Holding

In the absence of a refusal by the insurer, the certificate of insurance is deemed transferred to the transferee under Section 103-A, and the policy does not lapse.

Summary

A Fiat car was sold and the transferee informed New India Assurance Co. Ltd. of the transfer by letters that did not follow the prescribed form under Section 103-A of the Motor Vehicles Act, 1939. The insurer gave no reply. The car later met with an accident, and the victims claimed compensation from the insurer. The insurer contended that the policy had lapsed because the intimation was not in the required form. The Motor Accident Claims Tribunal, the Rajasthan High Court and its Division Bench rejected this contention, holding the insurer liable. The Supreme Court affirmed that, in the absence of a refusal by the insurer, the certificate of insurance is deemed transferred to the transferee under Section 103-A, so the policy does not lapse, and dismissed the appeal.

Issues considered

Whether failure to give intimation of vehicle transfer in the prescribed form under Section 103-A causes the insurance policy to lapse.
Whether the insurer's silence amounts to acceptance, deeming the certificate of insurance transferred to the transferee.
Whether the insurer is liable to third‑party claimants when the policy has not been formally transferred.

Legislation cited

Motor Vehicles Act, 1939s. 103-A, s. 94, s. 95
Motor Vehicles Act, 1988s. 145, s. 146, s. 147, s. 156, s. 157

Subjects

Motor Vehicles ActSection 103-ASection 157insurance policy lapsetransfer of vehiclethird‑party liabilityinsurer's silence

Judgment

THE .NEW INDIA ASSURANCE CO. LTD. A
v.
SMT. SHEELA RANI AND ORS.

SEPTEMBER 15, 1998

- (K. VENKATASWAMI AND A.P. MISRA, .LI.) B

Motor Vehicles Act, 193<}-Section 103-A-Lapse of policy-Intimation
of tramfer of vehicle given to Insurance Company but not in the presc1ibed
f 01111 as required under Section· 103-A-No reply given by Insurance Company
to this Intimation-Held, in absence of reply the ce1tificate of policy shall C
deem to have been transfe1red in favour of the transferee as per Section 103-A
of the Act and policy would not lapse.

A Fiat Car was sold by the sixth respondent to the fourth respondent
aud the said transfer was accepted on 26.6.1976 by the transport .l!-uthority.
This car was insured with the appellants for the p~riod 16.6.1976 to D
5.6.1977. Thereafter, the fourth respondent intimated to the appellants
about the transfer of the vehicle in his favour though not in the prescribed
form as required under Section 103-A of the Act and sought transfer of
the policy. But no reply was given· to this by the appellants and sub-
~.
sec1uently the car met with an accident on 10.5.1977 in which the husband E
of the first respondent died.

A Claim Petition was tiled before the Motor Accident Claims
Tribunal, Jaipur for compensation. The appellants denied its liability on
the ground that the policy had lapsed. The Tribunal rejected the conten-
tion of the appellants. Thereafter, Single Judge of the High Court relying F·
on the principles laid down in Maidineni Kondaiah 's case also rejected the
contentions of the appellants. TI1e Division Bench affirmed the view taken
by the Single Judge.

In this appeal challenging the order, the appellants contended that G
because the intimation of the transfer of vehicle by the respondent was not
in accordance with the prescribed form as required under Section 103-A .
of the Act, the insurance policy lapsed and therefore, the appellants are
not liable.

Dismissing the appeal, the Court
591
592 SUPREME COURT REPORTS [1998) SUPP. I S.C.R.

A HELD: 1. In absence of reply by the appellants, to the intimation
given by the respondent about the transfer of the vehicle in his favour
seeking transfer of the policy, though not strictly in the prescribed form
as required under Section 103-A of the Act, the Certificate of Policy shall
deemed to have been transferred in favour of the transferee as per Section

B
103-A of the Act and the policy would not lapse. [598-G-H-A]
-
Madineni Kondaiah & 01:r. v. Yaseen Fatima & Ors., AIR (1986) A.P.
62, approved.

Complete Insulations (P) Ltd. v. New India Assurance Co. Ltd., [1996)
c 1 sec 221, held applicable.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5525 of
1995.

From the Judgment and Order dated 8.4.87 of the Rajasthan High
D Court in D.B.S.C.A. No. 29 of 1987.

S.C. Paul for Ms. Indra Sawhney for the Appellant.

Indra Ma'kwana for the Respondent No.l.

E B.S. Chahar for Ashok Mathur for the Respondent Nos. 4-6.

The Judgment of the Court was delivered by

VENKATASWAMI, J. This appeal arises out of a judgment dated
p 8.4.87 of the Division Bench of the Rajasthan High Court in D.B. Civil
Special Appeal No.29 of 1987.

