Case Details: JASWINDER SINGH vs.THE NEW INDIA ASSURANCE COMPANY LTD. & ORS., SLP(C) No. 028825 / 2015
Summary
The Supreme Court has referred the issue of the presumed transfer of insurance policy upon the transfer of vehicle ownership under the Motor Vehicle Act, 1988 to a larger bench after identifying an inconsistency among two previous judgments. The Supreme Court’s decision in Complete Insulations Private Limited v. New India Assurance Company Limited and Surendra Kumar Bhilawe v. The New India Insurance Company Limited determined that the deemed transfer of an insurance policy upon the sale of a vehicle would only be applicable to third-party risks. However, the Supreme Court in Surendra Kumar Bhilawe determined that the deemed transfer would be applicable to the entire policy.
The appellant had acquired a vehicle from its previous proprietor and submitted an application for a registration modification. After an accident while operating the vehicle on the same day that the registration was transferred to his name, the appellant submitted a claim to the insurance company of respondent no. 1, but the insurance company declined to consider the claim. The appellant argued that the insurance is presumed to be transferred upon the transfer of vehicle ownership, as per Section 157 of the Motor Vehicle Act, 1988. The insurance company contended that Section 157 of the Motor Vehicles Act, 1988 is inapplicable in this instance, as it does not involve third-party liability.
The Supreme Court notes that an authoritative determination must be made regarding the presumed transfer of insurance policy for third-party liability by interpreting the other provisions of the Insurance Act, 1938, and the Motor Vehicles Act, 1988. The matter should be referred to a bench of three judges in light of the aforementioned consideration.
About the case
The Supreme Court, in a significant development, referred the issue of the presumed transfer of the insurance policy upon the transfer of vehicle ownership under the Motor Vehicle Act, 1988 to the larger bench after identifying an inconsistency among two of its previous judgments.
After observing an inconsistency among its previous judgments in Complete Insulations Private Limited v. New India Assurance Company Limited and Surendra Kumar Bhilawe v. The New India Insurance Company Limited, the Supreme Court referred the aforementioned issue to a larger bench.
Although the judgment in Complete Insulations determined that the deemed transfer of an insurance policy upon the sale of a vehicle would only be applicable to third-party risks, the judgment in Surendra Kumar Bhilawe determined that the deemed transfer would be applicable to the entire policy.
“It is crucial to acknowledge that the decision in Complete Insulations (supra) is rendered by a bench of three judges, and the decision is categorical in its assertion that Section 157 of the 1988 Act does not apply to third-party liability.” Although the Surendra Kumar Bhilawe references the judgment in Complete Insulations, the portion that we have extracted and referenced above has not been acknowledged. The Bench Comprising Justices P.S. Narasimha and Aravind Kumar stated that it is imperative to reconcile these two decisions, as the judgment in Complete Insulations was rendered by a three-judge bench. Consequently, the matter should be referred to a three-judge bench.
In the present instance, the appellant had acquired a vehicle from its previous proprietor and had submitted an application for a registration modification. The vehicle was insured by the previous proprietor under an insurance policy that was issued on September 14, 2009. On March 25, 2010, two incidents transpired. The appellant was involved in an accident while operating the vehicle on the same day that the registration was transferred to his name. The appellant submitted a claim to the insurance company of respondent no. 1 after the accident; however, the insurance company declined to consider the claim. The appellant submitted a Consumer Complaint to the District Consumer Disputes Redressal Commission in accordance with Section 12 of the Consumer Protection Act of 1986. The complaint was permitted by the District Forum.
The insurance company submitted a complaint to the State Consumer Disputes Redressal Commission. On the basis of Section 157(2) of the Motor Vehicles Act, 1988, the appellant was required to notify the insurance company of the change in registration within 14 days, and the appeal was thus granted. Nevertheless, the State Commission determined that the insurance company had legitimately rejected the claim, as the appellant had failed to do so. The National Commission received a Revision Petition from the appellant. Nevertheless, the revision petition was denied. The appellant argued that the insurance is presumed to be transferred upon the transfer of vehicle ownership, as per Section 157 of the Motor Vehicle Act, 1988. She has cited the decision of Surendra Kumar Bhilawe v. The New India Insurance Company Limited, which is nearly identical in terms of the facts, to substantiate her argument.
On the contrary, the insurance company contended that Section 157 of the Motor Vehicles Act, 1988, is inapplicable in this instance, as it does not involve third-party liability. Complete Insulations Private Limited v. New India Assurance Company Limited was the decision upon which the insurance company relied.
In Complete Insulations, the Supreme Court’s three-judge bench determined that “the certificate of insurance and the policy of insurance described therein shall be deemed to have been transferred in favor of the person to whom the motor vehicle is transferred liability” solely in relation to third-party risks. The court also determined that the Insurer was entitled to refuse to transmit the certificate of insurance and/or the insurance policy under Section 103-A of the old Motor Vehicle Act, 1939, unless the certificate of insurance pertains to third-party risks.
Nevertheless, the Two Judge Bench of the Supreme Court in Surendra Kumar Bhilawe distinguished the Complete Insulations case by noting that the Complete Insulation case pertains to the old Motor Vehicle Act 1939. Under Section 103-A of the old Act, the insurer was permitted to refuse to transfer the certificate of insurance and/or the insurance policy unless the certificate of insurance was for third-party risks.
“However, Section 157 of the Motor Vehicles Act, 1988 introduces a deeming provision that deems the transfer of the certificate of insurance and the policy of insurance to have been completed when the owner transfers the vehicle and the insurance policy to another individual.” Surendra Kumar Bhilawe, the Supreme Court stated, “This provision has eliminated the Insurer’s right to refuse to transfer the Policy Certificate of Insurance, which was present under the previous Act.”
In addition, the Supreme Court notes that an authoritative determination must be made regarding the presumed transfer of insurance policy for third-party liability by interpreting the other provisions of the Insurance Act, 1938, and the Motor Vehicles Act, 1988.
“The issue of deemed transfer of insurance policy, which is a principle similar to that incorporated in Section 157 for third-party liability, is to be considered by interpreting the other provisions of the Insurance Act, 1938 and the Motor Vehicles Act, 1988, in addition to the difficulty in reconciling the two judgments, as indicated above.” This is also a significant matter that necessitates authoritative determination and consideration.
“We are of the opinion that this appeal should be referred to a bench of three judges in light of the aforementioned consideration.” The Supreme Court stated that the Registry will present the matter to the Hon’ble Chief Justice for additional guidance.
