Judgment : 1. Claimant in M.O.P. No.444 of 1998 on the file of the IV Additional District Judge-cum-Chairman, Motor Accident Claims Tribunal, Visakhapatanam, filed the present Civil Miscellaneous Appeal under Section 173 of the Motor Vehicles Act, 1988 (for short, 'the MV Act, 1988'), challenging the award dated 04.02.2002 in dismissing the claim against the second respondent-insurance company and also for enhancement of the compensation. 2. The brief facts that are necessary for disposal of the present appeal may be stated as follows: The petitioner and his friends were travelling in bus bearing No.MH31M 3799 belonging to the first respondent to go to Aurangabad on 21.4.1997, and when the bus reached Teku river bridge, due to rash or negligent driving by the driver of the bus, the bus fell into river, as a result of which the petitioner sustained multiple injuries and was referred to Medical College Hospital, Aurangabad. Thereafter, he underwent treatment in K.G. Hospital, Visakhapatnam. 3. The first respondent remained exparte before the Tribunal. The second respondent stated in its counter that the cheque issued by the first respondent towards insurance premium was dishonoured and therefore the second respondent had cancelled the policy by its letter dated 30.8.1996 and the same was endorsed in the outward register maintained by the second respondent and that the insurance company also informed to the Assistant Regional Transport Officer, Baldhana on 11.11.1997, and so the second respondent is not liable to pay any compensation. 4. The issue with regard to the rash or negligent driving by the driver of the vehicle bearing No.MH31M 3799 in causing the accident, has become final as none of the respondents in the O.P. preferred any appeal. Now, the points that arise for consideration in this appeal are, (i) whether the second respondent-insurance company is liable to pay the compensation? (ii) whether the petitioner is entitled for enhancement of the compensation, if so, against whom ? 5. Now, the points that arise for consideration in this appeal are, (i) whether the second respondent-insurance company is liable to pay the compensation? (ii) whether the petitioner is entitled for enhancement of the compensation, if so, against whom ? 5. The learned counsel for the appellant contended that the second respondent has not produced any evidence to show that the cancellation of the insurance policy was intimated to the owner; that once the first respondent was not aware of the cancellation of the policy, it is deemed that the policy was in force; that it is obligatory on the part of the second respondent to serve notice of cancellation on the first respondent and inform the same to the concerned Regional Transport Authority, and that the cancellation of the policy can be effected only from the date of intimation to the authority; hence, the insurance policy is liable to pay the compensation amount. It is further contended that the claimant sustained 60% permanent disability and so, the compensation awarded by the Tribunal is on lower side; hence, the same is liable to be enhanced. The learned counsel relied on two decisions, which will be referred to at appropriate time. 6. On the other hand, the learned counsel for the second respondent contended that since the policy was cancelled, question of liability of the insurance company does not arise; that the evidence of R.W.1 would go to show that the policy was cancelled; that the Tribunal rightly held that the insurer is not liable to pay the compensation as the policy stood cancelled because of the dishonour of the cheque given by the owner towards premium of insurance, and rightly dismissed the O.P. against the second respondent. Hence, he prayed to dismiss the appeal. 7. Admittedly, the accident took place on 21.4.1997. There is no dispute about taking of place of the accident and sustaining injuries by the claimant. There is evidence on record to show that the first respondent paid the premium amount by issuing a cheque bearing no. 89755, dated 12.8.1996 in favour of the second respondent. But, the said cheque was bounced for want of sufficient funds, under Ex.B3-cheque return memo. On 30.8.1996, the second respondent informed about the same to the first respondent duly canceling the policy. 89755, dated 12.8.1996 in favour of the second respondent. But, the said cheque was bounced for want of sufficient funds, under Ex.B3-cheque return memo. On 30.8.1996, the second respondent informed about the same to the first respondent duly canceling the policy. On coming to know about the accident, the insurance company also informed about the cancellation of the cover note to the concerned police station and also to the Regional Transport Authority, under Ex.B7-letter. 8. In support of his contention, the learned counsel for the appellant placed strong reliance on a decision of a Division Bench of this Court in M. Nageswara Rao v. New India Assurance Company Limited, Visakhapatnam & others 1, wherein it is held as follows: " ..We are inclined to hold that the Insurance Company cannot be absolved of its obligation to pay compensation to the third parties covered by the policy issued by it, on the ground that it did not receive premium, instead of following the judgment in Seema Malhotra's case (supra) [2001 ACJ 638], which proceeded on the provisions of the Indian Contract Act without reference to Chapter-II of the Motor Vehicles Act dealing with the Insurance Policy to be obtained by the owners of the vehicle before putting them as in public place for use. .." 