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Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS.10608-10609 OF 2014 [Arising out of S.L.P. (Civil) Nos. 19079-19080 of 2014]

HDFC Bank Ltd. ... Appellant

Versus

Kumari Reshma and Ors.              ... Respondents

J U D G M E N T

Dipak Misra, J.

Leave granted in both the Special Leave Petitions.  

2. In these appeals, by special leave, the assail is to the  

judgment  and  order  dated  22.10.2013  passed  by  the  

learned  Single  Judge  of  the  High  Court  of  judicature  of  

Madhya Pradesh Bench at Indore in Misc. Appeal No. 2261 of  

2005  preferred  by  the  Centurion  Bank  Limited,  the  

predecessor-in-interest  of  the  appellant  herein,  and  Misc.  

Appeal No. 3243 of 2005 preferred by the claimants, the 1st  

respondent herein, whereby the High Court has dismissed  

the appeal  preferred by the appellant  herein and allowed

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the appeal of the claimants by enhancing the awarded sum  

to Rs. 3 lacs opining that the said amount would be just and  

equitable  compensation  for  the  injuries  sustained  by  her.  

The  High  Court  also  dismissed  the  review  petition  no.  

619/2013  vide  order  dated  13.05.2014  preferred  by  the  

appellant herein.  Be it stated, the Additional Member, Motor  

Accident Claims Tribunal, Indore had awarded Rs.1,75,000/-  

in Claim Case No.181/2003.

3. Filtering the unnecessary details,  the facts which are  

requisite to be stated are that on 20.12.2002 about 12.30  

p.m.  the  claimant  was  going  on  a  scooter  bearing  

registration No. MP09Q92 from Shastri Bridge to Yashwant  

Square and at that time the Motor Cycle belonging to 2nd  

respondent and driven by the respondent No.3 herein, in a  

rash and negligent manner dashed against the scooter as a  

consequence of which she sustained a fracture in the right  

hand  superacondylar  fracture  and  humerus  bone  fracture  

and certain other injuries.  She availed treatment at various  

hospitals as she had to undergo an operation and thereafter  

advised to take physiotherapy regularly.  Keeping in view,  

the  injuries  suffered  and  the  amount  she  had  spent  in  

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availing  the  treatment,  she  filed  a  claim  petition  putting  

forth  the  claim for  Rs.4,50,000/-.   The  tribunal  as  stated  

earlier awarded a sum of Rs.1,75,000/- with 6% interest and  

opined that all the non-applicants to the claim petition were  

jointly and severally liable to pay the compensation amount.  

It is apt to state here the stand and stance put forth by the  

predecessor-in-interest the appellant bank 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.  Reliance was placed on  

Clause 16 and 17 of the loan agreement which stipulated  

that the bank was required to get the vehicle insured if the  

borrower failed to or neglected to get the vehicle insured.  

The   accident  as  stated  earlier  had  taken  place  on  

20.12.2002 and the vehicle was insured by the owner on  

16.1.2003.   It  was further put forth by the bank that the  

owner  deposited  Rs.6,444/-  with  the  dealer  of  the  motor  

cycle i.e. Patwa Abhikaran Pvt. Ltd., whereas it was required  

to  pay  Rs.9,444/-.   Despite  the  same,  he  obtained  the  

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possession of the vehicle on the same day itself which was  

not permissible.   

4. It was urged before the tribunal the financer was not  

liable  to  pay  the  compensation  and  it  was  the  exclusive  

liability  of  the  borrower.   The tribunal  on  scrutiny  of  the  

clauses opined that as the financer had a duty to see that  

borrower does not neglect to get the vehicle insured, it was  

also liable along with the owner and accordingly fastened  

the liability both jointly and severally.   

5. In appeal, it was contended that the financer could not  

have  been  fastened  with  the  liability  to  pay  the  

compensation.   The  High  Court  referred  to  the  definition  

clause in Section 2 (30) of the Motor Vehicles Act, 1988 (for  

brevity “the Act”), 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 preferred by the claimants.  Be it stated,  

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the application for  review filed by the Bank did not meet  

with success.  

6. We have heard Mr. Gopal Subramaniam, learned senior  

counsel for the appellant.  None has appeared on behalf of  

respondent despite service of notice.   

