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2008 DIGILAW 484 (JK)

United India Insurance Co. Ltd. v. Bashir Ahmed

2008-12-12

VINOD KUMAR GUPTA

body2008
1. The Appellant-United India Insurance Co. has preferred this Civil First Miscellaneous Appeal under section 173 of Motor Vehicles Act, 1988 against the award dated 10.10.2003 passed by the Presiding Officer of Motor Accident Claims Tribunal, Jammu (hereinafter referred to as the Tribunal in short) in File No.55/Claims of 1999 entitled Bashir Ahmed Vs. United India Insurance Co. Ltd. and others. 2. The brief and admitted facts of the case are that the claimant-respondent No.1 herein Bashir Ahmed received grievous injuries as a result of hit by a rashly and negligently driven Truck bearing Registration No.JKC-2799 by its driver respondent No. 3 on 09.01.1998. He preferred a claim of Rs.14.70 lacs as compensation from the driver, owner of the truck and Insurance Company with which the said truck was insured. The owner and driver of the truck did not contest the claim but the insurance company-appellant herein contested the said claim petition on the ground that there was no privity of contract between the owner and the Insurance Company. It is alleged by the Insurance Company that the owner of the vehicle got his vehicle insured with the appellant-Insurance Company on 28.04.1997 and a policy No.111407/24/1/126/97 was issued which was valid from 28.04.1997 to 27.04.1998. The premium was paid through a cheque which was dishonoured by the banker and as such no premium was received by the Insurance Company. The Insurance Company had cancelled the insurance policy on 15.07.1997, as such the insurance Company-appellant not liable to indemnify the insurer. After trial the learned Tribunal awarded an amount of Rs.1,71,000/- along with interest at the rate of 9% per annum vide impugned order. Being aggrieved by this award, the appellant-Insurance Company has preferred this appeal. 3. I have heard the learned counsel for the appellant and respondent No.1-claimant and have also perused the record of the case. 4. The contentions of the learned counsel for the appellant is two fold namely that the Insurance Company was not liable to pay a compensation amount on the ground that no premium was received by the Insurance Company from the insured and there was no privity of contract between them and quantum of compensation is not properly assessed by the Tribunal. The contentions of the learned counsel for the appellant is two fold namely that the Insurance Company was not liable to pay a compensation amount on the ground that no premium was received by the Insurance Company from the insured and there was no privity of contract between them and quantum of compensation is not properly assessed by the Tribunal. On the other hand, the learned counsel for the claimant-respondent No.1 has contended that there is no evidence on the file to show that the intimation in respect of cancellation of insurance policy was sent to the owner nor the Regional Transport Officer has been informed about the same. She has further stated that the Insurance Company is not able to trace the owner and the insurance policy remained with the owner of the vehicle. It is further contended that the compensation has been properly assessed by the Tribunal. 5. It is an admitted fact that the owner of the vehicle had insured the vehicle by payment of a cheque as premium and the appellant-Insurance Company issued a policy. The Insurance Company has alleged that the Company could not get the premium amount of the insurance policy as the cheque which has been issued by the owner of the vehicle for premium was dishonoured and accordingly policy was cancelled. 6. The Tribunal has framed a specific issue in respect as to whether the Insurance Company is liable to indemnify the owner of offending vehicle. The Tribunal after relying upon case reported in 2001 ACJ 670, 2001 ACJ 585 and 2002 ACJ 1845 held as under:- Non-payment of premium and subsequent cancellation of policy is matter between the owner and the company of the insurance company is not absolved of its obligation to third parties under the policy because it did not receive the premium. It had issued the policy of insurance on receipt of cheque towards premium which was dishonoured later on. In this connection, it has been held by the Honble Supreme Court in a case reported in 1998 ACJ 123 as under: "We have, therefore, this position Despite bar created sections 64-VB of the Insurance Act, appellant an authorized insurer issued a policy of insurance to cover the post without receiving the premium therefore. In this connection, it has been held by the Honble Supreme Court in a case reported in 1998 ACJ 123 as under: "We have, therefore, this position Despite bar created sections 64-VB of the Insurance Act, appellant an authorized insurer issued a policy of insurance to cover the post without receiving the premium therefore. By raising of the provisions of sections 147(5) 149(1) of the Motor Vehicles Act the appellant became liable to indemnify third parties in respect of the liability which with policy covered and to satisfy awards of compensation in respect thereof notwithstanding its entitlement (upon which expressed any opinion) avoid or cancel the policy for the reason that the cheque issued in payment to the premium thereon had not been honoured. In view of the law laid down by the Apex Court of the country, it can safely be concluded that the insurance company is liable to indemnify the third party against any risk and the non payment of premium does not absolve the company to pay compensation to the petitioner. In such a situation the Insurance Company can seek the legal remedy against the insured. Issue No.3 is disposed of accordingly. 