Module_-5_IL pdf

7/25/2019 Module_-5_IL pdf

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Module-5

MOTOR INSURANCE

There has been a sudden rise in the motor accidents in the last few years. Much of

these are attributable to increase in the number of vehicles. Every vehicle before

being driven on roads has to be compulsorily insured. The motor insurance policy

represents a combined coverage of the vehicles including accessories, loss or damage

to his property or life and the third party coverage. Persons driving vehicles maycause losses and injuries to other persons. Every individual who owns a motor

vehicle is also exposed to certain other risks. These include damage to his vehicle due

to accidents, theft, fire, collision and natural disasters and also injuries to himself. In

1939, motor vehicle act came into force in India and compulsory insurance was

introduced by motor vehicle act to protect the pedestrians and other third parties.

Definition

Motor insurance policy is a contract between the insured and the insurer in which the

insurer promises to indemnify the financial liability in event of loss to the insured.Motor Vehicles Act was passed to mainly safeguard the interests of pedestrians.

According to the Act, a vehicle cannot be used in a public place without insuring the

third part liability.

According to Motor Vehicles Act, No person shall use or allow any other person to

use a motor vehicle in a public place, unless the vehicle is covered by a policy of

Insurance.

For purpose of insurance, motor vehicles are classified into three broad categories:

(a) Private cars

(b) Motor cycles and motor scooters

(c) Commercial vehicles, further classified into

(I) Goods carrying vehicles

(II) Passenger carrying vehicles e.g.

- Motorized rickshaws

- Taxis

- Buses

(III) Miscellaneous Vehicles, e.g.

- Hearses (funeral van)- Ambulances

- Cinema Film Recording & Publicity vans

- Mobile dispensaries etc.


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Classification of Motor Vehicles

As per the Motor Vehicles Act for the purpose of insurance the vehicles are classified

into three broad categories such as.

Private cars:

(a) Private Cars - vehicles used only for social, domestic and pleasure purposes

(b) Private vehicles - Two wheeled

1. Motorcycle/Scooters2. Auto cycles

3. Mechanically assisted pedal cycles

Commercial vehicles

(1) Goods carrying vehicles

(2) Passengers carrying vehicles

(3) Miscellaneous & Special types of vehicles

The risks under motor insurance are of two types:

(1) Legal liability due to bodily injury, death or damage caused to the property ofothers.

(2) Loss or damage to ones own vehicle\ injury to or death of self and other

occupants of the vehicle.

BASIC PRINCIPLES OF MOTOR INSURANCE

Motor insurance being a contract like any other contract has to fulfill the

requirements of a valid contract as laid down in the Indian Contract Act 1872.

In addition it has certain special features common to other insurance contracts.

They are:

Utmost good faith

Insurable interest

Indemnity

Subrogation and contribution

Proximate cause

All of these principles have already been discussed in detail in earlier chapters. But

for the students convenience, we will be discussing these here again:

Utmost good faith

The principle of Utmost good faith casts an obligation on the insured to disclose allthe material tracts. These material facts must be disclosed to the insurer at the time of

entering into the contract. All the information given in the proposal form should be

true and complete. E.g. the driving history, physical health of the driver,type of

vehicle etc. If any of the mentioned material facts declared by the insured in the


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proposal form are found inappropriate by the insurer at the time of claim it may result

in the claim being repudiated.

Insurable Interest

In a valid insurance contract it is necessary on the part of the insured to have an

insurable interest in the subject matter of insurance. The presence of insurable

interest in the subject matter of insurance gives the person the right to insure. The

interest should be pecuniary and must be present at inception and throughoutthe term of the policy. Thus the insured must be either benefited by the safety of the

property or must suffer a loss on account of damage to it.

Indemnity

Insurance contracts are contracts of indemnity. Indemnity means making good of the

loss by reimbursing the exact monetary loss. It aims at keeping the insured in the

same position he was before the loss occurred and thus prevent him from making

profit from insurance policy.

Subrogation and ContributionSubrogation refers to transfer of insured's right of action against a third party who

caused the loss to the insurer. Thus, the insurer who pays the loss can take up the

assureds place and sue the party that causedthe loss in order to minimise his loss for

which he has already indemnified the assured.

Subrogation comes in the picture only in case of damage or loss due to a third party.

The insurer derives this right only after the payment of damages to the insured.

Contribution ensures that the indemnity provided is proportionately borne by other

insurers in case of double insurance.

TYPES OF POLICIES

For all classes of vehicles, there are two types of Policy Forms:-

Policy Forms-1)Form A ,2)Form B

Form A : to cover Act Liability.

Form B : to cover Own Damage Losses and Act Liability. Thepolicy can also be

extended to cover additional liabilities as provided in the Tariff.

Form A is called Standard Form for A Policy for Act

Liability. This form applies uniformly to all classes of vehicles,whether Private

Cars, Commercial Vehicles, Motor Cycles or Motor Scooters, with suitableamendments in Limitations as to Use.

Form B, which provides wider cover as indicated above, varies with the class of

vehicle covered. There are therefore Form BPolicies for Private Cars, Commercial

Vehicles, Motor Cycles/ Scooters, etc.


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Policy Form B

This policy provides the so-called comprehensive cover andthe structure of the

policy form is the same for all vehicles, (with some differences which are pointed

out, wherever applicable)

Section I : Loss or Damage (or Own Damage). The riskscovered are :

a) Fire, explosion, self-ignition or lightning.

b) Burglary, house breaking or theft.c) Riot and strike.

d) Earthquake (fire and shock damage)

e) Flood, typhoon, hurricane, storm, tempest, inundation,cyclone, hailstorm, frost.

f) Accidental external means.

g) Malicious act.

h) Terrorist activity.

i) Transit by road, rail, inland waterway, lift, elevator or air.

j) Landslide /rockslide.Exclusions

i. consequential loss

ii. depreciation

iii. wear and tear; and

iv. mechanical or electrical breakdowns, failures or breakages

v. Damage to tyres unless the vehicle is damaged at the same time. (Then, 50% of

cost of replacement payable).

vi. Loss when the vehicle is driven under the influence of intoxicating liquor or drugs

(Notes: 1. In the motor cycle and commercial vehicle policy there are additional

exclusions :

(1) Loss of or damage to accessories by burglary, housebreaking or theft unless the

vehicle is stolen at the same time.

(2) In commercial vehicle policy, there is a further exclusion: Damage caused by

overloading or strain of the vehicle.

