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The learned Judge then dealt with the issue as to what would be the insurable interest of the owner. Elaborating on this aspect, the learned Judge observed as under:

"41. ......... In the present case the insurable interest so far the third party risk is concerned, is not the proprietary interest in the vehicle that is required. It is a public liability imposed by the Statute on person using the vehicle in a public place. Hence, it is clear that the basis of this public liability insurance is the user of the vehicle either by the owner or by any other person and hence the proprietary interest in the vehicle is not decisive. ........."

Dealing with the statutory obligation visited on the Insurance Company by Section 94 of the Act of 1939 (corresponding to Section 146 of the Act of 1988), the learned Judge observed that it would be incorrect to assume that the moment the title of the vehicle passes to the transferee, the statutory obligation under Section 94 ceased and the original owner would no longer be guilty of causing or allowing the purchaser to use the vehicle. The question, according to the learned Judge, would be when the statutory liability ceases. The mere passing of the title in the vehicle to the transferee, per the learned Judge, would not put an end to this liability. The learned Judge pointed out that under Section 31 of the Act of 1939 the owner of the motor vehicle was required within 14 days to inform the registering authority of the transfer of the vehicle. Failure to comply with this requirement was made punishable under Section 112 of the Act of 1939. The learned Judge also took note of the fact that Section 31 of the Act of 1939 was amended, whereby the obligation to inform the authority was placed not only on the transferee but also the transferor of the vehicle. The learned Judge therefore concluded that the public liability to notify the transfer and secure a 'no objection certificate' under Section 31 read with Section 94 of the Act of 1939 would make the original owner retain the insurable interest and the insurable interest would not be the proprietary interest but the public liability not to run the vehicle or cause or allow any person to run the vehicle without insurance and also to notify the transfer of such vehicle to the registering authority. So long as such an obligation continues, notwithstanding the cessation of the proprietary interest, the insurable interest which is the foundation for the continuance of the operation of the policy would continue.

Relying upon case law, the learned Judge concluded thus:

"46. ......... Thus, we are clearly fortified in our view that the insurable interest in the property is not necessary in the case of public liability insurance. The test is whether the liability under the statute ceased or not notwithstanding the passing of title and hence we respectfully dissent with the view expressed by various High Courts that on the sale of the vehicle the insurable interest ceases and the policy lapses. We agree that any claim of the transferee in respect of his property and his person cannot be enforced against the insurance company. He being a stranger he cannot have any claim against the insurance company. But the third party risk is concerned so long the obligations under the statute are not fulfilled, as contemplated under sec. 31 read with sec. 94, he continues to have the insurable interest till such obligations are fulfilled.

A distinction was thus drawn between proprietary and insurable interests covered by an Insurance Policy and it was held that so far as third party risks, under the insurable interest, are concerned, cessation of proprietary interest would be of no consequence. The Insurance Company was therefore held liable. Though, in these cases, we are not faced with proprietary interest issues, the Insurance Companies seek to disown liability on the ground that the insured vehicles were given on lease to the APSRTC without intimation to them and without payment of additional premium enabling such lease etc. Mere transfer of possession of the insured vehicle under a lease agreement cannot stand on a worse footing than transfer of the ownership of such vehicle itself, as was the case in MADINENI KONDAIAH 11. The insurable interest of third parties would stand on a higher immutable level and the Insurance Companies, having committed themselves in this regard, cannot wash their hands off public liability insurance claims on technicalities. The ratio decidendi of MADINENI KONDIAH 11 ordains to the contrary.