In G. GOVINDAN v. NEW INDIA ASSURANCE CO. LTD., the Supreme Court has preferred the ratio laid down by Andhra Pradesh High Court and quoted with approval following observations made in the case of MADINENI KONDAIAH v. YASEEN FATIMA, AIR 1986 A.P. 62  and held the view taken by this Court in the case of NATIONAL INSURANCE CO.LTD. v. MALLIKARJUN AND ORS  I (1991) ACC 414(Kar)  as not correct:-

"It is incorrect to assume that the moment the title of the vehicle passes to the transferee the statutory obligation under Section 94 ceases and the original owner is no longer guilty of causing or allowing the purchaser to use the vehicle. The question is when does the statutory liability cease? The mere passing of title in the vehicle to the transferee will not put an end to this liability. For this purpose we must examine two more provisions of the Act. Under Section 31 the transferor shall within 14 days of the transfer report the fact of transfer to the registering authority within whose jurisdiction the transfer is to be effected and shall simultaneously send a copy of the said report to the transferee and within forty-five days of the transfer forward to the registering authority no objection certificate obtained by him under Section 29-A. Section 29-A contemplates issuing of no objection certificate both on the occasion of assignment of a new registration mark and also while transferring the motor vehicle. The registering authority is enjoined to issue a certificate within a period of thirty days and if no orders are passed the registering authority shall be deemed to have granted the no objection certificate. The failure to comply with Section 31 is made punishable under Section 112. However, as an alternative measure it also provided under Section 31(1-A) that if the transferor or transferee fails to comply with the requirements of Section 31 they have to pay a fine of Rs. 100 or the prescribed amount considering the period of delay on their part by way of penalty. It is pertinent to note that Section 31 was amended by Act 100 of 1956. Under Section 31 as it stood prior to this amendment in 1956 only the transferee was required to report the transfer of the ownership and was expected to forward a certificate of registration to the registering authority within thirty days of the transfer. Prior to this amendment there was no statutory obligation on the transferor as is now provided in sub-Clause (a) of Sub-section (1) of Section 31 to notify the transfer to the registering authority within whose jurisdiction the transfer is effected. Thus we see till the transferor fulfils the statutory obligation under Section 31 his liability continues. Further he is the ostensible owner of the vehicle so long the registration is not changed."

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"The registration of the vehicle in the name of the transferee is not necessary to pass title in the vehicle. Payment of price and delivery of the vehicle makes the transaction complete and the title will pass to the purchaser. When the policy of insurance obtained by the original owner of the vehicle is a composite one covering the risks for his person, property (vehicle) and the third party claim, on passing of title the transferee cannot enforce his claim in respect of any loss or damage to his person and vehicle unless there is a novation. So far the third-party risk is concerned the proprietary interest in the vehicle is not necessary and the public liability continues till the transferor discharges the statutory obligation under Sections 29-A and 31 read with Section 94 of the Act. Till he complies with the requirement of Section 31 of the Act the public liability will not cease and that constitutes the insurable interest to keep the policy alive in respect of the third-party risks are concerned. It must be deemed that the transferor allowed the purchaser to use the vehicle in a public place in the said transitional period and accordingly till the compliance of Section 31, the liability of the transferor subsists and the policy is in operation so far it relates to the third-party risks. We answer the second question accordingly."
(Mahabala vs Satyanarayana And Ors. 2004 ACJ 850, ILR 2004 KAR 375)