1st owner to pay money for 2nd owner's rash driving

On September 7, 2006, Sujith tragically lost his life while riding his motorcycle home on Tippu Sultan Road in Kerala. His bike was struck by another speeding motorcycle, which was reportedly being driven in a rash and negligent manner. Sujith sustained serious injuries which he succumbed to on the same day. To make matters worse, the rider of the motorcycle that hit him didn’t even have a valid driving license at that time. Additionally, this motorcycle had been bought from another person and the transfer of ownership with the RTO hadn’t been completed by the date of the accident.

As a result, when the accident occurred, the motorcycle's ownership records still showed the original owner instead of the person who bought it and caused the accident. The original owner, who had sold his bike long time ago, was completely unaware that his old motorcycle was being used in such a dangerous manner. Nevertheless, the motor accident claims tribunal held that both he and the person who bought the bike should pay compensation, along with interest, to Sujith’s legal heirs .

On July 10, 2025, the Kerala High Court referenced the Supreme Court case of Naveen Kumar v. Vijay Kumar and others [2018 KHC 6083], where it was held that for the purpose of the Motor Vehicles Act, the person whose name is reflected in the records of the registering authority is the owner and he is liable to compensate. However, the tribunal found that since the rider of the motorcycle lacked a valid driving licence, both the registered owner and the rider of the motorcycle were held liable for the incident.

Jayati Chitale, Partner, Chitale and Chitale Partners, said to ET Wealth Online: "This judgment holds the transferor jointly liable for compensation as even though he had sold the vehicle, the change of ownership was not recorded with the RTO which continued to show the transferor as the owner. Vehicle owners should therefore ensure that every transfer of vehicle is registered with the RTO within the time limit by following the prescribed process failing which they continue to be liable with respect to the vehicle in accordance with the MV Act."

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Tushar Agarwal, Founder & Managing Partner, C.L.A.P. JURIS, Advocates & Solicitors, says that this judgement deals with an important legal principle under the Motor Vehicles Act in India, particularly regarding liability in motor vehicle accidents when ownership has changed hands but registration has not been updated. Even if the actual possession and sale of the vehicle have taken place, until the registration certificate (RC) is officially transferred, the law continues to recognize the registered owner as the legal owner.

Agarwal says that the person who appears as the "owner" in the RTO records is held legally accountable, regardless of private sale or delivery. If a road accident occurs, the registered owner may be sued for compensation, even if they weren’t driving. Courts have held that liability for third-party claims lies with the person whose name is on the registration certificate.

According to Agarwal, vehicle owners should not rely only on a sale agreement or delivery. They should initiate transfer of ownership immediately by submitting Form 29 & Form 30 to the RTO. They should inform your insurance company and cancel/change the policy. They should keep proof of sale and delivery. A notarized sale agreement, payment receipt, and acknowledgment of transfer request can help protect you later from such incidents.

Keep reading to know the full details of this judgement.

Relevant facts of this case
The original owner of the motorcycle filed an appeal against the judgement of the motor accident claims tribunal. The respondents 1 to 5 herein are the claimants, who are the legal representative of deceased Sujith and respondents 6 to 9 are respondents 2 to 5.

According to the claimants, on September 7, 2006, the victim Sujith, while riding his motorcycle on Tippu Sultan Road, was struck by another motorcycle , which was being ridden in a rash and negligent manner by the second owner, coming from opposite direction, as he reached the Bhajanamadam bus stop. Due to this collision, Sujith sustained serious injuries and succumbed to them on the same day. The legal heirs approached the tribunal claiming compensation.

Before the tribunal, the respondents 2 to 5, filed separate written statements denying the allegation that the second owner rode the motorcycle in rash and negligent manner at a high speed. The third respondent (the insurer), filed a written statement, confirming the existence of the policy.

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The tribunal, looked over the pleadings and materials available and concluded that the first respondent (original owner) is indeed the owner of the motorcycle in question, as the registration certificate was in the name of the first respondent (original owner) and there had been no change of ownership.

Additionally, it was also determined that the third respondent (insurance company) was liable to pay compensation to the petitioners and after making that payment, the third respondent (insurance company) was allowed to recover the amount from respondents 1 and 2 (original owner and 2nd owner), owner and driver. The tribunal awarded a total compensation of Rs 3,70,810 with interest @ 7.5% per annum.

Aggrieved by the grant of right of recovery to the insurer to recover the amount from the first owner, he filed an appeal in the Kerala High Court.

Kerala High Court hears what the first owner had to say
According to the Kerala High Court in its judgement (2025:KER:50546, MACA NO. 2872 OF 2014) dated July 10, 2025, the lawyer representing the first owner of the vehicle said that he was the previous owner of the offending vehicle, motorcycle ridden by the second owner.

The first owner submitted that the vehicle was transferred to a third owner by the second owner. In this regard the first owner submitted an indemnity bond jointly executed by the third and second owner in his favour, undertaking to indemnify the liability of compensation which may be awarded by the tribunal.

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It is the first owner’s case that the tribunal did not consider the indemnity bond produced and passed an award directing him to compensate the claimants for the injuries sustained, for violation of policy conditions that the second owner was not having a valid driving licence.

The first owner’s lawyers further submitted that the third owner filed a written statement before the tribunal admitting that the first owner had transferred the vehicle to his name and hence, it was the liability of the third owner to compensate the claimant and not him herein.

