Liability for damages to third party.

Veeraswami, J.

(1) The appeal and the Memorandum of Cross objections raise a question of importance as to accident liability to third party under motor insurance and come before us on a reference by Ramakrishnan, J. The precise point for our decision is whether the insurer of a motor car is not liable to a third party on a comprehensive policy of insurance on account of an accident to him by the negligence of the assured's driver, because the accident took place after the assured, the owner of the car, had sold it to another and before the purchaser got an extension of the cover to him or obtained a fresh policy. The Court below allowed as it was bound to, Madras Motor Insurance Co. Ltd. v. Mohammed Mustafa Badsha, AIR1961Mad208 and held against the insurer. Ananthanarayanan, J. was there of the view that a policy of insurance did not lapse the moment the insured parted with the ownership of the insured vehicle and that notwithstanding such transfer and ownership, the insurer, having regard to the terms of S. 96 of the Motor Vehicles Act, could not escape his liability on the policy in respect of third party risks.

The lower Court decreed the suit against defendants 1 and 3 for Rs. 1,000. The plaintiff has preferred an appeal dissatisfied with the quantum of damages awarded by the Court below and the 3rd defendant has preferred cross-objections canvassing the correctness of the view of Ananthanarayanan, J.

(2) The facts of this case are not now in dispute. A Vauxhall saloon with registration mark MYA 4446 owned by one Venkataswaminappa, 2nd defendant, was insured in his name with Hercules Insurance Company Ltd., at its branch office at Madras under a Comprehensive policy covering third party risks. During the currency of the policy, the 2nd defendant sold his car to his daughter, the 1st defendant on August 11, 1958 and the transfer of ownership to her was effected by the Regional Transport Officer at Bangalore on August 29, 1958. But the Insurance Company, the 3rd defendant, had no knowledge of this transfer until December 5, 1958. On that date the 1st defendant applied for and obtained on the same date a fresh policy of insurance from the 3rd defendant in her name. This policy clearly mentioned its effective date of commencement to the December 5, 1958.

In the meantime on December 4, 1958 the car knocked down the plaintiff from his cycle as he was riding from the Fort along the Munroe statute road at Madras, resulting in fracture of his right forearm. The man who was driving the car at the time was prosecuted for criminal negligence and was convicted. The plaintiff, in the circumstances brought the suit claiming Rs. 6,000 against the defendants as damages. He impleaded the 3rd defendant, the insurer, as liable to him under the third party cover. The court below found the negligence of the Driver, and fixing the damages at Rs. 1,000 decreed the suit against defendants 1 and 3, the 2nd defendant having died pendente lite. In doing so, the Court below relying on AIR1961Mad208 rejected the 3rd defendant's contention that the policy had terminated with the sale of the car in August 1958, and that it was not in force on the date of the accident to make him liable to the suit claim. Before proceeding further, to conclude the facts we must mention that when the 1st defendant applied for and got a fresh policy on December 5, 1958, she did not apprise the Company of the accident that had occurred the previous day.

(3) The policy of insurance issued to the 2nd defendant is in the usual form and has been issued in the name of the 2nd defendant in respect of his car specified in it with details as to its name, cubic capacity, year of manufacture, value, type of body, seating capacity and as to whether it was new or second hand, and provides for comprehensive cover including third party risks. The pro-poser, among other queries, was asked whether he was the sole owner of the car and whether it was registered in his name and the 2n