Towing Charges

If the motor car is disabled as a result of damage covered by the policy, the insurers

bear a reasonable cost of protecting the car and removing it to the nearest repairers, asalso the reasonable cost of re-delivery to the insured. The amount so

borne by the insurers is limited to maximum of Rs.2,500/- in respect of any one

accident.

Note: For motor cycles the limit is Rs.300/-, for cars Rs.1500/- and for commercial

vehicles Rs.2500/-).


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Repairs

Ordinarily repairs arising out of damage covered by the policy can be carried out only

after they are authorized by the insurers. However, the insured is allowed to carry out

the repairs without authorization from the insurers, provided that:

(a) the estimated cost of such repair does not exceed Rs-500/- (Rs.150/- for motor

cycles).

(b) the insurers are furnished forthwith with a detailed estimate of the cost; and(c) the insured gives the insurers every assistance to ensure that such repair is

necessary and that the charge is reasonable.

Compulsory Excess

This applies to all vehicles. The insured has to bear a part of the claim amount in

respect of each accident.

Further loss / damage to lamps, tyres, mudguards and / or bonnet side parts, bumpers

and / or paintwork is not payable except in the case of a total loss of vehicle.

TYPES OF MOTOR INSURANCE POLICIESThe All India Motor Tariff governs motor insurance business in India. According to

the Tariff all classes of vehicles can use two types of policy forms. They are form A

and form B. Form A which is known as Act Policy is a compulsory requirement of

the motor vehicle act. Use without such insurance is a penal offence.

Form B which is also known as Comprehensive Policy is an optional cover.

1. Liability only policyThis covers third party liability and/or death and property

damage.

Compulsory personal accident covers for the owner in respect of owner driven

vehicles is also included.

2. Package policyThis covers loss or damage to the vehicle insured in addition to

1 above.

3. Comprehensive policy- Apart from the above-mentioned coverage, it is

permissible to cover private cars against the risk of fine and/or theft and third party/

theft risks.

Every owner of motor vehicle has to take out a policy covering third party risks but

insurance against other two risks is optional. When insurance policy covers third

party risks, third party who has suffered any damages, can sue the InsuranceCompany even though he was not a party to the contract of insurance.

Insurance policies for the vehicles subject to the purchase agreements, lease

agreements and hypothecation are to be issued in the joint names of the hirer and

owner, lease and lessor, owner and pledge respectively.


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In case of policy renewal a notice of one month in advance before the date of expiry

is issued by the insurers. The notice gives the details of premium payable for renewal.

Transfer of Ownership

In case of any sale of vehicle involving transfer of policy, the insured should apply to

the insurer for consent to such transfer. The transfer is allowed, if within 15 days of

receipt of application, the insurer does not reject the plea. The transferee shall apply

within fourteen days from the date of transfer in writing to the insurer whohas insured the vehicle, with the details of the registration of the vehicle, the date of

transfer of the vehicle, the previous owner of the vehicle and the number and date of

the insurance policy so that the insurer may make the necessary changes in his record

and issue fresh Certificate of Insurance.

Insurers Duty to Third Party

It is obligatory on the part of the insurer to pay the third party since, the insurer has

no rights to avoid or reject the payment of liability to a third party. The duties of the

insurer towards a third party are provided in section 96(1). The court determines thethird party liability and accordingly compensation is paid. The liability is unlimited.

Cancellation of Insurance

The insurer may cancel a policy by sending to the insured seven days notice of

cancellation by recorded delivery to the insureds last known address and the insurer

will refund to the insured the pro-rata premium for the balance period of the policy. A

policy may be cancelled at the option of the insured with seven days

notice of cancellation and the insurer will be entitled to retain premium on short

period scale of rates for the period for which the cover has been in existence prior to

the cancellation of the policy. The balance premium, if any, will be refundable to the

insured.

Double Insurance

When two policies are in existence on the same vehicle with identical cover, one of

the policies may be cancelled. Where one of the policies commences at a date later

than the other policy, the policy commencing later is to be cancelled by the insurer

concerned. If a vehicle is insured at any time with two different offices of the same

insurer, 100% refund of premium of one policy may be allowed by canceling the later

of the two policies. However, if the two policies are issued by two different insurers,the policy commencing later is to be cancelled by the insurer concerned and pro-rata

refund of premium thereon is to be allowed.

Calculation of Premiums

In the case of Comprehensive Insurance Cover, for the purpose of premium, vehicles

are categorized as follows:


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Private Car

This is used for personal purposes. Private cars are lesser exposed than taxis, as the

latter is used extensively for maximum revenue. The premium is computed on the

following basis

1. Geographical area of use: Large cities have higher average claim costs followed by

suburban areas, smaller cities, and small towns or rural areas. In India, the

geographical areas have been classified into Group A and Group B.2. Cubic capacity: The more the cubic capacity, the higher the premium rate.

Value of the vehicle: The premium rate is applied on the value of the vehicle. Owner

has to declare the correct value of the vehicle to the insurer. This value is known as

the Insureds Estimated Value (IEV) inmotor insurance and represents the sum

insured.

Two-wheeler

It is used for personal purpose only. Premium is calculated on cubic capacity and

value of vehicle. Theft of accessories is not covered, unless the vehicle is stolen at thesame time.

Commercial Vehicle

This is the vehicle used for hire. For goods carrying commercial vehicle, premium is

calculated on the basis of carrying capacity i.e. gross vehicle weight and value of the

vehicle. For passenger carrying commercial vehicles, premium is calculated on the

basis of again carrying capacity i.e. number of passengers and value of the vehicle.

Accessories extra, as specified. Heavier vehicles are more exposed to accidents since

the resultant damages they incur are more. Similarly, vehicles with higher carrying

capacity expose more passengers to risk. Therefore heavier vehicles attract higher

premium rate.

Claim Settlement-Motor Insurance

Claim arise when

(1) The insureds vehicle is damaged or any loss incurred.

(2) Any legal liability is incurred for death of or bodily injury

(3) Or damage to the third partys property.

The claim settlement in India is done by opting for any of the following by the

insurance company(a) Replacement or reinstatement of vehicle

(b) Payment of repair charges

In case, the motor vehicle is damaged due to accident it can be repaired and brought

back to working condition. If the repair is beyond repair then the insured can claim

for total loss or for a new vehicle. It is based on the market value of the vehicle at the


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time of loss. Motor insurance claims are settled in three stages. In the first stage the

insured will inform the insurer about loss. The loss is registered in claim register.

