Judgment :- 1. This Civil Miscellaneous Appeal is filed against the Judgement and Decree dated 30.12.2003 made in MCOP.No.266/1995 by the learned Chief Judicial Magistrate (MACT) Vellore. 2. The Tribunal by the impugned award allowed the claim petition filed by the parents of the deceased child Basker and granted a compensation of Rs.1,63,000/- to the parents of the child. 3. The deceased child, while he was travelling along with his father in a bicycle, met with an accident on 15.7.1995, in which the lorry came from behind and hit the bicycle, as a result of which, the child was thrown and the front wheel of the lorry run over the child, causing instantaneous death. 4. Before the Tribunal, as regards the negligence aspect, the evidence of the claimants remained unrebutted. The Tribunal found that the driver of the lorry was negligent in causing the accident by his rash and negligent driving, which is not assailed by the Insurance Company, the Appellant herein. Therefore, the said finding is liable to be confirmed and accordingly, confirmed. 5. The Insurer/appellant has laid evidence to the extent that the Insured, the owner of the vehicle, namely the 1st Respondent in the claim petition and the 3rd Respondent herein, has paid the premium of the Insurance Policy by way of a cheque, which was bounced and therefore, the Insurance Company cancelled the policy. It produced a xerox copy of the receipt of the cheque for a sum of Rs.1565/-marked as Ex.R3 and the xerox copy of the Bank reconciliation statement as Ex.R4 and Ex.R5 is the xerox copy of the letter dated 5.7.1996 written by the Insurance Company to the 1st Respondent, intimating that the cheque for Rs.1565/-towards premium of the policy got dishonoured. Ex.R6 is the copy of the letter dated 4.7.1996, written by the Branch Manager at Gudiyattam to the Divisional Officer at Vellore, informing about the dishonour of cheque on 9.2.1995. 6. Mr.K.S.Narasimhan, the learned counsel for the Appellant contended that the accident had occurred on 15.7.1995 and the policy was cancelled for dishonour of cheque paid towards premium and therefore, disputed the liability on the ground that there was no insurance coverage at the time of the accident. The learned counsel would submit that there was no privity of contract between the Insurer and the Insured. 7. The learned counsel would submit that there was no privity of contract between the Insurer and the Insured. 7. Yet another contention was put forward by the learned counsel for the Appellant that the vehicle was sold by the 3rd Respondent V.M.Ravi in favour of the 4th Respondent Nizar Ahmed, who is the 2nd Respondent before the Tribunal and therefore, the Insurance Company is not liable to pay compensation, as the question of payment of compensation by the Insurer in discharge of its obligation to indemnify the Insured arises only when the Insured is held responsible vicariously for the negligence of the driver. 8. On the other hand, Mr.R.Markabandhu, the learned counsel for the Respondents 1 and 2/claimants submitted that in order to avoid liability, the Insurance Company has to plead and prove that the cheque was bounced and the Insured was intimated. He pointed out that there is no evidence to show that the intimation in respect of cancellation of insurance policy was received by the owner nor the Regional Transport Officer has been informed about the same. As there was no material or evidence placed on record the prove that the owner and the Regional Transport Officer/Authority was informed or intimated about the bouncing of the cheque and cancellation of the policy, the Insurance Company would be liable. 9. The learned counsel for the claimants relied on Section 157 of the Motor Vehicles Act, 1988 and submitted that when the lorry was transferred to Nizar Ahmed, along with the vehicle, policy of the insurance shall be deemed to have been transferred and therefore, the Insurer cannot escape from the liability. 10. It is an admitted fact that the owner of the vehicle has insured the vehicle by payment of cheque as a 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 on 9.2.1995. The evidence placed on record through RW.1, the Administrative Assistant of the Insurance Company shows that the Insured was intimated vide letter dated 5.7.1996. There is nothing on file to prove that the owner and the Regional Transport Officer/Authority was intimated about the bouncing of the cheque and the cancellation of the policy immediately after the accident. The evidence placed on record through RW.1, the Administrative Assistant of the Insurance Company shows that the Insured was intimated vide letter dated 5.7.1996. There is nothing on file to prove that the owner and the Regional Transport Officer/Authority was intimated about the bouncing of the cheque and the cancellation of the policy immediately after the accident. There is also no record to prove that such intimation has been received by the Insurer. 