7. The learned counsel for the parties have relied upon number of judgments on this point. This question has been considered by Honble Supreme Court and different High Courts in number of cases. Our own High Court in case entitled Oriental Insurance Company Limited Vs. Mst. Misra and others reported in 2005(1) SLJ 399 held as under:- 18. Thus, when the insured fails to pay the premium promised, or when the cheque issued by him towards the premium is returned dishonoured by the bank concerned the insurer need not perform his part of the promise. The corollary is that the insured cannot claim performance from the insurer in such a situation. 14. In the present case admittedly the insurance contract between the insured and the insurer in respect of the vehicle in question was entered into on 22.05.1998. The insured had given a cheque for the premium amount but the same got bounced due to which the contract was cancelled by the company from inception on 15.07.1998. Vide letter dated 15.07.1998 the insured was informed that the company shall not be liable for any loss/damage as such. The accident took place on 05.02.1999. The insured had given a cheque for the premium amount but the same got bounced due to which the contract was cancelled by the company from inception on 15.07.1998. Vide letter dated 15.07.1998 the insured was informed that the company shall not be liable for any loss/damage as such. The accident took place on 05.02.1999. There is no material on record to show that during this period the insured had either paid the premium or the policy cancelled had been revived by the company or that the insured had entered into fresh insurance contract with the insurer. Thus, on 05.02.1999 when the accident took place there was no insurance contract between the insured and in surer as such, the insurer-company was not bound to satisfy the award. 15. Liability of a Insurance Company to satisfy judgment and award passed against an owner of the vehicle arises only when there is an insurance contract between the company and the owner. If there is no such contract the company cannot be held to indemnify third party for the claim on the ground that earlier the company or the owner had entered into any such contract which had been revoked or cancelled by the company much before the liability arose. 8. In case Deddappa and others Vs. The Branch Manager, National Insurance Co. Ltd. reported in (2008) SCCR 224 Honble Supreme Court of India held as under:- 9. Before embarking on the said question we may notice the admitted facts. Second respondent who was driving the vehicle was also the owner thereof. The insurance policy was to remain valid for the period 17.10.1997 to 16.10.1998. Respondent No.3 issued a cheque on 15.10.1997. The said cheque was presented for encashment before the Syndicate Bank. The Bank by its letter dated 21.10.1997 issued a Return Memo disclosing dishonour of the cheque with remarks fund insufficient. First Respondent thereupon cancelled the policy of insurance. The said information was communicated to Respondent No.2. An intimation thereabout was also given to the R.T.O concerned. 9. In that case the owner obtained insurance policy which was to be remained valid for period 17.10.1997 to 16.10.1998 and premium was paid vide a cheque. The said cheque was presented for encashment before the bank which was dishonoured on the ground that funds were insufficient. An intimation thereabout was also given to the R.T.O concerned. 9. In that case the owner obtained insurance policy which was to be remained valid for period 17.10.1997 to 16.10.1998 and premium was paid vide a cheque. The said cheque was presented for encashment before the bank which was dishonoured on the ground that funds were insufficient. The Insurance Company cancelled the policy of the insurer and information was communicated to the owner and with an intimation to RTO concerned. The Honble Apex Court held as under:- 26. We are not oblivious of the distinction between the statutory liability of the Insurance Company vis-a-vis a third party in the context of Sections 147 and 149 of the Act and its liabilities in other cases. But the same liabilities arising under a contract of insurance would have to be met if the contract is valid. 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. 10. Similar view was taken by the Himachal Pradesh High Court in case New India Assurance Company Limited Vs. Leela Devi and others reported in 2006 ACJ 2138 and Kerala High Court in case New India Assurance Company Limited Vs. Raghu and other reported in 2002 ACJ 217. 11. The learned counsel for the respondents-claimant has relied upon case The Oriental Insurance Co. Ltd. Vs. A.B.Sivankuty and Others reported in AIR 2006 Kerala 20(FB) wherein it was held as under:- 15. Thus by no means can an insurer who has issued a policy of insurance for a motor vehicle receiving cheque towards payment of premium be allowed to disown liability to third party. Their remedies have to be worked out against the insured 20.The position is that the liability of the Insurance Company in damages for third party risks continues for the entire period covered by the policy in spite of the cheque issued toward payment of premium was dishonoured and consequently policy was cancelled by the Insurance Company. The remedy of the Insurance Company lies against the insured to have the amount paid by them by way of compensation for third party risks to be got reimbursed. 