SHAFIUR RAHMAN, J.---Leak to appeal was granted with a view to examine the interpretation of sections 94 to 96 of the Motor Vehicles Act, 1939 which stand saved by the Motor Vehicles Ordinance, 1965.
2. The facts in the two appeals and the decisions rendered therein are somewhat different and need separate narration in order to bring out the issue.
' CA.152-K/84.
3. Azhar Ali (respondent No,1) instituted a civil suit on the original side in the High Court of Sindh at Karachi claiming a sum of Rs,60,000 on account of the death of his son Javed Ali in a road accident on 6th of March, 1976. The vehicle involved in the accident was a Suzuki van bearing Registration No,KAZ-6985 of which Sheikh Muhammad Rais defendant/pendent No,2 was recorded to be the owner while the other respondent (No,3) Azad Badshah was driving it. The vehicle was said to be insured with the appellant. This claim was contested by the appellant on various grounds including the ground that though it had insured the vehicle and its owner but the insured person namely, the user/owner was different than Shaikh Muhammad Rais Shamsi on whose behalf he was required to pay the compensation. The learned Judge in the High Court arrived at the liability of the respondents Nos.2 and 3 but as regards that of the present appellant he refered it to a larger Bench. The two questions framed for determination by the larger Bench were as hereunder:-- "(1) Whether the insurer who has insured the vehicle against third party risks, is liable although the real owner of the vehicle at the time of the accident is not the person named in the insurance policy?
(2) Whether a driver who is permitted to drive the insured vehicle will be deemed to be an insured under the insurance policy, though his name is not specifically mentioned in the policy? If so, whether the insurance company will be liable if such driver is found to be liable?"
4. The facts forming the background of these two questions were that Shaikh Muhammad Rais Shamsi had purchased vehicle involved in the accident during the currency of the insurance policy but as the registration book was not transferred in his name, he obtained the renewal of the insurance policy in the name of the previous owner Muhammad Shagil and not in his own name.
This had afforded a ground to the appellant to raise the plea that the insured person was a different one and the person driving and involved in the accident had no authority or permission to drive the vehicle insured and on that account the appellant was not liable in the matter.
5. A survey of the British-and sub-continental decisions of the superior Courts was undertaken very exhaustively by the High Court's larger Bench and the conclusion reached was expressed as hereunder:-- "...In order to maintain an action against an insurer, it is incumbent to show that the person or classes of persons specified in the policy have incurred any liability in terms of clause (b) of subsection (1) of section 95. In other words, if the liability incurred is by a person other than the person or. Classes of persons specified in the policy, the insurer shall not be liable. It is only when it is shown that the liability was incurred during the currency of the policy by the person or classes of persons specified in the policy, the above subsection (2) of section 96 is attracted to."
' The condition in the Insurance Certificate relevant to the issue was held to be para. 5, which read as hereunder:-- "Person or classes of persons entitled to drive.--Any persons provided the person driving holds a valid licence to drive the vehicle."
' On the basis of this provision, the following conclusion was drawn:- "It may be observed that the above-quoted para. 5 of the insurance certificate is susceptible to two interpretations, namely, any persons mean the person or persons in employment/contemplation of the insured but liberal construction of the above para. Will cover any person holding a valid driving licence. Zafar Hussain Mirza, J preferred the latter interpretation and pointed out that the driver conductor and passengers whoever they may be at the material time a class of persons insured and that it was not warranted to add condition that only a driver in the employment of the main insured person was intended to be covered by the insurance policy.
However, I may point out that if the above insurance certificate would have been couched differently, for example providing against above para. 5 `Owner or any person driving with his permission or order having a valid driving licence', in that event, it would not have been possible t take the above view, which found favour with Zafar Hussain Mirza, J I am inclined to subscribe to the above view found favour with Zafar Hussain Mirza, J. As it is a beneficial view and also seems to be in consonance with the spirit of the provisions of the Act highlighted hereinabove in para 6."
' The two questions were answered as hereunder:-- "(1) That an insurer shall be liable under the insurance policy against third party risks in case the action is brought in respect of the liability incurred by the person or classes of persons specified in the insurance policy in terms of clause (b) of subsection (1) of section 95 notwithstanding the transfer of ownership of the insured vehicle.
