SHANTILAL MOHANLAL Vs. AHER BAWANJI MALDE

JUDGEMENT

(1.) In view of the importance of the question as to whether a transfer of the vehicle by the insured without intimation to the insurer relieves the latter from its obligation to indemnify against the loss or injury caused by the insured vehicle and the conflicting decisions given by different High Courts the Division Bench hearing this appeal felt that the question deserves to be answered by a larger bench. It has therefore raised the following question which we are required to answer.

(2.) Before we proceed to consider the legal position a few relevant facts may be stated. On 5-3-1978 motor truck bearing registration No. GTG 444 knocked down fatally one Kiritkumar Shantilal who was standing on one side of the road. His parents filed Claim Petition No. 58 of 1978 before the Motor Accident Claims Tribunal Jamnagar for recovering Rs. 1 0 0 as compensation. It was their case that the said truck at the relevant time was driven by respondent No. 2 in a rash and negligent manner and as a result thereof it knocked down Kiritkumar who died on the spot. It was also their case that the said vehicle belonged to respondent No. 1 and was insured with respondent No. 3 company. In his written statement respondent No. 1 denied ownership of the vehicle on the date of the accident and stated that respondent No. 4 was the real owner. It was further averred that the sale made by respondent No. 4 in his favour had not become complete as all the required formalities were not completed. In its written statement respondent No. 3 insurance company denied its liability on the ground that ownership having been transferred by respondent No. 4 to respondent No. 1 on 2-3-1978 without informing it or taking its consent insurance policy in respect of the said vehicle had lapsed. There was no subsisting contract between it and respondent No. 1. The change was notified to it later on and transfer of the certificate of insurance and the policy in favour of respondent No. 1 was made effective only from 15-5-1978. Respondent No. 4 denied his liability on the ground that having sold the truck on 2-3-1978 he was no longer the owner thereof. The Tribunal held that respondent No. 1 had become the owner of the vehicle on 2-3-1978 and therefore on the date of the accident the vehicle belonged to him. It thrfor held respondents No. 1 2 and 5 liable for payment of compensation awarded by it. Respondent No. 5 is the firm of which respondent No. 1 is the partner. As regards the liability of the insurance company the Tribunal held that it was not liable to indemnify respondent No. 1 to whom the vehicle was transferred. as there was no privity of contract between them and the insurance policy had lapsed upon transfer of the vehicle by respondent No. 4 to respondent No. 1. On these findings the Tribunal awarded Rs. 36 200 to the claimants and directed respondents No. 1 2 and 5 to satisfy the said award. The claimants not being satisfied with the award regarding liability of the insurance company and the quantum of compensation have filed this appeal.

(3.) The Division Bench agreed with the findings regarding negligence and liability of respondents No. 1 2 and 5. As regards the amount of compensation it found that it was inadequate and raised it to Rs. 50 0 While determining the liability of the insurance company it considered the view taken by this Court in two earlier cases that a transfer of vehicle in breach of the terms of the policy merely enables the insurance company to avoid its liability but does not have the effect of cancellation of the policy and therefore it would not absolve the insurance company from answering the judgment relating to the claim of the third party. It also referred to the decisions of other High Courts wherein similar or contrary view is taken. it then observed that the view taken by this Court is in consonance with the policy of Legislation in its attempt to safeguard the interest of the third party but at at the same time the approach of the contrary view is also basic to the principles of the law of contract. Feeling the necessity of a clear pronouncement by a large bench it has referred to us the above stated question.