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Financier not liable to pay damages

If a motor vehicle is hypothecated to a finance company and the borrower does not insure it, the claim for compensation must be paid by the latter, and not the financier, the Supreme Court has held in the judgment, HDFC Bank Ltd vs Kumari Reshma. It set aside the Madhya Pradesh High Court view that it was the lender who was liable to pay compensation if the borrower does not insure the vehicle and meets with a road accident, raising claims by the victim. The high court relied on the term in the loan agreement that the bank was required to get the vehicle insured if the borrower failed, to or neglected to, get the vehicle insured. Overruling that view, the Supreme Court asserted that "the person in possession of the vehicle under the hypothecation agreement is the owner", according to the provisions of the Motor Vehicles Act. Though the bank was the registered owner of the vehicle along with the borrower, the latter was "in control and possession of the vehicle". If he neglects to take insurance and causes injury to a road user as in this case, the borrower is liable to pay compensation.

 Article referred: http://www.business-standard.com/article/printer-friendly-version?article_id=114121400629_1

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