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2015 DIGILAW 1214 (GUJ)

National Insurance Co. Ltd. v. Subhadraben

2015-11-27

M.R.SHAH

body2015
JUDGMENT : M.R. SHAH, J. 1. Feeling aggrieved and dissatisfied with the impugned judgment and award passed by the learned Motor Accident Claims Tribunal (Main), Sabarkantha at Himatnagar (hereinafter referred to as "the tribunal") dated 17/09/2005 in MACP No.663/1995, the appellant herein-original opponent no.2-The National Insurance Company Ltd. the insurer of Jeep No.GJ-V-5911 involved in the accident has preferred the present First Appeal in so far as holding the appellant- Insurance Company liable to pay the compensation. 2. The facts leading to the present Appeal in a nutshell are as under; 2.1 In a vehicular accident, which occurred on 22/08/1994 deceased-Pratapsinh Punjaji Parmar who was traveling in the Jeep No.GJ-V-5911 died and, therefore, the original claimants filed the Claim Petition before the learned tribunal claiming Rs. 3 lakhs towards compensation. It was the case on behalf of the original claimants that at the relevant time the deceased was traveling in the offending Jeep, which at the relevant time was being driven by original opponent no.1. According to the original claimants, original opponent no.1 was driving the said Jeep in a rash and negligent manner and when the said Jeep reached near the place of the accident, the driver of the offending Jeep suddenly applied the break and the deceased who was sitting on the back side of the Jeep fell down and serious head injuries was caused and he died while taking treatment. 2.2 The Claim Petition was opposed by original opponent no.1 by filing written statement at Exh.14 wherein he inter alia contended that he was driving the offending vehicle/Jeep at the time of the accident and he was having valid driving license for driving the said vehicle/Jeep. According to him the vehicle was insured with original opponent no.2- Insurance Company i.e. the appellant herein. The Claim Petition was vehemently opposed by original opponent no.2- Insurance Company by filing written statement at Exh.19. The Insurance Company specifically denied their liability. According to him the vehicle was insured with original opponent no.2- Insurance Company i.e. the appellant herein. The Claim Petition was vehemently opposed by original opponent no.2- Insurance Company by filing written statement at Exh.19. The Insurance Company specifically denied their liability. It was also contended on behalf of the appellant-Insurance Company that as the cheque towards the premium of the insurance policy, which was given by the owner of the Jeep involved in the accident, was dishonoured and even an intimation was given to the owner of the Jeep and thereafter the accident took place, the Insurance Company cannot be fastened with the liability to pay the compensation as there was no valid insurance policy and the risk was not covered. In support of the above defence the Insurance Company relied upon the decision of the Kerala High Court in the case of New India Assurance Co. Ltd. v. Raghu & Ors reported in 2002 ACJ 217. However, relying upon the decision of this Court in the case of United Insurance Co. Ltd. v. Minor Mamtaben B. Rathod, through Byassingh Bansisingh Rathod reported in 2005 (1) GLH 330 and observing that no intimation was given by the Insurance Company to the RTO Office regarding dishonour of the cheque or cancellation of the policy, by the impugned judgment and award the learned tribunal has held the appellant-Insurance Company liable to pay the compensation. Feeling aggrieved and dissatisfied with the impugned judgment and award passed by the learned tribunal in holding the appellant herein-Insurance Company liable to pay the compensation, the appellant herein-original opponent no.1-Insurance Company-the insurer of Jeep No.GJ-V-5911 has preferred the present First Appeal. 3. Shri Sunil Parikh, learned advocate appearing on behalf of the appellant-Insurance Company has vehemently submitted that the learned tribunal has committed a grave error in holding the appellant-Insurance Company liable to pay the compensation. It is further submitted that the owner of the Jeep involved in the accident gave the cheque towards the premium on dated 08/10/1993, which came to be dishonoured and an intimation was given about dishonour of the cheque and cancellation of the policy to the owner of the Jeep on 03/11/1993. It is submitted that at the relevant time when the cheque towards the premium was issued, the insurance policy was given only in anticipation of honouring the cheque and on an assurance that the cheque will be honoured. It is submitted that at the relevant time when the cheque towards the