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The South India Insurance Co., Bombay Vs. Lakshmi and ors. - Court Judgment

LegalCrystal Citation
SubjectMotor Vehicles;Insurance
CourtChennai High Court
Decided On
Case NumberA.A.O. Nos. 65 to 67 of 1969
Judge
Reported inAIR1971Mad347; [1971]41CompCas537(Mad); (1971)2MLJ354
ActsMotor Vehicles Act, 1939 - Sections 31, 95(2), 96(1) and 96(2); Tribunal Rules - Rule 18; Code of Civil Procedure (CPC), 1908 - Sections 151
AppellantThe South India Insurance Co., Bombay
RespondentLakshmi and ors.
Cases ReferredGray v. Black Moore
Excerpt:
insurance - liability - section 96 of motor vehicles act, 1936 and rule 18 of tribunal rules - liability of insurer to third party in case of transfer of vehicle prior to occurrence of accident - after transfer of ownership insurer cannot be held liable on mere ground that transfer was not made in accordance with provisions of act. - - 96 of the motor vehicles act, which warrants the view that a sale or transfer of an insured car by the insured during the currency of the policy does not terminate the policy if it clearly laid down that the insurer is not liable to the transferee for damages awarded to a third party for injuries caused by the rash and negligent driving of the car on a date subsequent to the transfer of ownership. it is because of this situation the learned counsel for.....1. as these three maters arise out of three claims in respect of the same motor accident, they have to be dealt with together.2. on 21-8-1964 at about 10-30 p.m. one chinnathambi udayar along with rajakannu udayar, lakshmana udayar were returning in three bullock carts driven by them from pudukottai to kandarvakottai dashed while they were returning, the lorry mdo 2914 proceeding towards puducottai dashed against the said three bullock carts coming in the opposite direction. as a result of the accident chinnathambi udayar and rajakannu udayar died and lakshmana udayar was seriously injured. two bulls of chinnathambi udayar and three other bulls also died, and all the three carts got damaged. the accident is alleged to have taken place due to the rash and negligent driving of the driver of.....
Judgment:

1. As these three maters arise out of three claims in respect of the same motor accident, they have to be dealt with together.

2. On 21-8-1964 at about 10-30 p.m. one Chinnathambi Udayar along with Rajakannu Udayar, Lakshmana Udayar were returning in three bullock carts driven by them from Pudukottai to Kandarvakottai dashed While they were returning, the lorry MDO 2914 proceeding towards Puducottai dashed against the said three bullock carts coming in the opposite direction. As a result of the accident Chinnathambi Udayar and Rajakannu Udayar died and Lakshmana Udayar was seriously injured. Two bulls of Chinnathambi Udayar and three other bulls also died, and all the three carts got damaged. the accident is alleged to have taken place due to the rash and negligent driving of the driver of the lorry MDO 2914, belonging to the second respondent in all these appeals and insured with the appellant herein.

3. The widow of Chinnathambi Udayar filed a claim M.A.C.T.O.P. 1 of 1967 before the Motor Accidents Claims Tribunal, Tiruchirapalli, claiming a sum of Rs. 15,000 for his death and Rs. 1600 towards the value of the bulls and carts. She claimed that Chinnathambi Udayar was aged only 30 years and he was earning an annual income of Rs. 3000 per year and that by the death of her husband she has suffered a damage at the rate of Rs. 300 per year. Calculating for a period of 30 years she worked out the total damages sustained by her at Rs. 90,000 but however, she restricted her claim to Rs. 15,000.

4. The father of the deceased Rajakannu Udayar filed M.A.C.T.O.P. 2 of 1967 claiming a compensation of Rs. 15,000 in addition to a sum of Rs. 950 being the value of the cart and one bull which died. His case was that he is the father of the deceased, who was aged 21 at the time of his death, that the deceased was supporting the family by getting and income of Rs. 3000 per year and that taking his normal expectation of life at 60 years, he would have earned a sum of Rs. 1,20,000. But he has restricted his claim to Rs. 15,000 only.

5. Lakshmana Udayar who got injured in the accident claimed a sum of Rs. 7200; Rs. 5000 being the medical expenses, Rs. 1800 being the loss of income for 9 months when he was treated for the injuries, Rs. 4000 being the compensation for the injury and mental pain, and Rs. 900 being the cost of the bulls and cart.

