Holding

Section 157 of the Motor Vehicles Act, 1988, deems transfer of the certificate of insurance only for third‑party risks; therefore the insurer is not liable for loss to the vehicle of the transferee under a comprehensive policy lacking a separate agreement.

Summary

MIS. Complete Insulations (P) Ltd. bought a Maruti car originally insured by New India Assurance for the original owner. The car’s registration was transferred to the appellant on 15‑June‑1989 and the appellant requested the insurer to transfer the insurance policy, but the insurer gave no response. The vehicle was later involved in a serious accident, and the insurer denied liability, claiming the appellant had no insurable interest. The Consumer Disputes Redressal Commission ordered the insurer to pay the insured value, but the National Consumer Disputes Redressal Commission set aside that order, holding that Section 157 of the Motor Vehicles Act, 1988, which deems transfer of the certificate of insurance, applies only to third‑party risk and not to a comprehensive policy covering damage to the vehicle itself. The Supreme Court upheld this view, noting that even if the transfer is deemed under the old or new Act, the liability under Chapter XI is limited to third‑party losses and there was no separate agreement covering the appellant’s own‑vehicle risk. Consequently, the insurer was not liable for the loss and the appeal was dismissed.

Issues considered

Whether Section 157 of the Motor Vehicles Act, 1988, deems the transfer of a comprehensive insurance policy covering own‑vehicle damage to the transferee.
Whether the insurer is liable to indemnify the transferee for loss to the vehicle when the policy was not expressly transferred.
Whether the timing of the transfer (old Act vs new Act) affects the deeming provision.

Legislation cited

Central Motor Vehicles Rules, 1989s. Rule 141
Motor Vehicles Act, 1939s. 103-A
Motor Vehicles Act, 1988s. 146, s. 147, s. 157

Subjects

Motor Vehicles Actinsurance transferthird‑party riskcomprehensive insuranceinsurable interestconsumer disputesdeeming provisionpolicy of insuranceliability

Judgment

A MIS. COMPLETE INSULATIONS (P) LTD.
v.
NEW INDIA ASSURANCE COMPANY LTD.

NOVEMBER 21, 1995
B
[A.M. AHMADI, CJ, S.C. AGRAWAL AND
>
SUJATA V. MANOHAR, JJ.] •

Motor Vehicles Act, 1988-Chapter XI-Insurance of motor vehicles
against Third Pmty Risks-Liability in regard to third parties-Transfer of
c certificate of insurance and policy of insurance-Deemed to have been made
where vehicle along with insurance policy is trans/e1Ted by owner to another
person-If policy covers other risks-There must be an agreement between
insurer and trans/eree.

D The respondent issued a comprehensive insurance policy for a
Maruti Car in favour of the owner. The premium for the insurance was
paid by the appellant company in whose favour the car was transferred.
The registration of the car was transferred to the appellant on 15.6.1989.
On 26.6.1989, the appellant intimated the transfer of registration and
asked for transfer of the insurance policy. A reminder was sent on
E 24.7.1989. The respondent did not reply to the two letters. On 17.9.1989 the
I-
car met with a serious accident in which the Managing Director of the
appellant Company suffered serious injuries and his sister died. On
11.10.1989 the appellant asked for the assessment of the damage as the car
was a total loss. The respondent did not respond. The appellant got a
F notice issued to which the respondent replied that the appellant had no
insurable interest in the car. The appellant filed a complaint before the
Consumer Disputes Redressal Commission which directed the respondent
to pay Rs. 83,000 i.e. the insured value of the vehicle, as the vehicle was a
total loss, alongwith costs and interest.

G On appeal the national Consumer Disputes Redressal Commission
set aside the order of the State Commission, dismissed the complaint and
granted cost of the appeal. The Commission held that under section 157
of the Motor Vehicle Act, 1988, a certificate of insurance is deemed to have
been transferred in favour of the person to whom the vehicle is transferred
H but the said provision applies only in relation to third party risk and did
500
(
COMPLETE INSULATIONS (P) LTD. v. NEW INDIA ASSURANCE CO. LTD. 501

not apply to a policy covering risk of damage to the vehicle or person of A
the insured. The question raised for consideration was whether on these
facts, without the insurance policy being transferred in the name of the
appellant, it was entitled to be indemnified by the insurer.

