Car Sale Liability and RC Transfer Delays: What Every Car Seller Should Know

Car Sale Liability: The Hidden Risks When Selling Your Car to Online Dealers

Consumers increasingly prefer online platforms to sell their used vehicles. Many choose quick-sale services offered by known brands such as Cars24 or Spinny for convenience. These platforms provide instant valuation, doorstep inspection, and fast payment. However, beneath this smooth customer experience lies a significant legal blind spot: car sale liability during the ownership transition period. Most sellers remain unaware that they retain legal responsibility for the vehicle long after handing over the keys and unfortunately, the dealers do not tell about this aspect.

The Legal Reality Behind Quick Car Sales

Under the Motor Vehicles Act, 1988, the person listed as the registered owner continues to be legally liable for the vehicle until the Regional Transport Office (RTO) officially records the change of ownership. A seller may hand over possession, receive payment, and sign multiple forms. However, the law recognises only the name printed on the Registration Certificate (RC).

Therefore, the seller remains responsible for:

Third-party accident claims
Traffic violations and pending e-challans
Criminal misuse of the vehicle
Insurance liability gaps
Road tax and statutory dues

The Supreme Court of India has repeatedly emphasised this point. In its ruling in Naveen Kumar v. Vijay Kumar (2018), the Court held that liability cannot be shifted merely through a private agreement. Therefore, the person whose name remains on the RC carries legal responsibility.

The Transition Period: A High-Risk Window for the Seller

Online resale platforms normally take full possession of the car immediately upon payment. They also collect the seller’s original RC book, insurance papers, and completed transfer forms. Although they process the transfer with the RTO, the timeline may stretch between 120 and 180 days. Sometimes it extends further due to administrative delays, Party Peshi requirements, backlog, or technical issues.

During this period, the car is often driven by staff, transported to yards, refurbished, test-driven, or even shown to potential buyers. As a result, the vehicle may be involved in traffic violations or more serious incidents.

Since the RC remains unchanged, all notices, legal summons, and liabilities may still come to the seller.

Why Sellers Are Exposed Despite Handing Over the Vehicle

Many platforms use non-negotiable sale agreements that define payment terms, document submissions, inspection conditions, and delivery rules. They also include clauses stating that “responsibility transfers at the time of vehicle delivery”. However, such private terms cannot override statutory obligations.

Key reasons sellers remain exposed

RTO records take precedence over private contracts.
The insurance policy often remains in the seller’s name until endorsement.
Third-party victims sue the registered owner, not the driver.
Police identify ownership based on RC data.
Legal defences become ineffective when the RC is outdated.

Therefore, the seller may receive legal notices for events occurring after the sale. This includes civil compensation cases and criminal investigations if the vehicle is involved in a fatal accident.

Contractual Clauses That Shift Risk to Sellers

Many agreements contain clauses that appear balanced but ultimately favour the platform. For example:

RC transfer timelines of 120–180 days with disclaimers for further delay.
The buyer’s right to terminate or revise the offer after delivery.
The seller’s obligation to cooperate fully with Party Peshi.
Absence of any indemnity clause protecting the seller during the transition.
Permission to assign rights or resell the vehicle without informing the seller.

These terms leave the seller carrying the burden of ownership without control over the vehicle.

Car Sale Liability and Its Real-World Consequences

If the car meets with an accident before RC transfer, the consequences may be serious:

Potential legal outcomes

The seller may be named in an FIR as the “registered owner”.
Police may issue notices for verification.
The seller may face liability before the Motor Accident Claims Tribunal.
Insurance companies may deny claims if the policy has not been endorsed to the buyer.
E-challans may accumulate without the seller’s knowledge.

Therefore, the transition period is more than an administrative formality. It is a legally vulnerable phase that sellers must navigate carefully.

How Sellers Can Protect Themselves

Although platforms offer convenience, sellers should adopt safeguards that align with the law.

Recommended protective steps

Submit written intimation of sale to the RTO under Rule 55 of the Central Motor Vehicle Rules, 1989.
Notify the insurer on the same day with proof of delivery.
Keep a stamped and time-noted delivery letter with photographs.
Retain signed copies of all transfer forms (29, 30, 35, 28).
Avoid signing third-party payment authorisations unless necessary.
Seek written confirmation that the platform assumes responsibility from the moment of delivery.
Follow up with the RTO every two weeks to track the RC transfer status.

These steps significantly reduce the seller’s exposure under the car sale liability framework.

Need for Policy Reform

India’s used-vehicle market has expanded rapidly, yet regulations have not kept pace with consumer risk. Therefore, the government should consider:

Setting a maximum RC transfer limit of 30 days.
Establishing a digital system where liability shifts automatically once the seller files intimation.
Mandating indemnity coverage by intermediaries.
Introducing temporary transfer-in-trust mechanisms.
Making it mandatory for the dealer/platforms to keep the owner informed about every step including transfer intimation.

Such measures will protect citizens who rely on quick-sale services.

The Road Ahead for Car Sellers

Selling a car through online platforms may be efficient, but convenience should not come at the cost of legal safety. A responsible seller must understand the implications of the Motor Vehicles Act and remain aware of car sale liability until the transfer is officially recorded. The transition period carries real risks, and sellers must act proactively to safeguard themselves.