New India Assurance Co. Ltd. vs Nagarathinamma and Others

E. Padmanabhan, J.—This appeal has been preferred by the insurer challenging the award and decree dated 30.3.1990 made in M.C.O.P.

No. 273 of 1983 on the file of Motor Accident Claims Tribunal (II Additional Sub Judge), Chengalpattu.

With the consent of either side, the appeal itself is taken up for final disposal. Heard Mr. K. Padmanabhan for M/s. Kurian and Associates for

the appellant and Mr. A.N. Vishwanatha Rao for respondent Nos. 1 to 3, respondent Nos. 4 and 5 not appearing.

Respondent Nos. 1 to 3 herein instituted M.C.O.P. No. 273 of 1983 on the file of the Motor Accident Claims Tribunal, Chengalpattu against

the appellant and respondent Nos. 4 and 5 herein claiming a compensation of Rs. 1,00,000/-. The claimant No. 1 is the widow of Ravindran. The

claimant Nos. 2 and 3 being the mother and father of deceased. On the date of death the deceased was aged 21 years. The claimant No. 1 was

aged 19 years, claimant No. 2 was aged 38 years and claimant No. 3 was aged 45 years. Deceased Ravindran died in the accident that occurred

on 6.9.1982 at 10.30 a.m. in the Kavarapettai Sathiavedu Road.

According to claimants, the deceased Ravindran was riding in a bicycle at 10.30 a.m. on 6.9.1982 on Kavarapettai Sathiavedu Road. At that

time, the lorry bearing registration No. ATM 6543 being driven rashly and negligently dashed against the deceased Ravindran and he died. It is

contended that the accident has been caused by rash and negligent driving of the lorry by its driver. The deceased succumbed to the injuries as he

was knocked down by the lorry belonging to the respondent No. 1 and insured with the respondent No. 2 Insurance Company. Deceased was a

postal carrier attached, to Kavarapettai Sub-Post Office.

The respondent No. 2 insurer of the vehicle filed a counter pointing put that particulars of insurance coverage such as policy number has not

been furnished. Hence the respondent No. 2 is not liable to pay the compensation. Respondent No. 2 contested the claim both on the ground of

negligence as well as on the question of quantum of compensation claimed. It is also pointed out that the driver has been acquitted by the Criminal

Court. In the additional counter it is contended by the insurer that the vehicle is found to be insured in the name of one K.R.P. Enterprises, Sri

Ramakrishna Boiled Rice Mill, Vayulur, Andhra Pradesh. In Vijayawada Division, the insured-owner of the vehicle has not been impleaded as

respondent and this is fatal. The insurance policy in respect of the lorry was transferred in favour of the respondent No. 3 owner of the vehicle only

on 7.9.1982 with a transfer endorsement on payment of Rs. 5 towards transfer fee. It is contended that there is no privity of contract and there

was no insurable interest for the respondent No. 3 on the date of the accident, as the respondent No. 3 came into picture only on 7.9.1982.

Unless it is established that the actual insured was in possession of the vehicle on the date of accident and that the driver was under its employment,

the respondent No. 2 insurer is not liable to answer the present claim. The respondent No. 2 prayed for dismissal of the claim petition.

Before the Claims Tribunal below the claimants marked Exhs. P-1 to P-4 while the respondents marked Exhs. R-1 to R-4. The claimants

examined two witnesses and the respondent examined two witnesses on his side. The Tribunal below framed the following three points for

consideration:

(i) Whether the accident was caused by the rash and negligent driving of the respondent''s lorry?

(ii) Whether the claimants are entitled to any compensation?

(iii) Whether respondent No. 2 insurer is liable to pay compensation?

On the first issue the Tribunal below while accepting the evidence of PW 2, recorded a finding that the accident has been caused by the rash

and negligent driving of the lorry driver. On the second point, the Tribunal held that the claimants are entitled to compensation of Rs. 1,00,000/-, in

all under various heads. On the third point, the Tribunal held that the respondent including the insurer is liable to pay the compensation with interest

at 12 percent and costs, The Tribunal apportioned the compensation among the claimants and the apportionment being Rs. 60,000/- to the

claimant No. 1, widow of the deceased, Rs. 30,000/- to the mother of the deceased and Rs. 10,000/- to the claimant No. 3, the father of the

deceased.