7.  We  are  obliged  to  mention  here  that  while  issuing  

notice we had directed that the appellant-bank shall deposit  

the  awarded  sum before  the  tribunal  which  would  be  at  

liberty to disburse the same in favour of the claimant.  Mr.  

Subramaniam 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.   

8. Criticising the impugned award and the order passed in  

appeal,  learned  senior  counsel  has  submitted  that  the  

definition of ‘owner’ under Section 2(30) of the Act would  

not cover a financer who has entered into a hypothecation  

agreement  with  the  borrower  who  is  in  possession  and  

control  of  the  vehicle.   Learned  senior  counsel  would  

contend  that  Clauses  16  and  17  of  the  agreement  have  

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nothing to do with the financer‘s liability, for Section 146 of  

the Act requires the owner to insure the vehicle before it  

plies on the road and in the case at hand the borrower, who  

was in possession and control of the vehicle in question, in a  

clandestine manner without paying the insured amount and  

getting the vehicle insured had taken the vehicle the same  

day  from the  dealer  and  got  it  insured  afterwards.   It  is  

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 is instance.    Elaborating further,  

it is 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.  It is canvassed by him that 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.   

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9. To appreciate the said submission,   it is appropriate to  

refer to Section 2 (30) of the Act which reads as follows:-  

“(30). “owner” means 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.”

10. On  a  plain  reading  of  the  aforesaid  definition,  it  is  

demonstrable that a person in whose name a motor vehicle  

stands registered is  the owner  of  the  vehicle  and,  where  

motor vehicle is the subject of hire-purchase agreement or  

an agreement of hypothecation, the person in possession of  

the  vehicle  under  that  agreement  is  the  owner.   It  also  

stipulates that in case of a minor, the guardian of such a  

minor shall be treated as the owner.   Thus, the intention of  

the legislature in case of a minor is mandated to treat the  

guardian of such a minor as the ‘owner’.   This is the first  

exception to the definition of the term ‘owner’.  The second  

exception that has been carved out is that in relation to a  

motor  vehicle,  which  is  the  subject  of  hire-purchase  

agreement or an agreement of lease or an agreement of  

hypothecation,  the  person  in  possession  of  vehicle  under  

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that agreement is the owner.  Be it noted, the legislature  

has  deliberately  carved  out  these  exceptions  from  

registered owners thereby making the guardian of a minor  

liable, and the person in possession of the vehicle under the  

agreements  mentioned in  the dictionary clause to be the  

owners for the purposes of this Act.   

11. As we find from the judgment of the High Court, it has  

placed reliance on  Mohan Benefit Pvt. Ltd. V. Kachraji   

Rayamalji & Ors.1.  In the said case, the 2nd  respondent  

was the registered owner of the truck and the appellant was  

the  “legal  owner  of  the  vehicle  as  per  hire-purchase  

agreement”.  The claim petition stated that at the time of  

the accident, the 1st respondent was driving the truck owned  

by  the  2nd respondent  and  the  appellant  and  they  had  

become liable,  jointly  and  severally,  to  pay  the  damages  

claimed.   The  tribunal,  on  the  basis  of  the  evidence  led  

before  it  came  to  the  conclusion  that  hire-purchase  

agreement was not the only document executed between  

the appellant and the second respondent.  It had awarded  

damages against the appellant and the second respondent.  

The award passed by the tribunal was affirmed by the High  

1  (1997) 9 SCC 103

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Court  holding  that  real  documents  executed between the  

parties at the time of the alleged loan had been kept back  

from the Court with ulterior motives and in that situation, all  

possible  adverse  inference  should  be  drawn  against  the  

appellant  therein;  and  that  the  hire  purchase  agreement  

that was produced could not be made the basis for deciding  

the relationship between the parties nor could it be pressed  

into  service  for  proving  that  the  transaction  was  only  of  

hypothecation  in  the  garb  of  hire  purchase  agreement.  

