The Oriental Insurance Co. Ltd vs Mr. Karbhari Daga Gaikwad And Ors
2021 Latest Caselaw 15820 Bom

                                                                                       fa-522-2017.doc




                                   IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                                        APPELLATE SIDE CIVIL JURISDICTION

                                           FIRST APPEAL NO.522 OF 2017
                                                      WITH
                                        CIVIL APPLICATION NO.1153 OF 2017

                      The Oriental Insurance Company Limited                 ...Appellant
                                 vs.
                      Karbhari Daga Gaikwad and Another                      ...Respondents
VISHAL
SUBHASH
PAREKAR
                      Mr. Devendra Joshi, for the Appellant
                      Mr. Pritesh Bohade, for the Respondent Nos. 1 to 4.
Digitally signed by
VISHAL
SUBHASH
PAREKAR
Date: 2021.11.16                               CORAM :             N.J. JAMADAR, J.
15:06:05 +0530

                                          RESERVED ON :            4th OCTOBER, 2021
                                          PRONOUNCED ON :          16th NOVEMBER, 2021
                                                         -------------

                      JUDGMENT :

1. This appeal is directed against the judgment and award dated

28th March, 2014 passed by the learned Member, MACT, Nashik in

MACP No. 288 of 2009 whereby the appellant/insurer was held

jointly and severely liable to pay compensation of Rs. 6,68,400/-

along with interest @ 9% p.a. from the date of the petition to the

respondents/claimants for the death of Milind Karbhari Gaikwad

(the deceased), in a vehicular accident.

2. The background facts leading to this appeal can be stated in

brief as under:

                      a]       On 4th February, 2009 the deceased, who was the son of

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respondent Nos. 1 and 2 and the brother of respondent Nos. 3 and 4,

was riding a motor-cycle bearing registration number MH-41/M-

7593 on his way to Satpur MIDC. When he reached near ITI signal,

Satpur, Nashik, a TVS motor-cycle bearing registration number MH-

15/BT-4275, owned by the respondent No. 5/original opponent No.

1 and insured with the appellant/original opponent No. 2, gave a

violent dash to the motor-cycle of the deceased. Eventually, the

deceased succumbed to his injuries. The deceased was 27 years old.

He was a bachelor. The respondents/original claimants instituted

the petition under section 166 of the Motor Vehicles Act, 1988 (the

Act 1988) asserting that the deceased was earning Rs. 5,000/- p.m.

and all the respondents were dependent on the deceased. The

claimants averred that the offending vehicle was insured with the

appellant/insurer.

b] The respondent No. 5 / original opponent did not appear before

the Tribunal despite service of the notice and thus petition

proceeded ex-parte against the opponent No. 1/owner. The appellant

/opponent No. 2 resisted the claim qua the insured on the principal

ground that on the date of the accident the offending vehicle was

not insured with the insurer. It was contended that the opponent

No. 1 had insured the offending vehicle with the insurer for the

period 17th June, 2006 to 16th October, 2007. The policy was,

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however, not renewed. Thus, the insured was not liable to indemnify

the insurer.

3. The learned Member of the Tribunal recorded the evidence of

Karbhari Gaikwad (PW.1), the claimant No.1; Ashok Shinde (PW.2),

the Manager of Tricom India Limited where the deceased was

working as a Data Processor, and Mohan Gondhalekar (DW.1), the

Assistant Regional Manager of the insurer. After appraisal of the

evidence and the documents tendered for his perusal, the learned

Member was persuaded to allow the petition holding inter alia that

the accident occurred due to rash and negligent driving of the

offending motor-cycle by its driver and at the time of the accident,

the said vehicle was insured with the appellant under the scheme of

"One Time Insurance" and thus the appellant as well as the insured/

owner of the vehicle were jointly and severely liable to pay

compensation to respondent Nos. 1 to 4/ claimants. To arrive at the

said conclusion, the learned Member banked upon the entry made

in the record maintained by the RTO wherein it was noted that the

vehicle was insured under "One Time Insurance Scheme".

4. Being aggrieved by and dis-satisfed with the aforesaid fnding,

as regards the liability of the insurer/opponent No. 2, the

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appellant/insurer has preferred this appeal. The principal ground of

appeal is the erroneous fnding by the learned Member of the

Tribunal that the vehicle was insured with the appellant on the date

of the accident.