(2) The question whether a driver can be deemed to be an insured under the insurance policy will depend on the terms of the insurance certificate or the insurance policy. If he is covered by the person or classes of persons specified in the policy he shall be deemed to be an insured person under the insurance policy."
' On the basis of it, the appellant was adjudged liable notwithstanding the fact that the insured person was different and the person permitting the driver to drive the vehicle was not the insured person.
' C.A.116-K/85:
6. In Civil Appeal No,116-K/1985, one Mst. Ayesha Bai (respondent No,1) filed a suit under section 4 of the Fatal Accidents Act of 1855 claiming damages for the death of her husband Mr.R.P. Hamza on 19-2-1967 caused by a bus bearing No, KAT-7037. The bus was being driven by Abdul Ghafoor (respondent No,2) who was employed by M/s. United Bus Service (respondent No,3) for the purpose. On being served with a notice under section 96 (2) of the Motor Vehicles Act, 1939, the appellant submitted objections to the claim pleading that the insured person in respect of that vehicle was Habib Ahmad and the person driving the vehicle at the time the accident took place was not one who was permitted and authorised to use the bus by the insured person but by the transferee who had not got the, bus insured. The insurance policy itself was produced in this case.
The Judge trying the suit on facts took note of the following matters:-- "Now there is no dispute that there was a valid and effective policy as required by section 94 of the said Act covering the use of Bus No,KAT-7037 the vehicle involved in the event. The policy on its face shows its validity period from 5-4-1968 to 4-4-1969 and therefore, on the date of the event viz. 19-2-1969 it was obviously in force. It is also clear from the policy that it was issued to Mr.Habib Ahmad and the name of defendant No,2 nowhere figures as the person insured. The decree against defendant No,2 therefore, as already stated, would not be enforceable against or bind the company. But Mr. Saeed-uz Zaman contended that defendant No,2 has been proved to be the driver of the bus at the relevant time and as the policy extended the insurance cover to any driver of the vehicle, the decree against defendant No,1, in any case will be binding upon the company."
' The perusal of the Insurance Policy (Ex.5/1) shows that it commences with the following recitals:-- "Whereas the insured by the proposal and declaration dated as stated in the schedule which shall be the basis of this contract and is deemed to be incorporated herein has applied to the company for the insurance hereinafter contained........................................."
' The terms and conditions of the policy include a reference to the driver of the vehicle and inter alia provide that the company will indemnify "any driver who is driving the motor vehicle as declared by the proposer or any person authorised by him on his behalf'. The reference therefore, so far as the driver is concerned, is to the driver declared by the proposer which in turn has reference to the declaration contained the schedule annexed to the policy of which reference has been made in the recitals. The schedule mentions no specific name against the column relating to the driver but merely states 'driver, conductor and 37 passengers'. Reading the contents of the policy as a whole it appears that the policy extended to insurance cover to any driver who was driving the vehicle at the relevant time."
' It was further concluded that-- "in the instant case the language of the relevant term of the policy relating to the driver is couched in much wider terms than in the reported case. Mere there is no qualification that the driver to be entitled to indemnity must be one who should be driving the vehicle on the insured's order or with his permission. The dictum laid down in the decision is therefore applicable with greater force in the present case and the insurance company cannot therefore avoid its liability by pleading the absence of the main insured's permission."
' On these facts and findings, the appellant was held liable. On Intra Court Appeal, this judgment was affirmed and upheld by reference to the judgment of the Full Bench of the High Court which had by then come to be reported as Azhar Ali v. Sh.Muhammad Raees Shamsi and 2 others (PLD 1984 Karachi 38).
7. The arguments addressed by the learned counsel for the appellants, the Insurance Companies are straightforward. They state that they are being made responsible for their statutory liability and nothing beyond it. The statutory provisions (sections 95 and 96 of the Motor Vehicles Ordinance) provide for indemnification of the insured. Insured person is actually the user, the owner or the person who seeks to be insured. The contract is between the insured and the Insurance Company.
