In a recent judgment, the Allahabad High Court reaffirmed that an insurance company remains liable for compensations in motor accident cases, even when the transfer of ownership has not been officially recorded with transport authorities.
This decision was made in the case of The New India Assurance Company vs Permanent Lok Adalat and Another, reinforcing the legal protection for vehicle owners and transferees under Section 157 of the Motor Vehicles Act (MV Act).
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Court’s Interpretation of Section 157 of the Motor Vehicles Act
Justice Subhash Vidyarthi, while delivering the ruling, highlighted that Section 157 of the MV Act creates a “deeming fiction.”
This section specifies that upon the transfer of a vehicle’s ownership, the insurance policy associated with it is automatically deemed to have been transferred in favor of the transferee from the date of the vehicle’s transfer.
According to the court, this statutory provision makes the insurance company liable to the transferee, even if the insurance policy itself has not been officially transferred in the insurance company’s records or those of the transport office.
The Court emphasized that the legislature’s intent behind this provision is to protect transferees liberally, ensuring that they are not excluded from the scope of insurance coverage merely due to procedural formalities.
“The deeming fiction provided by the statute means that even if the insurance policy is not transferred in fact, the insurance company would become liable under the policy to the transferee of the vehicle. The intention of the legislation is to include the transferees liberally and not to exclude them strictly,” the Court stated.
The Case at Hand: Ownership Transfer Dispute
The case arose when Govind Gupta, the registered owner of a truck, filed an insurance claim after his vehicle was damaged in an accident.
The insurance company, New India Assurance, rejected the claim, arguing that the truck had been transferred to another individual, Sanjeev Kumar, under an agreement to sell.
According to the insurance company, the vehicle was under the control of Kumar’s driver at the time of the accident and was no longer in Gupta’s possession.
The key issue was that although there was an agreement to transfer ownership between Gupta and Kumar, the actual transfer had not yet been officially recorded, as the transaction was contingent upon the repayment of a loan taken for the vehicle’s purchase.
Gupta, therefore, remained the registered owner in official records.
Court’s Decision: Liability Rests with Insurance Company
The Permanent Lok Adalat ruled in favor of Gupta, dismissing the insurance company’s argument and holding that the agreement to sell did not impact the resolution of the insurance dispute.
Unhappy with this decision, the insurance company appealed to the Allahabad High Court.
However, the High Court upheld the decision of the Lok Adalat, citing that as per Section 157 of the MV Act, the insurance policy’s automatic transfer would only take place after the official transfer of the vehicle’s ownership.
The court also referenced a Supreme Court ruling where it was held that an insurance company is liable to indemnify the transferee, even if the insurance policy had not yet been formally transferred to their name.
Since Gupta continued to be the registered owner of the vehicle and had an active contract of insurance, the Court ruled that the insurance company remained liable under the terms of the insurance policy.
Parties Involved:
- Petitioner: New India Assurance Company Limited
- Respondent: Govind Gupta
- Bench: Justice Subhash Vidyarthi