Children in their death punish us for not keeping this
world safe for them. The scar of Kumbakonam incident is still in our collective
conscious and the guilt aggravates when each time our little ones slipping into
abandoned bore-wells. This time, they took revenge by locking themselves inside
a car, parked negligently in a public place; no respite for souls with
conscience, it seems.
Our hearts went to the parents of these playful kids;
we can understand their misery from the severity with which it hit, even the
strangers like us. No money can compensate the deaths but our laws know no
better way than to provide compensation to pull them out of their shock!
Since those deaths were caused by the use of a motor
vehicle, their right to claim compensation lies within the realm of the Motor
Vehicles Act’ 1988. Under The owner is expected to pay the compensation under
Section 168. Since the vehicle had been seized by the financier who removed it
from the possession and control of the owner, is it possible to fasten the
registered owner with such liability?
The answer lies is Section 2 (30) which defines the
term owner as “a person in whose name a motor vehicle stands registered …………….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”
Hence between the registered owner and the financier,
the financier as ‘owner’ is liable to pay the compensation.
It is most likely the vehicle had an effective
insurance cover against claims of third party victims. It is a private car and
hence, if the vehicle is covered only by an Act Policy (A Policy or Liability
only Policy), the insurer may contend that as the children where inside the
car, they are not covered as they were not third parties. Such contention can
be easily rejected as it was not the intention of those children to be its
passengers and without any kind of relation with the owner/ financier;
strangers they were and naturally third parties though they were inside the
car, while suffering death.
Such issue may not arise, if the car was covered under
a Package Policy (B Policy or Comprehensive Policy) which would compensate both
third parties as well as passengers.
The insurer may contend that under the Policy of
insurance, they have agreed to insure only the registered owner; there was no
privity of contract between them and the owner/financier. No financier takes
pain to intimate the insurer about the transfer of ownership as provided under
Section 157. There is no cause for alarm as our Courts have consistently held
that the failure to carry out the obligation under Section 157 would not affect
the third party victim’s right to claim the compensation from the insurer as
the Policy would run with the vehicle and the transfer is automatic as against
the claim of the victims. Accordingly the parents of those children can receive
the compensation from the insurer.
Lastly, whether the insurer can ask the
owner/financier to reimburse the money it paid as compensation? The insurer is
to establish the financier has failed in its statutory duties in seizing the
vehicle and transferring the policy; possibly it may succeed.
On the seizure and the possession of the vehicle, is
it necessary for the financier to have the registration of the vehicle in its
name, to buy or transfer insurance in its name?
Though under Section 39 it is compulsory to register
the vehicle, it was not necessary when it was in the possession of a dealer.
Section 39. Necessity
for registration .-
No person shall drive any motor vehicle and no owner of a motor vehicle shall
cause or permit the vehicle to be driven in any public place or in any other
place unless the vehicle is registered in accordance with this Chapter ………………………………………
Provided that nothing in this section shall apply to a motor vehicle in possession
of a dealer.
Section 2(8)
defines dealer as someone ‘engaged ………………………….
(d) in the
business of hypothecation, leasing or hire-purchase of motor Vehicle’
It seems it is
not necessary for the financier to register the vehicle. However in order to get
such exemption, the dealer has to obtain what is known as Trade Certificate as
provided under Rule 35 of the Central Motor Vehicle Rules’1989.
The trade certificate
can be used under Rule 41(h) for removing the vehicle after it has been taken
possession of by or on behalf of the financier due to any default on the part
of the other party under the provisions of an agreement of hire-purchase, lease
or hypothecation.
The other option
for the financier is to apply for temporary registration under Section 41 as it
is specifically provided under Section 41(3) In a case where the motor vehicle
is held under hire-purchase agreement, lease or hypothecation, the registering
authority or other prescribed authority shall issue a temporary certificate of
registration of such vehicle, which shall incorporate legibly and prominently
the full name and address of the person with
whom such
agreement has been entered into by the owner.
Such temporary
registration is valid for only one month and it is not necessary to issue
notice to the registered owner. However if the financier wants to keep the
vehicle with itself, it can make application for transfer of registration in
its name, it is possible after giving notice to the registered owner under
Section 51(5) which reads that 'Where the person whose name has been specified
in the certificate of registration as the person with whom the registered owner
has entered into the said agreement, satisfies the registering authority that
he has taken possession of the vehicle from the registered owner owing to the
default of the registered owner under the provisions of the said agreement and
that the registered owner refuses to deliver the certificate of registration or
has absconded, such authority may, after giving the registered owner an
opportunity to make such representation as he may wish to make ( by sending to
him a notice by registered post acknowledgement due at his address entered in
the certificate of registration ) and notwithstanding that the certificate of
registration is not produced before it, cancel the certificate and issue a fresh
certificate of registration in the name of the person with whom the registered owner
has entered into the said agreement'.
A combined
reading of the above provisions makes it clear that the financier on the
seizure of vehicle has to obtain a Trade Certificate to keep it in his
possession and later to obtain a Temporary registration to be valid for one
month, which is renewable. Lastly, the financier has to apply for the
registration in its name and such transfer will be made only after notice to
the registered owner. Simultaneously, the financier has to intimate the insurer
to effect changes in its record or apply for new policy on the basis of Trade
Certificate or temporary registration or change in registration.
In conclusion;
(i) Once
the vehicle is seized by the financier for the default in the repayment of
loan, the financier in possession of the vehicle is the owner and hence liable
to pay compensation for any injury that may be caused in the use of the motor
vehicle
(ii) The
financer on seizing the vehicle is expected to obtain the Trade Certificate or
temporary registration or transfer of registration in its name to keep
possession of the motor vehicle. On effecting such changes, it may have to
either buy a Policy in its name or to apply for transfer as per Section 157.
(iii) The
insurer is to pay compensation to the victims in all cases either it be Act Policy
or Package Policy
(iv) The
insurer can ask the financier to reimburse the compensation, if the financier
has failed in its obligation, above stated both legal and contractual.
(v) Lastly,
in the cases where the defaulting borrowers approaching the Courts alleging
forcible deprivation of possession of vehicle, it is necessary for the Courts
to examine whether the financier has carried out the above legal obligations
mentioned above to take and keep the vehicle in his possession. It must be
mentioned that to the extent of the research undertaken, it is not found in any
of the cases concerning ‘taking possession’ of the vehicle by the financier,
such compliance of legal formalities under the provisions of the Motor Vehicle
Act is discussed.
Madurai
23/08/14
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