Dismissing the appeal, this Court

HELD : 1.1. Section 157 of the Motor Vehicle Act, 1988, introduces
a deeming provision whereby the transfer of the certificate of insurance
and the policy of insurance are deemed to have been made where the
vehicle alongwith the insurance policy is transferred by the owner to
another person. This provision has withdrawn the insurer's right of refusal C
w1 :h was granted under the old Act. [506-B-C]

1.2. The New Act of 1988 came into force with effect from July 1989.
Since the vehicle in question was sold on 15.6.1989 and the letter of intima-
tion of transfer and request to transfer the certificate of insurance and the
policy described therein was sent on 26.6.1989 the Old Act applied. Admit- D
tedly the request was not refused under section 103 A of the Old Act till the
New Act came into force. Thereafter, on 24.7.1989 the Insurance Company
was once again requested to effect the transfer of the Certificate of In-
surance as well as the policy but to no avail. By that date the New Act had
come into force. Actually the application dated 26.6.1989 was pending when
E
the New Act had come into force. That application had to be processed
under section 157 of the New Act and hence the Certificate as well as the
policy must be deemed to have been transferred in the name of the trans-
feree. "Even if the Old Act applied to pending cases, the certificate and
policy must be deemed to have been transferred since no refusal was com-
municated by the Insurance Company to the transferor or the transferee. F
Therefore, in either case the transfer of the Certificate of Insurance and
policy described therein must be taken as complete in view of the language
of section 103A of the Old Act and section 157 of the New Act. [508-B-E]

1.3. The entire chapter XI of the New Act concerns third party risks G
only. Insurance is compulsory only in respect of third party risks since
section 146 prohibits the use of a motor vehicle in a public place unless
their is in relation thereto a policy of insurance complying with the
requirements of Chapter XI. Thus, the requirements of the Chapter are in
relation to Third party risks only and hence the fiction of section 157 of
the New Act must be limited thereto. The certificate of insurance to be H
502 SUPREME COURT REPORTS [1995] SUPP. 5 S.C.R.

A issued in the prescribed form, Form 51 prescribed under Rule 141 of the
Central Motor Vehicles Rules, 1989, must, therefore, relate to Third party
risks. Since the provisions under the New Act and the Old Act in this
behalf are substantially the same in relation to liability in regard to third
parties, the National Consumer Disputes Redressal Commission was right
in the view it took based on the decision in Kondaiah's case because the
B transferee insured could not be said to be a third party qua the vehicle in
question. It is only in respect of Third party risks that section 157 of the
New Act provides that the certificate of insurance together with the policy
of insurance described therein "shall be deemed to have been transferred
in favour of the person to whom the motor vehicle is transferred". If the
c policy of insurance covers other risks as well e.g., damage caused to the
vehicle of the insured himself, that would be a matter falling outside
Chapter XI of the New Act and in the realm of contract for which there
must be an agreement between the insurer and the transferee, the former
undertaking to cover the risk or damage to the vehicle. [510-B-F]
D 1.4. In the present case since there was no such agreement and since
the insurer had not transferred the policy of insurance in relation thereto
to the transferee, the insurer was not liable to make good the damage to
the vehicle. The view taken by the National Commission was therefore
correct. [510-F-G]
E
Madiani Kondiah & Ors Etc. v. Yaseen Fatima & Ors. Etc., AIR (1986)
A.P. 62, referred to.
:"

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2131 of
..
1994.
(
F
From the Judgment and Order dated 15.4.93 of the National Con-.
sumer Disputes Redressal Commission, New Delhi in F.A. No. 118 of 1992.

Ashok Mathur for the Appellant.

G S.K. Paul, Salil Paul and Ms. Indira Sawhney, for the Respondent.