Brief facts leading to the filing of this appeal are given below :

The sixth respondent herein was the owner of a Fiat Car bearing
G Registration No. RSM-9701. The said Car was insured with the appellant-
lnsurance Company for the period 16.6.76 to 5.6.77. It appears that the
sixth respondent sold the said car to the fourth respondent on 18.6.76. This
transfer was accepted on 24.6.76 by the Regional Transport Author~ty,
Jaipur. The said Car met with an accident on 10.5.77 in which one Moti
H Lal Jain, husband of the first respondent, died.
NEW INDIA ASSURANCE CO. LTD. v. SMT. SHEELA RANI IVENKATASWAMI..l.l 593

A Claim Petition was filed before the Motor Accident Claims Tribunal, A
Jaipur, in M.A.C. No. 291/77 by the first and second respondents, widow and
minor son of the deceased, respectively. The third respondent, mother of the
deceased, was shown as respondent later on transposed as claimant in the
Claim Petition. We are not concerned with the quantum of compensation in
this appeal as the sole issue raised by the appellant Insurance Company was
with reference to its liability. In other words, according to the appellant, the
B
transfer of the car by the sixth respondent to fourth respondent was not
informed to it by the sixth respondent-(lransferor) as required under Section
103-A of the Motor Vehicles Act, 1939 (hereinafter called the "Act") and,
therefore, the accident having taken place subsequent to the transfer, the
appellant-Insurance Company cannot be held liable. All the Courts below, C
namely, the ,Tribunal, a learned Single Judge as also the Division Bench of the
High Court have rejected such a contention holding that the appellant-In-
surance Company was liable to pay the compensation.

It is not in dispute that the fourth respondent (transferee) vide letters D
dated 23.6.76 and 30.6.76 had informed the appellant about the transfer of
the Car, to which there was no reply from the appellant. The contention
raised on behalf of the appellant before the Tribunal and the High Court
as well as in this Court was to the effect that the intimation about the
transfer by the transferee was not in accordance with the prescribed form
and, therefore, it was not taken note of by the appellant-Insurance Com- E
pany. Though, it was contended before the Tribunal and the High Court
that no such letters said to have been sent under Certificate of Posting,
were received by the appellant-Insurance Company, in the light of concur-
rent findings on facts by the Tribunal and the High Court, we cannot allow
such contention to be raised in this Court.
·( F
In coming to the conclusion that in the absence of proper intimation
about the transfer by the transferor in the prescribed form, the Policy will not
lapse, the learned Single Judge of the High Court placed reliance on a
judgment of the Full Bench of the Andhra Pradesh High Court in Madineni
Kondaiah & Ors. v. Yaseen Fatima & Ors. reported in AIR (1986) A.P. 62.
G
Applying the principles laid down in the said judgment, the learned
Single Judge rejected the contention of the Insurance Company that it was
not liable on the facts of this case. The Division Bench also rejected a
similar contention and affirmed the view taken by the .learned Single Judge
after referring to some more cases. H
594 SUPREME COURT RE~TS [1998] SUPP. l S.C.R.

A Learned counsel appearing for the appellant-Insurance Company
reiterating the s1me contention, namely, that the appellant was not liable
to pay the compensation in the absence of valid transfer of the Policy in
favour of the trnnsferee, invited our attention to a recent judgment of this
Court in Complete l11sulations (P) Ltd. v. New !11dia Assurance Co. Ltd.,
B [1996] l sec 221. After carefully going through the facts and the ratio of
the said judgment, we find that this judgment instead of supporting the
appellant, it supports the view taken by the High Court. As a matter of
fact, in the said judgment this Court has approved the ratio laid down in
the decision of the Full Bench of the Andhra Pradesh High Court m
Kondaiah's case.
c
The facts in Complete Insulations's case are more or less identical
to the case on hand. In that case, a transfer took place on 15.6.89. It was
the transferee, who informed on 26.6.89 about the transfer of registration
and asked for transfer of the Insurance Policy. A reminder was also sent
D on 24.7.89. The Insurance Company in that case did not respond to the
said letters. The transferee preferred a complaint before the Consumer
Disputes Redressal Commission, Chandigarh, claiming compensation for
the damage caused to the Car. The commission, overruling the objection
of the Insurance Company, awarded a sum of Rs. 83,000. On appeal by the
Insurance Company, the National Consumer Disputes Redressal Commis-
E sion set aside the order of the Commission at Chandigarh and dismissed
the complaint. The transferee preferred an appeal to this Court. While
affirming the decision of the National Commission, this Court elaborately
considered the nature of a claim by a third party. It was held that the
defence available to the Insurance Company against the claim of the
F transferee in the absence of proper transfer of policy regarding the damage
to own vehicle or injury to self will not be available to a claim by a third
party. This Court also compared the relevant provisions of the old Act
Section 103-A with Section 157 of the 1988 Act. After comparing the
relevant provisions, as noticed above, this Court held as follows:-

