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The Motor Vehicles Act, 1988

150. Rights  of third  parties against  insurers on insolvency of the insured. 

  1. Where  under any  contract of  insurance effected in accordance with  the provisions  of this  Chapter, a person is insured against liabilities which he may incur to third parties, then--
  1. in  the event of the person becoming insolvent or making a composition or arrangement with his creditors, or
  2. where the insured person is a company, in the event of a winding up  order being  made or  a resolution  for  a  voluntary winding up  being passed  with respect  to the  company or  of  a receiver or  manager of  the company's  business  or  undertaking being duly  appointed, or  of possession  being taken  by  or  on behalf of  the holders  of any  debentures secured  by a floating charge of  any property comprised in or subject to the charge, f, either before or after that event, any such liability is incurred by the  insured person,  his rights against the insurer under the contract in  respect  of  the  liability  shall,  notwithstanding anything to  the contrary in any provision of law, be transferred to and  vest in  the third  party to  whom the  liability was  so incurred.
  1. Where  an order  for the  administration of  the estate  of a deceased debtor  is made  according to the law of insolvency, then, if  any debt provable in insolvency is owing by the deceased in respect of  a liability  to a  third party  against which  he was  insured under a contract of  insurance in  accordance  with  the  provisions  of  this Chapter, the  deceased debtor's  rights against the insurer in respect of that  liability shall,  notwithstanding anything to the contrary in any provision of law, be transferred to and vest in the person to whom the debt is owing.
  2. Any  condition in  a policy  issued for  the purposes of this Chapter purporting  either directly  or indirectly to avoid the policy or to alter the rights of the parties there under upon the happening to the insured  person of  any of  the events  specified in clause (a) or clause (b)  of sub-section  (1) or upon the making of an order for the administration of the estate of a deceased debtor according to the law of insolvency shall be of no effect.
  3. Upon a transfer under sub-section (1) or sub-section (2), the insurer shall be under the same liability to the third party as he would have been to the insured person, but-
  1. if  the liability  of the  insurer to the insured person exceeds the  liability of  the insured person to the third party, nothing in  this Chapter  shall affect  the rights of the insured person against the insurer in respect of the excess, and
  2. if the liability of the insurer to the insured person is less than the liability of the insured person to the third party, nothing in  this Chapter  shall affect  the rights  of the  third party against the insured person in respect of the balance.

Motor Vehicles Act, 1988 Back

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