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2008 DIGILAW 459 (AP)

National Insurance Co. Ltd. v. Sk. Ahmedunnia

2008-07-04

GHULAM MOHAMMED, SWAROOP CHAUDHARI

body2008
JUDGMENT: (Per Sri GM, J) This Civil Miscellaneous Appeal has been preferred by the 3rd respondent- insurance company against the award dated 24-3-2003 passed in O.P.No.1975 of 1999 on the file of the Motor Accidents Claims Tribunal-cum-I Additional District Judge, Visakhapatnam. 2. The respondents-claimants filed the above O.P. under Section 166 of the Motor Vehicles Act, 1988 claiming compensation of Rs.21,93,000/- due to death of Sk. Anwar Basha, who died in the motor accident that occurred on 12-4-1999. 3. On 12-4-1999 while the deceased was proceeding in a jeep bearing No.OR-06 B-9111 from his work place to Visakhapatnam a lorry bearing No.AHH 2125 belonging to the 2nd respondent and driven by its driver (R.1) in a rash and negligent manner dashed the jeep, on account of which, the deceased and three others traveling in the jeep, died on the spot. 4. The Tribunal, on consideration of the evidence on record, held that the accident occurred due to rash and negligent driving of the driver of the lorry. With regard to quantum of compensation, the Tribunal took Rs.9,333/-, as contribution to the deceased's family per month, after deducting 1/3rd towards personal expenses of the deceased, quantified the loss of dependency at Rs.16,79,940/- by applying appropriate multiplier. In addition to that amount an amount of Rs.15,000/- was awarded towards loss of consortium and Rs.15,000/- towards loss of estate, in all granted compensation of Rs.17,14,940/- holding that the accident occurred due to rash and negligent driving of the driver of the lorry driven by R.1. 5. Hence, this appeal by the 3rd respondent-insurance company mainly contending that in the absence of premium received in advance, the insurance company is not liable to pay any compensation. 6. Sri K. Subba Rao, learned Standing Counsel appearing on behalf of the appellant-insurance company vehemently contends that the owner has not denied about the cancellation of policy and that there was no valid insurance coverage as on the date of the accident. The learned Standing Counsel elaborating his contention submits that as the owner of the vehicle issued a cheque towards premium for the policy and the cheque was bounced, thus, the amount to be paid towards premium remained unpaid. Therefore, it is contended, as the accident occurred after cancellation of policy and in the absence of payment of premium, there is no contract as such to pay any compensation by the appellant-insurance company. Therefore, it is contended, as the accident occurred after cancellation of policy and in the absence of payment of premium, there is no contract as such to pay any compensation by the appellant-insurance company. In support of his contentions, learned Standing Counsel has relied on the following decisions reported in NATIONAL INSURANCE CO., LTD v. SEEMA MALHOTRA ( (1) 2001 ACJ 638 ), UNITED INDIA INSURANCE CO. LTD v. AYED MOHAMMED ( (2) 1991 ALT 650), DADDAPPA v. BRANCH MANAGER, NATIONAL INSURANCE CO. LTD ( (3) 2008 ACJ 581 ), NATIONAL INSURANCE CO. LTD v. NARESH KUMAR ( (4) 2008 ACJ 869 ). 7. On the other hand, Sri K. Subramanya Reddy, learned Senior Counsel appearing for the respondents-claimants would contend that the cheque was issued to renew the policy and that no communication has been received by the owner as to dishonour of the cheque, therefore, the insurance company is not exonerated to pay the compensation. In support of his contention the learned Senior Counsel relied on the following decisions reported in NEW INDIA ASSURANCE CO. LTD v. RAM DAYAL AND OTHERS ( (5) 1990 (2) Supreme Court Cases 680), MANAGER, UNITED INDIAN INSURANCE CO. LTD v. ABBISETTI VENKATARAO ( (6) 2008 (1) ALT 471 ), M. NAGESWARA RAO v. NEW INDIA ASSURANCE CO. LTD., VISAKHAPATNAM ( (7) 2003(3) ALD 379 ) (DB), NEW INDIA ASSURANCE CO. LTD v. SHAMSED AND OTHERS ( (8) 2001 ACJ 585), NEW INDIA ASSURANCE CO. LTD v. RULA ( (9) 2000 (3) Supreme Court Cases 195), ORIENTAL INSURANCE CO. LTD v. INDERJIT KAUR ( (10) AIR 1998 SUPREME COURT 588). 8. In Seema Malhotra's case ( 1 supra ), it was held by the Apex Court as follows. " 19. Under section 25 of the Contract Act an agreement made without consideration is void. Section 65 of the Contract Act says that when a contract becomes void any person who has received any advantage under such contract is bound to restore it to the person from whom he received it. So, even if the insurer has disbursed the amount covered by the policy to the insured before the cheque was returned dishonoured, insurer is entitled to get the money back. So, even if the insurer has disbursed the amount covered by the policy to the insured before the cheque was returned dishonoured, insurer is entitled to get the money back. However, if the insured makes up the premium even after the cheque was dishonoured but before the date of accident it would be a different case as payment of consideration can be treated as paid in the order in which the nature of transaction required it. As such an event did not happen in this case the insurance company is legally justified in refusing to pay the amount claimed by the respondents." 