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Karnataka High Court · body

2007 DIGILAW 338 (KAR)

RAJU, MEGU RATHOD v. BHARAT, APPURAO PATIL

2007-06-09

K.SREEDHAR RAO

body2007
( 1 ) THE Mini Truck (goods vehicle) bearing registration No. MH-13/b-954 insured with the New India Assurance company Ltd. , collided with a mini goods truck bearing Regn. No. MH-13/b-3995 insured with United India Insurance Company ltd. As a result of the accident, four of the inmates of the Truck bearing No. MH-13/b-954 sustained personal injuries and one inmate died. The Tribunal held that the drivers of both the vehicles are equally negligent and apportioned the negligence at 50% each. The owners of the vehicle were directed to pay the compensation. The insurers' of both the vehicles are exonerated of the liability. The claimants are in appeal seeking enhancement of compensation and for an award against the insurers. ( 2 ) THE vehicle No. MH-13/b-954 is a goods vehicle. The claimants have pleaded in the petition that they were travelling in MH-13/b-954 as coolies. The evidence discloses that the claimants were travelling as passengers in the goods vehicle. In view of the evidence, the Tribunal found that the insurer is not liable to pay compensation for a passengers in the goods vehicle. ( 3 ) IN respect of goods vehicle MH-13/b-3995, the Tribunal finds that the policy of insurance issued at Ex. R-1 is validly cancelled, and that the accident has occurred subsequent to the cancellation of the policy. The insurer had written letter to the owner of the vehicle intimating the cancellation of the policy as per rule 10 of the Motor Vehicles Third Party insurance Rules, 1946. The copy of the letter of cancellation is also sent to RTO, Pune for proper action in the matter. ( 4 ) IT is the contention of the insurer that the policy at Ex. R-l was issued against payment of a cheque Ex. R-6. On presentation, the cheque was sent back on the ground that "effects not yet cleared" with an advice for representation on 19-8-1996. The insurer represented the cheque on 19-8-1996. The Bank again returned the cheque with an endorsement that "effects not yet cleared". The insurer has not produced the endorsement of the bank pertaining to the second presentation. ( 5 ) THE insurer by intimation at Ex. R-3 dated 21-8-1996, cancelled the policy on the ground of non payment and states that the cheque Ex. R-6 is dishonoured. The Bank again returned the cheque with an endorsement that "effects not yet cleared". The insurer has not produced the endorsement of the bank pertaining to the second presentation. ( 5 ) THE insurer by intimation at Ex. R-3 dated 21-8-1996, cancelled the policy on the ground of non payment and states that the cheque Ex. R-6 is dishonoured. ( 6 ) THE provisions of Section 64-VB of the insurance Act, 1938 and Section 149 (1) of the motor Vehicles Act and Rule 10 of the Motor vehicles Third Party Insurance Rules 1946 are extracted hereunder for convenient reference: "64-VB : No risk to be assumed unless premium is received in advance - (1) No insurer shall assume any risk in India in respect of any insurance business on which premium is not ordinarily payable outside India unless and until the premium payable is received by him or is guaranteed to be paid by such person in such manner and within such time as may be prescribed or unless and until deposit of such amount as may be prescribed, is made in advance in the prescribed manner. (2) For the purposes of this section, in the case of risks for which premium can be ascertained in advance, the risk may be assumed not earlier than the date on which the premium has been paid in cash or by cheque to the insurer. Explanation.-Where the premium is tendered by postal money order or cheque sent by post, the risk may be assumed on the date on which the money order is booked or the cheque is posted, as the case may be. (3) Any refund of premium which may become due to an insured on account of the cancellation of a policy or alteration in its terms and conditions or otherwise shall be paid by the insurer directly to the insured by a crossed or order cheque or by postal 'money order and a proper receipt shall be obtained by the insurer from the insured, and such refund shall in no case be credited to the account of the agent. (4) Whether an insurance agent collects a premium on a policy of insurance on behalf of an insurer, he shall deposit with, or despatch by post to. the insurer, the premium so collected in full without deduction of his commission within twenty-four hours of the collection excluding bank and postal holidays. (4) Whether an insurance agent collects a premium on a policy of insurance on behalf of an insurer, he shall deposit with, or despatch by post to. the insurer, the premium so collected in full without deduction of his commission within twenty-four hours of the collection excluding bank and postal holidays. (5) The Central Government may, by rules, relax the requirements of sub-section (1) in respect of particular categories of insurance policies. " section 149 (1) of the Motor Vehicles Act, 1988 thus reads: "149. Duty of insurers to satisfyjudgments and awards against persons insured in respect of third party risks- (1) If, after