Himachal Pradesh High Court
Oriental Insurance Co. Ltd. vs Top Bahadur And Ors. on 1 January, 1996
Equivalent citations: 1996ACJ931
Author: S.N. Phukan
Bench: S.N. Phukan
JUDGMENT Bhawani Singh, J.
1. This appeal arises out of the award of the Motor Accidents Claims Tribunal, Solan (hereinafter 'the Tribunal') in M.A.C. Petition No. 26-S/2 of 1984, dated 17.6.1988. Briefly, the facts may be narrated thus.
2. The claimant was enrolled as recruit in 14 Gorkha Training Centre, Subathu, on 15.9.1983. During the course of training, he was required to participate in Battle Physical Efficiency Test during the morning hours of 20.3.1984 along with other recruits. All the recruits were required to participate in a long race from Subathu to Dharampur and back. While racing back from Dharampur to Subathu, when they reached near Forest Rest House, Subathu, at 8.10 a.m., respondent No. 1 came from behind on his scooter and knocked down the claimant who fell on the ground and sustained fracture of lower end of right fibula and multiple abrasions on the right knee and elbow. He was removed to the Military Hospital for medical treatment. Ultimately, the Medical Board, held at Military Hospital, Kasauli, declared his disability to the extent of 20 per cent on account of the fracture in the leg for two years. Consequently, the claimant was discharged from the training centre on 21.1.1985 as the injury was not found curable within six months as required under the rules. The age of the claimant at the time of accident was 21 years and he was drawing Rs. 514.65 per mensem besides the 'ration' money and accommodation rent in the sum of Rs. 250/- and Rs. 35/-respectively, total coming to Rs. 764.65. Compensation has been claimed for loss of bright future and earnings on account of disfigurement and permanent disability. It has been alleged that the accident took place on account of the rash and negligent driving of the scooter by respondent No. 1. The vehicle involved in the accident was owned by respondent No. 3 and it was sold by him to respondent No. 1 on 9.3.1984. It was duly insured for third party risk with respondent No. 2 in favour of respondent No. 3 and the insurance cover was from 30.11.1983 to 29.11.1984. Claim petition was instituted on 22.10.84 with an application under Section 5 of the Limitation Act seeking condonation of delay of 33 days in filing the petition on the ground that the claimant, after being discharged from the Military Hospital, was unable to move about due to pain and medical advice.
3. Respondent No. 3 has denied the knowledge of the accident but he has asserted that he had sold the vehicle prior to the accident and necessary steps for getting the transfer of registration certificate and completing other formalities were duly taken prior to the date of alleged accident. Respondent No. 1 has claimed ignorance about the injury to the claimant due to the rash and negligent driving of the vehicle. According to him, it was the claimant who negligently hit against the vehicle. The insurance cover was valid at the time of accident. Respondent No. 2 has also opposed the claim on the ground of limitation. It has also been stated that the vehicle was being driven by a person who did not have valid driving licence nor was authorised to drive it. The policy was issued in favour of respondent No. 3, therefore, it ceased to be in operation since no intimation regarding sale of the vehicle was given to it.
4. Following issues were framed by the Tribunal in this case:
(1) Whether there are sufficient grounds to condone the delay in filing the present claim petition? OPP.
(2) Whether petitioner Top Bahadur suffered injuries as a result of accident caused due to the rash and negligent driving of scooter by Subhash Chand, respondent No. 1, as alleged? OPP.
(3) If issue No. 2 is decided in the affirmative, whether the petitioner is entitled for compensation, if so, how much and from whom? OPP.
(4) Relief.
5. The Tribunal decided all the issues in favour of the claimant and awarded compensation of Rs. 44,000/- from respondent No. 2 with costs of Rs. 300/-besides interest at the rate of 12 per cent per annum from the date of institution of the claim petition till the realisation of the amount. Against this award the appellant (insurance company, respondent No. 2) has serious objections.
6. It was contended by the learned Counsel for the appellant that the claim petition was barred by time, therefore, the same ought to have been dismissed by the Tribunal. Apart from the fact that the petitioner has explained the circumstances for the late filing of the claim petition as discussed by the Tribunal while discussing issue No. 1, this question does not detain us any further in view of our judgment in Sadh Ram v. State of H.P. 1996 ACJ 880 (HP) and other connected matters, decided on 9.8.1995 holding that claim petition filed before coming into force of the Act of 1994 will also be governed by this Act which does not provide for any specific period of limitation for filing the claim petition.
7. The second contention of the appellant is that the vehicle was transferred by respondent No. 3 in favour of respondent No. 2 without intimation to it, therefore, there was no insurable interest between the insurer and the insured. In the absence of privity of contract, the appellant could not be asked to indemnify the insured. Therefore, in these circumstances, no award could be passed against the appellant.
8. From the opposite side it was pointed out that the information about the transfer of the vehicle had been passed on to the appellant, therefore, it is liable to pay the compensation. The accident took place on 20.3.1984. Validity period of insurance policy was from 30.11.1983 to 29.11.1984. This means, the accident took place during the validity period of the insurance policy.
