HDFC Bank Ltd. Versus Kumari Reshma and Ors : Supreme Court - Section 2 (30) of the Motor Vehicles Act, 1988
Supreme Court of India
CIVIL APPEAL NOS.10608-10609 OF 2014 Judgment Date: Dec 01, 2014
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS.10608-10609 OF 2014
[Arising out of S.L.P. (Civil) Nos. 19079-19080 of 2014]
HDFC Bank Ltd. ... Appellant
Versus
Kumari Reshma and Ors. ... Respondents
J U D G M E N T
Dipak Misra, J.
Leave granted in both the Special Leave Petitions.
In these appeals, by special leave, the assail is to the judgment and order
dated 22.10.2013 passed by the learned Single Judge of the High Court of
judicature of Madhya Pradesh Bench at Indore in Misc. Appeal No. 2261 of
2005 preferred by the Centurion Bank Limited, the predecessor-in-interest
of the appellant herein, and Misc. Appeal No. 3243 of 2005 preferred by the
claimants, the 1st respondent herein, whereby the High Court has dismissed
the appeal preferred by the appellant herein and allowed the appeal of the
claimants by enhancing the awarded sum to Rs. 3 lacs opining that the said
amount would be just and equitable compensation for the injuries sustained
by her. The High Court also dismissed the review petition no. 619/2013
vide order dated 13.05.2014 preferred by the appellant herein. Be it
stated, the Additional Member, Motor Accident Claims Tribunal, Indore had
awarded Rs.1,75,000/- in Claim Case No.181/2003.
Filtering the unnecessary details, the facts which are requisite to be
stated are that on 20.12.2002 about 12.30 p.m. the claimant was going on a
scooter bearing registration No. MP09Q92 from Shastri Bridge to Yashwant
Square and at that time the Motor Cycle belonging to 2nd respondent and
driven by the respondent No.3 herein, in a rash and negligent manner dashed
against the scooter as a consequence of which she sustained a fracture in
the right hand superacondylar fracture and humerus bone fracture and
certain other injuries. She availed treatment at various hospitals as she
had to undergo an operation and thereafter advised to take physiotherapy
regularly. Keeping in view, the injuries suffered and the amount she had
spent in availing the treatment, she filed a claim petition putting forth
the claim for Rs.4,50,000/-. The tribunal as stated earlier awarded a sum
of Rs.1,75,000/- with 6% interest and opined that all the non-applicants to
the claim petition were jointly and severally liable to pay the
compensation amount. It is apt to state here the stand and stance put
forth by the predecessor-in-interest the appellant bank that it had only
advanced a loan and the hypothecation agreement was executed on 1.11.2002
by it. As per the terms of the agreement, the owner of the vehicle was
responsible to insure the vehicle at his own costs. Reliance was placed on
Clause 16 and 17 of the loan agreement which stipulated that the bank was
required to get the vehicle insured if the borrower failed to or neglected
to get the vehicle insured. The accident as stated earlier had taken
place on 20.12.2002 and the vehicle was insured by the owner on 16.1.2003.
It was further put forth by the bank that the owner deposited Rs.6,444/-
with the dealer of the motor cycle i.e. Patwa Abhikaran Pvt. Ltd., whereas
it was required to pay Rs.9,444/-. Despite the same, he obtained the
possession of the vehicle on the same day itself which was not permissible.
It was urged before the tribunal the financer was not liable to pay the
compensation and it was the exclusive liability of the borrower. The
tribunal on scrutiny of the clauses opined that as the financer had a duty
to see that borrower does not neglect to get the vehicle insured, it was
also liable along with the owner and accordingly fastened the liability
both jointly and severally.
In appeal, it was contended that the financer could not have been fastened
with the liability to pay the compensation. The High Court referred to the
definition clause in Section 2 (30) of the Motor Vehicles Act, 1988 (for
brevity "the Act"), took note of the language employed in Clause 16 of the
agreement that if the owner neglects to get the vehicle insured the bank
was required to get it insured, and the fact that the financer and the
borrower were the registered owners and, accordingly opined that the bank
was liable to pay. Being of this view the learned Judge dismissed the
appeal preferred by the bank and partly allowed the appeal preferred by the
claimants. Be it stated, the application for review filed by the Bank did
not meet with success.
We have heard Mr. Gopal Subramaniam, learned senior counsel for the
appellant. None has appeared on behalf of respondent despite service of
notice.
