Rengaperumalraja vs Moideen Muthu Beevi and others

Srinivasan, J.—The appellant is the owner of the vehicle MDR-5955 having purchased the same from its prior owner by name Jayaraman

on August 4, 1980. The vehicle was involved in an accident on August 27, 1980. The legal representatives of the deceased victim (respondents

Nos. 1 to 5 herein) filed a petition for compensation. The Tribunal awarded a compensation of Rs. 31,450 on December 21, 1981, and made the

insurance company who was the second respondent before it liable to pay the money.

The insurance company (sixth respondent herein) filed CMA No. 297 of 1982, in this court contending that the vehicle having been transferred

on August 4, 1980, in favour of the appellant by the insured, the policy which was taken by the insured on November 28, 1979, for a period of

one year had lapsed automatically and there was no subsisting policy on the date of the accident in order to make the insurance company liable to

pay the compensation. The contention of the insurance company was accepted by a learned single judge of this court who followed the judgment

of a Division Bench in Oriental Insurance Co. Ltd. v. Rajamani [1991] 1 MLJ 474. The appeal was allowed. Against the said judgment of the

learned single judge the present letters patent appeal has been filed by the owner of the vehicle.

It is the contention of learned counsel for the appellant that the transfer of the vehicle does not by itself cause the insurance policy to lapse and,

on the facts of this case, there was intimation of the transfer by the transferor to the insurance company pursuant to which the policy was

transferred to the appellant herein on September 2, 1980. According to learned counsel, if the transferor had given intimation in due time and the

insurance company had failed to carry out the transfer of the policy in favour of the transferee of the vehicle, it cannot escape its liability by taking

advantage of its own fault. It is also argued that there is a judgment of another Division Bench of this court in Dharman v. N. C. Srinivasan [1989]

1 LW 315, which lays down the principles of law correctly. According to the said judgment, the only defences available to the insurance company

are set out in section 96(2) of the (old) Motor Vehicles Act of 1939, and it is not open to the insurance company to contend that the policy lapsed

on account of the transfer of the vehicle.

On the facts of this case, there is absolutely no evidence before us to show that the transferor or the transferee gave an intimation to the

insurance company immediately after the transfer of the vehicle to cause the policy to be transferred as a consequence. The appellant herein has

not gone into the witness box; nor has he examined anybody in support of his case. The only witness examined on the side of the respondent

before the Tribunal was the driver of the vehicle by names Sivasailam. The insurance company produced the policy dated September 2, 1980,

which was in favour of the appellant herein. No document was filed by the appellant to substantiate his claim that intimation was given to the

insurance company certifying the transfer of the vehicle.

On the facts we hold that the insurance policy in favour of the appellant herein came into force only on September 2, 1980, after the date of the

accident. We also hold that on the date of the accident, viz. August 27, 1980, there was no policy subsisting with reference to the said vehicle.

The position in law has been well settled in so far as this court is concerned by a series of judgments rendered by different Division Benches

starting from M. Bhoopathy (Died) and Others Vs. M.S. Vijayalakshmi and Another, . In that case, the view taken by a learned single judge of this

court earlier was overruled and it was categorically laid down that on transfer of the vehicle the policy would lapse and the transferee cannot take

advantage of the policy obtained by the transferor. The same view was taken in Queensland Insurance Co., Ltd. Vs. Rajalakshmi Ammal and

Others, ; Hema Ramaswami Vs. K.M. Valarence Panjani and Others, and Rengasamy v. Periammal [1990] 1 LW 453.

All the above judgments of this court were rendered by Division Benches and yet, another Division Bench of this court chose to take a different

view in Dharman''s case [1989] 1 LW 315, purporting to rely on Section 96(2) of the Motor Vehicles Act of 1939 and some judgments of the

Supreme Court of India. The Division Bench ought to have referred the matter to a Full Bench if it chose to differ from the earlier Division Bench

judgments. However, the Division Bench tried to take shelter under two judgments of the Supreme Court in British India General Insurance Co.