5. I have heard Mr. Devendra Joshi, learned counsel for the

appellant and Mr. Pritesh Bohade, learned counsel for the

Respondent Nos. 1 to 4/original claimants at length. With the

assistance of the learned counsels for the parties, I have perused

the pleadings before the Tribunal, depositions of the witnesses,

documents tendered for the perusal before the Tribunal and the

material on record.

6. Mr. Joshi, learned counsel for the appellant strenuously urged

that the learned Member committed a manifest error in recording a

fnding that the offending vehicle was insured with the appellant

under "One Time Insurance Scheme". Amplifying the submission,

Mr. Joshi would urge that in arriving at the said fnding, the learned

Member of the Tribunal, on the one hand, failed to consider the

certifcate of insurance (Exhibit 43), which was duly proved in

evidence of DW.1, in its correct perspective, and, on the other hand,

the learned Member gave undue weight to the information

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furnished by RTO and the circular dated 17 th May, 2015 whereby the

insurers were allowed to issue long term Act only policy for two

wheelers. Mr. Joshi would urge that the learned Member lost sight

of the fact that the said proposal authorizing the issue of Long Term

Act Policy was never implemented and by the subsequent

communication dated 29th June, 2005 implementation of Long Term

Act Policy only for two wheeler w.e.f. 1 st July, 2005 was decided to

be kept in abeyance. A grievance was made on behalf of the

appellant that despite the said position having been brought to the

notice of the learned Member, there was no adequate consideration

which resulted in the passing of the impugned award holding the

appellant liable to satisfy the award though there was no subsisting

contract of insurance between the insured/owner and the appellant/

insurer.

7. In opposition to this, Mr. Pritesh Bohade, learned counsel for

the respondents No. 1 to 4 banked upon the information furnished

by RTO wherein under the caption of the Insurance Particulars the

validity of the insurance policy, issued vide Cover Note No. 1357679

is shown: "17th October, 2006 - One Time Insurance". Mr. Bohade

further submitted that it is not the case that there was no

authorization for issuance of one time insurance policy. In view of

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the circular dated 17th May, 2005, the authorized insurers were

authorized to issue Long Term Act Policy only for two wheelers and

if it was the stand of the appellant/ insurer that the said Long Term

Act Only Policy was kept in abeyance it was for the respondents to

lead evidence and establish the same before the Tribunal. Having

failed to lead cogent evidence, at this juncture, according to Mr.

Bohade, the appellant cannot be permitted to agitate the ground

that there was no valid of contract of insurance.

8. In the backdrop of the aforesaid submissions, it would be

contextually relevant to note, at this stage itself, as to how the

learned Member of the Tribunal dealt with the said ground. The

learned Member recorded that Mohan Gondhalekar (DW.1)

conceded in the cross examination that the offending vehicle was

insured with the appellant and on the basis of cover note issued by

the appellant, the said vehicle was registered with RTO. Thus an

inference was drawn by the learned Member that the entry in the

RTO record, to the effect of 'One Time Insurance' was made on the

basis of the information furnished by the appellant. Since, the

appellant did not lead evidence in support of its claim that "Long

Term Act Only Policy" for two wheelers was kept in abeyance and

there was nothing to show that the policy initially issued by the

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appellant was cancelled, the appellant was held liable to indemnify

the insured.

9. Evidently, the controversy lies in a narrow compass. Whether

the offending vehicle was insured with the appellant on the date of

the accident, is the moot question. It is trite that existence of a

valid contract of insurance is a per-requisite for fastening the

liability on the insurer. The insurance policy issued by the insurer to

the insured represents a contract between the parties. The insurer

undertakes to compensate the insured for the losses covered under

the contract of insurance subject to terms and conditions of the

policy. Section 149 of the Act of 1988 incorporates the duty of

insurer to satisfy the judgment and award against the insured in

respect of third party risk. The entitlement to avail the beneft

under the statutory provision, would enure if on the date of accident

there is a valid contract of insurance between the insurer and

insured. To put it in other words, if on the date of the accident, there

is a policy of insurance in respect of the offending vehicle, the third

party would have a claim against the insurance company and the

later is obligated to indemnify the owner of the vehicle (insured), in

respect of the claim of the third party.

