RIKHI RAM AND ANR. v. SMT. SUKHRANIA AND ORS

Citation: [2003] 1 S.C.R. 872

Court: Supreme Court of India

Bench: V.N. KHARE, B.N. AGRAWAL, ASHOK BHAN

Judgment text

RIKHI RAM AND ANR. v. SMT. SUKHRANIA AND ORS. FEBRUARY 5, 2003 [V. N. KHARE, CJI. , B. N. AGRAWAL AND ASHOK BHAN, JJ. ] Motor Vehicles Act, 1939; Sections 94, 95, 103-A & 110: liability of Insurer to pay compensation to thirdparty- -Insured vehicle transferred without any intimation to insurer-Effect on- Held, since compulsory insurance under the Insurance Policy isfor the benefit ofthird party/victim, liability ofinsurer c,bes not cease on the ground ofno intimation to insurer either by transferor or transferee of such vehicle. -. ; Words and Phrases: 'Third party'-Meaning of in the context of Insurance of a vehicle. Son of the claimant-respondents died in a motor cycle accident. The vehicle was insured by its original owner who sold it to the present ownerappellant, but failed to intimate the insurer.

Motor Accident Claims Tribunal granted compensation to the parent of the deceased-respondent and held that in the absence of any intimation about transfer of vehicle, insurer was not liable to make payment and compensation has to be paid by the appellants. Appeal preferred by the appellants was dismissed by the High Court. Hence the present appeal. The question which arose in the appeal was whether in the absence ofan intimation of transfer, as required under Section 103-A of the Motor ... Vehicles Act, the liability of insurer to pay compensation to the third party ceases. Answering the question in negative, the Court HELD: I. I. Provisions under Sections 94 and 95 of the Motor Vehicles Act do not make compulsory insurance to the vehicle or to the owners. It manifests that compulsory insurance is for the benefit of third parties. The scheme of the Act shows that an insurance policy can cover three kinds of risks, i. e. , owner of the vehicle; property (vehicle) and third party.

The liability of the owner to have compulsory insurance is only in . , regard to the third party and not to the property. The provision of law shows that it was intended to cover two legal objectives. Firstly, that no one who was not a party to a contract would bring an action on a contract; and secondly, that a person who has no interest in the subject matter of an insurance can claim the benefit of an insurance. Thus, once the vehicle is insured, the owner as well as any other person can use the vehicle with the consent of the owner. Section 94 does not provide that any person who . ,. will use the vehicle shall insure the vehicle in respect of his separate use• (875-G, ff; 876-B-C( G. Govindan v. New India Assurance Co. ltd. and Ors. , (1999] 3 SCC 754, relied on. t. 2. On an analysis of Sections 94 and 95, it is found 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 to the contract and other third party is for whose benefit the vehicle was insured. So far, the transferee who is the third party in the contract, cannot get any personal benefit under the policy unless there is a compliance of the provisions of the Act. However, so far as third party injured or victim is concerned, he can enforce liability undertaken by the insurer. (876-C, D] ... 1. 3. Whenever a vehicle covered by the insurance policy is L transferred lo a transferee, the liability of insurer does not cease so far as the third party/victim is concerned, even if the owner or purchaser does not give any intimation as required under the provisions of the Act. The insurer shall pay compensation to the victims with the interest from the dale of incident and it will be open lo the insurer to recover the said amount either from the insured or from the transferee of the vehicle.

> (876-F, GJ - vehicle in public place and, therefore, the insurance of vehicle had been made compulsory under Section 94 read with Section 95 of the Act. A perusal of Sections 94 and 95 would further show that the said provisions do not make compulsory insurance to the vehicle or to the owners. Thus, it is manifest that compulsory insurance is for the benefit of third parties. The scheme of the Act shows that an insurance policy can cover three kinds of risk, i. e. owner of the vehicle; property (vehicle) and third party. The liability of the owner to have compulsory insurance is only in regard to the third party and not to the property.

Section 95(5) of the Act runs as follows: · "Notwithstanding anything elsewhere contained in any law, a person issuing a policy of insurance under this section shall be liable to indemnify the person or classes of person specified in the policy in respect of any lia~ility which the policy purports to cover in the case of that person or those classes of person. '' The aforesai~ provision shows that it was intended to cover two legal objectives. Firstly, that no one who was not a party to a contract would bring an action on a contract; and secondly, that a person who has no interest in the subject matter of an insurance can claim the benefit of an insurance. Thus, once the vehicle is insured, the owner as well as any other person can use the vehicle with the consent of the owner. Section 94 does not provide that any person who will use the vehicle shall insure the vehicle in respect of his separate use.

On an analysis of Section 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 to the contract and other third party is for whose benefit the vehicle was insured. So far, the transferee who is the third party in the contract, cannot get any personal benefit under the policy unless there is a compliance of the provisions of the Act. However, so far as third party injured or victim is concerned, he can enforce liability undertaken by the insurer. For the aforesaid reasons, we hold that whenever a vehicle which is covered by the insurance policy is transferred to a transferee, the liability of insurer does not ceases so far as the third party/victim is concerned, even if the owner or purchaser does not give any intimation as required under the provisions of the Act. For the aforesaid reasons, the appeal is allowed. We set aside the order and judgment under challenge.

It is hereby directed that the insurer shall pay compensation to the victims within eight weeks along with the interest @ Ii% p. a. from the date of incident and it will be open to the insurer to recover the said amount either from the insured or from the transferee of the vehicle. However, tllere shall be no order as to the costs. S. K. S. Appeal allowed: