M/S. BALWANT SINGH & SONS versus NATIONAL INSURANCE COMPANY LTD & ANR. on 31 July 2019

[2019] 11 S.C.R. 693

M/S. BALWANT SINGH & SONS

v.

NATIONAL INSURANCE COMPANY LTD & ANR.

(Civil Appeal No. 5998 of 2019)

JULY 31, 2019

[DR. DHANANJAYA Y CHANDRACHUD AND

INDIRA BANERJEE, JJ.]

Motor Vehicles Act, 1988: ss. 50, 157 – Transfer of certificateof insurance – On facts, appellant purchased vehicle in auction –Insurance premium collected by insurer from the appellant-insured– However, insurance policy continued to reflect the name ofrespondent as insured and registration certificate still not transferred– Thereafter, loss of vehicle occasioned by theft – Insurance claimby insured – Claim rejected by insurer – Consumer complaint –Consumer Forum held that insurer not liable on the claim preferredfor loss of vehicle – On appeal, held: There was an acceptance ofpremium as also issuance of a policy document – After the transferof the vehicle, the insurer was specifically informed by the Bankwhich held a lien on the insurance policy, of the lifting of its lienfollowing the termination of the agreement of hypothecation –Following this, insurer issued insurance policy – More so, thirdrespondent did not raise any claim in respect of the loss of the vehiclesince the vehicle had already been repossessed and sold by thebank on account of its default in the payment of dues – Furthermore,loss of the vehicle took place in close proximity to the date of auctionpurchase – Thus, the insurer cannot repudiate the claim of theappellant holding that its liability is to the third respondent who hasno subsisting interest in the ownership in the vehicle and the claimof the insured is allowed.

Allowing the appeal, the Court

HELD : 1.1 Section 50 of the Motor Vehicles Act, 1988provides that where the ownership of any motor vehicle registeredunder Chapter IV is transferred, certain formalities have to befulfilled. The formalities require the transferor to report the

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Atransfer to the registering authority within whose jurisdiction thetransfer has to be effected and to send a copy of the report to thetransferee. The transferee also has to report the transfer to theregistering authority within whose jurisdiction he resides ormaintains a place of business where the vehicle is normally kept.The transferee has to forward the certificate of registration toBthe registering authority together with the prescribed fee and acopy of the report received from the transferor so that particularsof the transfer of ownership may be entered in the certificate ofregistration. [Para 13][700-B-D]

1.2 As a result of s. 157, where a person in whose favourCthe certificate of insurance has been issued in terms of theprovisions of Chapter XI transfers the ownership of the vehicleto another person, the certificate of insurance and the policydescribed in the certificate are deemed to have been transferredin favour of the new owner to whom the motor vehicle is Dtransferred, with effect from the date of its transfer. [Para 17][702-E-F]

In the instant case, not only was there an acceptance ofpremium but the issuance of a policy document. The insurer hadknowledge of the transfer when the Bank informed it of the liftingEof the lien. In the instant case, the Court is dealing with a situationwhere following the transfer of the vehicle, the insurer wasspecifically informed by the Bank which held a lien on theinsurance policy, of the lifting of its lien following the terminationof the agreement of hypothecation. Following this, a policy ofinsurance was issued by the insurer. Admittedly the payment ofFpremium was made by the appellant. The third respondent didnot set up any claim in respect of the loss of the vehicle since thevehicle had already been repossessed and sold by the bank onaccount of its default in the payment of dues. The insurer cannotrepudiate the claim of the appellant holding that its liability is toGthe third respondent who has no subsisting interest in theownership in the vehicle. The appellant has undertaken to furnishan indemnity to the insurer against any claim at the behest of thethird respondent. The transfer of the vehicle is not in dispute.[Paras 25-27] [706-F-H; 707-A]

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1.4 The insurer adopted a basis which was unsustainableto repudiate the insurance claim. The loss of the vehicle tookplace in close proximity to the date of auction purchase. The claimin the amount of Rs 2,42,000 is allowed on which the appellantshall be entitled to interest at the rate of 9% per annum from thedate on which the claim was lodged until payment. [Para 28][707-B]

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Life Insurance Corporation of India v. Raja VasireddyKomalavalli Kamba 1984 ACJ 345 ; CompleteInsulations (P) Ltd v. New India Assurance Co Ltd(1996) 1 SCC 221 : [1995] 5 Suppl. SCR 500 ; PrakashChand Daga v. Saveta Sharma (2019) 1 SCALE 2 ;Naveen Kumar v. Vijay Kumar (2018) 3 SCC 1 : [2018]2 SCR 572 ; T V Jose v. Chacko PM (2001) 8 SCC748 : [2001] 3 Suppl. SCR 366 ; P P Mohammed v. K.Rajappan (2008) 17 SCC 624 ; Pushpa v. Shakuntala(2011) 2 SCC 240 : [2011] 1 SCR 334 - referred to.

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CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5998of 2019.

From the Judgment and Order dated 11.03.2014 of the NationalConsumer Dispsutes Redressal Commission, New Delhi in RevisionPetition No. 2809 of 2013.

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Rohit Sharma, Raunak Nayak, Atul Agarwal, Anshul Chowdhary,Kumar Dushyant Singh, Advs. for the Appellants.

AMrs. Nanita Sharma, Vivek Sharma, Amardeep Sharma, BajrangLal Jat, Advs. for the respondents.

The Judgment of the Court was delivered by DR DHANANJAYA Y CHANDRACHUD, J.B1. Leave granted.

2. This appeal arises from a judgment of the National ConsumerDisputes Redressal Commission[1] dated 11 March 2014 dismissing arevision petition filed by the appellant. The NCDRC upheld the view ofthe District Consumer Disputes Redressal Forum, Jalandhar[2] and of theCState Consumer Disputes Redressal Commission, Chandigarh[3] that theinsurer was not liable on a claim preferred under a policy of insurancefor the loss of a vehicle occasioned by theft.

3. The third respondent entered into a Hire Purchase Agreementwith ICICI Bank[4], the second respondent through its Branch at JalandharDin respect of a vehicle. Pursuant to the agreement, the third respondentpaid a few instalments but then committed a default upon whichpossession of the vehicle was taken by the Bank. The vehicle was putup for auction on 31 March 2006 and was purchased by the appellantfor a consideration of Rs 2,42,000. Besides the payment of an amount ofRs 5,000 as earnest money, the appellant paid the balance by a chequeEdated 31 March 2006 drawn on the State Bank of Bikaner & Jaipur.Possession of the vehicle was handed over to the appellant on 7 April2006 after the cheque was encashed together with a certificate ofpossession of the vehicle. The Bank issued a letter dated 19 April 2006to the first respondent, which had insured the vehicle, for the cancellationof the entry of hypothecation from the registration certificate of theFvehicle. On 22 May 2006, the appellant got the vehicle insured by thefirst respondent in the amount of Rs 3,28,100 against payment of apremium in the amount of Rs. 6,999. An insurance policy was issued bythe first respondent. The name of the insured was reflected as the thirdrespondent but significantly the address section in the policy documentGcontained the name of the appellant together with its business address.

1 “NCDRC”2 “District Forum”

3 “SCDRC”H4 “Bank”

4. According to the appellant, insurance premium was collectedby the insurer from it but since the registration certificate was still to betransferred, the insurance policy continued to reflect the name of thethird respondent as the insured.

5. The appellant applied for and obtained a certificate of exemptionfrom the Regional Transport Authority so as to facilitate the transfer ofthe registration certificate to its name. The certificate of exemption wason the ground that the vehicle was exempted from obtaining a routepermit.

6. The vehicle was stolen on the intervening night between 13and 14 June 2006. The appellant lodged a First Information Report aboutthe incident on 14 June 2006 and the first respondent was informed on 4July 2006.

7. On 12 October 2006, the police issued a certificate to the effectthat the vehicle was untraced. On 19 October 2006, the appellant lodgeda claim for the loss of the vehicle with the first respondent and enclosedthe registration certificate, FIR and the certificate of the police statingthat the vehicle was untraced.

8. On 16 November 2006, the first respondent rejected the claimon the ground that the ownership of the vehicle and the insurance policystood in the name of the third respondent and on the ground that thebank had a financial interest. The first respondent stated that the vehiclemust have been insured by the Bank as well. The claim was also rejectedon the ground that the appellant did not have an insurable interest. Theappellant addressed a letter dated 28 November 2006 to the firstrespondent. However, the claim was repudiated on 21 March 2007 bythe insurer on the ground that the appellant had no insurable interestsince the registration certificate was not transferred to it. The rejectionof the claim led to the filing of a consumer complaint before the DistrictForum at Jalandhar. The claim was dismissed on 30 April 2008. Theorder of the District Forum was upheld by the State Commission on 22March 2013 in appeal and, in revision, by the NCDRC on 11 March2014.

9. Assailing the view which has prevailed with the consumer fora,Mr Rohit Sharma, learned counsel appearing on behalf of the appellantsubmitted that it is undisputed that the appellant purchased the vehicle inan auction sale conducted by Bank following a default committed by the A

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Aoriginal owner in the payment of instalments under a Hire-PurchaseAgreement. The Bank handed over to the appellant a certificate ofpossession upon receiving the full bid consideration at the auction sale.The Bank also informed the insurer of its ceasing to have a claim on thevehicle based on the deed of hypothecation entered into by it with theerstwhile owner. Following this, premium for the insurance cover wasBaccepted by the insurer from the appellant. The insurance policy thoughissued in the name of the third respondent, reflected the name of theappellant and this was on the clear understanding of the insurer that theappellant had paid the premium and obtained the cover of insurance asthe owner of the vehicle. In the circumstances, it was submitted that theCinsurer, having accepted the premium from the appellant, has absolutelyno ground to repudiate the policy. It was urged in support of the abovesubmission that the decisions of this Court in the context of third partyliability, in view of the provisions of Chapter XI of the Motor VehiclesAct, 1988[5], more particularly Section 157, stand on a distinct footing. Inthat context, it has been held that the erstwhile owner of a vehicle wouldDcontinue to be jointly liable with the insurer even after the transfer of thevehicle, unless the transfer is reflected in the registration certificate ofthe vehicle. Learned counsel submitted that this can have no applicationto a claim by the transferee against the insurer in a case such as thepresent where the loss or damage is sustained on account of a theft ofthe vehicle.E

10. On the other hand, affirming the correctness of the view whichhas been taken by the consumer fora, Ms. Nanita Sharma, learned counselappearing on behalf of the Respondents submitted that there is no privityof contract between the appellant and the insurer. Learned counsel reliedupon the decisions of this Court in Life Insurance Corporation ofFIndia vs Raja Vasireddy Komalavalli Kamba[6]; (ii) CompleteInsulations (P) Ltd vs New India Assurance Co Ltd[7] ; (iii) PrakashChand Daga vs Saveta Sharma[8 ]and (iv) Naveen Kumar vs VijayKumar[9] in support of the submission that until the name of the transfereeis reflected in the registration certificate, the insurance company wouldnot be liable. It was urged that in the present case, the appellant had noG

5 Act of 19886 1984 ACJ 345 (1)7 (1996) 1 SCC 2218 (2019) 1 SCALE 2H9 (2018) 3 SCC 1

M/S. BALWANT SINGH & SONS v. NATIONAL INSURANCECOMPANY LTD & ANR. [DR DHANANJAYA Y CHANDRACHUD, J.]

insurable interest since the vehicle was not transferred in its name andconsequently the insurer was within its rights in repudiating the claimunder the policy.

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11. The basic facts are not in dispute. What is not in dispute is that:

(i) The appellant purchased the vehicle at an auction conductedBby the Bank to whom the vehicle was hypothecated inpursuance of a Hire-Purchase agreement;

(ii) The appellant paid full consideration for the sale which wasconducted in an auction to the Bank; C

(iii) A certificate of possession was furnished to the appellantby the Bank;

(iv) The Bank intimated the insurer that it ceased to have a lienon the vehicle consequent to the auction sale;

(v) The proposal for insurance was submitted by the appellantto the insurer;D

(vi) Premium in respect of the insurance cover was paid by theappellant; and

(vii) The policy of insurance was issued by the insurer in thename of the third respondent but clearly reflecting the nameof the appellant as well. Evidently, in this background, thereference of the appellant was not just for the purposes ofa postal address.

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12. Now it is in this background that it becomes necessary todetermine the correctness of the basis for the repudiation of the insuranceclaim by the insurer. Essentially, the contention of the insurer is thatunless the transfer is reflected in the registration certificate issued bythe Regional Transport Authority, the insurer would not be liable and theownership would continue to stand in the name of the erstwhile owner.In this context, it becomes necessary to analyse the provisions of theMotor Vehicles Act, 1988 and the basis on which the decisions whichwere relied upon by the insurer have been rendered. Section 2(30) definesthe expression “owner” in the following terms:

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“Section 2(30) - “owner” means a person in whose name a motorvehicle stands registered, and where such person is a minor, theguardian of such minor, any in relation to a motor vehicle which isthe subject of a hire-purchase agreement, or an agreement of H

Alease or an agreement of hypothecation, the person in possessionof the vehicle under that agreement;”

13. Section 50 provides that where the ownership of any motorvehicle registered under Chapter IV is transferred, certain formalitieshave to be fulfilled. The formalities require the transferor to report theBtransfer to the registering authority within whose jurisdiction the transferhas to be effected and to send a copy of the report to the transferee.The transferee also has to report the transfer to the registering authoritywithin whose jurisdiction he resides or maintains a place of businesswhere the vehicle is normally kept.

C14. The transferee has to forward the certificate of registration tothe registering authority together with the prescribed fee and a copy ofthe report received from the transferor so that particulars of the transferof ownership may be entered in the certificate of registration. Sub-section (1) of Section 50 provides as follows:

D“Section 50 Transfer of ownership –(1) Where the ownership ofany motor vehicle registered under this Chapter is transferred, - (a) the transferor shall, -

(i) in the case of a vehicle registered within the same State, withinfourteen days of the transfer, report the fact of transfer, inEsuch form with such documents and in such manner, as maybe prescribed by the Central Government to the registeringauthority within whose jurisdiction the transfer is to be effectedand shall simultaneously send a copy of the said report to thetransferee; and F(ii) in the case of a vehicle registered outside the State, withinforty five days of the transfer, forward to the registeringauthority referred to in sub-clause (i) - (A) the no objection certificate obtained under section 48; or (B) in a case where no such certificate has obtained, - G

(I) the receipt obtained under sub-section (2) of section 48;or

(II) the postal acknowledgment received by the transferee ifhe has sent an application in this behalf by registered post H

acknowledgment due to the registering authority referredto in section 48, together with a declaration that he ha snot received anycommunication from such authority refusing to grant suchcertificate or requiring him to comply with any directionsubject to which such certificate may be granted;

(b) the transferee shall, within thirty days of the transfer, reportthe transfer to the registering authority within whosejurisdiction he has the residence or place of business wherethe vehicle is normally kept as the case may be, and shallforward the certificate of registration to that registeringauthority together with the prescribed fee and a copy of thereport received by him from the transferor in order thatparticulars of the transfer of ownership may be entered inthe certificate of registration.”

15. Sub-section (3) of Section 50 provides the consequence of afailure to fulfil the obligation under sub-Section (1) in the following terms:

“(3) If the transferor or the transferee fails to report to theregistering authority the fact of transfer within the period specifiedin clause (a) or clause (b) of sub-section (1), as the case may be,or if the person who is required to make an application under sub-section (2) (hereafter in this section referred to as the other person)fails to make such application within the period prescribed, theregistering authority may, having regard to the circumstances ofthe case, require the transferor or the transferee, or the otherperson, as the case may be, to pay, in lieu of any action that maybe taken against him under section 177 such amount not exceedingone hundred rupees as may be prescribed under sub-section (5):

Provided that action under section 177 shall be taken against thetransferor or the transferee or the other person, as the case maybe, where he fails to pay the said amount.”

16. Chapter XI provides for the insurance of motor vehicles againstthird party risks. Section 146 prohibits the use of a motor vehicle in apublic place unless there is in force in relation to its use, a policy ofinsurance complying with the requirements of the Chapter. Section 147specifies the requirements of such a policy and the limits of liability.

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ASection 149 imposes a duty on the insurer to satisfy judgments and awardsagainst persons insured against third party risks. Section 157 deals withthe transfer of the certificate of insurance:

“157. Transfer of certificate of insurance - (1) Where a person inwhose favour the certificate of insurance has been issued inaccordance with the provisions of this Chapter transfers to anotherperson the ownership of the motor vehicle in respect of whichsuch insurance was taken together with the policy of insurancerelating thereto, the certificate of insurance and the policy describedin the certificate shall be deemed to have been transferred infavour of the person to whom the motor vehicle is transferredwith effect from the date of its transfer.

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Explanation.— For the removal of doubts, it is hereby declaredthat such deemed transfer shall include transfer of rights andliabilities of the said certificate of insurance and policy of insurance.

(2) The transferee shall apply within fourteen days from the dateof transfer in the prescribed form to the insurer for makingnecessary changes in regard to the fact of transfer in the certificateof insurance and the policy described in the certificate in his favourand the insurer shall make the necessary changes in the certificateand the policy of insurance in regard to the transfer of insurance.”

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17. As a result of the above provision, where a person in whosefavour the certificate of insurance has been issued in terms of theprovisions of Chapter XI transfers the ownership of the vehicle to anotherperson, the certificate of insurance and the policy described in thecertificate are deemed to have been transferred in favour of the newowner to whom the motor vehicle is transferred, with effect from theFdate of its transfer.

18. The above provisions have been the subject matter of severaldecisions of this Court. In Complete Insulations(P) Ltd (supra), arequest was made to the insurer for the transfer of the certificate ofinsurance prior to the enforcement of the Motor Vehicles Act, 1988 on 1GJuly 1989. The vehicle met with an accident but the insurer repudiatedthe claim on the ground that the appellant had no insurable interest. Theclaim was, allowed by the District Forum but the decision was set asideby the NCDRC.

19. In that context, a three judge Bench of this Court held thus:

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19. In that context, a three judge Bench of this Court held thus:

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“10. There can be no doubt that the said chapter provides forcompulsory insurance of vehicles to cover third-party risks. Section 146forbids the use of a vehicle in a public place unless there is in force inrelation to the use of that vehicle a policy of insurance complying withthe requirements of that chapter. Any breach of this provision mayattract penal action. In the case of property, the coverage extends toproperty of a third penal action. In the case of property, the coverageextends to property of a third party i.e. a person other than the insured.This is clear from Section 147(1)(b)(i) which clearly refers to “damageto any property of a third party” is Rupees six thousand only as pointedout earlier. That is why even the Claims Tribunal constituted under Section165 is invested with jurisdiction to adjudicate upon claims for compensationin respect of accidents involving death of or bodily injury to personsarising out of the use of motor vehicles, or damage to any property of athird party so arising, or both. Here also it is restricted to damage tothird-party property and not the property of the insured. Thus, the entireChapter XI of the new Act concerns third-party risks only. It is, therefore,obvious that insurance is compulsory only in respect of third-partyrisks since Section 146 prohibits the use of a motor vehicle in apublic place unless there is in relation thereto a policy of insurancecomplying with the requirements of Chapter XI. Thus, therequirements of that chapter are in relation to third-party risksonly and hence the fiction of Section 157 of the new Act must belimited thereto. The certificate of insurance to be issued in theprescribed form (See Form 51 prescribed under Rule 141 of the CentralMotor Vehicles Rules, 1989) must, therefore, relate to third party risks.Since the provisions under the New Act and the Old Act in this behalfare substantially the same in relation to liability in regard to third parties,the National Consumer Disputes Redressal Commission was right in theview it took based on the decision in Kondaiah case because thetransferee insured could not be said to be a third party qua thevehicle in question. It is only in respect of third party risks that Section157 of the New Act provides that the certificate of insurance togetherwith the policy of insurance described therein “shall be deemed to havebeen transferred in favour of the person to whom the motor vehicle istransferred”. If the policy of insurance covers other risks as well,e.g., damage caused to the vehicle of the insured himself, thatwould be a matter falling outside Chapter XI of the New Act andin the realm of contract for which there must be an agreement AB

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Abetween the insurer and the transferee, the former undertakingto cover the risk or damage to the vehicle. In the present casesince there was no such agreement and since the insurer had nottransferred the policy of insurance in relation thereto to thetransferee, the insurer was not liable to make good the damageto the vehicle. The view taken by the National Commission is thereforeBcorrect.”

(emphasis supplied)

20. This Court dealt with the provisions of Chapter XI and explainedthat it concerns only third party risks and as a result, the fiction containedCin Section 157 must be limited for that purpose. The above extractemphasises that if the policy covers other risks, that would be a matterwhich falls outside Chapter XI and would rest in the domain of contractfor which there has to be an agreement between the insurer and thetransferee. In that case the Court held that there was no such agreementsince the insurer had not transferred the policy of insurance in relationDthereto to the transferee and was held therefore not to be liable to makegood the damage.

21. Another line of judgments specifically deals with the obligationto satisfy third party claims with reference to the provisions contained inChapter XI. A three judge Bench of this Court in Naveen Kumar (supra)Eadverted to the judgments of this Court in T V Jose vs Chacko PM[10],P P Mohammed vs K. Rajappan[11] and Pushpa vs Shakuntala[12] andheld thus:

“13. The consistent thread of reasoning which emerges from theabove decisions is that in view of the definition of the expressionF“owner” in Section 2(30), it is the person in whose name the motorvehicle stands registered who, for the purposes of the Act, wouldbe treated as the “owner”. However, where a person is a minor,the guardian of the minor would be treated as the owner. Wherea motor vehicle is subject to an agreement of hire purchase, leaseor hypothecation, the person in possession of the vehicle underGthat agreement is treated as the owner. In a situation such as thepresent where the registered owner has purported to transfer thevehicle but continues to be reflected in the records of the 10 (2001) 8 SCC 74811 (2008) 17 SCC 624H12 (2011) 2 SCC 240

Registering Authority as the owner of the vehicle, he would notstand absolved of liability. Parliament has consciouslyintroduced the definition of the expression “owner” inSection 2(30), making a departure from the provisions ofSection 2(19) in the earlier 1939 Act. The principleunderlying the provisions of Section 2(30) is that the victimof a motor accident or, in the case of a death, the legal heirsof the deceased victim should not be left in a state ofuncertainty. A claimant for compensation ought not to beburdened with following a trail of successive transfers, whichare not registered with the Registering Authority. To holdotherwise would be to defeat the salutary object and purposeof the Act. Hence, the interpretation to be placed mustfacilitate the fulfilment of the object of the law. In thepresent case, the first respondent was the “owner” of thevehicle involved in the accident within the meaning ofSection 2(30). The liability to pay compensation stands fastenedupon him. Admittedly, the vehicle was uninsured. The High Courthas proceeded upon a misconstruction of the judgments of thisCourt in Reshma and Purnya Kala Devi”