In the second stage, the automobile surveyor will assess the causes of loss and extent

of loss. He will submit the claim report showing the cost of repairs and replacement

charges etc. In the third stage, the claim is examined based on the report submitted by

the surveyor and his recommendations. The insurance company may then authorize

the repairs. After the vehicle is repaired, insurance company pays the charges directlyto the repairer or to the insured if he had paid the repair charges. Motor Vehicle Act

empowers the State Government in establishing motor claim tribunals. These

tribunals will help in settling the third party claims for the minimum amount.

1. Motor Vehicles Act, 1988

The Motor Vehicles Act, 1988 is an Act of the Parliament of India which regulates all

aspects of road transport vehicles. The Act came into force from 1 July 1989. It

replaced the Motor Vehicles Act, 1938 which earlier replaced the first suchenactment Motor Vehicles Act, 1914. The Act provides in detail the legislative

provisions regarding licensing of drivers and conductors, registration of motor

vehicles, control of motor vehicles through permits, special provisions relating to

state transport undertakings, traffic regulations, insurance, liability, offences and

penalties etc. Further, in order to exercise the legislative provisions of the Act, the

Government of India made the Central Motor Vehicles Rules, 1989.

Necessity for insurance against third party risk

Section 146 of the above Act states that no person shall use, other than as a passenger

or allow to use a motor vehicle in a public place unless a policy of insurance which

covers the liability to third party on account of death or bodily injury to such third

party or damage to any property of a third party arising out of the use of the vehicle

in a public place. Therefore, it is mandatory for the owner of any motor vehicle to

obtain, at the minimum, a policy from any General insurance company holding a

valid licence from IRDA, which covers the risk of death or bodily injury to a third

party arising out of usage of the vehicle in a public place.

The liabilities which require compulsory insurance are as follows:(a) death or bodily injury of any person including the owner of the goods or his

authorized representative carried in the carriage

(b) damage to any property of a third party

(c) death or bodily injury of any passenger of a public service vehicle


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(d) liability arising under the Workmens Compensation Act, 1923 in respect of death

or bodily injury of the paid driver of the vehicle, conductor or ticket examiner (public

service vehicles) and workers carried in a goods vehicle

(e) The limit of liability to third party property is `6,000.

No Fault liability

Section 140 of the Motor Vehicles Act, 1988, provides for liability of the owner ofthe Motor Vehicles to pay compensation in certain cases, on the principle of no fault.

The amount of compensation so payable is Rs.50,000 for death and Rs.25,000 for

permanent disablement of any person resulting from an accident

arising out of the use of the motor vehicles. The principle of no fault means that the

claimant need not prove negligence on the part of the motorist. Liability is automatic

in such cases. Further, under Section 141(1) of the said Act, claims for death or

permanent disablement can also be pursued under other provisions of the Act on the

basis of negligence (fault liability).Duty of insurers to satisfy judgements and awards against persons insured in

respect of third party risks

Where a judgement or an award has been given against a insured person in respect of

a third party liability covered under the insurance policy, then, notwithstanding the

rights or the insurer to avoid or cancel the insurance policy, the insurer shall be liable

to pay to the person entitled to the benefit of decree (third party),

as if the insurer were the judgement debtor, together with any amount payable in

respect of costs and any sum payable alongwith interest.

However, no sum as above shall be payable by an insurer if notice of the bringing of

any such proceedings in which the judgement or award is given, is given to insurer

and the insurer can defend the action on the ground of breach of any of the following

conditions in the policy document:

(a) Condition that the vehicle on the date of contract of insurance not covered by a

permit to ply for hire or rewardif the vehicle was used for hire or reward

(b) For organised racing and speed testing

(c) For purposes not allowed by the permit under which vehicle is used where the

vehicle is a transport vehicle(d) Without side car being attached where the vehicle is a motor cycle

(e) Usage of car by an unlicensed person

(f) Condition excluding liability for injury caused or contributed by conditions of

war, civil war, riot or civil commotion


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(g) The policy was obtained by non disclosure of a material fact or by representation

of a fact which was false in some material particular

A settlement between the insurer and insured shall be valid only if the third party is

also made a party to the settlement contract. Insolvency of the insured person will not

affect the liability of the insured or claims by third parties.

Issuance of Certificate of Insurance

As per the Act, policy of insurance shall have no effect unless and until a certificateof insurance in the form prescribed under the Rules of the Act is issued. The only

evidence of the existence of a valid insurance as required by the Motor Vehicles Act

acceptable to the police authorities and R.T.O. is a certificate of

insurance issued by the insurers.

Transfer of insurance upon sale of vehicle

Where a person holding a Certificate of insurance for a motor vehicle, transfers the

ownership of the vehicle to another person, the certificate of insurance and the policy

described in the certificate shall be deemed to have been transferred in favour of theperson to whom the motor vehicle is transferred with effect from the

date of transfer.

The transferee shall apply within 14 days from the date of transfer in the prescribed

form to the insurer for making necessary changes in regard to the fact of the transfer

in the certificate of insurance and the policy described in the certificate in his favour

and the insurer shall make the necessary changes in the certificate and the policy of

insurance in regard to the transfer of insurance.

Hit and Run Accident

Section 161 defines hit and run motor accident as accident arising out of a motor

vehicle or motor vehicles the identity of whereof cannot be ascertained in spite of

reasonable efforts for the purpose. The Section provides for payment of

compensation as follows in such cases:

(a) In respect of death of any person resulting from a hit and run accident, a fixed

sum of Rs.25,000

(b) In respect of grievous hurt to any person resulting from a hit and run motor

accident, a fixed sum of Rs.12,500

(c) Compensation known as Solatium is payable out of a Solatium Fund establishedby the Central Government

Motor Accidents Claim Tribunals

For speedy disposal of third party claims and at a minimum cost, the Claims

Tribunals have been constituted by different State Governments. Only a nominal fee


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has to be paid for instituting a case and Court fee is not based on the value of the suit.

Thus it is very much less expensive and poor third party claimants are not

prevented from making proper claims.

Where a Tribunal has been set up for an area, no Civil Court has any jurisdiction to

entertain any claim falling under the tribunals jurisdiction.

