Sale of an old vehicle without change of ownership-Beware!!

Sale of an old vehicle without change of ownership-Beware!!

It’s time to pause and ponder

By:Ms.Bhakti Sethi (Pasrija),Advocate,Supreme Court of India

Around two months ago we visited my sister-in-law’s family. During normal chit-chat her younger brother told us that he has sold his old car and purchased a brand new luxury car. We congratulated him and asked ‘Whether he has completed the formalities regarding intimation to RTO regarding change of ownership of the car?’ He said ‘No’, it’s not required at all. The purchaser has signed the ‘Delivery Note’ and that’s sufficient.

Hmm..!! The Alarm Bell rings here. Let me tell you all. It’s not sufficient. Section 50 of the Motor Vehicle’s Act, 1988 imposes duty both on transferor and transferee of the motor vehicles to inform the registering authority about the transfer and seek change of the registration & that the non compliance of those requirements entails them with penal action. Here it goes:

“Section 50 in the Motor Vehicles Act, 1988

  1. Transfer of ownership.—

(1) Where the ownership of any motor vehicle registered under this Chapter is transferred,—

(a) the transferor shall,—

(i) in the case of a vehicle registered within the same State, within fourteen days of the transfer, report the fact of transfer, in such form with such documents and in such manner, as may be prescribed by the Central Government to the registering authority within whose jurisdiction the transfer is to be effected and shall simultaneously send a copy of the said report to the transferee; and

(ii) in the case of a vehicle registered outside the State, within forty-five days of the transfer, forward to the registering authority referred to in sub-clause (i)—

(A) the no objection certificate obtained under section 48; or

(B) in a case where no such certificate has been obtained,—

(I) the receipt obtained under sub-section (2) of section 48; or

(II) the postal acknowledgment received by the transferee if he has sent an application in this behalf by registered post acknowledgment due to the registering authority referred to in section 48, together with a declaration that he has not received any communication from such authority refusing to grant such certificate or requiring him to comply with any direction subject to which such certificate may be granted;

(b) the transferee shall, within thirty days of the transfer, report the transfer to the registering authority within whose jurisdiction he has the residence or place of business where the vehicle is normally kept, as the case may be, and shall forward the certificate of registration to that registering authority together with the prescribed fee and a copy of the report received by him from the transferor in order that particulars of the transfer of ownership may be entered in the certificate of registration.

(2) Where—

(a) the person in whose name a motor vehicle stands registered dies, or

(b) a motor vehicle has been purchased or acquired at a public auction conducted by, or on behalf of, Government, the person succeeding to the possession of the vehicle or, as the case may be, who has purchased or acquired the motor vehicle, shall make an application for the purpose of transferring the ownership of the vehicle in his name, to the registering authority in whose jurisdiction he has the residence or place of business where the vehicle is normally kept, as the case may be, in such manner, accompanied with such fee, and within such period as may be prescribed by the Central Government.

(c) If the transferor or the transferee fails to report to the registering authority the fact of transfer within the period specified in clause (a) or clause (b) of sub-section (1), as the case may be, or if the person who is required to make an application under sub-section (2) (hereafter in this section referred to as the other person) fails to make such application within the period prescribed, the registering authority may, having regard to the circumstances of the case, require the transferor or the transferee, or the other person, as the case may be, to pay, in lieu of any action that may be taken against him under section 177 such amount not exceeding one hundred rupees as may be prescribed under sub-section (5): Provided that action under section 177 shall be taken against the transferor or the transferee or the other person, as the case may be, where he fails to pay the said amount.

(4) Where a person has paid the amount under sub-section (3), no action shall be taken against him under section 177.

(5) For the purposes of sub-section (3), a State Government may prescribe different amounts having regard to the period of delay on the part of the transferor or the transferee in reporting the fact of transfer of ownership of the motor vehicle or of the other person in making the application under sub-section (2).

