MANAGING DIRECTOR, K.S.R.T.C.versusNEW INDIAASSURANCE CO. LTD. & ORS.

                    [2015] 10 S.C.R. 743


             MANAGING DIRECTOR, K.S.R.T.C.                        A
                               v.
        NEW INDIAASSURANCE CO. LTD. & ORS.
             (Civil Appeal No. 5293 of2010 etc.)
                     OCTOBER 27 2015I
                                                                  8

        [H. L. DATTU, CJI AND ARLIN MISHRA, J.]
       Motor Vehicles Act, 1988- ss.2(30), 147, second proviso
 to s.147(1) ands. 157-Accidentbythe bus given to Transport
 Corporation under a lease agreement by the registered owner C
 thereof - Liability to pay compensation - Whether on the
 registered owner, the Corporation or the insurer - Held: In
 view of the provisions of ss. 2(30), 147 and 157 the insurer
 cannot escape the liability to pay the compensation - The
                                                                   0
 liability of the insurer continues notwithstanding the contract
 of transfer of vehicle - Such contractual liability cannot be
 said to be excluded by virtue of second proviso to Section
· 14 7(1) - The Corporation being in actual control of the vehicle
 would be liable to make the compensation - Even though, E
 the Corporation is treated as owner under Section 2(30), the
 registered owner continues to remain liable as per terms and
 conditions of lease agreement - Therefore, the registered
 owner, insurer as well as the Corporation would be liable to
 make the payment of compensation jointly and severally - F
  In view of the terms of the agreement, the Corporation can
  recover the amount from the registered owner or insurer.

     Insurance - Insurance Policy- Nature of- Held: Policy
of insurance is contractual obligation between the insured G
and the insurer.

     Allowing the appeals, the Court

    HELD: 1. No vehicle can be driven without insurance
as provided in Section 147 of Motor Vehicles Act, 1988.           H
                          743
744      SUPREME COURT REPORTS               [2015] 10 S.C.R.


A The policy of insurance is contractual obligation between
  the insured and the insurer. Clause 14 of lease agreement
  between the appellant-Corporation and the owner
  clearly stipulate that it shall be the liability of the owner
  to provide the comprehensive insurance covers for all
B kind of accidental risks to the passengers, other persons/
  property. The agreement is not shown to be illegal in any
  manner whatsoever nor shown to be opposed to the
  public policy. It has not been shown that while entering
  into the aforesaid agreement of lease for hiring the buses,
C any of the provisions contained in the insurance policy
  has been violated. It has also not been shown that owner
  could not have given bus on hire as per any provision
  of policy. It was the liability of the registered owner to
  provide the bus regularly, to employ a driver, to make
0
  the payment of salary to the driver and the driver was
  required to be duly licensed and not disqualified as
  provided in the agreement though buses were to be plied
  on the routes as specified by the appellant-Corporation
E and hiring charges were required to be paid to the
  registered owner. In the absence of any stipulation
  prohibiting such an arrangement in the insurance policy,
  in view of agreement of lease, the registered owner has
  owned the liability to pay. The insurer cannot also escape
F the liability. [Paras 23 and 24] [757-B-D, F-H; 758-A]

        2. It is also provided u/s. 157 of the Motor Vehicles
  Act, 1988 that the certificate of insurance and the policy
  described in the certificate shall be deemed to have been
G transferred in favour of the person to whom the motor
  vehicle is transferred with effect from the date of its
  transfer. Even if there is a transfer of the vehicle by sale,
  the insurer cannot escape the liability as there is deemed
  transfer of the certificate of insurance. In the present case
H it is not complete transfer of the vehicle, it has been given
    MANAGING DIRECTOR, K.S.R.T.C. v. NEW INDIA                745
             ASSURANCE CO. LTD.

on hire for which there is no prohibition and no condition/ A
policy of insurance as shown to prohibit plying of vehicle
on hire. The vehicle was not used for inconsistent
purpose. Thus, in the absence of any legal prohibition
and any violation of terms and conditions of the policy,
more so, in view of the provisions of Section 157 of the B
Act of 1988, the insurer cannot escape the liability. [Para
25] [758-B-E]
     4. When the provisions of Section 147 and Section
157 are read together, it leaves no room for any doubt C
thatthore is deemed transfer of policy in case of transfer
of vehicle. Hence, liability of insurer continues
notwithstanding the contract of transfer of vehicle, such
contractual liability cannot be said to be excluded by
virtue of second proviso to Section 147(1) of 1988 Act. D
An agreement for lease on hire cannot be said to be
contract envisaged for exclusion under contractual
liability in second proviso to Section 147(1) of the Act of
1988. The High Court has erred in holding otherwise.
[Para 26] [758-F-H] [759-A]                                 E

     5. The appellant-Corporation can also be treated as
owner for the purposes of Section 2(30) of the Act of 1988
plying the buses under lease agreement. The insurance
company admittedly has insured the vehicle and taken F
the requisite premium and it is not a case set up by the
insurer that intimation was not given to the insurance
company of the hirirrg arrangement. Even if the
intimation had not been given, the insurer cannot escape
the liability to indemnify as in the case of hiring of vehicle G
intimation is not required to be given. It is only in the
case of complete transfer of the vehicle when change of
registration particulars are required under Section 157
of the Act, an intimation has to be given by the transferee H
746       SUPREME COURT REPORTS              [2015] 10 S.C.R.


