenuously pressed before us was that as the Insurance Policy had not been transferred in favour of the transferee of the vehicle, it had lapsed. In support of this argument reliance was placed upon "Anand Sarup Sharma v. P.P. Khurana and Ors." 1988 (2) Delhi Lawyer 88 (FB): 1989 Delhi 88. In that case it was remarked: "It is clear from the clause that the Insurance Company undertook to indemnify the insured against all sums which insured became legally liable to pay in respect of death or bodily injury to any person caused by or arising out of the use of 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 insurable interest in the vehicle. Under the terms of the contract of insurance, therefore, the Insurance Company was not liable to indemnify the transferee."

The above observation of the Full Bench of course help the appellant. But, it is to be noticed that the said case was decided in the light of the provisions of Motor Vehicles Act, 1939. In 1988 New Motor Vehicles Act was placed on the statute book and the old Act was repealed. That Act came in force on 1st July, 1989 i.e. long before the present accident. The Counsel for the appellant should not have cited the aforementioned ruling before us.

Section 157 of the New Act reads as follows : "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 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 the 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." [Emphasis added]

In view of the aforesaid provisions of law, upon transfer of the vehicle policy of insurance (relating to third party risks) automatically stands transferred in favour of the transferee of the vehicle under the new law.

It may be mentioned here that Section 157 had to be enacted in the Motor Vehicles Act, 1988 because earlier though most of the High Courts had held that the policy of insurance lapsed when the insured transferred the vehicle to another person and the transferee did not get the policy of insurance issued in his name, however, Andhra Pradesh High Court, placing reliance upon the provisions of Sections 22 and 31 of the Motor Vehicles Act, 1939, held that transferor had insurable interest in the vehicle transferred till the name of the transferee was entered in the certificate of registration. Reference can be made to AIR 1986 Andra Pradesh 62. The view held by the Delhi High Court was supported by most of the High Courts. As discussed in National Insurance Co. Ltd. v. Mallikarjun and Others, 1990 Karnataka 166 (F.B.) which followed its earlier Divisional Bench ruling reported as United India fire and General Insurance Company Ltd. v. Chennamma, 1982 Karnataka 1 (D.B.)

WE have discussed the above question only because it was raised before us. Otherwise we are of the opinion that for the purpose of this appeal it is totally immaterial whether the transfer or had any insurable interest or not under the Motor Vehicles Act in the vehicle transferred to another person till there was novation of contract of insurance in favour of such other person. Both under Motor Vehicles Act, 1939 and New Motor Vehicles Act, 1988 the clauses about insurance of vehicle are contained in the chapter relating to risk against third party when the vehicle is plied in a public place. Under the old Act Sections 93 to 111-A occur in chapter VIII which is titled "Insurance of Motor Vehicles against Third Party Risks". Certificate of Insurance has been defined in Clause (b) of Section 93 as follows: ''''Certificate of Insurance" means a certificate issued by an authorised insurer in pursuance of Sub-section (4) of Sec.95, and includes (a cover note complying with such requirements as may be prescribed and) where more than one certificate has been issued in connection with a policy, or where a copy of a certificate has been issued, all those certificates or that copy, as the case may be."

Reloevant protion of Section 94 of the old Act reads as follows: "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." Under the New Act the corresponding chapter is XI titled "Insurance of Motor Vehicles against Third Party Risks." Certificate of insurance has been defined in Section 145 Clause (b) occurring in that chapter as follows:

"Certificate of insurance" means a certificate issued by an authorised insurer in pursuance of Sub- section (3) of Section 147 and includes a cover note complying with such requirements as may be prescribed, and where more than one certificate has been issued in connection with a policy, or where a copy of certificate has been issued, all those certificates or that copy, as the case may be;"

Policy of insurance has been defined in Clause (d) of the said Section as under" "Policy of insurance" includes "Certificate of insurance;" Section 146 of the New Act is pari passu with Section 94 of the old Act. Therefore, while reading Section 103-A of the Old Act and 157 of the New Act, both provisions being contained in the policies relating to Third Party Risks, we will have to keep in mind that these provisions apply only in respect of Third Party Risk. The above provisions of the Motor Vehicles Act re la ting to insurance policy do not apply to the policy covering the risk of damage to vehicle or person of the Insured. Therefore, it cannot be held that the said Sections have reference to a composite policy covering the risks to property, person and Third Party Risks. In Kondaiah case (Supra) it was remarked (para 40):

"We have no hesitation to hold that the transferee who is a third party to the contract cannot secure any personal benefit under the policy unless there is a novation i.e. the Insurance Company, the transferor of the vehicle, and the transferee must agree that the policy must be assigned to the transferee so that the benefit derivable, or derived under the policy by the original owner of the vehicle, the policy holder can be secured by the transferee. Thus, it is clear under a composite policy, covering the risk of property, person, Third Party Risks, the transferee cannot enforce the policy without the assignment in his favour so far the policy covers the risk of the person and property. He has no remedy against the Insurance Company."

In the present case the claimant is claiming indemnity in respect of the damage sustained by the Car. The insured had transferred the vehicle in favour of the complainant long before the accident. The transferee did not get any novation of contract of insurance in respect of his person or property. Therefore, he is not entitled to claim any amount as compensation under the insurance policy from the appellant.

IN the light of the above discussions. We are constrained to remark that the State Commission has not referred to any provisions of la w while granting relief to the complainant. The matter required consideration. For the foregoing reasons we accept the present appeal set aside the impugned order and dismiss the complaint filed by the Complainant. The appellant will be entitled to cost of this appeal which is assessed at Rs. 1000/-.