Is Deemed Transfer Of Motor Insurance Policy On Sale Of Vehicle Applicable Only To Third Party Risks? Supreme Court Refers To Larger Bench
In a significant development, the Supreme Court referred the issue of deemed transfer of the insurance policy upon transfer of vehicle ownership under the Motor Vehicle Act, 1988 to the larger bench after finding an inconsistency amongst two of its previous judgments.The Supreme Court referred the aforesaid issue to a larger bench after witnessing an inconsistency amongst its earlier rulings...
In a significant development, the Supreme Court referred the issue of deemed transfer of the insurance policy upon transfer of vehicle ownership under the Motor Vehicle Act, 1988 to the larger bench after finding an inconsistency amongst two of its previous judgments.
The Supreme Court referred the aforesaid issue to a larger bench after witnessing an inconsistency amongst its earlier rulings in Complete Insulations Private Limited v. New India Assurance Company Limited and Surendra Kumar Bhilawe v. The New India Insurance Company Limited.
While the judgment in Complete Insulations held that deemed transfer of insurance policy on sale of vehicle will take place only with respect to third party risks, the judgment in Surendra Kumar Bhilawe held that deemed transfer will be applicable to the whole policy.
“It is important to note that the decision in Complete Insulations (supra) is by a bench of 3 judges and the decision is categorical in its finding that Section 157 of the 1988 Act has no application to third-party liability. Though the judgment in Complete Insulations is referred to in the Surendra Kumar Bhilawe, the portion that we have extracted and referred to hereinabove has not been noticed. It is therefore necessary to reconcile these 2 decisions as the judgment in Complete Insulations is by a 3-judges bench, it is appropriate that the matter be placed before a bench of 3 judges.”, the Bench Comprising Justices P.S. Narasimha and Aravind Kumar said.
Background
In the instant case, the appellant had purchased a car from its previous owner and had applied for a change in registration. The car was insured by the previous owner under an insurance policy dated 14.09.2009. Two events occurred on 25.03.2010. The registration of the car was transferred in the name of the appellant and on the same day, the appellant met with an accident while he was driving the car. Following the accident, the appellant submitted a claim with the respondent no.1 insurance company but the insurance company did not entertain the same.
The appellant had approached the District Consumer Disputes Redressal Commission by filing a Consumer Complaint under Section 12, Consumer Protection Act, 1986. The District Forum allowed the complaint.
The insurance company filed before the State Consumer Disputes Redressal Commission. The appeal was allowed on the grounds that under Section 157(2) of the Motor Vehicles Act, 1988, the appellant was liable to inform the insurance company about the change in registration within 14 days. However, as the appellant failed to do so, the State Commission held that the claim was rightly repudiated by the insurance company. The appellant filed a Revision Petition before the National Commission. However, the revision petition was dismissed.
The present appeal before the Supreme Court arises out of the dismissal of the revision petition by the NCDRC.
Arguments
It was contended on behalf of the appellant that as per Section 157 of the Motor Vehicle Act, 1988 there is a deemed transfer of the insurance once the vehicle ownership is transferred. In support of her case, she has relied on the decision of Surendra Kumar Bhilawe v. The New India Insurance Company Limited which is more or less identical on facts.
Per Contra, on behalf of the insurance company, it was argued that Section 157, Motor Vehicles Act, 1988 has no application as this is not a case of third-party Liability. The insurance company relied on the decision of Complete Insulations Private Limited v. New India Assurance Company Limited.
Supreme Court's Discussion
In Complete Insulations, the three-judge bench of the Supreme Court held that “it is only in respect of third-party risks that Section 157 of the new Act provides that the certificate of insurance together with the policy of insurance described therein “shall be deemed to have been transferred in favour of the person to whom the motor vehicle is transferred liability.” The court further held that under Section 103-A of the old Motor Vehicle Act, 1939, the Insurer had the right to refuse to transfer the certificate of insurance and/or the Insurance policy unless the certificate of insurance is with respect to third-party risks.
However, in Surendra Kumar Bhilawe, the Two Judge Bench of the Supreme Court distinguished the Complete Insulations case on the note that the Complete Insulation delves on the old Motor Vehicle Act 1939 where under Section 103-A of the old Act, the Insurer had the right to refuse to transfer the certificate of insurance and/or the Insurance policy unless the certificate of insurance is with respect to third-party risks.
“However, Section 157 of the Motor Vehicles Act, 1988 introduces a deeming provision whereby the transfer of the certificate of Insurance and the policy of Insurance are deemed to have been made, where the vehicle along with the Insurance policy is transferred by the owner to another person. This provision has taken away the Insurer's right of refusal to transfer the Policy Certificate of Insurance which was there under the old Act.”, the Supreme Court said in Surendra Kumar Bhilawe.
Further, the Supreme Court records that an authoritative determination is required to be made on the issue relating to the deemed transfer of insurance policy for 3rd party liability by interpreting the other provisions of the Insurance Act, 1938, and the Motor Vehicles Act, 1988.
“Apart from the difficulty in reconciling the two judgments, as indicated above, the issue relating to deemed transfer of insurance policy, as a principle akin to that of which is incorporated in Section 157 for 3rd party liability is to be considered by interpreting the other provisions of the Insurance Act, 1938 and the Motor Vehicles Act, 1988. This is also an important issue which requires consideration and authoritative determination.”
“In view of the above referred- consideration, we are of the opinion that this appeal be referred to a bench of 3 judges. The Registry shall place the matter before the Hon'ble Chief Justice for further directions.”, the Supreme Court said.
Case Details: JASWINDER SINGH vs.THE NEW INDIA ASSURANCE COMPANY LTD. & ORS., SLP(C) No. 028825 / 2015
Citation : 2024 LiveLaw (SC) 190