MoRTH tightens grip on used vehicle dealers to ensure transparency

After issuing a draft notification earlier this year in September, the Ministry of Road Transport and Highways (MoRTH) has executed an amendment to the Central Motor Vehicle Rules (CMVR), outlining measures to ensure transparency in the sale and purchase of registered vehicles through dealers.

According to the amendment, used vehicle dealers will be obligated to obtain an authorisation certificate to be issued by the registering authority under whose jurisdiction the dealer’s business lies. The certificate will be issued within 30 days of the applicant furnishing the requisite business details, including a Goods and Services Tax (GST) number in the Form 29B, along with a sum of Rs 25,000, in an online application process.

The authorisation certificate will be issued for a five-year timeframe, and will enable the dealer to apply for the renewal of a possessed used vehicle’s registration certificate (RC), certificate of fitness, duplicate RC, NOC, as well as transfer of ownership of the said vehicle in possession.

As per the amendment, a dealer will be given reasons in writing if the registering authority decides against issuing an authorisation certificate, and will also be given an opportunity of being heard.

Furthermore, the possession of a used vehicle will also entail full responsibility of the said vehicle, including any liability emanating out of any incident, on the used vehicle dealer. According to MoRTH, in the current ecosystem, many issues such as disputes regarding third-party damage liabilities, and difficulty in determination of defaulter during the transfer of a vehicle to the subsequent transferee were being faced.

“The MoRTH has issued a notification G.S.R 901(E) on December 22, 2022 to promote ease of doing business and transparency in the sale and purchase of registered vehicles through dealers,” the Ministry said in a release on December 28.

Seller’s and dealer’s responsibilities
The new guidelines also put the onus of ensuring transparency in a used vehicle sale on the vehicle’s seller, who will have to inform about the handover of the registered vehicle to the dealer, to the registering authority, through Form 29C on the MoRTH’s online portal. The submission of Form 29C will result in generation of an acknowledgment number by an automated process.

Once this acknowledgment number is generated, the dealer will be deemed to be the sole owner of the registered motor vehicle and shall be liable towards any incident until the vehicle is transferred into a new owner’s name.

The amendment also binds the dealer who possesses a registered used vehicle to maintain an electronic trip register, detailing the possessed vehicle’s usage (trip purpose, driver name, time, odometer mileage), which has been restricted on public roads to only showcase the vehicle to prospective buyers or for taking and bringing it back from a service centre for repairs or from a vehicle inspection or pollution-control centre for the purpose of renewal of RC, fitness certificate or PUCC.

MoRTH’s changes to the CMVR also put in place a procedure for the suspension or cancellation of a used vehicle dealer’s authorisation certificate, if the business is found in non-compliance of the new guidelines.

India’s pre-owned vehicle market is highly fragmented and unorganised with many used vehicle dealers in the lookout for making a quick buck by selling sub-standard, accidental or vehicles involved in crimes to unsuspecting buyers. Although the advent of online marketplaces and foray of start-ups which are leveraging digital tools to eliminate trust issues between the dealer and buyer are particularly giving a push to India’s used-car market which is likely to surge 2.5 times in value to Rs 4.4 trillion by FY2027, the chunk of the pre-owned car market continues to be in the grip of independent dealers.

MoRTH says that its latest guidelines will aid in recognising and empowering intermediaries or dealers of registered vehicles as well as provide adequate safeguards against fraudulent activities to the selling or purchasing of such vehicles.