National Insurance Co. Ltd. vs Seema Devi And Ors.
2003 Latest Caselaw 1065 Del

JUDGMENT

S.K. Mahajan, J.

1. Though in this case notice had been issued to the respondents and they have not been served but since the matter is fully covered by the judgments of the Supreme Court, I do not deem it necessary to issue any further notice to the respondents.

2. This appeal is directed against the award of the Motor Accident Claims Tribunal whereby the tribunal has awarded compensation for the death of Om Prakash who had died in a road accident caused by the rash and negligent driving of the offending vehicle by its driver.

3. Appellant has challenged the award on two grounds, namely, (a) The cheque given by the insurer for insuring the vehicle had bounced and the insurance company had cancelled the policy of insurance and it could, therefore, not be held liable to pay compensation to the claimants; and (b) The driver of the offending vehicle at the relevant time did not have a valid driving license in his favor and assuming the insurance company had issued the certificate of insurance, there being a clear breach of the conditions of insurance by the insured, the insurance company can avoid its liability to pay. In my view, none the points raised by learned counsel for the appellant can be agitated in as much as they are fully covered by the judgments of the Supreme Court.

4. In Oriental Insurance Co. Ltd. Vs. Inderjit Kaur and others , the Supreme Court was concerned with a similar matter. In that case, the policy of insurance was issued after the premium for the policy was paid by cheque. The cheque on presentation to the Bank was dishonoured. On the cheque being dishonoured, the insurance company wrote to the insurer that as the premium on the policy had not been received, the company would not be at risk. In the meantime, the vehicle met with an accident and on a claim petition being filed, the tribunal directed the insurance company to pay compensation to the claimants. The matter was ultimately taken to the Supreme Court and on these facts the Supreme Court held that even if the insurance company was entitled to avoid the policy on not having received the premium nonetheless it would be liable for third party risk as public interest served by the insurance policy must prevail ever the insurer's interest.

5. It is submitted by Mr. Mehra that explanation to sub-Section (2) of Section 64VB of the Insurance Act was not brought to the notice of the Supreme Court and had it been brought to its notice perhaps a different view might have been taken by the Supreme Court. I do not agree with Mr. Mehra. Section 64VB of the Insurance Act reads as under: -

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) For the purposes 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 of insurance policies.

6. The Supreme Court while dealing with Inderjeet Kaur's case was fully aware as to what is prescribed by Section 64VB of the Insurance Act. Complete Section 64VB including explanation has been quoted in the judgment referring to this Section and after noting the legal provisions, the Supreme Court observed that the insurance company itself was responsible for its predicament. It held that the insurance company having issued the policy of insurance after receiving only a cheque towards premium in contravention of the provisions of Section 64VB of the Insurance Act, the public interest that a policy of insurance serves must clearly prevail over the interest of the insurer. It was held that despite the bar created by Section 64VB of the Insurance Act, the insurance company issued a policy of insurance to cover the vehicle without receiving the premium therefore. By reason of the provisions of Section 147(5) and 149(1) of the Motor Vehicles Act, the insurance company becomes liable to indemnify the third party in respect of the liability which that policy covered and to satisfy awards of compensation in respect thereof notwithstanding its entitlement to avoid or cancel the policy for the reason that the cheque issued for payment of the premium had not been honoured. It was held that the policy of insurance that the insurer issued was a representation upon which the authorities and third parties were entitled to act and the insurer was not absolved of its obligations to third parties under the policy of insurance because it did not receive the premium. Its remedy in that behalf lay against the insured. It was held that the insurer was itself responsible for its predicaments. It had issued policy of insurance upon receipt only of a cheque towards premium in contravention of Section 64VB of the Insurance Act. The public interest that a policy of insurance serves must, clearly, prevail over the interest of the insurer.

7. In another judgment reported as Oriental Insurance Co. Ltd. Vs. Pinjary Hussainamma and others 2002 ACJ 597. It was observed by the Supreme Court that even if the cover note has been cancelled by the insurance company for dishonour of the cheque issued by the owner of the vehicle the insurance company still cannot avoid its liability to pay under the policy of insurance. That being the legal position, in my opinion, there is no force in the contentions of learned counsel for the appellant/insurance company that the cheque issued by the insured for premium having been dishonoured and policy having been cancelled, it cannot be held liable for payment of compensation under the Award.

8. The second contention of learned counsel for the appellant is that even assuming the insurance company had issued the policy of insurance, there being a clear breach of the conditions of insurance by the insured by permitting the vehicle to be driven by a person who did not have a valid driving license in his favor, the insurance company could not be directed to pay the amount of compensation.

9. In New India Assurance Co. Ltd. Vs. Kamla and others 2001 ACJ 843, the Supreme Court had held that the insurer and the insured are bound by the conditions enumerated in the policy and the insured is liable to the insurer if there is violation of any policy conditions but the insurer who is made statutorily liable to pay compensation to third party on account of the certificate of insurance issued shall be entitled to recover from the insured. The amount paid to third party if there was any breach of policy conditions on account of the vehicle being driven without a valid driving license. In another judgment of the Supreme Court reported as United India Insurance Co. Ltd. Vs. Lehru and others 2003 ACJ 611, it was held that in order to avoid its liability, the insurance company has to prove that driver was not fully licensed and even in such a case the insurance company would remain liable to third party but it may recover the amount from the insured.

10. In the present case, the tribunal has held that the driver of the offending vehicle did not have a valid driving license in his favor and thus there was a breach of conditions of the policy. After observing this, the tribunal has permitted the insurance company to recover the amount of compensation from the insured after it is paid to he claimants. Liberty having already been granted by the tribunal to the insurance company to recover the amount of compensation from the insured, after it is paid to the claimants, in my opinion, the insurance company cannot challenge the award by filing the present appeal.

11. It is submitted by Mr. Mehra that the judgments in New India Assurance Co. Ltd. Vs. Kamla and others as well as in United India Insurance Co. Ltd. Vs. Lehru and others deal with fake license. I do not agree with Mr. Mehra. These judgments lay down the principle of law that even if the driver does not have a valid driving license in his favor, the insurance company will still continue to be liable to make payment of compensation to the claimants. It will hardly matter whether the driver did not have a license or had a fake license or the license issued in his favor had expired.

12. For the foregoing reasons, I do not find any merits in this appeal and the same is, accordingly, dismissed.