The Judgment of the Court was delivered by
,.
AHMADI, CJI. A Maruti Car with registration No. CHK-9253 was
purchased in the name of Mrs. Archana Wadhwa for which the respondent,
H M/s. New India Assurance Company Ltd., had issued a comprehensive
COMPLETE INSULATIONS (P) LTD. v. NEW INDIA ASSURANCE CO. LTD. [AHMADI, J.) 503

insurance policy. The premium for the insurance was paid by the appellant A
company in whose favour the car was transferred. The registration of the
car was transferred to the appellant on 15.6.1989. On 26.6.1989, the appel-
lant intimated the transfer of registration and asked for transfer of the
insurance policy. A reminder was sent on 24.7.1989. The respondent did
not reply to the two letters. On 17.9.1989 the car met with a serious
B
accident in which the Managing Director of the appellant suffered serious
injuries and his sister died. On 11.10.1989 the appellant asked for the
assessment of the damage as the car was a total loss. The respondent did
not respond. A reminder dated 26.12.1989 met the same fate. The appellant
got a notice issued to which the respondent replied that the appellant had
no insurable interest in the car. The appellant filed the complaint before c
the Consumer Disputes Redressal Commission, Chandigarh, which
directed the respondent to pay Rs. 83,000 i.e. the insured value of the
vehicle, as the vehicle was total loss, along with costs and interest. The
National Consumer Disputes Redressal Commission set aside the order of
the Commission at Chandigarh, dismissed the complaint and granted cost D
of the appeal. Hence the appeal.

The moot question involved in the case is whether on the above facts,
.without the insurance policy being transferred in the name of the appellant,
it was entitled to be indemnified by the insurer. The National Consumer
Disputes Redressal Commission held that under section 157 of the Motor E
Vehicle Act, 1988, (hereinafter called 'the New Act') a certificate of
\ insurance is deemed to have been transferred in favour of the person to
whom the vehicle is transferred but that the said provision applied only in
relation to third party risk and did not apply to a policy covering risk of
damage to the vehicle or person of the insured. The National Commission
F
placed reliance on a judgment of the High Court of Andhra Pradesh in
Madinani Kondaiah & Ors. Etc. v. Yaseen Fatima & Ors. Etc. AIR 1986

-· Andhra Pradesh 62.

Before proceeding further it is necessary to examine the provisions
of section 103-A of the Motor Vehicle Act, 1939, hereinafter called the G
'Old Act' and section 157 of the New Act, in Juxtaposition :

Old Act New Act
103-A TRANSFER OF "157 TRANSFER OF
CERTIFICATE OF INSURANCE CERTIFICATE OF INSURANCE
H
504 SUPREME COURT REPORTS [1995) SUPP. 5 S.C.R.