premium was issued, the insurance policy was given only in anticipation of honouring the cheque and on an assurance that the cheque will be honoured. It is submitted that thereafter even after 03/11/1993 after giving intimation to the original owner with respect to dishonour of the cheque and cancellation of the policy, no amount was paid by the owner towards premium. It is submitted that thereafter the accident in question occurred on 22/08/1994. It is submitted that in view of the above when the accident took place the insurance policy was not in existence and, therefore, the risk was not covered and, therefore, the appellant-Insurance Company could not have been/ought not to have been held liable to pay the compensation. In support of his above submission, Shri Parikh, learned advocate appearing on behalf of the Insurance Company has heavily relied upon the decisions of the Hon'ble Supreme Court in the case of Deddappa and Ors v. Branch Manager, National Insurance Co. Ltd. reported in (2008) 2 SCC 595 as well as in the case of National Insurance Company Ltd. v. Yellamma and Anr. reported in (2008) 7 SCC 526 . 3.1 It is further submitted that as such the learned tribunal has committed an error in relying upon and/or considering the decision of this Court in the case of Minor Mamtaben B. Rathod (Supra). It is submitted that in the said decision this Court was considering the provisions contained in Motor Vehicles Act, 1939, more particular Section 105 of the Motor Vehicles Act, which cast duty upon the Insurance Company to intimate the RTO Office with respect to dishonour of the cheque and/or cancellation of the policy. It is submitted that such a requirement is not there in the Motor Vehicles Act, 1988. It is submitted that the present case is covered by the Motor Vehicles Act, 1988. It is submitted that therefore the Insurance Company followed the normal procedure of intimating the owner with respect to dishonour of the cheque and consequently cancellation of the policy. It is submitted that therefore the learned tribunal has committed a grave error in holding the appellant-Insurance Company liable to pay the compensation. It is submitted that therefore the Insurance Company followed the normal procedure of intimating the owner with respect to dishonour of the cheque and consequently cancellation of the policy. It is submitted that therefore the learned tribunal has committed a grave error in holding the appellant-Insurance Company liable to pay the compensation. 3.2 Shri Parikh, learned advocate appearing on behalf of the appellant-Insurance Company has further submitted that in the present case while considering the application given by the original claimant under Section 140 of the Motor Vehicles Act the learned tribunal rejected the said application by holding that on dishonour of the cheque and cancellation of the policy there was no policy in existence. Making the above submissions, it is requested to allow the present Appeal and quash and set aside the impugned judgment and award passed by the learned tribunal in so far as holding the appellant-Insurance Company liable to pay the compensation. 4. The learned advocate appearing on behalf of the original claimants has chosen to remain absent. The present Appeal was notified and taken up for hearing on 24/11/2015. Though, on that day, the matter was called out twice on both the occasions the learned advocate appearing on behalf of the original claimants remained absent. However, in the interest of justice, the matter was adjourned to today as a last chance. Today also, when the present Appeal is taken up for final hearing, the learned advocate appearing on behalf of the original claimants has chosen to remain absent and, therefore, this Court has no other alternative but to proceed further with the hearing of the present Appeal ex-parte and to decide the same on merits ex-parte. 5. Today also, when the present Appeal is taken up for final hearing, the learned advocate appearing on behalf of the original claimants has chosen to remain absent and, therefore, this Court has no other alternative but to proceed further with the hearing of the present Appeal ex-parte and to decide the same on merits ex-parte. 