a certificate of insurance has been issued under sub-section (3) of Section 147 in favour of the person by whom a policy has been effected, judgment or award in respect of any such liability as is required to be recovered by a policy under clause (b) of subsection (1) of Section 147 (being a liability covered by the terms of the policy) (or under the provisions of Section 163-A) is obtained against any person insured by the policy then, notwithstanding that the insurer may be entitled to avoid or cancel or may have avoided or cancelled the policy, the insurer shall, subject to the provisions of this section, pay to the person entitled to the benefit of the decree any sum not exceeding the sum assured payable thereunder, as if he were the judgment debtor, in respect of the liability, together with any amount payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any enactment relating to interest on judgment. " Appendix XXXII, Rule 10 of the Motor vehicles Third Party Insurance Rules 1946, part I thus reads : "10. Cancellation or suspension of certificate or cover note given with a policy of insurance or cover note is cancelled or suspended by an insurer, the insurer shall forthwith inform the policy holder of such cancellation or suspension, by post to the latest address of the policy holder in the records of the insurer. " ( 7 ) IN the instant case, the United India Insurance Co. Ltd. , has issued the policy ex. R-1 for the period 15-8-1996 to 14-8-1997. Office copy of the intimation of cancellation of policy is at Ex. R-3 dated 21-8-1996. Ex. " ( 7 ) IN the instant case, the United India Insurance Co. Ltd. , has issued the policy ex. R-1 for the period 15-8-1996 to 14-8-1997. Office copy of the intimation of cancellation of policy is at Ex. R-3 dated 21-8-1996. Ex. R-5 dated 23-8-1996 are the receipts relating to registered post sent to the insured and to the rto Pune. The accident has occurred on 11-12-1996. The rw-1 Branch Manager of UIC testify to the fact that the cheque amount was not realised. Therefore, the policy is cancelled and due intimation is given to the insured and to the RTO. ( 8 ) SRI B. C. Seetharama Rao, learned counsel for the United India Company submitted that Sec. 149 (1) of MV Act, and Rule 10 of the Motor Vehicles Third Party Insurance rules 1946 makes the legal position very clear that the Insurer becomes liable to pay compensation only when accident happens during the currency of the policy. When accident occurs after the cancellation of the policy, the insurer is not liable. In this regard, he relied on the rulings of the decision of the Supreme court in Oriental Insurance Co. Ltd. v. Inderjit kaur and others reported in AIR 1998 SC 588 . At para 7, the following observations are made : 2a. For the purposes of the appeal, therefore, very few facts are relevant. A bus met with an accident. Its policy of insurance was issued by the appellant on 30th November, 1989. The premium for the policy was paid by cheque, the cheque was dishonoured. A letter stating that it had been dishonoured was sent by the appellant to the insured on 23rd january, 1990. The letter claimed that, as the cheque had not been encashed, the premium of the policy had not been received and that, therefore, the appellant was not at risk. The premium was paid in cash on 2nd May, 1990. In the meantime, on 19th April, 1990, the accident took place; the bus collided with a truck, whose driver died. The truck driver's widow and minor sons filed the claim petition. The appellant denied the claim asserting that under the terms of Section 64-VB of the insurance Act. 1938, no risk was assumed by an insurer unless the premium thereon had been received in advance. The truck driver's widow and minor sons filed the claim petition. The appellant denied the claim asserting that under the terms of Section 64-VB of the insurance Act. 1938, no risk was assumed by an insurer unless the premium thereon had been received in advance. The Motor Accident Claims Tribunal rejected the appellant's contention and awarded the claimants compensation in the sum of Rs. 96,000/- with interest at the rate of 12% p. a. from the date of petition to be paid by the insured and the appellant jointly and severally. The appeal filed by the appellant before the High Court of punjab and Haryana was summarily dismissed, and it is that order which is now under challenge. "7. We have, therefore, this position. Despite the bar created by S. 64-VB of the insurance Act, the appellant, an authorised insurer, issued a policy of insurance to cover the bus without receiving the premium therefor. By reason of the provisions of Sec. 147 (5)and 149 (1) of the Motor Vehicles Act, the appellant became liable to indemnify third parties in respect of the liability which that policy covered and to satisfy awards of compensation in respect thereof notwithstanding its entitlement (upon which we do not express any opinion) to avoid or cancel the policy for the reason that the cheque issued in payment of the premium thereon had not been honoured". ( 9 ) THE facts stated in the cited case disclose that the policy was issued on 30-11-99 and the premium was paid by cheque. Upon presentation, the cheque was dishonoured. The insurer sent the