Supreme Court of India
M/S. GODAVARI FINANCE CO.versusDEGALA SATYANARAYANAMMA & ORS.
- Citation
- 2008 INSC 479
- Decided
- 10 April 2008
- Disposal
- Case Allowed
- Bench
- S B SINHA
Holding
A financer under a hire‑purchase agreement is not the "owner" of the vehicle for purposes of the Motor Vehicles Act, 1988, and therefore is not liable to pay compensation.
Summary
The vehicle involved in a fatal accident was financed by M/s. Godavari Finance Co. under a hire‑purchase agreement, while the fourth respondent, Ch. Praveen Kumar, was the registered owner and in possession of the vehicle. The claimants filed a compensation claim against the driver, the owner, the insurer and the financer. The Motor Accident Claims Tribunal and the High Court held the financer liable as an "owner" under the Motor Vehicles Act, 1988. On appeal, the Supreme Court examined the definition of "owner" in Section 2(30) and held that, where a vehicle is subject to a hire‑purchase agreement, the person in possession and control of the vehicle—not the financer—constitutes the owner for liability purposes. Consequently, the appellant was not liable to pay compensation. The appeal was allowed and the earlier judgment set aside.
Issues considered
- Whether a financer of a motor vehicle under a hire‑purchase agreement is deemed the "owner" within the meaning of Section 2(30) of the Motor Vehicles Act, 1988.
- Whether such a financer can be held liable to pay compensation under Section 168 of the Act.
Legislation cited
- Motor Vehicles Act, 1988s. 140, s. 147, s. 162, s. 165, s. 166, s. 168, s. 2(30)
Subjects
Motor Vehicles Actowner definitionHire purchaseLiabilityCompensationMotor accidentVicarious liabilityPossession and control
Judgment
[2008] 6 S.C.R. 231
M/S. GODAVARI FINANCE CO. A
v
DEGALA SATYANARAYANAMMA & ORS.
(Civil Appeal No. 2725 of 2008)
APRIL 10, 2008
~
B
[S.8. SINHA AND V.S. SIRPURAKAR, JJ.]
Motor Vehicles Act, 1988 - ss. 2 (30) and 168 - Motor
accident - Compensation - Offending vehicle subject of Hire
I Purchase Agreement - Liability of the financer of the vehicle c
treating it as the owner - Courts below holding it liable - On
appeal, held: The liability to pay compensation is not on the
financer- In such matters ordinarily financer not to be treated
as the owner- The person in possession of the vehicle would
be the owner- Hence- It is essential to find out the liability of
D
the person who is involved in the use of the vehicles or the
person who is vicariously liable.
Words and Phrases- 'Owner' - Meaning of, in the context
of Motor Vehicles Act, 1988.
The offending vehicle, involved in a motor accident, E
was subject of Hire Purchase Agreement with the
appellant-Company. Therefore its name was mentioned
in the Registration Book. The claimant-respondent Nos.
1 and 2 in their claim petition for compensation for
)
i agreement, alongwith the driver, owner and insurer, also F
impleaded the appellant company. Appellant denied its
liability to pay the compensation. Tribunal held it liable.
High Court confirmed the order of the tribunal. Hence the
present appeal.
G
Allowing the appeal, the Court
HELD: 1.1 Section 2 of Motor Vehicles Act, 1988
provides for interpretation of various terms enumerated
,. therein. It starts with the phrase "Unless the context
231 H
232 SUPREME COURT REPORTS [2008] 6 S.C.R.
.
A otherwise requires". The definition of "owner" is a
comprehensive one. The interpretation clause itself states
that the vehicle which is the subject matter of a Hire
Purchase Agreement, the person in possession of vehicle
under that agreement shall be the owner. Thus, the name
B of financer in the Registration Certificate would not be
decisive for determination as to who was the owner of
the vehicle. Ordinarily the person in whose name the
Registration Certificate stands should be presumed to be
the owner but such a presumption can be drawn only in
c the absence of any other material brought on record or
unless the context otherwise requires.[Para 12] [236-A,
B, C, D]
1.2 In-case of a motor vehicle which is subjected to a
hire purchase agreement, the financer cannot ordinarily
D be treated to be the owner. The person who is in
possession of the vehicle, and not the financer being the
..
owner would be liable to pay damages for the motor
accident. [Para 13] [236-D, E]
1.3 Appellant was not liable to pay any compensation
E to the claimants. An application for payment of
compensation is filed before the Tribunal constituted
under Section 165 of the Act for adjudicating upon the
claim for compensation in respect of accident involving
the death of, or bodily injury to, persons arising out of the
F use of motor vehicles, or damages to any property of a
third party so arising, or both. Use of the motor vehicle is
a sine qua non for entertaining a claim for compensation.