It is insurance of indemnification whereby the direct and indirect liability of the insured is picked up as required by the statute by the Insurance Company. The insurance of the user of the vehicle if he happens to be different from the insured is on the extended principle contained in section 95 of the Motor Vehicles Ordinance itself which is limited to permitting someone to use. The permission to use must come from the insured person and if it has come and in fact exists or can be implied then that permitted person will also on account of the statutory extension of the Insurance fall within the category insured. If the permission of the insured person is wanting the extended connection between the insured person and the user would not exist and the insurance company would not in that case through the insured be liable for indemnification of the insured or the user. In order to further strengthen their case it is stated that the certificate of insurance itself contained the condition that it was not transferable. Further, all contracts of indemnity disappear or cease to have legal efficacy the moment the insurable rights of the insured are transferred. As soon as the primary insured person parted with the property wholly and unequivocally the policy came to an end and so did the liability of the appellants as insurer.
8. The relevant portions of sections 94 and 95 of the Motor Vehicles Act are reproduced as hereunder:-- "94. Necessity for insurance against third party risk.--(1) No person shall use except as a passenger or cause or allow any other person to use a motor vehicle in a public place, unless there is in force in relation to the use of the vehicle by that person or that other person, as the case may be, a policy of insurance complying with the requirements of this Chapter.
' Explanation.--A person driving a motor vehicle merely as a paid employee, while there is in force in relation to the use of this vehicle such policy as is required by this subsection, shall not be deemed to act in contravention of the subsection unless he knows or has reason to believe that there is no such policy in force.
(2)....................................................................................
95. Requirements of policies and limits of liability.--(1) In order to comply with the requirements of this Chapter, a policy of insurance must be a policy which--
(a) is issued by a person who is an authorised insurer or by a cooperative society allowed under section 108 to transfer the business of an insurer; and
(b) insures the person or classes of persons specified in the policy to the extent specified in subsection (2) against any liability which may be incurred by him or them in respect of the death of or bodily injury to any person caused by or arising out of the use of the vehicle in a public place in Pakistan or in a reciprocating territory: ' Provided that a policy shall not be required--
(i) to cover liability in respect of the death, arising out of and in the course of his employment, of the employee of a person insured by the policy or in respect of bodily injury sustained by such an employee arising out of and in the course of his employment, other than a liability arising under the Workmen's Compensation Act, 1923, in respect of the death of, or bodily injury to any such employee--
(a) engaged in driving the vehicle; or
(b) if it be a public service vehicle, engaged as a conductor of the vehicle or in examining tickets on the vehicle; or
(c) if it be a goods vehicle, being carried in the vehicle; or
(ii) except where the vehicle is a vehicle in which passengers are carried for hire or reward or by reason of or in pursuance of contract of employment, to cover liability in respect of the death of or bodily injury to persons being carried in or upon or entering or mounting or alighting from the vehicle at the time of the occurrence of the event out of which a claim arises; or
(iii) to cover any contractual liability.
(2) Subject to the provision of subsection (1), a policy of insurance shall cover any liability incurred in respect of any one accident up to the following limits namely:--
(a) where the vehicle is a goods vehicle, a limit of twenty thousand rupees in all, the liabilities, if any, arising under the Workmen's Compensation Act,1923, in respect of the death of, or bodily injury to, employees other than the driver being carried in the vehicle being limited to six such employees;
(b) where the vehicle in which passengers are carried for hire or reward or by reason of or in pursuance of a contract of employment, in respect of persons other than passengers carried for hire or reward, a limit of twenty thousand rupees; and in respect of passengers a limit of twenty thousand rupees in all, and four thousand rupees in respect of an individual passenger, if the vehicle is registered to carry not more than six passengers excluding the driver or two thousand rupees in respect of an individual passenger, if the vehicle is registered to carry more than six passengers excluding the driver;
(c) where the vehicle is a vehicle of any other class the amount of the liability incurred.
(3) Omitted.
(4) A policy shall be of no effect for the purposes of this Chapter unless and until there is issued by the insurer in favour of the person by whom the policy is effected a certificate of insurance in the prescribed form and containing the prescribed particulars of any conditions subject to which the policy is issued and any of other prescribed matters; and different forms, particulars and matters may be prescribed in different cases.
