Keshar Bai and Others vs Afsar Ali and Others

Prakash Shrivastava, J.—This appeal u/s 173 of the Motor Vehicles Act. 1988 has been filed against the award dated 6.0.2006 passed by the Motor Accidents Claims Tribunal, Dhar, in Claim Case No. 58 of 2006.

Cheetar, the husband of the appellant No. 1 and father of the appellant Nos. 2 to 5, had died in a motor accident, which had taken place on 22.5.2005. On the date of accident Cheetar was travelling in his tractor and the accident was caused by truck No. MP 09-K 4912 coming from opposite direction. Shivkant, respondent No. 2, was the owner of the truck No. MP 09-K 4912.

The appellants had filed the claim petition before the Tribunal and the Tribunal found that the appellants were entitled to the compensation of Rs. 1,49,500 along with 6 per cent interest from the date of application. Claims Tribunal exonerated the insurance company on the ground that the cheque, which was issued towards the insurance of truck No. MP 09-K 4912, had been dishonoured, therefore, the insurance company cannot be held liable to pay the compensation amount.

Learned counsel appearing for the appellants challenging the award submitted that the Claims Tribunal had committed an error in exonerating the insurance company. He has also challenged the award on the ground that the compensation amount awarded by the Tribunal is on the lower side.

Learned counsel appearing for the respondent insurance company submitted that no error has been committed by the Tribunal in exonerating the insurance company on the ground of dishonour of cheque and the compensation amount which has been awarded by the Tribunal is just and proper.

Learned counsel appearing for the owner of the vehicle, respondent No. 2, has supported the appellants on the issue of liability of the insurance company and has opposed their claim for enhancement of the compensation amount.

I have heard the learned counsel for the parties and perused the record.

The Tribunal on the basis of the evidence on record has found that Shivkant, the owner of the truck No. MP 09-K 4912, respondent No. 2, had deposited the cheque towards payment of premium with the insurance company on 5.4.2005 and the insurance policy for the period 5.4.2005 to 4.4.2006 was issued. The cheque was dishonoured on 5.5.2005. The intimation was issued to the respondent No. 2 on 11.5.2005 but same was not received as the registered envelope had returned back. The Tribunal presumed that the insured had knowledge of dishonour of cheque and held that the insurance company was not liable for payment of compensation amount.

In the present case, undisputedly on payment of premium by cheque the insurance policy valid for the period 5.4.2005 to 4.4.2006 was issued. Exhs. D3 and D4 indicate that the cheque was dishonoured by the bank on 5.5.2005. Sanjeev Kumar Shukla, NAW 1, has stated that intimation of dishonour of cheque and cancellation of policy, vide Annexure D5 dated 11.5.2005, was sent to the respondent No. 2 under registered post. He admitted in his cross-examination that the registered envelope was not served upon the respondent No. 2 and the same was received back by the insurance company unserved in original. Though he has stated that the intimation was given to the respondent No. 2 by the post office about the registered letter on 16.5.2005 and the respondent No. 2 had not come to the post office to receive a registered letter but no evidence of any other witness or any supporting material has been adduced to prove such a fact. There is some noting on back side of Exh. D8 but it is not proved by cogent evidence who had made said endorsement and except for some noting on the back side of the registered envelope, Exh. D8, there is nothing on record to show that any such intimation was given to the respondent No, 2 by the post office. Thus insurance company has failed to establish that insured had knowledge of dishonour of cheque prior to the accident.

