National Insurance Co Ltd vs Sangem Hanumandlu 2 Ors

These two appeals are being disposed of by this common judgment since M.A.C.M.A.No.2644 of 2014 filed by the claimants for enhancement of compensation and M.A.C.M.A.No.1526 of 2007 filed by the Insurance Company are directed against the very same judgment, dated 05.09.2006, passed in O.P.No.29 of 1999 on the file of the Motor Accident Claims Tribunal (III A.D.J. (FTC), Nizamabad (for short “the Tribunal”).

For the sake of convenience, the parties will hereinafter be referred to as arrayed before the Tribunal.

The facts, in issue, are as under:

The claimants, who are the parents of one Hanumandlu (hereinafter referred to as “the deceased”), filed a petition under Section 166 of the Motor Vehicles Act, 1988, claiming compensation of Rs.3,00,000/- for the death of deceased in a road accident that took place on 16.10.1998. It is stated that, on 16.10.1998, the deceased was proceeding to his village on his cycle after dropping his father (1st claimant) at Kamshettypalli Bus Stand and when he reached P.W.D. Main Road, leading to Banswada from Bodhan, a lorry bearing No.MHV-6397 driven by its driver came in opposite direction at a high speed in a rash and negligent manner and dashed against the deceased, as a result of which, the deceased fell down and the lorry ran over him and that he died on the spot. It is stated that prior to the accident, the deceased was hale and healthy and was earning Rs.6,000/- per month by doing agriculture and paddy business. On account of death of the deceased, the claimants lost their son. The 1st respondent being the insurer of the vehicle and 2nd respondent being the owner of the vehicle are jointly and severally liable to pay compensation to the claimants.

Before the Tribunal, the 1st respondent filed counter denying the material averments including the age and earnings of the deceased, manner of accident, valid and subsisting license to the person, who drove the lorry at the time of accident and also liability of the insurance company. It is also stated that the Insurance Company has issued policy bearing No.270601/6701004/388/ 205/98 under Cover Note No.47780 in favour of the 2nd respondent through cheque bearing No.725508, dated 25.07.1998, for a sum of Rs.3,044/- drawn on NDCC Bank Limited, Degloor Branch and when the said cheque was presented it was dishonoured, hence the Insurance Company cancelled the policy and intimated it to the 2nd respondent by letter dated 07.09.1998 by registered post. Since the policy issued stands cancelled due to dishonour of the cheque issued towards payment of premium, there was no subsisting policy on the date of accident and as such the Insurance Company is not liable to pay compensation.

No counter has been filed by the 2nd respondent, who is the owner of the lorry.

Basing on the above pleadings, the Tribunal framed the following issues:

1) Whether the accident was occurred due to rash and negligent driving of the Lorry bearing No. MHV-6397?

2) Whether there was a valid policy issued by R1 company in favour of R2 for the lorry bearing No.MHV-6397 as on the date of accident?

3) Whether the petitioners are entitled for compensation? If so, to what amount and against which of the respondents?

4) To what relief?

During trial, on behalf of the claimants, P.Ws.1 to 3 were examined and Exs.A1 to A8 were marked. On behalf of the 1st respondent, R.W.1 was examined and Exs.B1 to B6 were marked.

After analyzing the evidence available on record, the Tribunal held that the driver of the 2nd respondent was responsible for the accident and accordingly awarded an amount of Rs.2,41,000/- with interest @ 9% per annum from the date of petition till the date of realization payable by the 1st respondent/Insurance Company within one month from the date of order and then recover the same from the 2nd respondent/owner of the crime lorry in execution proceedings. Aggrieved by the same, both the appeals have been filed.

The main contention of the learned Counsel for the claimants is that the Tribunal has not taken into consideration the avocation of the deceased. It is further submitted that though the deceased was earning Rs.6,000/- per month by doing agriculture, the Tribunal has erred in not fixing the income of the deceased at Rs.6,000/- per month. It is further submitted that as per the principles laid down by the Apex Court in National Insurance Company Limited Vs. Pranay Sethi and others 2017 ACJ 2700, the claimants are also entitled to the future prospects. Therefore, it is argued that the income of the deceased may be taken into consideration reasonably for assessing loss of dependency and prayed to enhance the same.