A for effecting necessary changes in the policy. Even
  otherwise, that would be a ministerial act and the insurer
  cannot escape the liability for that reason. When the
  appellant-Corporation has become the owner of the
  vehicle during the period it was on hire with it for the
B purpose of Section 2(30) of the 1988 Act by virtue of
  provisions contained in Section 157 of the 1988Act, the
  insurance policy shall be deemed to be transferred. As
  such, insurer is liable to make indemnification and cannot
  escape the liability so incurred by the appellant-
C Corporation. [Para 27] [759-B-F]

        6. In the instant cases there are certain clauses which
   indicate that ifthe appellant-Corporation has to make the
   payment, it can recover the same from the owner out of
 D the amount payable by it or from the amount payable by
   the insurer to the owner. The appellant-Corporation being
   in actual control of the vehicle would be liable to make
   the compensation, however, it can recover the amount
   from the registered owner or insurer, as the case may
 E be. [Para 28] [764-B-C]

       7. Even though, appellant-Corporation is treated as
   owner. under Section 2(30) of the Act of 1988, the
   registered owner continues to remain liable as per terms
 F and conditions of lease agreement lawfully entered into
   with appellant-Corporation. [Para 33] [770-C]

        8. Therefore, the register~d owner, insurer as well
   as appellant-Corporation would be liable to make the
 G payment of compensation jointly and severally to the
   claimants and the appellant-Corporation in terms of the
   lease agreement entered into with the registered owner
   would be entitled to recover th~ amount paid to the
   claimants from the owner.as stipulated in the agreement
 H or from the insurer. [Para 34] [770-D-E]
    MANAGING DIRECTOR, K.S.R.T.C. v. NEW INDIA           747
             ASSURANCE CO. LTD.

    Rajasthan State Road Transport Corporation v.        A
    Kai/ash Nath Kothari & Ors. 1997 (3) Suppl. SCR
    724: (1997) 7 SCC 481; Godavari Finance
    Company v. Dega/a Satyanarayanamma & Ors.
    2008 (6) SCR 231: (2008) 5 sec 101; Uttar
    Pradesh State Road Transport Corporation v.          B
    Ku/sum & Ors. 2011 (15) SCR 618: (2011) 8 SCC
    142; HDFC Bank Limited v. Reshma & Ors.
    (2015) 3 sec 679 - relied on.

    National Insurance Co. Ltd. v. Deepa Devi & Ors.     C
    2001 (13) scR 134: (2008) 1 sec 414 -
    distinguished.

    Pushpa alias Leela & Ors. v. Shakuntala & Ors.·
    2011 (1) SCR 334: (2011) 2 SCC 240- referred         D
    to.
                 Case Law Reference
  2011 (15) SCR 618          relied on.       Para 5
  1997 (3) Suppl. SCR 724    relied on.       Para 6     E
   2007 (13) SCR 134         distinguished. Para 23
   2008 (6) SCR 231          relied on. ·     Para 30
   (2015) 3 sec 679          relied on.       Para 32
                                                         F
   2011 (1) SCR 334          referred to.     Para 32
   CIVIL APPELLATE JURISDICTION: Civil Appeal No.
5293 of2010.

    From the Judgment and .Order dated 20.02.2009 of the· G
High Court of Karnataka at Bangalore passed in MFA No.
11440 of2007.
                            WITH
    C.A. No. 6641 of2010.                                H
748        SUPREME COURT REPORTS                    [2015] 10 S.C.R.


A         S. N. BhatfortheAppellant.

          Vishnu Mehra, Sakshi Mittal, Pramod Dayal, Shanthkumar
      V. Mahale,Amith J., Rajesh Mahaleforthe Respondents.

          The Judgment of the Court was delivered by
 B
          ARUN MISHRA, J. 1. The questions involved in the
   appeals are whether in the wake of lease agreement entered
   into by registered owner with Karnataka State Road Transport
   Corporation (hereinafter referred to as the 'KSRTC'), the
 C registered owner and insurer along with KSRTC can be
   fastened with the liability to make payment to the claimants
   and whether KSRTC can recover the amount from registered
   owner and its entitlementto seek indemnification from insurer?

 D      2. The facts giving rise to Civil Appeal No.5293 of 2010
   reflect that the accident in question was caused by the bus
   which was driven under the control of KSRTC. The bus was
   owned by respondent no.2, T.M. Ganeshan, insured by the New
   India Assurance Co. Ltd. Admittedly, an agreement dated
 E 28.2.2002 was entered into between the KSRTC and owner
   respondent no.2. The MACT, Tumkur, Karnataka on 25.6.2007
   allowed the claim petition preferred by the claimants and
   awarded a sum of Rs.4,09,000/-with interest@ 6% p.a.
 F        3. In view of the agreement between KSRTC and the
     owner of the bus, the liability was fastened upon the owner
     and the insurer of the vehicle jointly and severally to make the
     payment of compensation, not on KSRTC. Aggrieved thereby,
     the insurer preferred .an appeal before the High Court of
 G · Karnataka. The same has been allowed by the impugned
     judgment and order dated 20.2.2009. The High Court has
     allowed the appeal filed by the insurer and held that the liability
     to make the payment of compensation is that of KSRTC alone.
 H Aggrieved thereby, the KSRTC has come up in the appeal
     before us.
      MANAGING DIRECTOR, K.S.R.T.C. v. NEW INDIA                  749 .
        ASSURANCE CO. LTD. [ARUN MISHRA, J.]

     4. In Civil Appeal No.6641 of 2010, the bus was plied A
 similarly on hire agreement by the KSRTC. The Claims
 Tribunal has fastened the liability jointly and severally upon the
 KSRTC and upon Internal Security Fund, Bangalore.Aggrieved
 thereby, the appeal was preferred in the High Court and the
 same has been dismissed. Hence, Civil Appeal No.6641 of B
 2010 has been filed in this Court.

       5. It was submitted by Shri S.N. Bhat, learned counsel for
 the appellant that the High Court has erred in fastening the
 liability upon the KSRTC. In view of the lease agreement for C
 hire entered into between the KSRTC and the owner, the owner
 could not escape the liability to make the p~yment of
 compensation. As such, the insurer was liable to indemnify
Jhe owner and to make the payment of compensation. The
 liability could not have been fastened upon the KSRTC. D
 Learned counsel has placed reliance on the decision of this
 Court in Uttar Pradesh State Road Transport Corporation v.
 Ku/sum & Ors., (2011) 8 SCC 142.