CLAIM PROCEDURE FOR MOTOR INSURANCE

(a) Vehicle Accident ClaimsAfter the insured submit his claim form and the relevant documents, the insurer

appoints a surveyor to inspect the vehicle and submit his/her report to the insurance

company. Insured also get the details of the surveyor's report. In case of major

damage to the vehicle, the insurer arranges for a spot survey at the site of accident.

The insured can undertake repairs only on completion of the survey. Once the vehicle

is repaired, the insured should submit duly signed bills/cash memos to the insurance

company. In some cases, companies have the surveyor re-inspect the vehicle after

repairs. In such a scenario, the insured should pay the workshop/garage and obtain aproof of release document (this is an authenticated document signed by you to release

the vehicle from the garage after it is checked and repaired).

Once the vehicle has been released, insured should submit the original bill, proof of

release, and cash receipt from the garage to the surveyor. The surveyor sends the

claim file to the insurance company for settlement along with all the documents and

Finally, the insurance company reimburses the insured.

In case of an accident, the insurance company pays for the replacement of the

damaged parts and the labor fees.

The costs that the insured has to bear include:

A. The amount of depreciation as per the rate prescribed

B. Reasonable value of salvage (to be discussed separately)

C. Voluntary deductions under the policy, if the insured have opted for any

D. Compulsory excesses levied by the insurer

In the insured uses the cashless repair facility, the claim money is paid directly to the

workshop or garage.

Otherwise, the amount of claim is paid to the insured.

(b) Third Party Insurance Claim

In the event of a third party claim, the insured should notify the insurance company in

writing along with a copy of the notice and the insurance certificate. The insured

should not offer to make an out-of-court settlement or promise payment to any party

without the written consent of the insurance company. The insurance company has a

right to refuse liabilities arising out of such promises.


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The insurance company will issue a claim form that has to be filled and submitted

along with:

(a) Copy of the Registration Certificate

(b) Driving license

(c) First information report (FIR)

After verification, the insurance company will appoint a lawyer in the defense ofinsurer and the insurer should cooperate with the insurance company, providing

evidence during court proceedings. If the court orders compensation, the insurance

company will then do it directly.

(C) Vehicle Theft Claims

In the event of theft of vehicle, the insured should lodge the First Information Report

(FIR) with a police station immediately, inform the insurance company and provide

them with a copy of the FIR. He should also submit the Final Police Report to the

insurance company as soon as it is received and Extend fullcooperation to the surveyor or investigator appointed by the company. After the

claim is approved, the Registration Certificate of the stolen vehicle has to be

transferred in the name of the company and the insured needs to submit the duplicate

keys of the vehicle along with a letter of subrogation and an indemnity

on stamp paper (duly notarized) to the insurance company.

If there is a dispute regarding the claim settlement between the insured and the

insurer, how is the dispute resolved?

The most common form of dispute that arises between the insured and the insurer is

about admission of liability or the size of the claim. Disputes regarding claim

amounts, where the insurer has agreed to cover the claim under the policy, are

referred to an arbitrator. If the decision of the arbitrator is disputed by either

party, the Consumer Forum or the Civil Court could be approached.

The Motor Vehicles Act, 1988

Object and ScopeThe Motor Vehicles Act, 1988 has been applicable to whole India

and has been prepared to achieve the following objectives:

1.

To take care of the fast increasing number of both commercial vehicles andpersonal vehicles in the country.

2. II. The need for encouraging adoption of higher technology in automotive

sector.

3. The greater flow of passenger and freight with the least impediments so that

islands of isolation are not created leading to regional or local imbalances.


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16 The Motor Vehicle (Amendment) Act, 2001, Statement of Objects and

Reasons 17 Ibid. 18 The Motor Vehicle Act, 1988, Statement of Objects

and Reasons35

4. Concern for road safety standards, and pollution-control measures,

standards for transportation of hazardous and explosive materials.

5. V. Simplification of procedure and policy liberalizations for private sector

operations in the road transport field.6.

Need for effective ways of tracking down traffic offenders.

7.

Rationalization of certain definitions with additions of certain new

definitions of new types of vehicles.

8. Stricter procedures relating to grant of driving licences and the period of

validity thereof.

9.

Laying down of standards for the components and parts of motor vehicles;

10.

Standards for anti-pollution control devices.

11.

Provision for issuing fitness certificates of vehicles also by the authorizedtesting stations.

12. Enabling provision for updating the system of registration marks.

13. Liberalized schemes for grant of stage carriage permit on non nationalized

routes, all-India Tourist permits and also national permits for goods

carriages.

14.

Administration of the Solatium Scheme by the General Insurance

Corporation.

15. Provision for enhanced compensation in cases of no fault liability and in

hit and run motor accidents.36

16.

Provision for payment of compensation by the insurer to the extent of actual

liability to the victims of motor accidents irrespective of the class of

vehicles.

17. Maintenance of State registers for driving licences and vehicle registration.

18. Constitution of Road Safety Councils.

19. The introduction of newer type of vehicles and fast increasing number of

both commercial and personal vehicles in the country.

20.

Providing adequate compensation to victims of road accidents withoutgoing into long drawn procedure.

21. Protecting consumers interest in Transport Sector.

22. Concern for road safety standards, transport of hazardous chemicals and

pollution control.


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23. Delegation of greater powers to State Transport Authorities and

rationalizing the role of public authorities in certain matters.

24.

The simplification of procedures and policy liberalization in the field of

Road Transport.

25. Enhancing penalties for traffic offenders.

26. Modification and amplification of certain definitions of new type of

vehicles.27.

Simplification of procedure for grant of driving licences.37

28.

Putting restrictions on the alteration of vehicles.

29.

Certain exemptions for vehicles running on non-polluting fuels.

30. Ceilings on individuals or company holdings removed to curb benami

holdings.

31.

States authorized to appoint one or more State Transport AppellateTribunals.

32.

Punitive checks on the use of such components that do not conform to the

prescribed standards by manufactures, and also stocking / sale by the

traders.

33. Increase in the amount of compensation of the victims of hit and run cases.

34. Removal of time limit for filling of application by road accident victims for

compensation.

35.

Punishment in case of certain offences is made stringent.

36.

A new pre-determined formula for payment of compensation to road

accident victims on the basis of age / income, which is more liberal and

rational .