(5) Notwithstanding anything elsewhere contained in any law, a person issuing a policy of insurance under this section shall be liable to indemnify the person or classes of persons specified in the policy in respect of any liability which the policy purports to cover in the case of that person or those classes of persons."
9. It is true that statutory liability of the insured both primary as well as extended will prevail over the contractual liability of the insurer and the insured. However, in the cases before us, there is no such conflict because the insurance itself in both the cases is expressed to be within the confines of the statutory provision applicable to it. It was third party insurance as required by the statute.
10. The basic feature of this or such a contract is expressed to be as hereunder in paragraph 727 in Halsbury's Laws of England, Third Edition (Volume 22):-- "727. Indemnity as basis of contract.-- In its main features a contract of motor insurance is a contract of indemnity. This means that, so far as concerns the insurance of the car as an example of property insurance, or the insurance of third party liability (whether limited or general) as an example of publice liability insurance, the ordinary principles of these classes of insurance are applicable. In so far, however, as clauses provide for insurance cover not in the nature of an indemnity, as where provision is made for the death or disablement of the assured himself, the principles of life insurance or personal accident insurance will apply."
' In paragraph 764 in Fourth Edition of Halsbury's Laws of England (Volume 25) it is provided as hereunder:-- "764. Obligation to indemnify.--Notwithstanding anything in any enactment authorised insurers issuing a policy pursuant to the statutory requirements must indemnify the persons or classes of persons specified in the policy in respect of any liability which the policy purports to cover in the case of those persons or classes of persons. From this provision there is derived the right of a permitted driver to claim directly against the insurers even though he is in no strict sense a party to the contract of insurance. However, no right of action is conferred by this provision upon injured third parties; nor are the insurers deprived by it of their normal rights to repudiate a policy on the ground of misrepresentation or non-disclosure."
11. 'A contract of indemnity' has been defined in section 124 of the Contract Act as hereunder:- "A contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself. Or by the conduct of any other person, is called a "contract of indemnity?
' The British Act of 1972 (Road Traffic Act) by its subsection (1) of section 143 made an identical provision on the subject of insurance in the following words:-- "Subject to the provisions of this part of this Act, it shall not be lawful for a person to use, or cause or permit another person to use, a motor vehicle on a road unless there is in force in relation to the use of the vehicle by that person or that other person, as the case may be, such a policy of insurance or such a security in respect of third party risks as complies with the requirements of this part of this Act; and if a person acts in contravention of this section he shall be guilty of an offence."
' In the Book 'The Law of Insurance" by Raoul Colinvaux (fourth edition) at page 406 in para. 20-10, the following comments on the subject appear:-- "It follows that the only persons caught by section 143(1) of the Act of 1972 are, (a) a person actually using a motor vehicle on a road; (b) the owner of it, whether registered or not, or a person responsible for its care, management or control, who permits another so to use it; and (c) a person causing another so to use it. Mere assistance, by advancing money to purchase a car and assistance in obtaining a policy, is not 'causing' in this sense."
' In paragraph 20-17 the following comments have been made:-- "Sale of car ends policy.--The main cover will usually be by reference to a specified car, owned by the policy-holder. The whole policy will then only remain effective while he retains an interest in that car. Even if it contains an extension in respect of the use by the policy-holder of any car being used at the time of the accident 'instead of the insured car' this extension will cease to be effective once he has parted with the car insured.
' While complete change of ownership of a vehicle will put an end to the policy, this is not so when the additional partner joins a partnership in whose name a vehicle is insured."