        6. Shri Vishnu Mehra, learned counsel appearing on E
..,behalf of New India Assurance Co. Ltd. contended that in view
  of the fact that the vehicle was plied under the complete control
  and supervision of KSRTC, it cannot escape from the liability
  to make the payment of compensation. He has relied upon
  the decision of this Court in Rajasthan State Road Transport F
   Corporation v. Kai/ash Nath Kothari & Ors., (1997) 7 SCC
   481 and the definition of the owner under Section 2(30) of the
   Motor Vehicles Act, 1988 (hereinafter referred to as the 'Act').
   He has consequently submitted that owner and insurer have
   rightly been exonerated by the High Court.                       G

     7. It was submitted on behalf of the claimants that they
 can recover the compensation from the KSRTC, owner and
 insurer jointly and severally.
                                                                   H
750         SUPREME COURT REPORTS                  (2015] 1OS.C.R.


A         8. The owner has been defined under Section 2(30) of
      the Motor Vehicles Act, 1988 (hereinafter referred to as the
      Act of.1988). The definition in the Act of 1988 is extracted
      hereunder:

 B         "2(30) "owner" means a person in whose name a motor
           vehicle stands registered, and where such person is a
           minor, the guardian of such minor, and in relation to a ·
           motor vehicle which is the subject of a hire-purchase
           agreement, or an agreement of lease or an agreement
C          of hypothecation, the person in possession of the vehicle
           under that agreement;"

          9. The definition of owner under Section 2( 19) of the Motor
      Vehicles Act, 1939 read as under:-
D
           "2(19) "owner" means, where the person, in possession
           of a motor vehicle is a minor, the guardian of such minor,
           and in relation to a motor vehicle which is the subject of
           a hire purchase agreement, the person in possession of
 E         the vehicle under that agreement."

          10. Under the Act of 1988, the owner means a registered"'"
      owner and where the agreement on hire-purchase or an
      agreement of hypothecation has been entered into or lease
 F    agreement, the person in possession of the vehicle is treated
      as an owner.

         11. Section 146 of the Act of 1988 prescribe the necessity
   for insurance against third party risk. Motor vehicle cannot be
   used in a public place without policy of insurance complying
 G with the requirement of Chapter X1. Exemption has been
   carved out to the vehicles owned by the Central or State
   Governments and used for government purposes. Under sub-
   section (3) of Section 146, it is open to the appropriate
 H Government to exempt the vehicle owned by the Central or
     MANAGING DIRECTOR, K.S.R.T.C. v. NEW INDIA                     751
       ASSURANCE CO. LTD. [ARUN MISHRA, J.]

State Governments if it is used for Government purposes or A
any local authority or any State transport undertaking.

     12. Section 14 7 of the Act of 1988 deals with the
requirements of policy and limits of liability. The statutory
requirement under Section 147 is that policy of insurance must s
be a policy which is issued by authorised Insurer and insures
the person or class of persons specified in the policy to the
extent spec[fied 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, including owner of the goods or his C
authorised representative carried in the vehicle or damage to
any property of a third party caused by or arising out of the use
of the vehicle in a public place; and (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.     D

      13. Certain exception have been carved out in the proviso
to sub-section (1) of section 147. It is contained in proviso (ii)
that the policy shall not be required to cover any contractual
liability. Limits of the liability have been provided in Section E
147(2). The liability un.der Section 147(2)(1)(b) is the amount
of liability incurred and with respect to any damage to any
property of a third party, a limit of Rs.6,000/-. Section 147(5)
provides that notwithstanding anything contained in any law
for the time being in force, an insurer shall be liable to indemnify F
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.

     14. Section 157 of the Act 1988 deals with the deemed G
transfer of certificate of insurance. Provisions of Section 157
are as under:

      "157. Transfer of certificate of insurance.-
      ( 1) Where a person in whose favour the certificate of H
752         SUPREME COURT REPORTS                   [2015) 1OS.C.R.


A           insurance has been issued in accordance with the
            provisions of this Chapter transfers to another person
            the ownership of the motor vehicle in respect of which
            such insurance was taken together with the policy of
            insurance relating thereto, the certificate of insurance and
 B         'the 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.

C          (2) The transferee shall apply within fourteen days from
           the date of transfer in the prescribed form to the insurer
           for making necessary changes in regard to the fact of
           transfer in the certificate of insurance and the policy
           described in the certificate in his favour and the insurer
D          shall make the necessary changes in the certificate and
           the policy of insurance in regard to the transfer of
           insurance."

           It is apparent from Section 157( 1) of the Act of 1988 that
 E    certificate shall be deemed to have been transferred in favour
      of the person to whom the motor vehicl.e is transferred with
      effect from the date of its transfer. Section 157(2) of the Act
      provides that the transferee to apply within 14 days from the
      date of transfer in the prescribed form to make necessary
 F    changes in the certificate of insurance.

        15. Before dilating further, we deem it appropriate to advert
   to the certain clauses in the lease agreement on the basis of
   which vehicles are plied on hire by the KSRTC. The owner of
 G the private bus has to provide new bus to KSRTC for the
   purpose of hire.

       16. As per clause 6, the owner of the private bus to
   discharge statutory liability. Clauses 6(i) and (ii) of lease
 H agreement are quoted below:
    MANAGING DIRECTOR, K.S.R.T.C. v. NEW INDIA                      753
     ASSURANCE CO. LTD. [ARUN MISHRA, J.]

     "6(i) In case the owner of the private bus defaults in the A
     discharge of any of his statutory liability, KSRTC reserves
     the right to deduct such amounts from the amount payable
     to the owner as it is sufficient to discharge the liability,
     and ifthe liability is more than the amounts payable by
     KSRTC to the owner, the owner alone shall be liable to B
     discharge the liability and/or to make good the amount
     to KSRTC, if discharged by KSRTC.

     6(ii) If because of any default by the bus owner or by his/
     her drivers/other employees, agent representative, any C
     liability comes on KSRTC, the KSRTC has the right to
     recover the amount either from the bills payable or the
     security deposit and to take further steps to recover the
     balance from the private owner by any lawful means."
                                                                    D
     17. The Conductor was to be provided under clause 7(iv)
by the KSRTC and was entitled to collect the fare and luggage
charges etc. for and on behalf of KSTRC.

