A three judge Bench of the Supreme Court clarified the legal position that where a vehicle was subject of an agreement of hypothecation and the person who was in possession and control of the vehicle without the requisite insurance, he alone was liable and not the financier to pay the claim in the event of an accident. The Court said that the intention of the legislature is clear that a registered owner of a vehicle should not be held liable if the vehicle is not in his possession and control. In the present case, the appellant bank had financed the owner for purchase of the vehicle and the owner had entered into a hypothecation agreement with the bank. The borrower had the initial obligation to insure the vehicle, but without insurance he plied the vehicle on the road and an accident took place. Without the insurance he plied the vehicle in violation of the statutory provision contained in Section 146 of the 1988 Motor Vehicles Act and hence he alone is liable and not the financier.
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