M/S.
Complete Insulations (P) Ltd. Vs. New India Assurance Company Ltd. [1995] INSC
711 (21 November 1995)
Ahmadi
A.M. (Cj) Ahmadi A.M. (Cj) Agrawal, S.C.
(J) Manohar Sujata V. (J) Ahmadi, Cji
CITATION:
1996 AIR 586 1996 SCC (1) 221 1995 SCALE (6)629
ACT:
HEAD NOTE:
A Maruti
Car with registration No. CHK-9253 was purchased in the name of Mrs. Archana Wadhwa
for which the respondent, M/s. New India Assurance Company Ltd., had issued a
comprehensive insurance policy. The premium for the insurance was paid by the
appellant company in whose favour the car was transferred. The registration of
the car was transferred to the appellant on 15.6.1989. On 26.6.1989, the
appellant intimated the transfer of registration and asked for transfer of the
insurance policy. A reminder was sent on 24.7.1989. The respondent did not
reply to the two letters.
On
17.9.1989 the car met with a serious accident in which the Managing Director of
the appellant suffered serious injuries and his sister died. On 11.10.1989 the
appellant asked for the assessment of the damage as the car was a total loss.
The respondent did not respond. A reminder dated 26.12.1989 met the same fate.
The appellant got a notice issued to which the respondent replied that the
appellant had no insurable interest in the car. The appellant filed the
complaint before Consumer Disputes Redressal Commission, Chandigarh, which directed the respondent to
pay Rs.83,000/- i.e. the insured value of the vehicle, as the vehicle was a
total loss, along with costs and interest. The National Consumer Disputes Redressal
Commission set aside the order of the Commission at Chandigarh, dismissed the complaint and
granted cost of the appeal. Hence the appeal.
The
moot question involved in the case is whether on the above facts, without the
insurance policy being transferred in the name of the appellant, it was
entitled to be indemnified by the insurer. The National Consumer Disputes Redressal
Commission held that under Section 157 of the Motor Vehicle Act, 1988,
(hereinafter called 'the New Act') a certificate of insurance is deemed to have
been transferred in favour of the person to whom the vehicle is transferred but
that the said provision applied only in relation to third party risk and did
not apply to a policy covering risk of damage to the vehicle or person of the
insured. The National Commission placed reliance on a judgment of the High
Court of Andhra Pradesh in Madinani Kondaiah & Ors. etc. v. Yaseen Fatima
& Ors. etc. [AIR 1986 Andhra Pradesh 62].
Before
proceeding further it is necessary to examine the provisions of Section 103-A
of the Motor Vehicle Act, 1939, hereinafter called the 'Old Act' and Section
157 of the New Act, in juxtaposition:
Old
Act 103-A : TRANSFER OF CERTIFICATE OF INSURANCE (1) Where a person in whose favour
the certificate of insurance has been issued in accordance with the provisions
of this Chapter proposes to transfer to another person the ownership of the
motor vehicle in respect of which such insurance was taken together with the
policy of insurance relating thereto, he may apply in the prescribed form to
the insurer for the transfer of the certificate of insurance and the policy
described in the certificate in favour of the person to whom the motor vehicle
is proposed to be transferred, and if within fifteen days of the receipt of
such application by the insurer, the insurer has not intimated the insured and
such other person his refusal to transfer the certificate and the policy to the
other person, the certificate of insurance and the policy described in the
certificate shall be deemed to have been transferred in favour of the person to
whom the motor vehicle is transferred with effect from the date of its
transfer.
(2)
The insurer to whom any application has been made under sub-section (1) may
refuse to transfer to the other person the certificate of insurance and the
policy described in that certificate, if he considers it necessary so to do,
having regard to - a) the previous conduct of the other persons, - (i) as a
driver of motor vehicles; or (ii) as a holder of the policy of insurance in
respect of any motor vehicle; or b) any conditions which may have been imposed
in relation to any such policy held by the applicant; or c) the rejection of
any proposal made by such other person for the issue of a policy of insurance
in respect of any motor vehicle owned or possessed by him.
