Supreme Court of India
G. GOVINDANversusNEW INDIA ASSURANCE CO. LTD. AND ORS.
- Citation
- 1999 INSC 165
- Decided
- 8 April 1999
- Disposal
- Appeal(s) allowed
- Bench
- K VENKATASWAMI
Holding
The insurance policy remains effective for third‑party liability despite the failure to give notice under Section 103A; the insurer is liable to third‑party claimants, while the transferee cannot enforce the policy for his own risks without novation.
Summary
The appellant purchased a bus from the fourth respondent but neither party gave the insurer the notice required under Section 103A of the Motor Vehicles Act, 1939. After the bus met with an accident, two third parties claimed compensation. The Motor Accident Claims Tribunal held the insurer liable because it had continued to receive premiums, but the Madras High Court reversed that decision, discharging the insurer. The Supreme Court allowed the appeal, holding that the insurance policy does not lapse for third‑party liability merely because the transfer was not intimated; the insurer remains liable to third‑party claimants, although the transferee cannot enforce the policy for his own risks without a novation. The Court emphasized the legislative intent to protect third‑party victims and interpreted Sections 94, 95, 103A, 31 and 29‑A accordingly.
Issues considered
- The omission of intimation under Section 103A of the Motor Vehicles Act, 1939, does it cause the insurance policy to lapse and extinguish the insurer's liability to third parties?
- What is the effect of a non‑transferred policy on the insurer's liability for third‑party risks after a vehicle is sold?
- Can a transferee claim under the original policy without a novation or assignment?
- How should Sections 94, 95, 103A, 31 and 29‑A be interpreted in the context of compulsory third‑party insurance?
Legislation cited
- Motor Vehicles Act, 1939s. 103A, s. 112, s. 29-A, s. 31, s. 94, s. 95
Subjects
Motor Vehicles ActSection 103Athird‑party insurancepolicy transferinsurer liabilitystatutory interpretationcompulsory insurancenovationvehicle transfer
Judgment
A G. GOVINDAN
v.
NEW INDIA ASSURANCE CO. LTD. AND ORS.
,.
APRIL 8, 1999
B [K. VENKATASWAMI AND A.P. MISHRA, JJ.]
Motor Vehicles Act, 1939-Section 103A, (Chapter Vlll)-Transfer of
vehicle-No intimation given to the insurer as required under Section 103A-
c
Effect of on such omission on insurance policy-Insurer accepting the premium
for subsequent periods-Held, insurance policy remains effective in respect
of third-party risks but not in respect of the transferee's risks.
-
Motor Vehicles-Third party risks-Insurance ofthird party is mandatory
under the Act and hence cannot be overriden by any clause in the insurance
policy.
D
Interpretation of Statutes-Basic rule of interpretation-Object clause-
Views which facilitate the object of the legislature be given.
Appellant had purchased a bu_s from Respondent No. 4. However, the
sale transaction was not intimated to the first respondent-insurer as required
E under Section 103-A of the Motor Vehicles Act. 1939. The bus met with an
accident in which R-2 and R-3 being third parties, filed a claim for
compensation before the Motor Accidents Claims Tribunal. Tribunal found
that even after the date of the accident and knowing that respondent No. 4
had sold the bus to the appellant, the insurer received th~ premium for
F subsequent period. On appeal, the High Court discharged the liability of the
insurer from payment of compensation. Hence this appeal by the appellant-
transferee.
Allowing the appeal, this Court
HELD: 1.1. The heading of Chapter VIII of the Motor Vehicle Act,
G
1939 read as "Insurance of Motor Vehicles against Third Party Risks". Its
provisions clearly indicate that the legislature made insurance of motor
...
vehicles compulsory against third-party (victims) risks. Since insurance
against third-party risks in compulsory, once the insurer-Company had
- ~
undertaken liability to third parties incurred by the persons specified in the
H policy, the third parties' right to recover any amount under or by virtue of
476
G. GOVINDAN v. NEW INDIA ASSURANCE CO.LTD. 477
the provisions of the Act is not affected by any condition in the policy. A
{485-B-CJ
Complete Insulation (P) Ltd. v. New India Assurance Co. Ltd., 119961
1SCC221; New India Assurance Co. Ltd. v. Sheela Rani, [1998) 6 SCC 599
and New Asiatic Insurance Co. Ltd. v. Pessumal Dhanamal Aswani & Ors.,
AIR (1964) SC 1736, relied on. B
1.2. Both under the old Act and under the new Act, the legislature was
anxious to protect the third-party (victim) interest. What was implicit in the
- provisions of the old Act is now made explicit, presumably in view of the
conflicting decisions on this aspect among the various High Courts.
