Gujarat High Court
Oriental Insurance Company Limited vs Premvati Wd/O Puransinh Rambhai Yadav on 6 February, 2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/FIRST APPEAL NO. 3505 of 2012
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ORIENTAL INSURANCE COMPANY LIMITED
Versus
PREMVATI WD/O PURANSINH RAMBHAI YADAV & ORS.
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Appearance:
MR VC THOMAS(5476) for the Appellant(s) No. 1
MR AMIT N CHAUDHARY(5599) for the Defendant(s) No. 1,2,3,4
RULE SERVED for the Defendant(s) No. 5,6
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CORAM:HONOURABLE MR. JUSTICE J. C. DOSHI
Date : 06/02/2025
ORAL ORDER
1. The present First Appeal, under Section 173 of Motor
Vehicles Act, 1988, is preferred by the appellant - Insurance
Company being aggrieved and dissatisfied with the judgment
and award dated 26.06.2012 passed by the Motor Accident
Claims Tribunal, Bharuch in Motor Accident Claim Petition
No.397 of 2007.
2. Heard learned advocates for the respective parties.
3. Relying upon judgment of Division Bench of this Court in
the case of Mansingbhai Jagabhai Amaliyar v/s. Reliance
General Insurance Co. Ltd. [First Appeal No.466 of 2012],
learned advocate Mr.V.C.Thomas for appellant - Insurance
Company raised solitary contention that in the present case
cheque issued towards premium to purchase policy was
returned unpaid. It is submitted that owner was duly informed
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about cancellation of policy which could be inferred from the
facts that subsequent to road accident but within same year,
owner has purchased new policy for vehicle. Learned advocate
Mr.Thomas referred to impugned judgment to submit that since
no premium was paid by the owner covering risk of date of
accident, insurance is not liable to pay compensation. Learned
advocate Mr.Thomas referred to deposition of
Mr.Surendrakumar Sonajibhai Bhagat - PW-1 - Administrative
Officer of insurance company (Exh.37) to submit that necessary
evidence was lied to establish that policy issued by the insurance
company is cancelled and also informed to the owner of vehicle.
In this circumstances, learned Tribunal has committed serious
error in fasten liability upon appellant to pay compensation.
3.1. Making above submission, it is submitted to allow the
appeal.
4. Per contra, learned advocate Mr.Amit Chaudhary for the
claimants referred to evidence on record to submit that it is
mandatory to inform RTO about cancellation of policy. Policy
needed to be cancelled in accordance with terms and conditions.
It is submitted that victim of road accident is third party and in
order to get exonerated to pay compensation, insurance
company has to lead evidence to the effect that policy is
cancelled and is informed both to the owner and RTO. In the
present case, no evidence is placed on record to prove that owner
and RTO are informed about cancellation of policy. He has relied
upon judgment of Co-ordinate Bench of this Court in the case of
United India Insurance Company Ltd. v/s. Ranuben Balubhai
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Rathod [First Appeal No.2821 of 2012 and allied matters] dated
06.08.2024 to buttress his contention.
5. What would be noticed that by impugned judgment and
award, Rs. 5,35,000/- with interest at the rate of 9% p.a. from
the date of petition till realization with cost to the claimant
holding opponents jointly and severally to pay compensation for
the accident which took place on 08.02.2007 in the outskirts of
Bharuch City, whereby, deceased who was walking nearby road,
was ramped by the Qualis Car plying at excessive speed. The
deceased having received serious injuries died. Noticeably
claimants who are legal heirs of deceased are third party.
Insurance Company raised defence that cheque given by the
owner of the car has been returned unpaid and said policy which
is issued does not get effective on the date of accident and it
could be inferred that owner is knowing this facts and as such
he has purchased new policy on 28.02.2007 (Exh.43). Noticeably
upon receipt of cheque issued towards purchasing policy,
insurance company ha issued policy, cheque later on got
dishonored. Learned advocate Mr.Thomas referred to Exh.42 and
press that letter regarding cancellation of policy was issued to
Mr.Champaksinh Parmar which amounts to cancellation of
policy and conveyed to owner. Perusal of Exh.42 indicates
photocopy of the paper, there is no signature of any person made
in said letter. It is blank. Learned advocate Mr.Thomas referred
to this letter for arguing that policy is cancelled. I fail to
understand that how blank paper having no signature could be
treated as letter conveying owner about cancellation of policy.
