JUDGMENT
M.Y. Eqbal, J.
1. Heard Mr. B. Chatterjee, learned Counsel appearing for the appellant-National Insurance Company Limited and Mr. D.C. Ghose, learned Counsel appearing for respondent No. 2 – New India Assurance Co. Ltd.
2. This appeal at the instance of the appellant-National Insurance Company Limited is directed against the judgment and award dated 17th January, 2003 passed by the Motor Vehicle Accident Claims Tribunal, Ranchi, whereby the Tribunal held both the Insurance Companies liable for payment of compensation.
3. Before deciding the issue, we would like to narrate some of the relevant facts which are necessary for the purpose of deciding this appeal. The vehicle in question is a Maruti van which was owned and possessed by M/s. Jai Durga Transport Company. The said owner M/s. Jai Durga Transport Company got the vehicle insured with the appellant-National Insurance Company Limited and the policy of insurance was issued for the period from 10th September, 1995 to 9th September, 1996. The previous owner M/s. Jai Durga Transport Company transferred the ownership of the vehicle in favour of the respondent No. 1-M/s. Sahu Gun House on 6th April, 1996. The subsequent owner, namely M/s. San uGun House, got the vehicle insured afresh on 26th April, 1996 with the respondent-New India Assurance Co. Ltd. and a policy of insurance was issued by the said New India Assurance Co. Ltd. On 28th April, 1996, accident took place and by reason of that, the deceased succumbed to the injuries. The claimants filed claim application before the Motor Accident Claims Tribunal for the grant of compensation and in that compensation case, both the Insurance Companies were impleaded as party-respondents. On the application filed by the claimants under Section 140 of the Motor Vehicles Act, 1988, the Tribunal awarded interim compensation by order dated 16th July, 1997 and directed the respondent-New India Assurance Co. Ltd. for payment with whom the vehicle was insured after transfer in favour of the owner M/s. Sahu Gun House. Thereafter, an application was filed before the Tribunal by the present appellant National Insurance Company Limited for deletion of its name from the claim application on the ground that after transfer of the vehicle, a fresh insurance policy was obtained by the transferee owner of the vehicle from New India Assurance Co. Ltd. before the accident took place. The Tribunal by order dated 1st September, 1999 allowed the application. Be that as it may, the claim application was finally heard and the Tribunal while deciding the question of liability, held that since on the date of accident the vehicle was insured with both the Insurance Companies, they are jointly and severally liable to pay the compensation.
4. The only question, therefore, falls that for consideration is whether the appellant-National Insurance Company Limited is liable to pay the compensation amount or part thereof, or, whether the entire liability shall have to be borne by the New India Assurance Co. Ltd.
5. The policy of insurance is a contract of indemnity. When the insured ceases to be the owner of the vehicle, the contract becomes inoperative. The underlying principle of Section 103 A of 1939 Act was that a policy of insurance cannot be transferred by the insured without the consent of the insurer. There is novation of the contract once the insurer agrees to transfer and the original assured is substituted by the new assured transferee to whom pol icy has been transferred. By operation of deeming provisions, there is automatic transfer of certificate of insurance and the policy taken by the owner of the vehicle shall cover the transferee thereof, when requisite notice in the prescribed form is given by the original owner-transferor and there is no refusal intimated by the insurer. Section 103-A of 1939 Act has been substituted by Section 157 of the new Act of 1988. Section 157 reads asunder.
157. Transfer of certificate of insurance.-(1) Where a person in whose favour the certificate of insurance has been issued in accordance with the provisions of this Chapter transfers to another person the ownership of the motor vehicle in respect of which such insurance was taken together with the policy of insurance relating thereto, the certificate of insurance and the policy described in the certificate shall be deemed to have been transferred in favour of the person to whom the motor vehicle is transferred with effect from the date of its transfer.
(2) The transferee shall apply within fourteen days from the date of transfer in the prescribed form to the insurer for making necessary changes in regard to the fact of transfer in the certificate on insurance and the policy described in the certificate in his favour and the insurer shall make the necessary changes in the certificate and the policy of insurance in regard to the transfer of insurance.
6. From bare perusal of the aforesaid provision, it is manifestly clear that in the event of transfer of ownership of the motor vehicle, there shall be deemed transfer of the certificate of insurance and the policy described in the certificate of insurance in favour of the person to whom the vehicle is transferred. Sub-section (2) of Section 157 provides that in the event of transfer as contemplated under Subsection (1), the transferee shall, within 14 days from the date of transfer in the prescribed form, apply to the Insurance Company for making changes in the certificate of insurance and the policy described in the certificate in his favour and the Insurance Company make necessary changes in the certificate and the policy of insurance in regard to transfer of insurance. In our view, therefore, both Sub-section (1) and Sub-section (2) shall have to be read together. Notwithstanding the fact that there shall be deemed transfer of the certificate of insurance and the policy by reason of transfer of ownership of the vehicle, it is mandatory obligation on the part of the transferee of the vehicle to get the certificate of insurance and the policy be corrected by entering the name of the transferee. However, there is no restriction in the aforesaid provision of Section 157 or any of the provisions of the M.V. Act, 1988 to get a fresh certificate of insurance and policy of the vehicle after transfer by the transferee. The transferee after transfer of the ownership of the vehicle may, instead of complying the requirement of Sub-section (2) in order to continue the insurance policy may apply for a fresh certificate of insurance and insurance policy in respect of the vehicle from any of the Insurance Companies. In such situation, in our considered opinion, the Insurance Company, with whom the vehicle is insured afresh after transfer of ownership of the vehicle, shall alone be liable to pay compensation. We are also of the view that if the transferee instead of getting the coverage of the existing policy obtained a fresh certificate of insurance and insurance policy from another Insurance Company, then the existing insurance policy stands terminated and ceases to be operative. It shall, therefore, be presumed that the New India Assurance Co. Ltd. issued a fresh certificate of insurance and the policy insuring the vehicle and covering all the risk and liability arising out of the accident. The Tribunal, therefore, committed error of law in holding that the vehicle was insured by two different Insurance Companies and the two policies were in force on the date of accident and, therefore, both the Insurance Companies shall be held liable for payment of compensation. There is no provision in the Act which permits a vehicle to be insured by two different Insurance Companies for the same period. The requirement of law is only to the extent that the vehicle must be insured with a Insurance Company covering the risk of persons or passengers in respect of any death or injury caused on account of use of the vehicle.
7. For the aforesaid reasons, this appeal is allowed and the direction of the Tribunal for payment of compensation by the two Insurance Companies is set aside. It is held that the respondent-New India Assurance Co. Ltd. is liable to pay the entire compensation amount.