Cigarette Smoking- Sorry- Selling Used Motor Vehicles Can Be Dangerous to your Health? Narasimhan Vijayaraghavan Preamble
Cigarette Smoking- Sorry- Selling Used Motor Vehicles Can Be Dangerous to your Health?
Narasimhan Vijayaraghavan
Preamble
For those active in the stock market,the automobile scrips are top of the heap in this festival season. Not only new motor vehicles are being picked up, old cars’ sales also are visibly scaling up. Add the availability of online insurance covers with multiple web aggregators, offering competing quotes.
Hey, what is your problem? If such good tidings are happening in the economy taking it to pre pandemic levels, it adds to India as the leader among Emerging Economies as standout in the economic recovery theme, then pray what then is the issue?
Almost everything. For the ordinary sellers of used motor vehicles! You and Me. Happy Diwali. Law is an Ass. But it kicks so hard on this front that it can be scary. Yes, hugely scary, impacting your financial health and thereby mental health too ie. If you are not guarded, cautious and aware to cover your tracks. While choosing, deciding and selling your used motor vehicle to a friend, relative, neighbour, stranger, dealer or broker or whoever. Why this rambling Preamble? Let me explain.
Sale of an Used Car
When is it safe to sell a motor vehicle? What is it you need to remember to ensure necessary compliance to ensure that sale was safe/secure and not harmful to your interest? Well, just one simple requirement. But, that is often and always forgotten to the utter detriment of sellers’ interest. Most or all are unaware. Most or all do not bother to care. Until they face a bolt from the blue. Totally shocked that it was a drone attack they had failed to account for from nowhere and at any time- next day,next week, next month, next year or even next decade!
Law relating to Sale of used MV
Sale of a motor vehicle is under Sale of Goods Act,1930. It is not under Motor Vehicles Act,1988. The latter provisions are relatable only to formalize the procedural requirement ‘after sale’. The right,title and interest in the property flows from the earlier statute alone.
The Supreme Court of India had made it clear, as early as on 8th Feb,1980 in Panna Lal v. Sri Chand Mail – that it is so. And that, failure to get the Registration Certificate transferred by the purchaser/transferee in his m/her/their band, does not impact or interdict the sale.
Once the ingredients of sale are satisfied under the 1930 Act, there is right,title and interest transfer to the purchaser/transferee . Sec.31 of the MV Act,1988 contemplates the fulfillment of formalities to transfer the Registration Certificate.
Problems Aplenty Associated with it
That is where the problem lies and arises. The sellers are oblivious of the dangers lurking around. It is assumed that the obligation is on the purchaser/trsnsferee, to get the Registration Certificate transferred, within the 30 day timeline. If the transferee fails, it is not the care or concern of the seller, runs the imagined refrain.
Excuse me, it is not so in legal reality. It would make robust common, logical and legal sense for the seller to be beware of the pitfalls from failure to follow up to see that Registration Certificate was duly transferred by the transferee. And the name of the seller as Registered Owner was erased and effaced for good. Why?
Registered Owner v. Real Owner
Under the MV Act,1939 the definition of ‘Owner’ as in Sec.2(18) thereof was based and founded on ‘possession’. Come MV Act,1988, w.e.f. 01.07.1989, there was a dramatic transformation introduced vide Sec.2(30). Under it, basically ‘Owner means Registered Owner’. It remains so on date.
So, after 01.07.1989, even after sale of a motor vehicle, the real owner continues to be ‘Registered Owner’, if the Registration Certificate is not promptly transferred. If the purchaser or dealer or broker or whoever
, fails to get the Registration Certificate transferred ,for whatever reason, the seller faces the loud music, as Registered Owner’.
Claim against Registered Owner
Let me illustrate for ease of understanding. A is the seller of a car or motor cycle on 01.01.2022. B is the purchaser. B fails to get the Registration Certificate transferred within 30 days. (Reasons cited are – if there is entry of transfer it may impact the market value or if a broker, may wait for a commercial buyer et al). And there is a motor accident on 01.03.2022, involving the vehicle. Third party on the road is injured. And a claim for compensation arises.
The claim will have to be made against the Registered Owner alone. A had already sold the motor vehicle to B. Hence, was no longer the Owner. Yet, as the Registration Certificate remains untransferred, the seller continues to be the Registered Owner. The claim is filed against the Registered Owner and the insurance company, if there is a motor insurance policy, in force for the vehicle, on the date of accident.
As per Sec.168 of MV Act,1988, the claims tribunal is required to impose liability on driver/owner/insurer. ‘Owner’, in this context would be ‘Registered Owner’. And not real owner or transferee.
Liability of Registered Owner
From the above, it would be clear that Registered Owner can/would be held liable to pay compensation, even if vehicle was already sold and only transferee was the real owner. For the sin or fault of the transferee in not getting the Registration Certificate transferred, the seller, as Registered Owner shall have to bear the burden of the cross.
There are instances of motor vehicles continuing in the name of Registered Owners, even for a decade or more. In the wake of an accident claim, the Registered Owner can/shall get sued, even after a legitimate and legal sale and cessation of ownership status. That is where law stands today and the mischief lies and most do not know or care until ‘it’ comes calling on them.