6. These claims were resisted by the second respondent herein, alleged to be the owners of the lorry and the appellant, Insurance Company. Another insurance company, who is the third respondent herein, was also cited as a respondent before the lower court in some of the petitions but as it was established that I had not insured the lorry in question at the relevant time, the claim as against it had been dismissed by the lower court and we are not concerned with the third respondent any more. The M.A.C.T.O.P. 1 of 1967 was that his driver was driving the lorry with great care and caution, that the accident was not caused due to his rashness or negligence, that the accident could have happened due to the break-down of the vital part of the machinery in the lorry, that the accident had happened owing to reasons beyond the control of the driver and that in any even the deceased and the injured were also guilty of contributory negligence. He also stated that the amounts claimed were excessive and imaginary. However, he put forward 3 different case in M.A.C.T.O.P. 2 and 3 of 1967. Therein he stated that he was not liable for damages since on the date of the accident he had parted with his interest in the lorry to a third party, in addition to his plea that the claim in that case was excessive and exaggerated.

7. The appellant herein originally contended that the accident was not due to the negligence of the driver and, that the damages claimed in each of the petitions are excessive. The appellant, after seeing the written statement filed by the second respondent that the lorry has been transferred to a third party and that he is not therefore liable to answer the claim, sought to file an additional written statement invoking the provisions of the Civil Procedure Code, but the Tribunal rejected the request holding that all the provisions of the Civil Procedure Code have not been made applicable to a proceedings before the Claims Tribunal and under Rule 18 of the Tribunal Rules only a few provisions of the Civil Procedure Code have been made applicable to these proceedings. That order was taken in revision to this court and Anantanarayanan C J. in South India Insurance Co. Ltd. v. Lakshmi, : (1967)ILLJ801Mad held that, though under the Madras Motor Accidents Claims Tribunal Rules certain provisions of the Civil Procedure Code alone are made applicable to proceedings before the Claims Tribunal, nevertheless the Tribunal is not divested of an inherent power to permit such other proceedings as are rendered imperative by the principles of natural justice, and that the principle of S. 151, C.P.C. has an intrinsic application to all judicial and/or quasi-judicial tribunals, though the section itself may not apply. It was further held that the filing of an additional written statement disclaiming liability on the ground that the insured vehicle had been parted with by the second respondent was not necessary as the question involved was one of law and that there can be no bar or prohibition to raise a legal defence even if the appellant had not been permitted to file an additional written statement, and the relevant observations are as follows:--

'In the present case, in two of the claims, the proprietor of the concerned vehicles has taken the plea that, prior to the date of the accident, the vehicle was transferred to another person, so that there was no subsisting legal liability on his part........Therefore, it is always open to the company to urge that if such transfer be true, the company has no legal liability in respect of the claim for damages arising out of the accident. Strictly speaking, no additional written statement to this effect is necessary, since it is a pure question of law related to a pleading, which is already on the record.'

8. When the claims were taken up for trial before the Tribunal evidence was adduced by all parties on all the issues. But the Tribunal, without giving a finding as to whether the second respondent had transferred the vehicle prior to the accident to a third party as contended by him in his written statement in one of the claims, proceeded to quantify the liability of the appellant and the second respondent arising out of the accident. It took the view that as it was an admitted fact that the lorry MDO 2914 stood registered in the name of the second respondent on the date of the occurrence and had been insured with the appellant, and that the second respondent had not taken any step whatever to have the transfer intimated to his insurer or notified to the registering authority, the claimants have rightly proceeded against the appellant and the second respondent. In its view, even if the transfer of the lorry had in fact taken place prior to the accident, the rights inter se between the appellant and the second respondent, that is the insurer and the insured, can be worked out by way of separate proceedings and that the rights and liabilities between them need not be gone into in these claim petitions. The Tribunal, on a consideration of the evidence adduced in the cases fixed the compensation payable to the claimants in M.A.C.T.O.P. 1, 2 and 3 at Rs. 16,400, Rs. 6350 and Rs. 4,400/- respectively.