(3)
Where the insurer has refused to transfer, in favour of the person to whom the
motor vehicle has been transferred, the certificate of insurance and the policy
described in that certificate, he shall refund to such transferee the amount,
if any, which, under the terms of the policy, he would have had to refund to
the insured for the unexpired term of such policy
."
New Act "157 : TRANSFER OF CERTIFICATE OF INSURANCE (1) Where a person in
whose favour the certificate of insurance has been issued in accordance with
the provisions of this Chapter transfers to another person the ownership of the
motor vehicle in respect of which such insurance was taken together with the policy
of insurance relating thereto, the certificate of insurance and the policy
described in the certificate shall be deemed to have been transferred in favour
of the person to whom the motor vehicle is transferred with effect from the
date of its transfer.
(2)
The transferee shall apply within fourteen days from the date of transfer in
the prescribed form to the insurer for making necessary changes in regard to
the fact of transfer in the certificate of insurance and policy described in
the certificate in his favour and the insurer shall make the necessary changes
in the certificate and the policy of insurance in regard to the transfer of
insurance." On a plain reading of Section 103-A it is obvious that the
insurer could in a given case refuse to transfer the certificate of insurance
and the policy described therein.
It is
only if the insurer fails to convey the refusal within fifteen days that the
deeming clause comes into operation.
However,
Section 157 of the New Act makes the transfer of the Certificate of Insurance
along with the insurance policy described therein automatic along with the
transfer of the motor vehicle together with the policy of insurance to the
purchaser. This is clearly an improvement over the previous provision on the
subject.
Thus
under the Old Act the insured was required to apply in the prescribed form to
the insurer for transfer of the certificate of insurance and the policy
described therein. Once such an application was made the insurer had to
communicate its refusal within fifteen days of the receipt of the application
for transfer failing which the certificate of insurance and the policy
described therein "shall be deemed to have been transferred" in favour
of the transferee. This shows that the insurer had the right to refuse transfer
of the certificate of insurance and the policy described therein provided the
right was exercised within the stipulated time of fifteen days. Section 157 of
the New Act introduces a deeming provision whereby the transfer of the
certificate of insurance and the policy of insurance are deemed to have been
made where the vehicle along with the insurance policy is transferred by the
owner to another person. This provision has withdrawn the insurer's right of
refusal which was granted under the Old Act.
Now,
under the Old Act although the insurer could refuse to transfer the certificate
of insurance in certain circumstances and the transfer was not automatic as
under the New Act, there was under the Old law protection to third parties,
that is victims of the accident. The protection was available by virtue of
Section 94 and 95 of the Old Act. The relevant part of these two provisions was
as under :- "Section 94 - Necessity for insurance against third-party risk
- (1) No person shall use except as a passenger or cause or allow any other
person to use a motor vehicle in a public place, unless there is in force in
relation to the use of the vehicle by that person or that other person, as the
case may be, a policy of insurance complying with the requirements of this
chapter." The other subsections permitted the appropriate government to
grant exemption from the operation of the aforesaid section to vehicles owned
by the Central or State Government or any local authority or State Transport
Authority under certain circumstances.
"95.
Requirements of policies and limits of liability - (1) In order to comply with
the requirements of this Chapter, a policy of insurance must be a policy which
- (a) is issued by a person who is an authorised insurer [or by a co-operative
society allowed under Section 108 to transact the business of an insurer], and
[(b) insures the person or classes of persons specified in the policy to the
extent specified in sub-section (2) –
(i) against
any liability which may be incurred by him in respect of the death of or bodily
injury to any person or damage to any property of a third party caused by or
arising out of the use of the vehicle in a public place;
(ii)
against the death of or bodily injury to any passenger of a public service
vehicle caused by or arising out of the use of the vehicle in a public place:]
(5)
Notwithstanding anything elsewhere contained in any law, a person issuing a
policy of insurance under this section shall be liable to indemnify the person
or classes of person specified in the policy in respect of any liability which
the policy purports to cover in the case of that person or those classes of
person."