A (1) Where a person in whose (1) Where a person in whose
favour the certificate of insurance favour the certificate of insurance
has been issued in accordance with has been issued in accordance with
the provisions of this Chapter the provisions of this Chapter
proposes to transfer to another transfers to another person the
person the ownership of the motor ownership of the motor vehicle in
B vehicle in respect of which such respect of which motor vehicle in
insurance was taken together with such insurance was taken together
the policy of insurance relating with the policy of insurance relating
thereto, he may apply in the thereto, the certificate of insurance
prescribed form to the insµrer for and the policy described in the
the transfer of the certificate of certificate shall be deemed to have
c insurance and the policy. described been transferred in favour of the
in the certificate in favour of the person to whom the motor vehicle
person to whom the motor vehicle is transferred with effect from the
is proposed to be transferred, and date of its transfer.
if within fifteen days of the receipt
of such application by the insurer,
D the insurer has not intimated the
insured and such other person his
refusal to transfer the certificate
and the policy to the other person,
the certificate of insurance and the
E policy described in the certificate
shall be deemed to have been
transferred in favour of the person
to whom the motor vehicle is
transferred with effect from the
date of its transfer.
F (2) The insurer to whom any (2) The transferee shall apply
application has been made under within fourteen days from the date
Sub-section (1) may refuse to
transfer to the other person the
of transfer in the prescribed form
to the insurer for making necessary r
certificate of insurance and the changes in regard to the fact of
policy described in that certificate, transfer in the certificate of
G if he considers it necessary so to do, insurance and policy described in
having regard to -
~~~~~~~~~~~~~---;
the certificate in his favour and the
(a) the previous conduct of the insurer shall make the necessary
other persons, - changes in the certificate and the
policy of insurance in regard to the
transfer of insurance."
H
COMPLETE INSULATIONS (P) I.:ID. v. NEW INDIA ASSURANCE CO. LTD. [AHMADI, J.) 505

(i) as a driver of motor vehicles; or A
(ii) as a holder of the policy of
insurance in respect of any motor
vehicle; or
(b) any conditions which may have
been imposed in relation to any B
such policy held by the applicant;
or
(c) the rejection of any proposal
made by such other person for the
issue of a policy of insurance in c
respect of any motor vehicle owned
or possessed by him.
(3) Where the insurer has refused
to transfer, in favour of the person
to whom the motor vehicle has D
been transferred, the certificate of
insurance and the policy described
in that certificate, he shall refund to
such transferee the amount, if any,
which, under the terms of the
policy, he would have had to refund E
to the insured for the unexpired
term of such policy."

On a plain reading of section 103-A it is obvious that the insurer
could in a given case refuse to transfer the certificate of insurance and the F
policy described therein. It is only if the insurer fails to convey the refusal
within fifteen days that the deeming clause comes into operation. However,
section 157 of the New Act makes the transfer of the Certificate of
Insurance along with the insurance policy described therein automatic
along with the transfer of the motor vehicle together with the policy of
insurance to the purchaser. This is clearly an improvement over the pre- G
vious provision on the subject.

Thus under the Old Act the insured was required to apply in the
prescribed form to the insurer for transfer of the certificate of insurance
and the poliCy described therein. Once such an application was made the H
506 SUPREME COURT REPORTS [1995) SUPP. 5 S.C.R.

A insurer had to communicate its refusal within fifteen days of the receipt of
the application for transfer failing which the certificate of insurance and
the policy described therein "shall be deemed to have been transferred" in
favour of the transferee. This shows that the insurer had the right to refuse
transfer of the certificate of insurance and the policy described therein
provided the right was exercised within the stipulated time of fifteen days.
B Section 157 of the New Act introduces a deeming provision whereby the
transfer of the Certificate of insurance and the policy of insurance are
deemed to have been made where the vehicle along with the insurance
policy is transferred by the owner to another person. This provision has
withdrawn the insurer's right of refusal which was granted under the Old
c Act.

Now, under the Old Act although the insurer could refuse to transfer
the certificate of insurance in certain circumstances and the transfer was
not automatic as under the New Act, there was under the Old law protec-
tion to Third parties, that is victims of the accident. The protection was
D available by virtue of sections 94 and 95 of the Old Act. The relevant part
of these two provisions was as under :

"Section 94 - Necessity for insurance against third- party risk - (1)
No person shall use excep~ as a passenger or cause or allow any
E other person to use a motor vehicle in a public place, unless there
is in force in relation to the use of the vehicle by that person or
that other person, as the case may be, a policy of insurance
complying with the requirements of this chapter."

F The other subsections permitted the appropriate government to grant