We are obliged to mention here that while issuing notice we had directed
that the appellant-bank shall deposit the awarded sum before the tribunal
which would be at liberty to disburse the same in favour of the claimant.
Mr. Subramaniam submitted that the bank does not intend to recover
anything from the claimant but the legal position should be made clear so
that the bank, which is the financer, is not unnecessarily dragged into
this kind of litigation.
Criticising the impugned award and the order passed in appeal, learned
senior counsel has submitted that the definition of 'owner' under Section
2(30) of the Act would not cover a financer who has entered into a
hypothecation agreement with the borrower who is in possession and control
of the vehicle. Learned senior counsel would contend that Clauses 16 and
17 of the agreement have nothing to do with the financer's liability, for
Section 146 of the Act requires the owner to insure the vehicle before it
plies on the road and in the case at hand the borrower, who was in
possession and control of the vehicle in question, in a clandestine manner
without paying the insured amount and getting the vehicle insured had taken
the vehicle the same day from the dealer and got it insured afterwards. It
is urged by him that the role of the bank would come in when there is
failure to insure the vehicle and, in any case, that will not fasten a
statutory liability on the financer to pay the compensation to the third
party, for the vehicle is not on the road by the financer or at is
instance. Elaborating further, it is submitted by him that if the owner
does not pay, the bank will pay the insurance company and recover it from
the borrower and hence, it would be inapposite to interpret the contract in
a different way to fasten the liability on the financer. It is canvassed
by him that there is no stipulation in the agreement that the financer
would indemnify the borrower against the third party in the event of an
accident and in the absence of such a postulate the interpretation placed
by the High Court is absolutely erroneous.
To appreciate the said submission, it is appropriate to refer to Section
2 (30) of the Act which reads as follows:-
"(30). "owner" means a person in whose name a motor vehicle stands
registered, and where such person is a minor, the guardian of such minor,
and in relation to a motor vehicle which is the subject of a hire-purchase
agreement, or an agreement of lease or an agreement of hypothecation, the
person in possession of the vehicle under that agreement."
On a plain reading of the aforesaid definition, it is demonstrable that a
person in whose name a motor vehicle stands registered is the owner of the
vehicle and, where motor vehicle is the subject of hire-purchase agreement
or an agreement of hypothecation, the person in possession of the vehicle
under that agreement is the owner. It also stipulates that in case of a
minor, the guardian of such a minor shall be treated as the owner. Thus,
the intention of the legislature in case of a minor is mandated to treat
the guardian of such a minor as the 'owner'. This is the first exception
to the definition of the term 'owner'. The second exception that has been
carved out is that in relation to a motor vehicle, which is the subject of
hire-purchase agreement or an agreement of lease or an agreement of
hypothecation, the person in possession of vehicle under that agreement is
the owner. Be it noted, the legislature has deliberately carved out these
exceptions from registered owners thereby making the guardian of a minor
liable, and the person in possession of the vehicle under the agreements
mentioned in the dictionary clause to be the owners for the purposes of
this Act.
As we find from the judgment of the High Court, it has placed reliance on
Mohan Benefit Pvt. Ltd. V. Kachraji Rayamalji & Ors.[1]. In the said case,
the 2nd respondent was the registered owner of the truck and the appellant
was the "legal owner of the vehicle as per hire-purchase agreement". The
claim petition stated that at the time of the accident, the 1st respondent
was driving the truck owned by the 2nd respondent and the appellant and
they had become liable, jointly and severally, to pay the damages claimed.
The tribunal, on the basis of the evidence led before it came to the
conclusion that hire-purchase agreement was not the only document executed
between the appellant and the second respondent. It had awarded damages
against the appellant and the second respondent. The award passed by the
tribunal was affirmed by the High Court holding that real documents
executed between the parties at the time of the alleged loan had been kept
back from the Court with ulterior motives and in that situation, all
possible adverse inference should be drawn against the appellant therein;
and that the hire purchase agreement that was produced could not be made
the basis for deciding the relationship between the parties nor could it be
pressed into service for proving that the transaction was only of
hypothecation in the garb of hire purchase agreement. Affirming the view
expressed by the High Court, this Court held
"Having heard the counsel and read the evidence adduced in the case, we
have no doubt that the hire-purchase agreement produced by the appellant
does not spell the true relationship between the appellant and the second
respondent. The High Court, therefore, was right in coming to the
conclusion that, had the documents which reflected the true relationship
between them been produced, they would have "exploded" the case of the
appellant. Consequently, the adverse inference drawn by the High Court was
justified".