    18. As per clau·se 8, Drivers were to be engaged and E
provided by the owner. Salary etc. was also to be paid by the .
owner and is subject to other conditions such as they should
not have been dismissed from the services of the Central
Government etc. and should possess requisite licence.
                                                                    F
    19. Clause 14 of lease agreement with respect to
insurance coverage is also relevant which is extracted as
under:

     "14. The owner of the private bus shall keep the hired
     bus duly insured under a Motor Vehicle comprehensive           G
     insurance police covering all risks and all such costs shall
     be born by the qwner of the private bus. In case of failure
     to have a valid comprehensive insurance policy. The bus
     will not be used for KSRTC's operations and it will be         H
754        SUPREME COURT REPORTS                    [2015] 1OS.C.R.


A          deemed that the bus has not been made available to
           KSRTC for scheduled operations, with all consequent of
           effects. The insurance shall cover 61 passengers."

          20. Clause 16 relating to liability as to accidents is also
 B    important for the purpose of decision of the case. Clauses
      16(a) (b) and (c) are extracted as under:-
           "(a) The owner of the bus alone shall be solely liable for
           any claim arising out of any accident, damages or loss
           or hurt caused during the operation of the bus. The
c          KSRTC shall not be liable for any claims arising out of
           the use of the buses, including claims made in connection
           with the impurities or loss of life sustained by passengers,
           bus crew or any other road user or to any property/person.
           Besides, all tortuous liability if any, shall be borne by the
 D
           owner or the insurer of the vehicle themselves. However
           the accidents should be reported to the KSRTC office/
           Depot.
           (b) KSRTC may make payment of ex-gratia amount to
 E         the victims in event of accident of such private hired buses
           while on KSRTC operations as per the KSRTC's
           prevailing norms which shall be recovered from any
           amounts due to the owner of such private buses or from
           security Deposit etc. Further, the owner of such private
 F         bus should make prompt payment of 'no fault liability' or
           any other claim under the law for such accident victims.
           In case KSRTC is compelled to make such payment on
           behalf of the owner of private buses, it shall be recovered
           from any amount due to the owner by KSRT:C or
 G         receivable to him from Insurance Company or .other
           debtors etc. 11\case of non-payment to non-recovery of
           such amount by KSRTC within 15 days, interest at 15%
           per annum shal! also be recoverable. For delays beyond
           30 days KSRTC may amount or adjustment thereof
 H
     MANAGING DIRECTOR, K.S.R.T.C. v. NEW INDIA                       755
      ASSURANCE CO. LTD. [ARUN MISHRA, J.]

     towards hire charges payable.                                    A
     (c) It shall be the responsibility of the owner of tho private
     bus to produce at his own cost, the driver/bus before the
     court of ......... and before the police authorities
     whenever required in case of accident or any other
     contingencies or on order or directions by the Judicial          8
     Or Executive authorities ....... charges shall be payable
     by KSRTC in such cases."
     It is apparent from clause 16(a) that in case of accident
claim, the KSRTC shall not be liable for any claim arising out C
of use of buses including loss of life sustained by passengers
or any other user or to any property/person. If KSRTC makes
any ex gratia payment in the case of accident, the same shall
be recovered from any amount due to the owner in case
KSRTC is made liable to make payment of compensation on D
behalf of private buses it shall be recovered from any amount
due to the owner by KSRTC or receivable to him from Insurance
Company etc.

     21. Clauses 17, 18, 19 and 20 are also relevant they are         E
extracted below:
     "17. The KSRTC shall not be liable for any loss caused
     to the buses hired, at any point of time including during
     the period of agitations, strikes, accidents, natural            F
     calamities etc.
     18. The owner of the private bus shall be liable for shall
     alone discharge or meet all claims including fines and
     penalties arising out of violation of traffic Rules, and
     Regulations, Statutes, Acts, Rules and Regulations etc., G
     in force for act of omissions or commissions committed
     either by his/her drivers or by any other person not
     authorised to drive. The owner of the private bus shall be
     liable and shall meet and discharge any claim for
     compensation or damages on account of tortuous H
756         SUPREME COURT REPORTS                  [2015] 10 S.C.R.


A          liability.
           19(a) The owner of the private bus shall provide and
           make available bus/buses as per the contract to KSRTC
           on all days or operation in time as per the schedule
           departing time and also as so as to cover the entire
 B
           schedule Kms. Duty.

           (b} The owner of the private bus shall not withdraw any
           bus from the operation except with advance notice before
           24 hours and with prior written consent of the depot
c          manager concerned of KSRTC to do so. In case any
           violation of this clause, the owner shall be liable for
           imposition of penalties by the KSRTC.

           20(1 )(a) The KSRTC on its part agrees to pay hire
 D         charges to the owner at the rates inculcation in the hiring
           rate charts atAnnexureA1 and A2, subject to the rules,
           terms and conditions of the contract. The hiring rate
           applicable shall be based on the schedule Kms. of the
           route allotted to the hired bus, except as otherwise
 E
           provided herein."

           22. The main question for consideration is whether the
      registered owner and insurer can escape the liability in view
      of the provisions contained in the Act and in view of the
 F    aforesaid terms and conditions of the lease agreement. The
      question also arise whether claimants can also recover the
      amount from KSRTC.

        23. The High Court has held that actual control of the bus
 G was with the KSRTC and the driver ~as driving the bus under
   its control. Relying upon the decisions in National Insurance
   Co. Ltd. V Deepa Devi & Ors., (2008) ·1 SCC 414 and
   Rajasthan State Road Transport Corporation v. Kai/ash Nath
   Kothari & Ors., ( 1997) 7 SCC 481, it was held that KSRTC to
 H be the owner under Section 2(30) of the Act. There is no liability
       MANAGING DIRE.CTOR., K.::>.R.T.C. v. NEW INDIA                 757
        ASSURANCE CO. LTD. [ARUN MISHRA, J.]

 of the registered owner as such insurer cannot be saddled A
 with liability to indemnify. Hence, the registered owner and the
 insurer have been exonerated. The KSRTC has been fastened
 with the liability.