[485-DI C
1.3. As between the conflicting views of the Full Bench of the Andhra
Pradesh High Court on the one hand and the Delhi and Karnataka High
Courts on the other, the Andhra Pradesh High Court's view is preferable as
it advances the object of the legislature to protect the third-party interest.
However, for this purpose, the third party here will not include a transferee D
whose transferar has not followed the procedure for transfer of policy.
(485-G-H; 486-A)
Madineni Kondaiah & Ors. etc. v. Yaseen Fatima, AIR (1986) A.P. 62
(FB), approved.
E
Anand Sarup Sharma v. P.P. Khurana & Ors. (1989) ACJ 577 and
National insurance Co. Ltd. v. Mallikarjun & Ors .. AIR (1990) Kant. 166,
overruled.
Northern India General Insurance Co. Ltd. v. Kanwarjit Singh, (1973)
ACJ 119; AIR (1973) All 357 and N. Kanakalashmi v. R. V. Subba Rao, F
(1972) 1 APLJ 249, referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1816 of
' 1982.
From the Judgment and Order dated 30.7 .81 of the Madras High Court G
in A.A.O. No. 364 of 1979."
.- V. Sudeer for S. Srinivasan for the Appellant.
B.R. Sabharwal for the Respondents.
The Judgment of tee Court was delivered by H
478 SUPREME COURT REPORTS [1999] 2 S.C.R.
A K. VENKATASWAMI, J. An important question of law under the Motor
Vehicles Act, 1939 (hereinafter called 'the Act') has arisen for our consideration
in this appeal.
The question is whether the Insurance Policy iapses and consequently
the liability of the insurer ceases when the insured vehicle was transferred
B and no application/intimation as prescribed under section 103A of the Act
was made/given.
We find from the case law cited before us at the bar that there are
conflicting views among the High Courts on this issue. Three different High
Courts' Full Bench judgments wete brought to our notice. The High Courts
C of Delhi and Karnataka had answered the issue in the affirmative while the
High Court of Andhra Pradesh .(all Full Bench judgments) had answered the
issue in the negative. Brief facts are the following :-
The appellant herein had purchased the motor vehicle (bus) from the
D fourth respondent on 15.8.74. However, neither the appellant (transferee) nor
the fourth respondent (transferor) intimated the sale transaction to the first
respondent-insurer as required under Section 103-A of the Act. Nevertheless,
the finding of the Motor Accident Claims Tribunal (for short 'Claims Tribunal')
was to the effect that the insurer knew about the transfer. The accident, which
gave rise to the claim for compensation by the respondents 2 and 3, took
E place on 18.5.75. It is the finding of the Claims Tribunal that'even after the
date of the accident and knowing that the fourth respondent had sold the bus
to the appellant, the insurer received the premium for subsequent periods,
namely, 18.11.75 to 17.11.76, 30.11.76 to 29.l 1.77 and from 30.11.77 to 29.11.78.
This finding of the claims Tribunal was not disturbed by the High Court while
deciding the appeal against the order of the Claims Tribunal.
F
The Claims Tribunal, after finding.that the insurer had knowledge of the
transfer held, that having received the premium it cannot repudiate its liability
to pay the compensation. We are not concerned here with the quantum of
compensation. We are concerned only with the liability of the insurer to pay
G the compensation. The Claims Tribunal found that the insurer as well as the
appellant are liable to pay the compensation to the claimants.
