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2013 DIGILAW 367 (CHH)

Oriental Insurance Co. Ltd. v. Nadiram

2013-12-17

SANJAY K.AGRAWAL

body2013
JUDGMENT : SANJAY K. AGRAWAL, J. 1. Invoking the appellate jurisdiction of this court u/s 173 of the Motor Vehicles Act, 1988 (to be referred to as 'the M.V. Act'), appellant Oriental Insurance Co. Ltd. has filed this appeal questioning the legality and validity of the impugned award dated 17.3.2009 passed by the Motor Accidents Claims Tribunal, Kanker, District Uttar Bastar, Chhattisgarh in Claim Case No. 61 of 2008, by which claimants' application has been partly allowed and the appellant insurance company has been directed to indemnify the amount under impugned award. Brief facts in nutshell necessary for adjudication of this appeal are as under: 1.1 Tanuja Thakur, aged about 34 years, was travelling in the minibus bearing registration No. CG 04-E 0694. Due to negligent act of the bus driver, Tanuja Thakur fell down from the minibus and sustained grievous injuries and subsequently died. Respondent Nos. 1 and 2 (to be referred to as 'the claimants') filed a claim petition before the Claims Tribunal seeking compensation of Rs. 9,29,000/- jointly and severally from owner, driver and insurance company. 1.2 The owner and insurer contested the claim petition on diverse grounds. The insurer raised the plea in the written statement that insurance policy No. 4368, dated 12.10.2006, issued by it covered the risk of said minibus for the period 12.10.2006 to 11.10.2007 was not valid as the premium was paid through cheque No. 37450 and the said cheque got dishonoured, which was duly intimated to the owner of the vehicle by cancelling the policy. Therefore, appellant insurance company was not liable to indemnify the impugned award. 1.3 The Claims Tribunal after recording evidence and after hearing the parties held that the claimants were successful in proving that on 24.4.2007, the deceased Tanuja Thakur was travelling in the minibus and fell down from the minibus by negligent act of the respondent driver and died due to the injuries sustained by her in the accident. The Claims Tribunal also recorded finding of fact that on examination of the documentary and oral evidence that the cheque against the policy No. 998 was dishonoured and cancellation of policy No. 4368 covering the vehicle in question has not been intimated to the owner of the vehicle, therefore, the appellant insurance company was liable to indemnify compensation amount to the claimants. The Claims Tribunal in its award dated 17.3.2009 further held that the claimants were entitled to compensation in the sum of Rs. 1,95,500/- and apportioned that amount amongst the claimants. 1.4 Feeling dissatisfied with the impugned award, the instant appeal has been filed by the appellant insurer. 1.5 Mr. Sudhir Agrawal, learned counsel appearing for the appellant insurance company, would submit that having regard to the undisputed fact that the cheque issued by the respondent owner of the vehicle towards the premium for insurance of vehicle was dishonoured and said fact was intimated to the respondent owner before the date of accident, the contract of insurance became void and the appellant insurer could not be compelled to perform its part of promise under the policy. According to Mr. Agrawal, no liability can be fastened on the insurer qua third party as the policy of insurance is rendered void for want of consideration to the appellant insurer. 1.6 Per contra, Mr. Rakesh Thakur, the learned counsel appearing for the respondent Nos. 1 and 2, would submit that cancellation of the policy covering the offending vehicle was never intimated to the owner of vehicle, therefore, the appellant insurer cannot disown its liability and the learned Claims Tribunal is absolutely justified in directing the appellant insurer to indemnify the compensation amount. 1.7 None appeared on behalf of owner and the driver, respondent Nos. 3 and 4, though served. 2. I have heard learned counsel appearing for the parties and perused the award impugned including records of the Claims Tribunal carefully. 3. The short question that falls for consideration is whether the learned Claims Tribunal is justified in holding the appellant insurer liable to indemnify the amount under impugned award? 4. Respondent owner issued a cheque No. 37450 for Rs. 19,864 dated 12.10.2006 to the officer of the insurance company for issuance of two policies. Appellant insurer, on receipt of afore stated cheque, issued a motor vehicle policy No. 4368 to the owner covering risk of motor vehicle, i.e., minibus vehicle in question as well as policy No. 998 was also issued to the owner of vehicle that is personal accident policy. The said insurance policy, Exh. Appellant insurer, on receipt of afore stated cheque, issued a motor vehicle policy No. 4368 to the owner covering risk of motor vehicle, i.e., minibus vehicle in question as well as policy No. 998 was also issued to the owner of vehicle that is personal accident policy. The said insurance policy, Exh. NA 3(1), shows that the policy issued on 12.10.2006, covering the risk of the offending vehicle for the period 12.10.2006 to 11.10.2007, in which it has clearly been mentioned that "Warranted that in case of dishonour of premium cheque(s), the said document stands automatically cancelled ab initio". 