Ordinarily if driver of the vehicle would use the same, he
remains in possession or control thereof. Owner of the
G vehicle, although may not have anything to do with the
use of vehicle at the time of the accident, actually he may
be held to be constructively liable as the employer of the
driver. What is, therefore, essential for passing an award
is to find out the liabilities of the persons who are involved
H in the use of the vehicle or the persons who are vicariously
M/S. GODAVARI FINANCE CO. v. DEGALA 233
SATYANARAYANAMMA & ORS. [S.B. SINHA, J.]
,I
liable. The insurance company becomes a necessary A
party to such claims as in the event the owner of the vehicle
is found to be liable, it would have to reimburse the owner
inasmuch as a vehicle is compulsorably insurable so far
as a third party is concerned, as contemplated under
Section 147 thereof. Therefore, there cannot be any doubt B
' whatsoever that the possession or control of a vehicle
plays a vital role. [Paras 16 and 18] [237-E, F, G; 238-A, B;
240-E, F]
Rajasthan State Road Transport Corporation vs. Kai/ash
Nath Kothari and Ors. 1997 (7) SCC 481; National Insurance c
Co. Ltd. vs. Oeepa Devi and Ors. 2007 (14) SCALE 168 -
relied on.
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
2725 of 2008.
D
From the final Judgment and Order dated 8.8.2008 of the
High Court of Judicature of Andhra Pradesh at Hyderabad in
C.M.A. No. 844of1999.
Bina Madhavan, S. Udaya Kumar Sagar and Hemal K.
Sheth (for M/s. Lawyer's Knit & Co.) for the Appellant. E
M.K. Dua and Kishore Rawat for the Respondents.
The Judgment of the Court was delivered by
S.B. SINHA, J. 1. Leave granted.
F
2. Whether a financerwould be an owner of a motor vehicle
within the meaning of Section 2(30) of the Motor Vehicles Act,
1988 (for short the Act) is the core question involved herein.
3. Ch. Praveen Kumar, fourth respondent, was the owner
of a vehicle being a mini truck of 'Mahendra Nissan' make G
purchased by him having been financed by the appellant for a
sum of Rs.50,000/-. The said loan was discharged by him by
" the end of 1995.
4. Indisputably the said vehicle had all along been in
possession and control of the fourth respondent herein. It met H
234 SUPREME COURT REPORTS [2008] 6 S.C.R.
•
A with an accident on 29th May, 1995. In the said accident one
Degala Balakrishana died. Respondent Nos. 1 and 2 filed an
application claiming compensation alleging rash and negligent
driving on the part of the driver of the said vehicle.
5. On or about 13th June, 1993, the appellant herein was
B impleaded in the proceeding on the premises that it was the
financer of the said vehicle.
6. The name of the appellant as a financer indisputably
was incorporated in the Registration Book of the vehicle.
c However, the extract of Registration Book revealed that the
vehicle was registered in the name of the 4th respondent only
w.e.f. 3rd June, 1992. It further revealed that the said vehicle
was held under a Hire Purchase Agreement with the appellant
w.e.f. 5th February, 1995 which was cancelled on 1oth November,
D 1995.
7. Appellant herein filed a written statement stating that on
the date of accident the ownership of the vehicle was solely
with the 4th respondent and not with the appellant. The Motor
Vehicle Accident Claims Tribunal by a judgment dated 23th
E October, 1993 awarded a sum of Rs.2,03,000/- in favour of the
respondent Nos. 1 and 2. The objection of the appellant that it
was not liable to pay any amount of compensation together with
the owner of the vehicle, driver and insurance company was
rejected by the Tribunal stating:-
F "ln the light of the decisions cited above, the legal position
that emerges is that it is the person who is in actual
possession and control of the vehicle, who can be brought
under the definition of owner, under the Act in order to
make him tortuously liable for the acts of the servant and
G the burden lies upon the party, who asserts it and on their
failure adverse inference can be drawn and the financier
can also fastened with liability alongwith the registered .,
owner. In our case, R-4 except taking a plea that the vehicle
is under the control of the owner R-2, it failed to file
H documents to show the nature of the transaction between
M/S. GODAVARI FINANCE CO. v. DEGALA 235
SATYANARAYANAMMA & ORS. [S.B. SINHA, J.]
it and R-2 and who is in actual control of the vehicle. The A
mere fact that RW.1, widow of the deceased admitted in
her evidence that the vehicle belong to R-2 and it is in his
custody, in my view, it cannot absolve R-4 from the burden
of establishing this fact in order of avoid the liability. P.W.1
a widow and a third party cannot be attributed with s
knowledge of control over the vehicle and the actual
contract between the parties. Thus, it is quite evident that
R-2 and R-4 did not place any material to show as to who
is in actual control of the vehicle and what are the rights of
R-4 over it." c
8. An appeal preferred thereagainst by the appellant
herein, by reason of the impugned judgment, dated 81h August,
2006 has been dismissed.