After so holding, the Court repelled the submission of the counsel for the
appellant that there was no evidence to show the appellant had any right to
control the driver of the truck. The Court opined that in the
circumstances of the case, the logical inference must be that, had the
documents that set out the true relationship between the appellant and the
second respondent been produced, they would have shown that the appellant
had a right to exercise control in the matter of the plying of the truck
and the driver thereof.
In this context, we may refer to a two-Judge Bench decision in Rajasthan
State Road Transport Corporation V. Kailash Nath Kothari & Others.[2] In
the said case, plea was taken by the Rajasthan State Road Transport
Corporation (RSRTC) before the High Court that as it was only a hirer and
not the owner of the bus, it could not be fastened with any liability for
payment of compensation but the said stand was not accepted. It was
contended before this Court that the Corporation not being the owner of the
bus was not liable to pay any compensation arising out of the accident
because driver who was driving the bus at the relevant time, was not in the
employment of the owner of the bus and not of the Corporation and hence, it
could not be held vicariously liable for the rash and negligent act of the
driver. The Court referred to the definition in Section 2(3), which
defines "contract carriage", Section 2(19), which defines the "owner",
Section 2(29), which defines "stage carriage" and Section 42 that dealt
with "necessity of permits". Be it stated, these provisions reproduced by
the Court pertained to Motor Vehicles Act, 1939 (for short, 'the 1939
Act'). The owner under the 1939 Act was defined as follows:
"2. (19) 'owner' means, where the person in possession of a motor vehicle
is a minor, the guardian of such minor, and in relation to a motor vehicle
which is the subject of a hire-purchase agreement, the person in possession
of the vehicle under that agreement;"
The Court referred to the conditions 4 to 7 and 15 of the agreement
and in that context held thus:
"The admitted facts unmistakably show that the vehicle in question was in
possession and under the actual control of RSRTC for the purpose of running
on the specified route and was being used for carrying, on hire, passengers
by the RSRTC. The driver was to carry out instructions, orders and
directions of the conductor and other officers of the RSRTC for operation
of the bus on the route specified by the RSRTC".
While dealing with the definition of the owner under the 1939 Act,
the Court ruled that the definition of owner under Section 2(19) of the Act
is not exhaustive. It has, therefore to be construed, in a wider sense, in
the facts and circumstances of a given case. The expression owner must
include, in a given case, the person who has the actual possession and
control of the vehicle and under whose directions and commands the driver
is obliged to operate the bus. To confine the meaning of "owner" to the
registered owner only would in a case where the vehicle is in the actual
possession and control of the hirer would not be proper for the purpose of
fastening of liability in case of an accident. The liability of the "owner"
is vicarious for the tort committed by its employee during the course of
his employment and it [pic]would be a question of fact in each case as to
on whom can vicarious liability be fastened in the case of an accident.
After so stating, the Court proceeded to analyse the conditions of the
agreement, especially conditions 6 and 7 which in that case showed that the
owner had not merely transferred the services of the driver to the
Corporation but actual control and the driver was to act under the
instructions, control and command of the conductor and other officers of
RSRTC. Being of this view, it affirmed the view expressed by the High
Court and dismissed the appeal.
