Buy­ing a Sec­ond­hand Ve­hi­cle?

Must Get In­sur­ance Trans­ferred In Your Name

Consumer Voice - - Legal Matters - Dr Prem Lata,Con­sumerAwak­en­ing Mem­ber,CDRF-Delhi

When you buy a sec­ond­hand car, the first thing you want to do is to get it legally in your name. So you ask the first owner to get the no-ob­jec­tion cer­tifi­cate from reg­is­tra­tion au­thor­i­ties so that you can reg­is­ter the ve­hi­cle in your name. Once all the reg­is­tra­tion for­mal­i­ties are com­plete, you go for the ve­hi­cle in­sur­ance pol­icy trans­fer, as it can­not hap­pen un­less the reg­is­tra­tion process is com­plete. How­ever, what if the ve­hi­cle meets with an ac­ci­dent in this tran­sit pe­riod?

The ve­hi­cle is in your name, but the pol­icy is still in the first owner’s name. How do you get the claim? Who should be held re­spon­si­ble in such sit­u­a­tions? Well, as far as the le­gal rules go, you may find yourself at the re­ceiv­ing end if you have not in­formed the in­sur­ance com­pany and have failed to trans­fer the in­sur­ance pol­icy in your name.

Look­ing at the num­ber of ve­hi­cles on road and the ever-in­creas­ing road mishap and theft rates, you can very well imag­ine how many such cases could be pour­ing into the var­i­ous courts across the coun­try. Courts, as they al­ways do, have made dif­fer­ent ob­ser­va­tions and de­ci­sions af­ter thor­oughly un­der­stand­ing the facts and cir­cum­stances of each case.

The Case of a Lost Truck

In Fe­bru­ary this year, a sim­i­lar case came be­fore the Na­tional Com­mis­sion. The com­mis­sion re­lied upon pre­vi­ous judge­ments pro­nounced by the Supreme Court while de­liv­er­ing its judge­ment.

This was San­deep Gupta ver­sus United In­dia In­sur­ance Com­pany, wherein Jit Singh and Prem Singh were the own­ers of the truck that was in­sured by United In­dia In­sur­ance for a pe­riod of one year.

The Singhs sold their truck to San­deep Gupta in Novem­ber 2005 and it was stolen ex­actly af­ter six months in April 2006. Gupta lodged the com­plaint on the same day and in­ti­mated the in­sur­ance com­pany. When he sub­mit­ted the claim pa­pers, his claim was re­pu­di­ated by the in­sur­ance com­pany on the grounds that the trans­fer of ve­hi­cle was not in­formed to the in­sur­ance com­pany.

The mat­ter came be­fore the district con­sumer fo­rum and com­plainant pleaded that ve­hi­cle was au­to­mat­i­cally in­sured as per Sec­tion 157 of The Mo­tor Ve­hi­cle Act and, hence, re­pu­di­a­tion of claim by the in­sur­ance com­pany was il­le­gal. The district fo­rum agreed with the com­plainant’s plea and di­rected the in­sur­ance com­pany to pay the claim amount. The court also awarded com­pen­sa­tion to the com­plainant.

How­ever, the in­sur­ance com­pany went to the State Com­mis­sion. Now, the com­mis­sion re­jected the or­der of the district fo­rum and held that the in­sur­ance com­pany was right.

Con­test­ing the or­der of the State Com­mis­sion, a re­vi­sion pe­ti­tion was filed by the orig­i­nal pur­chasers Jit Singh and Prem Singh against the in­sur­ance com­pany. Com­plainant sub­mit­ted that as per Sec­tion 157 of The Mo­tor Ve­hi­cle Act, the pol­icy au­to­mat­i­cally stood trans­ferred in the name of the sub­se­quent reg­is­tered owner of the ve­hi­cle. Sec­tion 157 (2) of Mo­tor Ve­hi­cle Act was only pro­ce­dural pro­vi­sion, so com­plainant could not be de­prived of the ben­e­fits of pol­icy merely be­cause in­sur­ance pol­icy was not trans­ferred in his name.

The core ques­tion to be de­cided in this re­vi­sion pe­ti­tion was whether in­sur­ance com­pany was li­able to make pay­ment to the sub­se­quent reg­is­tered owner with­out trans­fer of in­sur­ance pol­icy in his name. The Na­tional Com­mis­sion went into the de­tails and the ear­lier judge­ments were thor­oughly dis­cussed.

Ref­er­ence Cases that Were Dis­cussed in the Court

Re­fer­ring to the older judge­ments, the court ob­served that in 1996, in the mat­ter of Com­plete In­su­la­tions ver­sus New In­dia As­sur­ance Com­pany, as well as in the 2007 case of United In­dia In­sur­ance Com­pany ver­sus Harinder Kaur, the Na­tional Com­mis­sion had con­cluded that sub­se­quent pur­chaser of ve­hi­cle was ‘not en­ti­tled to get com­pen­sa­tion for loss of the ve­hi­cle in the ab­sence of trans­fer of in­sur­ance pol­icy in his name.’