Moreover, it is secondary evidence. The person who lead
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secondary evidence is required to prove that primary evidence is
not available with him. Third thing which could be notice from
the letter at Exh.42 is that no outward number is mentioned in
the letter. Learned advocate Mr.Thomas has submitted that
through registered post, owner is informed about cancellation of
policy. Witness - PW-1 entered into witness box at Exh.37 for
and on behalf of Oriental Insurance company Ltd. In cross
examination, he admitted that he has no acknowledgment which
shows that any such letter was posted to the owner and received
by him. He has stated in the cross examination that if in future
he comes to know, he will produce the same. He has stated on
oath that he has informed Bharuch RTO about cancellation of
policy, but no such documents are produced on record which
establish that Bharuch RTO is informed about cancellation of
policy. Thus, it indicates that officer of insurance company was
fully aware of legal knowledge that policy once issued should be
legally cancelled as per provisions of law and not only RTO but
owner is also required to be informed about it. Learned advocate
Mr.Thomas failed to point out any evidence which demonstrate
that owner and RTO have been informed about cancellation of
policy on the ground that cheque issued toward premium has
been dishonored.
6. In similar identical fact, Co-ordinate Bench after referring
the case of United India Insurance Company Ltd. v/s.
Laxmamma reproted in (2012) 5 SCC 234 in the case of United
India Insurance Company Ltd. v/s. Ranuben Balubhai Rathod
[First Appeal No.2821 of 2012 and allied matters] held in para 6
to 9 as under :-
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"6. The only point raised in these appeals is with regard to
the vehicle not being insured with the appellant-insurance
company as the cheque of premium was dishonoured. The
cheque being dishonoured is one side where the insurance
company comes to know that the cheque is not cleared and
the other side is that the insurance company informs the
owner of the vehicle about the dishonour of the cheque. In
this regard, the insurance company has examined the
branch manager of the insurance company has deposed
that the insurance policy was issued to the truck for the
period from 27.10.2008 to 26.10.2009 and the cheque of
premium was collected which was dishonoured on being
presented for payment on 4.11.2008 and therefore the
insurance company wrote a letter dated 6.11.2008 to the
insured by registered post a.d. intimating him that the
insurance policy issued in his name in respect of the truck
stands cancelled and also wrote to the R.T.O., Thane
regarding cancellation of the policy of the said truck and
this witness has been cross examined by the learned
advocate for the claimants. The learned Tribunal, after
discussing the evidence, has observed that the insurance
was taken from Boisar office of Thane district,
Maharashtra, however, the officer who deposed was
working at Navsari branch and no one from Boisar office
was examined; that the envelope produced by the
insurance company does not show any particular with
regard to the letter wrapped in it; that there is no
endorsement of the postal authority that envelop has been
unclaimed and therefore, the insurance company has
failed to establish the intimation with regards to non-
payment of premium amount and cancellation of the policy
was received by the owner of the vehicle. Therefore, unless
the owner of the vehicle is in knowledge of the said fact of
cancellation of the policy, he is deemed to be under the
impression that the policy is taken and is in existence and
no steps shall be taken by him. Therefore, the stand of the
insurance company of the policy not being in existence
cannot be sustainable.
7. In the case of Laxmamma (supra) relied on by the
learned advocate for the respondents, the judgment of
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Dedappa (supra) relied on by learned advocate for the
appellant herein is discussed and the Hon'ble Apex Court
has observed and held as under:
"16. In Deddappa, the Court was concerned with the
plea of the insurance company that although the
vehicle was insured by the owner for the period
October 17, 1997 to October 16,1998 but the cheque
issued therefor having been dishonoured, the policy
was cancelled and, thus, it was not liable. That was a
case where for the above period of policy, the cheque
was issued by the owner on October 15,1997; the
bank issued a return memo on October 21, 1997
disclosing dishonour of the cheque with remarks
"fund insufficient" and the insurance company,
thereafter, cancelled the policy of insurance by
communicating to the owner of the vehicle and an
intimation to the concerned RTO. The accident
occurred on February 6, 1998 after the cancellation
of the policy.
