Requirement To Intimate Transfer Of Vehicle To Insurance Company U/S 157(2) MV Act Only Directory: Kerala High Court

The Kerala High Court on Thursday held that the stipulation under Section 157(2) of the Motor Vehicles Act, 1988 to intimate about the transfer of a vehicle to the Insurance Company within a period of 14 days of such transfer is only directory in nature, and not mandatory.

Justice Ziyad Rahman A. A. arrived at this finding on the reasoning that no consequences for non-compliance of the provision has been stipulated in the Act. 

"Though sub-section (2) of Section 157 provides for intimation of such transfer, since the statute is silent as to the consequence of failure in doing so, it can only be treated as directory in nature and not mandatory", the Court said. 

The Court also found this view to be fortified in terms of Rule 144 of the Central Motor Vehicles Rules, formulated under the provisions of the Motor Vehicles Act, 1988.

Perusing the said Rule 144, the Court found that the purpose behind such information being provided to the Insurance Company had been clearly enshrined therein:

"It is evident that such intimation is to enable the insurer to make necessary changes in their records and nothing beyond that. Therefore, it is clear that, as far as the non compliance with Section 157(2) is concerned, it will have no consequence as regards the liability of the Insurance Company to indemnify the insured in respect of the claims arising from the victims of the motor vehicle accident", it was observed.

The Court in the instant case had been dealing with appeals preferred against the award passed by Motor Accidents Claims Tribunal, Pala, by the Insurance Company on the one hand, challenging the award that they weren't liable to provide compensation in view of Section 157(2) Motor Vehicles Act, and the petitioners 1-5 before the Tribunal on the other hand, seeking enhancement of compensation.

'Own Damage' Claims

The Court found that when the transfer of the vehicle is made and the same is not intimated to the Insurance Company, the person who transfers the vehicle would cease to have any insurable interest in the property so as to make any claim in respect of the vehicle, which he already transferred. Therefore, the liability of the Insurance Company, as far as the own damage of the insured is concerned, will cease to have any effect, when the vehicle is transferred to another person and he fails to intimate such transfer in the manner prescribed.

"The aforesaid termination of the contractual liability of the Insurance Company is on account of the fact that, the transferee is not a party to the contract of insurance. Therefore, the deemed transfer as contemplated under Section 157 of the Motor Vehicles Act cannot be made applicable in the case of own damage since the claim of own damage is something between the insurance company and the insured, who are parties to the contract of insurance," it held.

Advocate A.N. Santhosh appeared on behalf of the appellants in MACA No. 2554/2017, while Senior Advocate George Cherian and Advocates K.S. Santhi, Joby Joseph, and Latha Susan Cherian appeared on behalf of the respondents.

Case Title: Annamma Raju @ Bincy & Ors v. Shalet Jose & Ors.

Citation: 2022 LiveLaw (Ker) 555

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