Affirming the view expressed by the High Court, this Court  

held

“Having  heard  the  counsel  and  read  the  evidence adduced in  the case,  we have no  doubt  that  the  hire-purchase  agreement  produced by the appellant does not spell the  true relationship between the appellant and  the  second  respondent.  The  High  Court,  therefore,  was  right  in  coming  to  the  conclusion  that,  had  the  documents  which  reflected the true relationship between them  been produced, they would have “exploded”  the case of the appellant. Consequently, the  adverse inference drawn by the High Court  was justified”.

12. After so holding, the Court repelled the submission of  

the counsel for the appellant that there was no evidence to  

show the appellant had any right to control the driver of the  

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truck.  The Court opined that in the circumstances of the  

case, the logical inference must be that, had the documents  

that set out the true relationship between the appellant and  

the  second  respondent  been  produced,  they  would  have  

shown that the appellant had a right to exercise control in  

the matter of the plying of the truck and the driver thereof.

13. In  this  context,  we  may  refer  to  a  two-Judge  Bench  

decision  in  Rajasthan  State  Road  Transport  

Corporation V. Kailash Nath Kothari & Others.2  In the  

said  case,  plea  was  taken  by  the  Rajasthan  State  Road  

Transport Corporation (RSRTC) before the High Court that as  

it was only a hirer and not the owner of the bus, it could not  

be fastened with any liability for payment of compensation  

but  the  said  stand  was  not  accepted.   It  was  contended  

before this Court that the Corporation not being the owner  

of the bus was not liable to pay any compensation arising  

out of the accident because driver who was driving the bus  

at  the  relevant  time,  was  not  in  the  employment  of  the  

owner of the bus and not of the Corporation and hence, it  

could  not  be  held  vicariously  liable  for  the  rash  and  

negligent  act  of  the  driver.   The  Court  referred  to  the  2  

(1997) 7 SCC 481

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definition in Section 2(3), which defines “contract carriage”,  

Section  2(19),  which  defines  the  “owner”,  Section  2(29),  

which  defines  “stage carriage”  and Section  42 that  dealt  

with “necessity of permits”.  Be it stated, these provisions  

reproduced by the Court pertained to Motor  Vehicles Act,  

1939 (for short, ‘the 1939 Act’).  The owner under the 1939  

Act was defined as follows:

“2. (19) ‘owner’ means, where the person in  possession of a motor vehicle is a minor, the  guardian of such minor, and in relation to a  motor vehicle which is the subject of a hire- purchase  agreement,  the  person  in  possession  of  the  vehicle  under  that  agreement;”

The Court referred to the conditions 4 to 7 and 15 of  

the agreement and in that context held thus:

“The admitted facts unmistakably show that  the vehicle in question was in possession and  under  the  actual  control  of  RSRTC  for  the  purpose of running on the specified route and  was  being  used  for  carrying,  on  hire,  passengers by the RSRTC. The driver was to  carry out instructions,  orders and directions  of  the  conductor  and  other  officers  of  the  RSRTC for operation of the bus on the route  specified by the RSRTC”.

While dealing with the definition of the owner under the  

1939 Act, the Court ruled that the definition of owner under  

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Section 2(19) of the Act is not exhaustive. It has, therefore  

to  be  construed,  in  a  wider  sense,  in  the  facts  and  

circumstances of a given case.  The expression owner must  

include,  in  a  given  case,  the  person  who  has  the  actual  

possession  and  control  of  the  vehicle  and  under  whose  

directions and commands the driver is  obliged to operate  

the  bus.  To  confine  the  meaning  of  “owner”  to  the  

registered owner only would in a case where the vehicle is in  

the actual possession and control of the hirer would not be  

proper for the purpose of fastening of liability in case of an  

accident. The liability of the “owner” is vicarious for the tort  

committed  by  its  employee  during  the  course  of  his  

employment and it would be a question of fact in each case  

as to on whom can vicarious liability be fastened in the case  

of an accident.

14. After  so  stating,  the Court  proceeded to  analyse the  

conditions of the agreement, especially conditions 6 and 7  

which in that case showed that the owner had not merely  

transferred the services of the driver to the Corporation but  

actual  control  and  the  driver  was  to  act  under  the  

instructions,  control  and  command  of  the  conductor  and  

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other officers of RSRTC.  Being of this view, it affirmed the  

view expressed by the High Court and dismissed the appeal.  