5. The joint cheque No. 37450 for Rs. 19,864 dated 12.10.2006, issued by the respondent owner against the two policies, was dishonoured by the bank and bank by its memo dated 14.10.2006 vide Exh. NA 3(3) intimated the appellant insurer that aforesaid cheque No. 37450 issued by the owner has returned on account of 'not sufficient funds'. The insurance company vide its letter, Exh. NA 3(4), dated 7.11.2006 intimated the respondent owner that the cheque No. 37450 dated 12.10.2006 for Rs. 19,864 drawn on Central Bank of India towards premium against policy No. 998 is dishonoured. It was sent by registered post and postal book and postal receipt have been filed vide Exhs. NA 3(5) and NA 3(6) and duly proved by appellant insurer. 6. Vijay Kumar Bendy, NAW 3(1), Assistant Manager, Oriental Insurance Co. Ltd., has been examined, he has stated that policy issued by the appellant insurance company bearing No. 14252307/4368/2007 was cancelled on account of dishonour of the cheque for Rs. 19,864/- issued by the respondent owner of the vehicle. He explained in the course of his examination that two policies were issued to the respondent owner; one is the personal accident policy bearing No. 998 and other policy bearing No. 4368 covering the risk of vehicle in question. He further deposed that as per policy, in case of dishonour of premium cheques, the policy stands automatically cancelled, and has admitted that on account of inadvertent mistake, in memo dated 7.11.2006, the fact of cancellation of policy No. 4368 could not be written and only policy No. 998 of owner has been written. 7. Thus, on the basis of the pleadings and evidence on record, the following facts would emerge: (i) Cheque No. 37450 dated 12.10.2006 for Rs. 7. Thus, on the basis of the pleadings and evidence on record, the following facts would emerge: (i) Cheque No. 37450 dated 12.10.2006 for Rs. 19,864/- was issued by the respondent owner in favour of the appellant insurer as premium for issuance of two policies. (ii) Against the said premium amount, two policies were issued to the owner of the vehicle; one is the personal accident policy bearing No. 998 and other policy bearing No. 4368 covering the risk of vehicle in question. (iii) Premium cheque dated 12.10.2006 was dishonoured on 14.10.2006. The appellant insurer intimated the owner about dishonour of aforesaid cheque for Rs. 19,864/- and cancellation of policy No. 998 by a registered letter dated 7.11.2006. (iv) The vehicle in question met with an accident on 27.4.2007, after 144 days of intimation of the dishonour of cheque/cancellation of policy. 8. Now in view of the aforesaid factual situation, question for consideration would be whether the appellant insurer has cancelled the policy on dishonour of premium cheque and thereafter intimated the cancellation of policy to the respondent owner prior to the date of accident, i.e., 27.4.2007. 9. Admittedly, the insurance policy clearly provides a condition that in case of dishonour of the premium cheque, insurance policy stands automatically cancelled ab initio. In the instant case, cheque dated 12.10.2006 was dishonoured on 14.10.2006 on account of 'not sufficient funds' and dishonour of the cheque was informed to the respondent owner of vehicle by registered memo dated 7.11.2006 stating that aforesaid cheque has been dishonoured and the policy No. 998 has been cancelled, and he is advised to deposit fresh remittance. 10. Though, un-disputably the cancellation letter dated 7.11.2006, Exh. NA 3(4), would state that the cancellation of policy No. 998, i.e., personal accident policy issued to the respondent owner; but the fact remains that by aforesaid letter, dishonour of the cheque for Rs. 19,864/- has duly been intimated to the owner of the vehicle by registered post. The aforesaid cheque was issued towards the premium amount for issuance of insurance policy covering the vehicle in question as well as for issuance of personal accident policy. The address as well as receipt of the letter has been established on record. 19,864/- has duly been intimated to the owner of the vehicle by registered post. The aforesaid cheque was issued towards the premium amount for issuance of insurance policy covering the vehicle in question as well as for issuance of personal accident policy. The address as well as receipt of the letter has been established on record. The accident occurred on 27.4.2007, and owner took a plea that he did not receive any information about the cancellation of policy, but the policy in question covering the offending vehicle stood automatically cancelled on account of dishonour of cheque, which was the condition of the policy. Thereafter, dishonour of cheque has duly been intimated, which was received by respondent owner of the vehicle and accident occurred on 27.4.2007, i.e., 144 days of the intimation of dishonour of cheque, but the respondent owner did not take any steps to remit the premium amount to the appellant insurer, though the accident occurred on 27.4.2007 fairly long time after dishonour of cheque, therefore, it cannot be said that the policy has not been cancelled by the appellant insurance company and it has not been intimated to the respondent owner of the vehicle. 11. Thus, the finding of the Claims Tribunal that cancellation of the policy has not been duly intimated to the owner of the vehicle is perverse and liable to be set aside. 