dishonoured cheque along with a letter dated 23-1-1990 to the insured stating that the cheque is not encashed and that the insurer will not assume the risk. The insured paid cash on 2nd May 1990 and obtained policy. The accident occurred on 19-4-1990. The insurer contended that in terms of section 64-VB of the Insurance Act, the Insurer cannot assume the risk by issuing the policy unless the premium is paid. ( 10 ) THE facts in the Indrajit Kour's case ( AIR 1998 SC 588 ) does not specifically disclose whether the insurer had cancelled the policy as required under Rule 10 of the Motor Vehicles Third Party Insurance Rules 1946. ( 10 ) THE facts in the Indrajit Kour's case ( AIR 1998 SC 588 ) does not specifically disclose whether the insurer had cancelled the policy as required under Rule 10 of the Motor Vehicles Third Party Insurance Rules 1946. The observations of the Supreme Court in paragraph 7 emphasized by me supra makes it clear that the proposition of law regarding legal right of an insurer to cancel the policy when the cheque issued towards premium is dishonoured is kept open and the said proposition is very much res integra. ( 11 ) THE provisions of Section 64-VB legally permit the Insurer to issue a policy on the payment of premium either by cash or by cheque. When once the premium is paid by cheque and policy is issued, the insurer is liable for the third party risk until the policy is validly cancelled, as per the provisions of Rule 10 of the Third Party Insurance Rules. The words in Section 149 (1) of the M. V. Act that "notwithstanding the insurer may have entitled to avoid or cancel or may have avoided or cancelled the policy the insurer shall subject to the provisions of this section pay to the person entitled to the benefit of the decree of any sum not exceeding the sum assured therein". The emphasised words "may have avoided or cancelled have to be understood in its past tense. The intendment of the legislature is that the validity of the policy as against third party should remain intact until the policy is validly cancelled. In a case where premium is paid by way of cheque and the cheque is dishonoured, the liability of the insurer from the date of issue of policy till its cancellation as per law remains in-tact in respect of third party. Technically, in case of dishonoured cheque, there is virtually no payment of premium yet the policy issued will be valid by legal fiction as against the third party, till the formal cancellation of the policy. It is therefore, impermissible for the insurer to contend that the policy issued is invalid right from the date of issue. In that view, the provisions of Section 149 (1) of the Motor vehicles Act, declares that the insurer cannot avoid third party liability on the ground that the insurer is legally entitled to have avoided or cancelled the policy. It is therefore, impermissible for the insurer to contend that the policy issued is invalid right from the date of issue. In that view, the provisions of Section 149 (1) of the Motor vehicles Act, declares that the insurer cannot avoid third party liability on the ground that the insurer is legally entitled to have avoided or cancelled the policy. ( 12 ) IN the instant case, the premium is paid by cheque. The insurer presented the cheque to the bank on two occasions. On both the occasions, the Bank has returned the cheque with an endorsement "effects not yet cleared". In the banking terminology, the effects not yet cleared would not mean dishonour of the cheque. In the banking practice, when the funds of the drawer is awaited to the account, if any cheque is presented for encashment, looking to the record and integrity of the customer would return the cheque informing the payee that funds to the accounts are awaited. Therefore, advice the payee for representation. In the instant case, on the second presentation also, the bank had returned the cheque with an endorsement "effects not yet cleared". The insurer being a statutory body should not have acted in a hasty manner to conclude that the cheque is dishonoured without making effort to represent the cheque as per the advice of the Bank. The insurer keeping in view the public interest, ought to have waited till the cheque is formally dishonoured by the Bank. The insurer has also not produced any evidence by summoning the account statement of the insured to show what would have been the ultimate result of the cheque on its representation for the third time. Therefore, on the facts and evidence, I find that the insurer has acted in a hasty manner in cancelling the policy without making complete efforts for the encashment of the cheque. In that view, the insurer i. e. United India Insurance Company Ltd. , cannot avoid third party liability in respect of the accident in question. ( 13 ) MFA No. 6430/2001 relates to MVC no. 432/1997. The petitioner in MVC No. 432/97 sustained simple injuries and a sum of, rs. 4,000/- is awarded. The grant of compensation is just and reasonable and does not call for any enhancement. Accordingly, MFA No. 6430/2001 is dismissed. ( 14 ) MFA No. 6434/01 relates to MVC No. 434/97. ( 13 ) MFA No. 6430/2001 relates to MVC no. 432/1997. The petitioner in MVC No. 432/97 sustained simple injuries and a sum