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The Motor Vehicles Act is silent on vehicle intermediaries

Legal Correspondent: Mansi Tekam


30th September 2021: The pre-owned vehicles industry has observed an increase in the sale of used cars in the Covid-19 aftermath, which poses a risk to persons involved in selling pre-owned cars. As a result, consumers have demanded that an amendment under Motor Vehicles Act be enacted governing the temporary ownership of automobiles by intermediaries. According to the research reports published by consumer-centric interest organization Consumer Voice and public policy firm Chase India, a final online or offline agreement between an intermediary who buys pre-owned vehicles isn't completed until a final purchaser or buyer is found. The title of the ownership and related legal liabilities of the pre-owned vehicle vests with the seller while the possession of unsold used vehicles remains with the dealer or broker for a long duration in such situations. At present, this poses security risks for consumers as there are no regulatory provisions that define 'motor vehicle intermediaries' (MVI) under the existing legislation. It is known that in countries such as England, Australia, New Zealand, and Singapore, the practice of transferring the temporary ownership to intermediaries exist, which further calls for the attention of the Ministry of Road Transport and Highways to define intermediaries and give them temporary ownership of used cars under the Motor Vehicles Act.


The existing legislation, which governs the sale, purchase, and registration of motor vehicles, has been unable to keep up with market trends, particularly concerning the role of intermediaries. The law remains unclear on these growing market activities in the pre-owned car industry, putting the consumer in danger until the registration is transferred to the final owner. The reports published by the experts stipulated the potential growth in the pre-owned vehicle industry, and the insertion of the much-needed provision will result in proper organization of this sector, thus contributing towards foreign direct investment, employment, generation of tax, and empowerment of the consumer. The report made various suggestions that included providing a legal definition of MVI by adding a statutory provision on temporary registration, which further entails accountability on MVI if the unsold pre-owned vehicles are used for any illegal practice. The amended definition of MVI will define an intermediary as a dealer or trader who facilitates transactions between buyers and sellers in context to the sale and purchase of a pre-owned/registered motor vehicle. Under the existing law, a pre-owned vehicle is handled by multiple actors for various reasons before it is finally handed over and registered in the name of the final buyer. Every transfer of ownership depreciates the cost of the vehicle creating a general disincentive for multiple transfers in the pre-owned vehicle industry. No existing laws require the dealer to register the vehicle until he finds a genuine buyer. The report made suggestions regarding this issue by ensuring that intermediaries, buyers, and sellers are all required to ensure transfer of registration within a stipulated time. It further suggested amendments to section 43 of the Act, which only allows owners to apply for temporary registration of vehicles; however, the provision should also apply to intermediaries. The report also calls all the relevant stakeholders of the pre-owned vehicle industry players and actors for a collaborative approach to expand and explore the sector's potential growth.


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