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CASE NO.: Appeal (civil)  2725 of 2008

PETITIONER: M/s. Godavari Finance Co

RESPONDENT: Degala Satyanarayanamma and others

DATE OF JUDGMENT: 10/04/2008

BENCH: S.B. SINHA & V.S. SIRPURKAR

JUDGMENT: J U D G M E N T REPORTABLE

CIVIL APPEAL NO. 2725  OF 2008 (Arising out of SLP (C) NO. 21500 of 2006)

S.B. SINHA, J.

1.      Leave granted.

2.      Whether a financer would be an owner of a motor vehicle within the  meaning of Section 2(30) of the Motor Vehicles Act, 1988 (for short the  Act) is the core question involved herein.

3.      Ch. Praveen Kumar, fourth respondent, was the owner of a vehicle  being a mini truck of ’Mahendra Nissan’ make purchased by him having  been financed by the appellant for a sum of Rs.50,000/-.  The said loan was  discharged by him by the end of 1995.   

4.      Indisputably the said vehicle had all along been in possession and  control of the fourth respondent herein.  It met with an accident on  29th  May, 1995.  In the said accident one Degala Balakrishana died.  Respondent  Nos. 1 and 2 filed an application claiming compensation alleging rash and  negligent driving on the part of the driver of the said vehicle.   

5.      On or about 18th June, 1998, the appellant herein was impleaded in the  proceeding on the premises that it was the financer of the said vehicle.   

6.      The name of the appellant as a financer indisputably was incorporated  in the Registration Book of the vehicle.  However, the extract of Registration  Book revealed that the vehicle was registered in the name of the 4th  respondent only w.e.f. 3rd June, 1992.  It further revealed that the said  vehicle was held under a Hire Purchase Agreement with the appellant w.e.f.  6th February, 1995 which was cancelled on 10th November, 1995.  7.      Appellant herein filed a written statement stating that on the date of  accident the ownership of the vehicle was solely with the 4th respondent and  not with the appellant.   The Motor Vehicle Accident Claims Tribunal by a  judgment dated 28th October, 1998 awarded a sum of Rs.2,08,000/- in favour  of the respondent Nos. 1 and 2.  The objection of the appellant that it was  not liable to pay any amount of compensation together with the owner of the  vehicle, driver and insurance company was rejected by the Tribunal stating:-  

"In the light of the decisions cited above, the legal  position that emerges is that it is the person who is in  actual possession and control of the vehicle, who can be  brought under the definition of owner, under the Act in  order to make him tortuously liable for the acts of the

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servant and the burden lies upon the party, who asserts it  and on their failure adverse inference can be drawn and  the financier can also fastened with liability alongwith  the registered owner.  In our case, R-4 except taking a  plea that the vehicle is under the control of the owner R- 2, it failed to file documents to show the nature of the  transaction between it and R-2 and who is in actual  control of the vehicle.  The mere fact that RW.1, widow  of the deceased admitted in her evidence that the vehicle  belong to R-2 and it is in his custody, in my view, it  cannot absolve R-4 from the burden of establishing this  fact in order of avoid the liability.  P.W.1 a widow and a  third party cannot be attributed with knowledge of  control over the vehicle and the actual contract between  the parties.  Thus, it is quite evident that R-2 and R-4 did  not place any material to show as to who is in actual  control of the vehicle and what are the rights of R-4 over  it."

8.      An appeal preferred thereagainst by the appellant herein, by reason of  the impugned judgment, dated 8th August, 2006 has been dismissed.    

9.      Ms. Bina Madhavan, appearing on behalf of the appellant, would  submit :  (1)     In terms of Section 168 of the Act a financer cannot be held  liable to pay compensation as the definition of an "owner" as  contained in Section 2(30) of the Act would mean only a  "registered owner".     (2)     In view of the fact that it was not the case of the claimants that  the appellant was in possession or control over the vehicle at  the time of accident, the impugned judgment is wholly  unsustainable.   (3)     The finding of the learned Tribunal as also the High Court that  appellant as a registered owner was liable for payment of  compensation is wholly unsustainable.

10.     Indisputably, as on November 10, 1995 the Hire Purchase Agreement  was cancelled and an information thereabout was sent to the Deputy  Transport Commissioner, Kakinada.   

11.     Appellant admittedly was the financer.  As the vehicle was the subject  matter of Hire Purchase Agreement, the appellant’s name was mentioned in  the Registration Book.   

12.     Section 2 of the Act provides for interpretation of various terms  enumerated therein.   

It starts with the phrase "Unless the context otherwise requires".  The  definition of "owner" is a comprehensive one.  The interpretation clause  itself states that the vehicle which is the subject matter of a Hire Purchase  Agreement, the person in possession of vehicle under that agreement shall  be the owner.    Thus, the name of financer in the Registration Certificate  would not be decisive for determination as to who was the owner of the  vehicle.  We are not unmindful of the fact that ordinarily the person in  whose name the Registration Certificate stands should be presumed to be the  owner but such a presumption can be drawn only in the absence of any other  material brought on record or unless the context otherwise requires.