       In our opinion, decision of High Court is not sustainable. s
  The provisions contained in the Act are clear. No vehicle can
  be driven without insurance as provided in Section 147
  whereas clause 14 of lease agreement between KSRTC and
· the owner clearly stipulate that it shall be the liability of the owner
  to provide the comprehensive insurance covers for all kind of C
  accidental risks to the passengers, other persons/property. The
  provisions of said clause of the agreement are not shown to
  be opposed to any provision in the Contract Act or any of the
  provisions contained under the Act of 1988. Hiring of public
  service vehicles is not prohibited under any of the provisions D
  of the aforesaid laws. It could not be said to be inconsistent
  user by KSRTC. The agreement is not shown to be illegal in
  any manner whatsoever nor shown to be opposed to the public
  policy.
                                                                       E
      24. The policy of insurance is contractual obligation
 between the insured and the insurer. It has not been shown
 that while entering into the aforesaid agreement of lease for
 hiring the buses, any of the provisions contained in the
 insurance policy has been violated. It has not been shown that F
 owner could not have given bus on hire as per any provision of
 policy. It was the liability of the registered owner to provide the
 bus regularly, to employ a driver, to make the payment of salary
 to the driver and the driver should be duly licenced and not
 disqualified as provided in the agreement though buses were G
 to be plied on the routes as specified by the KSRTC and hiring
 charges were required to be paid to the registered owner. In
 the absence of any stipulation prohibiting such an arrangement
 in the insurance policy, we find that in view of agreement of H
758         SUPREME COURT REPORTS                    [2015) 1OS.C.R.


A     lease the registered owner has owned the liability to pay. The
      insurer cannot also escape the liability.
            25. Apart from that what is provided under Section 157 of
      the Act of 1988 is that the certificate of insurance and the policy
      described in the certificate shall be deemed to have been
8
      transferred in favour of the person to whom the motor vehicle
      is transferred with effect from the date of its transfer. Even if
      there is a transfer of the vehicle by sale, the insurer cannot
      escape the liability as there is deemed transfer of the certificate
c     of insurance. In the instant case it is not complete transfer of
      the vehicle it has been given on hire for which there is no
      prohibition and no condition/policy of insurance as shown to
      prohibit plying of vehicle on hire. The vehicle was not used for
      inconsistent purpose. Thus, in the absence of any legal
D     prohibition and any violation of terms and conditions of the
      policy, more so, in view of the provisions of Section 157 of the
      Act of 1988, we are of considered opinion that the insurer
      cannot escape the liability.
       26. Now, we come to the question of exclusion of
E contractual liability under second proviso to Section 147(1).
  When we read provisions of Section 147 with Section 157
  together, it leaves no room for any doubt that there is deemed
  transfer of policy in case of transfer of vehicle. Hence, liability
  of insurer continues notwithstanding the contract of transfer of
F vehicle, such contractual liability cannot be said to be excluded
  by virtue of second proviso to Section 147(1) of Act of 1988.
  Higher purcha~e agreement, an agreement for lease or an
  agreement for hypothecation are covered under Section 2(30)
G of the Act of 1988. A person in possession is considered to be
  an owner of the vehicle under such agreements. In case such
  contractual liability is excluded then anomalous results would
  occur and financer under higher purchase agreement would
  be held liable and so on. In our view, an agreement for lease
H on hire cannot be said to be contract envisaged for exclusion
      MANAGING DIRi.:CTOR, K.S.R.T.C. v. NEW INDIA                   759
        ASSURANCE CO. LTD. [ARUN MISHRA, J.]

under contractual liability in second proviso to Section 147 ( 1)    A
of the Act of 1988. The High Court has erred in holding
otherwise.
       27. The KSRTC can also be treated as owner for the
  purposes of Section 2(30) of the Act of 1988 plying the buses
                                                                       8
  under lease agreement. The insurance company admittedly
  has insured the vehicle and taken the requisite premium and it
  is not a case set up by the insurer that intimation was not given
 to the insurance company of the hiring arrangement. Even if
 the intimation had not been given, in our opinion, the insurer C
  cannot escape the liability to indemnify as in the case of hiring
  of vehicle intimation is not required to be given. It is only in the
  case of complete transfer of the vehicle when change of
  registration particulars are required under Section 157 of the
  Act, an intimation has to be given by the transferee for effecting o
  necessary changes in the policy. Even otherwise, that would
  be a ministerial act and the insurer cannot escape the liability
  for that reason. When the KSRTC has become the owner of
  the vehicle during the period it was on hire with it for the purpose
  of Section 2(30) of the Act by virtue of provisions contained in E
. Section 157 of the Act, the insurance policy shall be deemed
 to be transferred. As such, insurer is liable to make
  indemnification and ·cannot escape the liability so incurred by
  theKSRTC.
                                                                      F
     28. In RSRTC v. Kai/ash Nath Kothari (supra), question
of liability of insurance company did not come up ·for
consideration. The vehicle was taken by RSRTC from its owner
Sanjay Kumar and it was being plied on the route by RSRTC.
The case arose out of accident date 17. 7 .1981 under the Act G
of 1939. The definition of second owner under section 2(19)
of Act of 1939 came up for consideration before this Court,
and conditions 4 to 7 and 15 of agreement between RSRTC
and the owner, this Court held that vehicle in question was in
possession and actual control of RSRTC as such it cannot H
760       SUPREME COURT REPORTS                   (2015) 10 S.C.R.


A escape from liability. Relevant portion of decision is extracted
  below:-
         "15. Conditions 4 to 7 and 15 of the agreement executed
         between the RSRTC and the owner read:
 B       "4. The Corporation shall appoint the conductor for the
         operation of the bus given on contract by the second party
         and the conductor of the Corporation shall do the work
         of issuing tickets to the passengers, to receive the fare,
         to let all the passengers get in and get out of the bus, to
 c       help the passengers to lo.ad and unload their goods, to
         stop the bus at the stops fixed by the Corporation and to
         operate the bus according to time-table.

