National Insurance Co. , Ltd. v. Bhadramma W/o. Late Govinda Reddy
2009-01-21
K.SREEDHAR RAO, S.N.SATYANARAYANA
body2009
DigiLaw.ai
Judgment :- K. Sreedhar Rao, J. One Govinda Reddy a passenger in a BTS bus killed in an accident on 13.7.1994 at 11.15 a.m. on account of the collision between BTS bus and the lorry. The wife and children of the deceased filed a petition seeking compensation and have filed an appeal seeking enhancement of compensation. 2. The insurer has filed an appeal seeking avoidance of liability on the ground that there was no coverage of policy on the date of the accident. The policy issued is marked at Ex.R.2 w.e.f. zero hours of 14.7.1994 to mid night of 13.7.1995. The insured had paid the premium amount of Rs.1307/- on 13.7.1994. The Ex.R.1-receipt is issued by the insurer to that effect. The tribunal has awarded compensation of Rs.312948/-with interest at 6% p.a. and directed the owner and insurer of the lorry to pay compensation. The occurrence of the accident and negligence of the lorry is not in dispute. 3. In the context of the pleadings and evidence of the insurer, the precise question that arise for consideration would be: i) Whether the risk of the insurer would commence from the time of the acceptance of premium or whether it commences from the time of issue of the policy/cover note? 4. Sri. B.C. Seetharam Rao counsel for the insurer placed reliance upon the decision of the Supreme Court in Deokar Exports Pvt. Ltd., Vs. New India Assurance Co., Ltd., 2009 SAR(Civil) 85. In para 9 and 11 and 12, it is held thus: "9. In this case the proposal sent by the appellant was received by the insurer on 16.6.1989. It required that the period of insurance cover should be for the period 12.3.1988 to 12.9.1989. The reason why the respondent wanted the insurance cover retrospectively from 12.3.1988 is obvious. The initial insurance policy expired on 12.3.1988. Under the terms of finance between MSFC and the appellant, apparently it was necessary to have an uninterrupted and continuous insurance cover during the period the machine was secured in favour of MSFC. Therefore, the appellant wanted the insurance cover to be continued by way of renewal for the period 12.3.1988 to 12.9.1989. But the premium amount for one year was received by the insurer only on 26.8.1988.
Therefore, the appellant wanted the insurance cover to be continued by way of renewal for the period 12.3.1988 to 12.9.1989. But the premium amount for one year was received by the insurer only on 26.8.1988. Having regard to the bar contained in Section 64-VB of the Act, the insurer could not accept the request of the appellant to grant insurance cover with retrospective effect from a date prior to 26.8.1988 when it received the premium. Therefore, the insurer adopted the standard, logical and obvious course of issuing the insurance policy with effect from the date on which it received the premium amount by cheque that is with effect from 26.8.1988. As the premium paid was for one year and the standard term of the fire policy was one year, the policy was issued assuming risk for the period 26.8.1988 to 25.8.1989. Non-issue of the policy for the period commencing from 12.3.1988 required by the appellant, was for a good and valid reason. There was also nothing illogical or arbitrary about the insurance of a policy specifying the period of insurance cover as one year effective from the date of receipt of the premium, that is from 26.8.1988 to 25.8.1989. If the appellant wanted insurance cover prospectively it should have so specified in the proposal. Having failed to do so and having sought retrospective cover, the appellant cannot make a grievance when the insurance cover is issued retrospectively from the date of receipt of the premium. 11. A policy of Insurance is a contract based on an offer (proposal) and an acceptance. The Appellant made a proposal. The respondent accepted the proposal with a modification. Therefore, it was a counter proposal. The appellant had three choices. The first was to refuse to accept the counter-proposal, in which event there would have been no contract. The second was to accept either expressly or impliedly, the counterproposal of the respondent (that is respondent's acceptance with modification) which would result in a concluded contract in terms of the counter proposal. The third was to make a counter proposal to the counter proposal of the respondent in which event there would have been no concluded contract unless the respondent agreed to such counter-counter proposal. But the appellant definitely did not have the fourth choice of propounding a concluded contract with a modification neither proposed nor agreed to by either party.
