Kerala High Court
M. Swaminathan vs C.K. Jayalakshmi Amma And Ors. on 24 July, 1987
Equivalent citations: II(1987)ACC299, [1989]66COMPCAS503(KER)
Author: K.G. Balakrishnan
Bench: K.G. Balakrishnan
JUDGMENT Balakrishnan, J.
1. These two appeals arise out of a common judgment passed in MAC Nos. 41 of 1981 and 42 of 1981. The appellant herein was respondent No. 13 in MAC No. 42 of 1981 and respondent No. 12 in MAC No. 41 of 1981.
2. The second petitioner in MAC No. 41 of 1981 is the injured minor child and the first petitioner therein is her mother. The 2nd petitioner was studying in a tutorial college and was preparing for the SSLC examination. On the date of the incident, she was returning to her house in bus No. KLR-4980. The petitioner in MAC No. 42 of 3981 was also a passenger in the bus. According to the claimants, the bus was overcrowded and it was being driven at a very high speed. As the bus passed a culvert, a lorry bearing registration No. BD6556 came from the opposite direction and there was collision between the two vehicles. The incident happened at a place called Kokked. According to the petitioners, both the vehicles were driven negligently.
3. As a result of the accident, the second petitioner in MAC No. 41 of 1981 and the petitioner in MAC No. 42 of 1981 sustained serious injuries. Rs. 13,576'98 was claimed as compensation in MAC No. 41 of 1981 and Rs. 76,152 was claimed in MAC No. 42 of 1981. In MAC No. 41 of 1981 the Tribunal granted an award of Rs. 5,698 and in MAC No. 42 of 1981 a sum of Rs. 8,000 was awarded as compensation.
4. The appellant is said to be the owner of the lorry. Originally, he was not a party to the proceedings and was impleaded subsequently. The main contention of the appellant is that the accident occurred on account of the rash and negligent driving of the bus and the owner of the bus and the insurance company are liable for damages. Secondly, it was contended that even if the driver of the lorry was negligent, the liability under the statute was on the registered owner as there was no transfer of the vehicle in favour of the appellant. It was also contended that the claim as against the appellant was time-barred.
5. The Tribunal found that the drivers of both the vehicles were negligent in driving their vehicles and that the accident occurred as a result of their negligent driving. Exhibits R-23 and R-24 are the sketch and report prepared sometime after the accident. Exhibit R-23 sketch showed that there was sufficient width of the road and the accident happened almost in the middle of the road. Learned counsel for the appellant also contended that the accident occurred as a result of the negligence of the driver of the bus. The Tribunal has found that there was negligence on the part of both the drivers. It has come in the evidence that the bus was fully crowded with passengers. There were about 30 standing passengers. The accident occurred on the day of Kodungallur Bharani and it being the festival season naturally the bus would have been driven at a high speed. P.W. 3 was one of the passengers in the bus. He deposed that the bus came at a high speed and the accident occurred after the bus passed a culvert. P.W. 2, the lorry driver said that seeing the bus coming at a high speed, he stopped the lorry about 10 to 15 feet to the east and the bus hit the right side of the lorry. RW 5 is the driver of the bus. According to him, the lorry was coming at a high speed and it hit the right side of the bus. The fact that the accident was on the day of Kodungallur Bharani and that the bus was fully packed with passengers is spoken of by several witnesses. Apart from the interested evidence of PW-5, there is no evidence to show that the lorry was coming at a high speed. On a reappraisal of the evidence on both sides, we feel that the driver of the bus was more negligent than the lorry driver. Therefore, we fix the liability of the bus driver at 60 per cent, and that of the driver of the lorry at 40 per cent.
