Supreme Court: The questions that came before the bench of H.L. Dattu, CJ and Arun Mishra, J were whether in the wake of lease agreement entered into by registered owner with Karnataka State Road Transport Corporation (KSRTC), the registered owner and insurer along with KSRTC can be fastened with the liability to make payment to the claimants and that whether KSRTC can recover the amount from registered owner and its entitlement to seek indemnification from insurer.
Taking note of the definition of the term ‘owner’ as defined under Section 2(30) of the Motor Vehicle Act, 1988, the Court said that under the MV Act, the owner means a registered owner and where the agreement on hire-purchase or an agreement of hypothecation has been entered into or lease agreement, the person in possession of the vehicle is treated as an owner. It was held that the KSRTC being in actual control of the vehicle would also be liable to make the compensation, however, it can recover the amount from the registered owner or insurer, as the case may be. Regarding the liability of the insurer, it was held that the insurer cannot escape the liability, when ownership changes due to the hypothecation agreement It was further held that In the case of hire also, it cannot escape the liability, even if the ownership changes. Even though, KSRTC is treated as owner under Section 2(30) of the MV Act, the registered owner continues to remain liable as per terms and conditions of lease agreement lawfully entered into with KSRTC.
The Court, after referring to many decisions of this court, held that registered owner, insurer as well as KSRTC would be liable to make the payment of compensation jointly and severally to the claimants and the KSRTC in terms of the lease agreement entered into with the registered owner would be entitled to recover the amount paid to the claimants from the owner as stipulated in the agreement or from the insurer.[ Managing Director, K.S.R.T.C. v. New India Assurance Co.Ltd.,2015 SCC OnLine SC 1044, decided on 27.10.2015]