The third was to make a counter proposal to the counter proposal of the respondent in which event there would have been no concluded contract unless the respondent agreed to such counter-counter proposal. But the appellant definitely did not have the fourth choice of propounding a concluded contract with a modification neither proposed nor agreed to by either party. If the appellant did not agree to the policy covering the period 26.8.1988 to 25.8.1989 instead of the period 12.3.1988 to 12.9.1989, the result would never create an insurance contract effective from 30.6.1989 or any other date. 12. The contention of the learned counsel for the appellant that an equitable view must be taken is untenable. In a contract of insurance rights and obligations are strictly governed by the policy of insurance. No exception or relaxation can be made on the ground of equity". 5. The decision of the Supreme Court in Oriental Insurance Co., Vs. Sunita Rati, in AIR 1998 SC 257 is relied upon to contend that the liability of the insurer under the policy would precisely commences from the date and time (if mentioned) of the issue of policy. 6. The decision of the Supreme Court in M/s New India Assurance Co., Ltd. Vs. C.M. Jaya, in AIR 2002 SC 651 is relied upon the contend that the liability of the insurer is strictly in accordance with the terms of the policy. 7. In the light of the ratio laid down by the Supreme Court in the above decisions, it was strenuously contended that the policy in question is issued on 14.7.1994. The accident occurred on 13.7.1994 at 11.15 a.m. Therefore, the insurer is not liable to pay any compensation since there was no coverage of policy on the date and time of the accident. With emphasis, it was submitted that the receipt of premium and issuance of policy constitutes a contract in law. The liability of the insurer under the contract would arise only after the issuance of policy and not any time earlier to that. 8. Section 146 of M.V. Act mandatorily insists insurance against third party risk. Sec. 64 (v)(V) mandates that the insurance company can assume risk only on receipt of premium. A provision is made that the insurance company can also issue policy against the issue of cheque also. 9.
8. Section 146 of M.V. Act mandatorily insists insurance against third party risk. Sec. 64 (v)(V) mandates that the insurance company can assume risk only on receipt of premium. A provision is made that the insurance company can also issue policy against the issue of cheque also. 9. The insurer in question is a nationalized company owned by the Government and would constitute the State within the meaning of article 12 of the Indian Constitution. It is mandatory under the provisions of the M.V.Act that no vehicle can ply in a public place without a valid policy to cover the risk of third party. Whenever, the owner of a vehicle makes an offer for issue of policy, it is unavoidable obligation of the appellant to receive the required premium and after proper verification of necessary details issue a policy. The appellant has no discretion to arbitrarily reject the issuance of policy, since, it is the mandate of law that every vehicle can ply in a public place only when covered with valid insurance policy covering the risk of the third party. 10. In the instant case, the insured had paid the premium on 13.7.1994. The insurer of course, issued a receipt to that effect and also issued a policy, however, w.e.f. 14.7.1994. In the context of law and facts, the precise question would be whether the insurer can defer the assumption of risk to later point of time other than from the time of receipt of the premium. 11. In this regard Sri. B.C. Seetharam Rao strenuously argued that the insurer has to make inspection of the vehicle, scrutinize the records and thereafter would issue the policy if every thing is in order. The mere receipt of premium does not create any contract or obligation on the part of the insurer against the third party unless policy is issued. 12. After carefully going through the decision of the Supreme Court in Deokar Exports (p) Ltd., Vs. New India Assurance Co., we are of the view that the ratio laid down in the decisions cited is not applicable to the facts of the case. The facts cited in the case pertain to coverage of insurance of machinery. The financial institution had stipulated to the borrower the compulsory coverage of insurance from a particular date.