exemption from the operation of the aforesaid section to vehicles owned
by the Central or State Government or any local authority or State
Transport Authority under certain circumstances.

"95. Requirements of policies and limits of liability - (i) In order
G to comply with the requirements of this Chapter, a policy of
insurance must be a policy which -

(a) is issued by a person who is an authorised insurer (or by a
co-operative society allowed under section 108 to transact the
H business of an insurer], and
COMPLETE INSULATIONS (P) LTD. v. NEW INDIA ASSURANCE CO.LTD. [AHMADI, J.) 507

(b) insurers the person or classes of persons specified in the A
policy to the extent specified in sub-section (2) -

(i) against any liability which may be incurred by him in
respect of the death of or bodily injury to any person
or damage to any property of a third party caused by
or arising out of the use of the vehicle in a public place; B

(ii) against the death of or bodily injury to any passenger
of a public service vehicle caused by or arising out of
the use of the vehicle in a public place :
c
(5) Notwithstanding anything elsewhere contained in any law, a
person issuing a policy of insurance under this section shall be
liable to indemnify the person or classes of person specified in the
policy in respect of any liability which the policy purports to cover D
in the case of that person or those classes of persons."

In Kondaiah's case (supra) the vehicle in question was transferred
but not the insurance policy. The policy or the certificate was not trans-
ferred to the vendee. The victims of the accident filed a claim before the
Motor Accident Claims Tribunal. Broadly four contentions where con- E
sidered, namely, (i) whether the transfer of the vehicle to the purchaser is
not complete till the vehicle is registered in the name of the transferee (ii)
whether on transfer in the absence of the transfer of the insurance policy,
the policy lapses (iii) whether it lapses even against the third party (iv)
whether the Insurance Company can validly contend that the insurance F
policy had lapsed. The Full Bench held that under the Sale of Goods Act
the sale is complete on payment of the consideration and delivery of the
vehicle, regardless of transfer of registration in the name of the transferee.
On the second and third contentions it was held that notwithstanding the
non-transfer of the insurance policy, the liability qua third party subsists G
in view of sections 94 and 95 of the Old Act. The last point regarding right
of insurance company to raise the plea of the policy having lapsed is not
of any relevance to us. In the separate judgment of Kodandaramayya, J.
relied upon by the National Commission, it was pointed out that the 'third
party' referred to in section 95 did not include a transferee who was not a
party to the original contract of insurance and, therefore, the transferee or H
508 SUPREME COURT REPORTS (1995] SUPP. 5 S.C.R.

A vendee could not claim any benefit from the insurance company for
damage to his person or the vehicle.

The New Act came into force with effect from 1st July, 1989. Since
the vehicle in question was sold on 15.6.1989 and the letter of intimation
of transfer and request to transfer the Certificate of insurance and the
B policy described therein was sent on 26.6.1989 the Old Act applied. Ad-
mittedly the request was not refused under section 103A of the Old Act
till the New Act came into force. Thereafter on 24.7.1989 the Insurance
Company was once again requested to effect the transfer of the Certificate
of Insurance as well as the policy but to no avail. By that day the New Act
c had come into force. Actually the application dated 26.6.1989 was pending
when the New Act had come into force. That application had to be
processed under section 157 of the New Act and hence the Certificate as
well as the policy must be deemed to have been transferred in the name
of the transferee. Even if it is assumed that the Old Act applied to pending
cases, the certificate and policy must be deemed to have been transferred
D since no refusal was communicated by the Insurance Company to the
transferor or the transferee. Therefore, in either case the transfer of the
Certificate of Insurance and policy described therein must be taken as
complete in view of the language of section 103A of tl:te Old Act and
section 157 of the New Act.
E
Section 157 appears in Chapter XI entitled 'Insurance of Motor
Vehicles against Third Party Risks' and comprises sections 145 to 164.
Section 145 defines certain expressions used in the various provisions of
that chapter. The expression 'Certificate of Insurance' means a certificate
issued by the authorised insurer under section 147(3). 'Policy of Insurance'
F includes a certificate of insurance. Section 146(1) posits that 'no person
shall use, except as a passenger, or cause or allow any other person to use,
a motor vehicle in a public place, unless there is in force in relation to the
use of the vehicle by that person or that other person, as the case may be,
a policy of insurance complying with the requirements of this chapter'. Of
G course, this provision does riot apply to vehicles owned by the Central or
State Government and used for Government purposes not connected with
any commercial enterprises. This provision corresponds to section 94 of
the old Act. Section 147 provides that the policy of insurance to be issued
by the authorised insurer must insure the specified person or classes of
persons against any liability incurred in respect of death of or bodily injury
H to any person or damage to any property of a third party as well as against
