• Buying hypothecated car

I am planning to buy a second hand car from the dealer.

The car was originally purchased by first owner in January 2016 under loan from SBI.
The owner cleared the loan and received the NOC from the bank on April 2017.
The hypothecation is not yet removed from the RC and the first year insurance expired on January 2017 which has not yet been renewed.

The car is with dealer now and he is trying to sell me the car whose insurance was expired 5 months ago and is still hypothecated.

I have learnt over the internet that this will create lot of problem (ex. Claiming insurance in case of theft or accident) during the the first few weeks by the time i receive RC on my name.

I have paid an advance payment of half the amount. Now i am not willing to go ahead with such a vehicle and want to get my payment back. The dealer said that there will be no problem whatsoever but if i can prove him that there will be issues and there are some legal problems then he will give the payment back.

My concern is why to stuck money in a car whose insurance is expired and is still hypothecated.
Asked 7 years ago in Property Law
Religion: Hindu

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3 Answers

When a case was lodged due to an accident, which happened after the expiration of insurance, then the owner of the vehicle alone is liable to pay the compensation.

When the name of you come in the RC book, from that date on wards you become the owner of the vehicle and you should liable from that date.

If you are interested to purchase the vehicle then you can. When you change the ownership of the vehicle, then you will take insurance in your name. For changing the name submit your address proof, transfer form and NOC from bank.

Please note that no second hand car buyer will buy a non-insured car so as a owner its dealer (present seller )responsibility to get it insured first .With no insurance there cannot be a transfer at the RTO.

Ajay N S
Advocate, Ernakulam
4087 Answers
112 Consultations

1) you are absolutely correct

2) ask the dealer to have the hypothecation from RC book removed as loan has been repaid

3)ask the dealer to get the insurance of car renwed then only will you purchase the car

Ajay Sethi
Advocate, Mumbai
96769 Answers
7805 Consultations

It is your fault to buy a vehicle without enquiring the details properly about the vehicle to be bought.

Without hypothecation clearance the vehicle will not belong to the seller, it is still a property of the financier to whom the vehicle is hypothecated.

Without insurance updated, no claim can be made if there was an accident or anything that is involved with the vehicle.

You may better ask for refund of your advance amount and ask the dealer to clear these impediments and then to approach you for selling this vehicle to you.

T Kalaiselvan
Advocate, Vellore
86968 Answers
2334 Consultations

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