1. Vehicle purchased in auction — Insurance policy issued after premium payment — Theft of vehicle — Claim repudiated due to non-transfer of registration certificate. (Para 2 , 3 , 4 , 5 , 6 , 7 , 8 , 11 , 27 )
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2019 Supreme(SC) 949
SUPREME COURT OF INDIA
DHANANJAYA Y. CHANDRACHUD, INDIRA BANERJEE, JJ.
M/s. Balwant Singh & Sons – Appellants
Versus
National Insurance Company Ltd. and Another – Respondents
Civil Appeal No. 5998 of 2019, SLP (C) No. 23604 of 2014
Decided On : 31-07-2019
Advocates:
Advocate Appeared:
For the Appellants : Mr. Rohit Sharma, Mr. Raunak Nayak, Mr. Atul Agarwal, Mr. Anshul Chowdhary, Mr. Kumar Dushyant Singh.
For the Respondents: Mrs. Nanita Sharma, Mr. Vivek Sharma, Mr. Amardeep Sharma, Mr. Bajrang Lal Jat.
Advocate Appeared:
For the Appellants : Mr. Rohit Sharma, Mr. Raunak Nayak, Mr. Atul Agarwal, Mr. Anshul Chowdhary, Mr. Kumar Dushyant Singh.
For the Respondents: Mrs. Nanita Sharma, Mr. Vivek Sharma, Mr. Amardeep Sharma, Mr. Bajrang Lal Jat.
IMPORTANT POINT
Chapter XI of the MV Act deals with third party risk, not covering other risks. Other risks are governed by contract between the vehicle owner and the insurer.
Headnote:
(a) Motor Vehicles Act, 1988 - Chapter XI, section 157 - Deals with third party risk - Not covering other risks - Other risks governed by contract between the vehicle owner and the insurer. (Para 23)
(b) Insurance law - Commencement of insurance - Bank repossessing the vehicle in default of payment of loan and selling it to appellant and lifting the lien thereon - Bank informing the same to the - Thereafter Insurer accepting premium and issuing policy document - Held, insurer had the knowledge of transfer - Vehicle stolen - Erstwhile owner not setting up any claim - Insurer held liable to pay the claim. (Para 25, 26)
Facts of the case:
The NCDRC upheld the view of the District Consumer Disputes Redressal Forum, Jalandhar “District Forum” and of the State Consumer Disputes Redressal Commission, Chandigarh “SCDRC” that the insurer was not liable on a claim preferred under a policy of insurance for the loss of a vehicle occasioned by theft.
Finding of the Court:
Appellant is entitled to the claim with interest.
Result: Appeal allowed.
Legal Category Hierarchy
Table of Contents
2. Transferee claims insurer accepted premium and knew of transfer — Insurer contends lack of insurable interest and privity of contract due to non-transfer of registration. (Para 9 , 10 )
3. Chapter XI of Motor Vehicles Act concerns third-party risks; non-third-party risks are governed by the contract of insurance between the insurer and the transferee. (Para 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 )
4. Insurance claims for own-damage risks are governed by the contract of insurance and not by the registration status under the Motor Vehicles Act. (Para 19 , 20 , 23 , 26 )
5. Appeal allowed — Insurance claim granted with interest. (Para 28 , 29 )
6. Does the deemed transfer of insurance under Section 157 of the Motor Vehicles Act apply to theft claims?
No. Section 157 and Chapter XI of the Motor Vehicles Act apply only to compulsory third-party risks. Claims for other risks, such as theft or damage to the insured's own vehicle, are governed by the contract of insurance between the insurer and the transferee. (Para 16 , 17 , 19 , 20 , 23 )
7. Does the failure to transfer the registration certificate automatically negate an insurable interest in a theft claim?
Not necessarily. While the registration certificate defines the owner for third-party liability, a contract of insurance for own-damage risks can exist if the insurer accepts the premium and is aware of the transfer of possession and ownership. (Para 12 , 23 , 25 , 26 )
8. What is the effect of the registered owner's name remaining on the registration certificate after a vehicle transfer regarding third-party liability?
The person in whose name the vehicle stands registered continues to be liable for third-party claims under the Motor Vehicles Act, regardless of whether the vehicle was transferred to another person. (Para 21 , 22 )
JUDGMENT :
DHANANJAYA Y. CHANDRACHUD, J.
1. Leave granted.
2. This appeal arises from a judgment of the National Consumer Disputes Redressal Commission “NCDRC” dated 11 March 2014 dismissing a revision petition filed by the appellant. The NCDRC upheld the view of the District Consumer Disputes Redressal Forum, Jalandhar “District Forum” and of the State Consumer Disputes Redressal Commission, Chandigarh “SCDRC” that the insurer was not liable on a claim preferred under a policy of insurance for the loss of a vehicle occasioned by theft.
3. The third respondent entered into a Hire Purchase Agreement with ICICI Bank “Bank” the second respondent through its Branch at Jalandhar in respect of a vehicle. Pursuant to the agreement, the third respondent paid a few instalments but then committed a default upon which possession of the vehicle was taken by the Bank. The vehicle was put up for auction on 31 March 2006 and was purchased by the appellant for a consideration of Rs. 2,42,000. Besides the payment of an amount of Rs. 5,000 as earnest money, the appellant paid the balance by a cheque dated 31 March 2006 drawn on the State Bank of Bikaner & Jaipur. Possession of the vehicle was handed over to the appellant on 7 April 2006 after the cheque was encashed together with a certificate of possession of the vehicle. The Bank issued a letter dated 19 April 2006 to the first respondent, which had insured the vehicle, for the cancellation of the entry of hypothecation from the registration certificate of the vehicle. On 22 May 2006, the appellant got the vehicle insured by the first respondent in the amount of Rs. 3,28,100 against payment of a premium in the amount of Rs. 6,999. An insurance policy was issued by the first respondent. The name of the insured was reflected as the third respondent but significantly the address section in the policy document contained the name of the appellant together with its business address.
4. According to the appellant, insurance premium was collected by the insurer from it but since the registration certificate was still to be transferred, the insurance policy continued to reflect the name of the third respondent as the insured.
5. The appellant applied for and obtained a certificate of exemption from the Regional Transport Authority so as to facilitate the transfer of the registration certificate to its name. The certificate of exemption was on the ground that the vehicle was exempted from obtaining a route permit.
6. The vehicle was stolen on the intervening night between 13 and 14 June 2006. The appellant lodged a First Information Report about the incident on 14 June 2006 and the first respondent was informed on 4 July 2006.
7. On 12 October 2006, the police issued a certificate to the effect that the vehicle was untraced. On 19 October 2006, the appellant lodged a claim for the loss of the vehicle with the first respondent and enclosed the registration certificate, FIR and the certificate of the police stating that the vehicle was untraced.
8. On 16 November 2006, the first respondent rejected the claim on the ground that the ownership of the vehicle and the insurance policy stood in the name of the third respondent and on the ground that the bank had a financial interest. The first respondent stated that the vehicle must have been insured by the Bank as well. The claim was also rejected on the ground that the appellant did not have an insurable interest. The appellant addressed a letter dated 28 November 2006 to the first respondent. However, the claim was repudiated on 21 March 2007 by the insurer on the ground that the appellant had no insurable interest since the registration certificate was not transferred to it. The rejection of the claim led to the filing of a consumer complaint before the District Forum at Jalandhar. The claim was dismissed on 30 April 2008. The order of the District Forum was upheld by the State Commission on 22 March 2013 in appeal and, in revision, by the NCDRC on 11 March 2014.