9. The question for determination is whether the transfer of the vehicle had become effective on the day of the accident to make the appellant liable to pay the compensation? It was pointed out from the evidence that the transferor had moved the registration authority at Chandigarh on 9.3.1984 for seeking the transfer of the registration certificate in favour of the transferee. The vehicle was also sold on this date. This fact is proved by Exh. RB and May a Ram, RW 6, clerk working in the office of the Registering Authority, Chandigarh and the vehicle was transferred on 24.5.1984. Amar Lal, RW 2, also states that he had accompanied Subhash (respondent No. 1 in the claim petition) to Chandigarh when the application for seeking transfer of the vehicle through the Registering Authority at Chandigarh was moved. He also stated that they went to the office of the appellant where a 'baboo', sitting in the office, told them that the previous insurance cover was valid. The fact remains that the vehicle continued to remain in the name of the transferor on the day of the accident.
10. Section 103-A of Motor Vehicles Act, 1939, provides that:
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 person-
(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 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.
11. Reading of the evidence on record patently demonstrates that requirements of this section have not been resorted to. This falsifies the stand of Amar Lal, RW 2, that he accompanied the transferor and the transferee of the vehicle to the office of the insurance company, Chandigarh, where a 'baboo' sitting in the office told them that the insurance cover was valid one. As a matter of fact, it appears to us that the parties did not make any attempt to apply to the appellant for the transfer of the vehicle in accordance with Section 103-A of the Motor Vehicles Act, 1939, therefore, the insurance company could not transfer the certificate of insurance and the policy describing the certificate in favour of the transferee. Therefore, the insurance policy continued to remain in favour of the transferor, though he had actually passed on the vehicle to the transferee when the accident took place which fact the transferee has also admitted in his statement and that he was himself driving the vehicle at the time of the accident. Consequently, the appellant can take such a defence since there existed no privity of contract between the appellant and the transferee. Similar view has been taken in Mehtab Singh v. National Fire and Genl. Ins. Co. Ltd. 1958-65 ACJ 250 (Punjab); Alwar Motor Association (P) Ltd., Alwar v. Hazari Lal 1958-65 ACJ 542 (Punjab); Panna Lal v. Chand Mal 1980 ACJ 233 (SC); United India Fire & Genl. Ins. Co. Ltd. v. Chennamma 1982 ACJ (Supp) 53 (Karnataka); National Insurance Co. Ltd. v. Thekkeyil Rajan 1983 ACJ 23(1)Kerala); Mohd. Abdul Waheed Mohd. Nakim Khan v. Shyam Behari Rameshwar Kalvar 1983 ACJ 369 (Bombay); Shantilal Mohanlal v. Aher Bawanji Malde 1985 ACJ 505 (Gujarat); Labh Singh v. Sunehri Devi 1988 ACJ 170 (P&H); Anand Sarup Sharma v. P.P. Khurana 1989 ACJ 577 (Delhi); Kama Devi v. Dayal Singh 1991 ACJ 33(1)HP); Oriental Insurance Co. Ltd. v. Rajamani 1992 ACJ 354 (Madras); and United India Insurance Co. Ltd. v. Bimla 1994 ACJ 878 (HP).
12. In opposition to this contention, the learned Counsel for the opposite side sought assistance from National Insurance Co. Ltd. v. Magikhia Das 1976 ACJ 239 (Orissa); Raddipalli Chinnarao v. Reddi Lorurdu 1980 ACJ 470 (AP); Madineni Kondaiah v. Yaseen Fatima 1986 ACJ 1 (AP); National Insurance Co. Ltd. v. Kastoori Devi 1988 ACJ 8 (Rajasthan); New India Assurance Co. Ltd. v. Sheela Rani 1988 ACJ 20(1)Rajasthan); Shankerlal v. Shankerlal 1988 ACJ 86(1)Rajasthan); New Great Insurance Co. of India Ltd. v. Koshalesh Sharma 1989 ACJ 989 (Rajasthan); Dharman v. N.C. Srinivasan 1990 ACJ 27 (Madras); Sajid Mian v. Ganga 1990 ACJ 54 (Rajasthan); and National Insurance Co. Ltd. v. V.S.R. Kumaresan 1990 ACJ 873 (Madras).
13. It is not necessary to discuss all these decisions. Suffice it to refer to some of them where the question under consideration has been prominently considered and decided.