The Division Bench of this court in the matter of National Insurance Co. Ltd. Vs. Ramzan Khan and Others, where the insurance company had cancelled the policy from the date of inception on the ground of dishonour of cheque and had informed the owner of the vehicle by registered letter at the address different from the one given by the insured in the insurance policy, and thereafter the accident had taken place and the insured had specifically stated that he did not receive the intimation of the cancellation of policy, held that in the absence of intimation to the insured the contract of insurance existing between the parties remained in force and it was not cancelled. The Division Bench held that:

(10) In view of the aforesaid conclusion, it is not necessary to examine that liability of the insurance company to the third party continues even if there is dispute between the insurer and the insured with respect to existence or non-existence of policy of insurance between them as per decisions of the Apex Court in case of Oriental Insurance Co. Ltd. Vs. Inderjit Kaur and Others, National Insurance Co. Ltd. Vs. Seema Malhotra and Others, ; New India Assurance Co. Ltd. Vs. Rula and Others, followed by this court in Gaura Bai and Others Vs. Dev Nath Makad and Others, Otherwise also the liability of insurance company to third party is clear by virtue of section 149 of Motor Vehicles Act, 1988.

In the matter of Shiva Devi Jadon v. Shiv Kumar Sharma, 2007 ACJ 774 (MP), the cheque was dishonoured after issuance of cover note and the insurance company had sent the intimation to the insured about dishonour of cheque and cancellation of cover note and policy but the intimation was not served upon the insured. The Division Bench held the insurance company liable for the third party claim. The Division Bench held thus:

(17) Coming to question of liability of the insurer in both the appeals. Though the case was set up by the insured that amount was paid in cash to the insurer, thereafter the cover note was issued and in the cover note it was not mentioned that the payment was made by cheque which is usual where the payment is made by cheque. We find that case set up of payment by cash is rightly rejected. Cover note was issued on 3.8.1992 and it appears that the cheque given by Vasudeo Prasad Sharma was dishonoured, after receipt of the intimation of dishonour of the cheque, cover note was cancelled on 24.8.1992 by the insurer and intimation was sent to the insured Shiv Kumar Sharma by registered post. However, the said notice was not served on Shiv Kumar Sharma as on the registered envelope or notice, Exh. D8, it was mentioned by the postman that an incomplete address was given as Shiv Kumar Sharma, Amkho, Gwalior. It was not mentioned by the postman that the intimation was given to the insured to collect it from the post office or there was refusal to accept the notice. It was necessary to inform the dishonour of the cheque to the insured so that insured was able to take steps to deposit the amount with the insurer to cover the liability in case of dishonour of the cheque. It cannot be said to be a service of notice intimating the cancellation of the cover note. Though cancellation was made but it was not communicated. In the similar circumstances in M. Nageswara Rao Vs. New India Assurance Company Limited and Others, a Division Bench of Andhra Pradesh High Court had held that it was necessary to prove that the notices were served on the insured so as to give him an opportunity to remit the premium amount for cheque that is dishonoured. The question has been considered thus:

''(20) We are also of the firm view that even for an administrative action by a public sector undertaking the principle audi alteram partem has to be applied. In this case, though the insurance company produced Exh. B3 and Exh. B4, said to have been issued by them, it failed to prove that they served these notices on the insured. Hence, we express our inability to follow the judgment in National Insurance Co. Ltd. Vs. Seema Malhotra and Others, for the reasons given supra. We are inclined to follow the other two judgments, namely, Oriental Insurance Co. Ltd. Vs. Inderjit Kaur and Others, and New India Assurance Co. Ltd. Vs. Rula and Others, wherein their Lordships had specifically dealt with the provisions of Chapter XI of the Motor Vehicles Act dealing with the insurance policies of the vehicles to be put to use in public places and the consequences that will emanate from such a policy. Even assuming for a moment that the principle laid down in Seema Malhotra''s case (supra) is to be accepted in the light of the observations of their Lordships in para 20 of the judgment, those observations are squarely applicable to the facts of the case as the insured was not given opportunity to remit the premium amount for cheque that is dishonoured''.

In the matter of Oriental Insurance Co. Ltd. Vs. Mahesh Prasad Rawat and Others, , on the cancellation of the policy due to dishonour of cheque the insurance company failed to produce the receipt of sending of notice of cancellation or any other document showing that cancellation was ever notified to the insured, therefore, this court took the view that the insurance company cannot be exempted from its liability and it is for the insurer to settle the inter se dispute between themselves.