Aggrieved by the decision of the Claims Tribunal, the insurer (first -::
respondent herein) preferred an appeal to the High Court. The Division Bench
of the Madras High Court, reversing the view taken by the Claims Tribunal,
H held as follows :-
G. GOVINDAN "·NEW INDIA ASSURANCE CO. LTD. [K. VENKATASWAMI, J.] 479
.,......_
"Knowledge by itself is of no use. There ought to have been an A
application for transfer in the prescribed fonn or atleast a request
therefore ........... We are unable to sustain the finding of the Tribunal
in the instant case that merely because the Insurance Company, the
appellant herein, had knowledge of the transfer of the ownership of
the vehicle, its liability under the Policy, which never got transferred
--- in favour of the transferee, viz., the~!fourth respondent herein, must be
deemed to have continued, so as to bear the liability of compensation."
B
Accordingly, the High Court allowed the appeal and discharged the
liability of the insurer from payment of compensation.
The appellant-transferee, aggrieved by the order of he High Court, has c
- preferred this appeal by special leave.
In Madineni Kondaiah & Ors. etc. v. Yaseen Fatima & Ors. etc., AIR
(1986) A.P. 62 a Full Bench of the Andhra Pradesh High Court had occasion
to consider an identical question. The leading judgment was by Raghuvir. J.
Kodandaramayya, J., in his separate concurring judgment, had also analysed D
the relevant provisions of the Act, compared the provisions of the Act with
the provisions in English Act and after noticing the judgments of the Courts
in India and England? held as follows :-
"A perusal of S. 94 clearly discloses that the statute intended to give
protection to a third party in respect of death or bodily injury or E
damages to their property while using the vehicle in a public place.
Hence the insurance of the vehicle under S.94 read with S.95 is made
compulsory. Those two provisicms do not extend the compulsory
insurance to the vehicle or to the owner. In fact, these tw~ provisions
made exception to protect the life or limb of the driver of the vehicle
or the passenger in the vehicle except public service vehicle. Thus, F
it is seen the compulsory insurance is for the benefit of third parties.
.. Hence, it is clear that the insurance policy covering three kinds of
risks i.e. person (owner), property (vehicles) and third parties is clearly
in the nature of composite one. The public liability (third party liability)
alone is compulsory. While considering whether the transfer of the G
• vehicle would put an end to the policy, we must see whether such a
-- composite policy will lapse putting an end to all the three kinds of
risks undertaken by the insurance company. For this purpose S. 95(5)
must be looked into :
"Notwithstanding anything elsewhere contained in any law, to H
480 SUPREME COURT REPORTS [1999] 2 S.C.R.
person issuing a policy of insuranace under this section shall be liable
to indemnify the person or classes of persons specified in the policy
in respect of any liability which the policy purports to cover in the
-
case of that person or those classes of persons."
B
This section is clearly based upon provision of English statute. This
section is analogous to the provision in England where the third
party's rights against Insurers Act 1930 was enacted to confer on
third parties rights against the insurer of the third party risks. The
-
present Act made a specific provision in case where the insurer
becomes insolvent or dies (vide Ss. IOI and 102 of the Act) to obviate
c
..
any doubt ·or dispute in respect of such events. Section 95(5) intended
to cover two legal objections, firstly that no one who was not a party
to a contract could bring an action on a contract, secondly that a
person who has no interest in the subject-matter of an insurance can
claim the benefit of insurance. Thus this provision puts beyond doubt
removing these two objectiens and making an exception to the general
D
law of contract. Now the question is whether such rights secured to
the third party by insuring the vehicle can be- defeated by transferring
,.
