Ownership Transfer Dispute: Bank vs. Insurance Company

In a significant ruling by the Supreme Court of India, a dispute over ownership transfer involving a Bank and an Insurance Company was resolved. The case highlights key issues surrounding insurance claims and the transfer of ownership. Stay informed about the legal intricacies in this landmark decision. #SupremeCourt #InsuranceDispute #OwnershipTransfer

Facts

• The vehicle was put up for auction on 31 March 2006 and purchased by the appellant for Rs 2,42,000.
• Possession of the vehicle was handed over to the appellant on 7 April 2006
• The appellant lodged a First Information Report about the stolen vehicle on 14 June 2006.
• The insurance claim for the stolen vehicle was rejected on 30 April 2008 due to ownership and financial interest issues.
• The insurance policy reflected the name of the third respondent as the insured, even though the appellant had paid the premium and registered for insurance.
• The first respondent rejected the insurance claim citing ownership being in the name of the third respondent and the bank’s financial interest.
• The appellant had obtained a certificate of exemption from the Regional Transport Authority for transferring the registration certificate to its name.

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Arguments

• Appellant purchased the vehicle in an auction sale conducted by the Bank after the original owner defaulted on payments under a Hire-Purchase Agreement.
• Bank provided a certificate of possession to the appellant upon receiving full bid consideration at the auction sale.
• Bank informed the insurer that it no longer had a claim on the vehicle due to a deed of hypothecation with the erstwhile owner.
• Learned counsel for Respondent affirmed the view taken by consumer fora.
• Argued that there is no privity of contract between the appellant and the insurer.

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Analysis

• The coverage extends to property of a third party i.e. someone other than the insured.
• The principle that the insurer is not liable if there is no transfer reflected in the registration certificate.
• The dispute is about the liability of the insurer in case of a transferred vehicle ownership.
• The insurer’s contention is that unless the transfer is reflected in the registration certificate, they are not liable.
• The insurer repudiated the claim due to lack of insurable interest and ownership transfer proof.
• Chapter XI of the Motor Vehicles Act focuses on third-party risks only.
• The necessity for an agreement between the insurer and the transferee for covering risks other than third-party risks.
• Section 50 of the Motor Vehicles Act provides for the transfer of ownership of a motor vehicle.
• The transferor must report the transfer to the registering authority within 14 days if within the same state, or within 45 days if outside the state.
• The transferee must report the transfer to the registering authority within 30 days.
• Consequences of not fulfilling the obligation include a requirement to pay a prescribed amount under section 177.
• Section 157 deals with the transfer of the certificate of insurance when ownership of the vehicle is transferred.
• Chapter XI provides for compulsory insurance of vehicles to cover third-party risks.
• The definition of ‘owner’ in Section 2(30) plays a crucial role in determining the owner for insurance purposes.
• The owner is the person in whose name the motor vehicle is registered, with exceptions for minors and in cases of hire purchase, lease, or hypothecation agreements.
• Silence to an insurance proposal does not denote acceptance; acceptance must be communicated to the offeror.
• Mere receipt and retention of premium or preparation of a policy document does not constitute acceptance of insurance.
• Acceptance of insurance must be signified by some act agreed upon by the parties.
• Insurance policies covering other risks are part of the contract between insurer and transferee.
• Third-party claims under Chapter XI insurance policies are treated differently as per the judgment in Complete Insulations (P) Ltd case.
• The insurer’s basis for repudiating the insurance claim was found to be unsustainable.
• The appellant has agreed to provide indemnity to the insurer against any claims from the third respondent.
• The insurer cannot reject the appellant’s claim by arguing that their liability is only to the third respondent, who no longer has ownership of the vehicle.

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Decision

• The transfer of the vehicle is not in dispute.
• There shall be no order as to costs.
• The claim in the amount of Rs 2,42,000 is allowed with interest at 9% per annum from the date of claim lodgement.
• The loss of the vehicle occurred close to the date of auction purchase.
• The appeal is allowed with the above terms.

Case Title: M/S BALWANT SINGH AND SONS Vs. NATIONAL INSURANCE COMPANY LTD

Case Number: C.A. No.-005998-005998 / 2019

Click here to read/download original judgement