Report No. 106
Need for Reform
3.1. In the light of the last Chapter, the present position does not appear to be satisfactory. It causes injustice and confusion to the transferor, as well as the transferee and-most of al.- to the victim of a motor vehicle accident who seeks compensation against the insurer.
3.2. In fact, the present position has not failed to provoke comments for law reform from the High Courts. The latest hint on the subject comes from the Rajasthan High Court1. In the Rajasthan case, it was held (following a long line of decisions of various High Courts), that if, after the transfer of a motor vehicle to a third person, the insurance company is sought to be made liable to a third party in terms of sections 95(5) and 96 of the Motor Vehicles Act, 1939, the mere fact that the registration of the vehicle had been transferred was not enough; it must be shown that the fact of transfer was conveyed to the insurance company and accepted by it.
This is because the contract of insurance is a contract of personal indemnity, which comes to an end when the vehicle is transferred to another person or when the insured person dies or becomes bankrupt. For this reason, the benefit of the policy of insurance could not, after the transfer of the motor vehicle, be pursued against the insurance company. In view of the almost unanimous trend of judicial authority1, the High Court had to come to this conclusion. However, this conclusion was arrived at very reluctantly.
1. Motor Owners' Insurance Co. Ltd. v. Khetpal Singh, AIR 1983 Raj 83 (90), para. 25 (May). See further para. 3.3. infra.
2. Chapter 2, supra.
3.3. The following conservation made by Mr. Justice Dwarka Prasad, Acting Chief Justice, in his judgment in the Rajasthan case referred to above, are pertinent as to the need for reform of the law1:-
"The claim made by the injured against the insurance company fails and hence the same is dismissed as against the insurance company. It must be said that I have to come to the aforesaid conclusion with much regret, as in spite of the existence of the statutory provisions for compulsory insurance, persons injured in motor accidents are left with meagre prospects of obtaining compensation, without any fault of their own. The people at large believe, and with reason, that the Motor Vehicles Act ensures to them that if they have the misfortune of being injured by a driver's negligence, they would at least get compensation for the injury received or their dependants would get reasonable compensation, if a person is killed in such an accident, knowing little about the pitfalls."
1. Motor Owners' Insurance Co. Ltd. v. Khetpal Singh, AIR 1983 Raj 83 (90) (May).
3.4. Earlier, the Kerala High Court had, while holding, that section 103A of the Motor Vehicles Act, 1939 not actually transfer the insurance policy to the transferee of the motor vehicle, made the following observations for an amendment of the law1:-
"It remains to be pointed out that section 103A does not go the whole way. No doubt, under that section, there is a fictional transfer of the certificate of insurance and the policy described in the certificate taken by the transferor of a vehicle to the transferee thereof, by providing that unless the insurer gives intimation of refusal to transfer the certificate of insurance and the policy mentioned therein to the transferee within 15 days of receipt of the application for transfer of the same in favour of the transferee, the same shall be deemed to have been transferred to the transferee with effect from the date of the transfer of the motor vehicle. However, the statute does not provide as to what is to happen if the transferor does not apply to transfer the insurance policy and certificate. The statute also does not provide for coverage by the insurer or 3rd party risk arising out of an accident that happens within the 15 days stated in the sectio.- the insurer can very well in such an event refuse to transfer the certificate of insurance and the policy and avoid liability."
The Kerala judgment goes on to observe as under:-
"In view on the large use of motor vehicles on the road, it appears to us that it is necessary that the legislature bestows its attention on these aspects and provide for such eventualities as are mentioned above. Perhaps the same could be achieved by providing for a statutory fictional transfer of the certificate of insurance and the policy mentioned therein automatically with the transfer of the vehicle, with the further provision that till the insurer repudiates the insurance and cancels the same with notice to the concerned authorities under the Motor Vehicles Act, the insurance policy shall be in force and that the same would not lapse on mere transfer of at the vehicle in respect of which such policy has been taken."
1. National Insurance Co. Ltd. v. Thekkevil Rajan, AIR 1982 Ker 354, para. 13 (December).