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2021 DIGILAW 396 (GAU)

New India Assurance Co. Ltd. v. C. Khuanghliri

2021-05-18

MICHAEL ZOTHANKHUMA

body2021
JUDGMENT : Michael Zothankhuma, J. 1. Heard Mr. Lalfakawma, learned counsel for the appellant as well as Mr. L.H. Lianhrima, learned senior counsel appearing for the respondent No. 1. No one appears for the respondent No. 2, even though the appellant's affidavit dated 23.03.2021 and the copies of the newspapers i.e. Nagaland Post and Assam Tribune, both dated 17.03.2021, show that notice had been issued to the respondent No. 2 by newspaper publication, in terms of the order dated 24.2.2021 issued by this Court. Accordingly, notice is deemed to be served on the respondent No. 2. 2. The challenge made by the appellant Insurance Company to the impugned Judgment & Award dated 25.05.2018, passed by the Motor Accident Claims Tribunal, Aizawl in MACT Case No. 31/2016, by which compensation amounting to Rs. 5,50,000/- along with interest @ 7% per annum from the date of filing of the claim petition till final payment has been awarded, is on the ground that the vehicle owner had not been insured, as the cheque given for the Insurance Policy had bounced. As such, no liability could be fastened upon the appellant Insurance Company. 3. Mr. Lalfakawma, learned counsel for the appellant submits that the respondent No. 2, who is the owner of the accident vehicle bearing Registration No. NL-01K-0991 had given a Bank of India cheque No. 000168 dated 10.07.2015, for Rs. 40,749/- for the purpose of insuring his vehicle. The cheque dated 10.07.2015 was presented by the appellant to the Axis Bank, Guwahati. However, the cheque bounced due to the reason "Exceeds Arrangement". The appellant Insurance Company thereafter intimated the dishonor of the cheque to the respondent No. 2 and to the Regional Transport Officer, Regional Transport Authority, Kohima vide letters dated 19.11.2015, which was sent by registered post, stating that the Insurance Policy stood cancelled since its inception due to the above reason. 4. The learned counsel for the appellant submits that the accident occurred on 18.06.2016, wherein the accident vehicle (Truck) bearing Registration No. NL-01K-0991 ran over one Scooter rider namely, R. Lalthlana. The respondent No. 1, who was the wife of the deceased thereafter preferred the claim application under Section 163A of the Motor Vehicles Act, 1988 and consequently, the learned Tribunal awarded the compensation amount indicated above. 5. The respondent No. 1, who was the wife of the deceased thereafter preferred the claim application under Section 163A of the Motor Vehicles Act, 1988 and consequently, the learned Tribunal awarded the compensation amount indicated above. 5. The learned counsel for the appellant submits that as the appellant Insurance Company had intimated to the owner of the accident vehicle (respondent No. 2) and also to the concerned Regional Transport Officer, Regional Transport Authority, Kohima vide letters dated 19.11.2015, with regard to the dishonor of the cheque, and the fact that the insurance policy stood cancelled, the Insurance Company's liability to indemnify third parties covered by the Insurance Policy ceased, as the policy of insurance stood cancelled, when the insured was communicated about the dishonor/bouncing of the cheque. In support of his submission, he has relied upon the judgment of the Apex Court in the case of United India Insurance Company Limited Vs. Laxmamma & Ors., reported in (2012) 5 SCC 234 . The appellant's counsel thus prays that the impugned Judgment & Award dated 25.05.2018, passed by the learned Tribunal in MACT Case No. 31/2016, should be set aside, as the liability of paying the compensation amount now rested solely upon the owner of the vehicle, i.e., the respondent No. 2. 6. Mr. L.H. Lianhrima, learned senior counsel appearing for the respondent No. 1 submits that though there was no subsisting valid insurance policy between the parties at the time the accident occurred, the appellant Insurance Company should be directed to first pay the compensation amount to the claimant/respondent No. 1 and thereafter, recover the same from the owner of the vehicle. In support of his submission, he has relied upon the judgments of the Apex Court in the case of Pappu & Ors. Vs. Vinod Kumar Lamba & Anr., reported in 2018 (1) TAC 360 (SC), (ii) Singh Ram Vs. Nirmala & Ors., reported in 2018 (2) TAC 1 (SC) (iii) Uttar Pradesh State Road Transport Corporation Vs. National Insurance Company Ltd. & Ors., reported in 2018 (2) TAC 365 (SC) and (iv) Shamanna & Anr. Vs. Divisional Manager, Oriental Insurance Co. Ltd. & Ors., reported in 2018 (3) TAC 677 (SC). 7. I have heard the learned counsels for the parties. 8. National Insurance Company Ltd. & Ors., reported in 2018 (2) TAC 365 (SC) and (iv) Shamanna & Anr. Vs. Divisional Manager, Oriental Insurance Co. Ltd. & Ors., reported in 2018 (3) TAC 677 (SC). 7. I have heard the learned counsels for the parties. 