George Vadakkel, J.:— This appeal is from a suit for compensation in respect of an accident involving bodily injury to the plaintiff. The accident arose out of the use of motor vehicle, a lorry with registration number K.L.D 4282, at a place called Thalayi. The accident was on 15-11-1973. At the time of the accident the plaintiff was sitting on a bicycle on the road-side far removed from tarred-portion resting his feet on the ground. While so the lorry hit him and he was knocked down. His right mandible was fractured and he lost a number of teeth. He underwent treatment in the Medical College Hospital, Calicut from 15-11-1973 to 4-12-1973. He claimed compensation to the tune of Rs. 12,000/- against the driver of the lorry, the 1st defendant, its owner, the 2nd defendant and the National Insurance Company, the 3rd defendant who is the appellant before us. The lower Court decreed the suit for Rs. 4,250/- against all the defendants. The Insurance Company disputes its liability for compensation and that is the only question that falls to be decided here.

2. There is no dispute that the vehicle originally belonged to one C.K Kunhahamad who is not a party to the suit. It was he who insured the vehicle with the 3rd defendant-insurance company. While the policy was current, Kunhahamad sold the vehicle to the 2nd defendant. First defendant-driver is the 2nd defendant's employee. It is common case that though Kunhahamad transferred the ownership of the vehicle to the 2nd defendant, he did not transfer the insurance policy to the 2nd defendant. Therefore, the insurance company raised the contention that the policy has lapsed and that the insurance company is not liable to satisfy the judgment and decree against defendants 1 and 2 as provided for by Sec. 96 of the Motor Vehicles Act, 1939. The lower Court found against this contention and decreed the suit, as aforesaid, against all the defendants including the 3rd defendant-insurance company.

3. Under the insurance policy what the insurance company has undertaken is to indemnify the insured, inter alia, “against any liability which may be incurred by him in respect of the death of or bodily injury to any person or damage to any property of a third party caused by or arising out of the use of the vehicle in a public place”. (Section 95(1)(b)(i) of the Motor Vehicles Act). The indemnification provided by the policy may also extend to any person driving the vehicle with the consent of or on the order of the insured. Admittedly the insured under the policy is C.K Kunhahamad. The insured under the policy is not the 2nd defendant, the owner of the lorry at the time of the accident, nor the first defendant who was driving the vehicle at that time, as an employee of the 2nd defendant. The contract of insurance is a contract of personal indemnity and therefore the insured cannot transfer the benefits under a policy so long as such benefits are contingent. In short an insurance policy cannot be transferred by the insured without the consent of the insurer. On the insurer agreeing to such a transfer there is a novation of the contract by which the original assured is substituted by the new assured, the transferee to whom the policy has been transferred. It follows both defendants 1 and 2 cannot look to the 3rd defendant-insurance company for any indemnity on the basis of an insurance policy issued by the 3rd defendant.

4. In Peters v. General Accident, and Life Assurance Corpn. Ltd., (1938) 60 LI L Rep 311 CA Sir Wilfrid Greene, M.R said:—

“It appears to me to be as plain as anything can be that a contract of that kind is in its very nature not assignable. The effect of the assignment, if it were possible to assign, was stated by Mr. Comyns Carr to be that from and after the assignment the name of Mr. Pope, the assignee, would have taken the place of Mr. Coomber in the policy, and the policy would have to be read as though Mr. Pope's name were mentioned instead of Mr. Coomber's; in other words, the effect of the assignment would be to impose upon the insurance company an obligation to indemnify a new assured or persons ordered or permitted to drive by that new assured. That appears to me to be altering in to the character of the risk under a policy of this kind. The risk that A.B is going to incur liability by driving his motor car, or that persons authorised by A.B are going to cause injury by driving his motor car is one thing. The risk that C.D will incur liability by driving a motor car or persons authorised by C.D will incur liability through driving a motor car is, or may be, a totally different thing.

The insurance company in this case, as in every case, makes inquiries as to the driving record of the person proposing to take out a policy of insurance with them. The business reasons of that are obvious, because a man with a good record will be received at an ordinary rate of premium and a man with a bad record may not be received at all or may be asked to pay a higher premium. The policy is in a very true sense one in which a personal element is inherent of such a character as to make it in my opinion quite impossible to say that the policy is one assignable at the volition of the assured.”