12. The next case relied upon by respondent-claimant is New India Assurance Company Ltd. Vs. The remedy of the Insurance Company lies against the insured to have the amount paid by them by way of compensation for third party risks to be got reimbursed. 12. The next case relied upon by respondent-claimant is New India Assurance Company Ltd. Vs. Rula and others reported in 2000 ACJ 630 wherein the Honble Apex Court held as under:- 11. This decision, which is a three-Judge Bench decision, squarely covers the present case also. 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 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. Subsequently cancellation of insurance policy on the ground of non-payment of premium would not affect the rights already accrued in favour of the third party. 13. Further in case National Insurance Company Limited Vs. Lakshmi and others (2005) ACJ 1873, it was held that where a policy of insurance is obtained by paying premium through cheque which gets dishonoured and the insurance company cancels the policy from the date of its issue, insurance company is entitled to recover the amount from the owner after paying compensation to the third party. In case United India Insurance Company Limited Vs. Laiq Ram and others (2006 ACJ 359), the Himachal Pradesh High Court has held that where insurance company failed to prove that it actually posted communication then insurance company cannot be absolved from its liability. Further in case United India Insurance Company Ltd. Vs. B.P.Poovavva and others (2006 ACJ 1469) it was held that the insurance company can proceed against the insured if the insurance company has not issued the required notices to the insured and has not adduced any evidence to show mandatory compliance about the cancellation of insurance policy. Further in case M.Nageswara Rao Vs. New India Assurance Co. B.P.Poovavva and others (2006 ACJ 1469) it was held that the insurance company can proceed against the insured if the insurance company has not issued the required notices to the insured and has not adduced any evidence to show mandatory compliance about the cancellation of insurance policy. Further in case M.Nageswara Rao Vs. New India Assurance Co. Ltd. and other (2004 ACJ 1554), the Andra Pradesh High Court has held that when a cheque is dishonoured, procedure contemplated is that drawer has to be informed about the dishonour of the cheque and give an opportunity to make good the loss sustained by the drawee. The insurance company failed to produce any evidence that these two notices were served on the insured. It was held that insurer was not given opportunity to remit premium amount in lieu of dishonoured cheque. 14. From the above authorities, it emerges that in order to escape its liability from payment of compensation amount to the claimant, in cases where the premium of the insurance amount was paid through cheque and the said cheque was dishonoured, the insurance company has to prove the two essentials which are as under:- i) that the insurance policy was cancelled by the insurance company; and ii) an intimation to this effect was duly given to the insured along with authorities concerned. In view of above stated proposition, let us examine the position in present case. As stated above, it is an admitted fact that the insured in this case has paid the premium to the appellant-Insurance Company through a cheque which was dishonoured and the insurance company cancelled the insurance policy on the ground of non receipt of premium. In order to prove its assertion, the appellant-Insurance Company has examined Maharaj Krishan Raina, Branch Manager of its company at Anantnag. He has stated that vehicle No.JKC-2799 was insured with his Branch vide policy No. 111407/24/1/126/97 which was valid from 28.04.1997 to 27.04.1998 and the premium was paid through cheque which was dishonoured and the policy was cancelled. He has further stated that the notice of cancellation was sent to the owner vide letter dated 15.07.1997 but there is nothing on record to suggest as to whether notice of cancellation was received by the owner of the vehicle or not. The Superintendent of Police Traffic, Srinagar was also informed about the cancellation of insurance policy. He has further stated that the notice of cancellation was sent to the owner vide letter dated 15.07.1997 but there is nothing on record to suggest as to whether notice of cancellation was received by the owner of the vehicle or not. The Superintendent of Police Traffic, Srinagar was also informed about the cancellation of insurance policy. He admitted that he has no knowledge as to whether AD was sent with registered notice or not. 15. I have examined the record in this respect on the file of claim petition before the Tribunal. The Carbon copy of the letter written by the appellant-insurance company to the owner of the vehicle is dated 15.07.1997. This letter does not bear any number and this letter shows that the cheque has been dishonoured on the ground referred to drawer as intimated by the bank. The memo issued by the Anantnag Central Co-opeative Bank Ltd. shows that the reason of dishonour as exceed arrangements. However, the ground referred to drawer in the memo has been marked by somebody with other ink which raises a doubt about the ground of