         5. The tickets, waybills and other stationery shall be
 D       supplied by the Corporation to the said conductor of the
         Corporation.

         6. The driver of the bus shall have to4fettow all such
         instructions of the conductor, which shall be necessary
 E       under the rules for the operation of the bus.

         7. The driver of the bus shall comply with all the orders of
         the Corporation or of the officers appointed by the
         Corporation.
 F
         15. Upon the accident of the bus taking place the owner
         of the bus shall be liable for the loss, damages and for
         the liabilities relating to the safety of the passengers. The
         Corporation shall not be liable for any accident. If the
 G       Corporation is required to make any payment or incur
         any expenses through some court or under some mutual
         compromise, the Corporation shall be able to recover
         such amounts from the owner of the bus after deducting
         the same from the amounts payable to him."
 H
MANAGING DIRECTOR, K.S.R.T.C. v. NEW INDIA                          761
  ASSURANCE CO. LTD. [ARUN MISHRA, J.]

 16. The admitted facts unmistakably show that the vehicle A
 in question was in possession and under the actual control
 of RSRTC for the purpose of running on the specified
 route and was being used for carrying, on hire,
 passengers by the RSRTC. The driver was to carry out
 instructions, orders and directions of the conductor and B
 other officers of the RSRTC for operation of the bus on
 the route specified by the RSRTC.
  17. The definition of owner under Section 2(19) of the
  Act is not exhaustive. It has, therefore to be construed, in      c
  a wider sense, in the facts and circumstances of a given
  case. The expression owner must include, in a given
  case, the person whci has the actual possession and
  control of the vehicle and under whose directions and
· commands the driver is obliged to operate the bus. To             D
  confine the meaning of "owner" to the registered owner
  only would in a case where the vehicle is in the actual
  possession and control of the hirer not be proper for the
  purpose of fastening of liability in case of an accident.
  The liability of the "owner" is vicarious for the tort            E
  committed by its employee during the course of his
  employment and it would be a question of fact in each
  case as to on whom can vicarious liability be fastened in
  the case of an accident. In this case, Shri Sanjay Kumar,
  the owner of the bus could not ply the bus on the particular      F
  route for which he had no permit and he in fact was not
  plying the bus on that route. The services of the driver
  were transferred along with complete "control" to RSRTC,
  under whose directions, instructions and command the              G
  driver was to ply or notto ply the ill-fated bus on the fateful
  day. The passengers were being carried by RSRTC on
  receiving fare from them. Shri Sanjay Kumar was
  therefore not concerned with the passengers travelling
  in that bus on the particular route on payment of fare to         H
762   SUPREME COURT REPORTS                   [2015] 10 S.C.R.


A     RSRTC. Driver of the bus, even though an employee of
      the owner, was at the relevant time performing his duties
      under the order and command of the conductor of
      RSRTC for operation of the bus. So far as the
      passengers of the ill-fated bus are concerned, their privity
 B    of contract was only with the RSRTC to whom they had
      paid the fare for travelling in that bus and their safety
      therefore became the responsibility of the RSRTC while
      travelling in the bus. They had no privity of contract with
      Shri Sanjay Kumar, the owner of the bus at all. Had it
c     been a case only of transfer of services of the driver and
      not of transfer of control of the driver from the owner to
      RSRTC, the matter may have been somewhat different.
      But on facts in this case and in view of Conditions 4 to 7
      of the agreement (supra), the RSRTC must be held to
 D
      be vicariously liable for the tort committed by the driver
      while plying the bus under contract of the RSRTC. The
      general proposition of law and the presumption arising
      therefrom that an employer, that is the person who has
 E    the right to hire and fire the employee, is generally
      responsible vicariously for the tort committed by the
      employee concerned during the course of his employment
      and within the scope of his authority, is a rebuttable
      presumption. If the original employer is able to establish
 F    that when the servant was lent, the effective control over
      him was also transferred to the hirer, the original owner
      can avoid his liability and the temporary employer or
       the hirer, as the case may be, must be held vicariously
      liable for the tort committed by the employee concerned
 G     in the course of his employment while under the
      command and control of the hirer notwithstanding the fact
      that the driver would continue to be on the payroll of the
       original owner. The proposition based on the general
       principle as noticed above is adequately rebutted in this
 H     case not only on the basis of the evidence led by the
     MANAGING DIRECTOR, K.S.R.T.C. v. NEW INDIA                         763
       ASSURANCE CO. LTD. [ARUN MISHRA, J.]

      parties but also on the basis of Conditions 6 and 7 A
      (supra), which go to show that the owner had not merely
      transferred the services of the driver to the RSRTC but
      actual control and the driver was to act under the
      instructions, control and command of the conductor and
      other officers of the RSRTC.                            B
      18. Reliance placed by learned counsel for the appellant
      on Condition No. 15 of the agreement (supra) in our view
      is misconceived. Apart from the fact that this clause in
      the agreement between the owner and the RSRTC, to c
      the extent it shifts the liability for the accident from the
      RSRTC to the owner, may be against the public policy
      as opined by the High Court, though we are not inclined
      to test the correctness of that proposition of law because
      on facts, we find that RSRTC cannot escape its liability D
      to pay compensation. The second part of Condition No.
      15 makes it abundantly clear that the RSRTC did not
      completely shift the liability to the owner of the bus
      because it provided for reimbursement to it in case it
      has to pay compensation arising out of an accident. The E
      words "if the Corporatipn is required to make any
      payment or incur any expenses through some court or
      under some mutual compromise, the Corporation shall
      be able to recover such amounts from the owner of the
      bus after deducting the same from the amounts payable F
      to him" in the later part of Condition No. 15 leave no
      ambiguity in that behalf and clearly go to· show the
      intention of the parties. Thus, RSRTC cannot escape its
      liability under Condition No. 15 of the agreement either. G
      Thus, both on facts and in law the liability to pay
      compensation for the accident must fall on the RSRTC."