The Court of Appeal in the above case affirmed the decision of Goddard J. (as he then was) in Peters v. General Accident, and Life Assurance Corpn. Ltd., (1937) 4 All ER 628, where the learned Judge said:

“I do not think that you can assign a policy of this nature at all ……… You cannot thrust a new assured upon a company against its will. If you do that, you must have a novation. You must have the release of the assured and the acceptance of a new assured.” (p. 633)

5. That the position under the Motor Vehicles Act is also the same admits of no doubt. Till the Act was amended by the Motor Vehicles (Amendment) Act, 1969 (Act 56 of 1969) by introducing thereinto Section 103-A, there was no provision in the Act concerning transfer of certificate of insurance. By S. 103-A introduced into the Act by the Amending Act with effect from 1-10-1970 where the transferor of a vehicle proposes to transfer to another person the ownership of the motor vehicle, he may also apply in the prescribed form to the insurer for the transfer of certificate of insurance and the policy described in the certificate in favour of the person to whom the motor vehicle is proposed to be transferred. On such application being made to the insurer, under that section, the insurer is bound to intimate the insured (the transferor) and such other person (the transferee) of refusal, if any, to transfer the certificate and the policy to the other person, within 15 days of receipt of such application. If no such intimation is given to the transferor and the transferee within the 15 days prescribed in that behalf, “the certificate of insurance and the policy described in the certificate shall be deemed to have been transferred in favour of the person to whom the motor vehicle is transferred with effect from the date of its transfer”.

This provision in S. 103-A(1) shows that the insurer can refuse to transfer the certificate and the policy despite the fact that the motor vehicle has been transferred. No doubt the section contains a deeming provision to the effect that unless the insurer intimates the transferor and the transferee of the refusal to transfer the certificate and the policy to the transferee within 15 days of the receipt of the application for transfer of the certificate and the policy, it shall be deemed that the same have been transferred in favour of the transferee with effect from the date of the transfer of the motor vehicle. Sub-section (2) of S. 103-A enables the insurer to refuse to transfer to the transferee of the vehicle the certificate of insurance and the policy described in the certificate if he considers it necessary so to do, having regard to the previous conduct of the transferee as a driver of motor vehicles; or as a holder of the policy of insurance in respect of any motor vehicle; or any conditions which may have been imposed in relation to any such policy held by the applicant; or the rejection of any proposal made by such other person for the issue of a policy of insurance in respect of any motor vehicle owned or possessed by him.

Under sub-section (3) of S. 103-A where a motor vehicle has been transferred by the owner to another and the insurer has refused to transfer in favour of the transferee of the motor vehicle the certificate of insurance and the policy described therein, the insurer is bound to refund to the transferee of the vehicle the amount, if any, which, under the terms of the policy, he would have had to refund to the insured (the transferor of the vehicle) for the unexpired term of such policy. These provisions show that the law in India is not different from that stated by Goddard J. in Peters v. General Accident, and Life Assurance Corpn. Ltd., (1937) 4 All ER 628, as confirmed by the Court of Appea in Peters v. General Accident, and Life Assurance Corpn. Ltd., (1938) 60 LI L Rep 311.

6. In the face of the admission that the insurance policy has not been transferred to the 2nd defendant, the 3rd defendant-insurance company cannot be held to be liable to indemnify defendants 1 and 2 or to satisfy the judgment and decree obtained by the plaintiff against defendants 1 and 2. In other words, the 3rd defendant-insurance company is not liable under S. 96 of the Motor Vechices Act, 1939 and that provision is of no avail to the plaintiff to realise the amount of compensation payable by defendants 1 and 2 from the 3rd defendant-insurance company.

7. We are supported in this our view by the decisions in Hema Ramaswami v. K.M.V Panjani (AIR 1981 Mad 174) and National Insurance Co. Ltd. v. Thirumalai Ammal (AIR 1982 Mad 83). The second mentioned decision also relies on Peters v. General Accident, and Life Assurance Corpn. Ltd., (1937) 4 All ER 628. These decisions take the view that the insurance policy lapses upon the transfer of the ownership of the motor vehicle unless the insurance company agrees to accept the transferee as the insured in relation to the vehicle either at the instance of the transferor or of the transferee. We are in agreement with the view expressed by the Madras High Court in the aforesaid decisions.

8. The lower Court relied on the decisions in Haji Zakaria v. Naoshir Cama (AIR 1976 Andh Pra 171). It noticed that the Mysore High Court has taken a contrary view in B.P Venkatappa Setty v. B.N Lakshmiah, 1973 Acc CJ 306 : (AIR 1973 Mys 350) and that the Rajasthan High Court has followed the decision in Padma Devi v. Gurbaksh Singh, 1973 Acc CJ 460 : (AIR 1973 Raj 317).