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10. The question of liability of the insurer thus turns upon the

existence of contract of insurance and, if it is proved that there was

a contract of insurance, then the construction of the terms of the

said contract. A contract of insurance is required to be construed

according to the principles of construction generally applicable to

commercial contracts.

11. In a recent pronouncement in the case of Bajaj Allianz General

Insurance Co. Ltd and Anr. vs. State of Madhya Pradesh 1, the

Supreme Court expounded the nature of contract of the insurance

and principles of construction of contract of insurance. The

observations in paragraphs 15 and 16 are material and hence

extracted below:

15] MacGillivray on Insurance Law 10 elucidates the principles which govern the interpretation of insurance contracts:

"11-007 It is an accepted canon of construction that a commercial document, such as an insurance policy, should be construed in accordance with sound commercial principles and good business sense, so that its provisions receive fair and sensible application. Several consequences flow from this principle稀

11-008 It follows that in interpreting any clause of a policy, it is correct to bear in mind: (1) the commercial object of purpose of the contract; and (2) the purpose or function of the clause and its apparent relation to the contract as a whole... "

16] The provisions of an insurance contract must be imparted a reasonable business like meaning bearing in mind the intention conveyed by the words used in the policy document. Insurance policies should be construed according to the principles of construction generally 1 2020 SCC OnLine SC 401.

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applicable to commercial and consumer contracts. The court must interpret the words in which the contract is expressed by the parties and not embark upon making a new contract for the parties. A reasonable construction must therefore be given to each clause in order to give effect to the plain and obvious intention of the parties as ascertainable from the whole instrument. The liability of the insurer cannot extend to more than what is covered by the insurance policy. In order to determine whether the claim falls within the limits specifed by the policy, it is necessary to defne exactly what the policy covered and to identify the occurrence of a stated event or the accident prior to the expiry of the policy. Hence, while considering the rival submissions, it is necessary to preface our analysis with the provisions of the policy.

(emphasis supplied)

12. A proftable reference can also be made to the judgment of the

Supreme Court in the case of New India Assurance Co. Ltd. vs.

Harshadbhai Amrutbhai Modhiya2 wherein the manner of

construction of contract of insurance was expounded in paragraph

23 as under:

23] The law relating to contracts of insurance is part of the general law of contract. So said Roskill Lord Justice in Cehave vs. Bremer ([1976] Q.B. 44). This view was approved by Lord Wilberforce in Reardon Smith vs. Hanson-Tangen (1976 [1 WLR] 989, wherein he said:

"It is desirable that the same legal principles should apply to the law of contract as a whole and that different principles should not apply to the different branches of that law".

A contract of insurance is to be construed in the frst 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 Edition paragraph 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

2 (2006) 5 Supreme Court Cases 192.

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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.

(emphasis supplied)

13. In the case of Deddappa and Others vs. Branch Manager,

National Insurance Co. Ltd.3, where the insurance company had

cancelled the insurance policy consequent to dishonour of cheque

issued by the insurer towards the premium and subsequently the

vehicle had met with an accident, the Supreme Court after

adverting to the pronouncement in the case of Harshadbhai

Modhiya (supra) enunciated the legal position in the following

words:

24] We are not oblivious of the distinction between the statutory liability of the Insurance Company vis-`-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 benefcial legislation as is well known should not be construed in such a manner so as to bring within its ambit a beneft 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 (SCC pp.224-25, para 10) :

"10稀.. "We do not doubt that benefcial

3 (2008) 2 Supreme Court Cases 595.

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legislations should have liberal construction with a view to implementing the legislative intent but where such benefcial .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 beneft to those who are not covered by the scheme."

We, therefore, agree with the opinion of the High Court.

(emphasis supplied)

Holding thus the Supreme Court had, however, exercised the

extraordinary jurisdiction under Article 142 and directed the

insurer to pay the amount of compensation and recover the same

from the owner of the vehicle.

