Godavari Finance Co Vs. Degala Satyanarayanamma and Others  INSC 620 (10
S.B. SINHA & V.S. SIRPURKAR
REPORTABLE CIVIL APPEAL NO. 2725 OF 2008 (Arising out of SLP (C) NO. 21500
of 2006) S.B. SINHA, J.
1. Leave granted.
2. Whether a financer would be an owner of a motor vehicle within the
meaning of Section 2(30) of the Motor Vehicles Act, 1988 (for short the Act) is
the core question involved herein.
3. Ch. Praveen Kumar, fourth respondent, was the owner of a vehicle being a
mini truck of 'Mahendra Nissan' make purchased by him having been financed by
the appellant for a sum of Rs.50,000/-. The said loan was discharged by him by
the end of 1995.
4. Indisputably the said vehicle had all along been in possession and
control of the fourth respondent herein. It met with an accident on 29th May,
1995. In the said accident one Degala Balakrishana died. Respondent Nos. 1 and
2 filed an application claiming compensation alleging rash and negligent
driving on the part of the driver of the said vehicle.
5. On or about 18th June, 1998, the appellant herein was impleaded in the
proceeding on the premises that it was the financer of the said vehicle.
6. The name of the appellant as a financer indisputably was incorporated in
the Registration Book of the vehicle. However, the extract of Registration Book
revealed that the vehicle was registered in the name of the 4th respondent only
w.e.f. 3rd June, 1992. It further revealed that the said vehicle was held under
a Hire Purchase Agreement with the appellant w.e.f.
6th February, 1995 which was cancelled on 10th November, 1995.
7. Appellant herein filed a written statement stating that on the date of
accident the ownership of the vehicle was solely with the 4th respondent and
not with the appellant. The Motor Vehicle Accident Claims Tribunal by a
judgment dated 28th October, 1998 awarded a sum of Rs.2,08,000/- in favour of
the respondent Nos. 1 and 2. The objection of the appellant that it was not
liable to pay any amount of compensation together with the owner of the
vehicle, driver and insurance company was rejected by the Tribunal stating:-
"In the light of the decisions cited above, the legal position that
emerges is that it is the person who is in actual possession and control of the
vehicle, who can be brought under the definition of owner, under the Act in
order to make him tortuously liable for the acts of the servant and the burden
lies upon the party, who asserts it and on their failure adverse inference can
be drawn and the financier can also fastened with liability alongwith the
registered owner. In our case, R-4 except taking a plea that the vehicle is
under the control of the owner R- 2, it failed to file documents to show the
nature of the transaction between it and R-2 and who is in actual control of
the vehicle. The mere fact that RW.1, widow of the deceased admitted in her
evidence that the vehicle belong to R-2 and it is in his custody, in my view,
it cannot absolve R-4 from the burden of establishing this fact in order of
avoid the liability. P.W.1 a widow and a third party cannot be attributed with
knowledge of control over the vehicle and the actual contract between the
parties. Thus, it is quite evident that R-2 and R-4 did not place any material
to show as to who is in actual control of the vehicle and what are the rights
of R-4 over it."
8. An appeal preferred thereagainst by the appellant herein, by reason of
the impugned judgment, dated 8th August, 2006 has been dismissed.
9. Ms. Bina Madhavan, appearing on behalf of the appellant, would submit :
(1) In terms of Section 168 of the Act a financer cannot be held liable to
pay compensation as the definition of an "owner" as contained in
Section 2(30) of the Act would mean only a "registered owner".
(2) In view of the fact that it was not the case of the claimants that the
appellant was in possession or control over the vehicle at the time of
accident, the impugned judgment is wholly unsustainable.
(3) The finding of the learned Tribunal as also the High Court that
appellant as a registered owner was liable for payment of compensation is
10. Indisputably, as on November 10, 1995 the Hire Purchase Agreement was
cancelled and an information thereabout was sent to the Deputy Transport
11. Appellant admittedly was the financer. As the vehicle was the subject
matter of Hire Purchase Agreement, the appellant's name was mentioned in the
12. Section 2 of the Act provides for interpretation of various terms
It starts with the phrase "Unless the context otherwise requires".