9. In Haji Zakaria v. Naoshir Cama (AIR 1976 Andh Pra 171) the Andhra Pradesh High Court rested its decision on two grounds in the alternative. That was a case where the owner of the motor car died and the question was as to whether his heirs who inherited the car would also get the benefit of the insurance policy relating to the car taken by the deceased. The Andhra Pradesh High Court pointed out that the heirs have obtained a succession certificate and that therefore “if the car is property and has passed, on the death of its owner, to his heirs, on principle the policy of insurance taken by the late owner for which he paid valuable consideration in the shape of premium should also be property” which would “devolve on his heirs by operation of law”. On that basis that Court held that the heirs became entitled “to the car as well as to the benefits of the policy which was still in force”. We do not propose to examine this aspect herein in so far as this is not a case of that class.

10. The Andhra Pradesh High Court in the alternative and mainly rested its decision relying on Ss. 94, 95 and 96 of the Motor Vehicles Act. We are unable to find anything either in S. 94 or 95 which would make the insurer liable to indemnify some one other than the insured. Section 94 speaks of the necessity for insurance against third party risk and S. 95, of the requirements of policy and limits of liability. It is Section 96 that casts liability on the insurer to satisfy judgments against persons insured in respect of 3rd party risk and thereunder the insurer's liability, as already pointed out, is to satisfy judgments against persons insured in respect of third party risks and not judgments against persons, who vis-a-vis the insurer are not insured. We regret we are unable to subscribe to the view expressed by the Andhra Pradesh High Court in Haji Zakaria v. Naoshir Cama (AIR 1976 Andh Pra 171).

11. In Padma Devi v. Gurbaksh Singh, 1973 Acc CJ 460 : (AIR 1973 Raj 317) the Rajasthan High Court proceeded on the basis that S. 96(2) of the Motor Vehicles Act specifies the defences that are open to an insurance company; such specification of the defences is exhaustive; and it is not open to an insurance company to raise any other defence. Noticing S. 96(2) as aforesaid the Rajasthan High Court went on to say that the only circumstance in which the company can take up the above defence is when the policy has been cancelled in accordance with the provisions of S. 96(2)(a). It appears to us that (with respect) the reasoning as aforesaid founded on sub-section (2) omits to notice the provision in sub-section (1) of Section 96 which is to the effect that the insurer's liability is only where a “judgment in respect of any such liability as is required to be covered by a policy under Cl. (b) of sub-section (1) of S. 96 is obtained against any person insured by the policy”. In such a case, that is, where judgment is rendered against a person insured, then sub-section (2) comes into play and provides that the insurer shall not be liable to pay any sum, if one or the other of the matters stated therein is obtained.

12. The Mysore High Court in K.P Venkatappa Shetty v. B.N Lakshmiah, 1973 Acc CJ 306 : (AIR 1973 Mys 350) has taken the view we have taken, namely, that the insurance policy is a personal contract for indemnity and lapses upon the transfer of the vehicle and that therefore the benefit of the policy would not be available to the transferee without an express agreement with the insurance company. We are in agreement with the view expressed as aforesaid by the Mysore High Court — however, note, that new S. 103-A governs this point.

13. It remains to be pointed out that Section 103-A does not go the whole way. No doubt, under that section there is a fictional transfer of the certificate of insurance and the policy described in the certificate taken by the transferor of a vehicle to transferee thereof by providing that unless the insurer gives intimation of refusal to transfer the certificate of insurance and the policy mentioned therein to the transferee within 15 days of receipt of the application for transfer of the same in favour of the transferee, the same shall be deemed to have been transferred to the transferee with effect from the date of the transfer of the motor vehicle. However, the statute does not provide as to what is to happen if the transferor does not apply to transfer the insurance policy and certificate. The statute also does not provide for coverage by the insurer of 3rd party risk arising out of an accident that happens within the 15 days stated in the section — the insurer can very well in such an event refuse to transfer the certificate of insurance and the policy and avoid liability.

In view of the large use of motor vehicles on the road it appears to us that it is necessary that the Legislature bestows its attention on these aspects and provide for such eventualities as are mentioned above. Perhaps the same could be achieved by providing for a statutory fictional transfer of the certificate of insurance and the policy mentioned therein automatically with the transfer of the vehicle with the further provision that till the insurer repudiates the insurance and cancels the same with notice to the concerned authorities under the M.V Act, the insurance policy shall be in force and that the same would not lapse on mere transfer of the vehicle in respect of which such policy has been taken.

14. In view of what is stated hereinbefore the appellant is entitled to succeed. We set aside the judgment and decree of the lower Court to the extent the same are against the 3rd defendant-appellant and only to that extent. The judgment and decree passed by the lower Court is otherwise confirmed. The third defendant-appellant shall suffer costs in this Court and in the lower Court. This appeal is allowed as stated above to the above extent.

Order accordingly.