17. The Court in Deddappa again considered the
relevant statutory provisions and the decisions of this
Court including the above three decisions in Inderjit
Kaur, Rule 4 and Seema Malhotra. In para 24 (at
page 601) of the Report, the Court observed as
under:
"24. We are not oblivious of the distinction between
the statutory liability of the insurance company vis-
C-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."
Then in para 26 (at page 602), the Court invoked
extraordinary jurisdiction under Article 142 of the
Constitution of India and directed the insurance
company to pay the amount of claim to the claimants
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and recover the same from the owner of the vehicle.
18. We find it hard to accept the submission of the
learned counsel for the insurer that the three-Judge
Bench decision in Inderjit Kaur has been diluted by
the subsequent decisions in Seems Malhotra and
Deddappa. Seema Malhotra and Deddappa turned on
the facts obtaining therein. In the case of Seema
Malhotra, the claim was by the legal heirs of the
insured for the damage to the insured vehicle. In this
peculiar fact situation, the Court held that when the
cheque for premium returned dishonoured, the
insurer was not obligated to perform its part of the
promise. Insofar as Deddappa is concerned, that was
a case where the accident of the vehicle occurred
after the insurance policy had already been cancelled
by the insurance company.
19. In our view, the legal position is this : where the
policy of insurance is issued by an authorized
insurer on receipt of cheque towards payment of
premium and such cheque is returned dishonoured,
the liability of authorized insurer to indemnify third
parties in respect of the liability which that policy
covered subsists and it has to satisfy award of
compensation by reason of the provisions of Sections
147(5) and 149(1) of the M.V.Act unless the policy of
insurance is cancelled by the authorized 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 authorized
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.
20. Having regard to the above legal position, insofar
as facts of the present case are concerned, the owner
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of the bus obtained policy of insurance from the
insurer for the period April 16, 2004 to April 15,
2005 for which premium was paid through cheque
on April 14, 2004. The accident occurred on May
11,2004. It was only thereafter that the insurer
cancelled the insurance policy by communication
dated May 13, 2004 on the ground of dishonour of
cheque which was received by the owner of the
vehicle on May 21, 2004. The cancellation of policy
having been done by the insurer after the accident,
the insurer became liable to satisfy award of
compensation passed in favour of the claimants."
8. It is fruitful to reproduce the provisions of Section 64-VB
of the Insurance Act and Sections 147 and 149 of the MV
Act which read as under:
Section 64-VB of the Insurance Act reads as under:
"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 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,t he 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 of 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
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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, 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."
"147. Requirements of policies and limits of liability.--(1) In
order to comply with the requirements of this Chapter, a
policy of insurance must be a policy which--
(a) is issued by a person who is an authorised insurer; and
(b) insures the person or classes of persons specified in the
policy to the extent specified in sub-section (2)--
(i) against any liability which may be incurred by him in
respect of the death of or bodily [injury to any person,
including owner of the goods or his authorized
representative carried in the vehicle]or damage to any
property of a third party caused by or arising out of the
use of the vehicle in a public place;
(ii) against the death of or bodily injury to any passenger of
a public service vehicle caused by or arising out of the use
of the vehicle in a public place:
Provided that a policy shall not be required--
(i) to cover liability in respect of the death, arising out of
and in the course of his employment, of the employee of a
person insured by the policy or in respect of bodily injury
sustained by such an employee arising out of and in the
course of his employment other than a liability arising
under the Workmen's Compensation Act, 1923 (8 of 1923),
in respect of the death of, or bodily injury to, any such
employee--
(a) engaged in driving the vehicle, or
(b) if it is a public service vehicle engaged as a conductor of
the vehicle or in examining tickets on the vehicle, or
(c) if it is a goods carriage, being carried in the vehicle, or
(ii) to cover any contractual liability.
