IMPORTANT POINTS
1. A statutory policy would not cover the risk of a gratuitous passenger.
2. Liability of an insurer does not cease even if the owner or purchaser of the insured vehicle fails to give intimation of the transfer to the insurance company, as the purpose of legislation was to protect the rights and interests of the third party.
3. The insurance company owed no liability to pay compensation to the deceased who was a pillion rider because it was a statutory policy.

Headnote:Motor Vehicles Act, 1988—Sections 147 & 157—Failure of transferor to notify insurer of fact of transfer of ownership of insured vehicle—No difference whether u/s 103-A of 1939 Act or under section 157 of 1988 Act in so far as liability toward third party was concerned—Question whether gratuitous passenger would be covered by a statutory insurance policy? No—Even under 1939 Act unless there was a specific coverage of risk pertaining to a gratuitous passenger in policy, insurer was not liable—Deceased who suffered injuries and died was pillion rider on a two wheeler scooter—As the insurance policy was a statutory policy, it did not cover risk of death or bodily injury to gratuitous passenger—Impugned judgment fastening liability on Insurance Company was liable to be set aside.
       Held : Thus, in our view, the situation in law which arises from the failure of the transferor to notify the insurer of the fact of transfer of ownership of the insured vehicle is no different, whether under section 103-A of the 1939 Act or under section 157 of the 1988 Act in so far as the liability towards a third party is concerned. Thus, whether the old Act applies to the facts before us, or the new Act applies, as far as the deceased third party was concerned, the result would not be different. Hence, the contention of the appellant on the second issue must fail, either way, making a decision on the first contention unnecessary, for deciding the second issue. However, it may be necessary to decide which Act applies for deciding the third contention. In our view, it is not the transfer of the vehicle but the accident which furnishes the cause of action for the application before the tribunal. Undoubtedly, the accident took place after the 1988 Act had come into force. Hence it is the 1988 Act which would govern the situation.(Para 12)
       Thus, even under the 1939 Act the established legal position was that unless there was a specific coverage of the risk pertaining to a gratuitous passenger in the policy, the insurer was not liable. We find that clause (ii) of the proviso to section 95(1) has been eliminated while drafting section 147 of the 1988 Act. Under sub-section (1)(b) under the 1988 Act, compulsory policy of insurance required under the statute must now provide against any liability which may be incurred by the owner of the vehicle “in respect of the death of or bodily injury to any person including owner of the goods or authorised representative carried in the vehicle or damage to any property of a third party caused by or arising out of the use of the vehicle in a public place”.(Para 17)
       In our view, although the observations made in Asha Rani’s case (2003) 2 SCC 223 were in connection with carrying passengers in a goods vehicle, the same would apply with equal force to gratuitous passengers in any other vehicle also. Thus, we must uphold the contention of the appellant-insurance company that is owned no liability towards the injuries suffered by the deceased Rajinder Singh who was a pillion rider, as the insurance policy was a statutory policy, and hence it did not cover the risk of death of or bodily injury to gratuitous passenger.(Para 20)

Judgement Key Points

The law laid down in this case establishes that a statutory insurance policy under the Motor Vehicles Act, 1988, is primarily intended to cover the risks to third parties, including liability for death or bodily injury caused by the use of the vehicle in a public place. However, such a policy does not automatically extend coverage to gratuitous passengers, such as pillion riders, unless explicitly specified in the policy. The case clarifies that unless there is specific coverage for gratuitous passengers, the insurer is not liable for injuries or death of such passengers. Additionally, the case emphasizes that the liability of the insurer in cases of transfer of ownership or transfer of the insured vehicle’s policy depends on whether proper notice and transfer procedures are followed, but the primary focus remains on whether the injury or death falls within the scope of coverage provided by the policy. The accident itself, rather than the transfer of ownership, is the key factor in determining the applicable law governing the liability.

JUDGMENT

Srikrishna, J.—The core issue involved in this appeal is : Whether a statutory insurance policy under the Motor Vehicles Act, 1988, intended to cover the risk to life or damage to properties of third parties, would cover the risk of death or injury to a gratuitous passenger carried in a private vehicle.

2. Respondent No.5 Bal Krishan had insured his scooter with the appellant-insurance company for the period 7.3.1989 to 6.3.1990. For covering liability to pillion passengers endorsement of I.M.T. 70 pertaining to accident to unnamed hirer/driver/pillion passenger, is required on the insurance policy, which may be obtained by payment of additional premium. The insurance policy covering the scooter of respondent no.5 did not contain an endorsement of IMT 70.

3. On 23rd March 1989 the scooter was admittedly sold by respondent no.5 to respondent no.1. Tilak Raj. It is also an admitted position that the registration certificate of the scooter was transferred in the name of Tilak Raj but no notice thereto was given by the transferor respondent no.5 to the appellant-insurance company for transfer of the insurance policy and the insurance certificate in the name of the transferee i.e. respondent no.1. With effect from 1.7.1989 the Motor Vehicle Act, 1939 (hereinafter referred to as the ‘1939 Act’) was repealed and the Motor Vehicle Act. 1988 (hereinafter referred to as the ‘1988 Act’) came into force. On 31.10.1989 one Rajinder Singh, who was riding as a pillion rider while the scooter was being driven by respondent no.1, died as a result of an accident. Respondents 2 to 4 being the legal heirs (wife and minor daughters) of the deceased Rajinder Singh moved an application under section 166 of the Motor Vehicles Act, 1988, seeking compensation for the death of the deceased Rajinder Singh. This petition was opposed by the insurance company on two grounds (a) that the deceased was a pillion rider and the insurance policy did not cover the liability towards a pillion rider and, (b) that, although, the original insurer respondent no.5 had sold the scooter to respondent no.1 before the accident, neither was any intimation of such sale was given, nor was the insurance policy got transferred in favour of respondent no.1. Respondent no.5 denied his liability on the ground that he had ceased to be the owner of the scooter much prior to the accident. The Motor Accidents Claims Tribunal (hereinafter referred to as ‘the tribunal’) made an award dated 8.12.1992 and came to the conclusion that the accident had taken place due to rash and negligent driving on the part of respondent no.1. It also held that the claimants (respondents 2 to 4) were entitled to a total compensation of Rs. 3,89,000/-. The tribunal absolved the appellant-insurance company from liability on the ground that no notice of the transfer of the insured vehicle had been given to the appellant-insurance company in the manner prescribed by the 1939 Act. Only respondent no.1 was held liable for payment of the compensation determined by the tribunal together with interest and costs.

4. Respondent no.1 appealed against the award by FAO No. 9/93 before the High Court and assailed the findings of the tribunal on all the issues, particularly its absolution of the insurance company from liability. Respondents 2 to 4 also filed cross-objections and sought increase in the compensation awarded. The High Court by the impugned judgment upheld the finding, as to the quantum of compensation at Rs. 3,89,000/- but set aside the finding of the tribunal that the insurance company was not liable under the policy and held that the insurance company was jointly and severally liable along with the appellant for the payment of the amount of compensation determined and awarded. Being aggrieved thereby, the appellant-insurance company is before this Court.

5. The learned counsel for the appellant-insurance company has urged three contentions in support of the appeal : (a) The law applicable in determining

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2006 Supreme(SC) 310

Cases Referred (11)