Section 157 Motor Vehicles Act: Transfer of certificate of insurance

Section 157 of Motor Vehicles Act: Motor Vehicle Regulation & Claims Procedure

Official Bare Act Text

Override / Mandate Mens Rea (Intent) Actus Reus (Conduct) Punishment Limitation Monetary

(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.

Explanation.— For the removal of doubts, it is hereby clarified that such deemed transfer shall include transfer of rights and liabilities of the said certificate of insurance and policy of insurance.

(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 of 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.

Legal Commentary & Landmark Judgments: Section 157

Section 157 of the Motor Vehicles Act, 1988 establishes the statutory principle of 'deemed transfer', ensuring that vehicle ownership transfers automatically transfer third-party insurance coverage to protect accident victims.

Core Legal Standard: Section 157 prevents insurers from disclaiming liability on the ground that the insurance policy was not formally transferred into the buyer's name.
Sub-Section (1) Provision: Sub-section (1) provides that where a person transfers the ownership of a motor vehicle, the certificate of insurance and the policy shall be deemed to have been transferred in favor of the person to whom the vehicle is transferred with effect from the date of transfer.

Sub-section (2) requires the transferee to apply within fourteen days from the date of transfer to the insurer for effecting corresponding changes in the certificate and policy. However, the failure of the transferee to comply with this 14-day administrative window does not negate the statutory deemed transfer regarding third-party risks under sub-section (1).

Key Landmark Precedents:

G. Govindan v. New India Assurance Co. Ltd. (1999) 3 SCC 754: The Supreme Court held that transfer of a motor vehicle carries with it the deemed transfer of third-party insurance coverage under Section 157; third-party rights are protected irrespective of whether the buyer intimated the insurer within 14 days.
Rikhi Ram v. Sukhrania (2003) 3 SCC 97: A Three-Judge Bench ruled that while an insurer may escape own-damage liability if the policy was not transferred, the insurer remains strictly liable to third parties by virtue of the statutory deemed transfer under Section 157(1).
Mallamma v. National Insurance Co. Ltd. (2014) 4 SCC 658: Reaffirmed that third-party claims cannot be defeated on the ground of non-transfer of insurance policy endorsement following the sale of the offending vehicle.

Legal Commentary:

Section 157 creates a critical bifurcation between own-damage insurance claims and third-party liability claims. If a vehicle is sold and an accident occurs before the policy is formally transferred, the insurer is legally bound to pay third-party compensation under the deemed transfer rule of Section 157(1). However, regarding own-damage claims for damage to the vehicle itself, the lack of insurable interest can be validly raised by the insurer.

Section 157: Transfer of certificate of insurance

Section 157 of Motor Vehicles Act: Motor Vehicle Regulation & Claims Procedure

Legal Commentary & Landmark Judgments: Section 157