In this context, it is profitable to refer to a two-Judge Bench decision in
National Insurance Co. Ltd. V. Deepa Devi & Ors.[3] In the said case the
question arose whether in the event a car is requisitioned for the purpose
of deploying the same in the election duty, who would be liable for payment
of compensation to the victim of the accident in terms of the provisions of
1988 Act. The Court referred to the definition of 'owner' in the 1939 Act
and the definition of 'owner' under Section 2(30) of the 1988 Act. In that
context, the Court observed that the legislature either under the 1939 Act
or under the 1988 Act had visualized a situation of this nature. The Court
took note of the fact that the respondent no. 3 and 4 continued to be the
registered owners of the vehicle despite the fact that the same was
requisitioned by the District Collector in exercise of the power conferred
upon him under the Representation of People Act, 1951 and the owner of the
vehicle cannot refuse to abide by the order of requisition of the vehicle
by the District Collector. Proceeding further, the Court ruled thus:
"...... While the vehicle remains under requisition, the owner does not
exercise any control thereover. The driver may still be the employee of the
owner of the vehicle but he has to drive it as per the direction of the
officer of the State, who is put in charge thereof. Save and except for
legal ownership, for all intent and purport, the registered owner of the
vehicle loses entire control thereover. He has no say as to whether the
vehicle should be driven at a given point of time or not. He cannot ask the
driver not to drive a vehicle on a bad road. He or the driver could not
possibly say that the vehicle would not be driven in the night. The purpose
of requisition is to use the vehicle. For the period the vehicle remains
under the control of the State and/or its officers, the owner is only
entitled to payment of compensation therefor in terms of the Act but he
cannot not (sic) exercise any control thereupon. In a situation of this
nature, this Court must proceed on the presumption that Parliament while
enacting the 1988 Act did not envisage such a situation. If in a given
situation, the statutory definitions contained in the 1988 Act cannot be
given effect to in letter and spirit, the same should be understood from
the common sense point of view.
Elaborating the concept, the Court referred to Mukesh K. Tripathi V. Senior
Divisional Manager LIC[4], Ramesh Mehta V. Sanwal Chand Singhvi[5], State
of Maharashtra V. Indian Medical Assn.[6], Pandey & Co. Builders (P) Ltd.,
V. State of Bihar[7] and placed reliance on Kailash Nath Kothari (supra),
National Insurance Co. Ltd. V. Durdadahya Kumar Samal[8] and Chief Officer,
Bhavnagar Municipality V. Bachubhai Arjanbhai[9] and eventually opined the
State shall be liable to pay the amount of compensation to the claimant and
not the registered owner of the vehicle and consequently the appellant
therein, the insurance company.
In Godavari Finance Company V. Degala Satyanarayanamma and others[10], the
core question that arose for consideration whether a financier would be an
owner of the vehicle within the meaning of Section 2(30) of the 1988 Act.
It was contended before this Court that in terms of Section 168 of the Act,
a financier cannot be held liable to pay compensation as the definition of
'owner' as contained in Section 2(30) of the 1988 Act would mean only a
'registered owner'; that it was not the case of the claimants that the
appellant therein was in possession or control over the vehicle at the time
of accident and the findings recorded by the trial Court and the High Court
that the appellant as a registered owner was liable for payment of
compensation, was wholly unsustainable. The Court took note of the fact
that the appellant was a financier; that the vehicle was the subject matter
of hire-purchase agreement; and that the appellant's name was mentioned in
the registered book. Dealing with the definition of 'owner', the Court
opined that the definition of "owner" is a comprehensive one and the
dictionary clause itself states that the vehicle which is the subject-
matter of a hire-purchase agreement, the person in possession of vehicle
under that agreement shall be the owner; and that the name of financer in
the registration certificate would not be decisive for determination as to
who was the owner of the vehicle. The Court further opined that ordinarily
the person in whose name the registration certificate stands should be
presumed to be the owner but such a presumption can be drawn only in the
absence of any other material brought on record or unless the context
otherwise requires. The Court opined that in case of a motor vehicle which
is subjected to a hire-purchase agreement, the financer cannot ordinarily
be treated to be the owner. The person who is in possession of the vehicle,
and not the financer being the owner would be liable to pay damages for the
motor accident. In that context the Court observed that ordinarily if the
driver of the vehicle uses the same, he remains in possession or control
thereof. Owner of the vehicle, although may not have anything to do with
the use of vehicle at the time of the accident, actually he may be held to
be constructively liable as the employer of the driver. What is, therefore,
essential for passing an award is to find out the liabilities of the
persons who are involved in the use of the vehicle or the persons who are
vicariously liable. The insurance company becomes a necessary party to such
claims as in the event the owner of the vehicle is found to be liable, it
would have to reimburse the owner inasmuch as a vehicle is compulsorily
insurable so far as a third party is concerned, as contemplated under
Section 147 thereof. Thereafter, the Court relied upon the decisions in
Kailash Nath Kothari (supra) and Deepa Devi (supra) and came to hold that
the appellant was not liable to pay any compensation to the claimants.