In Kondaiah's
case (supra) the vehicle in question was transferred but not the insurance
policy. The policy or the certificate was not transferred to the vendee. The
victims of the accident filed a claim before the Motor Accident Claims
Tribunal. Broadly four contentions were considered, namely,
(i) whether
the transfer of the vehicle to the purchaser is not complete till the vehicle
is registered in the name of the transferee
(ii) whether
on transfer in the absence of the transfer of the insurance policy, the policy
lapses
(iii) whether
it lapses even against the third party
(iv) whether
the Insurance Company can validly contend that the insurance policy had lapsed.
The Full Bench held that under the Sale of Goods Act the sale is complete on
payment of the consideration and delivery of the vehicle, regardless of
transfer of registration in the name of the transferee.
On the
second and third contentions it was held that notwithstanding the non transfer
of the insurance policy, the liability qua third party subsists in view of
Section 94 and 95 of the Old Act. The last point regarding right of insurance
company to raise the plea of the policy having lapsed is not of any relevance
to us. In the separate judgment of Kodandaramayya, J. relied upon by the
National Commission, it was pointed out that the 'third party' referred to in
Section 95 did not include a transferee who was not a party to the original
contract of insurance and, therefore, the transferee or vendee could not claim
any benefit from the insurance company for damage to his person or the vehicle.
The
New Act came into force with effect from lst July, 1989. Since the vehicle in
question was sold on 15.6.1989 and the letter of intimation of transfer and
request to transfer the Certificate of insurance and the policy described
therein was sent on 26.6.1989 the Old Act applied.
Admittedly
the request was not refused under Section 103A of the Old Act till the New Act
came into force. Thereafter on 24.7.1989 the Insurance Company was once again
requested to effect the transfer of the Certificate of Insurance as well as the
policy but to no avail. By that day the New Act had come into force. Actually
the application dated 26.6.1989 was pending when the New Act had come into
force. That application had to be processed under Section 157 of the New Act
and hence the Certificate as well as the policy must be deemed to have been
transferred in the name of the transferee. Even it is assumed that the Old Act
applied to pending cases, the certificate and policy must be deemed to have
been transferred since no refusal was communicated by the Insurance Company to
the transferor or the transferee.
Therefore,
in either case the transfer of the Certificate of Insurance and policy
described therein must be taken as complete in view of the language of Section
103A of the Old Act and Section 157 of the New Act.
Section
157 appears in Chapter XI entitled 'Insurance of Motor Vehicles against Third
Party Risks' and comprises sections 145 to 164. Section 145 defines certain
expressions used in the various provisions of that chapter. The expression
'Certificate of Insurance' means a certificate issued by the authorized insurer
under section 147(3).
'Policy
of Insurance' includes a certificate of insurance.
Section
146(1) posits that 'no person shall use, except as a passenger, or cause or
allow any other person to use, a motor vehicle in a public place, unless there
is in force in relation to the use of the vehicle by that person or that other
person, as the case may be, a policy of insurance complying with the
requirements of this chapter'. Of course this provision does not apply to
vehicles owned by the Central or State Government and used for Government
purposes not connected with any commercial enterprise. This provision
corresponds to section 94 of the Old Act. Section 147 provides that the policy
of insurance to be issued by the authorized insurer must insure the specified
person or classes of persons against any liability incurred in respect of death
of or bodily injury to any person or damage to any property of a third party as
well as against the death of or bodily injury caused to any passenger of a
public service vehicle caused by or arising out of the use of the vehicle in a
public place. This provision is akin to section 95 of the Old Act. It will be
seen that the liability extends to damage to any property of a third party and
not damage to the property of the owner of the vehicle, i.e. the insured.
