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2005 DIGILAW 81 (KER)

National Insurance Co. Ltd. v. Lakshmi

2005-02-04

K.K.DENESAN

body2005
Judgment :- K.K. Denesan, J. National Insurance Company -- the third respondent in O.P.(MV).No.384/1991 on the file of the M.A.C.T., Thrissur is the appellant. The appellant has no grievance against the award granting compensation to the claimant. Award is challenged on the ground that the Claims Tribunal fastened the appellant with liability to indemnify the owner of the vehicle ignoring the fact that there was no valid policy as on the date of the accident, i.e., 15.1.1991. 2. It is contended that though RW1 was examined on behalf of the appellant and Exts.B1 to B7 were produced and marked to show that there was no policy as on 15.1.1991, the Tribunal without adverting to those documents passed the award directing the Insurance Company to deposit the amount of Rs.13,000/- with interest in the name of the claimant in a Nationalised Bank. In answer to issue No.3, framed by the Tribunal, the award says that though the insurer denied the policy in its written statement, no evidence was adduced to prove the contention raised therein, and therefore, the insurer should be made liable to pay the compensation. 3. A perusal of the documents produced and the evidence adduced by the appellant clearly shows that the above findings made by the Tribunal in the impugned award are not on the basis of proved facts and materials on record. The findings entered as above, compelled the appellant to file I.A.2518/1997 before the Tribunal seeking review of the award. In the review petition, the appellant had brought to the notice of the Tribunal that sufficient evidence was adduced in support of the pleadings in the written statement and in the light of the facts stated in the deposition of AW1, the Tribunal ought to have found that there was, in effect, no valid policy covering the offending vehicle on 15.1.1991. Evidence was adduced by the appellant to show that the payment of premium by cheque did not materialize as the cheque was bounced for want of funds in the account of the 2nd respondent The Tribunal on the basis of the provisions contained in Ss. Evidence was adduced by the appellant to show that the payment of premium by cheque did not materialize as the cheque was bounced for want of funds in the account of the 2nd respondent The Tribunal on the basis of the provisions contained in Ss. 147(5) and 149(1) of the Motor Vehicles Act held that the appellant had the statutory duty to indemnify the third parties and to satisfy the award of compensation, notwithstanding its entitlement to avoid or cancel the policy for the reason that the cheque issued for payment of premium was dishonoured. This view was taken quoting the judgment of the Supreme Court in Oriental Insurance co. Ltd. v. Inderjit Kaur & Ors., AIR 1998 SC 588. The Tribunal did not reserve the right of the insurer to recover the amount from the owner of the vehicle after satisfying the award, that is to say, by compensating the loss caused to the third party. 4. Aggrieved by the impugned award as also the order dismissing I.A.2518/97, the appellant has filed this Appeal. 5. Heard the Counsel for the appellant and the Counsel for respondents 1 and 2. 6. The first respondent sustained injuries while alighting bus No.KL.H-7610. The owner of the bus is the 2nd respondent. The incident happened on 15.1.1991. On that day, insurance policy was issued by the appellant in respect of the above vehicle. This was done acting upon the cheque issued by the 2nd respondent to the appellant company towards premium. When the cheque was presented for collection, it was bounced as there was no fund in the account of the 2nd respondent. When this fact came to the notice of the appellant, the policy issued on 15.1.1991 was cancelled by the appellant from the date of its issue. These facts are evident from Exts.B1 to B7 and the evidence given by the AW1 before the Tribunal. 7. According to the appellant, the policy was cancelled from the date of its issue and therefore, in effect and in the eye of law there was no valid policy on and from 15.1.1991. Learned counsel for the 2nd respondent submits that there was a policy as on 15.1.1991 and subsequent cancellation of that policy cannot be a ground for absolving the Insurance Company from its duty to indemnify the insured. 8. Learned counsel for the 2nd respondent submits that there was a policy as on 15.1.1991 and subsequent cancellation of that policy cannot be a ground for absolving the Insurance Company from its duty to indemnify the insured. 