The Motor Vehicles Act, 1988

Sections 2.Definitions.-

(9)"driver" includes, in relation to a motor vehicle which is drawn by another motor

vehicle, the person who acts as a steersman of the drawn vehicle;

(28)"motor vehicle" or "vehicle" means any mechanically propelled vehicle adapted

for use upon roads whether the power of propulsion is transmitted thereto from an

external or internal source and includes a chassis to which a body has not been

attached and a trailer; but does not include a vehicle running upon fixed rails or a

vehicle of a special type adapted for use only in a factory or in any other enclosed


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premises or a vehicle having less than four wheels fitted with engine capacity of not

exceeding thirty five cubic centimetres;

Section 125.Obstruction of driver.-No person driving a motor vehicle shall allow

any person to stand or sit or to place anything in such a manner or position as to

hamper the driver in his control of the vehicle.

CHAPTER VII(Section 109,110,110)CONSTRUCTION, EQUIPMENT AND MAINTENANCE OF MOTOR

VEHICLES

109.General provision regarding construction and maintenance of vehicles.-(1)Every motor vehicle shall be so constructed and so maintained as to be at all times

under the effective control of the person driving the vehicle.

(2) Every motor vehicle shall be so constructed as to have right hand steering controlunless it is equipped with a mechanical or electrical signalling device or a prescribed

nature.

(3) If the Central Government is of the opinion that it is necessary or expedient so to

do, in public interest, it may be order published in the Official Gazette, notify that

any article or process used by a manufacturer shall conform to such standard as maybe specified in that order.

110.Power of Central Government to make rules.-(1) The Central Government

may make rules regulating the construction, equipment and maintenance of motor

vehicles and trailers with respect to all or any of the following matters, namely:

(a)the width, height, length and overhand of vehicles and of the loads carried;

[(b) the size, nature, maximum retail price and condition of tyres, includingembossing thereon of date and year of manufacture, and the maximum load carrying

capacity;](c)brakes and steering gear;

(d)the use of safety glasses including prohibition of the use of tinted safety glasses;

(e)signalling appliances, lamps and reflectors;

(f) speed governors;(g)the emission of smoke, visible vapour, sparks, ashes, grit or oil;

(h)the reduction of noise emitted by or caused by vehicles;(i) the embossment of chassis number and engine number and the date of

manufacture;(j)safety belts, handle bars of motor cycles, auto-dippers and other equipmentsessential for safety of drivers, passengers and other road user;

(k)standards of the components used in the vehicle as inbuilt safety devices;


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(l)provision for transportation of goods of dangerous or hazardous nature to humanlife;

(m)standards for emission of air pollutants;

(n)installation of catalytic convertors in the class of vehicles to be prescribed;(o)the placement of audio-visual or radio or tape recorder type of devices in public

vehicles;(p)warranty after sale of vehicle and norms therefor:

Provided that any rules relating to the matters dealing with the protection ofenvironment, so far as may be, shall be made after consultation with the Ministry of

the Government of India dealing with environment.

(2) Rules may be made under sub-section (1) governing the matters mentioned

therein, including the manner of ensuring the compliance with such matters and themaintenance of motor vehicles in respect of such matters, either generally in respect

of motor vehicles or trailers or in respect of motor vehicles or trailers of a particularclass or in particular circumstances.

(3) Notwithstanding anything contained in this section,

(a)the Central Government may exempt any class of motor vehicles from the

provisions of this Chapter;

(b)a State Government may exempt any motor vehicle or any class or description ofmotor vehicles from the rules made under sub-section (1) subject to such conditions

as may be prescribed by the Central Government.

111.Power of State Government to make rules.-(1) A State Government maymake rules regulating the construction, equipment and maintenance of motor vehicles

and trailers with respect to all matters other than the matters specified in sub-section(1) of Section 110.

(2) Without prejudice to the generality of the foregoing power, rules may be made

under this section governing all or any of the following matters either generally in

respect of motor vehicles or trailers or in respect of motor vehicles or trailers of a

particular class or description or in particular circumstances, namely:

(a)seating arrangements in public service vehicles and the protection of passengers

against the weather;(b)prohibiting or restricting the use of audible signals at certain times or in certain

places;

(c)prohibiting the carrying of appliances likely to cause annoyance or danger;(d)the periodical testing and inspection of vehicles by prescribed authorities and fees

to be charged for such test;


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(e)the particulars other than registration marks to be exhibited by vehicles and themanner in which they shall be exhibited;

(f) the use of trailers with motor vehicles; and

141. Provisions as to other right to claim compensation for death or permanent

disablement.

(1) The right to claim compensation under section 140 in respect of death or

permanent disablement of any person shall be in addition to 1[any other right, exceptthe right to claim under the scheme referred to in section 163A (such other righthereafter] in this section referred to as the right on the principle of fault) to claim

compensation in respect thereof under any other provision of this Act or of any otherlaw for the time being in force.

(2) A claim for compensation under section 140 in respect of death or permanent

disablement of any person shall be disposed of as expeditiously as possible andwhere compensation is claimed in respect of such death or permanent disablement

under section 140 and also in pursuance of any right on the principle of fault, theclaim for compensation under section 140 shall be disposed of as aforesaid in the first

place.(3)Notwithstanding anything contained in sub-section (1), where in respect of the

death or permanent disablement of any person, the person liable to pay compensation

under section 140 is also liable to pay compensation in accordance with the right on

the principle of fault, the person so liable shall pay the first-mentioned compensation

and

(a) if the amount of the first-mentioned compensation is less than the amount of the

second-mentioned compensation, he shall be liable to pay (in addition to the first-

mentioned compensation) only so much of the second-mentioned compensation as isequal to the amount by which it exceeds the first mentioned compensation;

(b) if the amount of the first-mentioned compensation is equal to or more than the

amount of the second-mentioned compensation, he shall not be liable to pay the

second-mentioned compensation.

142. Permanent disablement.For the purposes of this Chapter, permanent

disablement of a person shall be deemed to have resulted from an accident of the

nature referred to in sub-section

(1) of section 140 if such person has suffered by reason of the accident, any injury orinjuries involving:

(a)permanent privation of the sight of either eye or the hearing of either ear, or

privation of any member or joint; or

(b) destruction or permanent impairing of the powers of any member or joint; or

(c)permanent disfiguration of the head or face.
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143.Applicability of Chapter to certain claims under Act 8 of 1923.The

provisions of this Chapter shall also apply in relation to any claim for compensation

in respect of death or permanent disablement of any person under the Workmens

Compensation Act, 1923 (8 of 1923) resulting from an accident of the nature referred

to in sub-section(1) of section 140 and for this purpose, the said provisions shall,

with necessary modifications, be deemed to form part of that Act.

