Bombay High Court
Nayajoddin Nijamuddin And Ors vs Hdfc Ergo General Insurance Co. Ltd., ... on 1 December, 2023
2023:BHC-AUG:25673
(1) fa2929.19
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
BENCH AT AURANGABAD
FIRST APPEAL NO. 2929 OF 2019
WITH
CIVIL APPLICATION NO. 4756 OF 2021
HDFC ERGO General Insurance Company Limited.. Appellant
Through its Manager, [original
Branch at : 1st Floor, Plot No.31, Res.No.2]
Land Mark Business Centre, HSG SOC.
Ring Road, Jalgaon
Through its Authorized Signatory,
1st Floor, Renuka Commercial Complex,
Nirala Bazar, Nageshwarwadi, Aurangabad,
Dist. Aurangabad.
Versus
1. Nayajoddin Nijamuddin .. Respondents
Age. 58 years, Occ. Nil, [Res.No.1to
4-original
2. Shahnajbi Bismilla Khan claimant,
Age. 39 years, Occ. Household, Res.No.5 -
R/o. Plot No.73, Near Marimata Mandir, original
Islampur, Jalgaon, Dist. Jalgaon. Res.No.1]
3. Yusuf Nayajoddin
Age. 31 years, Occ. Education
4. Asif Nayajoddin Shaikh
Age. 29 years, Occ. Education,
Respt. Nos.1,3 & 4 R/o. Shaha Karim
Mohalla, Nashirabad, Jalgaon,
Tal. And Dist. Jalgaon.
::: Uploaded on - 08/12/2023 ::: Downloaded on - 28/02/2024 13:14:27 :::
(2) fa2929.19
5. Vikas Babanrao Lakde,
Age. 56 years, Occ. Business,
R/o. Mehrun, Tq. Jalgaon,
Dist. Jalgaon.
Mr.Mohit R. Deshmukh, Advocate for the appellant.
Mr.Vishnu B. Madan Patil, Advocate for respondent Nos. 1
to 4.
None for respondent No.5.
CORAM : KISHORE C. SANT, J.
RESERVED ON : 10.10.2023
PRONOUNCED ON : 01.12.2023
J U D G M E N T :
-
01. The insurance company has filed this appeal
challenging the judgment and order dated 25.01.2019
passed in MACP No.332 of 2015 by the learned Member,
Motor Accident Claims Tribunal, Jalgaon. The learned
Member of the Tribunal by way of the impugned judgment
and order has allowed the petition. Insurance Company had
opposed the claim on the ground of breach of terms and
conditions of the policy. The petition in respect of
petitioner Nos.2 to 4 came to be dismissed. The owner of
the vehicle is held liable to pay compensation of
Rs.3,87,000/- including 'No Fault Liability' to
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petitioner No.1. However, while allowing claim only
against owner, the Insurance Company is directed to first
pay compensation and recover the amount from owner of the
vehicle. Present respondent Nos.1 to 4 are original
claimants and respondent No.5 is original respondent
No.1/owner of the vehicle.
02. The appellant is aggrieved by the direction to
first pay and then recover the amount from the owner of
the vehicle.
03. The facts in short giving rise to the present
appeal are that one Sedabi - deceased was travelling in
auto-rickshaw in the direction towards Nashirabad from
Jalgaon. A truck bearing No. MH-19-Z-3177 proceeding in
the same direction suddenly applied breaks. The rickshaw
coming from behind brushed the truck and met with an
accident. In the said accident the deceased received
fatal injuries and died on 02.04.2015. The claim was,
therefore, filed seeking compensation of Rs.25 lakhs
(4) fa2929.19
against owner of the rickshaw and the insurance company.
The claim was opposed on the ground that the claim is
false. The truck was not involved in the accident. The
cheque that was issued towards insurance premium for
amount of Rs.35,430/- was bounced as the account was
closed. The insurance company had already issued notice
on 12.03.2015 informing the owner about cancellation of
insurance policy. After considering evidence the learned
Tribunal partly allowed the claim as stated above holding
that the policy was not legal and valid.
04. The main question, therefore, to be considered
in this case is as to whether the policy in question can
be said to be valid and legal, since the cheque issued
towards premium was not honoured. Once the policy is not
held to be legal and valid, whether the insurance company
can still be fastened with the liability to first pay the
amount and then to recover the same. The case is based
mainly on this legal aspect and other facts are not
seriously disputed by any of the parties.
