Report No. 106
2.4. Effect of transfer of registration (Section 31).-
Construing section 31 of the Motor Vehicles Act, 1939, the Orissa High Court1 has held as under:-
(a) The provisions of the Act have nothing to do with the ownership of a motor vehicle. They provide only for regulation of the use of the motor vehicles in public places.
(b) The certificate of registration is not a document or title, but it is a piece of evidence to show the owner of the vehicle, who is liable to pay taxes and to perform the duties and obligations under the Act. There is nothing in the Act to indicate that it the registered owner who shall be liable to pay compensation.
1. Panda v. Premlata Choudhury, AIR 1980 06 102, following AIR 1973 Ori 166.
2.5. Conversely, a change of registration under section 31 of the Motor Vehicles Act is not a condition precedent to the transfer of ownership of the vehicle. Section 31 indeed imposes, both on the transferor and on the transferee, the obligation to notify the transfer. Non-compliance with it would not, however, invalidate the transfer as such, which has already taken place.
2.6. The third chronological stage relevant to the issue under discussion is the formal transfer of the insurance benefit to the transferee. It is only when such a transfer is effected that the transferee of the motor vehicle gets the benefit of insurance. Consequentially, for any injury caused by any accident in the course of the driving of the vehicle by the transferee or his servant, the injured person cannot make any claim against the insurer before the insurance policy is formally transferred as above.
2.7. This position arises because the majority of High Courts have taken the view that upon the transfer of ownership of a vehicle, the insurance policy comes to an end, and, in the absence of a stipulation to the contrary, the benefit of the policy is not available to the transferee without an express agreement with the insurance company. Of the numerous rulings taking this view, some are referred to in the footnotes.1-7
1. Oriental Fire & General Insurance Co. v. Vimal Rai, AIR 1973 Del 115.
2. United India Fire & General Insurance Co. v. Chennamma, AIR 1982 Kar 1.
3. National Insurance Co. v. Thekkeyil Rajan, AIR 1982 Ker 354 (357, 358).
4. Gyarsilal v. Pandit Sitacharan Dubey, AIR 1963 MI' 164.
5. (a) M. Bhoopathy v. M.B. Vijayalakshmi, AIR 1966 Mad 244.
(b) Hema Ramaswami v. K.M.V. Panjani, AIR 1981 Mad 174: 1981 MI4 182.
(c) National Insurance Co. v. 7'hirumalai Animal, AIR 1982 Mad 83.
(d) South India Insurance Co. v. Lakshmi, AIR 1971 Mad 347.
6. P.K. Panda v. Premalata Choudhury, AIR 1980 Ori 102.
7. (a) Automobiles Transport (Rajasthan) Pvt. Ltd. v. Dewalal, AIR 1977 Raj 121.
(b) Padmadevi v. Gurbaksh Singh, AIR 1973 Raj 317, is apparently not good law now.
(c) Motor Owners' Insurance Co. v. Khetpal Singh, AIR 1983 Raj 83 (May) (review cases). See also paras. 2.9 to 2.13, infra.
2.8. The Andhra Pradesh High Court is the only one that takes a different view on the subject.
2.9. It is not as if the Motor Vehicles Act is totally silent on the subject. In 1969, the Act was amended by inserting, in the Act, section 103A which is intended to deal with the procedure to be followed for the transfer of an insurance certificate and the policy of insurance. The gist of the section may thus stated:-
(i) The transferor of a motor vehicle must apply in the prescribed form to the insurer for the transfer of certificate of insurance and of the policy, in favour of the transferee.
(ii) Within fifteen days, the insurer must intimate to the transferor and the transferee the refusal, if any, to the transfer the certificate/the policy.
(iii) If no such intimation of refusal is given to both such persons within fifteen days, 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 the transfer.
(iv) On refusal by the insurer, the insurer is bound to refund to the transferee the amount, if any, which, under the term of the policy, he would have had to refund to the insured, i.e. the transferor, for the unexpired term of the policy.
