Madineni Kondaiah vs. Yaseen Fatima & Ors.

Madineni Kondaiah vs. Yaseen Fatima & Ors.
In the Andhra Pradesh High Court
1986 ACC 1 501
Madineni Kondaiah
Yaseen Fatima & Ors.
Date of Judgement
22nd June, 1985
Justice Raghuvir; Justice Kodandaramayya; Justice Sardar Ali Khan


Third-party insurance is mandatory for all vehicle owners according to the Motor Vehicles Act. A third party insurance policy is a policy under which the insurance company agrees to indemnify the insured person, if he is sued or is legally liable for injuries or damages caused to a third party.[1] The insurance company and the insured are the first and second, and any other person who has suffered death, injury or the person claiming damage against him is the third party.

The Motor Vehicles Act, 1988, under section 145 (g) “third party” includes the Government. “Third parties” include everyone (except the contracting parties of the insurance policy, whether it is a person traveling in another vehicle, a person walking on the road or a passenger in the vehicle that is the subject of the insurance policy.[2]

Third-party auto insurance or “act only” coverage is a legal requirement under the Motor Vehicles Act. It is known as “third-party” coverage since the beneficiary of the policy is someone who is not the two parties involved in the contract, that is, the insured and the insurance company. The policy covers the legal responsibility of the insured for death/disability for the loss of third parties or damage to the property of third parties. The victim can claim compensation under “no-fault liability” or “fault liability” of the Motor Vehicles Act of 1988.[3]

Historical Background of third party insurance:

Chapter VIII of the 1939 Act and Chapter XI of the 1988 Law have been promulgated following the model of several English statutes, which is evident in the report of the Motor Vehicle Insurance Committee, 1936-1937 ‘To find out the True intention to enact the 1939 Act corresponding the 1988 Act, it is relevant to track the historical development of the law for mandatory third-party insurance in England. Before 1930, there was no mandatory insurance law regarding third party rights in England. As an accident occurred, an injured person used to take action against the motorist to recover the damage.[4]
 But in many cases, it was discovered that the owner of the offending vehicle had no means to pay the injured or the deceased’s dependent and in that situation, the plaintiffs could not recover the damages. It is in such circumstances that several laws were enacted. To solve the situation, it is for the first time the Rights of Third Parties Against Insurance Act, 1930[5] was enacted in England. Subsequently, the Road Traffic Law of 1930 was enacted, which provided for compulsory insurance for motor vehicles.[6]

Prohibition of the use of motor vehicles without a legal insurance policy, the objective is to allow the third party that suffers injuries from the use of the motor vehicle to obtain damages regardless of the financial capacity or solvency of the driver or the owner.

Constitution and Statutory Provisions Discussed:

  • Section 22, 31, 94, 95, 96 of the Motor Vehicles Act, 1988.
  • Section 35, 143 of Road Traffic Act, 1930.


Naseeruddin Hussain was an employee in the Directorate of Industries and Commerce. He was on his way to the office on a cycle on October 11, 1973.  At 10:45 AM, he was present at Shah Inayat Ganj Police Station. The vehicle (truck) ADT 263 was in front of him on the road. There was another APT 7879 truck behind him. Mannu Singh, a police officer No. 2626 from Shah Inayat Ganj Police Station, arrested ADT 263. The agent directed the driver of the vehicle to go to the “right side” of the road. The driver of ADT 263 reversed the movement of the vehicle. He deflected the vehicle and launched the APT 7879 and hit Naseeruddin. Due to the injuries received in the accident the same day in the hospital, Naseeruddin died.

Procedural History:

The spouse of the deceased i.e, Naseeruddin Shah and her eight children claimed damages before the Motor Accidents Claims tribunal. The Tribunal directed M. Kondaiah to pay the amount to the dependents. Aggrieved thereby, the appellant filed the appeal.

 The appeal was heard by a Division Bench on February 15, 1978. The Bench found the decision (of which Raghuvir, J. is a part) in Haji Zakaria v. Naoshir Cama[7], decided on incidents and added the case in N. Kanakalakshmi v. RV Subba Rao[8]  was not noticed in the first case. The appeal, therefore, was decided to be heard by a Full Bench. This case was heard with five other cases.

Issues which are in challenge:

  • Whether the vendor or the vendee is liable to pay compensation to the respondents?
  • Whether the sale of the vehicle by the insured has the effect of causing the expiration of the policy.


