Motor Vehicles Act, 1988. Trade (Road Risks) Policy covers only dealers of vehicles. Road Risk policy limits explained. Karnataka High Court 14 October 2020.

The Regional Manager, National Insurance Company Limited vs Sathi@Sathya and others. M.F.A. 8575/2015. Decided on 14 October 2010.

Judgment link: http://judgmenthck.kar.nic.in/judgmentsdsp/bitstream/123456789/343931/1/MFA8575-16-14-10-2020.pdf

Relevant paragraphs: 13. Point No.1: Before considering the submissions made by the learned counsel appearing for the appellant, it is not in dispute that the sixth respondent is a dealer engaged in selling the cars and the sixth respondent being   a dealer of cars, has insured the vehicle under reference with the fifth respondent under Motor Trade (Road Risks) Policy. The said insurance was in force with effect from 2^nd September 2013 to 1^st September 2014. In  order  to consider the risk covered under the Motor Trade (Road Risks) Policy, it is to be considered that a Motor Trade Insurance, also known as Road Risk Insurance is a policy designed to cover any injury, loss or damage to the third party caused by the vehicles involved in the business. This insurance is ideal to meet the business needs of individuals who are into the business of cars, motorbikes or  are involved in buying and selling of cars, serving or running a garage, etc. The said policy covers or takes care of machinery replacement value to vehicle replacement, etc. The said policy also covers any loss, destruction  or  damage caused to the insured vehicle or its accessories by an insured event. But in case of death or bodily injury to any person due to alighting from the vehicle insured at the time of the incident will not be covered  under  this Insurance.

15. As observed above, the Motor Trade (Road Risks) Policy is a policy which covers only replacement of accessories, destruction or damage caused to the insured vehicle.

18. Regarding registration of Motor Vehicle i.e., Trade Certificate, Rule 35 of the said Rules of 1989 prescribes as under:

“35. Grant or renewal of trade certificate:- (1) On receipt of  an  application for the grant or renewal of a trade certificate in respect of a vehicle, the registering authority may, if satisfied that the applicant is a bona  fide dealer and requires the certificates specified in the application, issue to the applicant one or more certificates, as the case may be, in Form 17 [within thirty days from the date of receipt of such an application]  and  shall assign in respect of each certificate a trade registration mark consisting of the registration mark referred to in the notification made under sub-section (6) of section 41 and followed by two letters and a number  containing not more than three digits for each vehicle.”

19. Rules 39, 40 and 41 of the said Rules of 1989 are relevant which reads as under:

“39. Use of trade registration mark and number:- (1) A trade registration  mark and number shall not be used upon more than one vehicle at a time or upon any vehicle other than a vehicle bona fide in the possession of the dealer in the course of his business or on any type of vehicle other than the one  for  which the trade certificate is issued.

40. Restriction on use of trade certificate or trade registration mark and number:- A trade certificate  shall  be  used only by the person to whom it is issued and such person shall not allow or offer or cause  the certificate or the number assigned in connection therewith to be used by any other person:

Provided that the provision of this rule shall not apply where the person to whom the certificate is granted, or a person bona fide in his employment and acting under his authority, or any other person bona fide acting on behalf of the holder of a trade certificate is present in the vehicle, or if such vehicle is designed for use by only one person and is being used by a prospective purchaser of that vehicle for the purpose of reasonable test or trial.

41. Purpose for which motor vehicle with trade certificate may be used:- The holder of a trade certificate shall not use any vehicle in a public place under that certificate for any purpose other than the following:-

a. for test, by or on behalf of the holder of a trade certificate during the course of, or after completion of, construction of repair; or

b. for proceeding to or returning from a weigh bridge for or after weighment, or to and from any place for its registration; or

c. for a reasonable trial or demonstration by or for the benefit of a prospective purchaser and for proceeding to or returning from the place where such person intends to keep it; or

d. for proceeding to or returning from the premises of the dealer or of the purchaser or of any other dealer for the purpose of delivery; or

e. for proceeding to or returning from a workshop with the objective of fitting a body to the vehicle or painting or for repairs; or

f. for proceeding to and returning from airport, railway station, wharf for or after being transported; or

g. for proceeding to or returning from an exhibition of motor vehicles or any place at which the vehicle is to be or has been offered for sale; or

h. for removing the vehicle after it has been taken possession of by or on behalf of  the financier due to any default on the part of the other party under the provisions of an agreement of hire-purchase, lease or hypothecation.”

20. The motor vehicle which is registered in the name of the owner of the said vehicle and further as per sub-section (3) of Section 41 of the said Act of 1988, when once the registering authority issues certificate  of registration to the owner of the motor vehicle, from the date of issuing a certificate of registration the  person  who has got registered the vehicle in his name will be the owner of the motor vehicle. That sub-section (1) of Section 140 provides that where death or permanent of any person has resulted from the accident out of the use of a motor vehicle or motor vehicles, the owner of the vehicle shall, or, as the case may be, the owners of the vehicles shall, jointly and severally, be liable to pay compensation in respect of such death or disablement.

23. That as far as the Trade Certificate Insurance is concerned, sub-rule (1) of Rule 35 provides for grant or renewal of trade certificate.  The said trade certificate  will  be issued to the bona fide dealer and further the use  of trade registration mark and number Is concerned, sub- rule(1) of Rule 39 provides that trade registration mark and number shall not be used upon more than one vehicle at a time or upon any other vehicles bona  fide in possession of  a dealer in the course of its business.

28…..The fifth respondent is not liable to pay the compensation as awarded by the Tribunal as the vehicle involved in the accident is covered under the Trade Certificate Policy. The said Trade Certificate Policy is applicable to the persons who are engaged in buying and selling the vehicles, etc.

Compiled by S.Basavaraj, Daksha Legal