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2016 DIGILAW 413 (JK)

National Insurance Company Ltd. v. Kanth Ram

2016-08-05

JANAK RAJ KOTWAL

body2016
JUDGMENT : Janak Raj Kotwal, J. 1. This appeal by the Insurance Company is directed against the judgment and award of the learned Motor Accident Claims Tribunal, Jammu (for short the Tribunal) dated 03.03.2009, whereby compensation of Rs. 12,74,000/- has been awarded to respondent No. 1 (hereinafter to be referred to as the claimant) and liability of satisfying the award has been foisted on the appellant-Insurance Company. 2. Heard learned counsel for the parties and perused the record. 3. The claimant on 06.12.1993 had boarded a bus bearing registration JKU 1867. A powerful explosion took place in this bus at bus-stand, Kishtwar. Petitioner suffered injuries in this explosion. On a claim application filed by the petitioner under section 166 of the Motor Vehicles Act, 1988 (for short the M.V. Act), learned Tribunal after inquiry found that this incident had occurred due to carelessness of the driver of the bus and awarded compensation to the claimant. 4. Appellant-Insurance Company assails the judgment and award of the learned Tribunal mainly insofar as it foists liability on it on the ground that the cheque by which the owner had paid policy premium of Rs. 8,497/- bounced due to insufficient funds in the account of the owner and the Company cancelled the policy of insurance issued by it. It is contended that policy of insurance bearing No. 4209026300276/93-94 was issued in the name of the owner, respondent-Gian Chand on 30.07.1993. As the cheque bounced, the Company cancelled the policy vide endorsement No. E-63/98/93/94 dated 26.11.1993 and on the same day informed the owner in this regard. It is contended that with the cancellation of the policy of insurance contract of insurance between the Insurance Company and the owner had come to an end so the company is not liable for any risk insured after that. It is averred also that having come to know about cancellation of the policy the owner had obtained a fresh policy on 13.12.1993 after paying the premium in cash. 5. One of the issues framed by the learned Tribunal in the claim application was; whether the vehicle in question was not insured with the respondent No. 3 therein, that is, herein appellant/Insurance Company. In proof of this issue, the appellant examined Krishan Lal, an Assistant Branch Manager of the Company and Gian Chand, the owner of the offending bus as its witnesses. Important in their evidence has been noticed. In proof of this issue, the appellant examined Krishan Lal, an Assistant Branch Manager of the Company and Gian Chand, the owner of the offending bus as its witnesses. Important in their evidence has been noticed. 6. According to RW-Krishan Lal, the policy of insurance was valid from 30.07.1993 to 29.07.1994. Cheque valuing Rs. 8,497/- issued by the owner towards policy premium was dishonored by the bank so the Company issued letter No. E-69/98/93-94 dated 26.11.1993 regarding cancellation of the policy. A copy of this letter was sent to RTO also. Owner, Gian Chand obtained new policy of insurance on 13.12.1993. The policy issued on 30.07.1993 having been cancelled, the Company is not liable for the accident that occurred on 06.12.1993. 7. According to RW-Gian Chand, who is owner of the offending vehicle, the vehicle was insured by him with the appellant-Company with effect from 30.07.1993 to 29.7.1994. He has stated also that premium was paid by him in cash. In cross-examination he denied that premium for aforementioned insurance was paid by him by cheque and also denied knowledge about cancellation of the policy of insurance due to dishonor of any cheque. 8. Learned Tribunal rejected the evidence of RW-Krishan Lal observing that supporting documents including the bounced cheque, the memo issued by the Bank, the letters issued to the owner of the vehicle and the RTO regarding cancellation of the policy have not been produced. Learned Tribunal also noticed the report of Surveyor, V.K. Bakshi, appointed by the appellant-Company dated 26.2.1994 lying on the file, indicating that the owner of the offending bus had received own damage claim from the Company on the basis of the insurance policy, which is said to have been cancelled. 9. Mr. C.S. Gupta, learned counsel for the appellant, argued that the contract of insurance between appellant and owner of the offending bus was duly terminated by the appellant after it did not receive the premium due to bouncing of the cheque so the appellant has no liability in respect of any risk incurred after cancellation of insurance policy. Mr. Gupta also argued that the Tribunal has awarded compensation much on higher side, which is disproportionate to the injuries and disability suffered by the claimant. 10. No sufficient ground for differing with the view taken by the learned Tribunal has been found. Mr. Gupta also argued that the Tribunal has awarded compensation much on higher side, which is disproportionate to the injuries and disability suffered by the claimant. 10. No sufficient ground for differing with the view taken by the learned Tribunal has been found. The view taken by learned Tribunal is fully supported by the evidence of RW-Krishan Lal. It is noticed that RW-Krishan Lal, as per his evidence, is not the person who had issued the policy of insurance covering the period 30.07.1993 to 29.07.1994 or had cancelled the same. The said policy was issued from the Kathua office of the appellant-Company by an officer, namely, Manohar Lal. It is clear from the record of the case and evidence of RW-Krishan Lal that neither the bounced cheque nor the memo issued by the bank has been produced before the learned Tribunal. The copies of the letters said to have been written to the owner of the vehicle and the RTO informing them about the cancellation of the insurance policy due to bouncing of the cheque have not been produced. The appellant, therefore, can be said to have failed in producing reliable evidence to prove that the owner of the bus, RW-Gian Chand, had paid the policy premium by a cheque and in rebutting the say of the owner of the vehicle that premium was paid by him in cash as also in proving that cheque had bounced and the policy was cancelled. 