the vehicle during the period when the policy is in force. It is significant
to note that S.95 requires the insurance of the vehicle. Once the
vehicle is covered by the insurance not only the owner but any
E person can use the vehicle with his permission. S.94 does not require
that every person that uses the vehicle shall insure in respect of their
separate use. The decided cases now held that on transfer the policy
will lapse and a third party cannot enforce the policy against the
insurance company. We must make it clear that ther~ are two third
F parties, when such transfer took place. One is a transferee who is a
third party to the contract and the other for whose risk the vehicle is
insured. We have no hesitation to hold that the transferee who is a
third party to the contract cannot secure any personal "benefit under
the policy unless there is a novation i.e. the insurance company the
transferor of he vehicle and the transferee must agree that the policy
G must be assigned to the transferee so that the benefit derivable, or
·'.'9
derived under the policy by the original owner of the vehicle, the
~
policy holder can be secured by the transferee. Thus, it is clear
under a composite policy covering the risk of property, person, third
party risks, the transferee cannot enforce the policy without the
H assignment in his favour so far the policy covers the risk of the
G GOVINDANI'. NEW INDIA ASSURANCE CO.LTD.[K. VENKATASWAMl,J.] 481
person and property. He has no remedy against the Insurance A
Company.
B
It is incorrect to assume that the moment the title of the vehicle
passes to the transferee the statutory obligation under S. 94 ceases
and the original owner is no longer guilty of causing or allowing the
purchaser to use the vehicle. The question is when does the statutory
liability cease? The mere passing of title in the vehicle to the transferee C
will not put an end to this liability. For this purpose we must examine
two more provisions of the Act. Under S. 31 the transferor shall within
14 days of the transfer report the fact of transfer to the registering
authority within whose jurisdiction the transfer is to be effected and
shall simultaneously send a copy of the said report to the transferee
and within forty five days of the transfer forward tc the registering D
authority no objection certificate obtained by him under S.29-A. Sec.
29-A contemplates issuing of no objection certificate both on the
occasion of assignment of a new registration mark and also while
trausferring the motor vehicle. The registering authority is enjoined to
issue a certificate within a period of thirty days and if no orders are E
passed the registering authority shall be deemed to have granted the
no objection certificate. The failure to comply with Section 31 is made
punishable under S.112. However, as an alternative measure it also
provided under S. 31 (I-A) that if the transferor or transferee fails to
comply with the requirements <'f S. 31 they have to pay a fine of
Rs. I 00 or the prescribed amount considering the period of delay on F
their part by way of penalty. It is pertinent to note that S. 31 was
amended by Act 100 of 1956. Under S. 31 as it stood prior to this
amendment in 1956 only the transferee was required to report the
transfer of the ownership and was expected to forward a certificate of
registration to the registering authority within thirty days of the transfer G
prior to this amendment their was no statutory obligation on the
transferor as is now provided in sub-clause (a) of sub-sec.(l) of S. 31
to notify the transfer to the registering authority within whose
jurisdiction the transfer is effected. Thus we see till the transferor
fulfils the statutory obligation under S. 31 his liability continues.
Further he is the ostensible owner of the vehicle so long the registration H
482 SUPREME COURT REPORTS [1999) 2 S.C.R.
A is not changed. The liability to pay tax continues irrespective of his
rights against the transferee for reimbursement. In fact it was ruled in
Northern India General Insurance Company Ltd v. Kanwarjit Singh,
(1973) ACC CJ 119: AIR (1973) All 357 that a registered owner would
have sufficit:nt interest to effect insurance because he is the ostensible
owner. The question raised in that case was whether the registration
B in favour of benamidar is valid when the registered owner of the
vehicle is only benamider when the real owner never obtained the -
insurance. It was held that the registered owner has sufficient interest
to effect insurance because he is the ostensible owner and there is
nothing in S. 94 which.could be interpreted to mean that it is only the
c real owner who could effect the insurance. Any person who uses the
vehicle or allows any other person to use the vehicle could also get
the insurance effected. Thus, it is seen the public liability to notify
the transfer and secures no objection certificate under S. 31 read with
S. 94. would make the original owner retain the insurable interest. The
insurable interest in this case is not the proprietary interest but the
D public liability, not to run the vehicle or cause or allow any person to
run the vehicle without insurance and also to notify the transfer of
such vehicle to the registering authority. So long such obligation
continues notwithstanding the cession of proprietary interest the
insurable interest which is the foundation for the continuance of the
E operation of the policy stands.
Thus, we are clearly fortifiecf in our view that the insurable interest in
F the property is not necessary in the ca:se of public liability insurance.
