The Oriental Insurance Co. Ltd., ... vs Sukhadeo Khogalji Gurve And Anor
2017 Latest Caselaw 8793 Bom

                                                       1                           fa221.09

             IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                              NAGPUR BENCH : NAGPUR


                           FIRST APPEAL NO.221 OF 2009

The Oriental Insurance Co. Ltd.,
through its Divisional Manager, 
Palm Road, Civil Lines, Nagpur.                            ...            Appellant
                - Versus -
1)      Shri Sukhadeo s/o Khogalji Gurve,
        aged 35 years, occupation : nil,
        Plot No. 895, Trimurty Nagar,
        Nagpur. 

2)      Shri Inayatbhai Sheikh s/o G.
        Razzak Sheikh, aged major, 
        occupation : not known, 
        Ward No.23, Balapur, Akola.                        ...            Respondents
                                   -----------------
Shri L. Limaye, Advocate for appellant. 
                                   ----------------

                                          CORAM :   P.N. DESHMUKH, J.

DATED : NOVEMBER 17, 2017

ORAL JUDGMENT :

Heard Shri Limaye, learned Counsel for appellant. None

for respondent nos.1 and 2 though appear to be served. Record

further reveals that in spite of service of notice, as respondents were

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not represented by their Counsel, matter was adjourned for today

with a view to give them opportunity to defend the appeal on merits.

In spite of that, none appears for respondents.

2) This appeal takes exception to judgment and award dated

15/1/2017 passed by learned Member, Motor Accident Claims

Tribunal, Nagpur in Motor Accident Claim Petition No.839/2002

holding appellant Insurance Company and respondent no.2/owner

of truck jointly and severally liable to pay amount of Rs.39,500/- to

respondent no.1 with interest at the rate of 7.5% per annum from

the date of petition, i.e. 25/11/2002 till realisation with further

direction to appellant Company to satisfy the award and then

recover it from the owner of the truck by initiating recovery

proceedings.

3) Shri Limaye, learned Counsel for appellant, has not

disputed fact of accident and involvement of Truck bearing

Registration No. MTV 2833 in accident nor has seriously disputed

fact of respondent no.1 suffering injuries resulting in 10%

permanent disability . It is, however, contended that the impugned

judgment and award needs to be quashed and set aside as the

learned Tribunal has failed to appreciate the fact that policy, which

3 fa221.09

was issued in favour of respondent no.2/owner of truck was

cancelled much prior to date of accident as Cheque No.003534

issued by respondent no.2 to appellant was dishonoured by its

Banker and this fact was intimated to appellant on 26/6/2002. It is

submitted that on receiving such information from the Bank on

27/6/2002, appellant informed about cancellation of policy to

respondent no.2 by issuing registered letter and received

acknowledgment thereof. It is contended that since appellant has

established beyond doubt that for the reasons as aforesaid, policy

was cancelled and since appellant has complied with mandatory

requirement by informing about cancellation of insurance policy to

respondent no.2 by registered post, no liability can be fastened upon

appellant as the vehicle involved in the accident was not insured on

the date of accident, which occurred on 19/8/2002. It is further

submitted that learned Tribunal has wrongly considered law laid

down in the case of Oriental Insurance Co. vs. Inderjeet Kaur and

others (1998 ACJ 123 (SC) and New India Assurance Company vs.

Rula and others (2002 (2) TAC 1(SC). It is, therefore, contended

that the impugned judgment and award insofar as it holds

appellant/insurer liable to pay compensation amount jointly and

severally with respondent no.2/owner of vehicle is liable to be

4 fa221.09

quashed and set aside. In support of submissions, learned Counsel

for appellant has relied on the judgment of the Hon'ble Apex Court

in the case of United India Insurance Co. Ltd. vs. Laxmamma and

others (2012 ACJ 1307).

