Jharkhand High Court
Vijay Kumar Gupta @ Bijay Kumar ... vs Birendra Kumar on 7 February, 2023
1
IN THE HIGH COURT OF JHARKHAND AT RANCHI
M.A. No. 41 of 2015
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Vijay Kumar Gupta @ Bijay Kumar Gupta S/o Ram Rekha Prasad
Sahu, resident of Kali Mandir Road, Gumla, PO PS & District Gumla.
... Appellant
-versus-
1. Birendra Kumar S/o Kameshwar Prasad, resident of Palkot Road,
PO PS & District Gumla.
2. Shiv Shankar Bhagat S/o Sri Tiza Bhagat, resident of Village Dari,
PO Bargaon, District Ranchi.
3. National Insurance Company Ltd. Palkot Road, PO PS & District
Gumla.
... Respondents
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CORAM : HON'BLE MR. JUSTICE ANANDA SEN
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For the Appellant : Mr. Rajesh Kumar, Advocate
For the Respondents : Mr. Arun Kumar, Advocate
Mr. Alok Lal, Advocate
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ORDER
RESERVED ON 25.04.2022 PRONOUNCED ON 07.02.2023
This appeal is directed against the judgment and award dated 26th
April, 2014 passed in MAC Case No.19 of 2003, whereby the learned Tribunal
has assessed the compensation to the tune of Rs.1,72,214/- along with
interest @ 7.5%, with a direction that the compensation amount should be paid
by the owner of the offending vehicle.
2. This appeal is at the instance of the owner, challenging the
judgment, whereby he has been held liable to pay the amount of
compensation.
3. Since the appeal is at the instance of the owner of the offending
vehicle, being a truck, bearing registration number CG ZC 0239 and only his
liability is being challenged, I am not entering into the aspects of quantum of
compensation, the nature of injury etc. and the manner in which accident had
occurred.
4. This judgment is only confined on the question as to whether the
Tribunal was correct in holding that on the date of accident, offending vehicle
was not validly insured and thus, it is the owner, who has to pay the entire
amount of compensation.
5. The claimant, on 18.12.2002 was going to Gumla on his Scooter
bearing registration number BR 41 5431. The offending truck bearing
registration number CG ZC 0239 which was driven in a rash and negligent
manner, dashed the scooter, resulting in the accident, which caused serious
injuries on the person of Birendra Kumar, who is the claimant. The claimant
was initially treated at Sadar Hospital, Gumla and thereafter was referred to
Raj Hospital and Research Centre, Ranchi, where he was admitted for 35
days. According to the claimant, he became 50% disabled due to the said
accident. The owner appeared to contest the compensation claim and has
taken a plea that vide cover note of insurance dated 22.11.2002, the offending
truck was duly insured with the insurer. The Insurance Company denied the
fact of insurance of the vehicle with effect from 22.11.2002. They submitted
that admittedly a cover note was issued on 22.11.2002, accepting the
premium, but later the said cover note was cancelled on 25.11.2002 on the
ground that truck was of an old model and it could not have been covered
comprehensively. The owner was informed accordingly and thereafter the
owner got a fresh policy, but it became effective subsequent to the date of
accident. Thus, on the date of accident, it cannot be said that the vehicle was
duly insured with the Insurance Company.
6. As mentioned earlier, this appeal is at the instance of the owner of
the vehicle, who is challenging only the liability, thus, I am not deciding the
quantum and the manner of accident nor the question of disability or the
issues, which relates to the insured. This judgment is only confined to the
rights and liabilities of the owner of the vehicle, vis-à-vis the Insurance
Company.
7. The Insurance Company has examined one Anirudh Kumar as the
Surveyor. Exhibit 'A' is the Surveyor Report dated 25.05.2004, Exhibit 'B' and
Exhibit 'F' are the policy papers effective between 20.12.2002 to 19.12.2003.
Exhibit 'C' is the insurance cover note dated 22.11.2002, showing insurance
cover between 23.11.2002 to 22.11.2003. Exhibit 'D' is a document dated
25.11.2002 showing cancellation of cover note, which is Exhibit 'C'. Exhibit 'E'
is the new proposal form of insurance. Exhibit 'E/1' is the challan showing
receipt of Rs.3,864/- (Rupees Three Thousand Eight Hundred Sixty Four) for
the fresh insurance policy.
8. Counsel appearing on behalf of the appellant-owner of the vehicle
submitted that admittedly on 22.11.2002, Insurance Company issued a cover
note showing that the vehicle was insured with the Insurance Company with
effect from 23.11.2002 to 22.11.2003. The Insurance Company unilaterally
cancelled the cover note on 25.11.2002 and though the Insurance Company
had taken a plea that they have returned the premium to the appellant, but,
there is nothing on record to suggest that the premium was ever returned,
rather the exhibits would suggest that the amount was refunded to the agent of
the Insurance Company and there is nothing on record to suggest that the
agent ever returned the same to this appellant. In absence of any document
showing refund of the premium amount to this appellant, it cannot be said that
legally the cover note which was issued, insuring the vehicle with effect from
23.11.2002 to 22.11.2003 is invalid. Since the accident occurred during the
validity of the said policy/cover note, the Insurance Company is bound to
indemnify the owner.