Sub-section
(2) stipulates the extent of liability and in the case of property of a third
party the limit of liability is rupees six thousand only. The proviso to that
sub-section continues the liability fixed under the policy for four months or
till the date of its actual expiry, whichever is earlier. Sub-section (3) next
provides that the policy of insurance shall be of no effect unless and until
the insurer has issued a certificate of insurance in the prescribed form. The
next important provision which we may notice of is Section 156 which sets out
the effect of the certificate of insurance. It says that when the insurer
issues the certificate of insurance, then even if the policy of insurance has
not as yet been issued, the insurer shall, as between himself and any other
person except the insured, be deemed to have issued to the insured a policy of
insurance conforming in all respects with the description and particulars stated
in the certificate. It is obvious on a plain reading of this provision that the
legislature was anxious to protect third party interest. Then comes Section 157
which we have extracted earlier. This provision lays down that when the owner
of the vehicle in relation whereto a certificate of insurance is issued
transfers to another person the ownership of the motor vehicle, the certificate
of insurance together with the policy described therein shall be deemed to have
been transferred in favour of the new owner of the vehicle with effect from the
date of transfer. Sub-section (2) requires the transferee to apply within
fourteen days from the date of transfer to the insurer for making necessary
changes in the certificate of insurance and the policy described therein in his
favour.
These
are the relevant provisions of Chapter XI which have a bearing on the question
of insurer's liability in the present case.
There
can be no doubt that the said chapter provides for compulsory insurance of
vehicles to cover third party risks. Section 146 forbids the use of a vehicle
in a public place unless there is in force in relation to the use of that
vehicle a policy of insurance complying with the requirements of that chapter.
Any breach of this provision may attract penal action. In the case of property,
the coverage extends to property of a third party i.e. a person other than the
insured. This is clear from Section 147(1)(b) (i) which clearly refers to
'damage to any property of a third party' and not damage to the property of the
'insured' himself. And the limit of liability fixed for damage to property of a
third party is rupees six thousand only as pointed out earlier. That is why
even the claims Tribunal constituted under Section 165 is invested with
jurisdiction to adjudicate upon claims for compensation in respect of accidents
involving death of or bodily injury to persons arising out of the use of motor
vehicles, or damage to any property of a third party so arising, or both. Here
also it is restricted to damage to third party property and not the property of
the insured. Thus, the entire chapter XI of the New Act concerns third party
risks only. It is, therefore, obvious that insurance is compulsory only in
respect of third party risks since Section 146 prohibits the use of a motor
vehicle in a public place unless there is in relation thereto a policy of
insurance complying with the requirements of Chapter XI. Thus, the requirements
of that chapter are in relation to third party risks only and hence the fiction
of Section 157 of the New Act must be limited thereto. The certificate of
insurance to be issued in the prescribed form (See Form 51 prescribed under
Rule 141 of the Central Motor Vehicles Rules, 1989) must, therefore, relate to
third party risks. Since the provisions under the New Act and the Old Act in
this behalf are substantially the same in relation to liability in regard to
third parties, the National Consumer Disputes Redressal Commission was right in
the view it took based on the decision in Kondaih's case because the
transferee-insured could not be said to be a third party qua the vehicle in
question. It is only in respect of third party risks that Section 157 of the
New Act provides that the certificate of insurance together with the policy of
insurance described therein "shall be deemed to have been transferred in favour
of the person to whom the motor vehicle is transferred". If the policy of
insurance covers other risks as well, e.g., damage caused to the vehicle of the
insured himself, that would be a matter falling outside Chapter XI of the New
Act and in the realm of contract for which there must be an agreement between
the insurer and the transferee, the former undertaking to cover the risk or
damage to the vehicle. In the present case since there was no such agreement
and since the insurer had not transferred the policy of insurance in relation
thereto to the transferee, the insurer was not liable to make good the damage
to the vehicle. The view taken by the National Commission is therefore correct.
For
the above reasons, we see no merit in this appeal and dismiss the same but with
no order as to costs.
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