of, rs. 4,000/- is awarded. The grant of compensation is just and reasonable and does not call for any enhancement. Accordingly, MFA No. 6430/2001 is dismissed. ( 14 ) MFA No. 6434/01 relates to MVC No. 434/97. The MVC No. 434/97 is a case of death. The deceased was a lady aged about 20 years doing coolie. Husband and two minor children are the claimants. There is no evidence to show her monthly earnings. Therefore, statutory maximum of Rs. 15,000/- p. a. could be assessed. As per unit system, the income should be distributed in three units. Rs. 5,000/- should be defrayed towards personal expenses of the deceased and a sum of Rs. 10,000/- would enure to the petitioner's benefits. There are minor children. The deceased is aged about 20 years, hence 17 multiplier will apply. The total loss of dependency would be Rs. 10,000/- x 17 = Rs. 1,70,000/ -. The first claimant husband is entitled to a sum of rs. 10,000/- for loss of consortium and all the petitioners are entitled to a sum of Rs. 10,000/-towards loss of expectancy and Rs. 3,000/-towards funeral expenses. In all, the claimants are entitled to a just compensation of Rs. 1,93,000/- but the Tribunal has awarded Rs. 2,70,000/ -. The insurer has not filed any cross appeal. Therefore, whatever compensation awarded by the Tribunal is confirmed. Accordingly, MFA No. 6434/2001 is dismissed. ( 15 ) MFA No. 6435/01 relates to MVC No. 431/1997. The petitioner in MVC No. 431/ 97 suffered fracture of right parietal bone and he was in-patient in the hospital for about 8 days. The Tribunal has awarded compensation of Rs. 47,500/ -. In this case, the Tribunal has granted a sum of Rs. 30,000/- towards pain and agony and Rs. 4,500/- towards medical expenses, food and nourishment, nursing, attendant's charges, conveyance etc. Rs. 3,000/- for loss of income and Rs. 10,000/-towards medical expenses. The income of the petitioner is assessed at Rs. 1,500/- per month. The petitioner has not sustained any permanent disability. On overall assessment, the grant of compensation of Rs. 47,500/- with interest at 6% from the date of petition till payment is just and reasonable and does not call for interference. Accordingly, MFA No. 6435/01 is dismissed. 10,000/-towards medical expenses. The income of the petitioner is assessed at Rs. 1,500/- per month. The petitioner has not sustained any permanent disability. On overall assessment, the grant of compensation of Rs. 47,500/- with interest at 6% from the date of petition till payment is just and reasonable and does not call for interference. Accordingly, MFA No. 6435/01 is dismissed. ( 16 ) MFA No. 6436/02 relates to MVC No. 430/97. The petitioner in MVC No. 430/97 sustained fracture of left thigh and left shoulder and a steel rod is implanted. The petitioner is operated and he was under treatment for one and half months as in-patient. The monthly income of the petitioner is assessed at Rs. 1,500/ -. The total body disability is assessed at 10%. The petitioner is entitled to rs. 60,000/ -. The petitioner has stated that he has spent Rs. 20,000/- for medical expenses, nursing, attendance and etc. , Rs. 9,000/- towards loss of income during treatment period for 6 months. Rs. 10,000/- for loss of amenities and future unhappiness. Rs. 28,800/-rounded of to Rs. 29,000/- (10% of the annual income at Rs. 1800 x 16 multiplier) is the loss of future income on account of disability. In all, the petitioner in MVC No. 430/ 97 is entitled to a just compensation of Rs. 1,28,000/- with interest at 6% from the date of petition till payment as against Rs. 76,000/-awarded by the Tribunal. Accordingly, MFA no. 6436/2001 is partly allowed. ( 17 ) MFA No. 6437/01 relates to MVC No. 433/1997. MVC No. 433/1997 is a case of death. The deceased was a coolie aged about 32 years. The income of the deceased is assessed at Rs. 1. 500/- p. m. The deceased left behind six dependents, i. e. wife and 5 minor children. As per unit system, 4 parts have to be made. Towards personal expenses of the deceased a sum of Rs. 5,400/- has to be defrayed and a sum of Rs. 12,600/- would enure to the benefit of the dependents. As per the post Mortem Report, the deceased is aged about 34 years. Therefore, 14 multiplier is applicable. Hence, dependency works out to rs. 1,76,400/ -. The wife of the deceased is entitled to a sum of Rs. 10,000/- as loss of consortium and all the claimants are entitled to Rs. 10,000/- towards loss of expectancy and rs. 3,000/ -. As per the post Mortem Report, the deceased is aged about 34 years. Therefore, 14 multiplier is applicable. Hence, dependency works out to rs. 1,76,400/ -. The wife of the deceased is entitled to a sum of Rs. 10,000/- as loss of consortium and all the claimants are entitled to Rs. 10,000/- towards loss of expectancy and rs. 3,000/ -. In all, the claimants are entitled to a just compensation of Rs. 1,99,400/- with interest at 6% from the date of petition till payment. Accordingly, MFA No. 6437/01 is partly allowed. ( 18 ) THE United India Insurance Co. Ltd. , shall pay 50% of the compensation adjudged above to the petitioners in all the cases mentioned above. The petitioners to recover the balance of compensation from the owner of the vehicle bearing Registration No. MH-13/ b-954. Order accordingly.