(6) On receipt of a report under sub-section (1), or an application under sub-section (2), the registering authority may cause the transfer of ownership to be entered in the certificate of registration.

(7) A registering authority making any such entry shall communicate the transfer of ownership to the transferor and to the original registering authority, if it is not the original registering authority.”

 

Few days later an Old couple from Punjab with watery eyes and trembling hands walked into my office after being referred by a friend.My friend told me that it was a hopeless case where a man had sold his tractor but registration still stood in his name so the Tribunal as well as the Hon’ble High Court had directed him to pay compensation to the family of victim as the Driver of the Buyer had caused an accident. She requested me to look into the matter as the old couple was in real anguish. I asked the elderly man in his 70’s, Kya huaa thaa Uncle Ji (What had happened Uncle?)The man literally burst into the tears and chokingly said, ‘Mera case kar dau beta ji,hume bacha lo.Mene tractor bech diya thaa.Jisne kharida uske bande sei accident huaa.Mera koi matlab hei nahi thaa.Mein ab kahan sei pese du.Mere tau rato ki neende urr gayi hei.’(Daughter, pls.do my case and save us.I had sold the tractor and the employee of the purchaser caused an accident.I was nowhere in picture, how do I pay the money.I am spending sleepless nights).

 

I asked them few questions and collected all the documents from them. His wife who had wrinkles all over her face and strange warmth could not utter a word due to the emotional outburst. The purchaser hadn’t got the vehicle insured so insurance company was not in picture here.

I told my friend that after going through all the papers that I am of the firm belief that our client is innocent and he should not have been directed to pay. It’s a common sense that he was no longer the owner and had no role so it would be highly unjustified if he has to suffer for something which was not in his control.

Well I prepared the Special Leave Petition for filing it before the Hon’ble Supreme Court of India and seeking setting aside of the orders passed by the High Court directing my client to pay. Gist of submissions is as follows:

Brief facts– The petitioner (A) is a 70 years old, innocent, illiterate and ailing man who sold his tractor to meet out the financial requirements of the family to X and since then A is not the owner of the tractor in question nor he had concern with the same. The Petitioner has difficulty is walking & and is taking treatment of P1VD and Backache besides having higher sugar levels & lesser strength.

The Petitioner is totally naive and uneducated as he had never went to school in his life and now  his age and physical health does not permit him to do anything. The buyer(X) had got prepared all papers and had taken thumb impression of the Petitioner. The Petitioner was assured that the transfer was complete in all respects. It was the buyer X who took care of all the paper work and procedure. It was alleged that one day deceased J along with her husband P were going on a motorcycle. She was the pillion rider while motor cycle was driven by her husband P. They were hit by the Tractor driven by Y(employee of X)and J she died on the same day at about 5 p.m after succumbing to injuries.

The matter was reported to police and FIR was registered against Y. A claim petition was filed by the legal representatives of the deceased before the ld. Motor Accident’s and Claims Tribunal wherein A was also implicated as the Respondent.

The ld.Motor Accidents Claims Tribunal held as follows:

“In view of my findings arrived on the above issues, the claim petition succeeds and the same is allowed with costs against all the respondents A,X and Y jointly & severally.” Accordingly a compensation of several lakhs was directed to be paid to the victim’s family.

‘A’ preferred an Appeal before the Hon’ble High Court against the above mentioned award passed by the Motor Accidents Claims Tribunal as he had been wrongly directed to pay the compensation jointly & severally along with others. The Hon’ble High Court dismissed the Appeal of ‘A’.

Our Legal submissions before the Hon’ble Supreme Court of India :

The definition of ‘owner’ in the Motor Vehicle Act, 1988 reads as follows:

“Section 2(30) in The Motor Vehicles Act, 1988

(30) “owner” means a person in whose name a motor vehicle stands registered, and where such person is a minor, the guardian of such minor, and in relation to a motor vehicle which is the subject of a hire-purchase agreement*, or an agreement of lease or an agreement of hypothecation, the person in possession of the vehicle under that agreement;”

 

The above definition clearly shows that in various circumstances like hire purchase agreement, agreement of lease, or an agreement of hypothecation, person in possession of vehicle under the agreement is the ‘owner’. Hence the Parliament never wanted an innocent man who has neither the possession nor any kind of control over the vehicle should be saddened with the liability in case the person having possession & control of the vehicle causes accident.