Arguments of the petitioners:

  • This opinion of the insurance company was rejected by the Vendee to argue that there was no concluded sale of the vehicle under Ex. B.1 In addition to the sale being effective, it was argued that the certificate issued under the Law should have been mutated on behalf of the assignee under Sec. 31 of the law. In the absence of mutation, there was no transfer. The vehicle title was not stripped of the seller. The specific containment of the Vendee is; there was no divestment of the title under the terms of Ex. B.1.
  • The Vendee’s counsel, therefore, proffered the contention was a preliminary issue and argued in law there cannot be effective transfer unless the appropriate certificate is obtained on application under S. 31 of the Act.
  • It was contended on behalf of Vendee under the terms no transfer was made. To support the contention two clauses under Ex. B.1 was based on. Clause (4) of the agreement reads as follows: “That said vehicle will remain registered in the name of the seller until the transfer of the permit is made at the Secretary, State Transportation Authority, Hyderabad. From then on, the buyer must immediately transfer the vehicle in his name. Until that time, the seller must appear before the authorities interested as the owner,

Arguments of the Respondents:

  • The seller who had insured with them did not inform them; the vehicle was under the control of the Vendee on October 11, 1973, Vendee is responsible for the payment of compensation terminated by law and for that reason the insurance company is not responsible for paying any compensation to the deceased’s dependents.
  • The seller said that the employee of the Vendee was behind the wheel of the vehicle in the accident. Due to the sad act of the driver, it was alleged that the accident occurred. The transportation company argued that the compensation was payable by the seller and the seller was not legally obligated to pay compensation.
  • Rajkamal Transport Company, on the other hand, argued that the vehicle was delivered on March 14, 1973. The consideration was received in two tranches by them. The vehicle was under the control of the Vendee. The person responsible for the accident on October 11, 1973, was the employee of the Vendee.


Ratio Decidendi:

  • The Supreme Court considered the appropriate provisions of the Law and retained the transfer of ownership of a motor vehicle, the certificate mutation was not necessary.[9]
  • The seller or seller did not inform the insurance company of the vehicle transfer. The facts show that the Vendee used the vehicle between March and October 1973 without obtaining a new insurance policy to protect the interests of third parties. The Vendee also did not submit to the registration authority any petition under the Motor Vehicles Act (Law 4 of 1939) under Section 31 for the mutation of the vehicle certificate in its name.
  • The insurance company cannot raise any of the defenses since these defenses are not contemplated in Clause (2) of Section 96. It is carried out only to put a limited interpretation, the issue was considered from the point of given the “luck” if such an impediment is placed in the insurance defenses, it was noted that it may be “bad luck” for the insurance company. But luck was considered a danger in commercial enterprises.
  • The decision in I Insurance Co. Ltd. v. P. Ankaiah[10] does not establish correct law, therefore, it is reversed. A single Judge of this Court in United Fire and Gen. Insurance Co. Ltd. v. P. Parvathamma[11] held that the insurance company cannot claim any defenses other than those listed in Clause (2) of Section 96. But another judge of this Court in New India Assurance Co. v. M. Ramanamma[12], commented Parvathamma’s case is “confined only to that case”. The decision in New India Assurance Co. v. M. Ramanamma[13], is also reversed for the same reasons. 
  • The Court observed that in the present case, the policy is in respect of third party risks only and there is no necessity for the assured to have an insurable interest in the vehicle.
  • It is clear that till the transferor complies with Section 31 of the Act the statutory liability under Section 94 continues notwithstanding the transfer of title in the vehicle his public liability will not cease and that constitutes the insurable interest and the policy continues to be operative and he is liable to the third parties who are injured and the Insurance Company also is liable.
  • The victim or the legal representatives of the victim cannot be denied compensation by the insurer because the policy was not transferred in the name of the assignee.

Obiter Dicta:

