Bombay High Court Clarifies Bank’s Non-Liability for Motor Accident Compensation in Hypothecated Vehicle Case

LI Network

Published on: January 18, 2024 at 11:52 IST

The Bombay High Court has clarified that the mere hypothecation of a vehicle to a bank does not transfer the responsibility of paying motor accident compensation to the bank.

The Court’s decision came in response to an appellant’s argument that the Motor Accident Claims Tribunal overlooked the fact that the involved motorcycle was hypothecated with the bank, making it the bank’s duty to obtain insurance for the vehicle. The appellant claimed that the lack of insurance relieved them of the compensation liability.

A Single Bench, presided over by Justice Shivkumar Dige, observed that the owner of the vehicle was obligated to procure insurance, and the accident occurred due to the appellant’s negligence. As a result, the bank could not be held solely liable for compensation based on the hypothecation.

The Court noted that despite the hypothecation, no agreement specifying insurance terms with the bank was presented on record.

Therefore, the Court emphasized that the absence of such an agreement meant that the liability for compensation remained with the vehicle owner, who was obligated to secure insurance.

The case, titled Shrikant Annappa Shinde & Anr v. Khiraling Basavannappa Shingshetty & Ors., saw the High Court dismissing the appeal, reinforcing the principle that the bank’s involvement in the hypothecation alone does not make it liable for motor accident compensation.

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