Does ‘owner’ as defined under Section 2(30) of the
Motor Vehicles Act, 1988 cover a financier who has entered into a hypothecation
agreement with the borrower, who is in possession and control of the vehicle?, and whether the financier, not in possession or control of the vehicle, can be mulcted with liability?–
were the questions that confronted the Apex Court in a case that was decided recently1.
 |
| "a registered owner of the vehicle should not be held liable if the vehicle is not in his possession and control", ruled the Supreme Court in a recent case |
Answering the issues in the negative, a Bench of
the Apex Court comprising Justices Dipak Misra, Rohinton Nariman and U.U. Lalit, held
that a
registered owner of the vehicle should not be held liable if the vehicle is not
in his possession and control.
First,
the facts: On 20.12.2002 about 12.30 p.m., the claimant was going on a scooter when
the Motor Cycle belonging to borrower and driven by another (3rd respondent
in the case), in a rash and negligent manner dashed against the scooter as a
consequence of which she sustained injuries. 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 Motor Accidents
Claims Tribunal awarded a sum of Rs.1,75,000/- with 6% interest to the claimant
and opined that all the non-applicants to the claim petition were jointly and
severally liable to pay the compensation amount. The compensation awarded by
the Tribunal was enhanced to Rs. 3,00,000/- by the High Court of Judicature of
Madhya Pradesh Bench at Indore in appeal.
The predecessor-in-interest
of the appellant- Bank contended 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, and it could not be held liable.
The High Court referred to the definition clause in
Section 2 (30) of the Motor Vehicles Act, 1988, 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 of the claimants.
Though the Bank preferred an application to review
the said judgment, it was also dismissed by the learned Single Judge of the
Madhya Pradesh High Court, whereupon the Bank approached the Supreme Court by
way of a special leave petition against the judgment of the High Court.
Mr.
Gopal Subramaniam, Senior Advocate, appearing for the appellant-Bank 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.
“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”,
contended Mr. Subramanium. It was 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 its
instance. Elaborating further, he 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.
The
respondents did not enter appearance in the case despite service of notice.
On a
careful analysis of the principles stated in Rajasthan State Road
Transport Corporation V. Kailash Nath Kothari & Others2, National
Insurance Co. Ltd. V. Deepa Devi & Ors3, Pushpa alias Leela and
others V. Shakuntala and others4, T.V. Jose (Dr.) V. Chacko P.M5, Uttar
Pradesh State Road Transport Corporation V. Kulsum and others5, and Purnya
Kala Devi V. State of Assam & Anr.6 among others, the
Apex Court 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.
In Purnya
Kala Devi (supra), the Court observed that 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.
The
Apex Court accordingly held that when the intention of the legislature is quite
clear to the effect that 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 borrower, 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.
In
coming to that conclusion, the Apex Court, relied on a line of decisions
referred to above, including the one reported in Godavari Finance Company
V. Degala Satyanarayanamma and others7, wherein the core
question that arose for consideration was whether a financier would be an owner
of the vehicle within the meaning of Section 2(30) of the 1988 Act. In that
case the Apex Court had 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.
The
Apex Court therefore had no hesitation in holding that the High Court had
erroneously opined that the financier had the responsibility to get the vehicle
insured, if the borrower failed to insure it. “The appreciation by
the learned Single Judge in appeal, both in fact and law, is wholly
unsustainable”,
held the Apex Court.Accordingly,
allowing the appeal filed by the Bank, the Apex Court held that
the liability to satisfy the award is that of the owner, and not that of the
financier and accordingly set aside that part of the direction in the award.
However,
taking into account the concession made by Mr. Gopal Subramanium, the Bench
directed that no
steps shall be taken for realisation of the amount.
__________
1. C.A.
Nos. 10608-10609 of 2014,
decided on 01.12.2014
2. (1997)
7 SCC 481
3. (2008)
1 SCC 414
4. (2011)
2 SCC 240
5 (2001)
8 SCC 748
6. (2011)
8 SCC 142
7. 2014
(4) SCALE 586
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