CASE NAME	Rajasthan State Road Transport vs Kailash Nath Kothari & Ors.
CITATION	1997 (7) SCC 481, 1997 AIR SCW 3531
COURT	Supreme Court of India
Bench	K. Venkataswami
Date of Decision	3 September, 1997

INTRODUCTION

The Rajasthan State Road Transport Corporation v. Kailash Nath Kothari & Ors. (1997) case raises an important legal issue about a state transport corporation’s liability in collisions involving privately owned but rented vehicles. The lawsuit started on July 17, 1981, when 23 people died after floodwaters carried away a bus that was rented by the Rajasthan State Road Transport Corporation (RSRTC). The main point of disagreement was whether the RSRTC, the bus’s employer, could be held vicariously accountable for the driver’s carelessness as an employee of the private owner. Both the Rajasthan High Court and the Motor Accidents Claims Tribunal found RSRTC accountable, which resulted in the corporation’s appeal before the Supreme Court.

The Supreme Court considered important legal concepts in reaching its decision, such as the Motor Vehicles Act’s definition of “owner,” vicarious liability, and the conditions of the employment contract. In the end, the Court maintained RSRTC’s accountability, highlighting the fact that in these situations, actual possession and control of the vehicle establish culpability. This ruling impacted the legal environment for culpability in public transportation accidents by reaffirming the responsibility of transportation companies when they use private vehicles in their operations.

FACTS

On July 17, 1981, a bus hired by the Rajasthan State Road Transport Corporation (RSRTC) from its private owner, Shri Sanjay Kumar, was plying on the Kekri to Jaipur route. Despite heavy rainfall and warnings from passengers, the driver, Gopal, attempted to drive the bus over a flooded bridge at Renwal. The bus was swept away by the strong currents of the Bandi River, resulting in the tragic deaths of 23 passengers. The legal representatives of the deceased filed multiple claim petitions under Section 110-A of the Motor Vehicles Act, 1939, seeking compensation from RSRTC and the insurance company. The RSRTC denied liability, arguing that the driver was an employee of the private owner and that it could not be held responsible as a mere hirer of the vehicle. On the other hand, the insurance company contended that the bus was under RSRTC’s control at the time of the accident, thereby shifting liability to the corporation.

The Motor Accidents Claims Tribunal (MACT) ruled in favor of the claimants, holding that the driver’s negligence led to the accident and that RSRTC was vicariously liable as it had control over the vehicle. The tribunal also determined that a clause in the hiring agreement, which sought to shift liability to the private owner, was against public policy and could not absolve RSRTC of its responsibility. The High Court of Rajasthan upheld the tribunal’s decision, rejecting RSRTC’s argument that its role as a hirer shielded it from liability. The RSRTC then appealed to the Supreme Court, which had to decide whether a state transport corporation, as the hirer of a privately owned bus, could be held accountable for the negligence of a driver employed by the owner.

ISSUES

The key issue in this case was whether the Rajasthan State Road Transport Corporation (RSRTC), as the hirer of a privately owned bus, could be held vicariously liable for the negligence of the driver, who was an employee of the vehicle’s owner.

ARGUMENTS FROM BOTH SIDES 

Since it was only the bus’s hirer and not its owner, the Rajasthan State Road Transport Corporation (RSRTC) contended that it was not responsible for the carelessness of the driver, who worked for the private owner, Shri Sanjay Kumar. RSRTC cited Condition No. 15 of the employment contract, which clearly held the owner accountable for mishaps. It further argued that it had no vicarious culpability for the driver’s actions because he was not employed by it. Furthermore, the corporation argued that the private owner or the insurance company should bear responsibility, although the insurance policy’s coverage was only ₹75,000.

Conversely, the claimants and the insurance company argued that the RSRTC had complete control over the bus, including its operations and route, as it was running under a permit issued in RSRTC’s name. The bus conductor, an RSRTC employee, collected fares from passengers, creating a contractual relationship between RSRTC and the travelers. The claimants contended that, in such circumstances, RSRTC was effectively the “owner” for liability purposes and could not evade responsibility under the guise of a hiring arrangement. The insurance company further emphasized that since the vehicle was under RSRTC’s operational control, it was the corporation’s duty to compensate the victims’ families.

DECISION

The Supreme Court ruled that RSRTC was vicariously liable for the accident, upholding the rulings of the Rajasthan High Court and the Motor Accidents Claims Tribunal. Even though the bus was privately held, the Court reasoned that RSRTC actually controlled and owned it, had the authority to run it, collected fares via its conductor, and oversaw its operations. Therefore, even though the driver was officially working for the private owner, RSRTC was nonetheless liable for his carelessness.

Additionally, the Court dismissed RSRTC’s reliance on a contractual term that transferred accountability to the owner, ruling that it was against public policy and did not release the corporation from its legal obligations. The Supreme Court stressed that RSRTC was responsible for the safety of the passengers because they had a contractual arrangement with the company and not the individual owner. Consequently, the Court maintained the compensation granted to the victims’ families and denied RSRTC’s appeal.

ANALYSIS

In order to determine RSRTC’s liability, the Supreme Court looked at how much control it had over the rental car. Although the bus belonged to a private party, it was using a permit issued by RSRTC, and the passengers had paid fares to an RSRTC conductor. Additionally, even if the driver worked for the private owner, they were still required to obey RSRTC employees’ directions. The Court concluded that RSRTC served as the “owner” for the purposes of responsibility, emphasizing that possession and control are just as important factors in determining liability as ownership.

Additionally, the Court dismissed RSRTC’s reliance on a contractual provision that attempted to transfer accountability to the private owner, concluding that it was against public policy. It confirmed that when a transport company takes operational control of a vehicle, it cannot avoid liability. The Supreme Court upheld the Tribunal’s and the High Court’s decisions, reinforcing the idea that public transportation organizations that use private vehicles—even if the driver is not an employee—are accountable for the safety of their passengers.