6. According to the insurer of the lorry, namely, the New India Assurance Company, the lorry originally belonged to the late husband of the eighth respondent in MFA No. 415 of 1982 and this respondent executed an agreement in favour of the appellant Swaminathan on January 3, 1977 whereby the vehicle was transferred to the latter. As already stated, the accident occurred on March 22, 1977, i.e., about 2J months after exhibit R-25. The main contention urged by the insurance company is that exhibit R-25 is a sale deed in favour of the appellant and the insurance of the vehicle stood in the name of the registered owner of the vehicle and the appellant was not the insured under the policy issued by the insurance company and therefore the company is not liable to indemnify the loss sustained by the appellant. The insurance company further contended that the policy has lapsed upon the transfer of the motor vehicle and the transferee had not applied for transfer of the policy in his name and therefore the insurance company is not liable to pay any amount.
7. The important question that arises for consideration is whether the transfer of the vehicle in favour of the appellant by the original insured has resulted in the lapse of the insurance policy. The question as to whether an insurance policy lapses when the vehicle insured thereby is transferred without informing the insurer in the prescribed form under Section 103A of the Motor Vehicles Act had come up for consideration before several High Courts. The general view appears to be that the policy lapses when the vehicle is transferred.
8. The main contention urged by the insurance company is that the registered owner was one Clement, the husband of the 8th respondent in MFA No. 415 of 1982 and the company had no contract with the appellant, and therefore there cannot be any liability arising out of the insurance policy. The appellant has contended that he has executed only an agreement in favour of the 8th respondent and the registered owner was somebody else. Exhibit R-25 dated January 3, 1977, is the document by which the appellant derived a right over the vehicle. In exhibit R-25, it has been stated that the 8th respondent in MFA No. 415 of 1982, viz., Sheela Albert, has ceased to have any right over the vehicle from the date of that agreement and that the transferee, Swaminathan, alone will have all rights and liabilities over the vehicle subsequent to that document. The registered owner, the late husband of Sheela Albert was no more alive at the time of exhibit R-25.
9. When a vehicle is transferred, the insured can transfer the certificate of insurance in favour of the transferee. As per Section 103A of the Motor Vehicles Act, it is for the registered owner to apply for the transfer of the policy in favour of the person to whom the motor vehicle was transferred. In the instant case, the original registered owner was no longer alive and the transfer was effected by one of his legal representatives. So, there could not have been an application by the person in favour of whom the certificate of insurance had been issued. Here, no steps have been taken by the appellant also to get the policy transferred in his name.
10. From a reading of exhibit R-25 it can be seen that all rights and liabilities in respect of the vehicle were transferred in favour of the appellant. The appellant has no case that he has not paid the consideration under exhibit R-25 and that he did not obtain possession of the vehicle. The registration of the vehicle in the name of the transferee is not essential to pass the title in the vehicle. Payment of price and delivery of the vehicle make the transaction complete and the title will pass to the purchaser under the provisions of the Sale of Goods Act. For transfer of ownership of a motor vehicle, mutation of the certificate is not necessary. Obligation to register the vehicle is for controlling and regulating the movements of the vehicle by the authorities under the Act. The vehicle can be sold and purchased without following the procedure prescribed in Section 31 of the Act. (See Panna Lal v. Chand Mal [1980] ACJ 233 (SC)). Therefore, it is clear that the appellant purchased the lorry in question as per exhibit R-25 and the insurance policy stood in the name of the husband of the 8th respondent, who was the original owner of the vehicle.
11. The contract of insurance is basically governed by the rules which form part of the general law of contract. In a contract of insurance, one party agrees to indemnify the loss that would be sustained by another. The first party is bound to pay the money or provide its equivalent if any uncertain event occurs. The other party, namely, the insured must have an insurable interest in the property, life or liability which is the subject of the insurance.
" Insurable interest is a basic requirement of any contract of insurance unless it can be, and is, lawfully waived. At a general level, this means that the party to the insurance contract who is the insured or policy-holder must have a particular relationshsp with the subject-matter of the insurance, whether that be a life or property or a liability to which he might be exposed. The absence of the required relationship will render the contract illegal, void or simply unenforceable, depending on the type of insurance ", (See page 24 Chapter 3--" Modern Insurance Law " by John Birds).
