LAKHWINDER SINGH Vs. TARSEN SINGH

JUDGEMENT

(1.) The factual details:

(2.) If the case were to be instituted at the instance of a third party against a transferee and the insurer, the insurer may not be able to plead the fact of transfer had not been informed; that registered owner continues to be the transferor and, therefore, the insurer will not be liable. This situation cannot obtain to the insurer by virtue of the fact that there is a compulsory requirement of insurance for a third party and, therefore, a person, who purchases the vehicle by delivery and involves the vehicle in accident, could still make the insurer liable. This position has been made clear through a new provision under the Motor Vehicles Act, 1988 by expressly enacting that by a transfer of a vehicle, the certificate of insurance will be deemed to be transferred. Effect of this provision under section 157 and even the situation that obtained prior to the enactment of section 157 through the Motor Vehicles Act, 1939, vis-a-vis the insurer's liability was dealt with by the Hon'ble Supreme Court in G Govindan v. New India Assurance Co. Ltd., 1999 ACJ 781. This case dealt specifically only with the situation of the fact of a transfer and the liability of an insurer to a third party claim. This has no bearing to a claim by a transferee for any damage to his own vehicle. This situation was specifically brought out in the decision in Complete Insulations (P) Ltd. v. New India Assurance Co. Ltd., 1996 ACJ 65. This case dealt with the situation of a claim for damage to his own property that took place prior to the Motor Vehicles Act, 1988 but the claim was made subsequent to the commencement of the Act. The Hon'ble Apex Court, therefore, dealt with the distinction between the 1939 Act and the provisions of 1988 Act through section 157 and held that the deemed transfer will only protect a third party's claim against insurer irrespective of whether the transfer had been informed to the insurer or not. It specifically excluded claims by transferee from registered owners against the insurer, if the policy had not been transferred. The Hon'ble Supreme Court also took note of the fact that Chapter XI, which contains the provision under section 157, is captioned "Insurance of Motor Vehicles against Third Party Risks". A registered owner or a transferee from such registered owner was held not to be a third party. This principle was also explained by the Hon'ble Supreme Court in a subsequent decision in Rikhi Ram v. Sukhrania, 2003 ACJ 534, that said that even if a purchaser were to be regarded as a third party, he cannot get any benefit under the contract of insurance unless there is a compliance with the provisions of the Act. It made a distinction with reference to a third party/injured or victim, who could enforce a claim even against the insurer and a third party/transferee, who would seek for a benefit of the policy. This decision was dealt with under the Motor Vehicles Act, 1939 but the effect was the same. G. Govindan, 1999 ACJ 781, also concluded the judgment by pointing out a distinction in the following words:

(3.) The raison d'etre for this is not far to seek. An insurer that becomes liable to a third party undertakes the liability by the fact that the owner is required by the provisions of sections 146 and 147 to make compulsory insurance for third party risks. A third party's entitlement is secured by the statute. A transferee's right is not so protected by any of the provisions of the Motor Vehicles Act itself. A transferee who makes a claim for damage to his own property literally seeks to enforce a term of contract of insurance. By a transfer of the vehicle, a contract of insurance with the insured is not simultaneously transferred. The deemed transfer of policy is only for the purpose of employment of a claim by a third party claimant. The right to enforce an obligation under the policy against an insurer could arise for the transferee, in the absence of statutory provision, only by obtaining a transfer of the policy itself. This transfer of policy is contemplated in section 157 (2) which prescribes a procedure to apply within 14 days in a prescribed form to the insurer for making necessary changes in regard to the fact of transfer in the certificate of insurance. While the failure to obtain such a transfer may not affect a third party claimant, it will have an immediate bearing on the right of the transferee himself.