The definition of "owner" is a comprehensive one. The interpretation
clause itself states that the vehicle which is the subject matter of a Hire
Purchase Agreement, the person in possession of vehicle under that agreement
shall be the owner. Thus, the name of financer in the Registration Certificate
would not be decisive for determination as to who was the owner of the vehicle.
We are not unmindful of the fact that ordinarily the person in whose name the
Registration Certificate stands should be presumed to be the owner but such a
presumption can be drawn only in the absence of any other material brought on
record or unless the context otherwise requires.
13. In case of a motor vehicle which is subjected to a hire purchase
agreement, the financer cannot ordinarily be treated to be the owner. The
person who is in possession of the vehicle, and not the financer being the
owner would be liable to pay damages for the motor accident.
14. Motor Accident Claims Tribunals are constituted in terms of Section 165
of the Act occurring in Chapter XII thereof. Section 166 lays down the manner
in which the application for compensation should be filed and who can file the
same. Section 168 deals with the award of the Claims Tribunal, sub-section (1)
thereof reads as under :- "168. Award of the Claims Tribunal. (1) On
receipt of an application for compensation made under section 166, the Claims
Tribunal shall, after giving notice of the application to the insurer and after
giving the parties (including the insurer) an opportunity of being heard, hold
an inquiry into the claim or, as the case may be, each of the claims and,
subject to the provisions of section 162 may make an award determining the
amount of compensation which appears to it to be just and specifying the person
or persons to whom compensation shall be paid and in making the award the
Claims Tribunal shall specify the amount which shall be paid by the insurer or
owner or driver of the vehicle involved in the accident or by all or any of
them, as the case may be:
Provided that where such application makes a claim for compensation under
section 140 in respect of the death or permanent disablement of any person,
such claim and any other claim (whether made in such application or otherwise)
for compensation in respect of such death or permanent disablement shall be
disposed of in accordance with the provisions of Chapter X."
15. In terms of the aforesaid provisions, the Tribunal is required to issue
a notice to the insurer and after giving the parties, including the insurer, an
opportunity of being heard, it must hold an inquiry into the claims and
determine the person who would be liable therefor. It can make an award and
while doing so it can specify the amount which could be paid by the insured or
owner or driver of the vehicle involved in the accident or by all or any of
them, as the case may be.
16. An application for payment of compensation is filed before the Tribunal
constituted under Section 165 of the Act for adjudicating upon the claim for
compensation in respect of accident involving the death of, or bodily injury
to, persons arising out of the use of motor vehicles, or damages to any
property of a third party so arising, or both. Use of the motor vehicle is a
sine qua non for entertaining a claim for compensation. Ordinarily if driver of
the vehicle would use the same, he remains in possession or control thereof.
Owner of the vehicle, although may not have anything to do with the use of
vehicle at the time of the accident, actually he may be held to be
constructively liable as the employer of the driver. What is, therefore,
essential for passing an award is to find out the liabilities of the persons
who are involved in the use of the vehicle or the persons who are vicariously
liable. The insurance company becomes a necessary party to such claims as in
the event the owner of the vehicle is found to be liable, it would have to
reimburse the owner inasmuch as a vehicle is compulsorably insurable so far as
a third party is concerned, as contemplated under Section 147 thereof.
Therefore, there cannot be any doubt whatsoever that the possession or
control of a vehicle plays a vital role.