15. In this context, it is profitable to refer to a two-Judge  

Bench decision in National Insurance Co. Ltd. V. Deepa  

Devi & Ors.3  In the said case the question arose whether in  

the event a car is requisitioned for the purpose of deploying  

the  same  in  the  election  duty,  who  would  be  liable  for  

payment of compensation to the victim of the accident in  

terms of the provisions of 1988 Act.  The Court referred to  

the definition of ‘owner’ in the 1939 Act and the definition of  

‘owner’  under  Section  2(30)  of  the  1988  Act.   In  that  

context, the Court observed that the legislature either under  

the  1939  Act  or  under  the  1988  Act  had  visualized  a  

situation of this nature.  The Court took note of the fact that  

the respondent no. 3 and 4 continued to be the registered  

owners of the vehicle despite the fact that the same was  

requisitioned  by  the  District  Collector  in  exercise  of  the  

power  conferred  upon  him  under  the  Representation  of  

People Act, 1951 and the owner of the vehicle cannot refuse  

to abide by the order of requisition of the vehicle by the  

District Collector.  Proceeding further, the Court ruled thus:

3  (2008) 1 SCC 414

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“......  While  the  vehicle  remains  under  requisition, the owner does not exercise any  control thereover. The driver may still be the  employee of the owner of the vehicle but he  has  to  drive  it  as  per  the  direction  of  the  officer  of  the  State,  who  is  put  in  charge  thereof. Save and except for legal ownership,  for  all  intent  and  purport,  the  registered  owner  of  the  vehicle  loses  entire  control  thereover. He has no say as to whether the  vehicle should be driven at a given point of  time or not. He cannot ask the driver not to  drive  a  vehicle  on  a  bad  road.  He  or  the  driver could not possibly say that the vehicle  would not be driven in the night. The purpose  of  requisition is  to  use the vehicle.  For  the  period the vehicle remains under the control  of the State and/or its officers, the owner is  only  entitled  to  payment  of  compensation  therefor in terms of the Act but he cannot not  (sic)  exercise  any  control  thereupon.  In  a  situation  of  this  nature,  this  Court  must  proceed on the presumption that Parliament  while enacting the 1988 Act did not envisage  such a situation. If  in a given situation, the  statutory  definitions  contained  in  the  1988  Act  cannot  be given  effect  to  in  letter  and  spirit,  the same should be understood from  the common sense point of view.

16. Elaborating the concept, the Court referred to Mukesh  

K. Tripathi V. Senior Divisional Manager LIC4, Ramesh  

Mehta  V.  Sanwal  Chand  Singhvi5,  State  of  

Maharashtra V. Indian Medical Assn.6,  Pandey & Co.  

4  (2004) 8 SCC 387 5  (2004) 5 SCC 409 6  (2002) 1 SCC 589

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Builders (P) Ltd., V. State of Bihar7 and placed reliance  

on  Kailash  Nath  Kothari (supra),  National  Insurance  

Co.  Ltd.  V.  Durdadahya  Kumar  Samal8 and  Chief  

Officer,  Bhavnagar  Municipality  V.  Bachubhai   

Arjanbhai9 and eventually opined the State shall be liable  

to pay the amount of compensation to the claimant and not  

the registered owner of the vehicle and consequently the  

appellant therein, the insurance company.  

17. In  Godavari  Finance  Company  V.  Degala  

Satyanarayanamma and others10, the core question  that  

arose  for  consideration  whether  a  financier  would  be  an  

owner of the vehicle within the meaning of Section 2(30) of  

the 1988 Act.  It was contended before this Court that in  

terms of Section 168 of the Act, a financier cannot be held  

liable to pay compensation as the definition of ‘owner’  as  

contained in Section 2(30) of the 1988 Act would mean only  

a  ‘registered  owner’;  that  it  was  not  the  case  of  the  

claimants that  the appellant  therein was in  possession or  

control  over  the  vehicle  at  the  time  of  accident  and  the  

findings recorded by the trial Court and the High Court that  7  (2007) 1 SCC 467 8  (1988) 2 TAC 25 (Ori) 9   AIR 1996 Guj. 51 10  (2008) 5 SCC 107