8. In support of the above contentions, the learned Counsel for the 2nd respondent has cited the decision of the Supreme Court in New India Assurance Co. Ltd. v. Rula & Ors., 2000 (2) KLT (SN) Case No.31, P.27). It is submitted that the Supreme Court has, inter alia, held in the above decision as follows: “the owner of the vehicle would have to be indemnified in respect of the claim of that party”. On the strength of the above observation, the 2nd respondent claims the right to be indemnified by the appellant. 9. I am unable to accept the above contention advanced on behalf of the 2nd respondent. Liability to pay compensation awarded by the Tribunal to the third party arises as per the mandate of the provisions contained in S.146(1) of the Motor Vehicles Act. The insurer has got the statutory duty to compensate the third party, notwithstanding violation of the policy conditions. In case the amount payable as compensation is more than the amount covered by the policy, the balance amount can be recovered by the insurer from the insured after satisfying the decree. That the principle of law is to the above effect is clear from Oriental Insurance Co. Ltd. v. Nafeessu, 2001 (1) KLT 498. In paragraph 10 of the above decision, the Apex Court has held as follows: “In the facts and circumstances of this case we find that despite holding the liability under the policy limited to the extent of Rs.50,000/-, the Claim Tribunal and the High Court were not unjustified in directing the appellant-company to pay the whole of the awarded amount to the claimants on the basis of the contractual obligations contained in clauses relating to the liability of the third parties and avoidance clause. However, the claims Tribunal and the High Court were not justified in rejecting the right of the appellant-company to recover from the insured the excess amount paid in execution and discharge of the award of the Tribunal.” The above decision makes it clear that the duty of the insurer to indemnify the insured is not absolute but depends on the conditions of the policy. If there is no valid policy, the position of the insured cannot be better. In this case, the policy was issued on 15.1.1991. For want of payment of premium, the policy was cancelled retrospectively with effect from the date of its issue. The decision of the Supreme Court (New India Assurance Co. Ltd. v. Rula (supra)) cited by the 2nd respondent does not show that the policy issued in that case was cancelled retrospectively from the date of its issue. In that case, Supreme Court was examining the rights and liabilities of the parties consequent on the subsequent cancellation of the policy. Therefore, it was held by the Supreme Court that the third party would have a claim against the Insurance Company; and the owner of the vehicle would have to be indemnified in respect of the claim of that party. This is crucial aspect which distinguishes the facts of the case decided by the Supreme Court in Rula’s case (supra) and the facts of the case on hand. 10. In this case, the policy was cancelled ab initio. Hence in the eye of law there was no policy at all. If there was no policy, the appellant is not liable to indemnify the owner of the vehicle. Therefore, the appellant is entitled to recover the amount from the owner after paying the compensation to the third party as per the award. Law does not protect the owner of the vehicle who did not pay the premium to the insurer much less a person who issued a cheque without arranging required funds in his bank account. No valid contract can come into existence between the insurer and the insured for want of consideration. Whoever obtains a policy by paying the premium by cheque which gets bounced for want of funds in his bank account, cannot contend that the insurance company shall not cancel the policy from the date of its issue. It is also pertinent to note that the cancellation of the policy from the date of its issue has not been challenged by the owner in any proceedings. As it has been cancelled from the date of its issue, it has to be held that there was no policy at all. Hence I uphold the contentions of the appellant-Company and set aside the award as well as the order passed in I.A.No.2518 of 1997 passed by the M.A.C.T., Thrissur. As it has been cancelled from the date of its issue, it has to be held that there was no policy at all. Hence I uphold the contentions of the appellant-Company and set aside the award as well as the order passed in I.A.No.2518 of 1997 passed by the M.A.C.T., Thrissur. It is declared that the appellant will be entitled to recover the amount of compensation paid to the first respondent (the claimant) from the second respondent. Appeal is allowed as above. No order as to costs.