12. This takes me to next question, that is, whether appellant insurer can be held liable to satisfy the third party, even though the policy covering the vehicle in question has been cancelled? 13. In the case of Deddappa and Others Vs. The Branch Manager, National Insurance Co. Ltd., (2008) 2 SCC 595 , the Apex Court has held that the cheque issued for covering vehicle in question was dishonoured by communicating to the owner of the vehicle and accident occurred after the cancellation of policy. It has further held that if the contract of insurance is cancelled, then, insurance company would not be liable to satisfy the claim towards third party. Para. 26 reads thus: "(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. Para. 26 reads thus: "(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." 14. In case of United India Insurance Co. Ltd. Vs. Laxmamma and Others, AIR 2012 SC 2817 , Supreme Court after considering its earlier judgments in the cases of Oriental Insurance Co. Ltd. Vs. Inderjit Kaur and Others, (1998) 1 SCC 371 ; National Insurance Co. Ltd. Vs. Seema Malhotra and Others, (2001) 3 SCC 151 and Deddappa and Others Vs. The Branch Manager, National Insurance Co. Ltd., (2008) 2 SCC 595 , has held that where the policy of insurance is issued by an authorised insurer on receipt of cheque towards payment of premium and such cheque is returned dishonoured, the liability of authorised insurer to indemnify third parties in respect of liability which that policy covered subsists and it has to satisfy award of compensation by reason of the provisions of sections 147(5) and 149(1) of the M.V. Act unless the policy of insurance is cancelled by the authorised insurer and intimation of such cancellation has reached the insured before the accident, and observed in para. 19 as under: "(19) In our view, the legal position is this: where the policy of insurance is issued by an authorised insurer on receipt of cheque towards payment of premium and such cheque is returned dishonoured, the liability of authorised insurer to indemnify third parties in respect of the liability which that policy covered subsists and it has to satisfy award of compensation by reason of the provisions of sections 147(5) and 149(1) of the MV Act unless the policy of insurance is cancelled by the authorised insurer and intimation of such cancellation has reached the insured before the accident. In other words, where the policy of insurance is issued by an authorised insurer to cover a vehicle on receipt of the cheque paid for premium and the cheque gets dishonoured and before the accident of the vehicle occurs, such insurance company cancels the policy of insurance and sends intimation thereof to the owner, the insurance company's liability to indemnify the third parties which that policy covered ceases and the insurance company is not liable to satisfy awards of compensation in respect thereof." 15. In the instant case, indisputably, on the dishonour of cheque, the policy stood automatically cancelled as provided in the contract of insurance and dishonour of premium cheque jointly issued for covering the motor vehicle in question as well as for issuance of personal accident policy and cancellation of policy No. 998 (P.A. policy) was duly communicated to the respondent owner dated 7.11.2006, and the accident occurred on 27.4.2007. Therefore, applying the ratio of law laid down by the Supreme Court in the cases referred hereinabove particularly in Deddappa and Others Vs. The Branch Manager, National Insurance Co. Ltd., (2008) 2 SCC 595 , to the facts and circumstances of the present case, it is apparent that the learned Claims Tribunal has committed manifest legal error in fastening the liability upon appellant insurance company to indemnify the amount under the impugned award. I hold that the appellant insurance company is not liable to indemnify the amount under award and only respondent owner of the vehicle is responsible to make payment of the compensation under the impugned award. Thus, the impugned award stands modified to the extent indicated hereinabove. The amount, if any, deposited and withdrawn by the claimants, the appellant insurer will be entitled to recover the same from insured-owner and claimants would be entitled to recover the award amount from owner-insured. Rest of conditions mentioned in the award shall remain intact. 16. So far as cross-objection filed by the claimants-respondent Nos. 1 and 2 is concerned claiming enhancement of the compensation stating, inter alia, that the Claims Tribunal has committed grave illegality in applying the multiplier, according to them, multiplier of 10 would be proper in place of 5, and also pleaded that the amount of Rs. 10,000/- under the head of loss of love and affection is on lower side, it be enhanced to the extent of Rs. 16,000/-. 17. 10,000/- under the head of loss of love and affection is on lower side, it be enhanced to the extent of Rs. 16,000/-. 17. I have gone through the evidence on record and in my considered opinion, no case for enhancement in the compensation is made out by claimants. The cross-objection filed by claimants-respondent Nos. 1 and 2 has no merit and deserves to be and is hereby dismissed. Resultantly, the appeal is allowed in part. The appellant insurer is not liable to indemnify the amount award. The impugned award is modified to the extent indicated above. No order as to costs.