     It is apparent that question of the liability of the insurer did
not come up for consideration and also the relevant statutory
provisions relating thereto in aforesaid decision. This Court,          H
764       SUPREME COURT REPORTS                  [2015] 10S.C.R.


A considering clause 16 of the agreement entered into by RSRTC
  and owner, held that RSRTC did not completely shift the liability
  to the owner of the bus in case it has to pay compensation
  arising out of an accident. In the instant cases also there are
  certain clauses referred to above which indicate that if the
B KSRTC has to make the payment, it can recover the same
  from the owner out of the amount payable by it or from the
  amount payable by the insurer to the owner. On the strength of
  decision in RSRTC v. Kai/ash Nath Kothari (supra), the
  KSRTC being in actual control of the vehicle would also be
C liable to make the compensation, however, in our opinion it
  can recover the amount from the registered owner or insurer,
  as the case may be. In fact of the case, vis-a-vis, the claimants'
  liability would be joint and several upon the KSRTC, registered
  owner and the insurer.
0
        29. In National Insurance Co. v. Deepa Devi (supra),
  vehicle was under requisition by the State Government and
  that possession on requisition was not covered by the definition
  of the owner under section 2(30) in the Act of 1988 or the Act
E of 1939. It was held by this Court as the Motor Vehicles Act did
  not envisage such a situation. ~wner in such a case has to be
  understood from common sense point of view. Thus, the State
  was held liable to make the payment .of compensation. The
F question was altogether different in the aforesaid case.

        30. In Godavari Finance Company v. Degala
   Satyanarayanamma & Ors., (2008) 5 SCC 107, definition of
   owner came up for consideration. It was held that the name of
   the financer was incorporated in the registration book as
 G owner. The respondent was held to be owner of the vehicle
   which was purchased by him on being financed by Godavari
   Finance Company. The financer could not be held liable to
   make the payment of compensation as definition of the owner
 H in the Act of 1939 is a comprehensive one as vehicle which is
    MANAGING DIRECTOR, K.S.R.T.C. v. NEW INDIA                     765
      ASSURANCE CO. LTD. [ARUN MISHRA, J.)

the subject matter of hire purchase agreement, the person in A
possession of the vehicle under that agreement shall be the
owner. Thus, the name of the financer in the certificate would
not be decisive for determination as to who was the owner of
the vehicle. In the case of hire purchase agreement, financer
cannot ordinarily be treated to be the owner and the person in B
possession is liable to pay damages for the motor accident.
This Court has held thus:
     "15. An application for payment of compensation is
     filed before the Tribunal constituted under Section 165       c
     of the Act tor adjudicating upon the claim for
     compensation in respect of accident involving the
     death of, or bodily injury to, persons arising out of the
     use of motor vehicles, or damages to any property of
     a third party so arising, or both. Use of the motor vehicle   D
     is a sine qua non for entertaining a claim for
     compensation. Ordinarily if driver of the vehicle would
     use the same, he remains in possession or control
     thereof. Owner of the vehicle, although may not have
     anything to do with the use of vehicle at the time of the     E
     accident, actually he may be held to be constructively
     liable as the employer of the driver. What is, therefore,
     essential for passing an award is to find out the
     liabilities of the persons who are involved in the use of
     the vehicle or the persons who are vicariously liable.        F
     The insurance company becomes a necessary party
     to such claims as in the event the owner of the vehicle
     is found to be liable, it would have to reimburse the
     owner inasmuch as a vehicle is compulsorily
                                                                   G
     insurable so far as a third party is concerned, as
     contemplated under Section 14 7 thereof Therefore,
     there cannot be any doubt whatsoever that the
     possession or control of a vehicle plays a vital role."
                                    (emphasis supplied by us)      H
766         SUPREME COURT REPORTS                    [2015) 10 S.C.R.


A         This Court has observed in Godavari Finance Company
      (supra) that insurance company in such a case becomes a
      necessary party as it would have to reimburse the owner.

       31. In Uttar Pradesh State Road Transport Corporation
 B v. Ku/sum & Ors., (2011) 8 SCC 142, this Court has
      considered the question of vehicle given on hire by owner of
      the vehicle to UPSRTC with its existing and running insurance
      policy. It was held that the UPSRTC have become the owner
      of the vehicle during the specified period and vehicle having
C     been insured at the instance of the original owner, it would be
      deemed that vehicle was transferred alongwith insurance policy
      to UPSRTC. The insurer cannot escape the liability to pay the
      compensation. The appeal preferred by UPSRTC was
      allowed. The instant cases are more or less the same and the
D     decision of this Court in UPSRTC v. Ku/sum (supra) also
      buttress the submission raised by KSRTC. This Court has held
      as under:

           "30. Thus, for ali practical purposes, forthe relevant
 E         period, the Corporation had become the owner of the
           vehicle for the specific period. If the Corporation had
           become the owner ever. for the specific period and
           the vehicle having been insured at the instance of
           original owner, it will be deemed that the vehicle was
 F         transferred along with the insurance policy in existence
           to the Corporation and thus the Insurance Company
           would not be able to escape its liability to pay the
           amount of compensation.

G          31. The liability to pay compensation is based on a
           statutory provision. Compulsory insurance of the vehicle
           is meant for the benefit of the third parties. The liability of
           the owner to have compulsory insurance is only in regard
           to third party and not to the property. Once the vehicle is
 H         insured, the owner as well as any other person can use
      MANAGING DIRECTOR, K.S.R.T.C. v. NEW INDIA                   767
        ASSURANCE CO. LTD. [ARUN MISHRA, J.]

      the vehicle with the consent of the owner. Section 146 of A
      the Act does not provide that any person who uses the
      vehicle independently, a separate insurance policy should
      be taken. The purpose of compulsory insurance in the
      Act has been enacted with an object to advance social
      justice."                                                 B