I specifically argued that in view of facts of this nature, the Hon’ble Supreme Court must precede on the presumption that if the Parliament while enacting the 1988 Act did not envisage such a situation and that if in a given situation, the statutory definitions contained in the 1988 Act cannot be given effect to in letter and spirit; the same should be understood from the common sense point of view.

Undisputedly in the instant matter X was the actual owner of the tractor in question at time of accident & Y was his driver. He was having possession and control of the tractor & the petitioner A who had sold the tractor X had no role to play.Infact it was X who took the tractor on Sapurdari from Criminal Court & the petitioner A is nowhere in picture. All the evidence depicted threadbare about the ownership and possession of X who even admitted this fact in his cross examination.

The joint and several liability to pay compensation has been wrongly fastened upon the petitioner ‘A’ by the Ld.Tribunal & the Hon’ble High Court erroneously dismissed the Appeal of the Petitioner.

The Hon’ble Supreme Court of India  in HDFC Bank ltd. vs. Kumari Reshma and others,2015(3)SCC679 had observed that the person in the possession of vehicle under the agreement is the owner & undisputedly in the instant matter too ‘X’ was the actual owner of the tractor in question at time of accident.

The Hon’ble Courts below ought to have seen that ‘X’ was having actual ownership,possession and control of the tractor & it is his liability to pay the claim. The Hon’ble High Court should have considered the fact that the definition of ‘owner’ under Section 2(19) of the Act has, to be construed in a wider sense in the facts and circumstances of a given case & the expression owner must include, in a given case, the person who has the actual possession and control of the vehicle and under whose directions and commands the Driver is obliged to operate the vehicle.

I also argued that the Hon’ble High Court failed to appreciate that Section 50 of the Motor Vehicle’s Act imposes duty both on transferor and transferee of the motor vehicles to inform the registering authority about the transfer and seek change of the registration & that the non compliance of those requirements entails them with penal action but does not invalidates the sale of the vehicle.We further argued that the tractor is a movable property, the title in tractor passed on to the purchaser the moment the possession of the tractor in question was handed over in terms of the provisions of the Sale of Goods Act. As between the transferor and transferee the sale gets completed before the transfer of the registration certificate. The failure to report the transfer may involve some penalties under the law. But that certainly does not interdict the passing of property in the vehicle to the transferee. All that is required under the Act is that the transfer has to be notified, otherwise certain penal consequences follow, but that does not make the transfer invalid. The moment the sale of vehicle is effected & property/vehicle is passed, the registered owner ceases to have any proprietary interest. The beneficial interest, including the right of possession vests in the transferee.

The transfer of titles of the motor vehicle is considered to be complete on delivery of possession and by passing of consideration for sale. In a case where prima facie evidence of transfer of the vehicle, proof of delivery, payment of consideration, the contract details and evidence of the fact as to who applied for custody of vehicle from criminal court was available, the tribunal ought to have passed the award against the transferee only and not the innocent transferor.

Well the Hon’ble Supreme Court of India after hearing our submissions has been pleased to issue notice in the matter and has also stayed the impugned judgement of the Hon’ble High Court qua my client-the wrinkled old man! The couple is jubilant as of now and can sleep peacefully. I strongly hope that when the matter comes up for final hearing the Hon’ble Court will consider it favourably too.

I conclude with an advice to all those who wish to sell their old vehicles, to complete all the formalities and get the transfer of ownership registered with the concerned RTO immediately when they sell the vehicle to avoid any legal hassles and unforeseen circumstances in future.Best wishes!!

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