12. To the same effect are the judgments given on the point; for example in Peters v. General Accident and Life Assurance Corporation Limited (1937) 4 All England Reports 628, the law on the subject was laid down in the following words:-- "But it is perfectly true that motor insurers do give this wide extension clause, which puts it into the power of the insured person to allow any person whatever to drive his car, provided he holds a licence, and if there is an accident the insurance company will be liable, even though the person may have a very bad driving record. It would be a still more serious thing if it could be said, as indeed it is said in this case, that, by an assignment to take place between the owner of the car who is insured and somebody to whom he is going to sell his car, the buyer of the car can be thrust upon the insurance company as the assured, although they have no say in the matter whatever, and no opportunity then to refuse to insure him, because, as I understand the argument, the way it has been pressed on me--and, indeed, I think Mr. Comyns Carr must go so far--is that this new assured would be put upon the insurance company, although they had never heard of him and never heard of the transaction until after some serious accident had taken place... ... ... ...As to the question of what happened to the policy, I think the policy lapsed. I think that there was thereafter no policy in existence upon this car, because the only person who was insured was Mr. Coomber, and Mr. Coomber had parted with the car. I think that, unless I held that, I should be going behind the principle in the case in the House of Lords known as Rogerson v. Scottish Automobile & General Insurance Co. Ltd. (1931) 146 L.T. 26; Digest Supp."
' This case went to the Court of Appeal where the judgment was firmed in the following words (1938) 2 All England Reports 267:-- "The effect of that, therefore, is that Mr. Coomber is indemnified, and that person whom Mr. Coomber orders or permits to use the car are indemnified. It is said that the contract between Mr. Coomber and the insurance company constituted by that document is assignable... ... ...The insurance company in this case, as in every case, make inquiries as to the driving record of the person proposing to take out a policy of insurance with them. The business reasons for 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 there is inherent a personal element 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. That is all I need say upon that branch of the argument... .. -On the sale of the car, the property passed to him, and, although Mr. Comyns Carr at one stage of the argument appeared to suggest that it had not, yet, when his attention was called to the evidence, he felt himself constrained to giv up that point. The property, therefore, passed to the purchaser Ion before this accident took place. The circumstance that he had not paid the whole of the purchase price is irrelevant for that purpose, because that circumstance does not leave in the vendor, Mr. Coomber, any interest in the car. There is no vendor's lien, or anything of that sort. The car had become the out and out property of Pope. When Pope was using that car, he was not using it by the permission of Coomber. It is an entire misuse of language to say that. He was using it as owner and by virtue of his rights as owner, and not by virtue of an permission of Coomber."
13. The decision in Peter's case (1937) 4 All ER 628 was followed Gyarsilal Jagannathprasad Mor v.
Pandit Sitacharan Dubey and others (Al: 1963 Madhya Pradesh 164) in the following words:- "Now it is quite true that a motor insurance policy is a contact o personal indemnity and the assured cannot claim the insuranc amount when he does not suffer any loss or damage. It is clear that where a car insured against damage, third party risks etc., transferred by the owner to another person, the owner himself retai no interest in the car, and if subsequently the car is involved in an accident causing damage to it and injuries to others the owner can recover from the insurer any amount inasmuch as he cannot be said have suffered any loss. Again, the purchaser of the car cannot also the absence of an 'assignment' of the policy in his favour or a spec% statutory provision claim the insurance amount from the insurer. He there is no statutory provision either in the Motor Vehicles Act or the Insurance Act about the transferee's right under a mo. Insurance policy.. .. .. ...Such a policy being a contract of perso indemnity cannot be assigned; when it is transferred, there is only novation of the contract by which the original assured is released a new assured is accepted."
' This view prevailed earlier also as will appear from the decision in Des Pahwa and another v. The Concord of India Insurance Co. Ltd., Calcutta (A 1951 Punjab 114):-- "It is generally agreed that a motor insurance policy does not rem in force if there is a change of ownership of the car insured un there is an agreement between the Company and the new owner the policy shall remain in force, and there is no suggestion in present case that any agreement of this kind was entered into or even that any attempt to negotiate one was initiated."
14. The only decision directly to the contrary which we have come across is round in Madras Motor Insurance Co. Ltd., Madras v. Muhammad Mustafa Badsha and others (AIR 1961 Madras 208) wherein the same question was dealt with as hereunder:-- "In the decision quoted, Goddard, J., as he then was, expressed the view, that because of the transfer of property in the car, 'the policy lapsed'. Now, we have no such term in the present policy, and it is at least doubtful in view of S.96(2) and the Supreme Court decision referred to above, whether any such term could be legally imported into motor insurance policies, thereby entitling the insurer to avoid the policy as a result of the sale of the car. In any event, this may be as between the assurer and the assured. But the right of the third party to claim the benefit cf the decree has been put on a higher footing, and statutorily provided for in this country."