14. On the aforesaid touchstone reverting to the facts of the case,

it is imperative to note that certifcate of insurance (Exhibit 43)

explicitly records that the period of insurance of the offending

vehicle was from 4 am of 17 th October, 2006 to midnight of 16th

October, 2007. The schedule of premium reveals that Rs. 612/- were

accepted towards the basic own damage cover and Rs. 160/- towards

the basic third party cover. In addition, the premium of Rs. 50/- was

accepted to cover the risk of owner/driver. The certifcate of

insurance, thus, makes it abundantly clear that the contract of

insurance was valid for the period 17 th October, 2006 to midnight of

16th October, 2007. It is not the case of the respondents that the said

contract of insurance was renewed beyond 16 th October, 2007, by

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paying premium. On a plain construction of certifcate of insurance,

in accordance with the norm of construction of commercial

contracts, an inference becomes inescapable that the contract of

insurance was valid for the period of one year, commencing from

17th October, 2006 to 16th October, 2007. Indisputably, the offending

vehicle met with an accident on 4th February, 2009.

15. The respondent Nos. 1 to 4/ claimants have banked upon the

information furnished by RTO on 25 th February, 2009 wherein it is

recorded that the validity of the cover note 1357679 was "17 th

October, 2006 - one time insurance". Support was sought to be

drawn to the aforesaid entry from the circular dated 17 th May, 2005

whereby it was decided to permit insurers to issue Long Term Act

Only policy for two wheelers for fresh insurance and renewal

effective 1st July, 2005 subject to certain terms and conditions.

16. For the purpose of determination of the controversy at hand,

the following terms and conditions are relevant:

1] Issue of long term Act Only policy shall be compulsory in all those States/Union Territories where one time tax is collected by RTOs on two wheelers.

4] The long term policy one issued shall not be allowed to be cancelled except on cancellation of registration of the vehicle by the RTO following total loss of the vehicle or for wrongful use of the vehicle, etc. In any event, no refund of premium shall be

Vishal Parekar 12/22 fa-522-2017.doc

admissible on cancellation.

8] The policy shall bear the title "Long Term Act Only Policy". The standard form of Liability Only Policy given in Section 6 of India Motor Tariff shall be used mentioning the Limit of Liability under section 1(ii) of the Policy as Rs. 6,000/-.

9] Separate annual own damage or Liability Only policy (minus the Act liability) can be issued by an insurance company where long terms Act Only Policy is taken either from them or from another insurance company.

17. The learned Member of the Tribunal was of the view that since

the registration particulars were recorded on the basis of cover note

issued by the insurer, if the said policy of issue of one time

insurance was not implemented and/or kept in abeyance, it was for

the insurer to disclose the said fact to RTO. Secondly, since clause 4,

extracted above, prohibited cancelaltion of such long term policy

except on cancelaltion of the registration of the vehicle, it was not

open to the insurer to contest the liability as there was nothing on

record to indicate that the insurer has cancelled the insurance

policy issued in favour of the opponent NO.1 / insured.

18. I fnd it rather diffcult to agree with the view recorded by the

learned Member of the Tribunal. Even if it is held that the insurer

did not succeed in establishing that the proposal of issue of "One

Time Long Term Act Only Policy" was kept in abeyance by the

subsequent circular dated 29th June, 2005, followed by the internal

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circular issued by the Assistant General Manager of the appellant

on 6th July, 2005, yet, in the face of the material on record, it would

be impermissible to draw an inference that the insurer had issued

one time act only policy. For this purpose, of necessity, the recourse

is required to be made to the contract of insurance as is evident

from the certifcate of insurance (Exhibit 43). As indicated above,

on a plain construction of the said certifcate of insurance, it

becomes explicitly clear that the period of insurance was

specifcally provided; 17th October, 2006 to 16th October, 2007.

Conversely, the certifcate of insurance does not contain the terms

which would be in conformity with the conditions under which the

insurers were permitted to issue a "Long Term Act Only Policy",

extracted above. First and foremost, under clause 8, such policy was

to bear the title, Lone Term Act Only Policy. Secondly, clause 9,

extracted above, provided that separate own damage or liability

only policy could be issued by the insurance company where long

term act only policy was taken either from them or another

insurance company. Both these conditions have not been fulflled.