9. The appellant who is the insurer of the vehicle at the relevant time has filed the above three appeals and the main contentions of the appellant are that the Tribunal is in error in not giving a finding as to whether the vehicle had been transferred by the second respondent in favour of a third party before the date of the accident and if so whether the appellant is liable to the claims made against it, that the Tribunal was also in error in relegating the matter to a separate proceeding without deciding the basic fact on which depends the appellant's liability. The appellant also contends that the Tribunal wrongly proceeded to pass a decree against the insurer without passing a decree against the insured, that is the second respondent, even though the liability of the insurer comes only by way of indemnity. On the question of the quantum of compensation, the appellant contended that the total liability to which it could be made liable is restricted under Section 95(2) of the Motor Vehicles Act, 1939, to a sum of Rs. 20,000, in respect of any one accident and that the Tribunal was in error in awarding and aggregate compensation exceeding that limit.

10. In support of its contention that the liability of the insurer will cease if the vehicle had been physically transferred to a third party, notwithstanding the registration of the vehicle continuing in the name of the insured,. reference has been made to the following decisions; Bhoopathy v. Vijayalakshmi, : AIR1966Mad244 lays down the principle that the transfer of ownership of a vehicle will have the legal consequence of terminating the contract of insurance, so that the company (insurer) will no longer be liable under that policy. The Division Bench in that case, after an elaborate consideration of the relevant decisions on the point expressed stipulation to the contrary in the insurance policy, the moment the insured parts with his car, the policy relating to it lapses because the car is the subject-matter or the foundation of the contract of insurance. The Bench distinguished the decision of Anantanarayanan J. in Madras Motor Insurance Co. Ltd., Madras v. Md. Mustafa Badsha, : AIR1961Mad208 wherein he expressed the view that, whatever or not there was a term in the policy touching the matter, the sale by the insured of his car during the currency of the policy did not or would not in law operate to put an end to the policy and to enable the insurer to avoid the liability against third party risks. The Bench was of the opinion that there is nothing in sub-secs. (1) and (2) of S. 96 of the Motor Vehicles Act, which warrants the view that a sale or transfer of an insured car by the insured during the currency of the policy does not terminate the policy if it clearly laid down that the insurer is not liable to the transferee for damages awarded to a third party for injuries caused by the rash and negligent driving of the car on a date subsequent to the transfer of ownership. The Bench, after referring to the observations of Goddard J. in Tattersall v. Drydale, 1935 All ER 112 and Peters v. General Accident and Life Assurance Corpn. Ltd., 1937 4 All ER 628, held that once a vehicle has been parted with by the insured his insurance qua that car lapsed and that there was no insurance. The view expressed in Bhoopapthy's case, : AIR1966Mad244 has been accepted as correct by another Division Bench in Queensland Insurance Co. Ltd. v. Rajalakshmiammal, : (1970)1MLJ151 . In that decision it has been held that an insurance policy is a contract of personal liability and the insurers cannot be compelled to accept responsibility in respect of a third party quite unknown to him.

11. The learned counsel for the claimants does not dispute the legal position as enunciated in the above two decisions of this Court, but what he contends is that the liability of the insurer to third parties will continue until the vehicle is registered under the provisions of the Motor Vehicles Act in the name of the transferee. and that in fact there is no evidence, in these cases, of the transfer of the vehicle by the second respondent to a third party before the date of the accident. On the question of fact whether the second respondent had, in fact, transferred the vehicle to a third party as alleged by him in a written statement filed in one of the petitions, the court below has not gone into that questions and given a finding thereon which, it should have done before making the insurer liable. Therefore, at this stage it is not possible to say whether there was in fact a physical transfer of the vehicle, as alleged by the second respondent or not. It is because of this situation the learned counsel for the first respondent contends that even if there has been a physical transfer, unless there is a change of registry in the name of the transferee, the transferors as well as the insurer continue to be liable under the policy in respect of third party claims. The learned counsel seeks support for this contention from a decision of the Delhi High Court in Vimal Rai v. Gurcharan Singh, 1967 ACJ 115 (Delhi).

