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PETITIONER: M/S. COMPLETE INSULATIONS (P) LTD.

       Vs.

RESPONDENT: NEW INDIA ASSURANCE COMPANY LTD.

DATE OF JUDGMENT21/11/1995

BENCH: AHMADI A.M. (CJ) BENCH: AHMADI A.M. (CJ) AGRAWAL, S.C. (J) MANOHAR SUJATA V. (J)

CITATION:  1996 AIR  586            1996 SCC  (1) 221  1995 SCALE  (6)629

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T Ahmadi, CJI      A  Maruti   Car  with  registration  No.  CHK-9253  was purchased in  the name  of Mrs. Archana Wadhwa for which the respondent, M/s.  New  India  Assurance  Company  Ltd.,  had issued a comprehensive insurance policy. 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 24.7.1989. The  respondent did not reply to the two letters. On 17.9.1989  the car  met with  a serious 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 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 a 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 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  Vehicle Act,  1988, (hereinafter  called ’the New Act’) a  certificate of  insurance is  deemed to  have  been

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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  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  ’Old Act’  and Section 157 of the New Act, in juxtaposition:      Old Act      103-A  :   TRANSFER  OF  CERTIFICATE  OF      INSURANCE      (1) Where  a person  in whose favour the      certificate of insurance has been issued      in accordance  with  the  provisions  of      this Chapter  proposes  to  transfer  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, he      may apply  in the prescribed form to the      insurer  for   the   transfer   of   the      certificate of  insurance and the policy      described in  the certificate  in favour      of the  person to whom the motor vehicle      is proposed  to be  transferred, and  if      within fifteen  days of  the receipt  of      such application  by  the  insurer,  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 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.      (2)  The insurer to whom any application      has been  made under sub-section (1) may      refuse to  transfer to  the other person      the certificate  of  insurance  and  the      policy described in that certificate, if      he considers  it  necessary  so  to  do,      having regard to -      a)   the previous  conduct of  the other      persons, -      (i) as a driver of motor vehicles; or      (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 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  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   been      transferred,    the    certificate    of

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    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 to the insured      for the unexpired term of such policy."      New                                  Act      "157  :   TRANSFER  OF   CERTIFICATE  OF      INSURANCE      (1) Where  a person  in whose favour the      certificate of 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 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.      (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  policy      described  in  the  certificate  in  his      favour and  the insurer  shall make  the      necessary changes in the certificate and      the policy of insurance in regard to the      transfer of insurance." 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 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 previous 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 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. 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 Act.      Now, under  the Old  Act  although  the  insurer  could

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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 protection to third parties, that is victims of the accident. The protection was available by virtue of Section 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 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." 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  - (1)  In order  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  business of  an  insurer],      and      [(b) insures  the person  or classes  of      persons specified  in the  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;      (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:]      (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 in the case      of  that  person  or  those  classes  of      person." In Kondaiah’s  case (supra)  the  vehicle  in  question  was transferred but  not the insurance policy. The policy or the certificate was  not transferred  to the vendee. The victims of the  accident filed  a claim  before the  Motor  Accident Claims Tribunal.  Broadly four  contentions were considered, 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

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the insurance  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 nontransfer of the insurance policy, the liability qua third party subsists in view of Section 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  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 lst 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  policy described therein was sent on 26.6.1989 the Old Act applied. Admittedly 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 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  it is  assumed that the Old Act applied to pending cases,  the certificate and policy must be deemed to have been  transferred 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 the Old Act and Section 157 of the New Act.      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’ 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 course this provision  does not  apply to  vehicles  owned  by  the Central or State Government and used for Government purposes not connected with any commercial enterprise. 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 to any person or damage to any property of a third party as well as against the death of or bodily injury  caused to  any passenger  of a public service vehicle caused  by or  arising out of the use of the vehicle in a  public place.  This provision is akin to section 95 of

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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 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 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  respects   with  the  description  and particulars stated  in the  certificate. It  is obvious on a plain reading  of this  provision 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 whereto a certificate  of insurance  is issued  transfers to another person the  ownership of  the motor vehicle, the certificate of insurance  together with  the  policy  described  therein shall 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  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 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 damage to the property of the ’insured’ himself. And  the limit  of liability  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 accidents 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 damage to third party property 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  respect  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   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

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