8. The submissions made by the counsels for the parties and a perusal of the records make it clear that at the time the accident had occurred, there was no valid subsisting insurance policy which covered the accident vehicle/owner of the vehicle. In the case of United India Insurance Co. Ltd. Vs. Laxmanna & Ors. (Supra), where the third party died while travelling in a bus which collided with a tank, the Apex Court has held that where a policy of insurance is issued by the insurer on receipt of a cheque towards payment of premium for the said insurance policy and the cheque is subsequently dishonoured, the liability of the insurer to indemnify the third parties in respect of the liability which the policy covered continues in terms of Section 147(5) and 149(1) of the MV Act, 1988, unless the policy of insurance is cancelled by the insurer and the intimation of such cancellation has reached the insured before the accident. 9. In the present case, the Cheque dated 10.07.2015 bounced and the same was intimated to the insured vide Letter dated 19.11.2015 stating that the insurance policy stood cancelled since its inception, i.e. on 10.07.2015. The accident occurred on 18.06.2016 i.e., subsequent to cancellation of the Insurance Policy. The facts clearly show that the present case is not with regard to any breach of contract, but that there was no valid subsisting contract between the parties at the time when the accident occurred. In view of the above facts not being disputed by the respondent No. 1 and as per the law laid down by the Apex Court in United India Insurance Co. Ltd. Vs. Laxmamma & Ors. (Supra), the liability of the appellant Insurance Company to indemnify third parties ceased, as soon as cancellation of the insurance policy was communicated prior to the accident. As such, it appears that the appellant Insurance Company is not liable to satisfy the compensation amount awarded by the learned Tribunal. 10. Ltd. Vs. Laxmamma & Ors. (Supra), the liability of the appellant Insurance Company to indemnify third parties ceased, as soon as cancellation of the insurance policy was communicated prior to the accident. As such, it appears that the appellant Insurance Company is not liable to satisfy the compensation amount awarded by the learned Tribunal. 10. As referred to above, in the case of United India Insurance Company Limited v. Laxmamma & Others (Supra), the Apex Court held that when the cheque issued for an Insurance Policy gets dishonoured and the Insurance Company informs the owner of the vehicle that the Insurance Policy stood cancelled prior to an accident having occurred, the Insurance Company's liability to indemnify third parties which that policy covered ceased and the Insurance Company was not liable to satisfy the compensation award in respect thereof. However, in the case of National Insurance Company Limited Vs. Seema Malhotra & Ors., reported in (2001) 3 SCC 151 , the Apex Court has held that when the cheque issued for an insurance policy gets dishonoured, the company has still got to honour the contract of insurance and that the insurer is liable against third parties because it is covered by the statutory provisions contained in Chapter-IX of the M.V. Act, 1988. However, the insurer is legally justified in refusing to pay the amount claimed by the family of the insured, who died in the accident. Thus, there is an apparent contradiction in the judgment of the Apex Court in United India Insurance Company Limited v. Laxmamma & Others (Supra) and in the case of National Insurance Company Limited v. Seema Malhotra & Others (supra). 11. The above being said, in the judgments cited by the learned senior counsel appearing for the respondent No. 1, the Apex Court has held that even if Insurance Company has no liability under the law to pay to indemnify the insured against third parties, yet it must pay the compensation amount and recover it later on from the owner of the accident vehicle. In the cases cited by the Senior Counsel for the respondent No. 1, the Apex Court had also upheld the directions made by the learned Tribunals and the High Court directing the Insurer to first pay the compensation amount awarded and later on recover it from the owner of the vehicle. In the cases cited by the Senior Counsel for the respondent No. 1, the Apex Court had also upheld the directions made by the learned Tribunals and the High Court directing the Insurer to first pay the compensation amount awarded and later on recover it from the owner of the vehicle. In the case of Shamanna & Anr (Supra), the Apex Court held at paragraph. 12 as follows: "12. Since the reference to the larger bench in Parvathneni case has been disposed of by keeping the questions of law open to be decided in an appropriate case, presently the decision in Swaran Singh case followed in Laxmi Narain Dhut and other cases hold the field. The award passed by the Tribunal directing the Insurance Company to pay the compensation amount awarded to the claimants and thereafter, recover the same from the owner of the vehicle in question, is in accordance with the judgment passed by this Court in Swaran Singh and Laxmi Narain Dhut cases. While so, in our view, the High Court ought not to have interfered with the award passed by the Tribunal directing the first respondent to pay and recover from the owner of the vehicle. The impugned judgment of the High Court exonerating the Insurance Company from its liability and directing the claimants to recover the compensation from the owner of the vehicle is set aside and the award passed by the Tribunal is restored." In the case of Singh Ram Vs. Nirmala & Ors (Supra), the Apex Court has held at paragraph 9 as follows:- "9. In the circumstances, the direction by the Tribunal, confirmed by the High Court, to pay and recover cannot be faulted. The appeal is, accordingly, dismissed. There shall be no order as to costs." 