M/S National Insurance Co. Ltd vs Bhagwanf Rajaram Gawai And 4 ...
2017 Latest Caselaw 4389 Bom

1207 FA  142/2006                             1                        Judgment


        IN THE HIGH COURT OF JUDICATURE AT BOMBAY,
                 NAGPUR BENCH AT NAGPUR.


                        FIRST APPEAL NO. 142/2006 


M/s. National Insurance Co. Ltd.
Through its Divisional Manager,
Division Office No.IV, Dhantoli, Nagpur.                APPELLANT

                                .....VERSUS.....


1]     Bhagwan Rajaram Gawai,
       Aged 35 years, Occu: Labourer,
       (father of deceased)
2]     Smt. Ranjana Bhagwan Gawai,
       Aged 25 years, Occu: Nil,
       (mother of deceased)
3]     Nilesh s/o Bhagwan Gawai,
       Aged 5 years, 
       (brother of deceased)
4]     Ku. Swawati D/o Bhagwan Gawai, 
       Aged 2 years,
       (sister of deceased)
       Respondent nos.3 and 4 are minors,
       they are represented by their natural
       guardian father respondent no.1 Bhagwan.
       All R/o. Selsura, Tah. Deoli, 
       Distt. Wardha.
5]     Surendra Mohan Ruhariya,
       Aged 60 years, Occu: Owner of Truck
       MP-23-B-6244,
       R/o. Raipur (MP).
       New Address : C/o. S.R. Lohariya,
       Dhoot Computer Centre, Near Nagar
       College, Station Road, Ahmadnagar.


 ::: Uploaded on - 20/07/2017                      ::: Downloaded on - 28/08/2017 09:58:48 :::
 1207 FA  142/2006                               2                          Judgment



6]     Sayyad Aslam Sayyad Ibrahim,
       Aged 25 years, Occu: Driver,
       R/o. Gandhibagh, Nagpur.                              RESPONDE NTS
                                                                         


Smt. S.P. Deshpande, counsel for appellant.
None present for respondent nos.1 to 4.
None present for respondent nos.5 and 6.


                 CORAM  : DR. SMT. SHALINI PHANSALKAR-JOSHI, J.

               DATE     : JULY 12, 2017.



ORAL JUDGMENT :  

This appeal is preferred by the insurance company

which is held liable to pay compensation of Rs.79,500/- to

respondent nos.1 to 4 herein, along with the owner and the driver

of the offending vehicle, by the judgment and order dated

11/11/2005 by MACT, Wardha in Claim Petition No. 79/1998.

2] Brief facts of the appeal can be stated as follows:-

Deceased Shailesh was the son of respondent nos.1 and

2 and the brother of respondent nos.3 and 4. At the time of

accident, he was running the age of 6 years and studying in the

1207 FA 142/2006 3 Judgment

school. On 14/04/1995 at about 5:30 p.m. at village Selsura, he

was standing by the side of the road in order to cross the road, at

that time the Truck bearing no. MP-23-B-6244 driven by respondent

no.5 herein, came in rash and negligent manner and gave dash to

the deceased. Due to the said accident, offence was registered

against the Truck driver. Respondent no.6 is the owner of the said

Truck. Respondent nos.1 to 4, therefore, claimed compensation of

Rs.1,00,000/- from the appellant and respondent nos.5 and 6

jointly and severally.

3] This petition came to be resisted by appellant

contending inter alia that the cheque for the amount of Rs.6,531/-

issued by the owner of the Truck towards insurance premium for

the period from 15/07/1994 to 15/07/1995 came to be

dishonoured. The said fact was also communicated to the owner of

the Truck and in such situation as the insurance policy itself was

cancelled, appellant cannot be liable to pay any amount of

compensation to the claimants.

4]              So far as the respondent no.5 - the Truck driver and 





 1207 FA  142/2006                                4                          Judgment

respondent no.6 - the Truck owner, both of them, did not

participate in proceeding before the Tribunal and before this Court

also.

