The main legal point established in the judgment is that the insurance policy lapses upon the transfer of the vehicle, making both the transferor and the transferee liable to pay compensation in the event of an accident.

( 1 ) IN this reference under Section 7 of the Karnataka High Court Act, the following questions are referred for the opinion of the Full Bench :-" (1) Whether the Full Bench decision of this Court reported in ILR 1990 Kar 1 : (AIR 1990 Kar 116 (FB) applies to a case only where the transfer of ownership of a vehicle is entered in the Certificate of Registration as required under Section 31 of the Motor Vehicles Act, 1939, and has no application where it is not so entered ? (2) If the answer to the above question is in the negative, whether the decision reported in 1990 (2) Kar LJ 281 is good law ?"

( 2 ) SINCE the reference has arisen in a review petition, the brief facts of the case leading to the reference are stated as under :- on 24-2-1987, the car bearing Registration No. MR- 5694 driven by respondent-5, while proceeding on Saundatti-Munawalli Road in Belgaum District, dashed against P. W. 1 Gujjawwa and Tulasawwa, causing injuries to the former and instant death of the latter person. The accident and the resultant death of Tulasawwa and injuries sustained by P. W. 1 are not disputed. It is also established that the accident was due to the negligence of the driver of the vehicle.

( 3 ) THE Insurance Company (respondent4 herein) resisted the claim on the ground that since the original owner i. e. respondent-2, had sold and delivered possession of the vehicle to respondent-1 prior to the accident on 12-2-1987, the insurance policy issued to the original owner lapsed immediately on the event of a sale. As such, the car was not at all covered by insurance on 24-2-1987, the date of the accident and consequently it is not liable to meet the claim.

( 4 ) UPON applying the ratio of the decision in ILR 1990 (I) Kar 1 : (AIR 1990 Kar 116) while absolving the Insurance Company and the transferor of their liability, the Accident Claims Tribunal held respondent-1 the transferee who was the owner of the car on the date of the accident as well as respondent-3, the driver, liable to pay the compensation to the claimants. The correctness and legality of the award being challenged by the petitioner (the transferee of the vehicle) in M. F. A. No. 2027 of 1990, in so far as he is made liable to pay the compensation, the Division Bench has by its judgement dated 5-11-1990 dismissed the appeal and thereby affirmed the award. The petitioner has sought for review of the said judgement on the ground that there is an error apparent in the order since the Court has failed to appreciate that the Full Bench has not disagreed with the view taken by the Andhra Pradesh High Court in AIR 1986 AP 62 (FB) to the effect that so long as the obligations under the statute are not fulfilled by the transferor as contemplated under Section 31 read with Section 94 of the Motor Vehicles Act, the public liability will not cease and keeps the policy alive in respect of third party risk. Consequently, the insurer is liable to indemnify the party.

( 5 ) CERTAIN particulars relating to the transfer of ownership of the vehicle may be relevant to appreciate the point in issue. Admittedly, on 12-2-1987 the vehicle was transferred by respondent-2 the original owner to the petitioner. 24-2-1987 is the date of the accident. However, there was no assignment of the original policy of insurance to the transferee, but a fresh policy was taken by the transferee on 1-4-1987. Thereafter, the transfer of the vehicle came to be registered under Section 31 of the Motor Vehicles Act.

( 6 ) IN the circumstances, the only question that arose for consideration in the appeal was whether the policy taken by the transferor of the vehicle was subsisting on the date of the accident so as to enure to the benefit of the purchaser of the vehicle and saddle the Insurance Company with the liability for payment of compensation. Relying upon the ruling of the Full Bench in National Insurance Company Ltd. v. Mallikarjun, ILR 1990 (1) Kar 1 : (AIR 1990 Kar 116) to the effect that if the insure