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Judgment
Sole question in this appeal for determination before this court is as to what is file effect of cancellation of a policy on account of dishonor of
cheque of premium issued by the insured visà vis the claim of a third party, like respondents 1 to 3, hereinafter referred to as the claimants.
Facts giving rise to this appeal need to be noticed briefly. Late Shri Roshan Lai Raina was the husband of respondent no 1 and father of
respondents 2 & 3, who are his minor daughter and son. Deceased was a practicising lawyer earlier at Srinagar Ahantnag, who in 1990 had
migrated to Jammu. On 31. 12. 1993 deceased was one of the occupants of the car bearing registration no. JKO 2B1872 which was being driven
by Yash Paul Malhotra. This car was on its way from Chandigarh to Jammu when it met with an accident at a place Chack Janjan falling inbetween
Tanda to Moga road in Punjab. Further case of the claimants was that driver due to his rash and negligent driving lost control of the vehicle which
resulted in its dashing against a tree and as a consequence whereof all the five occupants including driver lost their lives.
Vehicle being insured with the appellantInsurance Company is not in dispute, policy of insurance had been issued by it. Only defense put forth to
resist the claim of the claimants before the Tribunal in proceedings under Section 186 Motor Vehicles Act 1988 was that the policy in question
dated 21. 12,1993 was cancelled on 20. 1. 1994 from its inception as the cheque of premium was dishonored, therefore, the appellant was not
liable to pay the compensation much less indemnify the owner.
As already explained widow of the deceased owner of the car admitted the factor of accident and death of Mr. Roshan Lai Raina along with
other four occupants of the car but disputed that the accident was caused due to rash and negligent driving of the deceased driver.
On the other hand it was pleaded that another vehicle hit the car in question as a result of which it struck into the tree, therefore, the car was
completely smashed and all the occupants killed.
On the aforesaid pleadings parties went to trial on the following issues:
Whether accident involving death of the deceased Roshan Lai Raina has occurred by the rash and negligent driving of the maruti car no. JKO
2B1878 on 31. 12. 1993? OPP
What is the amount of compensation payable to the petitioners in the event of issue no. 1 is proved in affirmative and by whom? OPP
Whether the Insurance Company is exempt from liability to indemnify the insured, if so, how? OPRI.
Relief.
As already noticed sole ground urged in support of this appeal was that on findings recorded by the Tribunal below on issue no. 3 on account of
the contract of insurance having come to an end when the cheque of premium was dishonored and intimation had been given by the appellant on
1. 1994 in that behalf revoking the policy in question from its very in option.
It may be worthwhile to notice that appellant is an authorized insurer under the provisions of the Insurance Act. In its capacity as such policy of
insurance which was later on revoked had been cancelled may be on account of the dishonors of the cheque in question, as per case set up by the
appellant before the Tribunal below as well as during the courses of this appeal. The question that needs consideration in this background is as to
whether in the face of provisions of section 147 and 149 of the Motor Vehicles Act, 1988, rights of third parties like the claimants are either
curtailed or taken away simply because the premium was either not paid at all or the cheque in question for such payment was dishonored. As per
law, after the issuance of policy, contract of insurance is complete and under section 149 of the Motor vehicles Act, 1988, it is the statutory duty
of the insurer appellant in the present case to satisfy the award passed by the Tribunal against the insurer. In this behalf it may also be appropriate
to notice that vehicle when is on the road is statutorily required to be insured in the absence whereof it cannot roll down much less move on the
road. Thus when a vehicle is moving third party presumes that the moving vehicle is duly insured under law and is entitled 4o act on that basis. That
being so, dishonor of cheque of premium, as in the present case, will in no case absolve the appellant insurer of its statutory liability under Section
149 of the Motor Vehicles Act, 1988. May be it may have some remedy due to dishonors of cheque of premium in accordance with law, but in no
case it can be made a ground to defeat or destroy the legitimate right of a third party, like the claimants in the present case.
