Saroja and 3 others vs Gopal and 3 others

Judgement pronounced by N.K. Jain A.C.J.

This matter was referred to by a Division Bench of this court on the following question of law:

Whether on the transfer/sale of the vehicle, the policy of insurance issued already in favour of the transferor/seller, in the absence of intimation

about such transfer, lapses and the Insurance Company cannot be fastened with liability.

Necessary facts for the disposal of the said reference are:

On 3.3.1981, while travelling in a van bearing Registration No. TMQ 257, four persons met with an accident, as the said van dashed against the

stationery lorry. The Tribunal awarded compensation fastending liability on the first respondent owner. The tribunal came to the conclusion

following the decision of a Division Bench in Hema Ramaswami Vs. K.M. Valarence Panjani and Others, . The matter, on appeal, heard in

extenso. The Bench considered various aspects made by Mr.V. Radhakrishnan, learned counsel appearing for the appellants. In Dharman and

another Vs. N.C. Srinivasan and others, a Division Bench of this Court had taken the view that ""on the transfer/sale of the vehicle during the period

of cover, the policy had lapsed will not be available by way of defence to the Insurance Company. In the decision of the Division Bench in the

Oriental Insurance Company Ltd. Coimbatore v. Rajamani and others, 1991 (1) LW 635 a view had been taken to the effect that ""on the

transfer/sale, the cover under the policy lapses and the transferee cannot take advantage of the policy in favour of the transferor/vendor. On these

conflicting decisions, the matter had been referred to the Full Bench, as stated above.

We have heard the learned counsel appearing on either side and perused the materials on record and the case law.

It is seen that in Section 157 of the Motor Vehicles Act, 1988, in sub-section (1) the Explanation was inserted on 11.11.1994, which says that,

Section 157(1) involves two transfers, (i) the transfer of ownership of the vehicle in respect of which insurance is taken and (ii) the policy of

insurance relating thereto. It is also stated that once both the transfers take place the deeming provisions operates in respect of insurance and

policy described thereon.

We are of the view that it is not necessary to deal with the case laws, cited before us, as our attention had been drawn to the latest decisions of

the Supreme Court rendered in M/s. Complete Insulations (P) Ltd. Vs. New India Assurance Company Ltd., and in Rajamani and Others Vs.

Oriental Insurance Co. Ltd., Coimbatore and Others, . In both the abovementioned decisions, the effect of transfer of certificate of insurance and

the liability of insurance company had been considered. In M/s. Complete Insulations (P) Ltd. Vs. New India Assurance Company Ltd., , when

the policy was not transferred and the vehicle was damaged in accident, whether the transferee was entitled to be indemnified by the insurer for the

damage to vehicle was considered and it had been held thus:

.. 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.

In Rajamani and Others Vs. Oriental Insurance Co. Ltd., Coimbatore and Others, the abovemention decision M/s. Complete Insulations (P) Ltd.

Vs. New India Assurance Company Ltd., was relied upon. Considering the same, the Apex Court held as follows:

..It was contended that, in any event, the first respondent was liable and reliance was placed upon the judgment of this Court in M/s. Complete

Insulations (P) Ltd. Vs. New India Assurance Company Ltd., . In that judgment, this Court considered the provisions of Section 103-A of the

Motor Vehicles Act, 1939 and Section 157 of the Motor Vehicles Act, 1988 both of which deal with the transfer of certificates of insurance. The

provisions of the 1988 Act in this regard are different from those of 1939 Act. By reason of the provisions of the latter Act, the certificate and

policy of insurance are deemed to be transferred in favour of the person to whom the motor vehicle is transferred with effect from the date of such

transfer. The provisions in the earlier Act were that where an application for transfer of the certificate and policy of insurance to the intending

purchaser has been made and no refusal to do so has been received within 15 days, the certificate and policy are deemed to be transferred in

favour of the transferee of the motor vehicle from the date of its transfer. The two provisions being different and there having been no application

for transfer by the second respondent to the third respondent of the certificate and policy of the insurance of the truck, it is not possible to hold that

they were deemed to be transferred in favour of the third respondent with effect from 5.10.1979, the date of transfer .......

The controversy, which was arisen in this reference, has been set at rest in view of the decision of the Supreme Court, mentioned above. Under

these circumstances and the facts of the case, in the absence of such intimation of transfer/sale of the vehicle, the insurance company is not liable to

be fastened with liability. We answer this reference accordingly.

Post the C.M.A. before a Division Bench for appropriate orders.