G "In Kondaiah case the vehicle in question was transferred but not
the insurance policy. The policy or the certificate was not trans-
ferrd to the vendee. The victims of the accident filed a claim
before the Motor Accident Claims Tribunal. Broadly four conten-
tions were considered, namely, (i) whether the transfer of the
H vehic:Ie to the purchaser is not complete till the vehicle is registered
NEW INDIA ASSURANCE CO. LTD. v. SMT. SHEELA RANiiVENKATASWAMI. J.] 59 5

in the name of the transferee (ii) whether on transfer in the absence A
of the transfer of the insurance policy, the policy lapses (iii)
whether it lapses even against the third party (iv) whether the
insurance company can validly contend that the insurance policy
had lapsed. The Full Bench held that under the sale of Goods Act
the sale is complete on payment of the consideration and delivery
of the vehicle, regardless of transfer of registration in the name of
B
the transferee. On the second and third contentions it was held
that notwithstanding the non-transfs:r of the insurance policy, the
liability qua third party subsists in view of sections 94 and 95 of
the old Act, The last point regarding right of insurance company
to raise the plea of the policy having lapsed is not of any relevance C
to us. In the separate judgment of Kodandaramayya, J. relied upon
by the National Commission, it was pointed out that the "third
party" referred to in section 95 did not include a transferee who
was not a party to the original contract of insurance and, therefore,
the transferee or vendee could not claim any benefit from the D
insurance company fo~ damage to his person or the vehicle.

The New Act came into force with effect from 1.7.1989. Since
the vehicle in question was sold on 15.6.1989 and the letter of
intimation of transfer and request to transfer the Certificate of
Insurance and the policy described therein was sent on 26.6.1989, E
the old Act applied. Admittedly the request was not refused under
section 103-A of the old Act till the new Act came into force.
Thereafter on 24.7.1989 the Insurance Company was once again
requested to effect the transfer of the Certificate of Insurance as
well as the policy but to no avail. By that day the new Act hatl F
come into force. Actually the application dated 26.6.1989 was
pending when the new Act had come into force. That application
had to be processed under Section 157 of the new Act and hence
the certificate as well as the policy must be deemed to have been
transferred in the name of the transferee. Even if it is assumed
that the old Act applied to pending cases the certificate and policy G
must be deemed to have been transferred since no refusal was
communicated by the Insurance Company to the transferor or the
transferee. Therefore, in either case the transfer of the Certificate
of Insurance and policy described therein must be taken as com-
plete in view of the language of Section 103-A of the old Act and H
596 SUPREME COURT REPORTS [1998) SUPP.1 S.C.R.

A Section 157 of the new Act. '·

Section 157 appears in Chapter XI entitled "Insurance of Motor
Vehicle1; against Third Party Risks" and comprises Sections 145 to
164. Section 145 defines certain expressions used in the various
provisions of that chapter. The expression "certificate of Insurance"
B
means 2. certificate issued by the authorised insurer under Section
147(3). "Policy of Insurance" includes a certificate of insurance.
Section 146(1) posits that 'no person shall use, except as a pas-
senger, or cause or allow any other person to use, a motor vehicle
in a public place, unless there is in force in relation to the use of
c the vehicle by that person or that other person, as the case may
be, a policy of insurance complying with the requirements of this
chapte::". Of course this provision does not apply to vehicles owned
by the Central or State Government and used for Government
purpmes not connected with any commercial enterprise. This
provision corresponds to Section 94 of the old Act. Section 147
D
provides that the policy of insurance to be issued by the authorised
insure:r must insure the specified person or classes of persons
against any liability incurred in respect of death of or bodily injury
to any person or damage to any property of a third party as well
as against the death of or bodily injury caused to any passenger of
E a pub lie service vehicle caused by or arising out of the use of the
vehicle in a public place. This provision is akin to Section 95 of
the old Act. It will be seen that the liability extends to damage to
any property of a third party and not damage to the property of
the owner of the vehicle, i.e., the insured. Sub-section (2) stipulates
F the extent of liability and in the case of property of a third party
the limit of liability is Rupees six thousand only. The proviso to
that :mb-section continues the liability fixed under the policy for
four months or till the date of its actual expiry, whichever is earlier.
Sub-:;ection (3) next provides that the policy of insurance shall be
of no effect unless and until the insurer has issued a certificate of
G insurance in the prescribed form. The next important provision
which we may notice is Section 156 which sets out the effect of the
certificate of insurance. It says that when the insurer issues the
certificate of insurance, then even if the policy of insurance has
not as yet been issued, the insurer shall, as between himself and
H any other person except the insured, be deemed to have issued to
NEW INDIA ASSURANCE CO. LTD. v. SMT. SHEELA RANI jVENKATASWAMI, J.] 597

