Liability of the financer, in the cases of accident occurred, after the vehicle is purchased with loan sanctioned to the owner of the vehicle - District forum - State Forum held that in terms of loan agreement the Bank has a right to recover insurance premium, held that the Bank cannot escape its liability - NCDRC dismissed the revision - Apex court held that the liability of such bank to get the vehicle insured is only till the vehicle comes out on the road. In other words, the creditor bank is not liable to get renewed the insurance policy on behalf of the owner of the vehicle from time to time.On a careful analysis of the principles stated in the forgoing 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.respondent Jagbir Singh purchased a tractor bearing registration No.HR-14B-3913, after getting loan sanctioned from the appellant-Bank - 2015 SC MSK LAWREPORTS



 On 24.9.2007 at about 11.50 a.m., an  accident  occurred  between  the
      above vehicle and motorcycle bearing registration  No.  DL-3S-AY-0421,
      in which Pankaj son of Babu Ram Garg, died due to rash  and  negligent
      driving on the part of Diwan Singh, driver of  the  tractor  owned  by
      respondent Jagbir Singh.
The parents  of  the  deceased  filed  claim
      petition No. 208/11/2007 before  Motor  Accident  Claims  Tribunal-II,
      Dwarka Courts, New Delhi, which was allowed by said Tribunal, vide its
      order  dated  17.11.2012  awarding  compensation  to   the   tune   of
      Rs.4,01,460/- with 7.5% interest per annum, against driver  and  owner
      of the vehicle.
It has not been disputed between the parties that  on
      the date of accident the vehicle No. HR-14B-3913 was not insured  with
      any of the insurance companies, as required under Section 146  of  the
      Motor Vehicles Act, 1988.

The respondent filed  complaint  (No.  157  of  208)  before  District
      Consumer Disputes Redressal Forum, Jhajjar, praying that  the  Central
      Bank of India (appellant), i.e., the  creditor  bank  should  be  made
      liable to pay the compensation, awarded against him by  the  Tribunal.
The District Consumer Disputes Redressal Forum, vide its  order  dated
      11.11.2009, held that the Bank (present appellant) is liable  for  the
      legal consequences for not getting the insurance renewed.
dismissing the appeal  on
      the ground that in terms of loan agreement the Bank  has  a  right  to
      recover insurance premium,  held  that  the  Bank  cannot  escape  its
      liability.
 NCDRC  in  its  wisdom  did  not  find  the
      explanation advanced for condonation of delay as sufficient, as  such,
      the revision petition was dismissed as barred by  limitation.   Hence,
      this appeal through special leave.

Apex court held that

 liability  of  the
      financer, in the cases of accident  occurred,  after  the  vehicle  is
      purchased with loan sanctioned  to  the  owner  of  the  vehicle.

Under Section 146 of the Act there is an obligation  on  the
           owner of a vehicle to take out an insurance policy  as  provided
           under Chapter XI of the Act. If any vehicle  is  driven  without
           obtaining such  an  insurance  policy  it  is  punishable  under
           Section 196 of the Act.
Thus  when
           the obligation was upon the appellant to obtain such  a  policy,
           merely by passing of a  cheque  to  be  sent  to  the  insurance
           company would not obviate his liability to obtain  such  policy.

A Three-Judge Bench of this Court,  

 has further explained the law relating to liability  of
      the creditor bank, and it has been held that  the  liability  of  such
      bank to get the vehicle insured is only till the vehicle comes out  on
      the road.  In other words, the creditor bank  is  not  liable  to  get
      renewed the insurance policy on behalf of the  owner  of  the  vehicle
      from time to time.
 On a careful  analysis  of  the  principles  stated  in  the
          forgoing 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.
 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
           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........"
 In view of the above discussion and the principle of law laid down  by
      this Court, the impugned order passed by  the  NCDRC  and  the  orders
      passed by the State Consumer Disputes  Redressal  Commission,  Haryana
      and the District  Consumer  Disputes  Redressal  Forum,  Jhajjar,  are
      liable to be set aside. Accordingly the appeal is allowed -2015 S.C.MSKLAWREPORTS

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