Challenging the said judgment and award the insurer alone has come before this Court contending that the insurer is not liable to pay

compensation as there is no valid insurance on the date of accident.

The learned Counsel appearing for the appellant while fairly stated that he is not challenging the finding of the Claims Tribunal below with respect

to negligence as well as quantum of compensation. The learned Counsel for the appellant also fairly stated that there is no dispute with respect to

the relationship between the deceased and the three claimants. The learned Counsel for the appellant mainly contended that the appellant herein;

the insurer, is not liable to pay compensation as there was no valid contract on the date of accident as the policy has been renewed in favour of the

respondent No. 3, the transferee after the accident and, therefore, the insurer is not liable and if at all it is the owner of the vehicle who has to pay.

The liability of the insurer alone is the point in issue and, therefore, we have to consider the said controversy. The points that arise for consideration

are:

(i) Whether the appellant insurer is liable to pay compensation awarded by the Tribunal below to the claimants?

(ii) Whether there was a valid insurance coverage of the vehicle on the date of the accident? and

(iii) To what relief, if any?

Exh. P-1 is the xerox copy of the RC Book. Exh. P-2 is the insurance certificate, Exh. P-4 is the insurance policy. It is the main contention of

the insurer appellant that there was no existing contract of insurance between the appellant and the respondent No. 3, the owner of the lorry on the

date of accident. According to the insurer K.R.P. Enterprises was the owner of the lorry, who has insured the ill-fated lorry. On 6.9.1982, the date

of accident, the owner of the lorry was K.R.P. Enterprises. The accident took place on 6.9.1982. Only on 7.9.1982 a day after the accident, the

respondent No. 3 has sought for transfer of insurance policy in his favour being the transferee of the lorry. It is pointed out by the appellant that on

the date of accident there was no valid insurance in respect of the lorry owned by the respondent No. 3, the transferee. As there was no contract

of insurance between the respondent No. 3 and the Insurance Company, the insurer is not liable to pay the compensation is the only and

substantial contention.

The respondent No. 3 owner of the lorry on the date of the accident was examined as RW 3. It is the evidence of RW 3, the owner of the

lorry that the said lorry was owned by K.R.P. Enterprises, that on 25.8.1982 the lorry was transferred in his name as seen from Exh. R-1 copy of

RC Book. According to RW 3, there was a valid insurance and, therefore, the insurer is liable to pay the compensation.

RW 3 further deposed that RC Book and the insurance policy were handed over to the insurer for transfer of the insurance in his name much

earlier to the accident. Exh. R-2 is the insurance policy. Therefore, the respondent No. 2 Insurance Company is liable to pay the compensation.

The evidence of RW 3 has been analysed by the Claims Tribunal below. The lorry has been transferred in favour of RW 3 on 25.8.1982 as seen

from the entries in Exh. R-1. Exh. R-2 is the insurance policy issued in favour of the respondent No. 3 Ramadoss who is the admitted owner on

the date of accident. On the date of accident there was valid insurance as has been admitted by respondent No. 2, Insurance Company. But the

respondent No. 2 contended that on 7.9.1982 alone the vehicle was insured and, therefore, in respect of the accident that occurred on 6.9.1982

there being no valid contract of insurance, the insurer is not liable to indemnify the loss, nor it is liable to pay the compensation.

The evidence of RW 3 has been accepted by the Tribunal below and his evidence would show that RW 3 has applied for transfer of policy on

25.8.1982. But the transfer of policy has been made only on 7.9.1982. RW 2 representing the insurer deposed that the application for transfer of

policy was submitted only after the accident and that the vehicle owner did not disclose about the accident and had there been a disclosure, the

policy would not have been issued. In this respect, the Tribunal below after considering the evidence of RWs 1 and 2, disbelieved RW 2 and held

that there was a valid insurance coverage in respect of the vehicle involved in the accident on the date of accident and, therefore, the appellant

insurer is liable to pay the compensation. The Tribunal below relied upon the pronouncement of Apex Court in sic. Division Bench of this Court in

Dharman and another Vs. N.C. Srinivasan and others, .

In the light of the said finding, the Tribunal below passed an award against all the respondents while holding that the insurer who is the appellant

herein is liable to pay the compensation.