In Pushpa alias Leela and others V. Shakuntala and others[11], the question
arose whether in the obtaining factual matrix therein the liability to pay
the compensation amount as determined by the tribunal was of the purchaser
of the vehicle alone or whether the liability of the recorded owner of the
vehicle was co-extensive and from the recorded owner it would pass on to
the insurer of the vehicle. The registered owner of the vehicle was one
Jitender Gupta who had sold the truck to one Salig Ram and handed over the
possession to the transferee and on the date of the sale, the truck was
covered by the insurance policy taken by Jitender Gupta. There was no
dispute that the policy stood in the name of Jitender Gupta on the date of
the accident who was no longer the owner of the truck as he had transferred
the vehicle to Salig Ram. The Tribunal had come to hold that Salig Ram
alone was liable for payment of compensation. On an appeal being
preferred, the High Court dismissed the appeals of the claimants. This
Court referred to the definition of the 'owner' under Section 2(30) of the
1988 Act that defines the owner and Section 50 of the 1988 Act that deals
with transfer of ownership. That apart, the Court also took note of the
fact that notwithstanding the sale of the vehicle, neither the transferor
Jitender Gupta nor the transferee Salig Ram took steps to change the name
of the owner in the certificate of registration of the vehicle. The Court
treated Jitender Gupta to be deemed to continue as the owner of the vehicle
for the purposes of the 1988 Act even though under the civil law he had
ceased to be its owner after its sale. While dealing with the facet of
liability, the Court referred to the authority in T.V. Jose (Dr.) V. Chacko
P.M.[12] wherein it has been held thus:
"There can be transfer of title by payment of consideration and delivery of
the car. The evidence on record shows that ownership of the car had been
transferred. However, the appellant still continued to remain liable to
third parties as his name continued in the records of RTO as the owner."
Thereafter, the Court held thus:
"The decision in T.V. Jose (Dr.) was rendered under the Motor Vehicles Act,
1939. But having regard to the provisions of Section 2(30) and Section 50
of the Act, as noted above, the ratio of the decision shall apply with
equal force to the facts of the case arising under the 1988 Act. On the
basis of these decisions, the inescapable conclusion is that Jitender
Gupta, whose name continued in the records of the registering authority as
the owner of the truck was equally liable for payment of the compensation
amount. Further, since an insurance policy in respect of the truck was
taken out in his name he was indemnified and the claim will be shifted to
the insurer, Oriental Insurance Company Ltd."
Be it noted, in the said case, the decision rendered in Deepa Devi
(supra) on the ground that it was rendered on the special facts of that
case and has no application to the facts of the case in hand. Being of
this view, it fastened the liability on the insurer.
In this context, another decision is apposite to be taken note of. In
Uttar Pradesh State Road Transport Coporation V. Kulsum and others[13], the
question arose if an insured vehicle is plying under an agreement or
contract with the Corporation, on the route as per permit granted in favour
of the Corporation, in case of an accident, whether the Insurance Company
would be liable to pay the compensation or would it be the responsibility
of the Corporation or the owner. The Court referred to Section 103 of the
1988 Act (Uttar Pradesh Amendment Act of 1993) wherein the Corporation has
been vested with the right to take vehicles on hire as per the contract and
to ply the same on the roads as the permit granted to it. In the said
case, according to the terms and conditions of the agreement, the mini-bus
was to be plied by the Corporation on the routes as per the permit issued
by the Regional Transport Officer in his favour. Except for the services
of the driver which were to be provided by the owner, all other rights of
the owner were to be exercised by the Corporation only. The conductor was
to be an employee of the Corporation and he was authorised and entitled to
collect the money after issuing tickets to the passengers and had the duty
to perform all the incidental and connected activities as a conductor on
behalf of the Corporation. When a claim was lodged before the Tribunal, it
allowed the claim petition placing reliance on Kailash Nath Kothari's case.
Being aggrieved, the Corporation preferred appeal and the owner of the bus
also filed a cross-objection against the finding recorded by the tribunal
holding therein that the insurance company was not liable to make the
payment and had fastened the liability on the owner on account of alleged
breach of insurance policy. The Court analysed the definition under
Section 2(30) of the 1988 Act, Section 103(1-A) which has been inserted by
the Uttar Pradesh Amendment Act 5 of 1993, Sections 146 and 149 of the 1988
Acts and thereafter referred to the authority in Kailash Nath Kothari
(supra) and distinguished the same by holding thus:-
"In our considered opinion, in the light of the drastic and distinct
changes incorporated in the definition of "owner" in the old Act and the
present Act, Kailash Nath case has no application to the facts of this
case. We were unable to persuade ourselves with the specific question which
arose in this and connected appeals as the question projected in these
appeals was neither directly nor substantially in issue in Kailash Nath
case. Thus, reference to the same may not be of much help to us.
