Report No. 106

Chapter 4

Comments Received on the working Paper

4.1. As the law on the subject prima facie appeared in need of reform, the Law Commission1, in Working Paper circulated on the subject put forth two alternatives as to reform of the law, as under:-

(a) According to the first alternative, it was proposed that where transfer of a motor vehicle in favour of the transferee is recorded by the competent authority on the registration certificate, the insurance policy (or policies, if there be more than one) shall stand transferred to the transferees without the need of a fresh formality. It can be expressly provided that the transfer of a vehicle does not cause the policy to lapse. The provisions of section 103A of Motor Vehicles Act would of course, need amendment for the purpose.

(b) According to the second alternative, the proposal was that on the very transfer of ownership of a motor vehicle, the policy of insurance shall stand transferred to the transferee. This would mean that even the transfer of registration is not to be required. It was stated in the Working Paper that this might possibly raise some questions of proof. But it would be a simpler course than first one.

1. Working Paper circulated 31st May, 1984.

4.2. The Commission invited views on the subject with special reference to the question whether there was need to amend the Motor Vehicles Act, 1939, on the lines indicated above, and if so, which of the two alternatives put forth above should be adopted. We give below the gist of the comments received on the Working Paper1.

1. Comments received upto 31st October, 1984.

4.3. At the outset, it may be stated that eleven judges of one High Court have no comments to officer1. Some judges of another High Court have also no comments to offer.2

1. Law Commission File No. F.2(7)/84-L.C., S. No. 3.

2. Law Commission File No. F.2(7)/84-L.C., S. No. 14.

4.4. Alternative (a) put forth in the Working Paper1 had been preferred by the Government of Sikkim (though the Motor Vehicles Act does not apply in Sikkim)2, and by the Calcutta3. The latter has issued guidelines but the provision should be phrased as under:-

"Upon the registration of the transfer of ownership of a motor vehicle, the existing policy of Insurance in respect thereof shall be deemed to have been transferred to or in favour of the transferee of the motor vehicle with effect from the date of transfer of the vehicle. The Controller of Insurance, Government of India (Department of Finance)4, also favours the first alternative. He has raised the point that the police will issue summons only to the registered owner; and therefore, alternative at (a) is preferable.5

1. Para. 4.1(a), supra.

2. Law Commission File No. F.2(7)/84-L.C., S. No. 6.

3. Law Commission File No. F.2(7)/84-L.C., S. No. 5.

4. Law Commission File No. F.2(7)/84-L.C., Comment of the Controller of Insurance.

5. See, further para. 5.4, infra.

4.5. Alternative (b) put forth in the Working Paper of the Law Commission1 has been favoured by the Government of India (Ministry of Shipping and Transport)2, and also by two State Governments3. This alternative has been favoured by three High Courts also.4 The Judges of one High Court who have favoured alternative (b) opposed the view5 that this alternative would be **** and have further made the suggestion that it may also be provided, as a requirement for every transfer of ownership of a motor vehicle, that "the transferor and transferee should intimate the insurer about such transfer as in section 31, deeming such intimation application for the transfer of insurance. They have expressed the opinion that if these provisions are enacted, the lacuna pointed out in the Kerala decision6 will probably be effectively filled.

1. Para. 4.1(b), supra.

2. Law Commission File No. F.2(7)/84-L.C., S. No. 7.

3. Law Commission File No. F.2(7)/84-L.C., S. Nos. 9 and 10.

4. Law Commission File No. F.2(7)/84-L.C., S. Nos. 3, 4, 10 and 11.

5. Law Commission File No. F.2(7)/84-L.C., S. No. 4.

6. The reference seems to be to National Insurance Co.'s case, AIR 1982 Ker 354.

4.6. The State Government of Maharashtra, in its comment on the Working Paper issued by the Law Commission, has made suggestion that the transferor must make to the insurer application for transfer of the certificate of insurance and the policy, and on the insurer's refusal, the transferee should not drive the vehicle in a public place without taking out a new insurance. The State Government further suggests penalization of the failure to make an application for transfer of certificate of insurance and policy, and even suggests minimum sentence by amending section 125 of the Motor Vehicles Act, 1939.

We find ourselves unable to agree with the suggestion. It would hardly meet the demands of social justice and would not achieve the objectives underlying the proposal for reform as put forth in the Working Paper. Such a cumbersome procedure, as is envisaged in the comment, would leave matters substantially as they are. In practice, it is bound to raise various factual controversies as to when the application for transfer (as envisaged) was made, when it was refused, when the letter of refusal was received by the transferee. We see no need for keeping the law encumbered with such controversies.