1999 Supreme(MP) 737

High Court Of Madhya Pradesh
S. P. SRIVASTAVA, R. B. DIXIT
NATIONAL INSURANCE CO.LTD. - Appellant
Versus
RAM MURTI - Respondents
M. A. 292 Of 1999
Decided On : 09/28/1999

The statutory fiction created under Section 157(1) of the Motor Vehicles Act, 1988, operates independently of the transferee's compliance with the requirements of Section 157(2). The fiction deems the certificate of insurance and the policy to have been transferred to the transferee from the date of transfer, irrespective of whether the insurer has been notified or not. This fiction is intended to protect the interests of third parties and ensure that the insurer does not escape liability for third-party claims arising from accidents involving the transferred vehicle.

Headnote:

MOTOR VEHICLES ACT - SECTION 157 - TRANSFER OF INSURANCE POLICY - LEGAL FICTION - LIABILITY OF INSURER - THIRD PARTY RISK - INSURANCE COVER NOTE - STATUTORY FICTION - PURPOSE AND SCOPE - DUTY OF TRANSFEREE - TIME PERIOD - CONDONATION OF DEFAULT - RECOGNITION OF TRANSFER BY INSURER - EFFECT - LAPSE OF POLICY - CONSTRUCTION OF SECTION 157(2) - RATIO DECIDENDI OF VARIOUS JUDICIAL PRECEDENTS - APPLICABILITY OF SECTION 157 TO NEW MOTOR VEHICLES ACT, 1988.

Fact of the Case:

An accident involving an insured motor vehicle occurred after its transfer to a new owner. The transferee had obtained an insurance cover note from the insurer on the date of the accident, but the insurance policy was issued only two days later. The insurer denied liability for the compensation awarded by the Motor Accidents Claims Tribunal, arguing that the policy had lapsed due to the transfer of ownership and the failure of the transferee to comply with the requirements of Section 157(2) of the Motor Vehicles Act, 1988.

Finding of the Court:

The court held that the insurer was liable to pay the compensation despite the transfer of ownership and the transferee's failure to comply with Section 157(2). The court interpreted Section 157(1) as creating a statutory fiction that the certificate of insurance and the policy are deemed to have been transferred to the transferee from the date of transfer, irrespective of whether the insurer has been notified or not. This fiction is intended to protect the interests of third parties and ensure that the insurer does not escape liability for third-party claims arising from accidents involving the transferred vehicle.

Issues: 1. Whether the insurer is liable to pay compensation for an accident involving a transferred motor vehicle, even if the transferee has not complied with the requirements of Section 157(2) of the Motor Vehicles Act, 1988? 2. Whether the statutory fiction created under Section 157(1) of the Motor Vehicles Act, 1988, is applicable only if the transferee complies with the requirements of Section 157(2)? 3. Whether the insurer can escape liability by arguing that the policy lapsed due to the transfer of ownership, even though it had issued an insurance cover note to the transferee before the accident?

Ratio Decidendi: 1. The statutory fiction created under Section 157(1) of the Motor Vehicles Act, 1988, operates independently of the transferee's compliance with the requirements of Section 157(2). The fiction deems the certificate of insurance and the policy to have been transferred to the transferee from the date of transfer, irrespective of whether the insurer has been notified or not. This fiction is intended to protect the interests of third parties and ensure that the insurer does not escape liability for third-party claims arising from accidents involving the transferred vehicle. 2. Section 157(2) of the Motor Vehicles Act, 1988, does not act as a proviso to Section 157(1) and does not provide the foundation upon which the statutory fiction rests. The statutory fiction continues to be available for a period of fourteen days within which the transferee owner of the offending motor vehicle has to move an application as contemplated under Section 157(2) of the Act securing his right to get the insurer saddled with the liability in regard to the payment of amount of compensation on the strength of the same policy which had been issued in favour of the transferor of the offending motor vehicle. 3. The insurer cannot escape liability by arguing that the policy lapsed due to the transfer of ownership, even though it had issued an insurance cover note to the transferee before the accident. The insurance cover note is a recognition by the insurer of the transferee as the registered owner of the offending motor vehicle and an acceptance of the premium. It creates a fresh contract of insurance between the insurer and the transferee, which is effective from the date of the cover note.

Final Decision: The court dismissed the insurer's appeal and upheld the Motor Accidents Claims Tribunal's decision holding the insurer liable for the payment of compensation.