11. The appellant having failed to produce sufficient evidence to prove the bouncing of the cheque and cancellation of the policy of insurance on that score, no illegality can be said to have been committed by the learned Tribunal in rejecting the defence of the appellant in this regard. It being so, question relating to consequences of cancellation of policy of insurance due to bouncing of cheque by which premium has been paid need not be taken up. 12. There is, however, another aspect of the matter, which should be addressed even if cancellation of the policy has not been proved by the appellant. The policy of insurance was issued on 30.07.1993 and is said to have been cancelled on 26.11.1993, that is, four months after the date of its issue. 12. There is, however, another aspect of the matter, which should be addressed even if cancellation of the policy has not been proved by the appellant. The policy of insurance was issued on 30.07.1993 and is said to have been cancelled on 26.11.1993, that is, four months after the date of its issue. This time gap of four months has not been explained, not even the date of bouncing of the cheque, if any, is traceable from the evidence of the appellant. A long time gap in the date of issue of a policy of insurance by the insurance company and the date of its cancellation due to bouncing of the cheque by which policy premium is paid is unusual. In such a case the time gap can be attributed either to delay in sending the cheque for encashment to the bank or negligence in cancelling the policy in time. An Insurance Company, having issued the third party risk policy on receiving the policy premium by cheque and having either delayed the sending of the cheque to the bank for encashment or failed to cancel the policy immediately after bouncing of the cheque, would not be justified in cancelling the policy after a long gap of time and would not be entitled to benefit of such cancellation. In such a case the public interest that a policy of third party risk insurance serves must prevail over the interest of the insurer. In taking this view it cannot be said that insurer is rendered remediless in spite of having not received the policy premium because a legal remedy against bouncing of a cheque always remains open to the payee of the cheque. 13. Section 149 of the M.V. Act casts duty on the insurers, subject to the provisions of this section, to satisfy judgments and awards against persons insured by them in respect of third party risks, notwithstanding that the insurer may be entitled to avoid or cancel or may have avoided or cancelled the policy. Question involving the liability of the insurer in a case where the policy of insurance has been canceled due bouncing of the cheque by which the insured had paid the policy premium came up for consideration of a learned 3-Judge Bench of the Supreme Court in the case of Inderjit Kour, 1998 ACJ 123(SC). Question involving the liability of the insurer in a case where the policy of insurance has been canceled due bouncing of the cheque by which the insured had paid the policy premium came up for consideration of a learned 3-Judge Bench of the Supreme Court in the case of Inderjit Kour, 1998 ACJ 123(SC). Even though such a question is not involved in this case for the reason that factums of bouncing and cancellation have not been proved, it is in place to quote what the Hon'ble Court has held in paras 8, 9 and 11: "8. We have, therefore, this position. Despite the bar created by Section 64-VB of the Insurance Act, the appellant, an authorized insurer, issued a policy of insurance to cover the bus without receiving the premium therefore. By reason of the provisions of Sections 147(5) and 149(1) of the Motor Vehicles Act, the appellant became liable to indemnify third parties in respect of the liability which that policy covered and to satisfy awards of compensation in respect thereof notwithstanding its entitlement (upon which we do not express any opinion) to avoid or cancel the policy for the reason that the cheque issued in payment of the premium thereon had not been honoured. 9. The policy of insurance that the appellant issued was a representation upon which the authorities and third parties were entitled to act. The appellant was not absolved of its obligations to third parties under the policy because it did not receive the premium. Its remedies in this behalf lay against the insured. 11. It must also be noted that it was the appellant itself who was responsible for its predicament. It had issued the policy of insurance upon receipt only of a cheque towards the premium in contravention of the provisions of Section 64-VB of the Insurance Act. The public interest that a policy of insurance serves must, clearly, prevail over the interest of the appellant." In Laxmamma's case, 2012 ACJ 1307 , Hon'ble the Supreme Court in reference to Inderjit Kaur's case has observed that: 13. In Inderjit Kaur, 1998 AJ 123 (SC), the court invoked the doctrine of public interest and held that the insurance company was liable to indemnify third parties in respect of the liability which the policy covered despite the bar created by Section 64-VB of the Insurance Act. In Inderjit Kaur, 1998 AJ 123 (SC), the court invoked the doctrine of public interest and held that the insurance company was liable to indemnify third parties in respect of the liability which the policy covered despite the bar created by Section 64-VB of the Insurance Act. The Court did leave open the question of insurer's entitlement to avoid or cancel the policy as against insured when the cheque issued for payment of the premium was dishonored. 14. In regard to the amount of compensation awarded by the learned Tribunal, I have examined the entire record lying on the file of the Tribunal. I have in particular noticed the injuries suffered by the claimant, which resulted into amputation of both his legs below knees at the age of 35. I find no ground for differing with the assessment of compensation made by the learned Tribunal under any head. 15. Viewed thus, this appeal has no merit and is dismissed. The award amount, if deposited in this Court, be released in favour of the claimant, however, without insisting upon condition of five years' deposit as directed by the learned Tribunal. 16. Record of the Tribunal be remitted back along with a copy of this judgment. Appeal Dismissed.