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the appellant as a registered owner was liable for payment  

of compensation, was wholly unsustainable.  The Court took  

note of the fact that the appellant was a financier; that the  

vehicle was the subject matter of hire-purchase agreement;  

and  that  the  appellant’s  name  was  mentioned  in  the  

registered book.  Dealing with the definition of ‘owner’, the  

Court  opined  that  the  definition  of  “owner”  is  a  

comprehensive one and the dictionary clause itself  states  

that  the  vehicle  which  is  the  subject-matter  of  a  hire-

purchase  agreement,  the  person  in  possession  of  vehicle  

under  that  agreement  shall  be  the  owner;  and  that  the  

name of financer in the registration certificate would not be  

decisive for determination as to who was the owner of the  

vehicle. The Court further opined that ordinarily the person  

in whose name the registration certificate stands should be  

presumed to be the owner but such a presumption can be  

drawn only in the absence of any other material brought on  

record or unless the context otherwise requires.  The Court  

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  

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of the vehicle, and not the financer being the owner would  

be liable to pay damages for the motor accident.  In that  

context the Court observed that ordinarily if the driver of the  

vehicle uses the same, he remains in possession or control  

thereof.   Owner  of  the  vehicle,  although  may  not  have  

anything to do with the use of vehicle at the time of the  

accident, actually he may be held to be constructively liable  

as the employer of the driver. What is, therefore, essential  

for  passing  an  award  is  to  find  out  the  liabilities  of  the  

persons who are involved in the use of the vehicle or the  

persons who are vicariously liable. The insurance company  

becomes a necessary party to such claims as in the event  

the owner of the vehicle is found to be liable, it would have  

to  reimburse  the  owner  inasmuch  as  a  vehicle  is  

compulsorily insurable so far as a third party is concerned,  

as contemplated under Section 147 thereof.  Thereafter, the  

Court relied upon the decisions in  Kailash Nath Kothari  

(supra) and Deepa Devi (supra) and came to hold that the  

appellant  was not  liable  to  pay any compensation to  the  

claimants.

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18. In  Pushpa alias Leela and others V. Shakuntala   

and others11, the question arose whether in the obtaining  

factual matrix therein the liability to pay the compensation  

amount as determined by the tribunal was of the purchaser  

of the vehicle alone or whether the liability of the recorded  

owner  of  the  vehicle  was  co-extensive  and  from  the  

recorded  owner  it  would  pass  on  to  the  insurer  of  the  

vehicle.   The  registered  owner  of  the  vehicle  was  one  

Jitender Gupta who had sold the truck to one Salig Ram and  

handed over the possession to the transferee and on the  

date of the sale,  the truck was covered by the insurance  

policy taken by Jitender Gupta.  There was no dispute that  

the policy stood in the name of Jitender Gupta on the date of  

the accident who was no longer the owner of the truck as he  

had transferred the vehicle to Salig Ram.  The Tribunal had  

come to hold that Salig Ram alone was liable for payment of  

compensation.   On  an  appeal  being  preferred,  the  High  

Court dismissed the appeals of the claimants.   This Court  

referred to the definition of the ‘owner’ under Section 2(30)  

of the 1988 Act that defines the owner and Section 50 of the  

1988 Act that deals with transfer of ownership.  That apart,  

11  (2011) 2 SCC 240

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the Court also took note of the fact that notwithstanding the  

sale of the vehicle, neither the transferor Jitender Gupta nor  

the transferee Salig Ram took steps to change the name of  

the owner in  the certificate of  registration of  the vehicle.  

The Court treated Jitender Gupta to be deemed to continue  

as the owner of the vehicle for the purposes of the 1988 Act  

even though under the civil  law he had ceased to  be its  

owner after its sale.  While dealing with the facet of liability,  

the Court referred to the authority in  T.V. Jose (Dr.) V.  

Chacko P.M.12 wherein it has been held thus:

“There can be transfer of title by payment of  consideration  and  delivery  of  the  car.  The  evidence on record shows that ownership of  the car had been transferred. However,  the  appellant  still  continued to  remain liable  to  third  parties  as  his  name  continued  in  the  records of RTO as the owner.”