12. In the case of National Insurance Co. Ltd. Vs. Parvathneni & Anr., reported in (2009) 8 SCC 785 , the Apex Court had reservation about the correctness of various decisions of the Apex Court, wherein the Apex Court had held that the Insurance Company has to first pay the compensation amount and recover it later on from the owner of the vehicle, even in cases where no liability could be fixed upon the Insurance Company to indemnify the owner of the vehicle and pay compensation. The two Judges Bench in the above case of National Insurance Co. Ltd. Vs. Parvathneni & Anr. The two Judges Bench in the above case of National Insurance Co. Ltd. Vs. Parvathneni & Anr. (Supra) were of the view that if the insurer did not have the liability to pay the insured the compensation amount, the Court could not compel the insurer to first pay the amount and later on recover it from the owner of the vehicle. The Apex Court thus directed that the case should be placed before the Hon'ble the Chief Justice of India, for constituting a larger Bench to decide the following questions:- "(1) If an insurance company can prove that it does not have any liability to pay any amount in law to the claimants under the Motor Vehicles Act or any other enactment, can the court yet compel it to pay the amount in question giving it liberty to later on recover the same from the owner of the vehicle? (2) Can such a direction be given under Article 142 of the Constitution, and what is the scope of Article 142? Does Article 142 permit the Court to create a liability where there is none?" 13. The three Judges Bench of the Supreme Court thereafter took up the matter, i.e. National Insurance Co. Ltd. Vs. Parvathneni & Anr., SLP(Civil) No. 22444/2009 and passed the following order:- "Application for impleadment is dismissed. Shri S.L. Gupta, learned counsel appearing for the petitioner vehemently argued the matter, but keeping in view the smallness of the amount involved, we are not inclined to entertain this petition under Article 136 of the constitution. The special leave petition is dismissed accordingly. The questions of law raised in this petition are kept open to be decided in an appropriate case." A reading of the above order clearly goes to show that the question of law raised by the two Judges Bench was kept open to be decided in an appropriate case. 14. In the case of Shamanna & Anr. Vs. Divisional Manager, Oriental Insurance Co. Ltd. & Ors., reported in (2018) 9 SCC 650 , the Apex Court has held that in view of the decision of the larger Bench in National Insurance Co. Ltd. Vs. Parvathneni & Anr. (Supra) which has kept the question of law open to be decided in an appropriate case, the decision in National Insurance Co. Ltd. Vs. Ltd. & Ors., reported in (2018) 9 SCC 650 , the Apex Court has held that in view of the decision of the larger Bench in National Insurance Co. Ltd. Vs. Parvathneni & Anr. (Supra) which has kept the question of law open to be decided in an appropriate case, the decision in National Insurance Co. Ltd. Vs. Swaran Singh & Ors, reported in (2004) 3 SCC 297 and followed in National Insurance Co. Ltd. Vs. Laxmi Narain Dhut, reported in (2007) 3 SCC 700 would still hold the field, i.e. the Insurance Company would have to pay the compensation amount and recover the same from the owner of the vehicle. The Apex Court in the case of Shamanna & Anr. Vs. Divisional Manager, Oriental Insurance Co. Ltd. & Ors. (Supra) further held that for the purpose of recovery of the amount from the owner of the vehicle, the Insurance Company shall recover the same as per the decision of the Apex Court in the case of Oriental Insurance Co. Ltd. Vs. Nanjappan, reported in (2004) 13 SCC 224 . 15. In the case of Swaran Singh & Ors. (Supra) and Laxmi Narain Dhut (Supra), the issue was with regard to the accident vehicle being driven by a person who was not duly licensed or was disqualified to hold a license. The Apex Court in the above cases held that the same cannot be a reason for denying the benefit of coverage of the insurance policies to third parties. As can be seen from the above facts, the issue in the case of Swaran Singh & Ors. (Supra) and Laxmi Narain Dhut (Supra) was in regard to a breach of the conditions of the insurance policy, while the case herein pertains to the absence of any valid subsisting contract/insurance policy between the parties. However, in view of the judgment of the Apex Court in Shamanna & Anr. (Supra) wherein the Apex Court has held that till the issue raised by the Apex Court in Parvathneni & Anr. (Supra) is decided by a larger Bench, the insurance company will have to first pay the compensation amount and recover the same from the owner of the vehicle, in terms of the directions passed by the Apex Court in Nanjappan (Supra). 