9. The learned counsel for the appellant also relied on a decision of Bombay High Court in Oriental Insurance Co. Ltd. v. Prakash Chunilal Mirgany & Ors. (2005) ACC 799 wherein it is held thus: ".. If on the date of the 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. The subsequent cancellation of the insurance policy on the ground of non-payment of premium would not affect the rights which have already accrued in favour of the third party." 10. Basing on the above two decisions, it is vehemently contended by the learned counsel for the appellant that non-payment of premium would not affect the rights which have already accrued in favour of the third party. 11. Section 147 of the MV Act, 1988 deals with requirements of policies and limits of liability. Basing on the above two decisions, it is vehemently contended by the learned counsel for the appellant that non-payment of premium would not affect the rights which have already accrued in favour of the third party. 11. Section 147 of the MV Act, 1988 deals with requirements of policies and limits of liability. Section 147(1) of the Act reads thus: "In order to comply with the requirements of this Chapter, a policy of insurance must be a policy which- (a) is issued by a person who is an authorized insurer; and (b) insures the person or classes of persons specified in the policy to the extent specified in sub-section (2), - (i) against any liability which may be incurred by him in respect of the death of or bodily injury to any person, including owner of the goods or his authorized representative carried in the vehicle or damage to any property of a third party caused by or arising out of the use of the vehicle in a public place; (ii) against the death of or bodily injury to any passenger of a public service vehicle caused by or arising out of the use of the vehicle in a public place: Provided that a policy shall not be required- (i) to cover liability in respect of the death, arising out of and in the course of his employment, of the employee of a person insured by the policy or in respect of bodily injury sustained by such an employee arising out of and in the course of his employment other than a liability arising under the Workmen's Compensation Act, 1923 (8 of 1923), in respect of the death of, or bodily injury to, any such employee, - (a) engaged in driving the vehicle, or (b) if it is a public service vehicle engaged as a conductor of the vehicle or in examining tickets on the vehicle, or (c) if it is a goods carriage, being carried in the vehicle, or (ii) to cover any contractual liability. Explanation: For the removal of doubts, it is hereby declared that the death of or bodily injury to any person or damage to any property of a third party shall be deemed to have been caused by or to have arisen out of, the use of a vehicle in a public place notwithstanding that the person who is dead or injured or the property which is damaged was not in a public place at the time of the accident, if the act or omission which led to the accident occurred in a public place." 12. A bare reading of clause (1) to proviso to the sub-section (1) of Section 147 of the MV Act, 1988 would make it clear that there is a statutory requirement to cover the liability in respect of the death of or bodily injury to, any person, including owner of the goods or his authorized representative, carried in the vehicle, or damage to any property of a third party caused by or arising out of, the use of the vehicle in a public place. Similarly, clause (ii) of sub-section (1) of Section 147 of the MV Act, 1988 provides for a statutory coverage of the risk in respect of death or bodily injury to any passenger in a public service vehicle. Admittedly, the deceased was a passenger in a public service vehicle. This statutory requirement has to be followed by injured and insurer. 13. Under Section 149 of the MV Act, 1988, it is the duty of the insurers to satisfy judgments and awards against persons insured in respect of third party risks. Admittedly, the deceased was a passenger in a public service vehicle. This statutory requirement has to be followed by injured and insurer. 13. Under Section 149 of the MV Act, 1988, it is the duty of the insurers to satisfy judgments and awards against persons insured in respect of third party risks. Section 149(1) reads thus: "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 covered by a policy under clause (b) of sub-section (1) of Section 147 (being a liability covered by the terms of the policy), or under the provisions of Section 163A 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 judgments." 