Insurance Claim Can Be Rejected If Vehicle Was Used Without Valid Registration: Supreme Court

The Supreme Court observed that an insurance claim can be rejected if a vehicle is used/driven without a valid registration, since that would constitute a fundamental breach of the terms and conditions of the contract of insurance.

The bench of Justices Uday Umesh Lalit, S. Ravindra Bhat and Bela M. Trivedi observed that when an insurable incident that potentially results in liability occurs, there should be no fundamental breach of the conditions contained in the contract of insurance. If on the date of theft, the vehicle had been driven/used without a valid registration, it amounts to fundamental breach, the court held.

In this case, the policy holder had purchased a new Bolero which had a temporary registration. After the registration lapsed, he travelled outside his residence. He parked outside the guest house premises from where it was stolen. He claimed insurance but it was repudiated on the ground that the temporary registration of the vehicle expired. Thereafter, he approached the District Forum seeking a direction to the insurer  to pay him the sum insured for the vehicle with rent amount of ₹1,40,000/- and also claimed relief for mental agony and costs of litigation. The said complaint got dismissed, against which he approached the State Consumer Disputes Redressal Commission. Allowing the appeal, the state commission observed that the insurer could not repudiate the insured's genuine claim on technical, petty and frivolous grounds of absence of permanent registration certificate from the competent authority and thus escape its liability to indemnify the insured for the loss of the vehicle. The revision petition filed by the insurer before National Consumer Disputes Redressal Commission was dismissed and thus it approached the Apex Court.

Relying on the Supreme Court judgment in Narinder Singh Vs. New India Assurance Co. Ltd (2014) 9 SCC 324 and also an NCDRC order in Naveen Kumar Vs. National Insurance Company Ltd, the appellant insurer contended that since the vehicle in question, had no registration, it constituted a fundamental breach of the policy, entitling the insurer to repudiate the claims under it. On behalf of the complainant, it was contended that the judgment in Narinder Singh (supra)  pertained to claim for compensation for a damaged vehicle on account of accident, and not on account of theft of a vehicle, and was thus not applicable to the present case.

The court noted that, in Narinder Singh, it was held that using a vehicle on the public road without any registration is not only an offence punishable under Section 192 of the Motor Vehicles Act but also a fundamental breach of the terms and conditions of policy contract. The court also noted that in Naveen Kumar (supra), NCDRC had held as follows:

(i) If a vehicle without a valid registration is or has been used/driven on a public place or any other place that would constitute a fundamental breach of the terms and conditions of the contract of insurance even if the vehicle is not being driven at the time it is stolen or is damaged

ii) If a vehicle without a valid registration is used/driven on a public place or any other place, it would constitute a fundamental breach of terms and conditions of the policy even if the owner of the vehicle has applied for the issuance of a registration in terms of S.41 of the Act before expiry of the temporary registration, but the regular registration has not been issued.

Taking note of the facts of the case, the bench observed that the NCDRC order is liable to be set aside. While allowing the appeal, the court observed:

13. In the present case, the temporary registration of the respondent's vehicle had expired on 28-07-2011. Not only was the vehicle driven, but also taken to another city, where it was stationed overnight in a place other than the respondent's premises. There is nothing on record to suggest that the respondent had applied for registration or that he was awaiting registration. In these circumstances, the ratio of Narinder Singh (supra) applies, in the opinion of this court. That Narinder Singh (supra) was in the context of an accident, is immaterial. Despite this, the respondent plied his vehicle and took it to Jodhpur, where the theft took place. It is of no consequence, that the car was not plying on the road, when it was stolen; the material fact is that concededly, it was driven to the place from where it was stolen, after the expiry of temporary registration. But for its theft, the respondent would have driven back the vehicle.

13....What is important is this Court's opinion of the law, that when an insurable incident that potentially results in liability occurs, there should be no fundamental breach of the conditions contained in the contract of insurance. Therefore, on the date of theft, the vehicle had been driven/used without a valid registration, amounting to a clear violation of Sections 39 and 192 of the Motor Vehicles Act, 19886 . This results in a fundamental breach of the terms and conditions of the policy, as held by this Court in Narinder Singh (supra), entitling the insurer to repudiate the policy.

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