12. The contention of the appellant is that the vehicle was covered by a valid third party insurance policy and as such the compensation amount is to be paid by the insurance company. The insurance company resists the claim on the ground that the policy was in the name of the registered owner and therefore the company is not liable to indemnify the loss arising out of the accident. A similar question came up for consideration before this court in National Insurance Co. Ltd. v. Thekkeyil Rajan [1985] 58 Comp Cas 40 (Ker); [1982] KLT 700. Vadakkal J., speaking for the Bench, held at p. 42.
" The contract of insurance is a contract of personal indemnity and therefore the insured cannot transfer the benefit under a policy so long as such benefits are contingent. In short, an insurance policy cannot be transferred by the insured without the consent of the insurer. On the insurer agreeing to such transfer, there is a novation of the contract by which the original assured is substituted by the new assured, the transferee to whom the policy has been transferred. The insurance policy lapses upon the transfer of the ownership of the motor vehicle unless the insurance company agrees to accept the transferee as the insured in relation to the vehicle either at the instance of the transferor or of the transferee ".
13. This question again came up for consideration in New India Assurance Co. Ltd. v. E. K. Muhammed [1987] 61 Comp Cas 490. This court held the same view. The Mysore High Court in B. P. Venkatappa v. B. N. Lakshmiah, AIR 1973 Mys 350, held as follows (headnote):
" An insurance policy is a personal contract between the parties for indemnifying the insured in case of an accident covered under the policy. Thus, where the motor vehicle is transferred by an insured to another person, the insurance policy lapses upon the transfer and in such a case the benefit of the policy is not available to the transferee without an express agreement with the insurance company. "
14. There is a host of other decisions holding the same view. (See Gulab Bai Damodar Tapse v. Peter K. Sundar [1975] ACJ 100 (Bom), Oriental Fire and General Insurance Co. v. Vimal Roy [1974] 44 Comp Cas 316 (Delhi), South India Insurance Co. v. Puran Chandra Misra [1973] ACJ 46 (Orissa), Balwani Singh v. Jhannubai [1980] ACJ 126 (MP), Oriental Fire & General Insurance Co. v. Meena Sharma[l975] ACJ 335 (P& H).
15. The Madras High Court in Madras Motor Insurance Co. v. Muhammed Mustafa, AIR 1941 Mad 208, took a different view and held that the right of the insurer to avoid his liability under the policy is confined to certain grounds specified in Section 96(2) and the court cannot add to those grounds for reasons of hardship. Transfer of the vehicle during the currency of a policy is one of such grounds and the policy does not lapse by such transfer. The court was of the view that even if the insurer has some ground which would entitle him, as against the insured, to avoid the policy or to have it declared as void, that will not protect the insurer from liability to pay the victim of the accident to the extent covered by the insurance and that was the sole intention to have a compulsory insurance in respect of the third party risk. However, this view of the learned single judge was subsequently reversed by a Division Bench of Madras High Court in Hema Ramaswami v. K. M. Valarence Panjani AIR 1981 Mad 174 ; [1983] 54 Comp Cas 600 (Mad). The Division Bench held (at p. 605, 606):
" Section 96 does not warrant the view that a sale or transfer of an insured car by the insured during the currency of the policy does not terminate the policy. Section 31 of the Act could not have the effect of keeping the policy alive qua third parties, that change of registry under Section 31 was not a condition precedent for the transfer of ownership of the vehicle, that the said section merely imposed an obligation both on the transferor and the transferee of the vehicle to notify the transfer and that the non-compliance there with will not invalidate the transfer as such which has already taken place ".