14. By virtue of the above provision, the insurer is held to be liable to indemnify the third party in respect of a liability which that policy covers and to satisfy the award of compensation, in respect of death or bodily injury, caused in the accident. In other words, there must be subsistence of policy issued by the second respondent-insurance company in favour of the first respondent-owner, to cover the risk of third parties in respect of an accident arising out and use of a motor vehicle. Further more, the liability of the insurance company, which sub-section (1) of Section 149 of the MV Act, 1988 declares is based on the terms and conditions of the contract of insurance between insured person, on one hand, and the insurance company, on the other. 15. In the backdrop of these provisions, it has to be seen as to whether from which date the liability of insurance company commences because the contract of insurance is a contract of personal indemnity. 16. 15. In the backdrop of these provisions, it has to be seen as to whether from which date the liability of insurance company commences because the contract of insurance is a contract of personal indemnity. 16. It is held in the decision of the Apex Court in National Insurance Co. Ltd. v. Seema Malhotra & others 2001 ACJ 638 relied on by the learned counsel for the second respondent-insurance company, as follows: (para 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." It is further held in the above decision as under. (para 20) "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." In the above case, the accident took place on 31.12.1993. The insured gave a cheque for Rs.4,492/- on 21.12.1993 towards first installment of the premium. On 10.1.1994, the cheque was returned by the Bank with endorsement 'no funds in the account of the insured'. On 20.1.1994, the insurance company informed to the business concern of the insured duly canceling the above policy with immediate effect. 17. The factual situation in the aforesaid mentioned case is more or less similar to the factual aspect in the present case. Because, in the case on hand, cheque dated 12.8.1996, which was issued for payment of premium, was bounced for want of sufficient funds. On 30.8.1996, the insurance company informed the owner duly canceling the cover note from inception. The accident took place on 21.4.1997. 18. Because, in the case on hand, cheque dated 12.8.1996, which was issued for payment of premium, was bounced for want of sufficient funds. On 30.8.1996, the insurance company informed the owner duly canceling the cover note from inception. The accident took place on 21.4.1997. 18. On this aspect, it is pertinent to refer to a decision in Union of India & another v. Major Bahadur Singh (2006) 1 Supreme Court Cases 368 wherein it is held thus: "The courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. Observations of the courts are neither to be read as Euclid's theorems nor as provisions of the statute and that too taken out of their context. These observations must be read in the context in which they appear to have been stated. ..." Further, in another decision in State of Orissa & others v. Md. Illiyas (2006) 1 Supreme Court Cases 275, it is held thus: "When the allegation is of cheating or deceiving, whether the alleged act is willful or not depends upon the circumstances of the case concerned and there cannot be any straitjacket formula. The High Court unfortunately did not discuss the factual aspects and by merely placing reliance on an earlier decision of the Court held that prerequisite conditions were absent. Reliance on the decision without looking into the factual background of the case before it, is clearly impermissible. ..." 19. In this context, it is relevant to mention Section 64-VB (2) of the Insurance Act, which reads thus: "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." The above provision makes it clear that the insurer has no liability to the insured unless and until the premium payable by the insured is received by the insurer. Because risk is not assumed earlier than the date on which premium has been paid. In other words, upon receipt of consideration only, contract can be said to have come into existence, which determines the existence of mutual rights and obligations arose out of the contract between the parties. 20. Because risk is not assumed earlier than the date on which premium has been paid. In other words, upon receipt of consideration only, contract can be said to have come into existence, which determines the existence of mutual rights and obligations arose out of the contract between the parties. 20. Under Section 25 of the Contract Act, an agreement made without consideration, is void. Consideration is a necessary element of a binding contract. Most obvious example of an agreement without consideration is purely gratuitous promise given and accepted. Such a promise has no legal force. No doubt, Section 25 of the Contract Act, can only be applied where the transaction is contractual in nature, but, at the same time, there is a statutory obligation. There is no dispute that the transaction between the respondents 1 and 2 herein is in the nature of statutory contractual obligation. When the cheque dated 12.8.1996 issued by the first respondent was bounced for want of sufficient funds under Ex.B3-cheque return memo, the second respondent duly informed about the same to the first respondent stating that they have cancelled the policy. Ex.B4 is the office copy of the notice dated 30.8.1996, which reads thus: "In view of the non-payment, please note that our cover note stands cancelled from inception and consequently our receipt no.2755 issued to you for the payment as also our acceptance advice, stand cancelled." It is further stated therein as under: "In case you (the insured) desire us to cover the risk afresh, please arrange to remit us either in cash or by Bank Draft for a sum of Rs.14,385/-. on receipt of the said amount and our previous Stamped Receipt issued to you, we will assume the risk and issue a Cover Note/Certificate from the date of receipt of the amount." 