9. Ms. Bina Madhavan, appearing on behalf of the
0
appellant, would submit :
(1) In terms of Section 168 of the Act a financer cannot
be held liable to pay compensation as the definition
of an "owner" as contained in Section 2(30) of the
Act would mean only a "registered owner". E
(2) In view of the fact that it was not the case of the
claimants that the appellant was in possession or
control over the vehicle at the time of accident, the
impugned judgment is wholly unsustainable.
F
(3) The finding of the learned Tribunal as also the High
Court that appellant as a registered owner was
liable for payment of compensation is wholly
unsustainable.
10. Indisputably, as on November 1O, 1995 the Hire G
Purchase Agreement was cancelled and an information
i thereabout was sent to the Deputy Transport Commissioner,
Kakinada.
11. Appellant admittedly was the financer. As the vehicle H
236 SUPREME COURT REPORTS [2008] 6 S.C.R.
)n
A was the subject matter of Hire Purchase Agreement, the
appellant's name was mentioned in the Registration Book.
12. Section 2 of the Act provides for interpretation of various
terms enumerated therein.
B It starts with the phrase "Unless the context otherwise
requires". The definition of "owner" is a comprehensive one.
The interpretation clause itself states that the vehicle which is
the subject matter of a Hire Purchase Agreement, the person in
possession of vehicle under that agreement shall be the owner.
c Thus, the name of financer in the Registration Certificate would
not be decisive for determination as to who was the owner of
the vehicle. We are not unmindful of the fact that ordinarily the
person in whose name the Registration Certificate stands should
be presumed to be the owner but such a presumption can be
drawn only in the absence of any other material brought on record
D
or unless the context otherwise requires. ~
13. In case of a motor vehicle which is subjected to a hire
purchase agreement, the financer cannot ordinarily be treated
to be the owner. The person who is in possession of the vehicle,
E and not the financer being the owner would be liable to pay
damages for the motor accident.
14. Motor Accident Claims Tribunals are constituted in
terms of Section 165 of the Act occurring in Chapter XI I thereof.
Section 166 lays down the manner in which the application for
F compensation should be filed and who can file the same. ,. '
Section 168 deals with the award of the Claims Tribunal, sub-
section (1) thereof reads as under :-
"168. Award of the Claims Tribunal. - (1) On receipt of an
application for compensation made under section 166,
G
the Claims Tribunal shall, after giving notice of the
application to the insurer and after giving the parties
(including the insurer) an opportunity of being heard, hold
an inquiry into the claim or. as the case may be, each of
the claims and, subject to the provisions of section 162
H
M/S. GODAVARI FINANCE CO. v. DEGALA 237
SATYANARAYANAMMA & ORS. [S.B. SINHA, J.]
may make an award determining the amount of A
compensation which appears to it to be just and specifying
the person or persons to whom compensation shall be
paid and in making the award the Claims Tribunal shall
specify the amount which shall be paid by the insurer or
owner or driver of the vehicle involved in the accident or B
by all or any of them, as the case may be:
}
Provided that where such application makes a claim for
compensation under section 140 in respect of the death
or permanent disablement of any person, such cl<!im and
any other claim (whether made in such application or c
otherwise) for compensation in respect of such death or
permanent disablement shall be disposed of in
' accordance with the provisions of Chapter X."
15. In terms of the aforesaid provisions, the Tribunal is
D
required to issue a notice to the insurer and after giving the
parties, including the insurer, an opportunity of being heard, it
.I
must hold an inquiry into the claims and determine the person
who would be liable therefor. It can make an award and while
doing so it can specify the amount which could be paid by the
insured or owner or driver of the vehicle involved in the accident E
or by all or any of them, as the case may be.
16. An application for payment of compensation is filed
before the Tribunal constituted under Section 165 of the Act for
adjudicating upon the claim for compensation in respect of F
accident involving the death of, or bodily injury to, persons arising
..... -, out of the use of motor vehicles, or damages to any property of
a third party so arising, or both. Use of the motor vehicle is a
sine qua non for entertaining a claim for compensation.
Ordinarily if driver of the vehicle would use the same, he remains
G
in possession or control thereof. Owner of the vehicle, although
may not have anything to do with the use of vehicle at the time of
the accident, actually he may be held to be constructively liable
i
as the employer of the driver. What is, therefore, essential for
passing an award is to find out the liabilities of the persons who
H
238 SUPREME COURT REPORTS [2008] 6 S.C.R.
A are involved in the use of the vehicle or the persons who are
vicariously liable. The insurance company becomes a necessary
party to such claims as in the event the owner of the vehicle is
found to be liable, it would have to reimburse the owner inasmuch
as a vehicle is compulsorably insurable so far as a third party is
B concerned, as contemplated under Section 147 thereof.