In this appeal, the learned Counsel appearing for the appellant contended that the accident took place on 6.9.1982. The policy was transferred

only on 7.9.1982 and, therefore, the insurer is not liable as there was no valid contract of insurance between the respondent No. 3, owner of the

vehicle and the appellant, the Insurance Company.

Mr. A.N. Vishwanatha Rao, learned Counsel appearing for contesting claimants-respondents contended that there is a valid insurance and,

therefore, the insurer is liable and at any rate the Insurance Company should be directed to pay the entire amount of compensation as assessed and

if at all liberty be given to the insurer to proceed against the owner of the lorry.

All the points raised in this appeal could be considered together. There is no dispute about the dates mentioned above. The findings recorded

by the Tribunal below that is the respondent No. 3 owner of the lorry has applied for transfer of insurance policy earlier in point of time. But the

communication of transfer was issued only a day after the accident and it is a continuance of insurance cover. It is also pointed out by the Counsel

for the respondent that the transfer of the insurance policy also covers the lorry which was issued prior to the accident and transferred in favour of

the respondent No. 3 owner of the lorry who is the transferee long prior to the date of accident. The findings of the Tribunal below deserve to be

sustained on facts.

The learned Counsel appearing for the appellant as well as the respondent No. 2 referred to various pronouncements in support of their

respective contentions. The Counsel of the appellant also relied upon the pronouncement of a Full Bench of this Court in Saroja and 3 others Vs.

Gopal and 3 others, and contended that the appellant Onsurance Company cannot be fastened with the liability unless the intimation of transfer and

sale of vehicle is given to the insurer. According to the appellant the insurance policy lapsed and, therefore, no liability could be fastened on the

appellant.

Per contra, reliance is placed upon the Division Bench judgment of this Court in Dharman v. N.C. Srinivasan (supra), where the Division

Bench held that the Insurance Company cannot avoid its liability against third party by taking a plea that the policy had come to an end on the

transfer of the vehicle before the accident and that such a defence is not available to the insurer u/s 96(2) as against third party claimants. The

Division Bench also held that it could be open to the insurer to work out its remedies against the parties concerned u/s 96(3) proviso or u/s 96(4)

of the Act. Very many pronouncements were relied upon by either side.

In our considered view, it may not be necessary to refer to all the pronouncements on which the Counsel on either side placed reliance. There

is no dispute that the vehicle was transferred in favour of the respondent No. 3 herein prior to the accident and the transfer has also been effected

prior to the accident and the transfer of the vehicle has also been intimated to the insurer prior to the accident. But the insurer has sent the

intimation regarding transfer of policy a day after the accident and on that score the insurer seeks to avoid the liability. The case relied upon the

Counsel for the appellant as well as the Counsel for the respondents relate to a case where the transfer of the vehicle has not been reported to the

Registering Authority as well as to the Insurance Company within the time prescribed. That is not the case here and, therefore, it is not necessary

to refer to the said pronouncements relied upon by either side.

In the present case on facts transfer has been intimated not only to the Registering Authority, but also to the appellant insurer within the period

stipulated and the insurer has taken time to effect transfer of the policy and factually after the accident only transfer of insurance-policy has been

intimated, but it is a continuation of policy and not a new policy. The Tribunal below rightly held that the transfer has been intimated to the insurer

well in time. But the transfer of policy has been intimated a day after the accident. It is not in dispute that the vehicle was covered by a policy of

insurance on the date of accident, but it was issued in favour of the transferor. Immediately after transfer the transferee has also intimated about the

transfer remitted the charges for continuation of the policy. Mere communication of intimation of transfer of policy, a day after the accident will not

absolve the insurer as the insurer has already been intimated, collected the fees for the transfer of the policy well before the accident. In such cases

the Insurance Company cannot avoid the liability in respect of third party claims.

On the facts of the case it has to be pointed out that the liability of the insurer to third party is neither absolved, nor the insurer could contend

that it is the owner of the vehicle alone who is liable and that the insurer is absolved of its liability. Not only the transfer has been intimated and

effected before the date with respect to the registration of certificate, but the transfer of policy has also been applied within the time stipulated by

intimating the transfer and necessary fee has been paid in this respect which is prior to the accident and the communication of transfer as to the

transfer of policy has been issued only after the date. On this score, the insurer cannot avoid its liability.

