The transfer of ownership of a vehicle is complete when possession and registration papers are handed over to the new owner, and insurance policies may not cover damages for the new owner without a specific agreement.

Mr. Justice P.N. Nag, President — This appeal is directed against the order of the District Forum, Una, dated 4.8.1997 whereby the complaint of the appellants/complainants (hereinafter to be referred to as the complainants) has been dismissed.

2. The undisputed facts which emerge are that a Maruti Van (Taxi) No. HP-02-3536 owned by Shri Kishan Chand, complainant No. 1, was insured with the respondents/opposite parties hereinafter to be referred to as the Insurance Company for the period from 17.4.1995 to 16.4.1996 for a sum of Rs. 1,50,000/- and during the period when the insurance policy was in force, the vehicle was stolen. FIR was lodged and the claim for the payment of insured amount of Rs. 1,50,000/- was preferred with the Insurance Company. After investigation the Insurance Company repudiated the claim of the complainants on the ground that since the vehicle, in question, was sold by the complainant No. 1 to the complainant No. 2 and the possession was also delivered as per agreement dated 21.8.1995 i.e. before the occurrence of the theft, there existed no privity of contract between the Insurance Company and the complainant No. 2 and the Insurance Company is not liable to pay the compensation. The complainants, therefore, have prayed for the payment of insured amount of Rs. 1,50,000/- alongwith compensation of Rs. 50.000/- for mental agony and harassment, totalling Rs. 2,00,000/-.

3. Mr. Anil Sharma, learned Counsel for the complainants very strongly contends that the vehicle was sold before the occurrence of theft by the complainant No. 1 to complainant No. 2 is factually not correct. Full and complete consideration was not paid by the complainant No. 2 to complainant No. 1 and there is only an agreement to sell and not a transfer, as such the complainant No. 1 still continues to be the owner of the vehicle and is entitled to damages under the contract of insurance.

4. In this context we may notice that the vehicle was handed over by the complainant No. 1 to complainant No. 2 alongwith registration papers before the occurrence of theft and that the driver of the vehicle complainant No. 2 was driving the vehicle. It is settled principle of law that the transfer of vehicle is complete when the owner sells the same to the transferee with the handing over the vehicle and registration papers. Notwithstanding a smaller part of consideration even if we assume was still to be paid by the complainant No. 2 to the complainant No. 1, nevertheless the fact remains that the possession of the vehicle alongwith registration papers was delivered to the complainant No. 2 by complainant No. 1 and the transaction of transfer was complete. The contention of the learned Counsel is rejected.

5. The next submission raised by the learned Counsel for the complainants that the complainant No. 2 is also entitled to damages that accrued on account of theft of the vehicle under Circular No. CHRO: MOT: JR: A: 97 dated 19.1.1997 issued by the Insurance Company. This circular shall be placed on record. The clarification given in this circular is about the interpretation of Section 157 of the Motor Vehicles Act, 1988, Section 157 covers the liability limited to third party risk only and does not cover the case of transferee.

6. In M/s. Complete Insulations (P.) Ltd. v. New India Assurance Company Ltd., I (1996) CPJ 1 (SC)=AIR 1996 SC 586, the Supreme Court has clearly held that:

“............ The transferee of the vehicle could not be said to be third party qua the vehicle in question. It is only in respect of third party risks that Section 157 of the New Act provides that the certificate of insurance together with the policy of insurance described therein "shall be deemed to have been transferred in favour of the person to whom the motor is transferred". If the policy of insurance covers other risks as well e.g. damage caused to the vehicle of the insured himself, that would be a matter falling outside Chapter XI of the New Act and in the realm of con