5] In support of their case, respondent no.1 Bhagwan,

father of the deceased examined himself and produced the copy of

F.I.R., spot panchnama and P.M. Report, with charge-sheet to prove

that the cause of accident was the rash and negligent driving of the

Truck. As against it, on behalf of appellant, one Mr. Raut was

examined to prove the dishonor of the cheque and issuance of the

notice to that effect to the owner of the Truck.

6] On appreciation of this evidence, the learned Tribunal

was pleased to hold that cause of the accident was rash and

negligent driving of the Truck. Learned Tribunal further held that

though the cheque was dishonoured, there was admission given by

witness Rao that the policy has been issued after the encashment of

the cheque and the appellant insurance company has not produced

the dishonoured cheque. As a result, learned Tribunal held the

appellant also jointly and severally liable to compensate the

1207 FA 142/2006 5 Judgment

claimants along with the owner and driver of the Truck. Learned

Tribunal awarded the compensation of Rs.79,500/- inclusive of NFL

amount, to respondent nos.1 to 4 with interest at the rate of 7.5%

per annum from the date of petition till its realization.

7] This judgment of the Tribunal is challenged in the

present appeal by learned counsel for appellant mainly on the

ground that the liability of payment of compensation should not

have and could not have been imposed on the appellant as the

insurance policy was already cancelled by issuing requisite notice

after dishonour of the cheque. It is submitted that law, in this

respect is clearly well settled, which learned Tribunal has failed to

consider, and therefore, appellant should be exonerated from the

liability of compensating the claimants. In the alternate, it is

submitted that as against the deceased who was a third party and

hence the liability is to be imposed on the appellant-insurance

company, then appellant should be held entitled to recover the said

amount of the compensation from the owner of the Truck, as

already entire amount of the compensation has been deposited by

the appellant in the court and it is also withdrawn by the claimants.

 1207 FA  142/2006                                  6                          Judgment




8]              As regards the factual aspects of the case, there is more 

than sufficient evidence on record, like the evidence of Bhagwan,

father of the deceased, who was an eye witness to the accident and

who has deposed as to the manner in which the Truck was driven in

a high speed and gave dash to his son Shailesh. Admittedly, the age

of the deceased was only 6 years at the time of accident. The copy

of F.I.R. also goes to show that police, after carrying out necessary

inquiry held the Truck driver responsible for the cause of accident.

The spot panchnama (Exh.22) is also sufficient to depict the manner

in which the accident had occurred. The charge sheet is also filed

against the Truck driver. The Truck driver himself has not entered

into witness box, nor adduced any evidence to prove that the

accident has not occurred on account of the rash and negligent

driving of the Truck. In such situation, it has to be held that

Tribunal has rightly held that the sole cause of accident was rash

and negligent driving of the Truck by respondent no.5.

9] Even as regards the compensation amount of

Rs.79,500/- inclusive of NFL amount awarded by the Tribunal, there

1207 FA 142/2006 7 Judgment

is no cross objection filed by learned counsel for respondent nos.1

to 4 for enhancement of the same and considering the finding and

reasoning given by the Tribunal for determining the quantum of

compensation, no interference is warranted in the said finding also.

10] The only crux of the dispute raised in this appeal

pertains to the liability of the appellant-insurance company. In this

case, it is deposed by witness Damodhar Raut, examined by the

appellant-insurance company that the cheque for the amount of

Rs.6,531/- was issued by the owner of the Truck on 15/07/1994. It

was towards the premium for the period from 15/07/1994 to

15/07/1995. Accordingly, the cover note bearing no. 324131 was

issued on 15/07/1994. The cheque was deposited in the bank for

encashment on 18/07/1994 and it was dishonoured by bank on

22/07/1994. The intimation about dishonor of the said cheque was

given to the Truck owner on 22/07/1994 itself. The said intimation

was also received by the owner. The requisite documentary evidence

is also produced on record to that effect including the letter

received from the bank about the dishonor of the cheque. The

intimation sent to the owner of the vehicle is at Exh.38 and its

1207 FA 142/2006 8 Judgment

acknowledgement is at Exh.39.