Therefore, there cannot be any doubt whatsoever that the
possession or control of a vehicle plays a vital role.
17. The question came up for consideration before this
Court in Rajasthan State Road Transport Corporation vs.
C Kai/ash Nath Kothari and others: (1997) 7 SCC 481where the
owner of a vehicle rented the bus to Rajasthan State Road
Transport Corporation. It met with an accident. Despite the fact
that the driver of the bus was an employee of the registered
owner of the vehicle, it was held :-
D
"Driver of the bus, even though an employee of the owner,
was at the relevant time performing his duties under the
order and command of the conductor of RSRTC for
operation of the bus. So far as the passengers of the ill-
fated bus are concerned, their privity of contract was only
E with the RSRTC to whom they had paid the fare for
travelling in that bus and their safety therefore became the
responsibility of the RSRTC while travelling in the bus.
They had no privily of contract with Shri Sanjay Kumar, the
owner of the bus at all. Had it been a case only of transfer
F of services of the driver and not of transfer of control of the
driver from the owner to RSRTC, the matter may have r •
been somewhat different. But on facts in this case and in·
view of Conditions 4 to 7 of the agreement (supra), the
RSRTC must be held to be vicariously liable for the tort
G committed by the driver while plying the bus under contract
of the RSRTC. The general proposition of law and the
presumption arising therefrom that .an employer, that is
the person who has the right to hire and fire the employee,
is generally responsible vicariously for the tort committed
H by the employee concerned during the course of his
M/S. GODAVARI FINANCE CO. v. DEGALA 239
SATYANARAYANAMMA & ORS. [S.B. SINHA, J.]
'-I employment and within the scope of his authority, is a A
I
i rebuttable presumption. If the original employer is able to
establish that when the servant was lent, the effective
~
control over him was also transferred to the hirer, the
original owner can avoid his liability and the temporary
employer or the hirer, as the case may be, must be held B
vicariously liable for the tort committed by the employee
j
concerned in the course of his employment while under
the command and control of the hirer notwithstanding the
fact that the driver would continue to be on the payroll of
. the original owner. The proposition based on the general c
principle as noticed above is adequately rebutted in this
case not only on the basis of the evidence led by the
-' parties but also on the basis of Conditions 6 and 7 (supra),
; which go to show that the owner had not merely transferred
the services of the driver to the RSRTC but actual control
D
and the driver was to act under the instructions, control
> and command of the conductor and other officers of the
RSRTC."
18. The question again came up for consideration recently
before this Court in National Insurance Co. Ltd. vs. Deepa Devi E
and others : 2007 (14) SCALE 168. This Court in that case
was dealing with a matter where the vehicle in question was
requisitioned by the State Government while holding that the
owner of the vehicle would not be liable it was opined :-
"10. Parliament either under the 1939 Act or the 1988 Act F
,. "\ did not take into consideration a situation of this nature.
No doubt, Respondent Nos. 3 and 4 Page 4561 continued
to be the registered owner of the vehicle despite the fact
that the same was requisitioned by the District Magistrate
in exercise of its power conferred upon it under the G
Representation of People Act. A vehicle is requisitioned
by a statutory authority, pursuant to the provisions
~
contained in a statute. The owner of the vehicle cannot
refuse to abide by the order of requisition of the vehicle by
the Deputy Commissioner. While the vehicle remains under H
240 SUPREME COURT REPORTS [2008] 6 S.C.R.
A requisition, the owner does not exercise any control ...
thereover. The driver may still be the employee of the owner
of the vehicle but he has to drive it as per the direction of
the officer of the State, who is put in-charge thereof. Save
and except for legal ownership, for all intent and purport,
8 the registered owner of the vehicle loses entire control
thereover. He has no say as to whether the vehicle should
be driven at a given point of time or not. He cannot ask the '
driver not to drive a vehicle on a bad road. He or the driver
could not possibly say that the vehicle would not be driven
c in the night. The purpose of requisition is to use the vehicle.
For the period the vehicle remains under the control of the
State and/ or its officers, the owner is only entitled to
payment of compensation therefore in terms of the Act but
he cannot not exercise any control thereupon. In a situation
of this nature, this Court must proceed on the presumption
D
that the Parliament while enacting the 1988 Act did not
envisage such a situation. If in a given situation, the statutory
definitions contained in the 1988 Act cannot be given effect
to in letter and spirit, the same should be understood from
the common sense point of view."
E
In so opining the Court followed Kai/ash Nath Kothari
(supra).
The legal principles as noticed hereinbefore, clearly show
that the appellant was not liable to pay any compensation to the
F claimants.
I' ~
19. For the aforementioned reasons, the impugned
judgment cannot be sustained. It is set aside accordingly. The
appeal is allowed. No costs.
G K.K.T. Appeal allowed.
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