The test is whether the liability under the statute ceased or not
notwithstanding the passing of title and hence we respectfully dissent.
with the view expressed by various High Courts that on the sale of
the vehicle the insurable interest ceases and the policy lapses. We
agree that any claim of the transferee in respect of his property and
G
his person cannot be enforced against the insurance company. He
being a stranger he cannot have any claim against the insurance
company. But the third partly risk is concerned so long the
obligations under the statute are not fulfilled, as contemplated under
sec. 31 read with sec. 94, he continues to have the insurable interest
H till such obligations are fulfilled.
G. GO VIND AN 1•. NEW INDIA ASSURANCE CO. LTD. [K. VENKA TASWAMI, J. j 483
Any prudent purchaser should take steps to get the policy A
transferred to him under S. l 03. The insurer is bound to accept the
transfer and can only refuse to consent on specified grounds. It is
clearly an impracticable view to take that on passing of property in
the vehicle, the policy lapses and the obligation under S.94 of the Act
ceases. In fact as observed by Supreme Court the policy is to the B
vehicle and hence normally it should run with the vehicle. It is just
to expect a reasonable time for the trnasferor to make the necessary
arrrangement to notify the transfer under S.31 and secure the certificate
under S.29-A within the time mentioned in those provisions. If this is
not allowed, the moment the vendor receives the money and puts the
vehicle in possession of the transferee, the latter is not in a position C
to uses the vehicle in view of S. 94 till a fresh policy is obtained. He
cannot take the vehicle tq his house passing through any public
place. When the transferor is liable to pay penalty under S.31 and also
liable to be prosecuted under S.112 for not notifying the transfer, we
are clearly of the opinion such statutory liability makes him to
retain the insurable interest as the liability subsists till he discharges D
the statutory obligation. We disagree with the view expressed in
(1972) I APLJ 249.
E
The registration of the vehicle in the name of the transferee is not
necessary to pass title in the vehicle. Payment of price and delivery
of the vehicle makes the transaction complete and the title will pass
to the purchaser. When the policy of insurance obtained by the
original owner of the vehicle is composite one covering the risks for F
his person, property (vehicle) and the third party claim, on passing
of title the transferee cannot enforce his claim in respect of any loss
or damage to his person and vehicle unless there is a novation. So
far the third party risk is concerned the proprietary interest in the
vehicle is not necessary and the pubic liability continues till the G
transferor discharges the statutory obligation under Ss. 29-A and 31
read with S. 94 of the Act. Till he complies with the requirement of
S. 31 of the Act, the public liability will not cease and that constitutes
the insurable interest to keep the policy alive in respect of the third
party risks are concerned. It must be deemed that the transferor
allowed the purchaser to use the vehicle in a public place in the said H
484 SUPREME COURT REPORTS [1999] 2 S.C.R.
A transitional period and accordingly till the compliance of S.31. the
liability of the transferor susbsists and the policy is in operation so
far it relates to the third party risks. We answer the second question
-
accordingly.
(Emphasis supplied)
B In Complete insulations (P) Ltd. v. New India Insurance Co. Ltd.,
[1996] 1SCC221 a three Judge Bench of this court had considered the scope
of section 103-A and Sections 94 and 95 of the 1939 Act and compared the
same with section 157 & 146, 14 7 and 156 of the Motor vehicles Act, 1988.
In that case the transferee of the vehicle contended inter alia that he was
C entitled to get the compensation for the damage caused to the vehicle in an
accident that took place after the transfer notwithstanding the fact that the
insurance policy was not transferred in his name. The Consumer Disputes
Redressal Commission, Chandigarh directed the insurer to pay a sum of Rs.
J
83,000 i.e. the insured value of the vehicle. The insurer preferred an appeal
to the National Consumer Disputes Redressal Commission which set aside the
D order of the Commission at Chandigarh and dismissed the claim of the
transferee. The National CommLssion after referring to the full bench judgment
in particular the separate concurring judgment of Kodandaramayya J. of
Andhra Pradesh High Court applied the ratio in that judgment in support of
its decision. The transferee preferred an appeal to this Court by Special Leave.