5. Having heard Shri Parikh, learned advocate appearing on behalf of the appellant-Insurance Company and considering the impugned judgment and award passed by the learned tribunal and the material/evidence on record, the factual aspect emerges as under; that the owner of the Jeep involved in the accident had paid the cheque towards the premium of the insurance policy on 08/10/1993; that on anticipation that the cheque would be honoured and on an assurance that the cheque towards the premium shall be honoured the Insurance Company issued the insurance policy covering the risk, however the said cheque towards the premium came to be dishonoured; that intimation with respect to dishonour of the cheque and consequently cancellation of the insurance policy was given to the owner of the Jeep on 03/11/1993 and the aforesaid is supported by the deposition of the Officer examined on behalf of the appellant-Insurance Company at Exh.78 as well as the documentary evidence on record produced at Exhs.79 to 83 and the accident occurred on 22/08/1994; that the date on which the accident took place there was no valid insurance policy covering the risk. Thus, what would be the consequence of dishonour of cheque paid towards premium has been elaborately considered by the Hon'ble Supreme Court in the case of Deddappa and ors. (Supra). In paragraph nos.19 to 25 the Hon'ble Supreme Court in the case of Deddappa and ors. (Supra) has observed and held as under; "19. Almost an identical question again came up for consideration before this Court in National Insurance Co. Ltd. v. Seema Malhotra and Ors. [ (2001) 3 SCC 151 ], a Division Bench noticed both the aforementioned decisions and analysed the same in the light of Section 64-VB of the 1938 Act. It was held : "17. In a contract of insurance when the 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 was held : "17. In a contract of insurance when the 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. The corollary is that the insured cannot claim performance from the insurer in such a situation. 19. Under Section 25 of the Contract Act an agreement made without consideration is void. Section 65 of the Contract Act says that when a contract becomes void any person who has received any advantage under such contract is bound to restore it to the person from whom he received it. So, even if the insurer has disbursed the amount covered by the policy to the insured before the cheque was returned dishonoured, the insurer is entitled to get the money back. 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". 20. A contract is based on reciprocal promise. Reciprocal promises by the parties are condition precedents for a valid contract. A contract furthermore must be for consideration. 21. In today's world payment made by cheque is ordinarily accepted as valid tender. Section 64VB of the 1938 Act also provides for such a scheme. 22. Payment by cheque, however, is subject to its encashment. In Damadilal & Ors. v. Parashram & Ors. [ (1976) 4 SCC 855 ], this Court observed : "13. 21. In today's world payment made by cheque is ordinarily accepted as valid tender. Section 64VB of the 1938 Act also provides for such a scheme. 22. Payment by cheque, however, is subject to its encashment. In Damadilal & Ors. v. Parashram & Ors. [ (1976) 4 SCC 855 ], this Court observed : "13. On the ground of default, it is not disputed that the defendants tendered the amount in arrears by cheque within the prescribed time. The question is whether this was a lawful tender. It is well-established that a cheque sent in payment of a debt on the request of the creditor, unless dishonoured, operates as valid discharge of the debt and, if the cheque was sent by post and was met on presentation, the date of payment is the date when the cheque was posted..." 23. Recently again in New India Assurance Co. Ltd. v. Harshadbhai Amrutbhai Modhiya and Anr. [ (2006) 5 SCC 192 ], although in the context of the Workmen Compensation Act, 1923, Balasubramanyan, J opined : "It is not brought to our notice that there is any other law enacted which stands in the way of an insurance company and the insured entering into a contract confining the obligation of the insurance company to indemnify to a particular head or to a particular amount when it relates to a claim for compensation to a third party arising under the Workmen's Compensation Act. In this situation, the obligation of the insurance company clearly stands limited and the relevant proviso providing for exclusion of liability for interest or penalty has to be given effect to. Unlike the scheme of the Motor Vehicles Act the Workmen's Compensation Act does not confer a right on the claimant for compensation under that Act to claim the payment of compensation in its entirety from the insurer himself". It was further observed:- "23. The law relating to contracts of insurance is part of the general law of contract. So said Roskill, L.J. in Cehave v. Bremer. It was further observed:- "23. The law relating to contracts of insurance is part of the general law of contract. So said Roskill, L.J. in Cehave v. Bremer. This view was approved by Lord Wilberforce in Reardon Smith v. Hansen Tangen (All ER p. 576 h ) wherein he said: "It is desirable that the same