15. We find with regard to this judgment and the question under examination the following comments in a judgment of High Court of Sindh recorded in Rukaybai and 5 others v. Secretary of Defence, Government of Pakistan, Islamabad and 4 others (PLD 1976 Karachi 131, at page 136 paragraph 12), as hereunder:-- "It has been pointed out by Mr. Abdul Rauf that the Division Bench Judgment in PLD 1966 Kar. 162 was based on the Madras case reported in AIR 1961 Mad.
208. But that case was again overruled by Madras High Court and was not considered as good law.
Consequently the Karachi view was also overruled in L.P.A.No, 61 of 1961 by a judgment delivered on 3-2-1966, by I.B. Khamisani and H.T. Raymond, JJ., although this judgment was not reported. In that case also the bus involved in the accident, originally belonged to one Sulleman Jan and was transferred by him to one Mehboob Ali, and then to Muhammad Sharif Chohan. The accident then took place, but the insurance policy still continued to remain in the name of Sulleman assured. The relevant part of that judgment reads as under:- ' The second point argued by the learned counsel for the appellant was that the bus being insured in the name of respondent No,2 and the insurance certificate issued in his name subsisting on the day of the accident, the Insurance Co. i,e, respondent No,3 would be liable to the extent of the amount for which the vehicle was insured and would therefore to that extent indemnify the appellant. He has tried to bring his case under section 96(1) of the Motor Vehicles Act which reads as under:-- `96(1). If, after a certificate of insurance has been issued under subsection (4) of section 95 in favour of the person by whom a policy has been effected, judgment in respect of any such liability as is required to be covered by a policy under clause (b) of subsection (1) of section 95 (being a liability covered by the terms of the policy) is obtained against any person insured by the policy, then notwithstanding that the insurer may be entitled to avoid or cancel or may have avoided or cancelled the policy, the insurer shall, subject to the provisions of this section, pay to the person entitled to the benefit of the decree any sum not exceeding the sum assured payable thereunder, as if he were the judgment-debtor, in respect of the liability, together with any amount payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any enactment relating to interest on judgments.'
' We have considered the arguments of the learned counsel and we are clearly of the view that there is no substance in them. In order to bring the case of the appellant within section 96(1) it is necessary to establish the liability of respondent No,3 as required to be covered by a policy under clause (b) of subsection (1) of section 95 of the Motor Vehicles Act. Clause (b) of subsection (1) of section 95 of Motor Vehicles Act reads as under:-- `95(1)(6) insures the person or classes of persons specified in the policy to the extent specified in subsection (2) against any liability which may be incurred by him or them in respect of the death of or bodily injury to any person caused by or arising out of the use of the vehicle in a public place in the Provinces and the Capital of the Federation or in a reciprocating territory.'
' This clause deals with the insurance of a person or classes of persons specified in the policy to the extent specified in subsection (2) of this section against any liability which may be incurred by him or them in respect of the death or bodily injury to any person caused by or arising out of the use of the vehicle in a public place. The other condition for the purpose of bringing the case of the appellant within section 96(1) of the Motor Vehicles Act is that the insurers will be called upon to pay to the person entitled to the benefit of the decree any sum not exceeding the sum assured, if a judgment in respect of such a liability is obtained against any person insured under the policy. It is quite clear in section 96(1) that the liability of the insurers to pay to the person entitled to the benefit of the decree will arise only after judgment against the insured has been obtained. The condition precedent therefore for the liability of the insurer is that a judgment and decree must be obtained against an insured person. In this particular case the judgment and decree has been obtained against the appellant who is admittedly not an insured person. The insured person in this case is Sulleman Jan respondent No,2 and not the appellant. In the event of the judgment having not been obtained against Sulleman Jan, the insured, the liability of the insurers i,e, respondent No,3, to pay to the person entitled to receive the amount for which the policy exists, will not arise.