E This Court after referring to the separate judgment of Kodandaramayya J.
approved the principle laid down therein, applied the same and upheld the
decision of the National Commission.
This Court in the said judgment held that the provisions under the new
Act and the old Act are substantially the same in relation to liability in regard
F to third party. This Court also recognised the view taken in the separate
judgment in Kondaiah's case that the transferee-insured could not be said to
be a third party qua the vehicle in question. In other words, a victim or the
legal representatives of the victim cannot be denied the compensation by the
insurer on the ground that the policy was not transferred in the name of the
transferee.
G
This Court further held as follows :-
"Now, under the old Act although the insurer could refuse to tansfer
the certificate of insurance in certain circumstances and the transfer
was not automatic as under the new Act, there was under the old law
H protection to third parties, that is victim of the accident. The protection
G. <..iOVINDAN r. NEW INDIA ASSURANCE CO. LTD [K. VENKATASWAMI, J.] 485
was available by virtue of Sections 24 and 95 of the old Act. A
(Emphasis supplied.)
The same view was taken in New India Assurance Co. Ltd v. Sheela
Rani (Smt.) & Ors., [1998] 6 SCC 599.
The heading of Chapter VIII of the old Act reads as "Insurance of B
Motor Vehicles against Third Party Risks". A perusal of the provisions under
Chapter VIII makes it clear that the Legislature made insurance of motor
vehicles compulsory against third-pai1y (victims) risks. This Court in New
Asiatic Insurance Co. ltd. v. Pessumal Dhanamal Aswani & Ors., AIR (1964)
SC 1736 after noticing the compulsory nature of insurance against third-party
observed that once the company had undertaken liability to third parties C
incurred by the persons specified in the policy, the third parties' right to
recover any amount under or by virtue of the provisions of the Act is not
affected by any condition in the policy.
In our opinion that both under the old act and under the new Act the D
Legislature was anxious to protect the third party (victim) interest. It appears
that what was implicit in the provisions of the old Act is now made explicit,
presumably in view of the conflicting decisions on this aspect among the
various High Courts.
Undoubtedly the full bench decision of the Delhi High Court in Anand E
Sarup Sharma v. P.P. Khurana & Ors., (1989) ACJ 577 and also the full bench
decision of Karnataka High Court in National Insurance ~o. Ltd. v.
MallikaTjun & Ors., AIR (1990) Karnataka 166 differed from the view taken
by the Andhra Pradesh High Court in Konadaiah's case and held that the
third party liability of the insurer comes t::> an end on transfer of vehicle by
the insured to someone else unless the procedure prescribed for transfer of F
policy was fulfilled. As noticed earlier, learned counsel on both sides brought
to our notice a number of judgments of different High Court taking divergent
views. We do not feel it necessary to refer to all those decisions in view of
the full bench judgments of three High Courts noticed earlier.
G
As between the two conflicting views of the full bench judgments
noticed above, we prefer to approve the ratio laid down by the Andhra
Pradesh High Court in Kondaiah's case as it advances the object of the
Legislature to protect the third party interest. We hasten to add that the third
party here will not include a transferee whose transferor has not followed
procedure for transfer of policy. In other words in accord with the well-settlyd H
486 SUPREME COURT ,REPORTS [1999] 2 S.C.R.
A rule of interpretation of statutes we are inclined to hold that the view taken
by the Andhra Pradesh High Court in Kondaiah's case is preferable to the
'
-
contrary views taken by the Kamataka and Delhi High Courts (supra) even
assuming that two views are possible on the interpretation of relevant sections
as it promotes the object of the Legislature in protecting the third party
B (victim) interest. The ratio laid down in the judgment of Kama~aka & Delhi
High Courts (supra) differing from Andhra Pradesh High Court is not the
correct one.
For the reasons stated above, we allow the appeal and set aside the
impugned judgment of the High Court and restore that of the Motor Accident
C Claims Tribunal. Cuddalore. There is no order as to costs.
RKS. Appeal allowed.
I
'
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