Insurer’s Indemnity Prevails Despite Unregistered Transfer of Possession – Clarifying Section 147 MV Act

1. Introduction

The Supreme Court’s decision in Brij Bihari Gupta v. Manmet & Ors., 2025 INSC 948, settles two recurring controversies under the Motor Vehicles Act, 1988:

• Liability of the insurer where the registered owner has informally “sold” and delivered the vehicle but the transfer is not recorded in the registration certificate; and
• Status of victims travelling in a goods vehicle while accompanying their merchandise – whether they are “gratuitous passengers” excluded from statutory coverage.

Arising out of multiple claim petitions from a single road accident in rural Chhattisgarh, the judgment overturns a High Court decision that had exonerated the insurer and foisted the entire burden on the driver–transferee. The Court not only reinstates the Tribunal’s award against the insurance company, but also elaborates practical tests to determine:

1. When does “ownership” change hands for compensation purposes?
2. When is a person in a goods vehicle protected as an “owner of goods” under Section 147(1)(b)(i)?

2. Summary of the Judgment

Holding. Allowing the appeals of the driver–transferee, the Supreme Court:

• Restores the finding that the injured / deceased were not gratuitous passengers but were accompanying their fish and vegetables and hence squarely fall within the expression “owner of the goods or his authorised representative carried in the vehicle”.
• Declares that the registered owner remains the “owner” in law until the registration is mutated (Section 50 MV Act). Consequently, the insurer whose policy is in the name of that registered owner cannot avoid liability merely because physical possession has been handed over to a would-be purchaser.
• Criticises the insurer’s “pick-and-choose” approach of appealing in only three out of eleven connected claims, holding that such selectivity cannot dislodge statutory liability when the underlying facts are common.
• Directs the insurer to satisfy the awards (with 12% and 6% interest as previously fixed) in the three surviving appeals; two other connected appeals had already been settled in Lok Adalat.

3. Analysis

3.1 Precedents Cited

Naveen Kumar v. Vijay Kumar & Ors., (2018) 3 SCC 1

The Court relied heavily on Naveen Kumar, which interpreted “owner” under Section 2(30) MV Act as the person in whose name the vehicle stands registered. The rationale is to protect third-party victims, sparing them the burden of tracing informal transfers.
Gupta extends this logic: even an agreement of sale plus delivery of possession is insufficient to shift liability unless registration changes hands.

Tribunal Findings & Evidence

Although not classic precedents, the judgment expressly adopted the Tribunal’s factual determination that the claimants were accompanying their goods. The High Court’s contrary view was dismissed as “perfunctory”.

3.2 Legal Reasoning

• A. Statutory Owner v. De facto Possessor
  • Section 50 prescribes reporting requirements for transfer.
  • Until compliance, the registered owner remains statutorily liable.
  • Informal agreements are irrelevant vis-à-vis third parties.
  • The insurer’s policy, being in the registered owner’s name, stays operative.
• B. Passenger Classification under Section 147(1)(b)(i)
  • “Any person including the owner of goods or his authorised representative carried in the vehicle” is protected.
  • Evidence showed the victims were petty hawkers transporting fish/vegetables.
  • In rural settings, accompanying goods is customary—such persons are not “gratuitous”.
  • The insurer produced no Mahazar or criminal-case records to disprove this.
• C. Burden of Proof
  • Once claimants assert they accompanied goods, insurer must establish otherwise.
  • Mere suggestions in cross-examination are inadequate.
  • The Court emphasised documentary corroboration (e.g., seizure memo) which was conspicuously absent.
• D. Pick-and-Choose Appeals
  • Selective challenges undermine consistency and fairness.
  • The Court hinted at abuse of process, noting insurer’s failure to rebut allegations of selective litigation.

3.3 Anticipated Impact

1. Clarity on “Owner”. Reinforces that registration, not possession, governs liability. This will deter insurers from raising the “informal sale” defence and encourage prompt compliance with transfer formalities.
2. Protection for Small Traders. Confirms that hawkers and owners of small consignments riding with their goods enjoy the same statutory cover as larger cargo-owners.
3. Litigation Strategy. Indicates that appellate courts may frown upon insurers fragmenting connected claims to limit exposure.
4. Tribunal Practice. Tribunals can confidently treat accompanying goods-owners as covered, shifting the evidentiary burden to insurers.

4. Complex Concepts Simplified

• Gratuitous Passenger: A person who is travelling in a vehicle without any connection to its operation, purpose or goods. Gupta clarifies that owners of goods are not gratuitous.
• Indemnity: The contractual obligation of the insurer to pay amounts for which its insured (the vehicle owner) becomes liable.
• Section 147 MV Act: Sets minimum coverage; clause (1)(b)(i) includes third-party injury and persons accompanying goods.
• Registered Owner vs. De facto Owner: The former is the person named in the Registration Certificate; the latter may be a buyer who has taken possession but not completed registration.
• Mahazar (Seizure Memo): A police document recording articles seized at an accident or crime scene, often crucial to prove presence of goods.

5. Conclusion

Brij Bihari Gupta v. Manmet cements the principle that statutory protections for road-accident victims cannot be whittled down by private arrangements or mere possession transfers. By insisting that insurers honour policies until registration formally changes, the Court underscores legislative intent: compensation should be swift and certain, not entangled in ownership disputes.

Equally significant is the recognition of rural and informal trade realities; owners of goods, no matter how small their consignment, are entitled to the statutory umbrella. Going forward, both insurers and vehicle purchasers must heed procedural requirements, lest they be saddled with liability or denied coverage. The judgment thus strengthens the remedial architecture of the Motor Vehicles Act and ensures that victims are not left remediless due to technicalities.