16. The question came up for consideration before this Court in Rajasthan
State Road Transport Corporation vs. Kailash Nth Kothari and others :
(1997) 7 SCC 481where the owner of a vehicle rented the bus to Rajasthan
State Road Transport Corporation. It met with an accident. Despite the fact
that the driver of the bus was an employee of the registered owner of the
vehicle, it was held :- "Driver of the bus, even though an employee of the
owner, was at the relevant time performing his duties under the order and
command of the conductor of RSRTC for operation of the bus. So far as the passengers
of the ill-fated bus are concerned, their privity of contract was only with the
RSRTC to whom they had paid the fare for travelling in that bus and their
safety therefore became the responsibility of the RSRTC while travelling in the
bus. They had no privity of contract with Shri Sanjay Kumar, the owner of the
bus at all. Had it been a case only of transfer of services of the driver and
not of transfer of control of the driver from the owner to RSRTC, the matter
may have been somewhat different.
But on facts in this case and in view of Conditions 4 to 7 of the agreement
(supra), the RSRTC must be held to be vicariously liable for the tort committed
by the driver while plying the bus under contract of the RSRTC. The general
proposition of law and the presumption arising therefrom that an employer, that
is the person who has the right to hire and fire the employee, is generally
responsible vicariously for the tort committed by the employee concerned during
the course of his employment and within the scope of his authority, is a
rebuttable presumption. If the original employer is able to establish that when
the servant was lent, the effective control over him was also transferred to
the hirer, the original owner can avoid his liability and the temporary employer
or the hirer, as the case may be, must be held vicariously liable for the tort
committed by the employee concerned in the course of his employment while under
the command and control of the hirer notwithstanding the fact that the driver
would continue to be on the payroll of the original owner. The proposition
based on the general principle as noticed above is adequately rebutted in this
case not only on the basis of the evidence led by the parties but also on the
basis of Conditions 6 and 7 (supra), which go to show that the owner had not
merely transferred the services of the driver to the RSRTC but actual control
and the driver was to act under the instructions, control and command of the
conductor and other officers of the RSRTC."
18. The question again came up for consideration recently before this Court
in National Insurance Co. Ltd. vs. Deepa Devi and others : 2007 (14) SCALE 168.
This Court in that case was dealing with a matter where the vehicle in question
was requisitioned by the State Government while holding that the owner of the
vehicle would not be liable it was opined :- "10. Parliament either under
the 1939 Act or the 1988 Act did not take into consideration a situation of
this nature. No doubt, Respondent Nos. 3 and 4 Page 4561 continued to be the
registered owner of the vehicle despite the fact that the same was
requisitioned by the District Magistrate in exercise of its power conferred
upon it under the Representation of People Act. A vehicle is requisitioned by a
statutory authority, pursuant to the provisions contained in a statute. The
owner of the vehicle cannot refuse to abide by the order of requisition of the
vehicle by the Deputy Commissioner. While the vehicle remains under
requisition, the owner does not exercise any control thereover. The driver may
still be the employee of the owner of the vehicle but he has to drive it as per
the direction of the officer of the State, who is put in-charge thereof. Save
and except for legal ownership, for all intent and purport, the registered
owner of the vehicle loses entire control thereover. He has no say as to
whether the vehicle should be driven at a given point of time or not. He cannot
ask the driver not to drive a vehicle on a bad road. He or the driver could not
possibly say that the vehicle would not be driven in the night. The purpose of
requisition is to use the vehicle.
For the period the vehicle remains under the control of the State and/ or
its officers, the owner is only entitled to payment of compensation therefore
in terms of the Act but he cannot not exercise any control thereupon. In a
situation of this nature, this Court must proceed on the presumption that the
Parliament while enacting the 1988 Act did not envisage such a situation. If in
a given situation, the statutory definitions contained in the 1988 Act cannot
be given effect to in letter and spirit, the same should be understood from the
common sense point of view."
In so opining the Court followed Kailash Nath Kothari (supra).
The legal principles as noticed hereinbefore, clearly show that the
appellant was not liable to pay any compensation to the claimants.
19. For the aforementioned reasons, the impugned judgment cannot be
sustained. It is set aside accordingly. The appeal is allowed. No costs.