legal principles should apply to the law of contract as a whole and that different legal principles should not apply to different branches of that law." A contract of insurance is to be construed in the first place from the terms used in it, which terms are themselves to be understood in their primary, natural, ordinary and popular sense. (See Colinvaux's Law of Insurance, 7th Edn., para 2-01.) A policy of insurance has therefore to be construed like any other contract. On a construction of the contract in question it is clear that the insurer had not undertaken the liability for interest and penalty, but had undertaken to indemnify the employer only to reimburse the compensation the employer was liable to pay among other things under the Workmen's Compensation Act. Unless one is in a position to void the exclusion clause concerning liability for interest and penalty imposed on the insured on account of his failure to comply with the requirements of the Workmen's Compensation Act of 1923, the insurer cannot be made liable to the insured for those amounts."" 24. 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. 25. A beneficial legislation as is well known should not be construed in such a manner so as to bring within its ambit a benefit which was not contemplated by the legislature to be given to the party. 25. A beneficial legislation as is well known should not be construed in such a manner so as to bring within its ambit a benefit which was not contemplated by the legislature to be given to the party. In Regional Director, Employees' State Insurance Corporation, Trichur v. Ramanuja Match Industries [ AIR 1985 SC 278 ], this Court held : "We do not doubt that beneficial legislations should have liberal construction with a view to implementing the legislative intent but where such beneficial .legislation has a scheme of its own there is no warrant for the Court to travel beyond the scheme and extend the scope of the statute on the pretext of extending the statutory benefit to those who are not covered by the scheme." We, therefore, agree with the opinion of the High Court. 5.1 In the case of Yellamma and Anr (Supra) while considering the similar facts situation in which the cheque which was paid towards premium was dishonoured and thereafter the accident occurred and the Insurance Company refuted the liability to pay the compensation, the Hon'ble Supreme Court in paragraph nos. 12 to 15 has observed and held as under; "12. Section 64-VB f the Insurance Act mandates that before a contract of insurance comes into being, the premium should be received by the insurer in advance, stating : "Section 64VB - No risk to be assumed unless premium is received in advance (1) No insurer shall assume any risk in India in respect of any insurance business on which premium is not ordinarily payable outside India unless and until the premium payable is received by him or is guaranteed to be paid by such person in such manner and within such time as may be prescribed or unless and until deposit of such amount as may be prescribed, is made in advance in the prescribed manner. (2) 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. Explanation. Where the premium is tendered by postal money order or cheque sent by post, the risk may be assumed on the date on which the money order is booked or the cheque is posted, as the case may be." 13. Explanation. Where the premium is tendered by postal money order or cheque sent by post, the risk may be assumed on the date on which the money order is booked or the cheque is posted, as the case may be." 13. The question came up for consideration recently before this Court in Deddaooa & Ors. v. Branch Manager, National Insurance Co. Ltd. [ (2008) 2 SCC 595 ], wherein upon noticing the precedents which were operating in the field, it was clearly held : "18. The ratio of the said decision was, however, noticed by this Court in New India Assurance Co. Ltd. v. Rula and Ors. [(2003) 3 SCC 195]. It was held that ordinarily a liability under the contract of insurance would arise only on payment of premium, if such payment was made a condition precedent for taking effect of the insurance policy but such a condition which is intended for the benefit of the insurer can be waived by it. It was opined: (SCC p.200, para 13) '13. 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.' The dicta laid down therein clarifies that if on the date of accident the policy subsists, then only the third party would be entitled to avail the benefit thereof. 19. Almost an identical question again came up for consideration before this Court in National Insurance Co. Ltd. v. Seema Malhotra and Ors. [ (2001) 3 SCC 151 ], a Division Bench noticed both the aforementioned decisions and analysed the same in the light of Section 64-VB of the 1938 Act. It was held: (SCC pp 156-57, paras 17-20) '17. In a contract of insurance when the 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. 