The Court was hearing a case where the insurance company said it was not liable for an accident involving a truck in respect of which there was an agreement to transfer ownership.
The Allahabad High Court recently held that an insurance company would remain liable in a motor accident case even when a transfer of ownership has not been recorded with the transport authorities [The New India Assurance Company vs Permanent Lok Adalat and Another].
Justice Subhash Vidyarthi noted that Section 157 of the Motor Vehicles Act (MV Act) provides that upon transfer of ownership of a vehicle, the certificate of insurance and the insurance policy shall be deemed to have been transferred in favor of the person to whom the motor vehicle is transferred with effect from the date of its transfer.
“The deeming fiction provided by the statute means that even if the insurance policy is not transferred in fact, the insurance company would become liable under the policy to the transferee of the vehicle. Therefore, the intention of the legislature is to make the insurance company liable immediately, in spite the transfer having not been recorded in the records of the transport office. The intention of the legislation is to include the transferees liberally and not to exclude them strictly,” the Court said.
The Court was hearing a petition filed by the New India Assurance Company Limited against the decision of a Permanent Lok Adalat in a motor accident case involving a truck.
Govind Gupta, the registered owner of the truck, had submitted an insurance claim after the repair of the vehicle. However, the insurance company rejected it on the ground that the vehicle already had been transferred to another person Sanjeev Kumar, subject to the condition that the new buyer would pay the bank’s installments.
The insurance company said the vehicle was being driven by Kumar’s (buyer) driver when it met with the accident and was not in Gupta’s (original registered owner) possession.
The vehicle had not been officially transferred but there was an agreement to sell between Gupta and Kumar
The Lok Adalat held that such an agreement would not affect the adjudication of the dispute and ruled in Gupta’s favor.
The insurance company then moved the High Court, arguing that Gupta was not entitled to make any insurance claim in respect of the transferred vehicle.
However, the Court said Gupta had merely entered into an agreement for the transfer of ownership at a future point in time, after repayment of the entire loan taken for purchase of the vehicle.
Section 157 of the MV Act is attracted when the owner of the vehicle transfers the ownership of the motor vehicle, the Court said although it noted that the same was yet to happen in the present case.
The Court then took note of a Supreme Court decision in which an insurance company had been held liable to indemnify the transferee even though the insurance policy had not been transferred in their name.
Taking note of the fact that Gupta continued to remain registered owner of the truck and had a contract of insurance for it, the Court said,
“In the absence of the ownership of the vehicle having been transferred, the petitioner (insurance company) would continue to be liable under the contract of insurance entered between the appellant and the registered owner (Gupta) of the vehicle.”
Thus, the Court upheld the decision of the Lok Adalat to allow Gupta’s claim.