11] Thus, according to learned counsel for appellant, as the

cheque towards the payment of the premium for the relevant period

came to be dishonoured and the owner of the vehicle was duly

informed about the same, the contractual liability between

insurance company and the owner of the vehicle has come to an

end. Moreover, as in this case the insurance policy itself was

cancelled by issuing requisite notice to the owner of the vehicle and

no fresh policy was taken to that effect, the insurance company

cannot be held liable to pay compensation.

12] In support of her submission, learned counsel for

appellant has relied upon the landmark judgment of the Hon'ble

Supreme Court in the case of National Insurance Co. Ltd. -Vs-

Seema Malhotra and others, (2001) 3 SCC 151, which is relied

upon in the decision of Punjab and Haryana High Court in the case

of Anarkali and others -Vs- Naresh Kumar and others, I (2016)

ACC 72 (P & H) and by Andhra Pradesh High Court in the case of

United India Insurance Co. Ltd. -Vs- Golla Nattala Gopal, II

1207 FA 142/2006 9 Judgment

(2016) ACC 116 (AP). It is submitted that as per the legal position

crystallized in these authorities, the liability of insurance company

comes to an end when it is shown that on dishonor of the cheque,

the owner of the vehicle was informed about the same and as also

of the cancellation of the policy. It was held that the insurance

policy, in such situation, never remained in force as the cheque

issued by the insured was only a promise to pay money and when

that promise had not been fulfilled, the insurer need not perform its

part of the promise.

13] The Hon'ble Supreme Court has also considered in this

judgment of Seema Malhotra that the policy itself is an agreement

and when the insured did not pay the premium, such a policy would

become an agreement without consideration, and therefore void

under Section 25 of the Contract Act and Section 64-VB of the

Insurance Act, 1938. It was held that as per section 64-VB of the

Insurance Act, 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

1207 FA 142/2006 10 Judgment

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. Here in the case, it is urged that as premium

itself was not received and this fact was informed to the insured and

he was also further intimated that his policy was cancelled, there

was no question of the appellant being liable in any way for

compensating the claimants.

14] Learned counsel for appellant has in this respect, also

relied upon section 147 of the Motor Vehicles Act to submit that,

where a cover note issued by the insurer under the provisions of this

Act or the rules made thereunder is not followed by a policy of

insurance within the prescribed time, the insurer after

communicating the said fact to the owner, will not be liable for the

risk by the insured. Thus, submission of learned counsel for

appellant is that in the instant case as the cheque issued by the

insured was dishonoured and the said fact was communicated to

the insured and despite that the premium was not paid and policy

was not revived, the liability of appellant to compensate and to

cover the risk of the insured comes to an end.

 1207 FA  142/2006                                 11                          Judgment




15]             However, when the Hon'ble Apex Court has occasion to 

                                                      As
consider this legal position in the case of New India    surance Co.
                                                                     

 Ltd. -Vs-  Rula and others, (

                                  ) 
                                     3 S
                                        upreme 
                                               C
                                                  ourt 
                                                       C
                                                          ases

                                                                 , it 

was held by the Hon'ble Apex Court that "A contract of insurance,

like any other contract, is concluded by offer and acceptance.