  • In Kanakalakshmi v. R.V Subba Rao[14]the vehicle case was sold, therefore, the vehicle owner was not required to pay compensation because the seller’s son continued on the certificate as the owner.
  • In the common-law, the insurance company is not hampered by any known principle of law. The Supreme Court in I.G Insurance Co. v. Itbar Singh[15] interpreted the provisions of the Motor Vehicles Act and argued that the insurance company cannot take defenses other than those specified in Clause (2) the insurance company’s defenses were reduced as well. There is an elaborated discussion in the case to adopt such a measure and justify such a course of action.
  • It is seen in our country that vehicle owners are often not anxious to protect the rights of third parties. Therefore, the Supreme Court emphasized the role of the insurance company in this area. The fact that the owners of the vehicle must ensure the risks of third parties, indicated the responsibility of the insurance company, finally, is obliged to serve for justice purposes. Clause (2) of Section 96 must be interpreted in limited terms to maintain the insurance company cannot raise defenses other than those established in Clause (2).
  • The insurance company cannot contend their contract is with the transferor, therefore, they are not responsible to redeem the compensation payable by the transferee.
  • The court indicated that they are not deciding the question of sale, therefore, they are not deciding the issue whether an insurance policy lapsed as a result of sale as held in Kanakalakshmi v. R.V Subba Rao[16].
  • Anyone who uses the vehicle or allows another person to use the vehicle could also obtain insurance.
  • The public responsibility to notify the transfer and does not guarantee the certificate of objection according to Section 31 read with Section 94, would cause the original owner to retain the insurable interest. 
  • As noted by the Supreme Court, the policy is for the vehicle and, therefore, should normally work with the vehicle. It is only to wait a reasonable time for the transferor to make the necessary arrangements to notify the transfer under Section 31 and secure the certificate under Section 29-A within the time mentioned in those provisions.
  • Under a composite policy, which covers the risk of property, person, third party risks, the assignee cannot enforce the policy without the assignment in his favor so far, the policy covers the risk of the person and the property. It has no remedy against the insurance company.
  • Defense-related to the granting of compensation beyond the legal limit. We say there are certain limitations in the powers of the court. Although they may seem worthy defenses, they are virtually limitations on the powers of the court.

Relevancy & Applicability:

The present case is not overruled till today and it is held to be a valuable precedent and some cases were decided based on the ratio delivered in this case. The Court also reiterated subsequently in the case of Oriental Insurance Co. v. Inderjit Kaur[17] if the insurer has issued a policy to cover the bus, then the insurer has to indemnify third parties covered by the policy. The liability cannot be avoided arguing that he was entitled to avoid or cancel the contract.


From the present case analysis, it is clear that the third-party liability insurance under the motor vehicles act, 1988. Third-party insurance protects the interest of the third party who becomes a victim of accident or injury caused by the fault of the insured. So any liability emerging on the insured by the third party is extenuated by the insurance company. Third-party insurance is compulsory under the Motor Vehicles Act and the same has been reiterated in this case. As the third party is mandatory so it cannot be overridden by any clause in the insurance policy.

It is the duty of insurers to satisfy lawsuits and awards against insured persons with respect to third party risks. The insurance company is ‘State’ within the meaning of Article 12 of the Constitution, cannot deny, discriminate against or reject third-party insurance coverage for state vehicles because actions are guided by Article 14 of the Constitution.

The mandatory nature of third party insurance is justifiable as it facilitates the process for the injured person to recover money from the insured. The defendant or the offender cannot be exempted due to the fact that he has become insolvent. If you own a vehicle, you must pay the injured directly or through your insurance company.

Edited by Parul Soni

Approved & Published – Sakshi Raje


[1] Chandralekha Mukerji, Claiming compensation under third-party motor insurance, Economic Times,  Jan 26, 2020,

[2] M/S New India Assurance Co.Ltd v. Thiru Murugan, C.M.A.Nos.3661 of 2013 & of 2080 of 2014. 

[3]M. K. Kunhimohammed v. P. A. Ahmedkutty,  (1987) 4 S.C.C. 284.

[4] British India General Insurance … vs Captain Itbar Singh And Others, 1959 AIR SCC 1313.

[5], Third Parties (Rights against Insurers) Act 1930, (last visited Jan. 26,2020, 8:00 P.M).

[6] John J. Clarke, The Town Planning Review, Vol. 14, No. 2, 104-117 (1930),.

[7] Haji Zakaria v. Naoshir Cama, AIR 1976 AP 171.

[8] Kanakalakshmi v. R.V Subba Rao, 1972 1 APLJ 249.

[9] Panna Lal v. Chand Mal, AIR 1980 SC 871.

[10] H.I Insurance Co. Ltd. v. P. Ankaiah, (1972) 1 APLJ 47.

[11] United Fire and Gen. Insurance Co. Ltd. v. P. Parvathamma, AIR 1981 AP 227.

[12] New India Assurance Co. v. M. Ramanamma, (1982) 1 APLJ (HC) 124.

[13] Supra note 15.

[14]Supra note 11.

[15] B.I.G Insurance Co. v. Itbar Singh, 1960 AIR P&H 131.

[16] Supra note 11.

[17] Oriental Insurance Co. v. Inderjit Kaur, 1998 SCC 1 371.

Abhishek Kumar
I am Abhishek Kumar, an enthusiastic law student at the National University of Study & Research in Law, Ranchi. Bearing an interest in the field of criminal law is what compelled me to take it as an Honors subject. I love to play guitar in my free time and being a sports aficionado I love to play Table Tennis and Volleyball. I also like to spend quality time reading articles of The Hindu Editorial page which helps me to be updated with the current issues.