The first owner’s lawyers also relied on the decisions reported in Said Mohammed v. Rema [1995 (2) KLT 343], Rajasthan State Road Transport Corporation v. Kailash Nath Kothari and others [(1997) 7 SCC 481] and Sreekumar v. Abdeen and others [2013 (3) KHC 329] and argued that though the first owner is the registered owner of the vehicle, since the third owner has filed written statement before the tribunal admitting that the vehicle was transferred in his name, the first owner ought to have been exonerated from the liability.

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Kerala High Court hears the insurer
The lawyers representing the insurance company submitted that though it is contended by the first owner that the vehicle was transferred to the third owner, in the written statement, the third owner has stated that the vehicle was again transferred to one fourth owner, who was the brother of the second owner.

The Standing Counsel for the insurer further submitted that the registration certificate was still in the name of the appellant/the first owner and he relied on the decision of the Supreme Court in Naveen Kumar v. Vijay Kumar and others [2018 KHC 6083] wherein it was held that the person whose name reflected in the records of the registering authority is the owner and he is liable to compensate. The Standing Counsel for the insurance company submitted that the owner is held liable since there is no driving licence for the rider of the vehicle.

Kerala High Court analysis
The Kerala High Court said that when the accident occurred on September 7, 2006, the vehicle had a valid insurance policy. The tribunal directed the insurance company to pay the amount to the claimant and then recover the said amount from respondents 1 and 2 (first and second owner).

The second respondent rider(second owner) has not challenged the order passed by the tribunal. Only the first respondent/first owner has challenged the order.

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It is the case of the appellant/first owner that even prior to the accident, the vehicle was transferred to the third owner. It is true that the third owner has filed a written statement admitting that the vehicle was transferred to him by the first owner herein and it was further contended that before the accident, the vehicle was sold to another person (fourth owner).

Kerala High Court said“So the person in whose name a motor vehicle stands registered is the owner of the vehicle for the purpose of the Act (Motor Vehicles Act).”

Section 50 of the Motor Vehicles Act deals with the procedure for transfer of ownership. It is an admitted fact that the ownership was not transferred and in the registration certificate, the appellant's (first owner) name is shown as the owner of the vehicle. The transfer of ownership did not come into effect, though, it is alleged that the vehicle was transferred to the third owner and thereafter to another person.

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Naveen Kumar judgement cited
The Kerala High Court said that the Parliament has consciously introduced the definition of the expression ‘owner’ under Section 2(30), making a departure from the provisions of Section 2(19) in the earlier Act of 1939 (Motor Vehicles Act).

The Kerala High Court said that the principle underlying the provisions of Section 2(30) is that the victim of a motor accident or, in the case of a death, the legal heirs of the deceased victim should not be left in a state of uncertainty.

The Kerala High Court said that in Naveen Kumar Supreme Court judgement, it was held that for the purpose of the Motor Vehicles Act, the person whose name is reflected in the records of the registering authority is the owner and he is liable to compensate. However, the tribunal has found that since there was no valid driving licence for the rider of the motorcycle, the tribunal has fastened the liability on the registered owner and the rider of the motorcycle. “I do not find any reason to interfere with the same,” said Kerala High Court.

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Kerala High Court judgement
The Kerala High Court said that the first owner had a specific case that an indemnity bond was executed by the additional fifth respondent (third owner) along with rider (2nd owner) jointly in favour his undertaking to indemnify the liability of compensation which may be awarded in O.P(MV) No.561/2008 and the said bond was produced before the tribunal, the same was not considered by the tribunal.

Kerala High Court said: “On a perusal of the trial court records, no such indemnity bond is seen produced by the appellant herein. Hence, I am not inclined to accept the above argument.”

Judgement: “The tribunal has rightly found that the insurer should pay the amount and then recover the said amount from the registered owner and driver. I do not find any reason to interfere with the same. But, I make it clear that in case the amount awarded by the tribunal is realised from the appellant/first owner, the appellant can recover the said amount with interest awarded by the tribunal from the date of payment till realisation from the additional fifth respondent (third owner), through due process of law. The appeal is accordingly partly allowed.”

Lessons for car owners
ET Wealth Online has asked various lawyers about what lessons from this judgement, car owners can learn, here's what they said:

Jayati Chitale, Partner, Chitale and Chitale Partners, says: "Under the Motor Vehicles Act, 1988, an owner, inter-alia, means the person in whose name the vehicle is registered. The MV Act requires the owner of a vehicle, being the transferor, to sign and submit the transfer forms with the RTO to register the change in ownership in the name of the buyer, being the new owner.

In the case of an inter-State sale, both the transferor and the buyer are required to inform the respective RTOs in their state of residence about the transfer. Failing the above process, the transferor will continue to be the owner of the vehicle for the purposes of the MV Act and therefore the liability in case of any accident or other illegal acts may be pinned upon the transferor, who will be deemed as the owner since the transfer is not recorded.

Tushar Kumar, Advocate, Supreme Court of India, says: The judgment serves as a solemn caution to all vehicle owners and transferors that statutory obligations under the Motor Vehicles Act cannot be waived by private convenience or delegated to intermediaries. Upon sale or delivery of a motor vehicle, the transferor must ensure that Form 29 and Form 30 are duly submitted to the registering authority, obtain written acknowledgment of transfer, and notify the insurer forthwith in compliance with Section 157.

Until such registration is formally mutated in the name of the transferee, the seller continues, in the eyes of law, to be the owner and thereby remains liable for all civil consequences, including compensation awards arising out of accidents. In essence, the decision highlights the enduring principle that ownership under the Motor Vehicles Act is not governed by possession or contract, but by the register of the State; and unless that register speaks differently, the person whose name it bears must bear the burden of ownership in both right and responsibility.