No cover after expiry of vehicle registration

Since the firm did not pay registration fee on time, driving the car was construed as an illegal act

Classic Bakery had taken a loan from ICICI Bank to purchase a Fortuner car costing Rs 20.9 lakh. The vehicle, which had a temporary registration, was insured with Tata AIG under a policy valid from February 26, 2014, to February 25, 2015.

During the subsistence of the policy, the vehicle met with an accident on April 30, 2014. A claim was lodged, but the insurer repudiated it on the ground that the vehicle did not have valid registration on the date of the accident since the temporary registration had expired and permanent registration had not been obtained.

The insured filed a complaint before the Chandigarh State Commission. It was contested by the insurer, stating that the vehicle neither had temporary nor permanent registration when the accident occurred, which was in breach of the provisions of the Motor Vehicles Act, and so the claim was not payable.

The State Commission upheld the insurer's stand and dismissed the complaint. Classic Bakery appealed to the National Commission. It pointed out an application for permanent registration had been made on March 18, 2014, well before the expiry of the temporary registration on March 25, 2014. Yet, the registration was not granted due to delay in an inspection by the transport authority. The insured argued that it could not be deprived of the claim amount and made to suffer due to this legal technicality. 

The National Commission observed that even though the application for permanent registration was made on March 18, 2014, the requisite fee was not paid in time. It noted that the registration fee of Rs 1.18 lakh was finally paid on May 5, 2014. Since payment of fees was a prerequisite for obtaining permanent registration, the Commission held that it would be wrong to blame the transport authority for delay when the insured has failed to pay the prescribed fee.

The Commission concluded that the date for application for permanent registration would have to be considered as the date of payment of the prescribed fee. Since the fee was paid on May 5, 2014, while the temporary registration had expired on March 25, 2014, the Commission held that the vehicle did not have valid registration from March 25, 2014, to May 5, 2014. The Commission concluded that the vehicle was being driven without registration at the time when the accident occurred on April 30, 2014, which would constitute a breach of the provisions of sections 39 and 192 of the Consumer Protection Act.

The Commission also held that no policy could cover an illegal act. So even though there may be no specific exclusion clause in the policy, the mere fact that the vehicle is being used contrary to the law would constitute a fundamental breach and be a valid ground for repudiating a claim.

Accordingly, by its order of April 26, 2019, delivered by Prem Narain, the National Commission dismissed the insured's appeal and upheld the repudiation of the claim.

The writer is a consumer activist