Insurance companies are bound to pay compensation even if the offending vehicle's ownership is transferred from the original owner to another as there is no requirement under law to go for a fresh policy, the Supreme Court has ruled.
A bench of justices Dalveer Bhandari and Deepak Verma said compulsory insurance provided under the Motor Vehicle Act was meant to provide protection for third party victims as part of social objective and there was no bar on a vehicle being driven only by the owner.
"The liability to pay compensation is based on a statutory provision. Compulsory insurance of the vehicle is meant for the benefit of the third parties. The liability of the owner to have compulsory insurance is only in regard to third party and not to the property.
"Once the vehicle is insured, the owner as well as any other person can use the vehicle with the consent of the owner. Section 146 of the Act does not provide that if any person uses the vehicle independently, a separate insurance policy should be taken," Justice Verma said writing the judgement.
The apex court passed the ruling while directing the National Insurance Company to compensate a widow Kulsum whose husband and three children were mowed down on June 13, 1998, by a mini bus belonging to a private party but hired by the UP State Road Transport Corporation.