Ltd. Vs. Captain Itbar Singh and Others, and New Asiatic Insurance Co. Ltd. Vs. Pessumal Dhanamal Aswani and Others, , Neither of the rulings

of the Supreme Court has any bearing on this aspect of the case. It is not laid down in those cases that even if there is no subsisting policy the

insurance company is not entitled to plead the same as a defence in a suit or proceedings. The decisions of the Supreme Court have been wrongly

understood by the Division Bench in Dharman''s case [1989] 1 LW 315.

In New Asiatic Insurance Co. Ltd. Vs. Pessumal Dhanamal Aswani and Others, , the essence of a contract of insurance has been set out in the

following terms (at page 702 of 34 Comp Cas) :

Thus, the contract between the insured and the company may not provide for all the liabilities which the company has to undertake vis-a-vis the

third parties, in view of the provisions of the Act. We are of opinion that once the company had undertaken liability to third parties incurred by the

person specified in the policy, the third parties'' right to recover any amount under or by virtue of the provisions of the Act is not affected by any

condition in the policy ...

The underlined words show that the contract of insurance is between the insurance company and particular person, viz. the insured. If the said

person ceases to be the owner of the vehicle and somebody else has become the owner then the policy will also lapse and the undertaking given

by the insurance company in the policy will not apply to any other third party. It will apply if at all only to the insured if he has anything to do with

the vehicle on the date of the accident.

The ruling of the Division Bench in Dharman''s case [1989] 1 LW 315 was also considered by the later Division Bench in Rajamani''s case

[1991] 1 MLJ 474. The Division Bench also referred to the two judgments of the Supreme Court relied on in Dharman''s case [1989] 1 LW 315

and pointed out a distinction between them and the case before them (Division Bench). We agree with the following observations made by the

Division Bench in Rajamani''s case [1991] 1 MLJ 474:

Considering the consistent and preponderant judicial opinion expressed in the decisions of this court referred to earlier, the decision in Dharman v.

N. C. Srinivasan [1989] 1 LW 315, cannot be applied to the facts of this case. In view of the aforesaid well settled legal position and the factual

situation that the lorry TNY 4629 has been transferred by the sixth respondent to the seventh respondent even on October 5, 1979, long prior to

the date of the accident, and the transfer was not intimated either by the transferor or by the transferee to the appellant-insurance company, the

policy issued by the appellant-insurance company to the sixth respondent lapsed, on the transfer of the vehicle, and thereafter no liability could be

fastened upon the appellant insurance company on the basis of such a lapsed policy ....

In our opinion, the terms of Section 96(2) of the (old) Motor Vehicles Act, 1939, do not exclude other defences available to any insurance

company under the general law. For example, an insurance company can always raise a plea that as a fact there was no accident as claimed by the

claimant and there was collusion between the claimant and the owner of the vehicle (insured) in order to extract money from the insurance

company. That is not one of the defences which is contemplated by Section 96(2). It is because section 96(2) does not set out such defences. It

does not mean that they are not available to the insurance company. The purpose of introduction of Section 96(2) of the Motor Vehicles Act is

only to enable the claimant to recover compensation easily from the insurance company and for the insurance company to defend the proceedings

for compensation in the best manner possible so that it need not be at the mercy of the insured. There may be cases in which the insured may allow

the proceedings to go by default. If the insurance company is itself a party to the proceedings it will be open to it to contest the same and only in

order to facilitate such contest the section has been introduced in the Act.

Learned counsel for the appellant refers to Section 103A of the Motor Vehicles Act, 1939. That Section sets out only the procedure by which

a certificate of insurance can be got transferred can be got transferred in the event of the insured deciding to transfer the vehicle. In fact, the section

contemplates an application being made in the prescribed from to the insurer for the transfer of the certificate of insurance and also the policy

described the certificate in favour of the person to whom the motor vehicle is proposed to be transferred. Thus the procedure prescribed in

Section 103A should have been availed of by the transferor before transferring the vehicle to any other person. In this case, there is nothing on

record to show that the said procedure was availed of by the prior owner of the appellant herein. Hence the section does not help the appellant on

the facts of this case.

In the above circumstances we have no hesitation to hold that the view taken by the learned single judge is correct and there is no merit

whatever in the appeal. It is accordingly dismissed. No costs.