We are strengthened in our view by the case of Gyarsilal v. Sitacharan AIR 1963 Madh. Pra.
164. We are consequently of the view that respondent No,3 is not liable to pay the whole or any part of the amount of the decree to respondent No,1 or 2 to indemnify the appellant on account of any subsequent payment made by him to respondent No,1."
16. The decision in Madras Motor Insurance Co. Ltd. (AIR 1961 Madras 208) was in fact overruled by a larger Bench of the same Court in M. Bhoopathy (died) and others v. M.S. Vijayalakshmi and another (AIR 1966 Madras 244). The Court dealt with that case in the following words:-- "In any event, with respect, we are unable to share the view of the learned Judge. In our opinion, there is nothing in section 96 of the Motor Vehicles Act which warrants a view that a sale or transfer of an insured car by the insured during the currency of the policy does not terminate the policy.
Outside the statutory provision, when the motor car specified in the policy is the very subject- matter of the insurance, with its disappearance on the insured parting with it by sale or transfer of ownership the policy must necessarily lapse.
' After the insured has parted with his car, he has no longer any insurable interest to which the policy in his favour can relate and continue to have force. The basis of the contract of insurance is affected but also the specified car to which the indemnity relates, as will be clear from the details required of the car which are set out in the schedule to the policy. It is with'reference to those details and the history of the vehicle and its owner including claims or no claims, the premium payable on the insurance is determined and the contract is formed. It follows, therefore, that in the absence of an express stipulation to the contrary in the policy, the moment the insured parts with his car, the policy relating to it lapses, because as we said, the car is the subject-matter or the very foundation of the contract of insurance."
17. It appears from the judgment under appeal that there were three considerations which prevailed with the Court in giving strained, extended and wider meaning to the language of the statute than the words permitted. The first was that there was a change in the definition of 'owner' in section 2(24) of the Motor Vehicles Ordinance, 1965 so as to include a 'transferee of the vehicle' and from this it was concluded in para. 11 of the judgment "a transferee for the purposes of the Motor Vehicles Ordinance, 1965 becomes an owner of the vehicle and acquires insurable interest notwithstanding that the registration of the vehicle remains in the name of the previous owner." The conclusion drawn from this was that "the effect of which seems to be that even a purchaser of a vehicle in whose name registration is not transferred becomes the owner of the vehicle and acquires insurable interest to obtain an insurance policy in his own name even without getting the registration changed."
' The second was that the Insurance Policy on certificate contained a wide-worded authorisation for the use of the vehicle as hereunder:-- "Person or classes of persons entitled to drive.--Any person provided the person driving holds a valid licence to drive the vehicle."
' This, according to the learned Judges in the High Court made the clause susceptible to two interpretations; the one beneficial and in conformity with the purpose of remedy and the other in negation of it. Naturally, the one remedial and beneficial was accepted and the other rejected.
' The third was the widespread evil practice of transferring the motor vehicles by a transfer letter without getting the corresponding alterations or transfer registered with the Registering authority or with the Insurance Company thereby exposing the third party victims to deprivation of the benefits which otherwise is statutory relief secured to them under the law.
18. So far as the first consideration i,e, the change in the definition of `owner' is concerned, that is not very relevant for deciding the question in issue because the statutory liability is on the person using the vehicle or permitting any person to use the motor vehicle in a public place. Any one having control and dominion, if not covered by the exclusion clause, is hit by this requirement of the statute. In the circumstances, the change in the definition of the 'owner' when the word 'owner' is not used in the statute, could not be availed of in interpreting such a statutory provision.
