Delhi High Court

The Oriental Insurance Co. Ltd. vs Jitender And Ors. on 29 June, 2015

Author: G.P. Mittal

*       IN THE HIGH COURT OF DELHI AT NEW DELHI
                                            Pronounced on: 29th June, 2015
+       MAC. APP. 811/2006


        THE ORIENTAL INSURANCE CO. LTD.                    ..... Appellant
                           Through:       Mr. Pankaj Seth, Advocate


                                   versus
        JITENDER AND ORS.                               ..... Respondents
                           Through:       Nemo.
        CORAM:
        HON'BLE MR. JUSTICE G.P.MITTAL


                             JUDGMENT

G. P. MITTAL, J.

CM APPL.13045/2006 (delay)

1. For the reasons as stated in the application, delay of 85 days in

filing the appeal is condoned.

2. Application stands disposed of.

CM APPL.13044/2006 (stay)

1. By an order dated 18.07.2007, the execution of the impugned

award had been stayed, if the award had not been satisfied.

2. As per the report made by the Registry, the amount was deposited

with the Claims Tribunal and was duly paid to the Claimants.

3. The application is, therefore, dismissed as having become

infructuous.

MAC. APP. 811/2006

1. The appeal is directed against the judgment dated 25.03.2006

whereby compensation of `4,60,000/- was awarded by the Motor

Accident Claims Tribunal (the Claims Tribunal) in favour of

Respondents no.1 to 3 for the death of Raj Kumar, who suffered

fatal injuries in a motor vehicular accident which occurred on

04.08.2004.

2. The sole ground of challenge raised by the learned counsel for the

Appellant is that during inquiry before the Claims Tribunal, the

Appellant sufficiently established that the cheque in respect of

premium for the policy issued to cover the risk in respect of vehicle

no.HR-47G-0376 was dishonoured. The Insurance Company also

duly intimated the insured about dishonour of the cheque. That

having been done, the Insurance Company had no liability to pay

the compensation. In any case, even if the Appellant was obliged

to discharge third party liability, it ought to have been permitted to

at least recover the amount of compensation paid from the insured.

3. The Claims Tribunal while relying on the judgments of the

Supreme Court in National Insurance Company Limited v. Seema

Malhotra & Ors., (2001) 3 SCC 151 and Oriental Insurance

Company Ltd. v. Inderjit Kaur & Ors. (1998) 1 SCC 371, held that

once the policy of insurance was issued only on receipt of a cheque

towards premium in contravention of provision of Section 64-VB

of the Insurance Act, the Insurance Company was obliged to

indemnify third parties. The Claims Tribunal further relied on the

judgment of Andhra Pradesh High Court in M. Nageswara Rao v.

New India Assurance Company Limited & Ors., 2004 ACJ 1554

where it was held that where the cheque is dishonoured, the

drawer has to be informed about the dishonour of the cheque and

given an opportunity to make good the loss sustained by the

drawee. Since the Insurance Company had failed to prove that any

such notice was issued to the insured, the Insurance Company is

not exempted from indemnifying the insured.

4. Before adverting to the law on the subject, it will be appropriate to

analyse the facts leading to the dishonour of the cheque and the

steps taken by the Appellant to inform the insured about the

dishonour of the cheque and subsequent cancellation of the

Insurance Policy. Respondent Kailash Chand was the owner (and

the insured) of vehicle no. HR-47G-0376. In its written statement,

the Appellant Insurance Company stated that the cover note

no.330027 dated 02.08.2004 issued by it became invalid on

account of dishonour of the cheque issued towards premium. The

Appellant got the information of the dishonour of the cheque vide

memo of the Bank dated 13.08.2004 and the same was informed to

the insured on 01.09.2004. Thus, it was pleaded that the Insurance

Company had no liability at all as the contract of Insurance on

account of non-payment of the premium became void.

5. The insured filed an Affidavit in the shape of reply and stated that

the risk was covered for the period 03.08.2004 to 02.08.2005 by

the cover note dated 02.08.2004. The accident occurred on

04.08.2004. The cheque given towards premium was not

dishonoured because of 'Insufficient Funds' but due to alleged

difference in signatures.

6. In his cross-examination, the insured as R1W1 admitted having

come to know about the dishonour of the cheque on 02.09.2004

when he received a letter from the insurance company. He stated

that he did not check his statement of account for the period

03.08.2004 to 02.09.2004.

7. The Appellant Insurance Company examined S.N. Ratra, Assistant

Administrative Officer as R3W1 who testified that the intimation

regarding dishonour of cheque was sent from their office only on

01.09.2004 and that the insured requested the Company to issue

another policy on 06.09.2005. He admitted that the reason for

dishonour of the cheque was difference in signatures.

8. From the facts, it is not in dispute that the Insurance Company had

voluntarily agreed to cover the risk of third party in respect of the

vehicle no.HR-47G-0376 on mere issuance of a cheque towards the

premium. Admittedly, it takes time in realisation of the amount.

No intimation regarding dishonour of the cheque was issued to the

insured and to the RTO in respect of cancellation of the policy on

account of dishonour of the cheque before the date of the accident.

In fact, that could not have been done as the cover note was issued

only on 02.08.2004 and the accident occurred on 04.08.2004.

9. The issue is covered by the latest judgment of the Supreme Court

in United India Insurance Company Limited v. Laxmamma & Ors.,

(2012) 5 SCC 234 wherein relying on Oriental Insurance Company

Limited v. Inderjit Kaur, (1998) 1 SCC 371, New India Assurance

Company Limited v. Rula, (2000) 3 SCC 195 and Deddappa &

Ors. v. Branch Manager, National Insurance Company Limited,

(2008) 2 SCC 595, the Supreme Court 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."

10. The intimation regarding the cancellation of the Insurance Policy

on account of dishonour of the cheque was done by a letter

Ex.RW1/A dated 01.09.2004. Thus, intimation of cancellation of

the Insurance Policy was not issued to the insured before the date

of the accident. Moreover, in the instant case, the cheque was not

dishonoured on account of insufficient funds. In fact, it is

established that there were funds to honour the cheque issued

towards premium on the date the cheque was issued and the cheque

was dishonoured merely on account of alleged difference in

signatures.

11. Thus, following the Supreme Court report in United India

Insurance Company Limited v. Laxmamma & Ors., (2012) 5 SCC