'Bond' Not Sufficient Security For Releasing Accident Vehicle Not Having Third Party Insurance: Kerala High Court Explains Motor Vehicle Rules

The Kerala High Court recently elaborated upon the nature of security contemplated under Rule 391A of the Kerala Motor Vehicle Rules, 1989 (hereinafter 'Rules, 1989') for the purposes of releasing a vehicle involved in an accident if it was not covered by a valid policy of insurance against third party risks at the time of the accident. 

Justice Bechu Kurian Thomas held that, 

"the word 'sufficient security' in Rule 391A of the Rules means a security from which the amount, when awarded, can easily be recovered, that too without any further litigation". 

Elaborating on the same further, the single Judge added, 

"Ideally, a cash deposit or a bank guarantee or fixed deposit receipts or other modes of security from which the amount when awarded, can easily be recovered, should be the nature of security to be furnished under Rule 391A. Executing a bond for the amount directed cannot, in the circumstances, be treated as sufficient security". 

In one of the two cases being decided by the Court, the Magistrate had initially directed the offending vehicle to be released on deposit of an amount of Rs.4,00,000/- since the vehicle did not possess a valid insurance policy. However, the higher court interfered and directed a reconsideration since the valuation of the vehicle was not shown to have been taken. While reconsidering the condition, the Magistrate after valuation of the vehicle, fixed the amount as Rs.3,80,000/- but directed that only a bond had to be executed for the said amount. The State challenged this.

Similarly, in the second case before the Court, the vehicle which was not found to be covered by a valid insurance policy was directed to be released, on executing a bond for Rs.19,80,000/- with two solvent sureties.

Public Prosecutor Vipin Narayan contended that bond could not be regarded as an adequate or sufficient security for releasing vehicle since it would be difficult and in many cases, even practically impossible to execute such bonds and ultimately the entire process would lead to another long drawn out litigation. It is in this context that the Court embarked on ascertaining the nature of the security contemplated under the provision. 

At the outset, the Court perused Rule 391A of the Rules, 1989, wherein it has been stipulated that when a vehicle involved in an accident is found to be not covered by a valid policy of insurance against third party risks, on the date of accident, or when the owner fails to furnish copy of such insurance despite demand by the Investigating Officer, the court cannot release the vehicle without the owner furnishing sufficient security to its satisfaction to enable release of the vehicle.

The Court noted that the aforementioned provision was incorporated following the amendment of the Rules, 1989, in accordance with the direction issued by the Apex Court in Jai Prakash v. National Insurance Co.Ltd. & Ors. (2010) followed by the decision in Usha Devi & Ors. v. Pawan Kumar & Ors. (2018).  

The Court observed that when a vehicle covered by a policy of insurance against third party risks is involved in an accident and the award passed becomes final, the victim would obtain immediate relief in the form of compensation from the insurance company, while the process to recover the amount would be more cumbersome if the vehicle is not so covered by an insurance. It was thus discerned that the security to be provided under Rule 391A of the Rules ought to be equivalent to the situation where the vehicle was covered with an insurance policy, which would provide an opportunity for immediate recovery of the amount awarded.

The Court went on to observe:

"If a bond alone is permitted to be executed as sufficient security under Rule 391A, the victim may have to, after years of litigation, initiate further litigation to recover the compensation awarded from the security furnished under the Rules. This certainly could not have been the intention of the rule-making body. The security to be furnished must be capable of being executed and recovered immediately and without further litigation". 

It thus noted that although in certain other statutes security to be furnished could be in the form of a bond, such an interpretation could not be extended to the word 'sufficient security' in Rule 391A of the Rules. 

"The context and the purpose behind the enactment of the provision cannot be ignored as the essence of law lies in its spirit and not in the letter," it was observed. 

The Court observed that the purpose behind the same was to to provide a relief to the victims of compensation where the vehicle involved in an accident is not covered by an insurance for third party risks.

"Thus, unless the security provided under 391A is capable of being executed immediately without a long drawn out litigation, the object of Rule 391A of the Rules will become redundant," it added. 

The Court thus proceeded to observe that if the vehicle is released without obtaining a fresh valid insurance policy against third party risks, it would militate against the intention behind the Rule, and in such a context, it would be appropriate that Magistrates insist on production of fresh valid insurance policy against third party risks before releasing the vehicle.

The Court therefore held that the condition directing release of the vehicle on bond by the Magistrate in both cases as irregular and set aside the same. 

"The respective Magistrates shall pass fresh orders on those petitions regarding release of the vehicles based on the observations made by this Court in this order," the Court held while allowing the petition. 

Public Prosecutors Vipin Narayan and Rekha S appeared on behalf of the State in both cases. The respondent in Crl. M.C. 1538/ 2022 was represented by Advocates K.V. Gopinathan Nair, Anumod B. Nair, and G. Chitra, while the respondent in Crl. M.C. 9174/ 2022 was represented by Advocate Binoy Vasudevan. 

Case Title: State of Kerala v. Sanith Jan and State of Kerala v. Arun

Citation: 2023 LiveLaw (Ker) 211

Click Here To Read/Download The Order