Per contra, the learned Counsel for the Insurance Company submits that the owner of the crime vehicle had issued a cheque towards payment of the premium, however, when the said cheque was presented, it was dishonoured. Since the policy issued by the Insurance Company in respect of the crime lorry in favour of the 2nd respondent stands cancelled due to dishonour of the cheque issued towards payment of premium and there was no subsisting policy on the date of accident, the Insurance Company is not liable for payment of compensation to the claimants, however, the Tribunal erroneously directed the Insurance Company to deposit the compensation amount and then recover the same from the owner of the crime lorry (2nd respondent) by filing execution proceedings.

The finding of the Tribunal with regard to the manner in which the accident took place has become final as the same is not challenged by the respondents. The only ground raised by the Insurance Company is that the cheque issued by the owner of the offending vehicle towards payment of premium was dishonoured and, therefore, the insurance policy has been cancelled and thus the Insurance Company is not liable to pay the compensation to the claimants.

A perusal of the material on record would show that the cover note No.47780 was issued covering the risk of the crime vehicle. Though it was stated that cover note was cancelled for dishonour of the cheque issued by the owner of the vehicle, the same was not communicated to the registering authority as contemplated under Section 147 of the M.V. Act. The Tribunal has rightly held that once the Insurance policy was issued by covering the risk and if any accident occurs during the period of the said policy, the third parties are entitled for the compensation and it is for the Insurance Company to proceed against the owner for the laches on the part of the owner and that the Insurance Company cannot escape from its liability to pay the awarded compensation.

A Full Bench of the Apex Court in the decision reported in Oriental Insurance Co. Ltd. v. Inderjit Kaur AIR 1998 SC 588 has categorically held that the rights of the third parties to claim compensation both from the insured and insurer are not affected under law by the conduct of insured in issuing a cheque, which was later on dishonoured. The relevant portion at paragraph No. 9 is extracted as under:

“The policy of insurance that the appellant issued was a representation upon which the authorities and third parties were entitled to act. The appellant was not absolved of its obligations to third parties under the policy because it did not receive the premium. Its remedies in this behalf lay against the insured.”

In another decision reported in New India Assurance Co. Ltd. v. Rula 2000 ACJ 630, the Apex Court following the earlier decision of the Apex Court (AIR 1998 SC 588 supra) held as under:

“9. Thus, any contract of insurance under Chapter 11 of the Motor vehicle Act, 1988 contemplates a third party who is not a signatory or a party to the contract of insurance but is, nevertheless, protected by such contract. As pointed out by this court in New Asiatic Insurance Co. Ltd. v. Pressumal Dhanamal Aswani {1958-65 ACJ 559 (SC)}, the rights of the third party to get indemnified can be exercised only against the insurer of the vehicle. It is thus clear that the third party is not concerned and does not come into the picture at all in the matter of payment of premium. Whether the premium has been paid or not is not the concern of the third party who is concerned with the fact that there was a policy issued in respect of the vehicle involved in the accident and it is on the basis of this policy that the claim can be maintained by the third party against the insurer.

The decision, which is a three Judge Bench decision, squarely covers the present case also. The subsequent cancellation of the insurance policy in the instant case on the ground that the cheque through which premium was paid was dishonoured, would not affect the rights of the third party which had accrued on the issuance of the policy on the date on which the accident took place. If on the date of accident, there was a policy of insurance in respect of the vehicle in question, the third party would have a claim against the insurance company and the owner of the vehicle would have to be indemnified in respect of the claim of that party. Subsequent cancellation of the insurance policy on the ground of non-payment of premium would not affect the rights already accrued in favour of the third party.”