19. Further, in the case at hand, the certifcate of insurance

indicates that it was a package policy in contradistinction to Act

only policy. A major component of premium i.e. Rs. 612/- was

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towards the own damage cover. Thus, the policy was one of

comprehensive insurance. In this view of the matter, in the absence

of the terms and conditions which spell out clearly that the policy

was "Long Term Act Only Policy", an inference of One Time

Insurance could not have been drawn merely on the basis of entry in

the RTO particulars, especially when the certifcate of insurance

specifcally incorporated the period of insurance. The learned

Member thus committed an error in recording a fnding that it was a

case of one time contract of insurance.

20. Once, a fnding is recorded that there was no subsisting

contract of insurance between the insurer and insured, on the date

of accident, the insurer cannot be fastened with the liability to

satisfy the award. The Court is, however, confronted with the

question as to whether the insurer can be directed to frst satisfy

the award and then recover the amount from the insured by

resorting to the principles of "Pay and Recover".

21. Mr. Joshi, learned counsel for the appellant, urged with

tenacity that there is a distinction between a case where there

exists a contact of insurance and the insurer is exonerated from the

liability on account of breach of conditions and the case where there

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is no valid contract of insurance between the insurer and insured.

In the later case, according to Mr. Joshi, the principle of "Pay and

Recover" cannot be resorted to. In contrast, Mr. Bohade, learned

counsel for the respondent Nos. 1 to 4/ claimants would urge that

there is no impediment in directing the insurer to frst pay and then

recover the amount from the insured lest the claimants would be

left in the lurch and the benefcial object of the provisions of the Act,

1988 would be defeated.

22. In order to appreciate the aforesaid submission in a correct

perspective, it may be expedient to trace, in brief, the evolution of

the principle of "Pay and Recover". This principle has been resorted

to, to ensure that the victim or claimants are able to reap the beneft

of the award of compensation without undergoing the rigour of

seeking execution of the award against the owner of the vehicle

which is fraught with elements of uncertainty, delay and arduous

persuasion.

23. In the case of National Insurance Co. Ltd. vs. Baljit Kaur and

Ors.4 where the insurance company was not held liable to satisfy the

award, the Supreme Court directed the insurer to frst satisfy the

award and then recover the amount from the insured by adverting 4 (2004) 2 Supreme Court Cases 1.

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to the scope and purport of adjudication under section 168 of the

Act, 1988. Following observations are instructive and hence

extracted below:

21] The upshot of the aforementioned discussions is that instead and in place of the insurer the owner of the vehicle shall be liable to satisfy the decree. The question, however, would be as to whether keeping in view the fact that the law was not clear so long such a direction would be fair and equitable. We do not think so. We, therefore, clarify the legal position which shall have prospective effect. The Tribunal as also the High Court had proceeded in terms of the decisions of this Court in Satpal Singh (supra). The said decision has been overruled only in Asha Rani (supra). We, therefore, are of the opinion that the interest of justice will be sub- served if the appellant herein is directed to satisfy the awarded amount in favour of the claimant if not already satisfed and recover the same from the owner of the vehicle. For the purpose of such recovery, it would not be necessary for the insurer to fle a separate suit but it may initiate a proceeding before the 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. We have issued the aforementioned directions having regard to the scope and purport of Section 168 of the Motor Vehicles Act, 1988 in terms whereof it is not only entitled to determine the amount of claim as put forth by the claimant for recovery thereof from the insurer, owner or driver of the vehicle jointly or severally but also the dispute between the insurer on the one hand and the owner or driver of the vehicle involved in the accident inasmuch as can be resolved by the Tribunal in such a proceeding.

24. Aforesaid pronouncement was followed by the Supreme Court

in the case of Oriental Insurance Co. Ltd. vs. Nanjappan and Others 5

and the procedure to be followed before releasing the amount, where

the principle of "Pay and Recover" is resorted to was delineated.

Paragraph 8 reads as under:

5 (2004) 13 Supreme Court Cases 224.

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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 fxed 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 fle 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 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.

25. In the case of National Insurance Company Limited vs.

Parvathneni and Another6 a two judge Bench of the Supreme Court,

being confronted with the question as to whether the insurance

company who has no liability at all can be compelled to frst pay the

compensation and later recover it from the owner of the vehicle,

referred, inter alia, the following question for determination by

larger Bench.