9. In Daddappa's case ( 3 supra ), cheque issued towards premium was dishonoured and the insurance company cancelled the policy. An information regarding cancellation of the policy was also communicated to the insured and intimation was also given to the R.T.O. Further, postal acknowledgement was also produced before the Tribunal to prove cancellation stating that the accident occurred much after the communication of cancellation of policy. The Tribunal held that the insurance company was liable despite cancellation of contract of insurance and, on appeal the High Court held that the insurance company was not liable to pay the compensation. The Apex Court in those circumstances, considering section 64 VB of the Insurance Act upheld the view taken by the High Court. The relevant portion of the judgment reads as follows : " .... If the contract of insurance has been cancelled and all concerned have been intimated thereabout, we are of the opinion, the insurance company would not be liable to satisfy the claim. ..... However, as the appellant hails from the lowest strata of society, we are the opinion that in a case of this nature, we should, in exercise of our extraordinary jurisdiction under Article 142 of the Constitution of India, direct the respondent No.1 to pay the amount of claim to the appellants herein and recover the same from the owner of the vehicle, viz., respondent no.2, particularly in view of the fact that no appeal was preferred by him. We direct accordingly." 10. In Naresh Kumar's case ( 4 supra ) a truck met with accident after 8 months of cancellation of policy. We direct accordingly." 10. In Naresh Kumar's case ( 4 supra ) a truck met with accident after 8 months of cancellation of policy. The cheque issued towards the policy was dishonoured and the insurance company sent notice to the owner under registered post with acknowledgement due canceling the policy and that a letter was also sent by ordinary post to the registration and licencing authority. The owner therein however during his examination-in-chief did not even assert that he has not received any such letter. In those circumstances, a learned single Judge of the Himachal Pradesh High Court held that insured expired during the pendency of the appeal, and the liability of his representatives would be to the extent of estate which they may have inherited. 11. In RAM DAYAL's case ( 5 supra), the vehicle was insured earlier upto August 31, 1984 and the same was available to be renewed but instead of obtaining renewal, a fresh insurance was taken from September 8, 1984 and on the same date the accident took place. In those circumstances it was held by the Apex Court that when a policy is taken on a particular date, its effectiveness is from the commencement of that date. The insurance policy obtained on the date of the accident became operative from the commencement of the date of insurance i.e. from the previous midnight and since the accident took place on the date of the policy the insurer became liable. 12. In ABBISETTI VENKATARAO's case, a cheque was issued by the owner of the vehicle involved in the accident towards insurance premium and the same was bounced long prior to the accident. Insurer pleaded that there was no insurance coverage to the accident vehicle on the date of accident as amount covered by bounced cheque was not paid subsequently by owner of the vehicle. No material was placed by the insurer, as in the present case, to prove that after bouncing of cheque, insurance policy was cancelled and that an intimation was sent to the owner of vehicle to that effect. Considering those situations, a learned single Judge of this Court held that insurer cannot avoid liability as it failed to give an opportunity to the owner to remit the amount of insurance premium relating to bounced cheque. 13. Considering those situations, a learned single Judge of this Court held that insurer cannot avoid liability as it failed to give an opportunity to the owner to remit the amount of insurance premium relating to bounced cheque. 13. In M. NAGESWARA RAO's case ( 7 supra ), the Division Bench of this Court while referring to various case laws in this regard held that when the insurance company failed to prove that notices were served on the insured informing that they cancelled the policy, the insurance company cannot avoid liability as they failed to give opportunity to the owner of the vehicle to remit the premium amount for the cheque dishonoured by the bank. 14. In SHAMSED' s case ( 8 supra), the Division Bench of Kerala High Court in similar situations held as follows: " ... We cannot approve an action on the part of the insurer insisting certificate of insurance on receiving a cheque and thus allowing the owner to put the vehicle in use and canceling such certificate at a later stage on dishonouring of cheque. The insurer cannot create such uncertainties and indefiniteness in issuing the certificate of insurance. Even for such faults, insurer alone is responsible and the rights of the thirty party in such situation are well protected by virtue of the provisions contained in section 147(5) and 149(1) of the Motor Vehicles Act and section 64-VB of the Insurance Act, 1938." 