13.     In case of a motor vehicle which is subjected to a hire purchase  agreement, the financer cannot ordinarily be treated to be the owner.  The  person who is in possession of the vehicle, and not the financer being the  owner would be liable to pay damages for the motor accident.

14.    Motor Accident Claims Tribunals are constituted in terms of Section  165 of the Act occurring in Chapter XII thereof.  Section 166 lays down the

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manner in which the application for compensation should be filed and who  can file the same.  Section 168 deals with the award of the Claims Tribunal,  sub-section (1) thereof reads as under :- "168. Award of the Claims Tribunal. \026 (1) On receipt of  an application for compensation made under section 166,  the Claims Tribunal shall, after giving notice of the  application to the insurer and after giving the parties  (including the insurer) an opportunity of being heard,  hold an inquiry into the claim or, as the case may be,  each of the claims and, subject to the provisions of  section 162 may make an award determining the amount  of compensation which appears to it to be just and  specifying the person or persons to whom compensation  shall be paid and in making the award the Claims  Tribunal shall specify the amount which shall be paid by  the insurer or owner or driver of the vehicle involved in  the accident or by all or any of them, as the case may be:            Provided that where such application makes a claim  for compensation under section 140 in respect of the  death or permanent disablement of any person, such  claim and any other claim (whether made in such  application or otherwise) for compensation in respect of  such death or permanent disablement shall be disposed of  in accordance with the provisions of Chapter X."

15.     In terms of the aforesaid provisions, the Tribunal is required to issue a  notice to the insurer and after giving the parties, including the insurer, an  opportunity of being heard, it must hold an inquiry into the claims and  determine the person who would be liable therefor.  It can make an award  and while doing so it can specify the amount which could be paid by the  insured or owner or driver of the vehicle involved in the accident or by all or  any of them, as the case may be.  

16.     An application for payment of compensation is filed before the  Tribunal constituted under Section 165 of the Act for 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  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 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.  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 compulsorably insurable so far  as a third party is concerned, as contemplated under Section 147 thereof.   Therefore, there cannot be any doubt whatsoever that the possession or  control of a vehicle plays a vital role.   

16.     The question came up for consideration before this Court in Rajasthan  State Road Transport Corporation  vs. Kailash Nth Kothari and others :  (1997) 7 SCC 481where the owner of a vehicle rented the bus to Rajasthan  State Road Transport Corporation.  It met with an accident.  Despite the fact  that the driver of the bus was an employee of the registered owner of the  vehicle, it was held :-

"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

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of the ill-fated bus are concerned, their privity 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 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 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  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 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 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  case not only on the basis of the evidence led by the  parties but also on the basis of Conditions 6 and 7  (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."

 18.   The question again came up for consideration recently before this  Court in National Insurance Co. Ltd.  vs.  Deepa Devi and others : 2007 (14)  SCALE 168.  This Court in that case was dealing with a matter where the  vehicle in question was requisitioned by the State Government while holding  that the owner of the vehicle would not be liable it was opined :-

"10. Parliament either under the 1939 Act or the 1988  Act did not take into consideration a situation of this  nature. No doubt, Respondent Nos. 3 and 4 Page 4561  continued to be the registered owner of the vehicle  despite the fact that the same was requisitioned by the  District Magistrate in exercise of its power conferred  upon it under the Representation of People Act. A  vehicle is requisitioned by a statutory authority, pursuant  to the provisions contained in a statute. The owner of the  vehicle cannot refuse to abide by the order of requisition  of the vehicle by the Deputy Commissioner. While the  vehicle remains under requisition, the owner does not  exercise any control thereover. The driver may still be  the employee of the owner of the vehicle but he has to  drive it as per the direction of the officer of the State,  who is put in-charge thereof. Save and except for legal  ownership, for all intent and purport, the registered  owner of the vehicle loses entire control thereover. He  has no say as to whether the vehicle should be driven at a  given point of time or not. He cannot ask the driver not to

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drive a vehicle on a bad road. He or the driver could not  possibly say that the vehicle would not be driven in the  night. The purpose of requisition is to use the vehicle.  For the period the vehicle remains under the control of  the State and/ or its officers, the owner is only entitled to  payment of compensation therefore in terms of the Act  but he cannot not exercise any control thereupon. In a  situation of this nature, this Court must proceed on the  presumption that the Parliament while enacting the 1988  Act did not envisage such a situation. If in a given  situation, the statutory definitions contained in the 1988  Act cannot be given effect to in letter and spirit, the same  should be understood from the common sense point of  view."

       In so opining the Court followed Kailash Nath Kothari (supra).    

       The legal principles as noticed hereinbefore, clearly show that the  appellant was not liable to pay any compensation to the claimants.

19.     For the aforementioned reasons, the impugned judgment cannot be  sustained.  It is set aside accordingly.  The appeal is allowed.  No costs.