21. So, from the contents in Ex.B4, there are two aspects. One is cover note already issued was cancelled by reason of dishonour of cheque, and secondly, if the insured desired to remit the amount mentioned therein, they would issue fresh cover note/certificate covering the risk of third party from the date of receipt of the amount. Therefore, it is crystal clear that the insurance company already exercised its right in canceling the policy long prior to the accident in question because there was no consideration. Therefore, it is crystal clear that the insurance company already exercised its right in canceling the policy long prior to the accident in question because there was no consideration. Now, the question is whether Ex.B4-notice was duly served on the first respondent or not. Ex.B5 is the outward register of the second respondent, which shows that the letter was communicated to the first respondent. To that effect, an endorsement was made on the policy under Ex.B6, which reads as follows: "Notwithstanding anything contained therein to the contrary, it is hereby declared and agreed that the Insurance under this policy stands cancelled as from inceptions i.e. 19.08.96. Since the cheque paid by the insured towards payment of premium, returned from our Bankers duly dishonoured, and in consequence whereof the premium amount of Rs.14,279/- is hereby written off." The above aspects have not been denied or disputed in cross-examination of R.W.1. It is not suggested to R.W.1 that copy of Ex.B4 notice was not received by the first respondent-owner and that the contents in Ex.B5-despatch register, are false, and that they have not made any Ex.B6-endorsement on the policy. Except suggesting that the second respondent is liable to pay compensation, nothing has been elicited to discredit the testimony of R.W.1. So, from the aforesaid discussion, it is clear that there was no policy of insurance in respect of the vehicle in question as on the date of accident to make the insured to indemnify any amount towards compensation in respect of third party claim or against passenger traveling in public service vehicle. Even prior to the accident, cancellation of the insurance policy was effected on the ground of nonpayment of premium, duly informing the same to the insured. 22. Coming to the other decision in M. Nageswara Rao's case (1 supra) relied on by the learned counsel for the appellant, the accident took place on 23.5.1986 and the appellant therein issued cheque on 28.12.1985 for certain amount for renewal of the insurance policy for one more year. But, the cheque was returned by the bank with endorsement 'not arranged for', by its note dated 2.1.1986. Thereafter, the insurance company, by its letter dated 8.1.1986, informed to the insured that the cheque was dishonoured and directed therein to remit the premium. But, the cheque was returned by the bank with endorsement 'not arranged for', by its note dated 2.1.1986. Thereafter, the insurance company, by its letter dated 8.1.1986, informed to the insured that the cheque was dishonoured and directed therein to remit the premium. In those circumstances, it was held that the insurance company waived its right to cancel the policy, and in spite of the fact of dishonour of the cheque, the company expressed its willingness to continue the policy if the premium is paid. But, in the present case, cover note had been cancelled. The second respondent-insurance company has not expressed its willingness to continue the policy if premium is paid. Therefore, the above decision has no application to the facts of the present case. 23. In the decision in Parkash Chunilal's case (2 supra), relied on by the learned counsel for the appellant, the accident took place on 25.11.1981 and defence taken in that case was that the insurance company had purported to have cancelled the policy on 19.11.1981, on account of dishonour of cheque given for payment of premium. In the said case, neither any notice required under Section 105 of the Motor Vehicles Act, 1939, was given to the registering authority, nor were any proceedings issued for cancellation after such notice. But, in the case on hand, immediately after receipt of intimation regarding dishonour of cheque issued for payment of premium, a Ex.B4-notice was issued to the owner duly canceling the policy, which is even prior to the accident. Hence, the said case has no application to the facts of the present case. 24. The next question that falls for consideration is whether it is the duty bound for the insurer to inform about the cancellation of the policy to the registering authority. Under the Motor Vehicles Act, 1939, there is an obligation on the