In that case Andley J. had expressed the view that it is not open to the insurance company to raise the plea in an action by a third party that the policy has lapsed by the general law of insurance by reason of a sale of the vehicle, so long as the sale has not been recognised as per the provisions of the Motor Vehicles Act. The learned Judge seems to think that S. 96(2) having specified exhaustively the defences that are open to an insurer in a claim by a third party, the insurer cannot put forward a defence not enumerated under the policy of insurance, that the mere transfer of a vehicle will not result in the lapse of the insurance policy. If the transfer had not been recorded as required by Section 31 of the said Act in the records of the Motor Registering Authority, that the defence that the policy lapsed by operation of the general law of insurance by reason of a sale was not one contemplated by Section 96(2) and that the statutory liability prescribed qua third parties under that Act cannot be got rid of by raising a defence not enumerated in Section 96(2). According to the learned Judge, Motor Vehicles Act being a special Act, dealing with a particular subject it alone should be looked into for the purpose of finding out if the conditions specified therein are satisfied, and it is not permissible to go into the general law to find out whether the liability of the insurer is extinguished and the liability of an insurer can be got rid of only when the transfer of the vehicle is recognised by the Motor Registering Authority under Section 31 of the Act and not otherwise.

12. With due respect, I am not inclined to agree with the view expressed by Andley J. referred to above. The learned Judge seems to think that though the contract of insurance might have come to an end under the general law it continues to subsist qua third parties until the ownership of the vehicle is transferred in accordance with the provisions of Section 31 of the Motor Vehicles Act, 1939, that the provisions of the Motor Vehicles Act, which is a special law had made specific inroads into the general law and that the object of Section 96 of the Motor Vehicles Act, enabling third parities to get compensation from the insurer is allowed to disown liability on the basis allowed to disown liability on the basis of a transfer which has not been recognised under Section 31 of the Act. With respect I am unable to agree with that reasoning.

13. Shawcross on Motor Insurance, 2nd Edn. at page 287 says that the policy of insurance stands automatically avoided when the assured dies, becomes a bankrupt or parts with the insured vehicles under the English section corresponding to Section 96 of the Motor Vehicles Act, 1939. In 1935 All ER (Reprint) 112 it has been directly laid down that if the insured parts with the ownership of the insured car the policy of insurance relating to it at once lapses. The relevant observations of Goddard J. are as follows:

'The policy insured the plaintiff in respect of the ownership and user of specified car, and when he divested himself of his interest in that car the extension clause ceased to have effect.'

Earlier Lord Buckmaster in the House of Lords case in Rogerson v. Scottish Automobile and Gen. Insurance Co. Ltd., (1931) 48 TLR 17 had observed as follows:--

'To me this policy depends upon the hypothesis that there is in fact an insured. When once the car which is the subject of this policy is sold the owner's rights in respect of it cease and the policy so far as the car is concerned is at an end.'

In Jones v. Welsh Insurance Corporation, 1937 4 All ER 149, the car had been used at the time of the accident not by the insured person in connection with his business person in connection with his business of a motor mechanic, but by his brother for some other purpose of carrying goods in connection with his business of sheep farm. Goddard J. upheld the insurer's contention that they are not liable to indemnify the insured and the learned Judge expressed:--

'The result is that the action fails, and must be dismissed, though I come to this conclusion with as much regret as a Judge may properly feel when he gives effect to what he decides are the legal rights of the parties. For this adds another to the growing list of cases which show that, in spite of the statutory provisions for compulsory insurance, persons injured by motor cars through no fault of their own may be left with no prospect of obtaining compensation............. The public believe, and with reason, that the Road Traffic Acts, insure that, if they have the misfortune to be killed or injured by a driver's negligence, there will at lease be compensation for themselves or their dependants, knowing nothing of the pitfalls which still abound in policies, in spite of Section 12 of the Act of 1934............... No legislation can guard against the criminal who wilfully drives an uninsured car, but it is just as well that it should be realised that, though there may be a policy in force, and an unauthorised person is driving the car which causes injury, there is no certainly that liability will attach to the insurers.'