Mandate vis a vis Motor Insurance Policy
Sec.157 of MV Act,1988 would help the seller/Registered Owner, if the accident occurred during the subsistence of a valid insurance cover and sale was made along with the benefits under the motor insurance policy.Parliament has mandated compulsory or automatic transfer of insurance benefits, in such cases, to protect the interest of innocent motor accident victims.
But this legal position would be unhelpful to Registered Owners if the transferee fails to either avail an insurance policy for the motor vehicle or chooses to avail one ( renewal) in the name of Registered Owner. There is nothing but harm and prejudice on the ‘Registered Owner’ even after cessation of ‘real/actual ownership’ of the motor vehicle. Crazy!
Supreme Court vis a vis Registered Owner
The benefit of changed definition of Registered Owner, is to afford protection to innocent motor accidents victims. Not seller or purchaser. Not Registered Owner or Real Owner. This is the area of discomfort and mischief , harmful to the interest of Registered Owners. The law as laid down by Supreme Court, sort of compelled by definition in Sec.2(30), is humongously prejudicial to Registered Owners.
Way back on 5th Feb, 2003 itself in Rikhi Ram v. Smt. Sukhrania, Supreme Court had said that while insurance company may be liable to the third party victims, to pay compensation, if there was a policy of insurance, in the name of Registered Owner or transferee, insurance company would be entitled to ‘right of recovery’, after payment to victims, from the Registered Owner ( in whose name Registration Certificate continues to stand) and/or transferee ie. The liability would fall on the Registered Owner, for no fault on his/her/their part except the legitimate act of sale of an used motor vehicle.
That the Registered Owner can seek reimbursement, in turn, from thf transferee or actual owner is no meaningful comfort/relief or remedy. It is possible that motor vehicle may have changed multiple hands and identifying the ‘ real’ owner may be a list cause as it may continue to change hands.
Implications to Registered Owner
In the worst case scenario, there may be no valid motor insurance policy for the vehicle, as on date of accident in the name of Registered Owner/transferee. Remains Uninsured. The transferee may not have renewed the policy and allowed it to lapse. In which case, the Registered Owner, on being sued has to meet the liability himself , despite the sale and not being ‘real owner’. This can be a huge problem if the Registered Owner was financially viable ( Yes- say HNI or an institution) or a honourable entity, facing liability.
And there could be another problematic issue in this context. If the transferee chooses to renew the insurance policy, in the name of Registered Owner, mechanically, without disclosing the factum of sale, fir convenience, that can lead to untold and multiple legal quandaries. It can be one messy and unresolvable development, if there were several sale transactions taking place, without change in Registry. Another story for another day.
What is the Solution?
Is there a solution? What can/should a seller do? Simple. Effective. But requires insistence and follow up. Seller, on selling, must put the purchaser/transferee on notice that transfer in Registry, must take place within the stipulated 30 days under Sec.31 of MV Act,1988. Seller can even offer an attractive incentive viz. discount in price/consideration to purchaser, if the transferee agrees to get the transfer recorded in time and produce proof thereof too ( Eminently worthwhile, to avoid pitfalls as above).
If the compulsory Registry transfer is insisted upon and happens in the name of transferee , the seller can breathe easy and ring fence himself/herself/themselves , from any possible litigation or liability. No other remedy or solution, is in place of possible/permissible, as the law stands today.
Supreme Court Must Reconsider Law
Of course, Supreme Court needs to be told. It is unfair and unjust to penalize a legitimate seller of a motor vehicle with ‘right of recovery’ damocles sword, for no fault on his/her/their part.
The obligation is exclusively on purchaser/transferee. Merely because seller is Registered Owner, why should he/she/they face such difficulties. Suing the Registered Owner for being Registered Owner is one thing. Being asked to pay for that reason alone, is altogether different- unjust and unfair.
The changed definition of Registered Owner was not intended to inflict such liability on the community of used car sellers. The ease for victims to sue Registered Owners cannot be extended/ stretched to make them ‘pay’ for the sin/failure of a transferee. The innocent and not culpable Registered Owner, with no obligation after sale, cannot be mulcted with ‘right of recovery’ to insurance companies. Such ‘right of recovery’ must be confined against transferee viz. real owner whoever he/she/they may be. The burden must be on insurer to identify he/she/they ( real/actual owner) to pursue recovery- and not compel Registered Owners to cough up any liability.
My Suggestion
Law needs to change. There should be no right of recovery ordered against Registered Owners. It should be confined to right of recovery against transferee or real owner. And unless Supreme Court pivots to introduce this change- innocent sellers of motor vehicles ( even constitutional judges would/could be sellers of used cars, you see! ) need to be aware of the dangers ahead and insist/ensure a Registry change in the name of transferee. Otherwise, it would be dangerous to the Registered Owners’ financial and mental health to continue as Registered Owners ( without even being aware unless they care to look into the MWahan online facility now available) even after a valid sale of a motor vehicle.
Happy Diwali.
Beware.
(Author of Motor Vehicles Laws, Butterworths LexisNexis,2019 edition- and practicing advocate in the Madras High Court).