If the plea urged on behalf of the appellant is upheld and it is held that the claimants are not entitled to enforce the award against the former it will
result in defeating the provisions enacted by the Legislature. Here it may also be appropriate to notice the history of the provisions of Motor
Vehicles Act relating to satisfaction of awards passed by the Tribunal below. Liability of the Insurance Company under the Motor Vehicles Act
1939 was Rs. 20,000 which was increased to Rs. 1,50,000 from time to time under the said Act. Matter relating to making the insurer liable for
satisfaction of entire award had been calling attention of the government and other authorities. When Motor Vehicles Act, 1988, came into force
repealing the Act of 1939 entire liability under the Award was passed on the Insurance Company.
A perusal of the aforesaid scheme shows that this was necessitated because it was being experienced in the past that in most of the cases where
either the vehicles were not insured at all or where the insurance company was absolved of its liability the award in such situations became
meaningless and remained only on paper without providing any succors to the family of the deceased, like the claimants in the present case. The
provisions relating to award of compensation in the Motor Vehicles Act were aimed at providing compensation to dependants of the deceased or
injured, as the case may be, to provide relief in a given situation. Despite there being an order for payment of compensation if it was not
recoverable would not be against the spirit and purpose of the enactment but would further defeat the same and instead of achieving the object
would deny the same. Keeping in view all these circumstances, in the Act of 1988 entire liability under the award had been passed on to the
insurer, like the appellant in the present case to satisfy the award in question. In fact, satisfying the award underthe statute, i. e. Motor Vehicles
Act, 1988, is in the nature of performance of a public duty by the insurance company. Consequence of accepting the plea of the appellant would
result in very grave and disastrous consequences. In addition to this it would also have serious repercussions leading to injustice on account of
failure of the provisions of law by adhering to a narrow interpretation of such provision thereby defeating the legislative intent and purpose. On this
count also, the plea of the appellant as urged in support of this appeal cannot be upheld.
Above all this matter need not detain us any further in the face of the decision of Apex Court reported in AIR 1998 Supreme Court 588,
Oriental Insurance Co. Ltd. vs. inderjit Kaur and others, wherein after considering the provisions of Section 64VB of the Insurance Act (4 of
1938) as also Sections 147 and 149 of the Motor Vehicles Act, 1988, it was observed as under:
We have, therefore, this position. Despite the bar created by S. 64VBof the insurance Act, the appellant, an authorized insurer, issued a policy
of insurance to cover the bus without receiving the premium therefore. By reason of the provisions of Sections 147(5) and 149(1) of the Motor
Vehicles Act, the appellant became liable to indemnify third parties in respect of the liability which that policy covered and to satisfy awards of
compensation in respect thereof notwithstanding its entitlement (upon which we do not express any opinion) to avoid or cancel the policy for the
reason that the cheque issued in payment of the premium thereon had not been honored.
It must also be noted that it was the appellant it self who was responsible for its predicament. It had issued the policy of insurance upon
receipt only of a cheque towards the premium in contravention of the provisions of S. 64VB of the Insurance Act. The public interest that a policy
of insurance serves must, dearly, prevail over the interest of the appellant.
In this judgments reliance was placed on the following observation of AIR 1917 Privy Council 142, Montreal Street Railway Company v.
Norman din:
When the provisions of a statute relate to the performance of a public duty and the case is such that to hold null and void acts done in neglect of
this duty, it would work serious genera! In convenience or injustice to persons who have no control over those entrusted with the duty and at the
same time would not promote the main object of the Legislature, it has been the practice to hold such provisions to be directory only, the neglect of
them, though punishable, not affecting the validity of the acts done.
While disposing the appeal of the Insurance company, the Apex Court overruled its decision in United India Insurance Company Ltd, vs.
Ayeb Mohammed, (1991)2A. C. J. 650, and in that behalf observed as under :
We find it is difficult to conclude that the judgment in the case of United India Insurance Company Ltd. v. Ayeb Mohammad, (1991
(2)ACCCJ650) decides a principle of law because no notice had been issued on the special leave petition. At the same time, the opinion is
expressed in the judgment that the High Court was in error in holding that, in the absence of steps to cancel the cover note, the risk would subsist.
No other point was urged.
From whatever angle present case may be examined in the considered view of this court, both on the basis of the decision of the Apex Court
as well as on account of view being taken, it is clear that there is no merit in this appeal which deserves to be dismissed and it is ordered
accordingly.
No costs.