Third Party Insurance Is Considered To Be Transferred Along With Effective Control Over Vehicle In A Hire Agreement Under The Motor Vehicles Act: Supreme Court by Somesh Vaidya @LexCliq

When a transportation company leases a motor vehicle from its registered owner, the third-party insurance coverage is considered to be transferred together with the vehicle, according to a recent Supreme Court ruling.

The individual who has effective control and command of the vehicle is referred to as the ‘owner.’ As a result, along with the vehicle, it must be assumed that the current insurance coverage is also transferred for the agreed-upon term of rental.

The Supreme Court reversed an Allahabad High Court decision based on this concept, which was established in the 2011 precedent Uttar Pradesh State Road Corporation v. Kulsum & Ors.

A division bench of Justices S. Abdul Naseer and Krishna Murari was deliberating whether an insured vehicle is plying under an agreement with the Corporation on the route as per the permission granted in favour of the Corporation and, in the event of an accident during that period, whether the Insurance Company would be liable to pay compensation or whether it would be the responsibility of the Corporation or the holder of the permit.


The Uttar Pradesh State Road Transport Corporation (Corporation) leased a bus that was involved in a tragic accident, killing one passenger. The deceased’s legal heirs filed a claim case with the Motor Accident Claim Tribunal in Bahraich, Uttar Pradesh. The Corporation submitted its written statement, which included the contract between the Corporation and the bus owner, as well as the factum of insurance for the bus with the Insurance Company. The Insurance Company responded, acknowledging the existence of the Insurance Policy in relation to the stated bus during the relevant time. The Tribunal imposed responsibility on the Insurance Company, ordering it to pay the claimants Rs.182,000/- in compensation with interest at the rate of 6% per year.

The Insurance Company filed an appeal with the Allahabad High Court, arguing that it is not obligated to pay the compensation granted by the Tribunal since the Corporation was driving the bus at the time of the accident. It contended that the Corporation was in fact obligated to fulfil the Award. The Allahabad High Court ruled that insurance companies are not obligated to pay compensation to third parties if the buses were operated under the Corporation’s supervision. The Corporation then filed an appeal with the Supreme Court.


The Supreme Court reversed the Allahabad High Court’s decision, imposing responsibility on the Corporation. It relied largely on its previous judgement in Uttar Pradesh State Road Corporation v. Kulsum & Ors (2011), in which it was ruled that effective control and command is the true measure of ownership. As a result, the insurance policy is considered to be transferred together with the car under a rental agreement. It had said

“If the Corporation had become the owner even for a specific period and the vehicle had been insured at the request of the original owner, it will be deemed that the vehicle was transferred to the Corporation along with the existing Insurance Policy, and thus the Insurance Company would not be able to escape its liability to pay the amount of compensation.”

In its 2011 decision, the Supreme Court also said that mandatory car insurance is intended to assist Third Parties. The owner’s obligation to carry mandatory insurance only applies to third parties and not to the property. As a result, once the vehicle is insured, the owner and anybody else with the owner’s permission may use it. Section 146 of the Act does not require anybody who uses the vehicle on their own to get separate insurance coverage. According to the Court, the objective of mandatory insurance under the Act was established with the goal of advancing social fairness.

As a result, based on the 2011 decision, the Supreme Court assigned responsibility to the Insurance Company in this case. It ordered the Insurance Company to deposit Rs.182,000/- in payment of the Tribunal’s award, with interest at the rate of 6% per year from the date of filing of the claim petition till the date of deposit.

..through the definition of “vicarious liability,” it can be inferred that the person supervising the driver is liable to pay the compensation to the victim. During such time, however, it will be deemed that that vehicle was transferred along with the insurance policy, even if it were insured at the instance of the original owner. Thus, the Insurance Company would not be able to escape its liability to pay the amount of compensation”, the Court said

Article by Somesh Vaidya

Title: Uttar Pradesh State Road Transport Corporation v. National Insurance Company Limited & Ors.

Citation: LL 2021 SC 313

Read The Order

Leave a Reply

Advocates Articles BARE ACTS

Five Reasons Why You Shouldn’t Rely On UNO CBD Gummies Anymore.

UNO CBD Gummies:– Uno CBD Gummies are powerful treatments that help to address a selected ailment, circumstance, or trouble. CBD gummies in low doses recognize the body functioning, and provide number one care to ease specific situations or sickness. These gummies now not only recognition on physical well-being, however also hold an eye on intellectual, […]

Read More

Heater Pro X Reviews

I was just recently searching for a DVD on Heater Pro X. Did you like that? It won’t hurt to try. All too soon I locate myself mentioning Advanced and innovative ceramic technology. Through what medium do aficionados track down outstanding Digital LED control tips? That will be undreamed of a couple of years ago. […]

Read More

MaleBoost Male Enhancement If You Struggling Low Drive | Minimal Erection | Poor Libido It Will Really Work[Safe Or Reckless]

MaleBoost Male Enhancement Model Name – Enhance Sex Drive & Libido (Pure Form Ingredients) Treatment – Sexual Health Quantity – 60 Capsule Benefits – Improved stamina & energy levels & reduced stress levels. Results – In 1-2 Months Customer Reviews – 5/5 Refund Policy – 60-Day Money-Back Policy Where to Buy Online – Male Boost […]

Read More