The court fur­ther ob­served that as the ve­hi­cle had al­ready been sold by Jit Singh and Prem Singh to San­deep Gupta, they too were not en­ti­tled to any in­sur­ance claim.

In the Com­plete In­su­la­tions case, the in­sured ve­hi­cle was burnt but the ve­hi­cle was not trans­ferred

in the name of the new pur­chaser at the time of the in­ci­dent. Since the reg­is­tra­tion cer­tifi­cate (RC) of the ve­hi­cle could not be pro­vided by the com­plainant, the case was closed by the in­sur­ance com­pany. The court held that the in­sur­ance com­pany was jus­ti­fied in re­pu­di­at­ing the claim as it could not even get the reg­is­tra­tion cer­tifi­cate.

In the case of United In­dia In­sur­ance Com­pany ver­sus Harinder Kaur, the same stand was taken by the Na­tional Com­mis­sion on the is­sue. In this case, one Jaswant Singh was the orig­i­nal owner of a car that he sold to Pun­jab Singh, hus­band of the com­plainant Harinder Kaur. While the reg­is­tra­tion was trans­ferred in the name of Pun­jab Singh, the in­sur­ance pol­icy was not. It may be noted that no steps were taken by Pun­jab Singh to get the in­sur­ance trans­ferred to his name.

Un­for­tu­nately, the car met with an ac­ci­dent and Pun­jab Singh suc­cumbed to the in­juries. An FIR was lodged against the driver of the truck with which the ve­hi­cle met with the ac­ci­dent. The wife of Pun­jab Singh filed a com­plaint be­fore the District Con­sumer Dis­putes Re­dres­sal Fo­rum, Fate­hgarh Sahib, claim­ing the as­sured sum of two lakh ru­pees from the in­sur­ance com­pany. The district fo­rum in its judge­ment and or­der dated 30.3.2005 al­lowed the com­plaint. The State Com­mis­sion too con­firmed the or­der but the Na­tional Com­mis­sion did not agree and the com­plainant was not held en­ti­tled to claim.

Fur­ther In­ter­pre­ta­tions of Law

In the ‘Rikhi Ram ver­sus Sukhra­nia and oth­ers’ case, the Supreme Court while in­ter­pret­ing the pro­vi­sions of Sec­tion 157 held that al­though with the trans­fer of ve­hi­cle the in­sur­ance com­pany re­mained li­able to­wards third-party claims, the trans­feree could not get any per­sonal ben­e­fit un­der the pol­icy un­less there was a com­pli­ance with the pro­vi­sions of the Act.

The court held that the in­sur­ance com­pany would re­main li­able to third par­ties, but it would be open to the in­sur­ance com­pany to re­cover the said amount ei­ther from the in­sured or from the trans­feree of the ve­hi­cle. The court fur­ther ob­served: ‘ On an anal­y­sis of Sec­tions 94 and 95, we fur­ther find that there are two third par­ties when a ve­hi­cle is trans­ferred by the owner to a pur­chaser. The pur­chaser is one of the third par­ties who can­not get any per­sonal ben­e­fit un­der the pol­icy un­less there is a com­pli­ance of the pro­vi­sions of the Act. How­ever, so far as the third party is in­jured or vic­tim is con­cerned, he can en­force li­a­bil­ity un­der­taken by the in­surer.’

To sim­plify: If the ve­hi­cle’s pol­icy is not in your name but in the first owner’s name and you lose the ve­hi­cle – it is stolen or dam­aged – you do not get the claim, nei­ther does the first owner. How­ever, if some­body (third party) is in­jured due to an ac­ci­dent caused by your ve­hi­cle, the in­sur­ance com­pany may be held li­able, pro­vided you have com­plied with all the other laws and rules.

If the pur­chaser fails to in­form the in­sur­ance com­pany about

trans­fer of the reg­is­tra­tion cer­tifi­cate in his name and if the pol­icy is not trans­ferred in the name of the pur­chaser, then the in­sur­ance com­pany can­not be held li­able to pay the claim in case of own

dam­age of ve­hi­cle.

The Fi­nal Ver­dict

The Na­tional Com­mis­sion con­cluded in the case of San­deep Gupta – in view of the pro­vi­sions of The Mo­tor Ve­hi­cle Act and the de­ci­sions of the Supreme Court – that if the pur­chaser failed to in­form the in­sur­ance com­pany about trans­fer of the reg­is­tra­tion cer­tifi­cate in his name and if the pol­icy was not trans­ferred in the name of the pur­chaser, then the in­sur­ance com­pany could not be held li­able to pay the claim in case of own dam­age of ve­hi­cle.

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