(5) fa2929.19
05. The learned Advocate Mr. Deshmukh for the
appellant submits that it is clear case that though a
cheque was issued towards premium by owner of the vehicle
but the said cheque was dishonoured for the reason
"account closed". Only cover note was delivered to the
owner. No policy documents were sent. Earlier policy had
expired on 22.02.2015. The accident took place on
28.03.2015. Thus on the date of accident earlier policy
period had already expired. As the cheque was
dishonoured, there was no question of policy being in
force thereafter. He submits that this case is accepted
by the learned Tribunal in para 26 of the judgment. He
further submits that pay and recover order can be passed
only in case where policy is found to be in existence.
Once it is shown that the policy was not in existence,
even direction to pay and recover could not have been
issued. He pointed out section 147 of the Motor Vehicles
Act. It is his case that even intimation was given to
the insured about the cancellation of policy. However,
(6) fa2929.19
said intimation could not be served upon the addressee as
the envelope was returned as address incomplete. He
relied upon judgment in the case of United India
Insurance Co. Ltd. Vs. Lakshmamma & Ors. reported in
(2012) 5 SCC 234. He also relied upon section 64-VB of
the Insurance act. He, further, relied upon definition
given in section 2(d) and sections 66, 25 and 26 of the
Contract Act to submit that in this case, contract itself
did not come into existence for non-payment of
consideration or lack of payment of consideration. It is
also further submitted that the reason for return of
cheque also needs to be considered as the same clearly
shows that the cheque was issued with deliberate
intention to commit fraud. Though right of third party
is involved, same is subject to proof of valid contract.
He also relied upon provisions of section 167 in respect
of indemnification and submitted that it comes in picture
only in case of valid contract.
06. He further relied upon judgment in the case of
(7) fa2929.19
National Insurance Company Limited Vs. Yellamma and
Another, reported in (2008)7 SCC 526.
07. As against this Mr.Madan Patil, learned Advocate
for the respondents - claimants submitted that if the
policy was cancelled, it was necessary to show that
intimation was given to the owner. It was required to
strictly prove that the intimation was received by the
insured. He relied upon judgment in the case of Oriental
Insurance Co. Ltd. Vs. Inderjit Kaur & Ors., reported in
(1998) 1 SCC 371.
08. To appreciate the arguments, certain dates are
required to be take into consideration, which are
admitted. Earlier policy of the insured expired on
22.02.2015. The insured issued cheque towards renewal of
the policy on 12.12.2015. The accident took place on
28.03.2015. The intimation of cancellation of policy was
sent on 12.03.2015. Said intimation could not be served
for want of complete address. Considering these dates,
(8) fa2929.19
this Court needs to consider as to whether in this case
it can be said that the intimation was properly served
upon the insured.
09. In the judgment in the case of United India
Insurance Co. Ltd. Vs. Laxmamma and Ors. reported in
(2012) 5 SCC 234, the Hon'ble Apex Court considered the
provisions of Sections 149, 146 and 147 of the Motor
Vehicles Act. In the said case the cheque issued for
payment of premium was dishonoured and subsequent to the
accident, the insurer cancelled the policy of the
insurance. It was held that it was necessary for the
insurer to satisfy the award of compensation unless
policy of insurance was cancelled by insurer and
intimation of such cancellation had reached insured
before the accident. The Hon'ble Apex Court further
considered section 64-VB of the Insurance Act, which is
reproduced as 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
(9) fa2929.19
and 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) For the purpose of this section, in the
case of risks for which premium can be ascertained in
advance, the risk may be assumed not earlier than the
date on which the premium has been paid in cash or by
cheque to the insurer.
Explanation - Where the premium is tendered by
postal money order or cheque sent by post, the risk may
be assumed on the date on which the money order is
booked or the cheque is posted, as the case may be.
(3) Any refund of premium which may become
due to an insured on account of the cancellation of a
policy or alteration in its terms and conditions or
otherwise shall be paid by the insurer directly to the
insured by a crossed or order cheque or by postal money
order and a proper receipt shall be obtained by the
insurer from the insured, and such refund shall in no
case be credited to the account of the agent.
(4) Where an insurance agent collects a
premium on a policy of insurance on behalf of an
insurer, he shall deposit with, or dispatch by post to,
the insurer, the premium so collected in full without
deduction of his commission within twenty four hours of
the collection excluding bank and postal holidays.
