Delhi High Court
New India Assurance Company Ltd. vs Smt. Rekha Devi & Ors. on 18 October, 2012
Author: G.P. Mittal
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 18th October, 2012
+ MAC. APP. 1100/2011
NEW INDIA ASSURANCE COMPANY LTD. ..... Appellant
Through: Mr. Anand Vardhan Sharma, Adv.
versus
SMT. REKHA DEVI & ORS. .... Respondents
Through: Mr. P.N. Jha, Adv. with
Mr. A.K.Upadhyay, Adv. for R-1 to R-5.
CORAM:
HON'BLE MR. JUSTICE G.P.MITTAL
JUDGMENT
G. P. MITTAL, J. (ORAL)
1. The Appellant New India Assurance Company Limited takes exception to
the judgment dated 12.09.2011 passed by the Motor Accident Claims
Tribunal (the Claims Tribunal) whereby while awarding compensation of
`10,42,768/- in favour of the legal heirs of deceased Ram Kishore for his
death in a motor vehicle accident which occurred on 02.04.2008, the
Appellant Insurance Company was made liable to pay the compensation
and to recover the same from the insured.
2. The Appellant's grievance is that since the insured was immediately
informed about the dishonour of cheque and an intimation in this regard
was also sent to the RTO, it had no liability to pay the compensation to
the Claimants even in the first instance. The relevant findings of the
Claims Tribunal is extracted hereunder:-
"15 The insurance company has raised the defence that the vehicle
was not insured when the accident occurred due to cancellation
of policy. In this respect, the witness, R3W1 Shri Hari Chand
has relied upon the notice issued to owner, Vijay Pal as well as to
RTA. He has also placed on record the original cheque,
Ex.R3W1/A, covering advise as Ex.R3W1/B and the letter posted
along with the postal receipt sent to the owner, Vijay Pal as
Ex.R3W1/C collectively. The original cancellation is also exhibited
as Ex.R3W1/D. In the circumstances above, having regard to
the judgment of Oriental Insurance Company Versus Inderjeet
Kaur, 1998 ACJ 123 (SC), wherein the Apex Court has clearly laid
down that the insurance company cannot be permitted to avoid its
liability qua the third party as the insurance itself is liable for its
predicament for having issued the policy of insurance upon receipt
of a cheque towards premium in contravention to the provisions of
Section 64(5)(b) of Insurance Act. Having regard to the public
interest, that a policy of insurance serves must clearly prevail
over the interest of the insurance company, I direct that the
amount of award be satisfied by the insurance company after
deducting the amount towards the interim award paid already with
the right to recover the same from the owner as he has clearly
failed to prove the factum of dishonouring of the cheque was not
informed to him by his bankers at any such and/or that the vehicle
was covered under any provision whereby award to the
liability qua any insurance company, can be sought. In such
circumstances, it is ordered that the burden of the award amount
shall be borne by the insurance company."
3. This case is squarely covered by the Supreme Court judgment in
Deddappa & Ors. v. Branch Manager, National Insurance Company
Limited, (2008) (2) SCC 595; where the Supreme Court considered the
judgments in Oriental Insurance Company Limited v. Inderjit Kaur,
(1998) 1 SCC 371 & New India Assurance Company Limited v. Rula,
(2000) 3 SCC 195 and held that if an insurance policy is cancelled on
account of dishonour of cheque and the Insured as well as the RTO are
informed about the same, the third party would not be entitled to get the
compensation from the Insurance Company as they are liable only so
long as the policy subsists.
4. Relying on Deddappa, the Supreme Court in its latest judgment in United
India Insurance Company Limited v. Laxmamma & Ors., (2012) 5 SCC
234 held as under:-
"26. In our view, the legal position is this: where the policy of
insurance is issued by an authorised insurer on receipt of cheque
towards the payment of premium and such a cheque is returned
dishonoured, the liability of the authorised insurer to indemnify the
third parties in respect of the liability which that policy covered
subsists and it has to satisfy the award of compensation by reason
of the provisions of Sections 147(5) and 149(1) of the MV Act
unless the policy of insurance is cancelled by the authorised
insurer and intimation of such cancellation has reached the
insured before the accident. In other words, where the policy of
insurance is issued by an authorised insurer to cover a vehicle on
receipt of the cheque paid towards premium and the cheque gets
dishonoured and before the accident of the vehicle occurs, such
insurance company cancels the policy of insurance and sends
intimation thereof to the owner, the insurance company's liability
to indemnify the third parties which that policy covered ceases and
the insurance company is not liable to satisfy awards of
compensation in respect thereof."
5. Thus, if the Insurance Company cancelled the policy and informed the
insured as also the RTO before the accident of the vehicle, it had no
liability.
6. In the instant case, the Appellant examined R3W1 Harichand, its Senior
Divisional Manager. He proved that the cheque Ex.R3W1/A was
dishonoured on presentation. The return memo was proved as R3W1/B.
Notice sent to the insured and the RTO was proved as Ex.R3W1/C along
with the postal receipt for dispatching it through speed post. The
endorsement of cancellation was proved as Ex.R3W1/D. In fact, this was
all what was required to be done as per Deddappa and Laxmamma. Thus,
Insurance Company had no liability to satisfy the award even in the first
instance.
7. The impugned judgment in so far as it made the Insurance Company
liable to pay the compensation in the first instance cannot be sustained.
The impugned judgment is set aside to that extent.
8. The Claimants shall be entitled to recover the compensation from the
driver and owner of the offending vehicle, that is, Respondents No.6 and
7, herein.
9. The Appeal is allowed in above terms.
10. The statutory deposit of `25,000/- shall be refunded to the Appellant
Insurance Company.
11. Pending Applications also stand disposed of.
(G.P. MITTAL)
JUDGE
OCTOBER 18, 2012
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