16. In the above case of Oriental Insurance Co. Ltd. Vs. (Supra) is decided by a larger Bench, the insurance company will have to first pay the compensation amount and recover the same from the owner of the vehicle, in terms of the directions passed by the Apex Court in Nanjappan (Supra). 16. In the above case of Oriental Insurance Co. Ltd. Vs. Nanjappan (Supra), the Apex Court held that for the purpose of recovering the compensation amount from the insured, the insurer is not required to file a suit. It may initiate a proceeding before the Executing Court, as if the dispute between the insurer and the owner was the subject matter before the Tribunal and the issue is decided against the owner and in favour of the insurer. The Apex Court further held that before release of the compensation amount to the claimant, the owner of the vehicle shall be issued a notice and he shall be required to furnish security for the entire amount which the insurer will pay to the claimant. The offending vehicle shall also be attached as apart of the security. Paragraph No. 8 of the judgment of the Apex Court in Oriental Insurance Co. Ltd. Vs. Nanjappan (Supra), is reproduced below:- "8. Therefore, while setting aside the judgment of the High Court we direct in terms of what has been stated in Baljit Kaur's case (supra) that the insurer shall pay the quantum of compensation fixed by the Tribunal, about which there was no dispute raised, to the respondents claimants within three months from today. For the purpose of recovering the same from the insured, the insurer shall not be required to file a suit. It may initiate a proceeding before the concerned Executing Court as if the dispute between the insurer and the owner was the subject matter of determination before the Tribunal and the issue is decided against the owner and in favour of the insurer. Before release of the amount to the insured, owner of the vehicle shall be issued a notice and he shall be required to furnish security for the entire amount which the insurer will pay to the claimants. The offending vehicle shall be attached, as a part of the security. If necessity arises the Executing Court shall take assistance of the concerned Regional Transport authority. The offending vehicle shall be attached, as a part of the security. If necessity arises the Executing Court shall take assistance of the concerned Regional Transport authority. The Executing Court shall pass appropriate orders in accordance with law as to the manner in which the insured, owner of the vehicle shall make payment to the insurer. In case there is any default it shall be open to the Executing Court to direct realization by disposal of the securities to be furnished or from any other property or properties of the owner of the vehicle, the insured. The appeal is disposed of in the aforesaid terms, with no order as to costs." 17. Thus, in the present case, while there is no liability on the part of the appellant Insurance Company to indemnify the owner against third party claims, in view of there being no subsisting contract of insurance between the insurer and the insured, the decision of the Apex Court in Shamanna & Anr. Vs. Divisional Manager, Oriental Insurance Co. Ltd. & Ors. (Supra), National Insurance Co. Ltd. Vs. Swaran Singh (Supra) and National Insurance Co. Ltd. Vs. Laxminarain Dhut (Supra) requires that the Insurance Company is to pay the compensation amount awarded to the claimants and thereafter, recover the same from the owner of the vehicle in question, till the issue is finally settled by a larger Bench of the Apex Court. Thus, in terms of the judgment of the Apex Court in Oriental Insurance Co. Ltd. Vs. Nanjappan (Supra), the appellant Insurance Company may initiate a proceeding before the Executing Court for the purpose of recovering the compensation amount from the owner of the vehicle. The owner of the vehicle shall be issued a notice and he shall be required to furnish security for the entire compensation amount prior to the appellant paying the same to the claimant. The offending vehicle can also be attached as a part of the security by the Executing Court by taking the assistance of the Regional Transport Authority concerned. The owner of the vehicle shall be issued a notice and he shall be required to furnish security for the entire compensation amount prior to the appellant paying the same to the claimant. The offending vehicle can also be attached as a part of the security by the Executing Court by taking the assistance of the Regional Transport Authority concerned. The Executing Court shall also pass orders in the manner in which the owner of the vehicle shall make payment to the insurer and in case there is any default, the securities furnished by the owner of the vehicle can be disposed of for realisation of the compensation amount The impugned Judgment & Award dated 25.05.2018 passed by the MACT, Aizawl in MACT Case No. 31/2016 is accordingly modified to the extent indicated above. 18. The appeal is accordingly disposed of.