( 1 ) IN this reference under Section 7 of the Karnataka High Court Act, 1961, the question that arises for consideration is:"when a registered owner of a motor vehicle covered by an insurance policy transfers the vehicle to another, but does not secure certificate of transfer of the insurance policy covering the vehicle to the transferee of the vehicle, whether the insurance company is liable to answer the liability arising out of an accident met with by the vehicle after transfer of ownership of the vehicle but during the period for which the insurance policy had been issued?"

( 2 ) THE facts of the case have been set out in the order of reference and therefore it is not necessary for me to reiterate the same. A division bench of this court in united India fire and general insurance company ltd. V chennamma (1981 (1) kar. Lj. 245), held that in the case of transfer of a motor vehicle unless a notice in the prescribed form was given to the insurance company concerned under Section 103-a of the Motor Vehicles Act, 1939 (hereinafter referred to as the act) and the certificate of transfer of insurance was issued or deemed to have been issued, by the force of the said provision, the policy of insurance lapses and consequently the insurance company cannot be saddled with any liability arising out of an accident of a motor vehicle which had been transferred to some other person prior to the date of the accident. One of the learned judges (kodandaramayya, j) who constituted the full bench of the Andhra Pradesh high court in madineni kondaiah v yaseen fatima (1986 ACJ 1), took the view that when the policy of insurance obtained by the original owner of the vehicle is composite one covering the risks for his person, property and the third party claim, on passing of title, the transferee cannot enforce his claim in respect of any loss or damage to the person and the vehicle unless there is a novation, but in so far as the third party risk is concerned, the proprietory interest in the vehicle is not necessary and the principal liability continues till the transferor discharges the statutory obligation under sections 29-a and 31 read with Section 94 of the act and therefore till he complies with the requirement of Section 31 of the Act, the public liability will not cease and that constitutes the insurable interest to keep the policy alive in respect of the third party risks. The learned judge further held that it must be deemed that the transferor allowed the purchaser to use the vehicle in public place in the said transitional period and accordingly till the compliance of Section 31 of the act the liability of the transferor subsists and the policy is in operation so far as it relates to third party risks.

( 3 ) ON the basis of this judgment the division bench which heard the matter in the first instance felt that the decision in chennamma's case (supra) may require reconsideration and referred the question set out above for our opinion.

( 4 ) A perusal of the facts in the Andhra Pradesh high court decision will show that the vendee of the vehicle used the same without obtaining fresh insurance policy to protect third party interests and the vendee further did not lodge before the registering authority any information as required under Section 31 of the Act, for the purposes of transfer of registration of the vehicle in his name. In the present case, there is no dispute that the ownership of the vehicle had been transferred by the registering authority under the act though the insurance had not been taken by the transferee-owner. The vehicle belonged to one pyarejan who sold the same in favour of mohamad ruknoddin prior to the date of accident and there is no dispute that the name of mohamad ruknoddin was entered as the registered owner in the registration certificate of the vehicle on 14-9-1983, the date of the accident. Therefore, whatever observations that have been made in the decision of the Andhra Pradesh high co