16. Learned counsel for the appellant drew our attention to a Full Bench decision of the Andhra Pradesh High Court in Madineni R. Kondaiah v. Yaseen Fatima [1986] 60 Comp Cas 762 (AP) [FB]. In this case, the court held that the insurance company was not entitled to raise the plea that the policy had lapsed because of the transfer of the vehicle by the registered owner and that such a plea was not available in view of Section 96(2) of the Act. The court was of the view that even if the policy had lapsed as against the insured, the liability of the insurer as against third parties still subsisted. The court held :
" So far as the third party risk is concerned, the proprietary interest in the vehicle is not necessary and the principal liability continues till the transferor discharges his statutory obligation under Sections 29A and 31 read with Section 94 of the Act. Till he complies with the requirement of Section 31 of the Act, the public liability will not cease and that constitutes the insurable interest to keep the policy alive in respect of third party risks. It must be deemed that the transferor allowed the purchaser to use the vehicle in a public place in the said transitional period and accordingly till the compliance with Section 31, the liability of the transferor subsists and the policy is in operation so far as it relates to third party risks.
The insurance company cannot raise any defence not contemplated in Section 96(2). Though the defence that the original policy was not issued by the company or that it is a forged one is not barred under Section 96(2), the defence of the insurer that the policy . has lapsed in view of the transfer of the vehicle touched the merits of the case and is barred under Section 96(2) ot the Act".
17. The facts of the case are slightly different from the case in hand. In the instant case, exhibit R-25 was executed about three months prior to the date of the accident. The appellant also knew that the registered owner of the vehicle was no more alive and therefore, no application could have been filed under Section 103A of the Act for the transfer of the certificate of insurance, and it was up to the appellant to get a fresh policy of insurance for the vehicle. The appellant has also no case that he had intimated the sale of the vehicle to the insurance company. It is true that Section 94 of the statute is enacted to give protection to a third party in respect of death or bodily injury or damage to their property while using the vehicle in a public place. Here, as already pointed out, the appellant has not taken any steps to get the insurance policy transferred in his name and he has no case that title to the vehicle has not passed. The original insured was dead and the policy was thereby terminated and even if the injured persons were third parties liable to be covered by third party insurance, the insurance company cannot have any liability as there is total absence of the policy. In view of the formidable array of authorities, we reject the contention of the appellant that the insurance company was liable to pay the compensation amount, despite the transfer of the vehicle by the registered owner in favour of the appellant.
18. The claimants in MAC No. 41 of 1981 filed a memorandum of cross objections for enhancement of the amount. The petitioners therein claimed a total compensation of Rs. 13,576.98. The Tribunal has granted Rs. 5,698.00. Learned counsel for these respondents contended that the injured Nirmala was a student of the SSLC class and because of this accident, she had lost one academic year. Apart from the medical and other incidental expenses, she was granted only Rs. 5,000. She had to be in the hospital for about 22 days. She had burn injuries on her body and naturally she would have suffered a lot of pain. Considering the entire facts and circumstances, we enhance the compensation from Rs. 5,698 to Rs. 8,000.
19. The claimant in MAC No. 42 of 1981 also has filed a memorandum of cross objections seeking enhancement of the amount of compensation. He was granted Rs. 8,000 as compensation. He was in the hospital for 12 days. He is a driver and it is contended that he would not be able to drive a vehicle since he sustained injury on his hand. It may be noted that his employer was kind enough to give him re-employment. Rs. 8,000 appears to be a reasonable amount and we see no reason to interfere with that.
20. In the result, in MAC No. 41 of 1981, the compensation amount is fixed at Rs. 8,000. 40 per cent of the same should be paid by the appellant. Since 60 per cent is to be borne by the owner of the bus, the insurer of the bus viz., M/s. Oriental Fire and General Insurance Company shall pay the amount of Rs. 4,800 and the balance amount of Rs. 3,200 shall be paid by the appellant. The principal amount will carry interest at six per cent per annum from 17th September, 1977, till realisation.
21. In MAC No. 42 of 1981, the 5th respondent, M/s. Oriental Fire and General Insurance Company shall pay Rs. 4,800 with interest at six per cent per annum from 17th September, 1977, and the balance amount of Rs. 3,200 with interest at six per cent per annum from 17th September, 1977, till realisation shall be paid by the appellant.
22. The MFAs and cross objections are disposed of as above. The parties shall bear their costs.