Admittedly, in the said case, this Court was dealing with regard to earlier
definition of "owner" as found in Section 2(19) of the old Act.
xxx xxx xxx xxx
A critical examination of both the definitions of the "owner" would show
that it underwent a drastic change in the Act of 1988, already reproduced
hereinabove. In our considered opinion, in the light of the distinct
changes incorporated in the definition of "owner" in the old Act and the
present Act, Kailash Nath Kothari case shall have no application to the
facts of this case".
Thereafter, the Court referred to the relevant clauses in the agreement and
opined that:
"A critical examination thereof would show that the appellant and the owner
had specifically agreed that the vehicle will be insured and a driver would
be provided by owner of the vehicle but overall control, not only on the
vehicle but also on the driver, would be that of the Corporation. Thus, the
vehicle was given on hire by the owner of the vehicle together with its
existing and running insurance policy. In view of the aforesaid terms and
[pic]conditions, the Insurance Company cannot escape its liability to pay
the amount of compensation.
There is no denial of the fact by the Insurance Company that at the
relevant point of time the vehicle in question was insured with it and the
policy was very much in force and in existence. It is also not the case of
the Insurance Company that the driver of the vehicle was not holding a
valid driving licence to drive the vehicle. The Tribunal has also held that
the driver had a valid driving licence at the time of the accident. It has
also not been contended by it that there has been violation of the terms
and conditions of the policy or that the driver was not entitled to drive
the said vehicle".
After so stating, the Court took note of the fact that the insurance
company had admittedly received the amount of the premium; that there was
no difference in the tariff of premium in respect of the vehicles insured
at the instance of the owner or for the vehicle which is being attached
with the Corporation; that no statutory duty is cast on the owner under the
Act or under any rules to seek permission from the insurer to get the
vehicle attached with the Corporation. On the aforesaid reasoning, the
Court held the insurer liable.
Recently in Purnya Kala Devi V. State of Assam & Anr.[14], a three-Judge
Bench was dealing with the issue when an offending vehicle is that under
the requisition of the State Government under the Assam Requisition and
Control of Vehicles Act, 1968 ('Assam Act', for short) the registered owner
would be liable or the State Government that has requisitioned the vehicle.
The Court referred to the definition of the term 'owner' under the 1939
Act as well as the 1988 Act. As was necessary in the said case, the Court
referred to the relevant provisions pertaining to release from the
requisition under the Assam Act. After analyzing the provisions, the three-
Judge Bench set aside the award passed by the High Court which had held
that owner was liable solely on the basis of the definition of the word
'owner' contained in Section 2(30) of the 1988 Act. The dictum laid down
in the said case is as follows:
"The High Court failed to appreciate that at the relevant time the
offending vehicle was under the requisition of Respondent No. 1 - State
of Assam under the provisions of the Assam Act. Therefore, Respondent No.
1 was squarely covered under the definition of "owner" as contained in
Section 2(30) of the 1988 Act. The High Court failed to
appreciate the underlying legislative intention in including in the
definition of "owner" a person in possession of a vehicle either under an
agreement of lease or agreement of hypothecation or under a hire-
purchase agreement to the effect that a person in control and
possession of the vehicle should be construed as the "owner" and not
alone the registered owner. The High Court further failed to appreciate
the legislative intention that the registered owner of the vehicle should
not be held liable if the vehicle was not in his possession and control.
The High Court also failed to appreciate that Section 146 of the 1988 Act
requires that no person shall use or cause or allow any other person to
use a motor vehicle in a public place without an insurance policy meeting
the requirements of Chapter XI of the 1988 Act and the State
Government has violated the statutory provisions of the 1988 Act. "
(Emphasis supplied)
In the present case, as the facts have been unfurled, the appellant bank
had financed the owner for purchase of the vehicle and the owner had
entered into a hypothecation agreement with the bank. The borrower had the
initial obligation to insure the vehicle, but without insurance he plied
the vehicle on the road and the accident took place. Had the vehicle been
insured, the insurance company would have been liable and not the owner.
There is no cavil over the fact that the vehicle was subject of an
agreement of hypothecation and was in possession and control under the
respondent no.2. The High Court has proceeded both in the main judgment as
well as in the review that the financier steps into the shoes of the owner.
