Motor Accident Claims - Supreme Court Absolves Car Dealer From Liability For Death During Test Drive By Manufacturer's Employees

The Supreme Court refused to hold a car dealer liable to pay compensation under the Motor Vehicles Act, 1988 for the death of persons caused due to an accident which took place while the vehicle was taken for a test drive by the employees of the manufacturer.In this case, an accident took place during a test drive in which the dealer (appellant) of the Lancer car, the driver of the car, and the manufacturer were held to pay compensation jointly and severally by a Tribunal. However, the dealer challenged the liability on the grounds that the deceased was an employee of the manufacturer Hindustan Motors and even though there was a dealership agreement to transfer the ownership of the vehicle, there was no sale at the time of the accident. The court agreeing with the submissions of the dealer, held: "The appellant was neither the owner nor in control/ command of the vehicle at the time of accident, and the vehicle was being driven by an employee of M/s. Hindustan Motors, we are of the view that apart from the driver, M/s. Hindustan Motors alone was liable for the compensation awarded. Thus, the appellant should not have been burdened with liability to pay compensation." Brief facts A claim petition for death compensation was filed before the Tribunal by heirs and legal representatives of the deceased, who died. The claim petition was filed under Section 166 of the Motor Vehicles Act, 1988 against the driver of the offending vehicle, the manufacturer of the vehicle Hindustan Motors Private Limited and the dealer of Hindustan Motors, Vaibhav Motors (appellant).The deceased was the Territory Manager of Hindustan Motors whereas, the driver of the vehicle was the Service Engineer. The accident took place when the vehicle was taken out for a test drive from the dealership of Vaibhav Motors. What did the Tribunal observe?The Tribunal held that on the day of the accident, Hindustan Motors was the owner of the vehicle though Vaibhav Motors was in possession of the vehicle as its dealer. Therefore, it stated that Hindustan Motors as well as Vaibhav Motors would jointly and severally be liable for the compensation awarded. However, the legal heirs and representatives of the deceased (claimants) were aggrieved by the quantum of compensation awarded. They preferred miscellaneous appeals before the High Court. The dealer also questioned the award to the extent it made him jointly and severally liable for payment of the compensation. However, no appeal was preferred by Hindustan Motors. Except for the appeal of the claimants, all other appeals were dismissed. By an appeal, the claimants' compensation was enhanced.Arguments of parties Senior advocate Arup Banerjee argued that though the offending vehicle was manufactured by Hindustan Motors, there is no evidence to suggest that the vehicle was transferred to the appellant. The vehicle at the time of the accident was in the control and possession of Hindustan Motors. The appellant's counsel also submitted that Vaibhav Motors does not come within the definition of 'owner' under Section 2(30) of the Motor Vehicle Act. The Dealership Agreement between the appellant and M/s. Hindustan Motors is neither an agreement of hirepurchase nor of lease or hypothecation. Therefore, even if the dealer is taken to be in constructive possession of the vehicle, the dealer would not be its owner within the meaning of Section 2(30) of the M.V. Act. Lastly, Clauses 3 (b) and 4 of the Dealership Agreement, relied to fasten liability on the appellant, are in respect of defects in the vehicle and not in respect of any claim for compensation arising from an accident involving the vehicle. Moreover, there is no concept of possessory owner under the MV Act. Therefore, the liability for compensation is of the owner of the vehicle including the driver. Whereas, advocate Purti Gupta Hindustan Motors argued that the vehicle was sold to the appellant and an invoice was generated. Pursuant thereto, the car hearing temporary registration number was delivered to the appellant on a principal-to-principal basis. As the sale stood complete in all respects, the appellant was the owner of the vehicle on the date of the accident.Further, Clause 3 (b) of the Dealership Agreement absolved Hindustan Motors. Moreover, the dealer was the possessory owner of the vehicle. Lastly, Hindustan Motors argued that even thought they did not file an appeal against the Tribunal's award, its liability can still be absolved by modifying the award in the exercise of its powers under Order 41 Rule Rule 33 of the Civil Procedure Code, 1908.What did the Supreme Court decide?Can the dealer of Hindustan Motors be jointly and severally liable with Hindustan Motors?The Court looked at how various judgments have construed the definition of 'owner' to find whether Vaibhav Motors was in constructive possession of the vehicle as a dealer. It relied on Godavari Finance ...

Motor Accident Claims - Supreme Court Absolves Car Dealer From Liability For Death During Test Drive By Manufacturer's Employees

Gursimran Kaur Bakshi

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