22. This position of law was subsequently followed by a two judgeBench in Prakash Chand Daga (supra).

23. The principle that emerges from the precedents of this Courtis that even though in law there would be a transfer of ownership of thevehicle, that by itself would not absolve the person in whose name thevehicle stands in the registration certificate, from liability to a third party.So long as the name of the registered owner continues in the certificateof registration in the records of the RTO, that person as an owner wouldcontinue to be liable to a third party under Chapter XI of the MotorVehicles Act, 1986. The above decisions, therefore, deal with the obligationof the registered owner to meet third party claims.

24. The principles which have been elucidated by this Court in thecontext of the liability of the registered owner of the vehicle in satisfyingthird party claims consequently has no application to the present case.For this reason, the three judge Bench of this Court in CompleteInsulations (P) Ltd (supra) carefully noted that third party claims withreference to insurance policies issued under Chapter XI stand on adifferent footing. Hence, it was held that if the policy of insurance coversother risks, that would be a matter of the contract of insurance betweenthe insurer and the transferee in whose favour the risk is assumed. In AB

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ARaja Vasireddy (supra), a two judge Bench of this Court has observedthat the mere receipt and retention of premium until after the death ofthe applicant for insurance or the mere preparation of a policy documentdoes not constitute acceptance and that acceptance must be signified byby some act or acts agreed on by the parties or from which the law mayraise a presumption. It has been further held:B

“15. Though in certain human relationships silence to a proposalmight convey acceptance but in the case of insurance proposalsilence does not denote consent and no binding contract arisesuntil the person to whom an offer is made says or does somethingto signify his acceptance. Mere delay in giving an answer cannotbe construed as an acceptance, as, prima facie, acceptance mustbe communicated to the offeror. The general rule is that thecontract of insurance will be concluded only when the party towhom an offer has been made accepts it unconditionally andcommunicates his acceptance to the person making the offer…..

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17. Having regard to the clear position in law about acceptanceof insurance proposal and the evidence on record in this case, weare, therefore, of the opinion that the High Court was in error incoming to the conclusion that there was a concluded contract ofinsurance between the deceased and the Life InsuranceCorporation and on that basis reversing the judgment and thedecision of the learned Subordinate Judge.”

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25. In the present case, not only was there an acceptance ofpremium but the issuance of a policy document. The insurer hadknowledge of the transfer when the Bank informed it of the lifting of theFlien.

26. In the present case, the Court is dealing with a situation wherefollowing the transfer of the vehicle, the insurer was specifically informedby the Bank which held a lien on the insurance policy, of the lifting of itslien following the termination of the agreement of hypothecation.GFollowing this, a policy of insurance was issued by the insurer. Admittedlythe payment of premium was made by the appellant. The third respondentdid not set up any claim in respect of the loss of the vehicle since thevehicle had already been repossessed and sold by the bank on accountof its default in the payment of dues. The insurer cannot repudiate theHclaim of the appellant holding that its liability is to the third respondent who has no subsisting interest in the ownership in the vehicle. Theappellant has undertaken to furnish an indemnity to the insurer againstany claim at the behest of the third respondent.

27. The transfer of the vehicle is not in dispute.

28. The insurer adopted a basis which was unsustainable torepudiate the insurance claim. The loss of the vehicle took place inclose proximity to the date of auction purchase. We allow the claim inthe amount of Rs 2,42,000 on which the appellant shall be entitled tointerest at the rate of 9% per annum from the date on which the claimwas lodged until payment.

29. The appeal is allowed in the above terms. There shall be noorder as to costs.

Nidhi Jain

Appeal allowed.

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