M/S. BALWANT SINGH & SONS versus NATIONAL INSURANCE COMPANY LTD & ANR.

Citation: [2019] 11 S.C.R. 693 · Decided: 31-07-2019 · Supreme Court of India · Bench: D.Y. CHANDRACHUD · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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M/S. BALWANT SINGH & SONS
v.
NATIONAL INSURANCE COMPANY LTD & ANR.
(Civil Appeal No. 5998 of  2019)
JULY 31, 2019
[DR. DHANANJAYA Y CHANDRACHUD AND
INDIRA BANERJEE, JJ.]
Motor Vehicles Act, 1988: ss. 50, 157 – Transfer of certificate
of insurance – On facts, appellant purchased vehicle in auction –
Insurance premium collected by insurer from the appellant-insured
– However, insurance policy continued to reflect the name of
respondent as insured and registration certificate still not transferred
– Thereafter, loss of vehicle occasioned by theft – Insurance claim
by insured – Claim rejected by insurer – Consumer complaint –
Consumer Forum held that insurer not liable on the claim preferred
for loss of vehicle – On appeal, held: There was an acceptance of
premium as also issuance of a policy document – After the transfer
of the vehicle, the insurer was specifically informed by the Bank
which held a lien on the insurance policy, of the lifting of its lien
following the termination of the agreement of hypothecation –
Following this, insurer issued insurance policy – More so, third
respondent did not raise any claim in respect of the loss of the vehicle
since the vehicle had already been repossessed and sold by the
bank on account of its default in the payment of dues – Furthermore,
loss of the vehicle took place in close proximity to the date of auction
purchase – Thus, the insurer cannot repudiate the claim of the
appellant holding that its liability is to the third respondent who has
no subsisting interest in the ownership in the vehicle and the claim
of the insured is allowed.
Allowing the appeal, the Court
HELD : 1.1 Section 50 of the Motor Vehicles Act, 1988
provides that where the ownership of any motor vehicle registered
under Chapter IV is transferred, certain formalities have to be
fulfilled. The formalities require the transferor to report the
   [2019] 11 S.C.R. 693
693
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SUPREME COURT REPORTS
[2019] 11 S.C.R.
transfer to the registering authority within whose jurisdiction the
transfer has to be effected and to send a copy of the report to the
transferee. The transferee also has to report the transfer to the
registering authority within whose jurisdiction he resides or
maintains a place of business where the vehicle is normally kept.
The transferee has to forward the certificate of registration to
the registering authority together with the prescribed fee and a
copy of the report received from the transferor so that particulars
of the transfer of ownership may be entered in the certificate of
registration. [Para 13][700-B-D]
1.2 As a result of s. 157, where a person in whose favour
the certificate of insurance has been issued in terms of the
provisions of Chapter XI transfers the ownership of the vehicle
to another person, the certificate of insurance and the policy
described in the certificate are deemed to have been transferred
in favour of the new owner to whom the motor vehicle is
transferred, with effect from the date of its transfer. [Para 17]
[702-E-F]
In the instant case, not only was there an acceptance of
premium but the issuance of a policy document. The insurer had
knowledge of the transfer when the Bank informed it of the lifting
of the lien. In the instant case, the Court is dealing with a situation
where following the transfer of the vehicle, the insurer was
specifically informed by the Bank which held a lien on the
insurance policy, of the lifting of its lien following the termination
of the agreement of hypothecation. Following this, a policy of
insurance was issued by the insurer. Admittedly the payment of
premium was made by the appellant. The third respondent did
not set up any claim in respect of the loss of the vehicle since the
vehicle had already been repossessed and sold by the bank on
account of its default in the payment of dues. The insurer cannot
repudiate the claim of the appellant holding that its liability is to
the third respondent who has no subsisting interest in the
ownership in the vehicle. The appellant has undertaken to furnish
an indemnity to the insurer against any claim at the behest of the
third respondent. The transfer of the vehicle is not in dispute.
[Paras 25-27] [706-F-H; 707-A]
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1.4 The insurer adopted a basis which was unsustainable
to repudiate the insurance claim. The loss of the vehicle took
place in close proximity to the date of auction purchase. The claim
in the amount of Rs 2,42,000 is allowed on wh

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