the insured a policy of insurance conforming in all respects with A
the description and particulars stated in the certificate. It is obvious
on a plain reading of this provision that the legislature was anxious
to protect third party interest. Then comes Section 157 which we
have extracted earlier. This p~ovision lays down that when the
owner of the vehicle in relation whereto a certificate of insurance
is issued transfers to another person the ownership of the motor
B
vehicle, the certificate of insurance together with the policy
described therein shall be deemed to have been transferred in
favour of the ·new owner of the vehicle with effect from the date
, of transfer. Sub-section (2) requires the transferee to apply within
fourteen days from the date of transfer to the insurer for making C
necessary changes in the certificate of insurance and the policy
described therein in his favour. These are the relevant provisions
of Chapter XI which have a bearing on the question of insurer's
liability in the present case.
D
There can be no doubt that the said chapter provides for
compulsory insurance of vehicles to cover third- party risks. Sec-
tion 146 forbids the use of a vehicle in a public place unless there
is in force in relation to the use of that vehicle a policy of insurance
complying with the requirements of that chapter. Any breach of
this provision may attract penal action. In the case of property, the E
coverage extends to property of a third party i.e. a person other
than the insured. This is clear from Section 147(1)(b)(i) which
clearly refers to "damage to any property of a third party" and not
damage to the property of the 'insured' himself. And the limit of
fo~bility fixed for damage to property of a third party is Rupees six F
thousand only as pointed out earlier. That is why even the Claims
Tribunal constituted under Section 165 is invested with jurisdiction
to adjudicate upon claims for compensation in respect of accidents
involving death of or bodily injury to persons arising out of the use
of motor vehicles, or damage to any property of a third party so
arising, or both. Here also it is restricted to damage to third- party G
property and not the property of the insured. Thus, the entire
Chapter XI of the new Act concerns third-party risks only. It is
therefore, obvious that insurance is compulsory only in respect of
third party risks since Section 146 prohibits the use of a motor
vehicle in a public place unless there is in relation thereto a policy H
598 SUPREME COURT REPORTS [1998] SUPP. 1 S.C.R.

A of insurance·complying with the requirements of chapter XI. Thus,
the requirements of that chapter are in relation to third-party risks
only and hence the fiction of Section 157 of the new Act must be
limited thereto. The certificate of insurance to be issued in the
prescribed form (see Form 51 prescribed under Rule 141 of the
Central Motor Vehicles Rules, 1989) must, therefore, relate to
B third party risks. Since the provisions under .the New Act and the
Old Act in this behalf are substantially the same in relation to
liability in regard to third parties, the National Consumer Disputes
Redressal Commission was right in the view it took based on the
decision in Kondaiah case because the transferee-insured could
c not be said to be a third party qua the vehicle in question. 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". If the policy of insurance covers other risks as well,
D
e.g., damage caused to the vehicle of the insured himself, that
• would be a matter falling outside Chapter XI of the New Act and
, in the realm of contract for which there must be an agreement
between the insurer and the transferee, the former undertaking to
cover the risk or damage to the vehicle. In the present case since
E there was no such agreement and since the insurer had not trans-
ferred the policy of insurance in relation thereto to the transferee,
the insurer was not liable to make good the damage to the vehicle.
The view taken by the Natior.al Commission is therefore correct."

F y.f e are conscious that in the above judgment of this Court, the claim
by the: transferee was one relating to damage to the vehicle and not one
relating to third party.

A careful reading of the judgment of this Court, extracted as above,
will clearly show that on the transfer of the vehicle about which intimation
G was given though not strictly as required under Section 103-A of the Act
and in the absence of refusal from the insurer the Policy already given by
the Insurance Company to the transferor will not lapse. As in the case of
Compl~te Insulations (supra) in the present case also the transferee had
intimated lo the appellant-Insurance Company about the transfer of the
H vehicle in his favour though not in the prescribed form and sought transfer
NEW INDIA ASSURANCE CO. LTD. v. SMT. SHEELA RANI [VENKATASWAMI, J. J 599

of the Insurance Policy. No reply was given by the appellant and in the A
absence of such reply the Certificate shall be deemed to have been trans-
ferred in favour of the transferee as per Section 103-A of the Act.

In view of the above discussion, we do not find any merit in this
appeal and the same is accordingly dismissed with no order as to costs.
B
N.J. Appeal dismissed.