14. In Shantilal Mohanlal v. Aher Bawanji Malde 1985 ACJ 505 (Gujarat), it has been held that after the sale of the vehicle, there is no subsisting contract between the insurance company and the transferee, therefore, insurance company is not liable to indemnify the transferee and the claimants are not entitled to recover any compensation from the insurance company. Thus, rejecting the contention that the insurance policy is with respect to a particular vehicle and its ownership during the subsistence of the policy is matter of no relevance or consequence. Unless there is stipulation to the contrary, the policy lapses on the realisation of the price and handing over of the vehicle to the transferee by the original owner. Sections 42, 94, 123 and 125 of the Act do not create any liability for payment of compensation by the insurance company. On the question whether this kind of defence is available to the insurance company under Section 96(2), it has been held that such a defence can be taken up since the Apex Court decision did not give such a broad interpretation to the provision and, more particularly, when there is no contract of insurance between the insurance company and the transferee of the vehicle.
15. In Anand Samp Sharma v. P.P. Khurana 1989 ACJ 577 (Delhi), the High Court of Delhi held that insurance company cannot be compelled to indemnify a person with whom it had no contract. After the sale, the insured was left with no insurable interest in the vehicle and under the terms of contract of insurance, the company was not liable to indemnify the transferee. Registration of the vehicle in the name of the transferee was not necessary for the purpose of completing the sale since sale takes place in accordance with the provisions of Sale of Goods Act. As to whether the insurance company could take up this defence in view of Section 96(2), the court held that the company could take this kind of defence. The single Judge of this court has followed this view in Kanta Devi v. Dayal Singh 1991 ACJ 33(1)HP). In paras 13 and 14 of this decision, it has been held that:
(13) A contract of insurance is between the insurer and the insured, the subject-matter is the vehicle specified in it and it is the risk arising out of its use that the insurer undertakes to compensate against. Where such a contract provides for indemnity to the assured against third party risks, the third party who is a stranger to the contract, cannot enforce it against the insurer. Neither the general principles of law relating to contracts, nor the common law gives third party a cause of action against the insurer. If a third party risk arises under the policy it is entirely a matter between the insurer and the insured governed by the terms of the policy. Section 96(1) of the Act makes it obligatory on the part of the insurer to meet or satisfy an award made by the Accidents Claims Tribunal against the person insured in respect of such third party risks. Thus, for the purpose of Section 96(1) the insurer could also be deemed to be a judgment-debtor. Under Section 96(2) of the Act the insurer can be made a party, so that he may defend the action by the third party against the insured which also enumerates the grounds, the insurer may take up for defending himself. The scheme of the provision is that no insurer who had notice under Section 96(2) is entitled to avoid liability to the party otherwise than in the manner provided for in Sub-section (2) thereof. Thus, after the insured has parted with his vehicle, he has no longer any insurable interest to which the policy in his favour can relate and continue to have force affecting thereby the basis of contract of insurance as also the specified vehicle to which the indemnity relates, as is clear from the details required to be set out in the policy. It is with reference to those details and the history of vehicle and its owner, including claims or no claims in the past that premium payable on the insurance is determined and the contract is formed. Thus, in the absence of express stipulation in the policy to the contrary, the moment the insured parts with his vehicle, the policy relating to it lapses, inasmuch as the vehicle is the subject-matter of the very foundation of contract of insurance. Neither Section 96(1) nor Section 96(2) of the Act results in a policy of motor insurance being continued to operate and not lapse, notwithstanding the fact that the insured during the currency of the policy has parted with the ownership of the vehicle to which the insurance relates. Section 96(1) itself proceeds on the basis that there is a 'subsisting policy' and the words to the effect 'being a liability covered by the terms of policy' are of particular significance. It is no doubt true that where insurer has been given notice of action, the grounds of his defence in the action are limited to those stated in Section 96(2) and it is not open to the insurer to avoid liability under the policy but the continued ownership of vehicle with the insured is basic to the subsistence of policy and once the subject-matter of policy is gone, as when parted by the insured, the policy automatically lapses and there is nothing for the insurer to avoid it. The policy of insurance is with respect to the insured person and not the vehicle and the liability of insurer ceases on transfer of ownership of vehicle.
(14) The third party liability of an insurance company ends on the transfer of vehicle by the insured. This view has been followed by various High Courts in South India Insurance Co. Ltd. v. Purna Chandra Misra 1973 ACJ 4(1)Orissa); Gulab Bai Damodar Tapse v. Peter K. Sunder 1975 ACJ 100 (Bombay); Indian Mutual Insurance Co. now merged in the United India Fire and Genl. Ins. Co. Ltd, v. Vijaya Ramulu 1978 ACJ 36(1)AP); Labh Singh v. Sunehri Devi 1988 ACJ 170 (P&H) and National Insurance Co. Ltd. v. Mallikarjun 1990 ACJ 688 (Karnataka).
16. No other point was urged by the learned Counsel for the parties.
17. The result of the aforesaid discussion is that the Tribunal committed error in holding the appellant liable for the payment of compensation. Consequently, it is held that the award liability would not fall on the appellant (insurance company). Transferor Amarpaul (respondent No. 3 to the claim petition) would be responsible to satisfy the award. Since this respondent has died, therefore, the amount be recovered from his estate.
18. The appeal is, therefore, allowed in the manner aforesaid with no order as to costs.