4) Facts involved in the present appeal can briefly be stated

as under :

On 19/8/2002, accident took place involving respondent

no.1 while he was proceeding on his bicycle and was given dash by

Truck bearing Registration No.MTV 2833, which came from opposite

direction in high and excessive speed due to which he suffered

injuries to his left thigh and in spite of having medical treatment,

sustained 10% permanent disability. It is the case of respondent

no.1 that at the time of accident, he was working as a daily wage

labourer earning Rs.100/- per day and he was required to spend

Rs.20,000/- on medical treatment and thus, he claimed

compensation of Rs.1 lakh.

5) Respondent no.2/owner of the truck was proceeded

ex parte while appellant/original respondent no.1 resisted the

petition by filing written statement (Exh. 15) inter alia denying that

accident occurred due to rash driving of Truck Driver. It was further

5 fa221.09

submitted that policy (Exh. 49) was issued in lieu of Cheque

No.003534 (Exh. 50) issued by respondent no.2. However, same

was cancelled on receiving intimation by Bank vide Exh. 51 on

26/6/2002 about dishonour of cheque for want of sufficient funds.

Appellant also brought on record letter dated 27/6/2002 (Exh. 52)

by which respondent no.2 was informed of cancellation of policy for

aforesaid reason and in compliance to mandatory requirement had

sent registered letter (Exh.52) to respondent no.2, of which

appellant received postal receipt (Exh. 53) and acknowledgment of

service of letter (Exh. 54).

6) On considering above proved documents, it is apparently

established by appellant that there is compliance of mandatory

requirement with regard to issuance of intimation to respondent

no.2 of cancellation of insurance policy on 27/6/2002 while accident

took place on 19/8/2002. As such, from the documents it is

established that on the day of accident, there was no valid insurance

policy of vehicle involved in the accident.

7) In view of facts as aforesaid, question which arises for

consideration in this appeal is :

Whether appellant Oriental Insurance Co. Ltd. (insurer) is

6 fa221.09

absolved of its obligation to third party under the policy

of insurance because the cheque given by owner of the

vehicle towards premium got dishonoured and prior to

accident on 19/8/2002, the insurer cancelled the policy of

insurance on 27/6/2002 ?

8) In the background of above facts, it is necessary to

consider first relevant provisions of Section 64-VB of Insurance Act,

1938, which is reproduced below :

"64-VB : 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) ......

(3) .......

(4) ......

(5) ......

(6) .....

7 fa221.09

In view of above provision, it is crystal clear that no risk is assumed

by insurer unless premium payable is received in advance. Similarly,

Chapter XI of the Motor Vehicles Act, 1988 deals with insurance of

motor vehicle against third party risks. Section 145 of the said

Chapter defines :

(a) authorised insurer,

(b) certificate of insurance,

(c) liability,

(d) policy of insurance,

(e) property,

(f) reciprocating country and

(g) third party

Section 146 mandates insurance of a motor vehicle against third

party risk. Inter alia, it provides that no person shall use the motor

vehicle in a public place unless a policy of insurance has been taken

with regard to such vehicle complying with requirements as set out

in Chapter XI. Section 147 makes provision for requirements of

policies and limits of liability. With regards to facts involved in the

appeal at hand, sub-section (5) of Section 147 is relevant, which is

reproduced below :

"(5) Notwithstanding anything contained in any law for the time being in force, an insurer issuing a policy of insurance under this Section shall be liable to indemnify

8 fa221.09

the person or classes of persons specified in the policy in respect of any liability which the policy purports to cover in the case of that person or those classes of persons."

9) After considering the relevant provisions in the Insurance

Act, 1938 and the Motor Vehicles Act, 1988, when the case of

Inderjit Kaur and others (cited supra) is considered, the facts

involved therein were that Bus of which policy was issued by the

Insurance Company on 30/11/1989 met with an accident. The

cheque issued for payment of premium was dishonoured, which fact

was communicated by the Insurance Company to the insured on

23/1/1990 clarifying that due to dishonour of cheque, Insurance

Company was not liable for any kind of risk. Thereafter on

19/4/1990 accident took place as the Bus collided with a Truck and

the Insurance Company accepted premium in cash on 2/5/1990.