New India Assurance Co., we are of the view that the ratio laid down in the decisions cited is not applicable to the facts of the case. The facts cited in the case pertain to coverage of insurance of machinery. The financial institution had stipulated to the borrower the compulsory coverage of insurance from a particular date. To keep in terms with the requirements of the stipulation, the borrower had sought issuance of policy with retrospective effect. The insurer had issued a policy assuming the risk only w.e.f. 26.6.1988 on which date the premium was received. In view of the provisions of Sec. 64(v)(b) and in the light of the general principles of contract pertaining to offer and acceptance, it is held that the insured had no right to seek policy retrospectively. When the policy is issued and accepted by the insured it becomes the concluded contract. If the insured was not agreeable to the terms stipulated in the policy he has the option to repudiate the contract, which of course was not done in the cited case. In the context of the said facts, it is held that, in the contract of insurance the rights and obligations are strictly governed by the policy of insurance. 13. The decision of the Supreme Court in Sunitha Rati's case AIR 1998 SC 257 also lays down salutary principle of law that the liability of the insurer would commences from the date of the policy. If any time is mentioned in the policy, from that time the liability becomes effective and not earlier to that. The coverage of insurance for a motor vehicle would virtually stand on a different footing unlike in the other types of contract of insurance. It is mandatory that third party risk should be covered when a vehicle has to ply in a public place. The appellant being the State authority doing business of insurance is duty bound to honour and implement the provisions of law. Sec. 64(v)(b) declares that the insurer can assume the risk only upon the receipt of premium. May be, that in other types of contracts where insurance is sought, the insurer may have the discretion to enter into a contract or not. But in respect of Motor vehicles there is no discretion on the part of the appellant.
Sec. 64(v)(b) declares that the insurer can assume the risk only upon the receipt of premium. May be, that in other types of contracts where insurance is sought, the insurer may have the discretion to enter into a contract or not. But in respect of Motor vehicles there is no discretion on the part of the appellant. The appellant has to enter into the contract and issue policy in accordance with law, if proper premium is paid. In the context of the said factual and legal situation, it is to be held that in a contract of insurance in respect of motor vehicles the issuance of policy becomes effective when premium is received. The insurer cannot postpone the assumption of liability after receipt of premium. The necessary verification of vehicle and the documents should be done before receipt of premium. However, under the said pretext, the insurer cannot postpone the assumption of risk, other than from the date and time of receipt of premium. Otherwise, the insurer would be guilty of abating the use of vehicle in a public place without policy. 14. In the instant case the receipt at Ex.R.1 does not mention the time of payment of premium. It is submitted that the office practice of the insurer is to receive the premium from 10.00 a.m. to 3.00 p.m. which almost corresponds the banking hours. The accident has occurred at 11.15 a.m. The office has commenced at 10.00 a.m. There is no material to show exactly at what point of time the premium was remitted and received. Therefore, it is not established that the premium is paid subsequent to the accident. Hence, the ratio laid down in Sunitha Rani's case would apply to the case and it is to be inferred that the policy is effective from the mid night on 13.7.1994. In view of the reasons and discussions made above, we hold that the finding of the tribunal that the insurer is liable to pay compensation is sound and proper. 15. The deceased was an agriculturist and vegetable vendor. The RTC extracts are produced. In the absence of credible proof of income, the income is assessed at Rs.1800/- p.m. 1/4th to be deducted towards personal expenses. Rs.1350/- p.m. would enure to the benefit of the dependents.
15. The deceased was an agriculturist and vegetable vendor. The RTC extracts are produced. In the absence of credible proof of income, the income is assessed at Rs.1800/- p.m. 1/4th to be deducted towards personal expenses. Rs.1350/- p.m. would enure to the benefit of the dependents. The total loss of dependency would be Rs.1350 (income) X12(months) X15 (multiplier)=Rs.243000/- The wife is entitled to Rs.25000/-towards loss of consortium, petitioners together are entitled to Rs.25000/- towards loss of expectancy and Rs.10000/-is granted towards funeral expenses. In all, the petitioners are entitled to a total compensation of Rs.303000/-. The tribunal has awarded higher compensation of Rs.312498/-. Hence, for the reasons stated above, both the appeals are dismissed.