Thereafter, the Court held thus:

“The decision in T.V. Jose (Dr.) was rendered  under  the  Motor  Vehicles  Act,  1939.  But  having  regard  to  the  provisions  of  Section  2(30)  and  Section  50  of  the  Act,  as  noted  above,  the ratio  of  the decision shall  apply  with  equal  force  to  the  facts  of  the  case  arising under the 1988 Act. On the basis of  these decisions, the inescapable conclusion is  that Jitender Gupta, whose name continued in  the records of the registering authority as the  owner  of  the  truck  was  equally  liable  for  

12  (2001) 8 SCC 748

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payment  of  the  compensation  amount.  Further, since an insurance policy in respect  of  the truck was taken out  in  his  name he  was indemnified and the claim will be shifted  to  the  insurer,  Oriental  Insurance  Company  Ltd.”

Be it noted, in the said case, the decision rendered in  

Deepa Devi (supra) on the ground that it was rendered on  

the special facts of that case and has no application to the  

facts of the case in hand.  Being of this view, it fastened the  

liability on the insurer.  

19. In this context, another decision is apposite to be taken  

note  of.   In  Uttar  Pradesh  State  Road  Transport   

Coporation V. Kulsum and others13, the question arose if  

an insured vehicle is plying under an agreement or contract  

with the Corporation, on the route as per permit granted in  

favour of the Corporation, in case of an accident, whether  

the  Insurance  Company  would  be  liable  to  pay  the  

compensation  or  would  it  be  the  responsibility  of  the  

Corporation or the owner.  The Court referred to Section 103  

of  the 1988 Act  (Uttar  Pradesh Amendment Act  of  1993)  

wherein the Corporation has been vested with the right to  

take vehicles  on hire  as  per  the contract  and to  ply  the  

13  (2011) 8 SCC 142

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same on the roads as the permit granted to it.  In the said  

case,  according  to  the  terms  and  conditions  of  the  

agreement, the mini-bus was to be plied by the Corporation  

on  the  routes  as  per  the  permit  issued  by  the  Regional  

Transport Officer in his favour.  Except for the services of  

the driver which were to be provided by the owner, all other  

rights of the owner were to be exercised by the Corporation  

only.   The  conductor  was  to  be  an  employee  of  the  

Corporation and he was authorised and entitled to collect  

the money after issuing tickets to the passengers and had  

the  duty  to  perform  all  the  incidental  and  connected  

activities  as  a  conductor  on  behalf  of  the  Corporation.  

When a claim was lodged before the Tribunal, it allowed the  

claim petition placing reliance on Kailash Nath Kothari’s  

case.   Being aggrieved,  the Corporation preferred appeal  

and the owner of the bus also filed a cross-objection against  

the finding recorded by the tribunal holding therein that the  

insurance company was not liable to make the payment and  

had  fastened  the  liability  on  the  owner  on  account  of  

alleged breach of insurance policy.  The Court analysed the  

definition  under  Section  2(30)  of  the  1988  Act,  Section  

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103(1-A)  which  has  been  inserted  by  the  Uttar  Pradesh  

Amendment  Act  5  of  1993,  Sections 146 and 149 of  the  

1988  Acts  and  thereafter  referred  to  the  authority  in  

Kailash Nath Kothari (supra) and distinguished the same  

by holding thus:-

“In our considered opinion, in the light of the  drastic and distinct changes incorporated in  the definition of “owner” in the old Act and  the  present  Act,  Kailash  Nath  case has  no  application to the facts of this case. We were  unable  to  persuade  ourselves  with  the  specific  question  which  arose  in  this  and  connected appeals as the question projected  in  these  appeals  was  neither  directly  nor  substantially  in  issue  in  Kailash  Nath  case.  Thus, reference to the same may not be of  much help to us. Admittedly, in the said case,  this Court was dealing with regard to earlier  definition  of  “owner”  as  found  in  Section  2(19) of the old Act.

xxx xxx xxx xxx A critical examination of both the definitions  of the “owner” would show that it underwent  a drastic change in the Act of 1988, already  reproduced  hereinabove.  In  our  considered  opinion,  in  the light of  the distinct  changes  incorporated in  the  definition of  “owner”  in  the old Act and the present Act, Kailash Nath  Kothari case shall have no application to the  facts of this case”.