part of the insurance company to inform the registering authority with regard to cancellation or suspension of the policy and within 7 days from that date, the insurer has to inform about the cancellation or suspension of the policy to the registering authority. But, there is no provision in the MV Act, 1988, similar to Section 105 of the Old Act. But, there is no provision in the MV Act, 1988, similar to Section 105 of the Old Act. But, sub-section (4) of Section 147 of the MV Act, 1988, reads thus: "Where a cover note issued by the insurer under the provisions of this Chapter or the rules made thereunder is not followed by a policy of insurance within the prescribed time, the insurer shall, within seven days of the expiry of the period of the validity of the cover note, notify the fact to the registering authority in whose records the vehicle to which the cover note relates has been registered or to such other authority as the State Government may prescribe." 25. 'Certificate of insurance' as defined under clause (b) of Section 145 of the MV Act, 1988, means, 'a certificate issued by an authorized insurer in pursuance of sub-section (3) of Section 147 and includes a cover note complying with such requirements as may be prescribed, and where more than one certificate has been issued in connection with a policy, or where a copy of a certificate has been issued, all those certificates or that copy, as the case may be.' Under clause (d) thereof, 'policy of insurance' includes certificate of insurance. 26. Sub-section (4) of Section 147 of the MV Act, 1988, deals with a situation where a cover note issued by the insurer under the provisions of this Act, is not followed by a policy of insurance within the prescribed time, the insurer shall, within 7 days of validity of the cover, notify the fact to the registering authority. No doubt, the above provision makes it clear that the issuance of policy is not followed the cover note within the prescribed time, the insurer shall, within 7 days of the period of expiry of validity of the cover note, notify to the registering authority. In the case on hand, Ex.B1-cover note does not indicate expiry of period of its validity. The column with regard to expiry of period of validity of the cover note, is left blank. But, it only reads that the date of commencement of the insurance for the purpose of the Act is from 19.8.1996 to 18.8.1997. In the case on hand, Ex.B1-cover note does not indicate expiry of period of its validity. The column with regard to expiry of period of validity of the cover note, is left blank. But, it only reads that the date of commencement of the insurance for the purpose of the Act is from 19.8.1996 to 18.8.1997. Therefore, the question of notifying to registering authority within the period of 7 days of the expiry of period of validity of the cover note, does not arise, and consequently the question of compliance of sub-section (4) of Section 147 of the MV Act, 1988, does not arise. Admittedly, in this case, the second respondent addressed Ex.B7-letter on 5.5.1997 duly informing to the police and the registering authority about the cancellation of the cover note on 19.8.1996. In view of the above discussion, it is clear that even prior to the date of accident, the cover note issued in respect of the offending vehicle, was cancelled by the second respondent on the ground that the cheque issued towards payment of premium, was dishonoured. Therefore, the second respondent-insurance company is not liable to pay the compensation to the claimant. The Tribunal rightly awarded compensation as against the first respondent only. 27. With regard to quantum of compensation, considering the evidence on record, the Tribunal granted compensation of Rs.1,01,000/-. The contention of the learned counsel for the appellant that the claimant sustained 60% permanent disability, cannot be accepted in view of the fact that admittedly an operation was conducted on the left leg of the claimant by inserting a plate, and again, by another operation, the plate was removed as the fracture had united without any malunion. There is no evidence to show that because of the fracture on the left leg, there was shortening of the leg. As the fractured leg was united properly, the plate was removed. The percentage of disability estimated by P.W.2 was in his individual capacity. He has not produced any evidence from the Medical Board for the purpose of assessing the percentage of partial or permanent disability. So, considering the nature of the injuries and period of treatment, the Tribunal rightly granted compensation of Rs.1,01,000/-, and there are no grounds to interfere with the same. 28. He has not produced any evidence from the Medical Board for the purpose of assessing the percentage of partial or permanent disability. So, considering the nature of the injuries and period of treatment, the Tribunal rightly granted compensation of Rs.1,01,000/-, and there are no grounds to interfere with the same. 28. The Civil Miscellaneous Appeal is devoid of merit and is, accordingly, dismissed, confirming the award dated 4.2.2002 in M.O.P. No.444 of 1998 on the file of the IV Additional District Judge-cum-Chairman, Motor Accident Claims Tribunal, Visakhapatanam. No costs.