India: Sold Your Car And Didn't Change Ownership? Act Now.

'Have you sold your vehicle and not transferred the ownership? Beware! You may land yourself in a great deal of difficulty'. You may have come across the afore-stated lines or similarly stated lines in many 'Auto-Industry' related promotions and advertisements. For a layman person, this may be threatening enough to ensure immediate compliance i.e., transfer of ownership after the sale of the vehicle and rightly so. But for those who have cared less or plead ignorance of law, now is the time to act.

Recently, the Hon'ble Supreme Court in its judgment Surendra Kumar Bhilwale v. The New India Company Assurance Limited¹ dated 18.06.2020 has re-affirmed that the person in whose name the motor vehicle stands registered, would be treated as the owner of the vehicle for the purpose of the Motor Vehicle Act, 1988 ("MVA"). The Hon'ble Supreme Court drew support from its earlier judgment in Naveen Kumar v. Vijay Kumar and Ors.², wherein the Bench observed:

"Even though in law there would be a transfer of ownership of the vehicle, that, by itself, would not absolve the party, in whose name the vehicle stands in RTO records, from liability to a third person ...Merely because the vehicle was transferred does not mean that such registered owner stands absolved of his liability to a third person. So long as his name continues in RTO records, he remains liable to a third person."

Evidently, this is not a res integra question that the Hon'ble Supreme Court has laid down in Surendra Kumar's case (supra). It has only reiterated the prevailing law perhaps to remind the Foras below to follow its dictum laid down in Pushpa @ Leela & Ors. vs. Shakuntala³ and Naveen Kumar vs. Vijay Kumar (supra) wherein the Hon'ble Supreme Court observed:

"However, the dictum of this Court that the registered owner continues to remain owner and when the vehicle is Insured in the name of the registered owner, the Insurer would remain liable notwithstanding any transfer, would apply equally in the case of claims made by the insured himself in case of an accident. If the insured continues to remain the owner in law in view of the statutory provisions of the Motor Vehicles Act, 1988 and in particular Section 2(30) thereof, the Insurer cannot evade its liability in case of an accident."

In Surendra Kumar's case, the truck of the insured (Surendra Kumar) met with an accident and a claim thereof was filed with the insurer (New India Insurance Company). The Surveyor appointed by the insurer, however, repudiated the claim inter alia on the ground that the truck was sold to another party. The fact that the insured continued to be the registered owner was not disputed. Both the District Forum and the State Commission gave concurrent findings and allowed the claim of the insured. However, the NCDRC in Revision Petition overturned the concurrent findings of the District Forum and State Commission. The NCDRC observed that when an owner of a vehicle sells his vehicle and executes a sale letter, the ownership in the vehicle passes to the purchaser on execution of the sale letter. In Appeal the Supreme Court observed that the NCDRC while reversing the concurrent findings of the District Forum and State Commission failed to answer many material questions including 'could ownership of the said truck be transferred without transfer of registration in the name of the transferee, in view of the Motor Vehicle Act, 1988 and the Rules framed thereunder'. Answering the same in negative, the Supreme Court overturned the decision of NCDRC relying on the decisions rendered in Pushpa @ Leela & Ors. vs. Shakuntala (supra) and Naveen Kumar vs. Vijay Kumar (supra) wherein the law relating to responsibility of the registered owner of the vehicle was authoritatively settled. Taking note of the observations in Naveen Kumar's case, the Bench said:

"35. The National Commission overlooked the definition of 'owner' in Section 2(30) of the Motor Vehicle Act, 1988. In Section 2(30) 'owner' has been defined to mean "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"......... 36. It would also be pertinent to note the difference between the definition of owner in Section 2(30) of the Motor Vehicles Act, 1988 and the definition of owner in Section 2(19) of the Motor Vehicles Act, 1939 which has been repealed and replaced by the Motor Vehicles Act, 1988. Under the old Act 'owner' meant the person in possession of a motor vehicle. The definition has undergone a change. Legislature has consciously changed the definition of 'owner' to mean the person in whose name the motor vehicle stands.......48. In view of the definition of the expression 'owner' in Section 2(30) of the Motor Vehicles Act, 1988, it is the person in whose name the motor vehicle stands registered, who, for the purposes of the said Act, would be treated as the owner of the vehicle. Where the registered owner purports to transfer the vehicle, but continues to be reflected in the records of the Registering Authority as the owner of the vehicle, he would not stand absolved of his liability as owner."

If one studies the facts of Naveen Kumar v. Vijay Kumar and Ors., I reckon that no person would dare to make the mistake of not transferring the ownership of the vehicle immediately after the sale of the vehicle. In that case Vijay Kumar had sold his car to another person on July 12, 2007. That person further sold the car on September 18, 2008. This third owner then sold the car to one Naveen Kumar who claimed before the Motor Accidents Claim Tribunal that he sold it to fifth person. While the car was allegedly in possession of the fifth person but driven by another person, an accident took place on May 27, 2009, in which one person was killed and other injured. The Tribunal awarded compensation and ordered Vijay Kumar whose name appeared in the registration certificate, to be jointly liable with the driver of the car. The order of the Tribunal was eventually upheld by the Supreme Court.

The maxim 'caveat emptor' in the case of sale of vehicle does not hold true. The Legislature has consciously introduced the definition of the expression 'owner' in Section 2(30) of MVA, 1988 making departure from the provisions of Section 2(19) in the earlier Act of 1939. The principle underlying the provisions of Section 2(30) is that the victim of a motor accident or in case of a death, the legal heirs of deceased should not be left in a state of uncertainty. The decision of the Supreme Court has far-reaching consequences in case of those owners who have sold the vehicles and not taken steps to effect change in ownership with the registering authority. It will now be in the interest of the owners to check whether the purchaser has been recorded as the owner of the vehicle sold by them and if not so done, act now.

Footnotes 

1 Civil Appeal No. 2632 of 2020 dated 18.06.2020

2 (2018) 3 SCC 1

3 (2011) 2 SCC 240