11. Section 64-VB of the Insurance Act, 1938 prohibits a Insurance Company from assuming any risk in respect of any insurance business, until premium payable is received or is guaranteed from the Insured. It also provides that the Insurer can assume risk for insurance business, only when premium is paid in cash or by cheque to the Insurer. In a case, where the premium amount is paid by a cheque, but the cheque is dishonoured by the Bankers, what would be its effect on the policy of insurance issued to the Insured and what would be the effect of legal right of a third party, whose risk is covered by policy of insurance have to be decided. This question has come up before the Honourable Supreme Court in various decisions. 12. It is appropriate to consider the authority reported in 2000-ACJ-630-SC (New India Assurance Co. Limited Vs. Rula). In the said decision, the Honourable Supreme Court considered the position of rights of third parties to get indemnified against the insurer of the vehicle when premium has not been paid and for that reason, the policy of insurance is cancelled. Placing reliance on the decision of the Honourable Supreme Court reported in 1998-ACJ-123-SC (Oriental Insurance Co. Limited Vs. Inderjit Kaur), the Honourable Supreme Court answered the question in favour of third parties and held as under:- "The subsequent cancellation of the insurance policy in the instant case on the ground that the cheque through which the 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. 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. 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." 13. In the case of National Insurance Co. Limited Vs. Seema Malhotra (2001-ACJ-638-SC), the accident had occurred on 31.12.1993 and in the Insured died and the car war damaged. On 10.1.1994, the bankers sent intimation about dishonour of cheque and therefore, on 20.1.1994, the Insurer informed business concerned of the Insured that insurance policy was cancelled. The widow and children of the Insured moved State Consumer Forum claiming for the loss of vehicle. The claim was rejected. A Division Bench of the High Court of Jammu and Kashmir, however, allowed the appeal on the ground that there was no proper communication of cancellation of insurance policy. Before the Honourable Supreme Court, the question was, in a case where the policy of insurance is cancelled for non payment of premium amount, whether the Insurer would be liable or not. The Honourable Supreme Court referred to the decisions reported in 1998-ACJ-123-SC and 2000-ACJ-630-SC cited supra and held that when premium promised is not paid, the Insurer cannot be held liable. It is held as follows:- "(17.) In a contract of insurance when an Insured gives a cheque towards payment of premium or part of the premium, such a contract consists of reciprocal promise. The drawer of the cheque promises the Insurer that the cheque on presentation, would yield the amount in cash. It cannot be forgotten that a cheque is a Bill of Exchange drawn on a specified banker. A Bill of Exchange is an instrument in writing containing an unconditional order directing a certain person to pay a certain sum of money to a certain person. It involves a promise that such money would be paid. (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. It involves a promise that such money would be paid. (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 insured cannot claim performance from the insurer in such a situation." (Emphasis supplied). 14. The Honourable Supreme Court in the case of Daddappa Vs. Branch Manager, National Insurance Co. Limited (2008-ACJ-581-SC) held that if the contract of insurance is cancelled, all the concerned ought to be intimated. It is apt to reproduce paragraph 26 of the said judgement herein:- "(26.) We are not obvious 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." 15. It, therefore, may be taken as well settled that when the premium is not paid in cash or valid cheque, the Insurance Company can cancel the policy of insurance. It is also well settled that if as on the date of the accident, the vehicle involved in the accident is not covered by valid policy, the insurer is not required to indemnify the insured against third party risk. It is also well settled that if the insured makes up the premium even after the cheque was dishonoured, but before the date of accident, the Insurance Company would be liable to pay the compensation. What would be the position, if the cancellation or the cancellation endorsement is not validly communicated to the insured As observed by the Honourable Supreme Court in Daddappas case cited supra, if the contract of insurance is cancelled, but not communicated to all concerned including the Insured, the Insurance Company would be still liable. 16. In this case, admittedly, there is no evidence to show that the cancellation of policy was intimated to the Insured. 