     32. In HDFC Bank Limited v. Reshma & Ors., (2015) 3
sec   679, definition of owner under the provisions of Section
2(30) of the Act of 1988 came up for consideration before a
bench of 3 judges of this Court. This Court referred to the C
decisions of Godavari Finance Company (supra) and Pushpa
alias Leela & Ors. v. Shakunta/a & Ors., (2011) 2 SCC 240
etc. in which the question arose whether the liability to pay
compensation amount as determined by the Tribunal was of
the purchaser of the vehicle alone or whether the liability of the D
recorded owner of the vehicle was co-extensive. This Court in
HDFC Bank Limited v. Reshma & Ors.(supra) held thus:
      "22. In the present case, as the facts have been unfurled,
      the appellant Bank had financed the owner for purchase E
      of the vehicle and the owner had entered into a
      hypothecation agreement with the Bank. The borrower
      had the initial obligation to insure the vehicle, but without
      insurance he plied the vehicle on the road and the
      accident took place. Had the vehicle been insured, the F
      insurance company would have been liable and not the
      owner. There is no cavil over the fact that the vehicle was
      the subject of an agreement of hypothecation and was in
      possession and control of Respondent 2. The High Court ·
      has proceeded both in the main judgment as well as in G
      the review that the financier steps into the shoes of the
      owner. Reliance placed on Mohan Benefit (P) Ltd. V.
      Kachraji Raymalji (1997) 9 sec 103, in our considered
      opinion, was inappropriate because in the instant case
      all the documents were filed by the Bank. In the said case, H
768   SUPREME COURT REPORTS                     [2015] 1os.c.R.


A     the two-Judge Bench of this Court had doubted the
      relationship between the appellant and the respondent
      therein from the hire-purchase agreement. Be that as it
      may, the said case rested on its own facts. In the decision
      in Rajasthan SRTC v. Kai/ash Nath Kothari,(1997) 7
B     SCC 481 the Court fastened the liability on the
      Corporation regard being had to the definition of the
      "owner" who was in control and possession of the vehicle.
      Similar to the effect is the judgment in National Insurance
      Co. Ltd. V. Deepa Devi, (2008) 1 SCC 414. Be it stated,
c     in the said case the Court ruled that the State shall be
      liable to pay the amount of compensation to the claimant
      and not the registered owner of the vehicle and the
      insurance company. In Pushpa v. Shakuntala case,
      (2011) 2 sec 240 the learned Judges distinguished the
D
      ratio in Deepa Devi on the ground that it hinged on its
      special facts and fastened the liability on the insurer. In
      UPSRTC v. Ku/sum, (2011) 8 SCC 142, the principle
      stated in Kai/ash Nath Kothari was distinguished and
 E    taking note of the fact that at the relevant time, the vehicle
      in question was insured with it and the policy was very
      much in force and hence, the insurer was liable to
      indemnify the owner.
      23. On a careful analysis of the principles stated in the
 F    foregoing cases, it is found that there is a common thread
      that the person in possession of the vehicle under the
      hypothecation agreement has been treated as the owner.
      Needless to emphasise, if the vehicle is insured, the
      insurer is bound to indemnify unless there is violation of
G     the terms of the policy under which the insurer can seek
      exoneration.
      24. In Pumya Kala Devi v. State of Assam, (2014) 14
      SCC 142, a three-Judge Bench has categorically held
      that the person in control and possession of the vehicle
 H
MANAGING DIRECTOR, K.S.R.T.C. v. NEW INDIA                       769
  ASSURANCE CO. LTD. [ARUN MISHRA, J.]

under an agreement of hypothecation should be                    A
construed as the owner and not alone the registered
owner and thereafter the Court has adverted to the
legislative intention, and ruled that the registered owner
of the vehicle should not be held liable if the vehicle is
not in his possession and control. There is reference to         B
Section 146 of the Act that no person shall use or cause
or allow any other person to use a motor vehicle in a
public place without insurance as that is the mandatory
statuto·ry requirement under the 1988 Act. In the instant
case, the predece~sor-in-interest of the appellant,              C
Centurion Bank, was the registered owner along with
Respondent 2. Respondent 2 was in control and
possession ofthe vehicle. He had taken the vehicle from
the dealer without paying the full premium to the insurance      D
company and thereby getting the vehicle insured. The
High Court has erroneously opined that the financier had
the responsibility to get the vehicle insured, if the borrower
failed to insure it. The said term in the hypothecation
agreement does not convey that the appellant financier           E
had become the owner and was in control and possession
of the vehi~le. It was the absolute fault of Respondent 2
to take the vehicle from the dealer without full payment of
the insurance. Nothing has been brought on record that
this fact was known to the appellant financier or it was         F
done in collusion with the financier. When the intention of
the legislature is quite clear to the effect, a registered
owner of the vehicle should not be held liable if the vehicle
is not in his possession and control and there is evidence
on record that Respondent 2, without the insurance plied         G
the vehicle in violation of the statutory provision contained
in Section 146 of the 1988Act, the High Court could not
have mulcted the liability on the financier. The
appreciation by the learned Single Judge in appeal, both
in fact and law, is wholly unsustainable."                       H
770          SUPREME COURT REPORTS                 [2015) 1OS.C.R.


A·          This Court has held that even when there was an
      agreement of and vehicle has been .insured and agreement
      holder is treated an owner, the insurer cannot escape the
      liability to make indemnification.

 B     33. In view of the decision in HDFC Bank Limited v.
  Reshma & Ors.(supra), the insurer cannot escape the liability,
  when ownership changes due to the hypothecation agreement.
  In the case of hire also, it cannot escape the liability, even if
  the ownership changes. Even though, KSRTC is treated as
C owner under Section 2(30) of the Act of 1988, the registered
  owner continues to remain liable as per terms and conditions
  of lease agreement lawfully entered into with KSRTC.

         34. In view of the aforesaid discussion, we hold that
 D  registered owner, insurer as well as KSRTC would be liable to
    make the payment of compensEi ~ion jointly and severally to the
    claimants and the KSRTC in terms of the lease agreement
  · entered into with the registered owner would be entitled to
    recover the amount paid to the claimants from the owner as
 E stipulated in the agreement or from the insurer.

           35. The appeals are, accordingly, allowed ..Parties to bear
      their own costs ..

 F    Kalpana K. Tripathy                              Appeals allowed.