14. In Bhoopathi's case, : AIR1966Mad244 this court also took the same view. If the view of Andley J. is to be accepted, even though the insurer may not be liable under the policy, the provisions of the Motor Vehicles Act, will make him liable so far as third parties are concerned. But the observations of Goddard J. in Jone's case 1937 4 All ER 149 and of this court in Bhoopathi's case show that the terms non-liability in case of transfer cannot be overlooked while considering the liability of the insurer qua third parties under the Motor Vehicles Act. When a policy of insurance had lapsed by the transfer of the insured vehicle by the insured as per the terms of the policy, Section 31 of the Motor Vehicles Act cannot have the effect of keeping alive such a policy qua third parties. Change of registry under Section 31 is not a condition precedent for the transfer of ownership of the vehicle. Section 31 merely imposes an obligation both on the transferor and the transferred of the vehicle to notify the transfer. It does not invalidate a transfer as such for non-compliance with that section,

15. In Joblin v. Watkins and Roseveare (Motors) Ltd., (1949) 1 All ER 47 = 64 TLR 464, while considering the scope and effect of the registration of a vehicle under Regulation 9(1) of the Road Vehicle (Registration and Licensing) Regulations, 1941, which is similar to Section 31 of the Motor Vehicles Act it was expressed that:--

'Although one reason for the book was to make known who was the owner of the vehicle to which it referred, its primary purpose was to show who was the person liable to pay the road fund licence tax in respect of the vehicle.'

Croom-Johnson J. had specifically held that the registration book kept under Regulation 9 was not a document of title and its purpose was only to show that the person from whom the vehicle tax had to be collected. The same principle has been laid down by Goddard J. in 1937 4 All ER 628, which has been affirmed by the court of Appeal in Peters v. General Acc., Fire and Life Asce. Co. Ltd:, 1938 LX L.L Rep 311 (CA) where Sir Wilfrid Greene M. R. Said:--

'At the date when the accident took place the entire property in this car was vested in Pope. He had bought the car. On the sale of the car the property passed to him, and although counsel at one stage of the argument appeared to suggest that it had not, when his attention was called to the evidence felt himself constrained to give up that point. The property, therefore. passed to the purchaser long before the accident took place: The circumstance that he had not paid the whole of the purchase price is irrelevant for that purpose, because that circumstance does not leave in the vendor, Mr. Coomber, any interest in the car. There is no vendor's lien, or anything of that sort. Now when pope was using that car he was not using it by the permission of Coomber. It is an entire misuse of language to say that. he was using it as owner and by virtue of his rights as owner and by virtue of his rights as owner and not by virtue of any permission of Coomber.'

Branson J. in guardian Assurance Co. Ltd. v. Sutherland, 1939 LXI LLJ Rep 220 held that where a few days before the accident the car had been sold to another persons, the extension clause was inoperative and that the insurer was under no liability on the policy as it was proved that the insured had no interest whatever in the car on the date of the accident.

16. In a recent decision of the Judicial Committee in Sajan Singh v. Sardara Ali, 1960 AC 167 the question whether there could be a transfer of a motor vehicle without there being a transfer of the registry with the motor vehicle authorities came to be considered. In that case the plaintiff purchased a lorry from the defendant but the plaintiff did not get the transfer of the registry in his name, as he was not entitled to get a haulage permit from the authorities but the defendant was so entitled. the lorry was running in the name of the defendant as the haulage permits stood in his name. In view of the facts that the lorry stood registered in his name, the defendant removed the lorry from the plaintiff's possession without his consent and refused to return it. On a claim by the plaintiff against the defendant for the return of the lorry or its value, the Judicial Committee held that notwithstanding that the contract for the sale of the lorry was unlawful, yet when in pursuance of the contract the lorry was sold and delivered to the plaintiff, the property in it passed to him; and thereby he derived the right to immediate possession of the lorry which entitles him to sue the defendant in detinue, and that he is therefore entitled to sue in trespass. Lord Denning who delivered the judgment express:--

'Their Lordship do not overlook the fact that the defendant remained registered as the owner of the lorry and that no permission was given for the sale; but this did not prevent the property in it passing to the plaintiff. The registration book is not in Malaya, and more than it is in England, a document of title. The title passed by the sale and delivery of the lorry to the plaintiff. The absence of registration would no doubt put the plaintiff in difficulty if he had to prove his title but it would not invalidate it. Se Bishopgate Motor Finance Corporation Ltd. v. Transport Brakes Ltd., 1949 1 KB 3222 = 65 TLR 66; 1949 1 All ER 37.'

