Recently, the Allahabad High Court reviewed a petition challenging the Permanent Lok Adalat’s decision in PLA Case No. 09 of 2022, which upheld the opposite party's insurance claim for a truck accident. However, the court observed that since ownership was not formally transferred under Section 157 of the Motor Vehicles Act, the petitioner remained liable under the insurance contract.
Brief Facts:
The petitioner, New India Assurance Co. Ltd., filed a petition under Article 227 of the Constitution, challenging the judgement of the Permanent Lok Adalat, Lakhimpur Kheri. The case involves a truck, insured by the petitioner for Rs. 13,00,000/- which met with an accident on 01.11.2020. The owner submitted a claim for repairs totalling Rs. 4, 85,768/-, but the petitioner rejected the claim, citing that the truck had been transferred to Sanjeev Kumar before the accident, thereby disputing the opposite party’s insurable interest.
The Permanent Lok Adalat examined three key issues: jurisdiction and the truck accident. It concluded that the agreement between the opposite party and Sanjeev Kumar did not affect the adjudication, affirming the opposite party’s entitlement to compensation for the truck’s damage.
Contention of Petitioner:
The counsel for the petitioner limited the challenge to the findings on issue no. 2, emphasising the agreement dated 24.10.2019 between the opposite party and Sanjeev Kumar Verma. According to this agreement, the opposite party had agreed to sell the truck to Sanjeev Kumar, with the latter assuming responsibility for repaying the loan instalments and taking over all liability for the vehicle after the execution of the agreement.
The counsel argued that since the truck had been effectively transferred to Sanjeev Kumar, the opposite party no longer held any insurable interest and was therefore not entitled to make an insurance claim for the vehicle. In support, the counsel referred to the judgements in ‘Complete Insulations (P) Ltd. v. New India Assurance Co. Ltd., [(1996) 1 SCC 221]’, and ‘Balwant Singh and Sons v. National Insurance Co. Ltd. [(2020) 11 SCC 745]’.
Observation of the court:
The Court observed that Section 157 of the Motor Vehicles Act, 1988, governs the transfer of vehicle ownership and insurance policies. This provision stipulates that upon transfer of vehicle ownership, the insurance certificate and policy are deemed to transfer to the new owner. However, in the present case, the truck was only the subject of an agreement to transfer ownership in the future, contingent on loan repayment, and no formal transfer had occurred.
The court highlighted that “The Hon’ble Supreme Court held that the transfer of the vehicle was not in dispute and the insurance company was liable to satisfy the claim. This judgment also supports the view of this Court that the intention of the legislature is to make the insurance company liable immediately, in spite the transfer having not been recorded in the records of the transport office and the intention is not to exclude the transferees strictly.”
The court observed that even if the insurance policy had not been formally transferred, the insurer is liable to cover the transferee as per the legislative intent, which aims to ensure immediate coverage despite formalities. This was supported by precedents such as Complete Insultations (P) Ltd. v. New India Assurance Co. Ltd. and Balwant Singh and Sons vs. National Insurance Co. Ltd., which affirm that the insurer’s liability persists even if the transfer is not recorded with the transport office. In the present case, since the ownership had not been formally transferred and the claimant was still the registered owner, the insurance claim should be considered valid.
The decision of the Court:
The court decided that, as the vehicle ownership was not formally transferred, the petitioner remains liable under the insurance contract. consequently, the judgement by the Permanent Lok Adalat, Lakhimpur Kheri, allowed the opposite party’s claim to stand. Hence, the petition is dismissed, and each party shall bear its costs.
Case Title: The New India Assurance Company Limited vs. Permanent Lok Adalat & Anr.
Citation: Neutral Citation No. - 2024:AHC-LKO:63642
Coram: Justice Subhash Vidhyarthi
Advocate for Petitioner: Adv. Asit Srivastava
Read Judgement @LatestLaws.com
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