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 6 (2009) 8 Supreme Court Cases 785.

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it liberty to later on recover the same from the owner of the vehicle ?

26. As recorded in a recent decision, in the case of Shamanna and

Another vs. Divisional Manager, Oriental Insurance Company

Limited and Others7 the aforesaid reference in Parvathneni (supra)

has been disposed of on 17th September, 2013 by the three judge

Bench keeping the questions of law open to be decided in an

appropriate case. In the case of Shamanna (supra), the Supreme

Court held that the principle of "Pay and Recover" can be resorted

to. The observations in paragraph Nos. 12 to 14 clarify the position:

12] The above reference in Parvathneni case has been disposed of on 17.09.2013 by the three-Judges Bench keeping the questions of law open to be decided in an appropriate case.

13] 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 feld. 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 frst 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.

14] So far as the recovery of the amount from the owner of the vehicle, the insurance company shall recover as held in the decision in Oriental Insurance Co. Ltd. v. Nanjappan and

7 (2018) 9 Supreme Court Cases 650.

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others (2004) 13 SCC 224 wherein this Court held that:

"8稀...For the purpose of recovering the same from the insured, the insurer shall not be required to fle 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."

27. In view of the aforesaid pronouncement, there is no

impediment to resort to the principle of Pay and Recover. However,

the said principle can be legitimately resorted to where there exits a

contract of insurance but the insurer is exonerated from the

liability to indemnify the insurer on account of breach of conditions

of insurance or causes of like nature. If there exits no contract of

insurance at all between the owner of the vehicle and the insurer

who is sought to be held liable to frst satisfy the award, I am afraid

the principle of Pay and Recover can be resorted to in such a case.

28. Undoubtedly, the benefcial nature of the legislation must be

kept in view. Yet, the principle of purposive construction cannot be

stretched to such an extent as to fasten the liability on a party who

is not at all liable to satisfy the award, for the only reason that in the

past there was a contract of insurance between the insurer and

insured. A case where the insurer has issued an insurance policy for

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a particular period and subsequently cancelled the insurance policy

for default in payment of premium on the part of the insured, stands

on a different footing. But for the default on the part of the insured

to pay the premium, a contract of insurance would have been valid

and operative. However, where post expiry of period of insurance

there is a complete non renewal, to fasten the liability on the insurer

on the basis of historical fact of the existence of a prior contract of

insurance would be in complete derogation of the principles of

construction of contract of insurance. The jural relationship

between erstwhile insurer and insured gets snapped with the term

of insurance coming to an end.

29. The aforesaid proposition may operate rather harshly in the

facts of the given case. However, the liability cannot be fastened

where none exists for the reason that the claimants would fnd it

diffcult to execute the award against the owner of offending vehicle.

30. The upshot of the aforesaid consideration is that the impugned

order fastening the liability upon the appellant/ insurer is legally

unsustainable. In the circumstances of the case, even the recourse

to the principle of Pay and Recover would also be not justifable.

Consequently, the appeal deserves to be allowed and the appellant/

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insurer deserves to be exonerated from the liability completely.

Hence, the following order.

                                  ORDER

1]       The appeal stands allowed.

2]       The impugned order fastening the liability upon the appellant/

insurer to jointly and severely satisfy the impugned award stands

quashed and set aside.

3] The appellant/ insurer stands exonerated from the liability to

satisfy the award.

4] By way of abundant caution, it is clarifed that the impugned

award shall be operative and executable against respondent No. 5/

opponent No. 1/ owner of the offending vehicle.

5] As the appeal succeeds, the application for withdrawal of the

amount i.e. Civil Application No. 1153 of 2017 fled by the

respondent Nos. 1 to 4/ claimants does not survive and accordingly

stands disposed of.

6] The amount deposited by the appellant/ insurer along with

interest accrued thereon as well as statutory deposit be refunded to

the appellant/ insurer, after a period of six weeks.

7] In the circumstances, there shall be no order as to costs.

                                            (N.J. JAMADAR, J.)


Vishal Parekar                                                          22/22