(5) The Central Government, may, by rules,
relax the requirements of sub-section (1) in respect of
particular categories in insurance policies.
(6) The Authority may, from time to time,
specify, by the regulations made by it, the manner of
receipt premium by the insurer."
. It is held that it is necessary that the
intimation of cancellation of policy is reached to the
insured.
10. In the case of Deddappa & Ors. Vs. Branch
( 10 ) fa2929.19
Manager, National Insurance Co. Ltd. Reported in (2008) 2
SCC 595, the Hon'ble Apex Court considered the provisions
of sections 147(5), 149(1) and 166 of the Motor Vehicles
Act and section 82(c) of the Negotiable Instruments Act.
While interpreting the beneficial legislation, it is held
that the same should not be considered in a manner so as
to bring within its ambit a benefit which was not
contemplated by the legislature to be given to the party.
In the said case, claim was filed under section 166 of
the Motor Vehicles Act against a vehicle that was insured
with the insurance company. In that case also the cheque
issued was dishonoured. The policy was cancelled and
therefore the company was not held liable. The learned
Tribunal held the insurance company to be liable to pay
the amount inspite of cancellation of contract of
insurance. The High Court allowed the appeal holding
that the insurance company was not liable in case of
cancellation of policy. The Hon'ble Apex Court considered
that the contract of insurance was cancelled and there
was no question and same was not intimated to all the
( 11 ) fa2929.19
concerned parties. Nonetheless, in that case it was held
that since the appellants i.e. the claimants were from
the lowest strata of the society, by invoking Article 142
of the Constitution, directed to pay the amount to the
claimants.
11. In the case of National Insurance Co. Ltd. Vs.
Yellamma And Anr. reported in (2008) 7 SCC 526 also the
Hon'ble Apex Court by invoking powers under Article 142
of the Constitution, had directed the insurance company
to pay the amount though it came to a conclusion that
when the insurer cancels the policy, it is not liable to
pay the compensation, as the cheques given towards
premium were dishonoured.
12. In both the above cases, it is clearly observed
that the policy was cancelled and intimation was received
by the concerned insured.
13. Learned Advocate Mr. Deshmukh for the appellant
( 12 ) fa2929.19
relied upon judgment in the case of New India Assurance
Co. Ltd.Vs. Anjanabai Parashram Jadhav & Ors. reported in
2005 SCC OnLine Bom 782. In that case the cover note was
issued on 08.09.1993. The accident occurred on
28.01.1994. The risk was covered vide cover note for the
period 08.09.1993 to 07.09.1994. The letter cancelling
cover note was issued by the insurance company addressed
to the office of Regional Transport Office. The learned
Tribunal had held that the insurance policy was not
issued nor that was produced on record. What was
produced on record was only a cover note. In that case
it was held that the insurance company was not liable to
pay the compensation, since the cheque was dishonoured.
14. In the further case relied upon by the learned
Counsel for the appellant in the case of National
Insurance Co. Ltd. Vs. Seema Malhotra and Ors., reported
in (2001) 3 SCC 151, the Hon'ble Supreme Court considered
the provisions of Section 64-VB, 2(9) and 2-D of the
Insurance Act and also considered assumption of risk by
( 13 ) fa2929.19
insurer. It is held that the contract of insurance
consists of a reciprocal promise, therefore, if the
insured failed to pay the promised premium or his cheque
is returned dishonoured by the bank, the insurer is under
no obligation to perform his part of the contract, except
in relation to his statutory liabilities in respect of
third parties. The Hon'ble Apex Court considered
sections 51, 52 and 54 of the Indian Contract Act. It is
held that when the preimum is paid there is reciprocal
promise. It involves a promise that such money would be
paid. When the insured fails to pay the premium promised,
or when the cheque issued by him towards the premium is
returned dishonoured by the bank concerned the insurer
need not perform his part of the promise. The corollary
is that the insured cannot claim performance from the
insurer in such a situation. The Hon'ble Apex Court also
held that in view of section 25 of the Contract Act,
agreement without consideration is void. As per section
65 of the Contract Act, when the contract become void,
any person who has received any advantage under such
( 14 ) fa2929.19
contract is bound to restore it to the person from whom
he received it. It was a case that the claim was made by
the insured or his legal heirs without any third party
being involved.