20. Thereafter, the Court referred to the relevant clauses  

in the agreement and opined that:

“A  critical  examination  thereof  would  show  that  the  appellant  and  the  owner  had  

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specifically  agreed  that  the  vehicle  will  be  insured and a  driver  would  be  provided by  owner of the vehicle but overall control, not  only  on  the  vehicle  but  also  on  the  driver,  would be that of the Corporation. Thus, the  vehicle was given on hire by the owner of the  vehicle together with its existing and running  insurance  policy.  In  view  of  the  aforesaid  terms  and  conditions,  the  Insurance  Company  cannot  escape  its  liability  to  pay  the amount of compensation.

There is no denial of the fact by the Insurance  Company that at the relevant point of time  the  vehicle  in  question  was  insured  with  it  and the policy was very much in force and in  existence.  It  is  also  not  the  case  of  the  Insurance  Company  that  the  driver  of  the  vehicle was not holding a valid driving licence  to  drive  the  vehicle.  The  Tribunal  has  also  held  that  the  driver  had  a  valid  driving  licence at the time of the accident. It has also  not been contended by it that there has been  violation of the terms and conditions of the  policy or that the driver was not entitled to  drive the said vehicle”.

21. After so stating, the Court took note of the fact that the  

insurance company had admittedly received the amount of  

the premium; that there was no difference in the tariff  of  

premium in respect of the vehicles insured at the instance of  

the owner or for the vehicle which is being attached with the  

Corporation;  that  no  statutory  duty  is  cast  on  the  owner  

under the Act or under any rules to seek permission from  

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the insurer to get the vehicle attached with the Corporation.  

On the aforesaid reasoning, the Court held the insurer liable.  

22. Recently in Purnya Kala Devi V. State of Assam &  

Anr.14, a three-Judge Bench was dealing with the issue when  

an  offending  vehicle  is  that  under  the  requisition  of  the  

State Government under the Assam Requisition and Control  

of Vehicles Act, 1968 (‘Assam Act’, for short) the registered  

owner  would  be liable  or  the  State Government  that  has  

requisitioned  the  vehicle.   The  Court  referred  to  the  

definition of the term ‘owner’ under the 1939 Act as well as  

the 1988 Act.  As was necessary in the said case, the Court  

referred to the relevant provisions pertaining to release from  

the requisition under the Assam Act.   After  analyzing the  

provisions,  the  three-Judge  Bench  set  aside  the  award  

passed by the High Court which had held that owner was  

liable  solely  on  the  basis  of  the  definition  of  the  word  

‘owner’  contained in  Section 2(30)  of  the 1988 Act.   The  

dictum laid down in the said case is as follows:

“The High Court failed to appreciate that  at  the  relevant  time  the  offending  vehicle   was  under  the  requisition  of  Respondent   No.   1  –  State  of  Assam  under the provisions of the Assam Act.  

14  2014 (4) SCALE 586

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Therefore,  Respondent  No.  1  was  squarely  covered under the definition of  “owner” as contained  in  Section  2(30)  of  the  1988  Act.    The  High  Court  failed  to  appreciate  the   underlying  legislative  intention  in  including  in  the  definition  of  “owner”  a  person   in  possession of a vehicle either under an  agreement  of  lease  or   agreement   of  hypothecation or under a  hire-purchase  agreement  to  the  effect  that  a person  in control and possession of the vehicle  should  be  construed   as   the  “owner”  and not alone the registered owner.  The  High  Court  further  failed  to  appreciate  the  legislative  intention  that  the  registered  owner  of  the  vehicle  should  not be held liable if the vehicle was not  in his possession and control.  The High  Court  also  failed  to  appreciate  that  Section  146  of the 1988 Act requires  that  no  person  shall  use  or  cause  or  allow  any  other person to use a motor  vehicle  in  a  public  place  without  an  insurance   policy  meeting  the  requirements  of  Chapter   XI   of   the  1988  Act  and  the  State Government  has violated the statutory  provisions  of  the  1988  Act. ” (Emphasis supplied)

23. In the present case, as the facts have been unfurled,  

the appellant bank had financed the owner for purchase of  

the vehicle and the owner had entered into a hypothecation  

agreement  with  the  bank.   The  borrower  had  the  initial  

obligation to insure the vehicle,  but  without insurance he  

plied the vehicle on the road and the accident took place.  

