Sold Your Car? You're Still Liable...

A vehicle seller remains legally liable for any accident until the RTO officially updates the registration certificate, even if the vehicle was sold earlier.

The Himachal Pradesh high court recently ruled that a vehicle's registered owner remains legally responsible for any accident until its ownership is officially transferred, even if the vehicle was sold earlier.

The case

In 2016, a car registered in the name of Boby Chauhan rolled down a ravine in Himachal Pradesh, killing three people.

Chauhan claimed he had sold the car to the driver, Gian Chand, before the accident. However, the HP high court held that under Section 50 of the Motor Vehicles Act, 1988, the ownership had not been officially transferred as the required intimation of transfer had not been made.

Under the Motor Vehicles Act, 1988, liability for accidents is based on statutory ownership.

"Section 2(30) defines the 'owner' as the person in whose name the vehicle is registered. Under Section 50, transfer of ownership takes effect only when duly intimated and endorsed by the registering authority," says Amit Kumar Nag, partner, Aquilaw.

Ownership transfer process

The seller must submit Form 29 to the regional transport office (RTO), along with buyer details, sale proof, copy of RC, insurance and PUC (pollution under control).

Reporting of vehicle transfer must be done within 14 days of the transaction (45 days in case of inter-state transfers). The seller should then provide a copy of the intimation of transfer to the buyer.

"The buyer must then apply for transfer within 30 days to the RTO of residence, submitting Form 30, the RC, transfer report, and prescribed fee. After verification, the RTO updates the RC with the new owner's name," says Shankey Agrawal, partner, BMR Legal. Transfer is complete only after the RTO updates the RC.

Mistakes to avoid

Many sellers assume that signing a sale agreement or handing over possession ends their liability. "But ownership continues until the RTO is formally notified within 14 days and the transfer is endorsed in the RC," says Nag.

"Others skip obtaining an RTO-stamped acknowledgement or neglect updating the insurance policy in the buyer's name. Often, sellers keep only photocopies or delivery notes without official proof of transfer," says Agrawal.

To limit liability, sellers must ensure that Forms 29 and 30 are submitted. "All pending dues should be cleared, an NOC obtained, and copies of the notarised sale agreement and related correspondence retained. The vehicle should not be handed over until the RTO acknowledges the transfer," says Mayank Arora, partner, Chambers of Bharat Chugh.

When selling through a dealer

Selling a vehicle through a dealer does not absolve the seller of responsibility.

"The seller must ensure timely submission of Form 29C, which, once acknowledged, makes the dealer the 'deemed owner' responsible for any accidents or legal issues during custody," says Arora.

The seller should monitor the transfer status on the Parivahan portal. If ownership records are not updated within 30 days, the seller must escalate the matter with the RTO or consumer forum.

If a legal notice arrives

The seller's liability continues until formal intimation of transfer to the RTO.

"If an accident or notice arises before transfer of registration, the seller should promptly inform the police, RTO, and the insurer in writing, enclosing the sale documents. Legal remedies include issuing a notice to the buyer or dealer and, if necessary, filing a declaration suit," says Gaurav Singh Gaur, managing associate, King Stubb & Kasiva, Advocates and Attorneys.

"The seller must ensure the vehicle remains insured until the new RC is issued, as reinforced in the Kamli vs Boby Chauhan case, where the insurer was held liable since the vehicle was insured at the time," says Arora.

Preventive measures depend on the seller's due diligence. "The most effective safeguard is to not hand over possession of the vehicle until all transfer formalities are fully completed," says Arora.

Feature Presentation: Rajesh Alva/Rediff