19. No doubt, the authorisation contained in paragraph 5 of the Insurance Certificate in the Policy, if read in isolation and out of context, is susceptible of the meaning attributed by the learned Judges in the High Court. However, being a part of the contract of Insurance of indemnity, any clause of such a contract cannot be interpreted in isolation. It has to be read as part and parcel of the contract. The contract contained the particulars of the insured person, the insured vehicle and thereafter proceeds to cover by an extension which is the requirement of the law, 'any driver'. The word 'any' here is controlled by the contract as well as by the statute and will be restricted to such a driver as has been allowed or permitted by the person having the dominion or control over it and its use, or being allowed or permitted as repairers Guru Govckar v. Miss Filomena F. Lobo and others (AIR 1988 S.C. 1332) its use, and insured as such. A person using the vehicle at the behest of or with the permission of the insured person gets extended cover under the law. However, after the transfer of the vehicle, not only the insurance policy as such lapses, but the transferee of the vehicle cannot, as held in the cases cited, be held to be using the vehicle with his permission nor any other person permitted by such transferee. The effect of the statutory liability, as regards the obligation of the Insurance Company, has been specified in paragraph 764 of Halsbury's Laws of England (Volume 25, 4th Edition) (quoted in para. 10 of the judgment).
20. As regards the great abuse entailing hardships on the third party, this has been universally recognized where this or such a law is in force, for example, in the sub-continent and in the United Kingdom. The .Reaction to it had been different. In U.K., this matter was dealt with as hereunder:-- "784. Loopholes in third parties' statutory rights.--Notwithstanding the stringent provisions originally enacted in the Road Traffic Act, 1930 and the Road Traffic Act, 1934, a substantial gap remained between the theoretical legal right of a third party to be compensated for injuries negligently inflicted by a motorist and the receipt in practice of the appropriate compensation. The motorist might well be, and often was, impecunious, so as to make bankruptcy proceedings a barren remedy; the insurers might well be, and often were, immune because the policy had been improperly obtained or the use of the vehicle was outside the scope of their cover. Further legislation would therefore have been inevitable if steps had not been taken to bridge the gap by an entirely novel price of extra-statutory machinery in the form of what was called the Motor Insurers' Bureau. The bureau took the form of a central organisation incorporated at the instance of insurers transacting compulsory motor insurance business in Great Britain. On 17th June 1946 it entered into an agreement with the Minister of Transport as to the provision it would make for cases of injury or death caused by uninsured motor cars. This agreement is commonly called "the Motor Insurers' Bureau Agreement". The funds required to fulfil these obligations were made available to the bureau pursuant to a second agreement, commonly called "the Domestic agreement", made between the bureau and the insurers transacting compulsory motor insurance business in Great Britain." Ref. Para. 784 of Halsbury's Laws of England, Fourth Edition, (Volume 25).
21. In Kerala, vide State of Kerala v. K.Bavakutty Rowther (AIR 1960 Kerala 341), the statutory rules framed made provision for compulsorily getting insurance on such a transfer of the vehicle or user's interest therein by providing so in Rule 14(c) of the Rules for the Insurance of Motor Vehicles, published in the Gazette Extraordinary, dated 13th April, 1951, as hereunder:- "When a policy-holder disposes his car, the rights of the policy may be transferred to the purchaser, if he so desires on informing this office in writing to the effect that the rights of the policy may be transferred to the purchaser and on payment of Rs,2 towards transfer fee. The purchaser shall forward a fresh proposal and also arrange for the surrender of the certificate of insurance and policy issued already by the State Insurance Officer for cancellation. On receipt of the above documents a fresh certificate of insurance and policy will be issued by the State Insurance Officer for the balance period of the policy."
22. In our law also, section 32 of the Motor Vehicles Ordinance makes it compulsory and puts the transferee under a legal obligation to report the transfer to the registering authority within whose jurisdiction he ordinarily resides about the fact of transfer of vehicle and his failure to do so is an offence.
23. The High Court has failed to notice that the certificate of Insurance was expressed to be non- transferable. There is no statutory provision which made that such a certificate is transferable or could not be non-transferable. In fact contract of indemnity puts to an end the contract itself where the insurable interest is transferred. In that position the condition of the vehicle is just as an uninsured vehicle. The need for making conditions more stringent with a view to safeguard the interest of any third party victims and also to increase the obligations of such transferees in the matter does exist and requires attention.
24. In the circumstances, and for the reasons given, we accept these appeals, set aside the judgments of the High Court declaring that the Insurance Companies are liable notwithstanding the sale/transfer of the vehicle. Driver need not be named in the insurance policy but must derive authority from the named/insured user of the vehicle, directly or indirectly. No order is made as to costs.