From the above decisions it is clear that where a persons states ion the proposal from that he is the owner of the vehicle to be insured and gets his vehicle insured on that basis, the insurer will be entitled to avoid liability if the owner of the vehicle has transferred the vehicle to another before the accident, and that notwithstanding the fact that the registry under Section 31 continued in the name of the insured the contract of insurance and along with it the liability of the insurer to indemnify the insured comes to an end as soon as the vehicle is transferred by the insured to another. It is true that the provisions of Section 96 sets out the defences that are open to an insurer in a claim by third parties based on the contract of insurance. But they cannot be said to be exhaustive. Having regard to the fact that under the general law the contract of insurance comes to an end on the transfer of the vehicle, it is not possible to say, relying on Section 31, that the policy of insurance is kept alive so far as the claims of third parties are concerned notwithstanding the transfer. Though the principle of compulsory insurance against third party risk helps third parties to believe that if they, through no fault of their own, have the misfortune to be injured or killed by a motor accident, they or their dependents would be certain of recovery of damages even though the wrong-doer is an impecunious person the provisions intended to effectuate the compulsory insurance cannot, by any stretch of imagination bring into a contract of assurance which ceases to exist between the insured and the insurer in vie of the vehicle being transferred. Section 96 suggests that the insurer cannot avoid liability under the policy in relation to claims by third parties by introducing exceptions and conditions other than those mentioned in that section. The principle of that section is that once there is a contract of insurance subsisting, it is not open to the insurer to avoid the liability by relying on certain exceptions and conditions in the policy which are ineffective as against third party. But the substance of the policy is a basic thing on which even a third party has to found his claim. Branson J. observed in Gray v. Black Moore, 1933 XXXXVIII LL Rep 69 :--

'The courts have upheld the claims of the insurer that they are not liable to third parties if the insured acts in breach of the conditions throwing a greater burden or obligation upon the insurer which they did not underwrite.'

If the contract is assumed to subsist in respect of third parties even if the vehicles has been parted with before the accident, it is likely to result in very many anomalies. If a vehicle has been insured as a private one, but if it was used for hire, contrary to the terms of the policy of insurance at the time of he accident, the insurer can avoid liability, under the general law, Obviously it cannot be said that as regards the claims of third parties the said policy cannot be avoided. It is not therefore possible to accept the view in 1967 ACJ 115 that unless the registry is changed in accordance with the provisions of Section 31, the courts cannot recognise a transfer qua third parties' claim. In these cases, the question whether the lorry was, in fact, transferred to a third party has not been gone into by the lower court. Hence the matter has to be remitted back to the Tribunal for giving a decision on that point.

17. On the question whether the liability of the appellant is limited in the aggregate of Rs. 20,000. reference is made by the learned counsel for the appellant to Section 95(2). This question came to be considered by a Full Bench of this court in Jayalakshmi v, Ruby Gen. Insurance Co. Ltd., Madras : AIR1971Mad143 (FB) and it has been held therein that where the insurance company insures the owner of a goods vehicle under Section 95 of the Motor Vehicles Act, 1939, against the liability which the owner may incur in respect of the death of a third party caused by the use of the vehicle in a public place, the policy being simply one conforming to the requirement of the Act. the liability of the Insurance Company is limited to Rs. 20,000 under Section 95(2) of the Act. In these cases the policy of insurance which has been marked as Ex. B-18 shows that the liability thereunder is limited to such amount as is necessary to meet the requirements of the Motor Vehicles Act, 1939. The decision of the Full Bench squarely applies to the policy in question. Therefore,. the total liability against the appellant ion respect of the claims arising out of the accident should be limited only to a sum of Rs. 20,000/- in all. In these cases the lower court has passed awards for more than Rs. 20,000 in all in respect of the accident which cannot be sustained. The total liability of the appellant in all has to be limited to Rs. 20,000. The lower court has not considered this aspect of the matter.

18. In the result, the appeals are allowed and the matters are remitted to the Tribunal for fresh disposal in the light of the observations made above. There will, however, be no order as to costs in any of these appeals. As the claims have been pending for a long time, the Tribunal will dispose of the matters as expeditiously as possible.

19. Appeals allowed


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