145.Definitions.In this Chapter,

(b) certificate of insurancemeans a certificate issued by an authorised insurer in

pursuance of sub-section (3) of section 147 and includes a cover note complying with

such requirements as may be prescribed, and where more than one certificate has

been issued in connection with a policy, or where a copy of a certificate has been

issued, all those certificates or that copy, as the case may be;

147. Requirements of policies and limits of liability.

1.

In order to comply with the requirements of this Chapter, a policy of insurancemust be a policy which--

a.

is issued by a person who is an authorised insurer; and

b.

insures the person or classes of persons specified in the policy to theextent specified in sub-section (2)--

i.

Against any liability which may be incurred by him in respect of the death of

or bodily injury to any person or damage to any property of a third partycaused by or arising out of the use of the vehicle in a public place;

ii.

Against the death of or bodily injury to any passenger of a public servicevehicle caused by or arising out of the use of the vehicle in a public place:

Provided that a policy shall not be required-

i. to cover liability in respect of the death, arising out of and in the courseof his employment, of the employee of a person insured by the policy or in

respect of bodily injury sustained by such an employee arising out of and inthe course of his employment other than a liability arising under the

Workmen's Compensation Act, 1923, (8 of 1923.) in respect of the death of,

or bodily injury to, any such employee--

a.

Engaged in driving the vehicle, or

b. If it is a public service vehicle engaged as a conductor of thevehicle or in examining tickets on the vehicle, or

c.

If it is a goods carriage, being carried in the vehicle, or

ii. To cover any contractual liability.
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Explanation.--For the removal of doubts, it is hereby declared that the death of orbodily injury to any person or damage to any property of a third party shall be

deemed to have been caused by or to

have arisen out of, the use of a vehicle in a public place notwithstanding thatthe person who is dead or injured or the property which is damaged was not in a

public place at the time of the accident, if the act or omission which led to theaccident occurred in a public place.

2.

Subject to the proviso to sub-section (1), a policy of insurance referred toin sub-section (1), shall cover any liability incurred in respect of any

accident, up to the following limits, namely:--

a.

Save as provided in clause (b), the amount of liability incurred;

b.

in respect of damage to any property of a third party, a limit of rupeessix thousand:

Provided that any policy of insurance issued with any limited liability and in

force, immediately before the commencement of this Act, shall continue to be

effective for a period of four months after such commencement or till the date ofexpiry of such policy whichever is earlier.

3. A policy shall be of no effect for the purposes of this Chapter unless anduntil there is issued by the insurer in favour of the person by whom the

policy is effected a certificate of insurance in the prescribed form and

containing the prescribed particulars of any condition subject to which thepolicy is issued and of any other prescribed matters; and different forms,

particulars and matters may be prescribed in different cases.

4. Where a cover note issued by the insurer under the provisions of this Chapter

or the rules made thereunder is not followed by a policy of insurancewithin the prescribed time, the insurer shall, within seven days of the expiry

of the period of the validity of the cover note, notify the fact to the

registering authority in whoserecords the vehicle to which the cover note relates has been registered

or to such other authority as the State Government may prescribe.

5.

Notwithstanding anything contained in any law for the time being in force,

an insurer issuing a policy of insurance under this section shall be liable to

indemnify the person or classes of persons specified in the policy in respect of

any liability which the policy purports to cover in the case of that personor those classes of persons.


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150. Rights of third parties against insurers on insolvency of the insured.

(1) Where under any contract of insurance effected in accordance with the provisions

of this Chapter, a person is insured against liabilities which he may incur to third

parties, then

(a) in the event of the person becoming insolvent or making a composition or

arrangement with his creditors, or

(b) where the insured person is a company, in the event of a winding-up order beingmade or a resolution for a voluntary winding-up being passed with respect to the

company or of a receiver or manager of the companys business or undertaking being

duly appointed, or of possession being taken by or on behalf of the holders of any

debentures secured by a floating charge of any property comprised in or subject to the

charge, if, either before or after that event, any such liability is incurred by

the insured person, his rights against the insurer under the contract in respect of the

liability shall, notwithstanding anything to the contrary in any provision of law, be

transferred to and vest in the third party to whom the liability was so incurred.(2) Where an order for the administration of the estate of a deceased debtor is made

according to the law of insolvency, then, if any debt provable in insolvency is owing

by the deceased in respect of a liability to a third party against which he was insured

under a contract of insurance in accordance with the provisions of this Chapter, the

deceased debtors rights against the insurer in respect of that liability shall,

notwithstanding anything to the contrary in any provision of law, be transferred to

and vest in the person to whom the debt is owing.

(3) Any condition in a policy issued for the purposes of this Chapter purporting either

directly or indirectly to avoid the policy or to alter the rights of the parties thereunder

upon the happening to the insured person of any of the events specified in clause (a)

or clause (b) of sub-section (1) or upon the making of an order for the administration

of the estate of a deceased debtor according to the law of insolvency shall be of no

effect.

(4) Upon a transfer under sub-section (1) or sub-section (2), the insurer shall be under

the same liability to the third party as he would have been to the insured person,

but

(a) if the liability of the insurer to the insured person exceeds the liability of theinsured person to the third party, nothing in this Chapter shall affect the rights of the

insured person against the insurer in respect of the excess, and

(b) if the liability of the insurer to the insured person is less than the liability of the

insured person to the third party, nothing in this Chapter shall affect the rights of the

third party against the insured person in respect of the balance.
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151. Duty to give information as to insurance.No person against whom a claim

is made in respect of any liability referred to in clause (b) of sub-section

(1) of section 147 shall on demand by or on behalf of the person making the claim

refuse to state whether or not he was insured in respect of that liability by any policy

issued under the provisions of this Chapter, or would have been so insured if the

insurer had not avoided or cancelled the policy, nor shall he refuse, if he was or

would have been so insured, to give such particulars with respect to that policy aswere specified in the certificate of insurance issued in respect thereof. tc "151. Duty

to give information as to insurance.No person against whom a claim is made in

respect of any liability referred to in clause (b) of sub-section (1) of section 147 shall

on demand by or on behalf of the person making the claim refuse to state whether or

not he was insured in respect of that liability by any policy issued under the

provisions of this Chapter, or would have been so insured if the insurer had not

avoided or cancelled the policy, nor shall he refuse, if he was or would have been so

insured, to give such particulars with respect to that policy as were specified in thecertificate of insurance issued in respect thereof."