15. In RULA's case ( 9 supra), the appellant-insurance company insured a truck on November, 8, 1991 and issued an insurance policy in terms of the requirements of the Motor Vehicles Act, 1988. On the same day, at midnight, the truck met with an accident in which three occupants died. Their dependants filed claims before the Motor Accidents Claims Tribunal. The appellant-insurance company contested the claim on the ground inter alia that the truck was not covered by any insurance policy, inasmuch as the truck owner had obtained the insurance policy on the basis of a cheque dated November 8, 1991, towards payment of premium, but this cheque had been dishonoured on November, 16, 1991, with the result that the insurance policy itself was cancelled. The Claims Tribunal rejected the contention and decreed the claims. The appellant-insurance company therein filed appeal to the High Court and the same were dismissed. On further appeal, the Apex Court while dismissing the appeal, held follows. The Claims Tribunal rejected the contention and decreed the claims. The appellant-insurance company therein filed appeal to the High Court and the same were dismissed. On further appeal, the Apex Court while dismissing the appeal, held follows. " ... The subsequent cancellation of the insurance policy in the instant case on the ground that the cheque through which premium was paid was dishonoured, would not affect the rights of the third party which had accrued on the insurance of the policy on the date on which the accident took place. If, on the date of accident, there was a policy of insurance in respect of the vehicle in question, 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. Subsequent cancellation of the insurance policy on the ground of non-payment of premium would not affect the rights already accrued in favour of the third party." 16. In INDERJIT KAUR's case (10 supra) a three Judge Bench of the Apex Court considering provisions of section 64 VB of the Insurance Act, held that judgment in AYEB MOHAMMED's case (2 supra) do not lay down good law. It is opt to refer to relevant portion of the judgment which reads as follows: " We have, therefore, this position. Despite the bar created by section 64VB of the Insurance Act, the appellant, an authorized insurer, issued a policy of insurance to cover the bus without receiving the premium therefore. By reason of the provisions of section 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." 17. The three Judge Bench of Apex court in INDERJIT KAUR's case (10 supra) categorically held that subsequent cancellation of the insurance policy on the ground that the cheque through which premium was paid was dishonoured, would not affect the rights of the third party which had accrued on the issuance of the policy on the date on which the accident took place. 18. 18. In the instant case, the accident in question occurred on 12-4-1999. The cheque was issued on 16-11-1998 towards renewal of the policy issued by the Insurance Company and the same was returned on 23-11-1998. R.W.1 who was examined on behalf of the appellant-insurance company deposed that they have not affixed the postal receipt in the register and marked only Ex.B.5 in proof of sending the notice of cancellation of policy to the second respondent-owner of the vehicle. Ex.B.4 is the office copy of the letter claimed to have been issued by the appellant company. Ex.B.5 is the Xerox copy of the relevant entry extract at page no.225 of the dispatch book of the appellant company to the effect that they have issued the letter. However, the appellant-insurance company did not produce any receipt stating that the letter was sent under registered post with acknowledgment due, to the effect that policy was not renewed as the cheque was bounced. No postal acknowledgment was marked by the appellant insurance company. Except a bald contention that they informed the insured on 13-12-1998, however, no material has been placed by the insurance company to prove that after bouncing of the cheque, the policy was cancelled and intimation was received by the owner of the vehicle to that effect. It is seen from the record that the 1st respondent-owner of the vehicle was not examined he remained ex parte. When the insurance company failed to prove that notices were served on the insured informing that it cancelled the policy, the appellant-insurance company cannot avoid liability as it failed to give opportunity to the insured of the vehicle to remit the premium for the cheque dishonoured. In these circumstances, we are of the opinion that subsequent cancellation of insurance policy on the ground that the cheque through which premium was paid was dishonoured would not effect the rights of the third party. In the circumstances, the decisions relied on by the learned counsel for the appellant-insurance company does not apply to the facts of the present case. 19. Considering the facts and circumstances of the case, and following principles laid down by the Apex Court in INDERJIT KAUR ( supra ) and RULA's case ( Supra), we are of the considered view that the Tribunal was justified in making the appellant-insurance company liable to indemnify the loss of the owner of the vehicle. 19. Considering the facts and circumstances of the case, and following principles laid down by the Apex Court in INDERJIT KAUR ( supra ) and RULA's case ( Supra), we are of the considered view that the Tribunal was justified in making the appellant-insurance company liable to indemnify the loss of the owner of the vehicle. Therefore, the contention of the learned counsel Sri Kota Subba Rao, that as on the date of accident the policy was cancelled and insured is not liable to pay the compensation does not merit any consideration. 20. In the result, the appeal is meritless and it is accordingly dismissed. No costs.