. This Court finds that the above cited case is
not applicable to the present case as in the present case
the claim is by third party under the beneficial
legislation. The claimants are the persons who are
passengers in the vehicle and not owner or driver of the
vehicle.
15. Coming to the judgment relied upon by learned
Advocate Mr. Madan Patil in the case of Inderjit Kaur
(Supra), wherein the Hon'ble Apex Court had considered
section 64-VB of the Insurance Act and sections 147(5),
149(1) and 146 of the Motor Vehicles Act. It was
considered that in view of provisions under the
beneficial legislation. When the claim is by third
party, it is duty of the insurance company to pay the
( 15 ) fa2929.19
amount of compensation. In that case the policy of the
insurance was issued to the appellant on 30.11.1989. The
cheque issued towards premium was dishonoured. A letter
was sent by the insurance company to the insured on
23.01.1990. It was specifically informed that since the
premium was not received, the company was not at risk.
The premium was thereafter paid in cash on 02.05.1990.
In the meantime on 19.04.1990 the accident had taken
place where bus collided with truck and in the said
accident the driver of the truck died. The claim was
filed by his widow and minor sons. Said claim was denied
by the insurance company in view of section 64-VB of the
Insurance Act, as the premium was not received in
advance. The learned Tribunal, however, allowed the
claim petition. The appeal against that also came to be
dismissed by the High Court and the matter was thus taken
to the Hon'ble Supreme Court by the Insurance Company.
In that case it is held that the insurance company was
not absolved of its obligations to third parties under
the policy because it did not receive the premium. Its
( 16 ) fa2929.19
remedies in this behalf lay against the insured. The
appeal of the insurance company was thus dismissed.
16. In the case of Laxmamma (Supra) the Hon'ble Apex
Court allowed the appeal of the insurance company
accepting its defence that the insurance company was not
liable to pay by considering provisions of section 64-VB
of the Act. In the said case, the policy was for a
period 16.04.2004 to 15.04.2005. The cheque was dated
14.04.2004. The accident occurred on 11.05.2004. It is,
thereafter, the insurer cancelled the policy by
communication dated 21.05.2004.
17. In the judgment in the case of Oriental
Insurance Co. Ltd. Vs. Sadhana Devidas Gujarathi & Ors.,
reported in 2021(5) Mh.L.J.535, this Court at Principal
Seat considered the liability of the insurer in case of
dishonour of cheque. In a similar case this Court has
also taken a view that Insurance Company would be liable
to pay compensation to third party. This was held in the
( 17 ) fa2929.19
case of New India Assurance Co. Ltd. Vs. Raghunath Aher,
First Appeal No.1961 of 2019 (Aurangabad Bench).
18. Considering all above judgments this Court finds
that the appellant could not produce evidence to show
that the intimation of cancellation of policy was
received by the insured prior to the date of accident.
It is the case of the appellant that the intimation was
sent to the insured. However, said intimation was not
served for want of complete address. The fact remains
that the intimation of cancellation of policy was not
received by the insured. Another aspect that needs to be
considered in view of judgment of the Hon'ble Apex Court
Inderjit Kaur (Supra) that a right of third party under
beneficial legislation is involved. In the case of
Laxmamma (Supra), the Hon'ble Apex Court held that the
insurance company is not liable, however, it was a case
where claim was made by the insured/his legal heirs.
Certainly no party can seek benefit of his own wrong. In
this case, however, considering the judgment of the
( 18 ) fa2929.19
Hon'ble Apex Court in the case of Inderjit Kaur (Supra),
question is of third party who is not party to the
contract, that too a party who is entitled to receive
compensation under beneficial legislation. Looking to
the case as it is and taking the facts as it is, this
Court finds that no case is made out to interfere with
the findings of the Tribunal. This Court finds that there
is no merit in the appeal and the same deserves to be
dismissed. Therefore, the following order :-
O R D E R
(i) The First Appeal is dismissed with no order
as to costs.
(ii) In view of dismissal of the First Appeal,
connected Civil Application does not survive and
disposed off accordingly.
[KISHORE C. SANT, J.]
. At this stage, learned Advocate for the
respondent No.1/claimant makes a request to direct the
Office of this Court to allow the respondent
No.1/claimant to withdraw the amount lying in this Court,
deposited by the appellant. The Office to allow
withdrawal of said amount with accrued interest, if any.
[KISHORE C. SANT, J.]
snk/2023/NOV23/fa2929.19