"(2) In the event of any person becoming insolvent or making a composition or

arrangement with his creditors or in the event of an order being made for the

administration of the estate of deceased person according to the law of insolvency, or

in the event of a winding up order being made or a resolution for a voluntary

winding-up being passed with respect to any company or of a receiver or manager of

the companys business or undertaking being duly appointed or of possession being

taken by or on behalf of the holders of any debentures secured by a floating charge on

any property comprised in or subject to the charge, it shall be the duty of the

insolvent debtor, personal representative of the deceased debtor or company, as the

case may be, or the official assignee or receiver in insolvency, trustee, liquidator,

receiver or manager, or person in possession of the property to give at the request of

any person claiming that the insolvent debtor, deceased debtor or company is under

such liability to him as is covered by the provisions of this Chapter, such information

as may reasonably be required by him for the purpose of

ascertaining whether any rights have been transferred to and vested in him by section

150, and for the purpose of enforcing such rights, if any; and any such contract ofinsurance as purports whether directly or indirectly to avoid the contract or to alter

the rights of the parties thereunder upon the giving of such information in the events

aforesaid, or otherwise to prohibit or prevent the giving thereof in the said events,

shall be of no effect."
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(3) If, from the information given to any person in pursuance of sub-section (2) or

otherwise, he has reasonable ground for supporting that there have or may have been

transferred to him under this Chapter rights against any particular insurer, that insurer

shall be subject to the same duty as is imposed by the said sub-section on the persons

therein mentioned. tc "(3) If, from the information given to any person in pursuance

of sub-section (2) or otherwise, he has reasonable ground for supporting that there

have or may have been transferred to him under this Chapter rights against anyparticular insurer, that insurer shall be subject to the same duty as is imposed by the

said sub-section on the persons therein mentioned."

(4) The duty to give the information imposed by this section shall include a duty to

allow all contracts of insurance, receipts for premiums, and other relevant documents

in the possession or power of the person on whom the duty is so imposed to be

inspected and copies thereof to be taken. tc "(4) The duty to give the information

imposed by this section shall include a duty to allow all contracts of insurance,

receipts for premiums, and other relevant documents in the possession or power ofthe person on whom the duty is so imposed to be inspected and copies thereof to be

taken."

152. Settlement between insurers and insured persons.

(1)No settlement made by an insurer in respect of any claim which might be made by

a third party in respect of any liability of the nature referred to in clause (b) of sub-

section (1) of section 147 shall be valid unless such third party is a party to the

settlement. 152. Settlement between insurers and insured persons.(1) No settlement

made by an insurer in respect of any claim which might be made by a third party in

respect of any liability of the nature referred to in clause (b) of sub-section (1) of

section 147 shall be valid unless such third party is a party to the settlement."

(2) Where a person who is insured under a policy issued for the purposes of this

Chapter has become insolvent, or where, if such insured person is a company, a

winding- up order has been made or a resolution for a voluntary winding-up has been

passed with respect to the company, no agreement made between the insurer and the

insured person after the liability has been incurred to a third party and after the

commencement of the insolvency or winding-up, as the case may be, nor any waiver,

assignment or other disposition made by or payment made to the insuredperson after the commencement aforesaid shall be effective to defeat the rights

transferred to the third party under this Chapter, but those rights shall be the same as

if no such agreement, waiver, assignment or disposition or payment has been made.

(2) Where a person who is insured under a policy issued for the purposes of this

Chapter has become insolvent, or where, if such insured person is a company, a


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winding- up order has been made or a resolution for a voluntary winding-up has been

passed with respect to the company, no agreement made between the insurer and the

insured person after the liability has been incurred to a third party and after the

commencement of the insolvency or winding-up, as the case may be, nor any waiver,

assignment or other disposition made by or payment made to the insured person after

the commencement aforesaid shall be effective to defeat the rights transferred to the

third party under this Chapter, but those rights shall be the same as if no suchagreement, waiver, assignment or disposition or payment has been made."

153. Saving in respect of sections 150, 151 and 152.

(1) For the purposes of sections 150, 151 and 152 a reference to liabilities to third

parties in relation to a person insured underany policy of insurance shall not include

a reference to any liability of that person in the capacity of insurer under some other

policy of insurance. 153. Saving in respect of sections 150, 151 and 152.(1) For the

purposes of sections 150, 151 and 152 a reference to liabilities to third parties in

relation to a person insured under any policy of insurance shall not include areference to any liability of that person in the capacity of insurer under some other

policy of insurance."

(2) The provisions of sections 150, 151, and 152 shall not apply where a company is

wound-up voluntarily merely for the purposes of reconstruction or of an

amalgamation with another company. (2) The provisions of sections 150, 151, and

152 shall not apply where a company is wound-up voluntarily merely for the

purposes of reconstruction or of an amalgamation with another company."

154.Insolvency of insured persons not to affect liability of insured or claims by

third parties.Where a certificate of insurance has been issued to the person by

whom a policy has been effected, the happening in relation to any person insured by

the policy of any such event as is mentioned in sub-section

(1) or sub-section (2) of section 150 shall, notwithstanding anything contained in this

Chapter, not affect any liability of that person of the nature referred to in clause (b) of

sub-section (1) of section 147; but nothing in this section shall affect any rights

against the insurer conferred under the provisions of sections 150, 151 and 152 on the

person to whom the liability was incurred. 154. Insolvency of insured persons not to

affect liability of insured or claims by third parties.Where a certificate of insurancehas been issued to the person by whom a policy has been effected, the happening in

relation to any person insured by the policy of any such event as is mentioned in sub-

section (1) or sub-section (2) of section 150 shall, notwithstanding anything

contained in this Chapter, not affect any liability of that person of the nature referred

to in clause (b) of sub-section (1) of section 147; but nothing in this section shall
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affect any rights against the insurer conferred under the provisions of sections 150,

151 and 152 on the person to whom the liability was incurred."