Reliance placed on Kachraji Rayamalji (supra), in our considered opinion,
was inappropriate because in the instant case all the documents were filed
by the bank. In the said case, two-Judge Bench of this Court had doubted
the relationship between the appellant and the respondent therein from the
hire-purchase agreement. Be that as it may, the said case rested on its
own facts. The decision in Kailash Nath Kothari (supra), the Court
fastened the liability on the Corporation regard being had to the
definition of the 'owner' who was in control and possession of the vehicle.
Similar to the effect is the judgment in Deepa Devi (supra). Be it
stated, in the said case the Court ruled that the State shall be liable to
pay the amount of compensation to the claimant and not the registered owner
of the vehicle and the insurance company. In the case of Degala
Satyanarayanamma (supra), the learned Judges distinguished the ratio in
Deepa Devi (supra) on the ground that it hinged on its special facts and
fastened the liability on the insurer. In Kulsum (supra), the principle
stated in Kailash Nath Kothari (supra) was distinguished and taking note of
the fact that at the relevant time, the vehicle in question was insured
with it and the policy was very much in force and hence, the insurer was
liable to indemnify the owner.
On a careful analysis of the principles stated in the foregoing cases, it
is found that there is a common thread that the person in possession of the
vehicle under the hypothecation agreement has been treated as the owner.
Needless to emphasise, if the vehicle is insured, the insurer is bound to
indemnify unless there is violation of the terms of the policy under which
the insurer can seek exoneration.
In Purnya Kala Devi (supra), a three-Judge Bench has categorically held
that the person in control and possession of the vehicle under an agreement
of hypothecation should be construed as the owner and not alone the
registered owner and thereafter the Court has adverted to the legislative
intention, and ruled that the registered owner of the vehicle should not be
held liable if the vehicle is not in his possession and control. There is
reference to Section 146 of the Act that no person shall use or cause or
allow any other person to use a motor vehicle in a public place without
insurance as that is the mandatory statutory requirement under the 1988
Act. In the instant case, the predecessor-in-interest of the appellant,
Centurion Bank, was the registered owner along with respondent no.2. The
respondent no. 2 was in control and possession of the vehicle. He had
taken the vehicle from the dealer without paying the full premium to the
insurance company and thereby getting the vehicle insured. The High Court
has erroneously opined that the financier had the responsibility to get the
vehicle insured, if the borrower failed to insure it. The said term in the
hypothecation agreement does not convey that the appellant financier had
become the owner and was in control and possession of the vehicle. It was
the absolute fault of the respondent no.2 to take the vehicle from the
dealer without full payment of the insurance. Nothing has been brought on
record that this fact was known to the appellant financier or it was done
in collusion with the financier. When the intention of the legislature is
quite clear to the effect, a registered owner of the vehicle should not be
held liable if the vehicle is not in his possession and control and there
is evidence on record that the respondent no.2, without the insurance plied
the vehicle in violation of the statutory provision contained in Section
146 of the 1988 Act, the High Court could not have mulcted the liability on
the financier. The appreciation by the learned Single Judge in appeal,
both in fact and law, is wholly unsustainable.
In view of the aforesaid premises, we allow the appeals and hold that the
liability to satisfy the award is that of the owner, the respondent no. 2
herein and not that of the financier and accordingly that part of the
direction in the award is set aside. However, as has been conceded to by
the learned senior counsel for the appellant, no steps shall be taken for
realisation of the amount. There shall be no order as to costs.
........................................J.
[DIPAK MISRA]
.........................................J.
[ROHINTON FALI NARIMAN]
........................................J.
[UDAY UMESH LALIT]
NEW DELHI
DECEMBER 01, 2014.
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[1] (1997) 9 SCC 103
[2]
(1997) 7 SCC 481
[3] (2008) 1 SCC 414
[4] (2004) 8 SCC 387
[5] (2004) 5 SCC 409
[6] (2002) 1 SCC 589
[7] (2007) 1 SCC 467
[8] (1988) 2 TAC 25 (Ori)
[9] AIR 1996 Guj. 51
[10] (2008) 5 SCC 107
[11] (2011) 2 SCC 240
[12] (2001) 8 SCC 748
[13] (2011) 8 SCC 142
[14] 2014 (4) SCALE 586
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