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Second Hand Car Dealers Deemed Owners of Vehicles- India

November 9, 2022
Pollution by vehicle

With a view to bring transparency and accountability in sale-purchase of vehicles, the Ministry of Road Transport and Highways (the “Ministry”) on September 14, 2022 has notified the Central Motor Vehicles (Fifteenth Amendment) Rules, 2022[1] (hereinafter referred to as “Amendment Rules”). The Amended Rules require pre-owned vehicle dealers to obtain “authorization” from the concerned State Transport Department in order to deal in resale of vehicles.

The Amended Rules provides that such authorized dealers will be the “deemed owners” of the vehicles which they have in their possession, until the vehicle is sold/ transferred to a new owner.

The Amendment Rules have come into force from November 1, 2022.

Central Motor Vehicles (Fifteenth Amendment) Rules, 2022

The problem which persisted prior to these Amended Rules was that there existed no law which imposed liability on the vehicle dealers if any accident occurred while the vehicle was in their possession.

Hence, earlier, in case if any accident occurred while the vehicle was in the possession of the dealer, the actual owner was held responsible for all acts/ omissions done by the dealer of vehicle as the vehicle was registered in the vehicle owner’s name.

Therefore, to remedy the situation, the Amendment Rules have been passed with an objective of shielding the actual owners from legal troubles, in the event of any untoward incidence involving the automobiles while they are in the dealers’ custody.

Proposed amendments to the Central Motor Vehicle Rules, 1989

As per the Amended Rules, any dealer operating business online i.e. an online marketplace for used cars like OLX, Cars24 etc. or offline is mandatorily required to obtain necessary authorization for his/ her business in order to deal in resale of vehicles.

Further, authorized dealers after obtaining necessary authorization for business are required to fulfil the following mandatory conditions:

  1. Except for test drives for prospective purchasers, maintenance, and painting, the authorised dealer of the vehicles will not use them on public roads.
  2. The authorised dealer must also keep track of the details in a register for each vehicle they have in their possession.
  3. The vehicle will be transferred in the name of the new owner following the final resale.

Additionally, as soon as the vehicle is given to the authorized dealer, the vehicle owner will need to electronically notify the registering authority (RTO). It may submit applications for ownership transfer, duplicate RCs and NOCs, and fitness certificate.

Impact

This reform will positively impact a large number of vehicle owners, who will now be safeguarded against any accident taking place while the vehicle is in possession of the dealer.

This step will significantly boost confidence among both used car buyers and dealers. With this move, it will be easier to deal with recurring problems such as late ownership transfers, incomplete or fake documentation, and improperly issued traffic challans. The end effect should be increased trust in second-hand transactions, which might expand the nation’s market for used cars.

[1] https://morth.nic.in/sites/default/files/notifications_document/GSR%20703(E)%20dt%2014%20September%202022%20for%20Trade%20Certificate.pdf

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