2.10. However, section 103A of the Motor Vehicles Act summarised above1, is not comprehensive enough on the subject of effect of transfer of vehicle on the policy. For example, it leaves out cases where no intimation of transfer is given to the insurer. The hardship resulting from the present state of the law is apparent from the state of the case law2. It has been specifically pointed out in a Kerala case3, to which we shall have occasion to revert later.4
1. Para. 2.9, supra.
2. Paras. 2.14 and 2.15, infra.
3. National Insurance Co. Ltd. v. Thekkeyil Rajan, APR 1982 Ker 354.
4. Para. 3.4, infra.
2.11. It has been specifically held in Karnataka that the insurer can raise the objection that the policy of insurance lapses on the transfer of a vehicle without notifying the insurer in the prescribed form under section 103A of the Motor Vehicles Act.1
1. United India Fire & General Insurance Co. Ltd. v. Chenmanima, AIR 1982 Kar 1.
2.12. It would, then, seem that according to the view of the most High Courts, the policy of insurance is effectively transferred to the transferee of a motor vehicle only on compliance with the formalities prescribed by section 103A of the Motor Vehicles Act.1
1. For the gist of section 103A, see para. 2.9, supra.
2.13. This is also the English law, as stated by Goodard, J. and confirmed by the Court of Appea1.1 In fact, in one of the decisions of the House of Lords reported in 1931, the learned lord expressed himself thus:2
"To me this policy depends upon the hypothesis that there is, in fact, an insured car. When once the car, which is subject of this policy, is sold, the owner's rights in respect of it ceases and the policy so far as the car is concerned is at an end."
1. Peters v. General Accident & Life Assurance Corpn. Ltd., (1938) 2 All ER 267: 158 Law Times 476 (CA).
2. Rogerson v. Scottish Automobiles etc., Insurance Co. Ltd., (1931) 48 TLR 17: 146 LT 26 (HL): 1931 All ER Rep 606 (HL).
2.14. The position as stated above may be technically correct in law, but it causes serious praCtical anomalies, and even injustice. Take the case of the transferee of the motor vehicle. Until the formalities prescribed by section 103A of the Motor Vehicles Act are completed, the transferee has no protection in the nature of insurance. The premium towards the policy may have been paid in full by the transferor (for the relevant period), but its benefit does not travel to the transferee. Vested with the ownership of the vehicle, and acquiring use of the vehicle and control over it, the transferee becomes subject to all the risks that such ownership, use and control usually involve. This includes the risk of an accident, for which the transferee must pay compensation if someone is injured or killed. And yet, the transferee can recover nothing from the insurer, even though the policy covers third party liability, and is a subsisting one. This is anomalous.
2.15. The anomalies caused by the present position regarding the effect of transfer of a motor vehicle without transfer of the policy become apparent when one takes actual cases. In a Punjab case1, the transferor, who had transferred the motor vehicle, did not make any application for transfer of the insurance certificate. The transferee applied for transfer of the certificate on the 31st January, 1970, but, before that date, an accident took place on the 24th January of the same year. The accident took place after the transfer of ownership, but before the transfer of insurance.
It was held that the transferee was not entitled to indemnity from the insurance company in respect of the accident. Thus, the transferee, even though he may incur liability towards third parties, does not get the benefit of the policy. This seems highly anomalous. It is true that the transferee has not paid the premium, and therefore cannot feel aggrieved. But it is to be remembered that at least some person (the transferor) has paid the premium. Moreover, it is quite likely that the parties would have taken the premium into account in fixing the consideration.
1. Oriental fire and General Insurance Co. Ltd. v. Sant Ram, AIR 1981 P&H 143.
2.16. From the point of view of the victim of an accident caused by a motor vehicle, again the present position causes serious hardship. Under the Motor Vehicles Act, the victim can enforce the liability arising from such accident, not only against the driver of the vehicle, but also against the insurer who has accepted third party risk. But this beneficial scheme may come to be frustrated if the accident occurs after the transfer of the ownership of the vehicle but before the completion of the formalities prescribed in section 103A of the Motor Vehicles Act. This has been noticed in a Rajasthan case, to which we shall refer later.1
1. Paras 3.2 and 3.3, infra.