Anand Sarup Sharma vs P.P. Khurana and Others

In the High Court of Delhi.
Decided on 28th September, 1988.
Equivalent citations: AIR 1989 Delhi 88, 1989 65 CompCas 413 Delhi, 1989 (16) DRJ 27, 1988 RLR 693.
Bench: Hon’ble Justice G. Jain
            Hon’ble Justice S. Chadha
            Hon’ble Justice S. Bhandare.
Petitioner: Anand Sarup Sharma.
Respondents: P.P. Khurana and Others. 


The court in the present case dealt with the third-party liability, where the insured had sold his scooter while the scooter was still registered in his name. It also dealt with the question of who would have to pay compensation in cases like these and whether the appellant could claim compensation from the insurance company or the seller of the scooter.

Provisions discussed: Section 110A of the Motor Vehicles Act, 1988 (hereafter referred to as the ‘Act’). Section 2(19) of the Sale of Goods Act, 1930.


Wadhwa was an owner of a two wheels scooter that was insured with the insurance company (M/s. Vanguard Insurance Co. Ltd) from the duration of September 27th, 1968, to September 26th, 1969. Wadhwa sold the scooter to P.P Khurana on December 15th, 1968. Ownership in the name of Khurana was not transferred in the records of the registering authority under the Motor Vehicles Act and subsequently, the scooter was registered with the registering authority in the name of Wadhwa and the same continued after the sale. Khurana was granted a certificate of insurance from the period March 1st, 1969, to September 26, 1969. On January 3rd, 1969, the appellant, Anand Sarup Sharma sustained injuries when the scooter in question hit him as he was going towards Nangal Rai. Subsequently, he brought a petition under section 110A of the Act against Khurana, Wadhwa, and the insurance company claiming a sum of Rs. 50,000 as compensation on the ground that though Wadhwa had sold the scooter to Khurana, he was still a registered owner and was, therefore, liable to pay compensation. The Motor Accidents Claims Tribunal in its judgment awarded a sum of Rs. 3,850 solely against Khurana. It dismissed the application against Wadhwa and the insurance company. Aggrieved by the decision, Sharma filed an appeal praying for enhancement of the compensation and for awarding the compensation against all the respondents.


  1. Does the third- party liability come to an end on transfer of vehicle by the insured to someone else?
  2. Is the seller liable to pay the compensation to the transferee by the mere fact that the vehicle was registered in his name?


Contentions put forth by the appellant:

  • It was contended that the seller would remain owner until the time such ownership of the scooter was transferred in the name of the buyer in the records of the registering authority.
  • It was contended that the buyer was driving the scooter on the seller’s order or with his permission and, therefore; the claim against the insurance company can also be deemed to be covered under the extended clause.


The court stated that the scooter being the property of Khurana was an indisputable fact, as the sale was complete on December 15th, 1968. The scooter is a movable property its sale would be governed under the Sale of Goods Act. Referring to section 2(19) of the sales of a good act, the court observed that section nowhere indicated that a registered owner would continue to be the owner of the vehicle even after he had sold such vehicle.

Relying on various legal precedents the court held that the transfer of ownership in the records of the registering authority was not a prerequisite condition for sale. Pertaining to the third-party liability the court perused Section 95 of the Act and held that the insurance policy nowhere states that the company would be liable to indemnify the person to whom the insured had sold the vehicle prior to such accident and that the company couldn’t be compelled to indemnify a person with whom it had no contract and who was rather unknown to it. After the sale of the vehicle, the insured couldn’t claim any insurable interest in the vehicle. Thus, it was held that the insurance company was not liable to indemnify the appellant.

It further held that “the statutory liability of the insurance company under section 96 is only to meet the decree against the insured with whom it has entered into a contract. In other words, the insurance company is liable to meet the decree or award, if the said decree or award is against the person insured by it.”

Regarding whether Wadhwa was liable to pay the appellant, the court held that the ‘seller cannot be held liable for the tortious act of the purchaser or his servant, committed during the course of this (purchaser’s) employment.’ The purchaser by the provision of Section 94 is barred from using the vehicle without getting it insured and non-compliance thereof, will not make the seller liable. The mere fact that the seller continues to be a registered owner wouldn’t make the seller liable for compensation.

The court rejected the contention of the appellant and stated that the extending clause of insurance comes to an end the moment the vehicle is sold. Thus, the court held that the change of ownership of a vehicle would put an end to the contract of the insurance policy and the third-party liability of the insurance company would thus, come to an end on the transfer of the vehicle by the insured to another person.


Thus, the court held that the appellant would not be entitled to compensation from the insurer or the seller of the scooter and thus, elucidated that third-party liability would come to an end if the ownership of a vehicle of the insured is vested to someone else.