COMPLETE INSULATIONS (P) LTD. v. NEW INDIA ASSURANCE CO. LTD. (AHMADI, J.) 509

the death of or bodily injury caused to any passenger of a public service A
vehicle caused by or arising out of the use of the vehicle in a public place.
This provision is akin to section 95 of the Old Act. It will be seen that the
liability extends to damage to any property of a third party and not damage
to the property of the owner of the vehicle, i.e. the insured. Sub-section (2)
stipulates the extent of liability and in the case of property of a third party
the limit of liability is rupees six thousand only. The proviso to that
B
sub-section continues the liability fixed under the policy for four months
or till the date of its actual expiry, whichever is earlier. Sub-section (3) next
provides that the policy of insurance shall be of no effect unless and until
the insurer has issued a certificate of insurance in the prescribed form. The
next important provision which we may notice of is section 156 which sets c
out the effect of the certificate of insurance. It says that when the insurer
issues the certificate of insurance, then even if the policy of insurance has
not as yet been issued, the insurer shall as between himself and any other
person except the insured, be deemed to have issued to the insured a policy
of insurance conforming in all respect with the description and particulars
stated in the certificate. It is obvious on a plain reading of this provision D
that the legislature was anxious to protect third party interest. Then comes
section 157 which we have extracted earlier. This provision lays down that
when the owner of the vehicle in relation where to a certificate of insurance
is issued transfers to another person the ownership of the motor vehicle,
the c.ertificate of insurance together with the policy described therein shall E
be deemed to have been transferred in favour of the new owner of the
vehicle with effect from the date of transfer. Sub-section (2) requires the
transferee to apply within fourteen days from the date of transfer to the
insurer for making necessary changes in the certificate of insurance and
the policy described therein in his favour. These are the relevant provisions
of Chapter XI which have a bearing on the question of insurer's liability in F
the present case.

There can be no doubt that the said chapter provides for compulsory
insurance of vehicles to cover third party risks. Section 146 forbids the use
of a vehicle in a public place unless there is in force in relation to the use G
of that vehicle a policy of insurance complying with the requirements of
that chapter. Any breach of this provision may attract penal action. In the
case of property, the coverage extends to property of a third party i.e. a
person other than the insured. This is clear from section 147(1)(b) (i)
which clearly refers to 'damage to any property of a third party' and not
dam<..3e to the property of the insured' himself. And the limit of liability H
510 SUPREME COURT REPORTS [1995] SUPP. 5 S.C.R.

A fixed for damage to property of a third party is rupees six thousand only
as pointed out earlier. That is why even the claims Tribunal constituted
under section 165 is invested with jurisdiction to adjudicate upon claims
for compensation in respect of aceidents involving death of or bodily injury
to persons .arising out of the use of motor vehicles, or damage to any
property of a third party so arising, or both. Here also it is restricted to
B damage to third party properey and not the property of the insured. Thus,
the entire chapter XI of the New Act concerns third party risks only. It is,
therefore, obvious that insurance is compulsory only in resped of third
party risks since section 146 prohibits the use of a motor vehicle in a public
place unless there is in relation thereto a policy of insurance complying
c with the requirements of Chapter XI. Thus, the requirements of that
chapter are in relation to third party risks only and hence the fiction of
section 157 of the New Act must be limited thereto. The certificate of
insurance to be issued in the prescribed form (see Form 51 prescribed
under Rule 141 of the Central Motor Vehicles Rules, 1989) must, there-
fore, relate to third party risks. Since the provisions under the New Act
D and the Old Act in this behalf are substantially the same in relation to
liability in regard to third parties, the National Consumer Disputes Redres-
sal Commission was right in the view it took based on the decision in
Kondaiah's case because the transferee-insured could not be said to be a
third party qua the vehicle in question. It is only in respect of third party
risks that section 157 of the New Act provides that the certificate of
E insurance together with the policy of insurance described therein "shall be
deemed to have been transferred in favour of the person to whom the
motor vehicle is transferred". If the policy of insurance covers other risks
as well, e.g., damage caused to the vehicle of the insured himself, that
would be a matter falling outside Chapter XI of the New Act and in the
realm of contract for which there must be an agreement between the
F
insurer and the transferee, the former undertaking to cover the risk or
damage to the vehicle. In the present case since there was no such agree-
ment and since the insurer had not transferred the policy of insurance in
relation thereto to the transferee, the insurer was not liable to make good
the damage to the vehicle. The view taken by the National Commission is
G therefore, correct.

For the above reasons, we see no merit in this appeal and dismiss
the same but with no order as to costs.

R.A. Appeal dismissed.