16. In this case, admittedly, there is no evidence to show that the cancellation of policy was intimated to the Insured. As already pointed, only the dishonour of cheque issued for premium by the 3rd Respondent herein, Ravi has been intimated to the Insured by letter dated 5.7.1996 Ex.R5. It is rightly held by the Tribunal that the Insurance Company has not intimated the cancellation of the policy to the Insured and therefore the Appellant is held liable. The reasoning given and the finding recorded by the Tribunal in this regard is not illegal or erroneous. Thus, I would hold that the Tribunal has properly held that the Appellant Insurance Company cannot be absolved of its liability to compensate third party on this ground. 17. The next point for consideration is that the 3rd Respondent Ravi has sold the vehicle to the 4th Respondent Nizar Ahmed. Ex.R1 the agreement of sale entered into between Ravi and Nizar Ahmed has been filed in this case. Section 157 of the Act deals about the transfer of certificate of insurance, when the vehicle is transferred. As per the said provision, when the vehicle is transferred, the Insurance Policy is deemed to have been transferred. Section 157 reads as under:- "157. Transfer of certificate of insurance:-(1) Where a person in whose favour the certificate of insurance has been issued in accordance with the provisions of this Chapter transfers to another person the ownership of the motor vehicle in respect of which such insurance was taken together with the policy of insurance relating thereto, the certificate of insurance and the policy described in the certificate shall be deemed to have been transferred in favour of the person to whom the motor vehicle is transferred with effect from the date of its transfer. Explanation: For the removal of doubts, it is hereby declared that such deemed transfer shall include transfer of rights and liabilities of the said certificate of insurance and policy of insurance. (2) The transferee shall apply within fourteen days from the date of transfer in the prescribed form to the insurer for making necessary changes in regard to the fact of transfer in the certificate of insurance and the policy described in the certificate in his favour and the insurer shall make the necessary changes in the certificate and the policy of insurance in regard to the transfer of insurance." 18. A plain reading of Section 157(1) of the Act would show that in respect of the third party risk, the certificate of insurance together with the policy of insurance described therein shall be deemed to have been transferred in favour of the person to whom the motor vehicle is transferred. As per Section 157(2), within 14 days from the date of transfer, the transferee has to apply to the Insurer for making necessary changes with regard to the policy in the certificate of insurance. Even if this requirement is not complied with by the transferee, it has no effect on the third party cover for whom the policy of insurance is issued. Reference may be made to the decision rendered in the case of Complete Insulations (P) Limited Vs. New India Assurance Co. Limited (1996-ACJ-65-SC) . Relevant observations from this decision are as follows:- "... It is obvious on a plain reading of this provision that the legislature was anxious to protect third party interest. Then comes Section 157 which we have extracted earlier. This provision lays down that when the owner of the vehicle in relation whereto a certificate of insurance is issued transfers to another person the ownership of the motor vehicle, the certificate of insurance together with the policy described therein shall be deemed to have been transferred in favour of the new owner of the vehicle with effect from the date of transfer. Sub Section (2) requires the transferee to apply within fourteen days from the date of transfer to the Insurer for making necessary changes in the certificate of insurance and the policy described therein in his favour. It is only in respect of third party risks that Section 157 of the new Act provides that the certificate of insurance together with the policy of insurance described therein shall be deemed to have been transferred in favour of the person to whom the motor vehicle is transferred. If the policy of insurance covers other risks as well, e.g., damage caused to the vehicle of the insured himself, that would be a matter failing outside Chapter XI of the new Act and in the realm of contract for which there must be an agreement between the insurer and the transferee, the former undertaking to cover the risk or damage to the vehicle..." 19. Therefore, in so far as the third party risks are concerned, the contract of insurance together with the policy of insurance shall be deemed to have transferred in favour of the person to whom the motor vehicle is transferred. Keeping in view the above discussions, I am of the considered view that the Tribunal has rightly saddled the Insurance Company with liability. 20. In the result, this Civil Miscellaneous Appeal is dismissed. However, dismissal of this appeal does not preclude the Appellant Insurance Company to proceed against the owner or the transferee of the vehicle, namely, the 3rd Respondent or 4th Respondent herein. For the purpose of recovering the same, the insurer shall not be required to file a suit and it may initiate a proceedings before the concerned executing court. No costs.