Normally, a liability under the contract of insurance would arise only

on payment of premium if such payment was made a condition

precedent to the insurance policy taking effect". However, it was

further held that, "These are the principles relating to an ordinary

contract of insurance, but the contract of insurance relating to motor

vehicles has to be understood in the light of the various provisions

contained in the Motor Vehicles Act, like section 146, 147(5) and

149". After taking review of these provisions, it was held by the

Hon'ble Apex Court, in para no.10 and 11 of this judgment, as

follows :-

"10. The contract of insurance in respect of motor vehicles has, therefore, to be construed in the light of the above provisions. Section 146(1) contains a prohibition on the use of the motor vehicles without an insurance policy having been taken in accordance with Chapter XI of the Motor Vehicles Act. The manifest object of this provision is to ensure that the third party, who suffers

1207 FA 142/2006 12 Judgment

injuries due to the use of the motor vehicle, may be able to get damages from the owner of the vehicle and recoverability of the damages may not depend on the financial condition or solvency of the driver of the vehicle who had caused the injuries".

"11. Thus, any contract of insurance under Chapter XI of the Motor Vehicles Act, 1988 contemplates a third party who is not a signatory or a party to the contract of insurance but is, nevertheless, protected by such contract. As pointed out by this Court in New Asiatic Insurance Co. Ltd. -Vs- Pessumal Dhanamal Aswani, the rights of the third party to get idemnified can be exercised only against the insurer of the vehicle. It is thus clear that the third party is not concerned and does not come into the picture at all in the matter of payment of premium. Whether the premium has been paid or not is not the concern of the third party who is concerned with the fact that there was a policy issued in respect of the vehicle involved in the accident and it is on the basis of this policy that the claim can be maintained by the third party against the insurer".

16] In this judgment, reliance was also placed by the

Hon'ble Apex Court, on its earlier decision in the case of Oriental

Insurance Co. Ltd. -Vs- Inderjit Kaur, (1998) 1 SCC 371, wherein

it was held in para no.9, as follows :-

"9. We have, therefore, this position. Despite the bar created by Section 64-VB of the Insurance Act, the appellant, an authorised insurer, issued a policy of insurance to cover the bus without receiving the premium therefor. By reason of the provisions of Section 147(5) and 149(1) of the Motor Vehicles Act, the appellant

1207 FA 142/2006 13 Judgment

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."

17] Thus, in the ultimate analysis it was held by the

Hon'ble Apex Court that, "The subsequent cancellation of the

insurance policy on the ground that the cheque through which

premium was paid was dishonored, 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 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."

18] In view of this clear legal position, in the instance case

also, appellant cannot be absolved from paying compensation to the

respondents-claimants for the death of their son. Now the only

1207 FA 142/2006 14 Judgment

question that remains is whether the appellant recover the amount

of compensation from the owner of the vehicle? According to

learned counsel for appellant, learned Tribunal has committed an

error in not passing any such order, and hence having regard to the

fact that there was no contractual liability, inter-se between insured

and insurer, even if insurer have not issued policy and the

provisions of the Motor Vehicles Act are satisfied, award in force the

insurer is entitled to recover that amount from the insured.

19] One would have accepted this argument, but for the

fact that in this case there is one admission given by Damodhar

Raut himself, who is examined on behalf of the appellant. He has

stated that policy was issued after encashment of the cheque. No

doubt, he has subsequently denied the said fact. However, the

Tribunal in this respect has held that it was necessary for the

appellant-insurance company, in such situation, to produce on

record the original dishonoured cheque, as normally after the

cheque is dishonoured, it returns to the person who has deposited

it. Here in this case, the original cheque was admittedly not

produced on record and it is coupled with the fact that Shri Raut

1207 FA 142/2006 15 Judgment

has admitted that policy was issued after cheque was encashed and

hence Tribunal has arrived at the conclusion that there is possibility

of the owner paying the amount of premium in cash and the

dishonoured cheque being returned to him, and therefore it was not

produced in the case. having regard to the entire evidence on

record, that possibility cannot be denied, and therefore, finding

arrived at by the Tribunal on this point, cannot be disturbed.

20] As a result, appellant cannot get absolved from its

liability of paying the compensation amount to the respondents-

claimants. As a matter of fact, amount is already deposited and it is

withdrawn also. Appeal therefore holds no substance, and hence

stands dismissed, with no order to costs.

JUDGE

Yenurkar