dishonour. Although it is alleged by the appellant-insurance company that this intimation was sent to the insured under registered cover but there is no such evidence on the record to prove this fact. Without receipt of dispatch issued by the postal authorities, no presumption can be raised about the dispatch of this letter by the appellant-insurance company. For establishing the fact of sending intimation to the insured about the cancellation of policy by registered post, the insurance company should have proved this fact by producing the best evidence i.e., receipt of sending the postal letter under registered cover. Without such evidence no presumption can be raised as to whether the appellant-insurance company intimated the insured about the cancellation of policy. Even the original insurance policy issued by appellant-insurance company remained with the owner insured and the appellant-insurance company did not take any steps for getting the same back. Nor the concerned authorities namely RTO was informed about the same. Had RTO been informed about the cancellation of insurance policy, the RTO could have taken the steps at the time of renewal of route permit or receipt of token tax (road tax). 16. Nor the concerned authorities namely RTO was informed about the same. Had RTO been informed about the cancellation of insurance policy, the RTO could have taken the steps at the time of renewal of route permit or receipt of token tax (road tax). 16. Further the insurance company is bound to discharge its statutory liability to indemnify the third party risk by making payment of the amount and can recover the same from the insured. Same view was taken by Honble Supreme Court of India in National Insurance Company Limited Vs. Laxmi Narian Dhut (2007) 3 SCC 700 and Prem Kumari and others Vs. Prahlad Dev and others (2008) 3 SCC 193. 17. Thus I would hold that the Tribunal has properly held that the appellant-insurance company can not be absolved of its liability to compensate third party on this ground. Further the learned Tribunal was correct in holding that the insurance company can seek the legal remedy against the insured if proved as alleged by the insurance company. 18. The next contention raised by the learned counsel for the appellant-insurance company is that the quantum has not been properly assessed. According to him the Tribunal has assessed the disability at the rate of 25% and there is no evidence in this respect while the disability is 20 per cent as per medical certificate. He has further argued that during discussion of issue No.2 the Tribunal has assessed the compensation of Rs.10,000/- under head pain and suffering but at the conclusion of the award this amount has been shown as Rs. 40,000/-. I have examined the record and the disability to the extent of 20 per cent has been shown by Dr. Ashok Sharma PW in respect of the injuries received by the claimant-respondent No.1 in his both eyes. Besides this the claimant-respondent No.1 has also received injuries on his head for which he was operated and aemotoma in temoral region was removed and the skull bone which was broken into pieces was also removed from the skull. 19. It is true that Dr. Ashok Sharma PW has given the physical disability due to the decrease of eye sight as 20 per cent but the Tribunal has wrongly mentioned it as 25 per cent in order to determine the future loss and income. 19. It is true that Dr. Ashok Sharma PW has given the physical disability due to the decrease of eye sight as 20 per cent but the Tribunal has wrongly mentioned it as 25 per cent in order to determine the future loss and income. The Tribunal has assessed the income of the claimant at Rs.2000/- per month which is not disputed or challenged by any party. After assessing the disability of 20 per cent, it comes to Rs. 400/ per month but the Tribunal has assessed it as Rs. 500/- after considering the disability of 25 per cent. Thus the annual loss to the claimant-respondent No.1 would be Rs.4800/- after considering the monthly economic loss at Rs.400/- and not Rs. 6000/ as assessed by the Tribunal which is wrong. Thus after applying the multiplier of 13 as provided for the person of this age group under the second schedule of the Act which is scaled down to 11 by the Tribunal which is correct. Thus the compensation payable for future loss of income to the complainant-respondent comes to Rs.52,800/- and not Rs. 66,000/- as assessed by the Tribunal. The award is thus modified to this extent. 20. From the perusal of the award passed by the Tribunal, it is evident that the amount of compensation of Rs. 10,000/- has been awarded by the Tribunal under the head pain and suffering. However, in the concluding para the learned Tribunal has shown this amount as Rs. 40,000/- which is not correct. This is typographically error and can be corrected by this court. 21. In view of above, I would hold that the claimant-respondent No.1 is entitled to the compensation on the ground of the injuries suffered by him in the vehicular accident is as under:- i) Medical expenses- Rs. 15,000/- ii) Future loss of income- Rs. 52,800/- iii) Pain and sufferings Rs.-10,000/- iv) Loss of amenties of life-Rs.50,000/- Total:- Rs. 127,800/- The claimant-respondent No. 1 is also entitled to the interest @ 9 per cent per annum on the above awarded amount except on future loss of income from the date of filing of claim petition till the payment is made. This appeal is accordingly disposed of as modified above. The parties shall bear their own cost.