Explanation.--For the removal of doubts, it is hereby
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declared that the death of or bodily injury to any person or
damage to any property of a third party shall be deemed to
have been caused by or to have arisen out of, the use of a
vehicle in a public place notwithstanding that the person
who is dead or injured or the property which is damaged
was not in a public place at the time of the accident, if the
act or omission which led to the accident occurred in a
public place.
(2) Subject to the proviso to sub-section (1), a policy of
insurance referred to in sub-section (1), shall cover any
liability incurred in respect of any accident, up to the
following limits, namely:--
(a) save as provided in clause (b), the amount of liability
incurred;
(b) in respect of damage to any property of a third party, a
limit of rupees six thousand:
Provided that any policy of insurance issued with any
limited liability and in force, immediately before the
commencement of this Act, shall continue to be effective
for a period of four months after such commencement or
till the date of expiry of such policy whichever is earlier.
(3) A policy shall be of no effect for the purposes of this
Chapter unless and until there is issued by the insurer in
favour of the person by whom the policy is effected a
certificate of insurance in the prescribed form and
containing the prescribed particulars of any condition
subject to which the policy is issued and of any other
prescribed matters; and different forms, particulars and
matters may be prescribed in different cases.
(4) Where a cover note issued by the insurer under the
provisions of this Chapter or the rules made thereunder is
not followed by a policy of insurance within the prescribed
time, the insurer shall, within seven days of the expiry of
the period of the validity of the cover note, notify the fact to
the registering authority in whose records the vehicle to
which the cover note relates has been registered or to such
other authority as the State Government may prescribe.
(5) Notwithstanding anything contained in any law for the
time being in force, an insurer issuing a policy of
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insurance under this section shall be liable to indemnify
the person or classes of persons specified in the policy in
respect of any liability which the policy purports to cover in
the case of that person or those classes of persons.
149. Duty of insurers to satisfy judgments and awards
against persons insured in respect of third party risks.--(1)
If, after a certificate of insurance has been issued under
sub-section (3) of section 147 in favour of the person by
whom a policy has been effected, judgment or award in
respect of any such liability as is required to be covered by
a policy under clause (b) of sub-section (1) of section 147
(being a liability covered by the terms of the policy) 1 [or
under the provisions of section 163A] is obtained against
any person insured by the policy, then, notwithstanding
that the insurer may be entitled to avoid or cancel or may
have avoided or cancelled the policy, the insurer shall,
subject to the provisions of this section, pay to the person
entitled to the benefit of the decree any sum not exceeding
the sum assured payable thereunder, as if he were the
judgment debtor, in respect of the liability, together with
any amount payable in respect of costs and any sum
payable in respect of interest on that sum by virtue of any
enactment relating to interest on judgments.
(2) No sum shall be payable by an insurer under sub-
section (1) in respect of any judgment or award unless,
before the commencement of the proceedings in which the
judgment or award is given the insurer had notice through
the Court or, as the case may be, the Claims Tribunal of
the bringing of the proceedings, or in respect of such
judgment or award so long as execution is stayed thereon
pending an appeal; and an insurer to whom notice of the
bringing of any such proceedings is so given shall be
entitled to be made a party thereto and to defend the
action on any of the following grounds, namely:--
(a) that there has been a breach of a specified condition of
the policy, being one of the following conditions, namely:--
(i) a condition excluding the use of the vehicle--
(a) for hire or reward, where the vehicle is on the date of
the contract of insurance a vehicle not covered by a permit
to ply for hire or reward, or
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(b) for organised racing and speed testing, or
(c) for a purpose not allowed by the permit under which the
vehicle is used, where the vehicle is a transport vehicle, or
(d) without side-car being attached where the vehicle is a
motor cycle; or
(ii) a condition excluding driving by a named person or
persons or by any person who is not duly licensed, or by
any person who has been disqualified for holding or
obtaining a driving licence during the period of
disqualification; or
(iii) a condition excluding liability for injury caused or
contributed to by conditions of war, civil war, riot or civil
commotion; or
(b) that the policy is void on the ground that it was
obtained by the non-disclosure of a material fact or by a
representation of fact which was false in some material
particular.
