Trapped in the registry: Unfair liability of registered owners under the Motor Vehicles Act

It was a call from a well-respected judge of the Madras High Court that triggered this piece.

He was anxious that a close relation of his was informed ‘out of the blue’ by a good friend that though he had sold his vehicle in January 2024 and had legally sustainable documents to prove the sale, since he verified and found from the registry records the seller’s name alone continued, it may be advisable for the seller to approach the buyer and get the registry records transferred immediately lest an unfortunate accident occurred and liability was fastened on the seller as ‘registered owner’ as the law stood today.

The learned judge called up to verify/confirm whether it was so and if so, what was the solution for his seller relation. One informed that there was literally no ‘solution’ in law as it stood today for the seller and his only recourse/salvation may be to ‘beg, borrow or steal’ or its equivalents to get the registry records altered, whether the original purchaser was now the owner or if the vehicle had passed multiple hands. Law is truly an ass if it can kick a legitimate seller of a motor vehicle even when he complies with all legal requirements.

Now, contextually, read on to protect your interest as an owner of a vehicle who has sold it or intends to sell it.

The sale of a motor vehicle in India is a transaction governed by the Sale of Goods Act, 1930. Upon payment of price and delivery of possession, ownership is transferred between parties as in any other movable property. Under the Motor Vehicles Act, 1939, this understanding was respected. Section 2(19) defined “owner” to mean the person in possession of the vehicle, aligning civil liability with the commercial reality of sale and transfer.

The Motor Vehicles Act, 1988 radically altered this position. Section 2(30) now defines “owner” as the person in whose name the motor vehicle stands registered with the registering authority. This statutory change superimposes registration over possession, creating consequences that continue to trouble sellers of motor vehicles long after they part with control and ownership in the commercial sense.

The Supreme Court in Rikhi Ram v. Sukhrania (2003) crystallised this position. It held that where a vehicle has been sold and possession delivered, yet the registration remains in the seller’s name, the seller continues to be treated as the “owner” for the purposes of liability towards third-party victims of road accidents.

The Court reasoned that the statutory definition in Section 2(30) leaves no scope for recognising the purchaser as an owner unless and until the registration certificate is formally transferred. Accordingly, even where the vehicle is insured, the insurer may satisfy third-party claims, but retains the liberty to recover the amounts from the registered owner.

This legal fiction works harshly in practice. A seller who has:

• executed a valid sale document,

• received the consideration,

• delivered possession of the vehicle, and

• even notified the Regional Transport Office (RTO),

remains exposed to liability until the purchaser takes steps to transfer the registration. If the purchaser defaults, or if subsequent transfers occur without proper registration, the original seller’s liability persists.

Such liability can extend for years, sometimes over a decade, long after the seller has ceased to have any connection with the vehicle. The injustice is compounded by the fact that the seller has no control over insurance renewal, fitness certification, or the vehicle’s use. Yet, he remains vicariously liable for third-party accidents.

The problem lies not in judicial interpretation but in the legislative design of Section 2(30). By attaching ownership solely to registration, the law penalises innocent sellers for the purchaser’s failure to comply with statutory obligations. This creates three adverse consequences:

1. Perpetual liability – Registered owners remain indefinitely liable despite divestment of possession.

2. Misallocation of risk – Liability attaches to those without control over the vehicle.

3. Discouragement of genuine sale – Risk of long-term liability deters lawful transactions, especially among individuals and small traders.

The injustice identified in Rikhi Ram is systemic. Legislative reform is necessary to provide that once a seller demonstrates valid sale, delivery of possession and notice to the RTO, his liability stands discharged notwithstanding delay in registration transfer.

Alternatively, constitutional courts may invoke principles of fairness under Article 14 to protect sellers from arbitrary liability. The RTO, as a public authority, should bear a statutory duty to update records promptly upon notice, preventing the perpetuation of outdated ownership entries.

The transition from Section 2(19) of the 1939 Act to Section 2(30) of the 1988 Act has created a disjunction between legal and commercial ownership. The decision in Rikhi Ram underscores how registered owners, even after lawful sale, remain exposed to claims for no fault of theirs. Unless Parliament amends the law or courts intervene to harmonise fairness with statutory text, the registry will continue to trap innocent sellers in liabilities that properly belong to others.

Narasimhan Vijayaraghavan is a practicing advocate in the Madras High Court.