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. The corollary is that the insured cannot claim performance from the insurer in such a situation. 19. Under Section 25 of the Contract Act an agreement made without consideration is void. Section 65 of the Contract Act says that when a contract becomes void any person who has received any advantage under such contract is bound to restore it to the person from whom he received it. So, even if the insurer has disbursed the amount covered by the policy to the insured before the cheque was returned dishonoured, the insurer is entitled to get the money back. 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.' 20. A contract is based on reciprocal promise. Reciprocal promises by the parties are condition precedents for a valid contract. A contract furthermore must be for consideration." 14. In today's world payment by cheque is ordinarily accepted as valid tender but the same would be subject to its encashment. A distinction, however, exists between the statutory liability of the insurance company vis-a-vis the third party in terms of Sections 147 and 149 of the Motor Vehicles Act and its liability in other cases but it is clear that if the contract of insurance had been cancelled and all concerned had been intimated thereabout, the insurance company would not be liable to satisfy the claim. 15. 15. In this case, there cannot be any doubt or dispute whatsoever that no privity of contract came into being between the appellant and the second respondent and as such the question of enforcing the purported contract of insurance while taking recourse to Section 147 of the Motor Vehicles Act did not arise." In the aforesaid, the law laid down by the Hon'ble Supreme Court now applying the aforesaid principles of law to the facts of the case on hand, the impugned judgment and award passed by the learned tribunal holding the appellant- Insurance Company liable to pay the compensation cannot be sustained. As observed herein above, the cheque dated 08/10/1993 which was paid towards premium came to be dishonoured and immediately thereafter an intimation was given to the owner of the Jeep on 03/11/1993 informing him about the dishonour of the cheque towards the premium as well as cancellation of the insurance policy. Under the circumstances, the appellant-Insurance Company cannot be held liable to pay the compensation as the risk was not covered as there was no valid contract between the parties and there was no policy in existence at the time of the accident covering the risk. 5.2 Now so far as the reliance placed upon the decision of this Court in the case of Minor Mamtaben B. Rathod (Supra) is concerned it is required to be noted that in the said decision this Court was considering Section 105 of the Motor Vehicles Act, 1939, which cast duty and/or obligation on the part of the Insurance Company to give intimation to the RTO with respect to dishonour of the cheque and/or cancellation of the policy. Such is not the requirement under the Motor Vehicles Act, 1988. The present case is covered by the Motor Vehicles Act, 1988. Under the circumstances, the learned tribunal has committed an error in relying upon the aforesaid decision of this Court in the case of Minor Mamtaben B. Rathod (Supra). 6. In view of the above and for the reasons stated herein above, the present Appeal succeeds. The impugned judgment and award dated 17/09/2005 in MACP No.663/1995 in so far as holding the appellant-Insurance Company liable to pay the compensation to the original claimants is quashed and set aside. 6. In view of the above and for the reasons stated herein above, the present Appeal succeeds. The impugned judgment and award dated 17/09/2005 in MACP No.663/1995 in so far as holding the appellant-Insurance Company liable to pay the compensation to the original claimants is quashed and set aside. It goes without saying that on allowing the present Appeal and quashing and setting aside the impugned judgment and award passed by the learned tribunal so far as the appellant-Insurance Company is concerned whatever amount is deposited by the appellant-Insurance Company pursuant to the impugned judgment and award passed by the learned tribunal, which is hereby quashed and set aside, the appellant-Insurance Company is entitled to get back the said amount with accrued interest, if already paid/deposited either from the Fixed Deposit lying with the learned tribunal, if any and/or from the original claimants or even from original opponent no.1. No order as to costs.