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Had the vehicle been insured, the insurance company would  

have been liable and not the owner.  There is no cavil over  

the fact  that  the vehicle was subject  of  an agreement  of  

hypothecation and was in possession and control under the  

respondent no.2.  The High Court has proceeded both in the  

main judgment as well as in the review that the financier  

steps  into  the  shoes  of  the  owner.   Reliance  placed  on  

Kachraji Rayamalji (supra), in our considered opinion, was  

inappropriate because in the instant case all the documents  

were filed by the bank.  In the said case, two-Judge Bench of  

this  Court  had  doubted  the  relationship  between  the  

appellant and the respondent therein from the hire-purchase  

agreement.  Be that as it may, the said case rested on its  

own facts.  The decision in  Kailash Nath Kothari (supra),  

the Court  fastened the liability  on the Corporation regard  

being had to the definition of the ‘owner’ who was in control  

and possession of the vehicle.  Similar to the effect is the  

judgment in  Deepa Devi (supra).  Be it stated, in the said  

case the Court ruled that the State shall be liable to pay the  

amount  of  compensation  to  the  claimant  and  not  the  

registered owner of the vehicle and the insurance company.  

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In  the  case  of  Degala Satyanarayanamma  (supra),  the  

learned  Judges  distinguished  the  ratio  in  Deepa  Devi  

(supra) on the ground that it hinged on its special facts and  

fastened the liability on the insurer.  In Kulsum (supra), the  

principle  stated  in  Kailash  Nath  Kothari (supra)  was  

distinguished and taking note of the fact that at the relevant  

time,  the vehicle in  question was insured with it  and the  

policy was very much in force and hence, the insurer was  

liable to indemnify the owner.   

24. On  a  careful  analysis  of  the  principles  stated  in  the  

foregoing cases, it is 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.  

Needless to emphasise, if the vehicle is insured, the insurer  

is bound to indemnify unless there is violation of the terms  

of the policy under which the insurer can seek exoneration.  

25. In Purnya Kala Devi (supra), 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  

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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.   There is reference to Section  

146 of the Act that no person shall use or cause or allow any  

other person to use a motor vehicle in a public place without  

insurance as that  is  the mandatory statutory requirement  

under the 1988 Act.  In the instant case, the predecessor-in-

interest of the appellant, Centurion Bank, was the registered  

owner along with respondent no.2.  The respondent no. 2  

was in control and possession of the vehicle.  He had taken  

the vehicle from the dealer without paying the full premium  

to the insurance company and thereby getting the vehicle  

insured.   The High Court has erroneously opined that the  

financier had the responsibility to get the vehicle insured, if  

the  borrower  failed  to  insure  it.   The  said  term  in  the  

hypothecation  agreement  does  not  convey  that  the  

appellant  financier  had  become  the  owner  and  was  in  

control and possession of the vehicle.  It was the absolute  

fault  of  the respondent no.2 to take the vehicle from the  

dealer without full payment of the insurance.  Nothing has  

been  brought  on  record  that  this  fact  was  known to  the  

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appellant  financier  or  it  was  done  in  collusion  with  the  

financier.  When the intention of the legislature is quite clear  

to the effect, 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 respondent no.2,  

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.  The appreciation by the learned Single Judge in  

appeal, both in fact and law, is wholly unsustainable.  

26. In view of the aforesaid premises, we allow the appeals  

and hold that the liability to satisfy the award is that of the  

owner,  the  respondent  no.  2  herein  and  not  that  of  the  

financier  and accordingly that part  of  the direction in the  

award is set aside.   However, as has been conceded to by  

the learned senior counsel for the appellant, no steps shall  

be taken for realisation of the amount.  There shall be no  

order as to costs.  

........................................J.      [DIPAK MISRA]

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.........................................J.                                 [ROHINTON FALI NARIMAN]

........................................J.                      [UDAY UMESH LALIT]

NEW DELHI DECEMBER 01, 2014.

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