The Madhya Pradesh High Court in Umed Chand Golcha Vs. Dayaram and Others, , held thus:

(5) The award was challenged by the claimant on various grounds mentioned in the memo of appeal. It may be pertinent to record that the Full

Bench in National Insurance Company Ltd. Vs. Kansram and Others, Kunj Bihari and Others, Dashrath and Others, Prabhat and Others, Ku.

Nirmala and Others, Leela Bai and Others and Dobdhe and Others, , on reference made by the Division Bench of this Court by order dated

23.9.1997 passed in timed Chand Golcha v. Dayaram M.A. No. 192 of 1996, held that the insurance policy remains effective in respect of third

party risks but not in respect of transferee risks, even if there has been absence of application/intimation as stipulated u/s 103-A of the Act and law

laid down in Balwant Singh v. Jhannubai 1980 ACJ 126 (MP) and Sabir Hussain Vs. Maya Bai and Others, and similar other decisions, was no

more good law. Therefore, the claim of the Insurance Company that it was not liable to pay compensation awarded by the Tribunal for the reasons

that on transfer of vehicle without intimation to it, policy ceased to exist and there was no privity of contract between the company and the

transferee, stands rejected.

In the above decision the Division Bench took the view that in respect of third party risks the insurance policy also remains effective even in

such circumstances and that the claim of the Insurance Company that it was not liable to pay the compensation has been repelled. The case on

hand is identical in all respects.

The Supreme Court in the case of M/s. Complete Insulations (P) Ltd. Vs. New India Assurance Company Ltd., , while considering the scope

of Section 103-A of the old Act and Section 157 of the Motor Vehicles Act, 1988 held thus:

(10) 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 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 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 u/s 165 is invested with the 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

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 Kondaiah''s case 1986 ACJ 1 (AP), 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 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.

The Supreme Court in Rikhi Ram and Another Vs. Smt. Sukhrania and Others, , laid down that on the transfer of motor vehicle to a

transferee, the liability of the insurer does not cease so far as the third party victim is concerned even if the owner or purchaser does not give any

intimation as required u/s 103-A of Motor Vehicles Act, 1939. In this respect, the Apex Court held thus:

(4) A perusal of Sections 94 and 95 would further show that the said provisions do not make compulsory insurance to the vehicle for the owners.

Thus, it is manifest that compulsory insurance is for the benefit of third parties. The scheme of the Act shows that an insurance policy can cover

three kinds of risks, i.e., owner of the vehicle; property (vehicle) and third party. The liability of the owner to have compulsory insurance is only in

regard to the third party and not to the property. Section 95(5) of the Act runs as follows:

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 persons specified in the policy in respect of any liability which the policy purports to cover the case of that person or those

classes of persons.

(5) The aforesaid provision shows that it was intended to cover two legal objectives. Firstly, that no one who was not a party to the contract

would bring an action on the contract; and secondly, that a person who has no interest in the subject-matter of an insurance can claim the benefit of

an insurance. Thus, once the vehicle is insured, the owner as well as any other person can use the vehicle with the consent of the owner. Section 94

does not provide that any person who uses the vehicle shall insure the vehicle in respect of his separate use.

xxx xxx xxx

(7) For the aforesaid reasons, we hold that whenever a vehicle which is covered by the insurance policy is transferred to a transferee, the liability of

insurer does not cease so far as the third party/victim is concerned, even if the owner or purchaser does not give any intimation as required under

the provisions of the Act.

In the light of the above pronouncement in Rikhi Ram v. Sukhrania (supra), the appellant insurer cannot avoid the liability.

It is also the settled law so far as the third party is concerned the insurer cannot avoid the liability as the insurance policy issued in respect of

the lorry was in force, the intimation has been given that the vehicle has been transferred and the intimation has been given much prior to the date of

accident and merely because the transfer of policy is intimated later, the insurer cannot avoid the liability. There is material to show that the

intimation has been given well in time and necessary fees has been remitted very much prior to the date of accident. Merely because the insurer

took time to issue communication of transfer, it will not absolve the liability of the insurer and particularly in respect of third party claim. It is well

settled law that the third party like the claimants cannot be made to suffer.

In the foregoing circumstances, the above appeal is dismissed with costs. Consequently connected C.M.Ps. are closed.