(3) Where any such judgment as is referred to in
subsection (1) is obtained from a Court in a reciprocating
country and in the case of a foreign judgment is, by virtue
of the provisions of section 13 of the Code of Civil
Procedure, 1908 (5 of 1908) conclusive as to any matter
adjudicated upon by it, the insurer (being an insurer
registered under the Insurance Act, 1938 (4 of 1938) and
whether or not he is registered under the corresponding
law of the reciprocating country) shall be liable to the
person entitled to the benefit of the decree in the manner
and to the extent specified in sub-section (1), as if the
judgment were given by a Court in India:
Provided that no sum shall be payable by the insurer in
respect of any such judgment unless, before the
commencement of the proceedings in which the judgment
is given, the insurer had notice through the Court
concerned of the bringing of the proceedings and the
insurer to whom notice is so given is entitled under the
corresponding law of the reciprocating country, to be made
a party to the proceedings and to defend the action on
grounds similar to those specified in sub-section (2).
(4) Where a certificate of insurance has been issued under
sub-section (3) of section 147 to the person by whom a
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policy has been effected, so much of the policy as purports
to restrict the insurance of the persons insured thereby by
reference to any conditions other than those in clause (b)
of sub-section (2) shall, as respects such liabilities as are
required to be covered by a policy under clause (b) of
subsection (1) of section 147, be of no effect:
Provided that any sum paid by the insurer in or towards
the discharge of any liability of any person which is
covered by the policy by virtue only of this sub-section
shall be recoverable by the insurer from that person.
(5) If the amount which an insurer becomes liable under
this section to pay in respect of a liability incurred by a
person insured by a policy exceeds the amount for which
the insurer would apart from the provisions of this section
be liable under the policy in respect of that liability, the
insurer shall be entitled to recover the excess from that
person.
(6) In this section the expressions "material fact" and
"material particular" means, respectively a fact or
particular of such a nature as to influence the judgment of
a prudent insurer in determining whether he will take the
risk and, if so at what premium and on what conditions
and the expression "liability covered by the terms of the
policy" means a liability which is covered by the policy or
which would be so covered but for the fact that the insurer
is entitled to avoid or cancel or has avoided or cancelled
the policy.
(7) No insurer to whom the notice referred to in sub-section
(2) or sub-section (3) has been given shall be entitled to
avoid his liability to any person entitled to the benefit of
any such judgment or award as is referred to in sub-
section (1) or in such judgment as is referred to in sub-
section (3) otherwise than in the manner provided for in
sub-section (2) or in the corresponding law of the
reciprocating country, as the case may be.
Explanation.--For the purpose of this section, "Claims
Tribunal" means a Claims Tribunal constituted under
section 165 and "award" means an award made by that
Tribunal under section 168."
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9. The legal position is that the insurance company has to
satisfy the award of compensation by reason of the
provisions of Sections 147(5) and 149(1) of the M.V.Act
unless the policy of insurance is cancelled by the
authorized insurer and intimation of such cancellation has
reached the insured before the accident. In the case on
hand, the accident has occurred on 9.4.2009 and though
the letter is said to be written by the insurance company
on 6.11.2008 to the owner, there is nothing on record to
show that the said letter is received by the owner before
the date of accident. Therefore, this Court does not find
any reason to interfere with the impugned judgment of the
learned Tribunal. Hence, this appeal deserves to be
dismissed."
7. In view of above, the First Appeal sans merits. Judgment
relied by learned advocate Mr.Thomas is factually
distinguishable. The First Appeal deserves to be dismissed and
accordingly, it is dismissed. The Tribunal shall disburse the
entire awarded amount lying in the FDR and/or with the
Tribunal, with accrued interest thereon, if any, to the claimants,
by account payee cheque / NEFT / RTGS, after proper
verification and after following due procedure. While making the
payment, the Tribunal shall deduct the courts fees, if not paid,
in accordance with rules/law. Record and proceedings be sent
back to the concerned Tribunal, forthwith.
(J. C. DOSHI,J)
SATISH
