MANAGING DIRECTOR, K.S.R.T.C. versus NEW INDIAASSURANCE CO. LTD. & ORS.

Citation: [2015] 10 S.C.R. 743 · Decided: 27-10-2015 · Supreme Court of India · Bench: H.L. DATTU · Disposal: Appeal(s) allowed

Judgment (excerpt)

[2015] 10 S.C.R. 743 
MANAGING DIRECTOR, K.S.R.T.C. 
v. 
NEW INDIAASSURANCE CO. LTD. & ORS. 
(Civil Appeal No. 5293 of2010 etc.) 
OCTOBER 27 I 2015 
[H. L. DATTU, CJI AND ARLIN MISHRA, J.] 
Motor Vehicles Act, 1988- ss.2(30), 147, second proviso 
A 
8 
to s.147(1) ands. 157-Accidentbythe bus given to Transport 
Corporation under a lease agreement by the registered owner C 
thereof - Liability to pay compensation - Whether on the 
registered owner, the Corporation or the insurer - Held: In 
view of the provisions of ss. 2(30), 147 and 157 the insurer 
cannot escape the liability to pay the compensation - The 0 
liability of the insurer continues notwithstanding the contract 
of transfer of vehicle - Such contractual liability cannot be 
said to be excluded by virtue of second proviso to Section 
· 14 7 ( 1) - The Corporation being in actual control of the vehicle 
would be liable to make the compensation - Even though, 
E 
the Corporation is treated as owner under Section 2(30), the 
registered owner continues to remain liable as per terms and 
conditions of lease agreement - Therefore, the registered 
owner, insurer as well as the Corporation would be liable to 
make the payment of compensation jointly and severally -
F 
In view of the terms of the agreement, the Corporation can 
recover the amount from the registered owner or insurer. 
Insurance - Insurance Policy- Nature of- Held: Policy 
of insurance is contractual obligation between the insured G 
and the insurer. 
Allowing the appeals, the Court 
HELD: 1. No vehicle can be driven without insurance 
as provided in Section 147 of Motor Vehicles Act, 1988. H 
743 
744 
SUPREME COURT REPORTS 
[2015] 10 S.C.R. 
A The policy of insurance is contractual obligation between 
the insured and the insurer. Clause 14 of lease agreement 
between the appellant-Corporation and the owner 
clearly stipulate that it shall be the liability of the owner 
to provide the comprehensive insurance covers for all 
B kind of accidental risks to the passengers, other persons/ 
property. The agreement is not shown to be illegal in any 
manner whatsoever nor shown to be opposed to the 
public policy. It has not been shown that while entering 
into the aforesaid agreement of lease for hiring the buses, 
C any of the provisions contained in the insurance policy 
has been violated. It has also not been shown that owner 
could not have given bus on hire as per any provision 
of policy. It was the liability of the registered owner to 
0 provide the bus regularly, to employ a driver, to make 
the payment of salary to the driver and the driver was 
required to be duly licensed and not disqualified as 
provided in the agreement though buses were to be plied 
on the routes as specified by the appellant-Corporation 
E and hiring charges were required to be paid to the 
registered owner. In the absence of any stipulation 
prohibiting such an arrangement in the insurance policy, 
in view of agreement of lease, the registered owner has 
owned the liability to pay. The insurer cannot also escape 
F the liability. [Paras 23 and 24] [757-B-D, F-H; 758-A] 
2. It is also provided u/s. 157 of the Motor Vehicles 
Act, 1988 that the certificate of insurance and the policy 
described in the certificate shall be deemed to have been 
G transferred in favour of the person to whom the motor 
vehicle is transferred with effect from the date of its 
transfer. Even if there is a transfer of the vehicle by sale, 
the insurer cannot escape the liability as there is deemed 
transfer of the certificate of insurance. In the present case 
H it is not complete transfer of the vehicle, it has been given 
MANAGING DIRECTOR, K.S.R.T.C. v. NEW INDIA 
745 
ASSURANCE CO. LTD. 
on hire for which there is no prohibition and no condition/ A 
policy of insurance as shown to prohibit plying of vehicle 
on hire. The vehicle was not used for inconsistent 
purpose. Thus, in the absence of any legal prohibition 
and any violation of terms and conditions of the policy, 
more so, in view of the provisions of Section 157 of the B 
Act of 1988, the insurer cannot escape the liability. [Para 
25] [758-B-E] 
4. When the provisions of Section 147 and Section 
157 are read together, it leaves no room for any doubt C 
thatthore is deemed transfer of policy in case of transfer 
of vehicle. Hence, liability of insurer continues 
notwithstanding the contract of transfer of vehicle, such 
contractual liability cannot be said to be excluded by 
virtue of s

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