9. Counsel appearing on behalf of the Insurance Company argued
that admittedly a cover note was issued on 22.11.2002 insuring the vehicle in
question from 23.11.2002 to 22.11.2003, but, when it was found that the
vehicle could not have been insured, the cover note was cancelled and the
amount was refunded to the owner. The owner, thereafter filed fresh proposal,
which was acted upon and thereby vehicle got insured from 20.12.2002 to
19.12.2003. Thus, the subsequent insurance policy is the only policy, which is
accepted by the Insurance Company. Since the accident had occurred on
18.12.2002, i.e., after cancellation of earlier cover note and before the new
policy, the owner of the vehicle is liable to pay the entire amount of
compensation.
10. On the aforesaid facts, it has to be only to be decided in this
appeal as to whether on 18.12.2002, i.e., the date of accident, the vehicle was
insured or not and what is the effect of cancellation of policy.
11. The dates are admitted by the parties. On 22.11.2002, the
appellant paid premium for insuring the offending vehicle. Cover note was
issued on 22.11.2002, which is Exhibit 'C'. As per Exhibit 'C', the offending
vehicle in question was insured with the National Insurance Company Ltd.
from 23.11.2002 to 22.11.2003. On 25.11.2002 the said cover note was
cancelled. Exhibit 'D' is a document of the Insurance Company, which
mentions that the cover note stands cancelled since the make of the vehicle is
of the year 1994, as such the amount of premium is refunded. The refund
amount of Rs.8,622/- is received by one Basant Kumar. The endorsement
made therein is as follows:-
"Received Rs.8,622/- to refund to the insured"
12. There is no document on record to suggest that the amount was
ever refunded to this appellant. The Insurance Company has not brought on
record any money receipt showing that this appellant has received the money.
Basant Kumar is, admittedly, an agent of the Insurance Company.
13. Thereafter another policy was obtained, whereby the vehicle got
insured with effect from 20.12.2002 to 19.12.2003. Exhibit 'E' is the proposal,
which this appellant had filled up. Exhibit 'E/1' is the receipt showing deposit of
amount of Rs.3,864/- which was deposited as premium. Exhibit 'F' is the fresh
policy, which covers the vehicle for the period 20.12.2002 to 19.12.2003.
14. Now the question is what is the effect of cancellation.
15. Section 64 VB of the Insurance Act prescribes that no risk is to be
assumed unless the premium is received in advance. It is necessary to quote
Section 64 VB (1) of the Insurance Act, which 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."
16. Section 64 VB (3) of the Insurance Act is very important in the
facts of this case. It provides that any refund of premium due to an insured on
account of cancellation or alteration of terms of policy, shall be paid by the
insurer directly to the insured. It also provides that such refund shall not in any
case be credited to the account of the agent. It is necessary to quote Section
64 VB(3) of the Insurance Act, which reads as under:-
"64 VB (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."
17. Thus, from the aforesaid provisions of law, it is clear that the
insurance premium has to be paid in advance and if the policy is cancelled or
altered, refund of premium has to be made directly to the insured and shall not
be refunded or credited in the account of the Agent.
18. In this case, from Exhibit 'D', it is clear that if at all there was a
refund, the same was refunded by the Insurance Company to Basant Kumar,
who admittedly is the agent. The said agent was acting on behalf of the
Insurance Company, and not on behalf of the insured. The relationship of
"principal" and "agent" was between Insurance Company and Shri Basant
Kumar. Thus, it can be held that the Insurance Company had not refunded the
premium amount to the insured, i.e., the owner of the vehicle.
19. The cancellation of the cover note was unilateral. There is nothing
on record nor there is any communication to suggest that the appellant was
made aware of the said cancellation before the accident had taken place.
Though Exhibit 'D' suggests that the said cancellation took place on
25.11.2002, but the signatory to the said cancellation order was not produced
as a witness. Further, the cancellation should be accompanied with the refund,
if at all there had to be a valid cancellation. The refund should be strictly in
terms of Section 64 VB(3) of the Insurance Act. It has already been held above
that the refund was not in terms of Section 64 VB(3) of the Insurance Act, thus,
in the eyes of law, there was no refund. When there is no refund of the
premium amount, nor there was any communication of such cancellation to the
insured, I hold that the cancellation of the cover note is not valid. Further, the
Hon'ble Supreme Court in the case of Bachhittar Singh versus State of
Punjab and Another reported in AIR 1963 SC 395 at paragraph 10 thereof
has held as under: -
"10. ... Thus it is of the essence that the order has to be
communicated to the person who would be affected by that
order before the State and that person can be bound by that
order. For, until the order is communicated to the person
affected by it, it would be open to the Council of Ministers to
consider the matter over and over again and, therefore, till
its communication the order cannot be regarded as anything
more than provisional in character.
20. Thus, the cover note remained valid till the new policy was issued.
In this case, admittedly a new policy was issued, which was valid from
20.12.2002, thus, the cover note of the policy, which the Insurance Company
claims to have cancelled will remain valid till 20.12.2002 and thereafter the
new policy will take effect, which is admittedly valid till 19.12.2003.
21. Since I have held that the cancellation was not valid and the cover
note which was allegedly cancelled by the Insurance Company was in force,
consequently, I hold that the vehicle was duly insured on the date of accident.
Since the vehicle was duly insured on the date of accident, the liability is upon
the Insurance Company to pay the amount of compensation.
22. In view of what has been held above, judgment and award dated
26th April, 2014 passed in MAC Case No.19 of 2003 is modified only to the
extent that the amount of compensation should be paid by the Insurance
Company and not by the owner of the vehicle bearing registration number CG
ZC 0239.
23. This appeal is, accordingly, allowed to the aforesaid extent. I.A.
No. 543 of 2015 also stands disposed of.
(Ananda Sen, J.)
Kumar/Cp-02
