Insurer Held Liable to Indemnify Registered Owner Where Ownership Not Transferred; Passengers Not Found Gratuitous

A bench of Justice K. Vinod Chandran and Justice N. V. Anjaria heard appeals arising from orders of the High Court of Chhattisgarh that had altered awards made by the Motor Accidents Claims Tribunal. The appeals concerned whether an insurer was liable to indemnify the registered owner of a goods vehicle when the vehicle was in the possession of an ostensible owner/driver under an agreement, and whether the injured/deceased occupants of the vehicle were “gratuitous passengers” disentitling them from third‑party protection under the policy.

The Court summarised the principal holding by restoring liability on the insurer to satisfy the awards except in matters already settled in Lok Adalat. The bench held that the plea that the deceased and injured were gratuitous passengers remained unsupported by evidence and that the alleged transfer of ownership to the driver was not completed as required by the Motor Vehicles Act, 1988. The Court, in its reasoning, observed: "Section 147 which has the nominal heading 'Requirements of policies and limits of liability' by sub‑section (1)(b)(i) enables indemnification by the insurer, any liability with respect to the death or bodily injury to third parties and any person including owner of the goods or his authorized representative carried in the motor vehicle." The Court further noted that the insurer’s contention that the passengers were gratuitous "remains in the realm of mere assertion without substantiation," and emphasised that "the ownership was with the registered owner even at the time of the accident and it is his liability to compensate the victims in the accident, which also has to be indemnified by the insurer." The Supreme Court allowed Civil Appeals Nos. 6338‑6339 of 2024 and No. 6340 of 2024 and ordered that the impugned awards, other than those dismissed on settlement, were to be satisfied by the insurer.

Background The disputes arose from a collision involving a goods vehicle that resulted in death/injuries and gave rise to eleven claim petitions before the Tribunal. The vehicle carried petty hawkers who, according to claimant testimony, accompanied their merchandise — fish and vegetables — in the goods vehicle. The vehicle bore a valid insurance policy in the name of the registered owner; the driver/appellant asserted possession under an agreement with the registered owner but had not effected transfer of registration or placed the policy in his own name. The insurer contested liability on two fronts: (i) that the occupants were gratuitous passengers and therefore not third parties under the policy, and (ii) that the appellant was the true owner at the time of accident and the policy in the registered owner’s name did not cover him.

The Tribunal found on facts that the occupants were not gratuitous passengers and made the registered owner, the ostensible owner/driver and the insurer jointly and severally liable. The High Court allowed the insurer’s appeals in part, absolving the insurer of indemnity liability while enhancing certain awards in claimant appeals and dismissing another. The appellant driver challenged the High Court order and its refusal of his review in these appeals.

The Supreme Court examined documentary and oral evidence, noting claimant depositions that the injured/deceased were hawkers accompanying goods and pointing out failures in the insurer’s proof: the insurer did not produce a mahazar from the criminal proceedings and its witness conceded lack of knowledge on the status of occupants. The Court found that the sale agreement evidenced only transfer of possession on payment of part consideration and that statutory transfer under Section 50 of the Motor Vehicles Act had not been effected. Reliance on this Court’s earlier decision in Naveen Kumar v. Vijay Kumar was noted to support the remedial purpose of the Act to protect victims rather than force claimants to trace successive transfers. The Court allowed the appeals, ordered the insurer to satisfy the awards (save those extinguished by Lok Adalat settlement filed as record), and recorded interest differentials granted earlier by the Tribunal and High Court.

Case Details: Case No.: 2025 INSC 948; Civil Appeal Nos. 6338‑6339 of 2024; C.A. Nos. 6340‑6342 of 2024 Case Title: Brij Bihari Gupta v. Manmet & Ors. Appearances: For the Petitioner(s): Kaustubh Shukla, Advocate (for appellant Brij Bihari Gupta) For the Respondent(s): Rajesh Kumar Gupta, Advocate (for insurer); Subhranshu Padhi, Advocate (Amicus Curiae for claimants)