155. Effect of death on certain causes of action.Notwithstanding anything

contained in section 306 of the Indian Succession Act, 1925 (39 of 1925), the deathof a person in whose favour a certificate of insurance had been issued, if it occurs

after the happening of an event which has given rise to a claim under the provisionsof this Chapter, shall not be a bar to the survival of any cause of action arising out of

the said event against his estate or against the insurer. 155. Effect of death on certaincauses of action.Notwithstanding anything contained in section 306 of the Indian

Succession Act, 1925 (39 of 1925), the death of a person in whose favour a certificateof insurance had been issued, if it occurs after the happening of an event which has

given rise to a claim under the provisions of this Chapter, shall not be a bar to the

survival of any cause of action arising out of the said event against his estate or

against the insurer."156. Effect of certificate of insurance.When an insurer has issued a certificate of

insurance in respect of a contract of insurance between the insurer and the insured

person, then(a) if and so long as the policy described in the certificate has not been issued by the

insurer to the insured, the insurer shall, as between himself and any other person

except the insured, be deemed to have issued to the insured person a policy of

insurance conforming in all respects with the description and particulars stated in

such certificate; and

(b) if the insurer has issued to the insured the policy described in the certificate, but

the actual terms of the policy are less favourable to persons claiming under or by

virtue of the policy against the insurer either directly or through the insured than theparticulars of the policy as stated in the certificate, the policy shall, as between the

insurer and any other person except the insured, be deemed to be in terms conforming

in all respects with the particulars stated in the said certificate.

157. Transfer of certificate of insurance.

(1) Where a person in whose favour the certificate of insurance has been issued in

accordance with the provisions of this Chapter transfers to another person the

ownership of the motor vehicle in respect of which such insurance was taken together

with the policy of insurance relating thereto, the certificate of insurance and the

policy described in the certificate shall be deemed to have been transferred in favour

of the person to whom the motor vehicle is transferred with effect from the date of its

transfer. [Explanation.For the removal of doubts, it is hereby declared that such

deemed transfer shall include transfer of rights and liabilities of the said certificate of

insurance and policy of insurance.]"


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(2) The transferee shall apply within fourteen days from the date of transfer in the

prescribed form to the insurer for making necessary changes in regard to the fact of

transfer in the certificate of insurance and the policy described in the certificate in his

favour and the insurer shall make the necessary changes in the certificate and the

policy of insurance in regard to the transfer of insurance. (2) The transferee shall

apply within fourteen days from the date of transfer in the prescribed form to the

insurer for making necessary changes in regard to the fact of transfer in the certificateof insurance and the policy described in the certificate in his favour and the insurer

shall make the necessary changes in the certificate and the policy of insurance in

regard to the transfer of insurance."

158. Production of certain certificates, licence and permit in certain cases.

(1) Any person driving a motor vehicle in any public place shall, on being so required

by a police officer in uniform authorised in this behalf by the State Government,

produce

(a) the certificate of insurance;(b) the certificate of registration;

(c) the driving licence; and

(d) in the case of a transport vehicle, also the certificate of fitness referred to in

section 56 and the permit, relating to the use of the vehicle.

(2) If, where owing to the presence of a motor vehicle in a public place an accident

occurs involving death or bodily injury to another person, the driver of the vehicle

does not at the time produce the certificates, driving licence and permit referred to in

sub-section (1) to a police officer, he shall produce the said certificates, licence and

permit at the police station at which he makes the report required by section 134.

(3)No person shall be liable to conviction under sub-section (1) or sub-section (2) by

reason only of the failure to produce the certificate of insurance if, within seven days

from the date on which its production was required under sub-section (1), or as the

case may be, from the date of occurrence of the accident, he produces the certificate

at such police station as may have been specified by him to the police officer who

required its production or, as the case may be, to the police officer at the site of the

accident or to the officer-in-charge of the police station at which he reported the

accident: (3) No person shall be liable to conviction under sub-section (1) or sub-section (2) by reason only of the failure to produce the certificate of insurance if,

within seven days from the date on which its production was required under sub-

section (1), or as the case may be, from the date of occurrence of the accident, he

produces the certificate at such police station as may have been specified by him to

the police officer who required its production or, as the case may be, to the police
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officer at the site of the accident or to the officer-in-charge of the police station at

which he reported the accident\:" Provided that except to such extent and with such

modifications as may be prescribed, the provisions of this sub-section shall not apply

to the driver of a transport vehicle. Provided that except to such extent and with such

modifications as may be prescribed, the provisions of this sub-section shall not apply

to the driver of a transport vehicle."

(4) The owner of a motor vehicle shall give such information as he may be requiredby or on behalf of a police officer empowered in this behalf by the State Government

to give for the purpose of determining whether the vehicle was or was not being

driven in contravention of section 146 and on any occasion when the driver was

required under this section to produce his certificate of insurance."

(5) In this section, the expression produce his certificate of insurance means

produce for examination the relevant certificate of insurance or such other evidence

as may be prescribed that the vehicle was not being driven in contravention of section

146.(6) As soon as any information regarding any accident involving death or bodily

injury to any person is recorded or report under this section is completed by a police

officer, the officer incharge of the police station shall forward a copy of the same

within thirty days from the date of recording of information or, as the case may be, on

completion of such report to the Claims Tribunal having jurisdiction and a copy

thereof to the concerned insurer, and where a copy is made available to the owner, he

shall also within thirty days of receipt of such report, forward the same to such

Claims Tribunal and Insurer.

159. Production of certificate of Insurance on application for authority to use

vehicle.A State Government may make rules requiring the owner of any motor

vehicle when applying whether by payment of a tax or otherwise for authority to use

the vehicle in a public place to produce such evidence as may be prescribed by those

rules to the effect that either

(a) on the date when the authority to use the vehicle comes into operation there will

be in force the necessary policy of insurance in relation to the use of the vehicle by

the applicant or by other persons on his order or with his permission, or(b) the vehicle is a vehicle to which section 146 does not apply.


27/27

Questions

Q.1 Define Motor Vehicle.

Q.2 Define Driver

Q.3 Define word use in motor vehicle insurance.

Q.4 DiscussaboutPerson Governed

Q.5 What are the elements of Section 109 of Motor Vehicle Act, 1988?

Q.6 What are the scopes of the Motor Vehicle Act, 1938?

Q.7 Define Certificate of Insurance.

Q.8 Explain effect of insolvency on claim.

Q.9 Explain effect of Death on claim.

Q.10 Explain the provisions given for Certificate of insurance in the

Motor Vehicle Act, 1938.

Q.11 Describe power to make rules under Motor Vehicle Act, 1988 by

Central Government and State Government.

Q12 What is motor accident insurance?

Q 13 Explain types of the motor accident insurance .

Date post:	26-Feb-2018
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