The facts as aforesaid thus established that after the accident, which

took place on 19/4/1990, premium was paid in cash, which was

accepted by the Insurance Company on 2/5/1990 and in the peculiar

facts as aforesaid, in paras 8, 9 and 11 of the judgment, the Hon'ble

Apex Court observed as under :

"(8) 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

9 fa221.09

bus without receiving the premium therefor. 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 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."

As such, in the case of Inderjit Kaur and others, the Hon'ble Apex

Court invoked the doctrine of public interest and held that the

10 fa221.09

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. However, 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 dishonoured.

10) In that view of the matter, the learned Tribunal appears

to have misread the law laid down in th case of Inderjit Kaur and

others (cited supra) and made it applicable to the claim petition

having distinguishing facts. Similarly, the law laid down in the case

of New India Assurance Co. Ltd. vs. Rula (cited supra) cannot be

applied to the facts given in the claim petition inasmuch as that was

the case where the insurance policy was issued by New India

Assurance Co. Ltd. in terms of the requirements of the Motor

Vehicles Act but the cheque by which the owner had paid the

premium bounced and the policy was cancelled by the Insurance

Company, but before the cancellation of the policy, accident had

taken place. Thus, in para 11 of its judgment, the Hon'ble Apex

Court held that the subsequent cancellation of the insurance policy

in the instant case on the ground that the cheque through which

11 fa221.09

premium was paid was dishonoured, 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 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.

11) From the above cited case law, thus it is to be noted that

when the insured fails to pay the premium as agreed between him

and Insurance Company or when the cheque issued by him while

purchasing insurance policy is dishonoured, no liability can be

saddled upon the insurer nor the insurer is required to perform his

part of agreement. In other words, in such a situation, insured

cannot claim performance of the contract from the insurer in any

case. In that view of the matter, having considered distinguishing

features of statutory liability of Insurance Company vis a vis third

party, in the background of provisions of Sections 147 and 149 of

the Motor Vehicles Act as well as same liabilities arising out of

12 fa221.09

contract of insurance, such liabilities can be satisfied only in the

event contract is valid and if such contract is cancelled and all

concerned are intimated about the same, Insurance Company cannot

be made liable to satisfy the claim.

12) In the background of above legal pronouncements, when

facts as have been culled out aforesaid are re-appreciated, it is found

that due to dishonour of cheque (Exh. 50) of which intimation was

given by Bankers to appellant on 26/6/2002 in writing vide Exh. 51

and as appellant on 27/6/2002 by issuing registered letter (Exh. 52)

intimated insured, i.e. respondent no.2 about cancellation of policy

which letter of intimation is found duly received by said respondent,

who had sent acknowledgment at Exh. 54, appellant has established

that by complying with mandatory requirement, no liability can be

fastened upon appellant as there was no insurance coverage of Truck

on 19/8/2002 when it met with accident.

13) In view of above facts, learned Tribunal appears to have

failed to consider above position of law and in spite of finding that

policy was cancelled because of dishonour of cheque, wrongly

relying upon the case of Inderjit Kaur and others (cited supra) has

found that third party has no concern with premium by virtue of

13 fa221.09

Sections 147(5) and 149(1) of the Motor Vehicles Act, 1988 and as

such, wrongly held that Insurance Company cannot avoid liability to

satisfy the claim and can recover the same from the insured.

14) Accordingly, first appeal is allowed. It is declared that

appellant did not incur any liability to satisfy the impugned award.

Consequently, impugned judgment and award dated 15/1/2007

passed by the learned Member, Motor Accident Claims Tribunal,

Nagpur in Motor Accident Claim Petition No.839/2002 insofar as it

directs appellant insurer to satisfy the award in the first instance and

then to recover amount from the insured is set aside. If any amount

has been deposited by appellant with the Registry of this Court or

has paid to insured, it shall be entitled to recover the same. No

order as to costs.

JUDGE

khj