In view of the judgment of the Apex Court (3 supra), the Insurance Company is liable to third parties on account of statutory compulsion due to the initial agreement entered between the insured and the company concerned. In fact, the facts of the said case reveal that the Apex Court was dealing with damages to a car. Therefore, the ground that the cheque issued by the insured towards payment of premium was dishonoured and the same was intimated to the insured and in spite of the same no premium was paid does not relieve the insurance company for payment of compensation in respect of third parties. Therefore, I do not agree with the contention of the learned Counsel for the Insurance Company that the owner alone is liable to pay the compensation and the Insurance Company is not under obligation to pay the compensation on the ground that the cheque issued by the owner of the offending vehicle was dishonoured. I do not see any merit in the appeal filed by the Insurance Company and the same is accordingly dismissed.

Insofar as the appeal filed by the claimants is concerned, a perusal of the material available on record would show that the deceased was doing business and contracts and was earning Rs.6,000/- per month, but no documentary evidence has been produced by the claimants. Further, a perusal of the inquest report would show that the deceased was an agricultural labourer. In Latha Wadhwa vs. State of Bihar (2001) 8 SCC 197, the Apex Court held that even there is no proof of income and earnings, it can be reasonably estimated minimum at Rs.3,000/- per month for any non-earning member. Therefore, this Court is inclined to take the income of the deceased as Rs.3,000/- per month and the annual income of the deceased would be Rs.36,000/-. Apart from the above, the claimants are entitled to addition of 40% towards future prospects, as per the decision of the Hon’ble Supreme Court in Pranay Sethi (2017 ACJ 2700 supra). Therefore, annual income of the deceased comes to Rs. 50,400/-(Rs.36,000/- + Rs.14,400/-). Since the deceased was a bachelor, his personal living expenses shall be 50% of the said amount i.e., Rs.25,200/-. In view of the decision of the Apex Court in Munna Lal Jain v. Vipin Kumar Sharma and others 2015 (6) SCC 347 when the deceased was a bachelor, the age of the deceased has to be considered while determining the multiplier and not the age of the younger parent as contended by the learned Standing Counsel for the Insurance Company. Since the age of the deceased was 20 years at the time of the accident, the appropriate multiplier is ‘18’ as per the decision reported in Sarla Verma v. Delhi Transport Corporation and another (2009) 6 SCC 121. Adopting multiplier 18, his contribution towards family would be Rs.25,200/- x 18, which comes to Rs.4,53,600/-. The claimants are also entitled to Rs.33,000/- towards loss of estate and funeral expenses as per Pranay Sethi’s case (2017 ACJ 2700 supra). Thus, in all the claimants are entitled to Rs.4,86,600/-.

At this stage, the learned Counsel for the Insurance company submits that the claimants restricted their claim only for Rs.3,00,000/- as compensation and the quantum of compensation which is now awarded would go beyond the claim made which is impermissible under law.

In Laxman @ Laxman Mourya Vs. Divisional Manager, Oriental Insurance Company Limited and another (2011) 10 SCC 756, the Apex Court while referring to Nagappa Vs. Gurudayal Singh 2003 ACJ 12 (SC) held as under:

“It is true that in the petition filed by him under Section 166 of the Act, the appellant had claimed compensation of Rs.5,00,000/- only, but as held in Nagappa vs. Gurudayal Singh (2003) 2 SCC 274, in the absence of any bar in the Act, the Tribunal and for that reason any competent Court is entitled to award higher compensation to the victim of an accident.”

In view of the Judgments of the Apex Court referred to above, the claimants are entitled to get more amount than what has been claimed. Further, the Motor Vehicles Act being a beneficial piece of legislation, where the interest of the claimants is a paramount consideration the Courts should always endeavour to extend the benefit to the claimants to a just and reasonable extent.

Accordingly, M.A.C.M.A.No.1526 of 2007 filed by the Insurance Company is dismissed. M.A.C.M.A.No.2644 of 2014 is allowed and the compensation amount awarded by the Tribunal is hereby enhanced from Rs.2,41,000/- to Rs.4,86,600/-. The enhanced amount will carry interest at 7.5% p.a. from the date of passing of award by the Tribunal till the date of realization. The enhanced amount shall be apportioned among the claimants in the same proportion in which original compensation amounts were directed by the Tribunal. However, the claimants are directed to pay Deficit Court Fee on the enhanced amount. There shall be no order as to costs.

Miscellaneous petitions, if any, pending shall stand closed.