Insurance company cannot repudiate claim even if 'RC' is not transferred in the name of buyer, and insurance is otherwise valid: Supreme Court

The SC on June 18, 2020 {Surendra Kumar Bhilawe vs The New India Assurance Company Limited} held that Sections 19 and 20 of the Sale of Goods Act, 1930, which deal with the stage at which the property in movable goods passes to the buyer, is of no assistance to the Insurer. 

It was further held by the Bench, comprising of Justice R. Banumathi and Justice Indira Banerjee, that the National Commission failed to appreciate that Section 157 of the Motor Vehicles Act provides that where a person, in whose favour the certificate of insurance has been issued in accordance with the provisions of Chapter XI of the Motor Vehicles Act, transfers to another person the ownership of the motor vehicle in respect of which such insurance was taken together with the policy of insurance relating thereto, the certificate of insurance and the policy described in the certificate are to be deemed to have been transferred in favour of the person to whom the motor vehicle is transferred, with effect from the date of its transfer.

It was held that the transferee might, within 14 days from the date of transfer, apply to the Insurer in the prescribed form, for making requisite changes in the certificate of insurance and the policy of insurance with regard to the factum of transfer of insurance. It was held that there could be no reason for a transferee of an insured motor vehicle, to refrain from applying for endorsement of the transfer in the Insurance Policy Certificate when insurance covering third party risk is mandatory for using a vehicle.

The SC also held that the policy of insurance in this case, was apparently a comprehensive policy of Insurance which covered third party risk as well. It was held that the Insurer could not have repudiated only one part of the contract of insurance to reimburse the owner for losses, when it could not have evaded its liability to third parties under the same contract of Insurance in case of death, injury, loss or damage by reason of an accident.

It was held that the FIR was lodged within three days of the accident. It was held that in the case of a major accident of the kind as in this case, where the said truck had turned turtle and fallen into a river, slight delay if any, on the part of the traumatized driver to lodge an FIR, cannot defeat the legitimate claim of the Insured. It was held that there was no delay at all in lodging the FIR. It was also held that in case of a serious accident in course of inter-state transportation of goods, delay of 20 days in lodging a claim is also no delay at all.

The SC concluded that the National Commission erred in law in reversing the concurrent factual findings of the District Forum and the State Commission ignoring vital admitted facts, including registration of the said truck being in the name of the Appellant, even as on the date of the accident, over three years after the alleged transfer, payment by the Appellant of the premium for the Insurance Policy, issuance of Insurance Policy in the name of the Appellant, permit in the name of the Appellant even after three years and seven months, absence of ‘No Objection’ from the financier bank etc. and also overlooking the definition of owner in Section 2(30) of the Motor Vehicles Act, as also other relevant provisions of the Motor Vehicles Act and the Rules framed thereunder, including in particular the transferability of a policy of insurance under Section 157.

The appeal was, therefore, allowed by the SC. The impugned order of the National Commission under appeal was set aside and the order of the District Forum was restored. It was directed that the Insurer shall pay to the Appellant a sum of Rs. 4,93,500/- as directed by the District Forum with interest as enhanced by the Court to 9% per annum from the date of claim till the date of payment.

It was further held by the SC that the sum of Rs. 5,000/- awarded by the District Forum towards compensation for mental agony and Rs. 2,000/- awarded towards the cost of litigation, is grossly inadequate. It was directed that the Insurer shall pay a composite sum of Rs. 1,00,000/- to the Appellant towards costs and compensation for the agony caused to the Appellant by withholding his legitimate dues.