The Division Bench of Allahabad High Court in the matter of National Insurance Co. Ltd. v. Jitendra Kumar 2010 ACJ 739 (Allahabad), has taken the view that in case of cancellation of policy on the ground of dishonour of cheque, the insurance company is duty-bound to inform the cancellation of insurance coverage, not only to the owner-insured but also to the Regional Transport Authority and for want of which the insurance company cannot be absolved. It has held that it is a beneficial piece of legislation for the third party and as soon as the insurer enters into a contract with insured, it becomes statutorily liable to the third party.

The Division Bench of Andhra Pradesh High Court in the matter of National Insurance Co. Ltd. v. Sk. Ahmedunnisa 2009 ACJ 2556 (AP), in a case where no opportunity was given to the insured to remit premium for the cheque dishonoured has held that the insurance company is liable to the third party.

In the present case, though there is evidence that the insurance company had sent the registered letter to the owner intimating about the cancellation of the policy and dishonour of cheque but there is also admission on the part of the insurance company that the said letter had returned unserved. There is no material on record indicating that the owner of the vehicle, respondent No. 2, had knowledge about the cancellation of the policy or dishonour of the cheque.

The Tribunal has also found that the notice of cancellation of the insurance company was not served upon the owner of the vehicle but the Tribunal drew the presumption that the fact of dishonour of cheque was within the knowledge of the owner and the notice of intimation was not necessary and since even thereafter the owner did not pay the amount, therefore, for want of consideration the contract between the insurer and the insured was void. The Tribunal was not right in holding that the owner had prior knowledge of dishonour of cheque because there is no such evidence on record.

It is also worth noting that though Sanjeev Kumar Shukla, NAW 1, has stated about sending the intimation of cancellation of policy to R.T.O., Dewas, but the manner of giving such an intimation has not been disclosed. Exh. D6 is the letter said to have been sent to the R.T.O. but no proof of its sending to R.T.O. has been filed.

Thus in view of the above analysis it is held that the Tribunal committed an error in exonerating the insurance company and the said direction of the Tribunal is set aside.

So far as the quantum of compensation is concerned, it is found that Claims Tribunal had assessed the monthly income of the deceased as Rs. 1,500. The accident is of the year 2005. The witnesses of the claimants, namely, Keshar Bai, AW 1 and Govind, AW 2, have stated that the deceased had agricultural land. He was also having tractor and was earning Rs. 7,000 to Rs. 8,000 per month but the Tribunal rejected this evidence on the ground that no documentary evidence in support was filed but considering the evidence on record and the year of the accident, the income which is presumed by Tribunal is on the lower side and it would be safe to presume Rs. 2,500 as the monthly income of the deceased. The Tribunal has rightly found that at the time of accident the deceased was aged 55 years and has rightly applied the multiplier of 11 but the Tribunal committed an error in deducting only 1/3rd for the self expenses. In the present case there are five claimants and in terms of the judgment of the Supreme Court in the matter of Smt. Sarla Verma and Others Vs. Delhi Transport Corporation and Another, , when the claimants are between 4-5, 1/4 th is required to be deducted towards self expenses.

Thus, the annual income of the deceased comes to Rs. 30,000 and the 3/4 th loss of dependency comes to Rs. 22,500 and applying the multiplier of 11 the total loss of dependency comes to Rs. 2,47.500. Thus appellants are entitled to Rs. 2,47,500 on account of loss of dependency, whereas Claims Tribunal has awarded only a sum of Rs. 1,32,000 on account of loss of dependency. Thus the appellants are entitled to an enhancement of Rs. 1,15,500, The amount which has been awarded by the Tribunal under the other heads is just and proper. The enhanced amount will bear the interest at the same rate as awarded by the Tribunal.

The appeal is allowed to the extent indicated above. No costs.