New Prem Bus Service vs Laxman Singh and Others

Mansoor Ahmad Mir, Actg. C.J.

The appellant has invoked the jurisdiction of this court in terms of section 173 of the Motor Vehicles Act, 1988 (hereinafter referred to as ''the M.V. Act'') and has questioned the award, dated 15.5.2008, made by the Motor Accidents Claims Tribunal (I), Kangra at Dharamshala, H.P. (hereinafter referred to as ''the Tribunal'') in M.A.C.T. Petition No. 2-P/11/2006, titled as Laxman Singh v. New Prem Bus Service, whereby compensation to the tune of Rs. 2,05,000 came to be granted in favour of claimant-respondent No. 1 and against the owner-appellant, with interest at the rate of 7 percent per annum from the date of institution of the claim petition till its realization (hereinafter referred to as ''the impugned award''), on the grounds taken in the memo of appeal.

Brief facts:

Laxman Singh, claimant-respondent No. 1, being the victim of vehicular accident, which occurred on 13.4.2004, near Malan on NH 20A at about 11 a.m., by the driver, namely, Kishore Chand, while driving bus No. HP 39-A 3365 rashly and negligently sustained injuries; was taken to the Community Health Centre, Nagrota Bagwan; referred to Dr. Rajindra Prasad Government Medical College & Hospital, Dharamshala; remained admitted in the hospital till 30.4.2004 and filed a claim petition before the Tribunal for grant of compensation to the tune of Rs. 10,00,000 as per the break-ups given in the claim petition.

The claim petition was resisted by the appellant-owner-insured and the insurer, respondent No. 2, on the grounds taken in the memo of objections.

The following issues were framed by the Tribunal on 27.12.2006:

"(1) Whether petitioner suffered injuries due to rash and negligent driving of bus No. HP 39-A 3365 by Kishore Chand?...OPP

(2) If issue No. 1 is proved in affirmative, to what amount of compensation the petitioner is entitled and from which of the respondents?...OPP

(3) Whether the petition is bad for nonjoinder of necessary parties?...OPR

(4) Whether the bus in question was insured with respondent No. 2 at the time of accident?...OPR-1

(5) Whether the bus in question was being plied in contravention of the terms and conditions of insurance policy, as alleged?...OPR-2

(6) Whether the driver was not holding a valid and effective driving licence at the time of accident?...OPR-2

(7) Relief."

The claimant-respondent No. 1 has examined four witnesses, i.e., Dr. Ruby Bhardwaj, PW 1, H.H.C. Trilok Raj, PW 2, Gurdarshan Dass Gupta, PW 3, Bias Dev Sharma, PW 4, and appeared himself as PW 5. The appellant-owner has examined Pawan Kumar, i.e., the proprietor of appellant company. The insurer-respondent No. 2 has examined S.K. Dhiman, the Administrative Officer of the said insurance company.

Issue No. 1:

After examining the pleadings and scanning the evidence on record, the Tribunal held that the claimant has proved, by leading oral as well as documentary evidence, that the driver Kishore Chand had driven the offending bus, bearing registration No. HP 39-A 3365, rashly and negligently and had caused the accident.

The respondents in the claim petition have not led any evidence in rebuttal to that effect, thus has remained unrebutted. Even the insured-owner-appellant and the insurer-respondent No. 2 have not questioned the same, has attained finality. Accordingly, the findings returned by the Tribunal on issue No. 1 are upheld.

Before I deal with issue Nos. 2 and 4, which are interdependent, I deem it proper to decide issue Nos. 3, 5 and 6.

Issue No. 3:

The respondents in the claim petition, i.e., the appellant insured and the insurer-respondent No. 2, have not led any evidence to the effect that the lis was suffering from non-joinder of necessary and proper parties. The finding returned by the Tribunal on this issue is not subject-matter of this appeal. Thus, the findings returned by the Tribunal on issue No. 3 have attained finality and are accordingly upheld.

Issue Nos. 5 and 6:

The insurer-respondent No. 2 had to discharge the onus to prove these issues. It has not led any evidence to prove that the offending vehicle was being driven in contravention of the terms and conditions of the route permit or the insurance policy and the driver was not having a valid or effective driving licence. The insurer-respondent No. 2 has also not questioned the said findings returned by the Tribunal in the impugned award to that effect, has attained finality. Accordingly, the findings returned by the Tribunal on issue Nos. 5 and 6 are upheld.

Issue Nos. 2 and 4:

Appellant insured has questioned exoneration of the insurer-respondent No. 2. Thus, the only question that needs to be determined is--whether the Tribunal has rightly discharged the insurer-respondent No. 2 from liability and asked the owner-insured-appellant to satisfy the award? The answer is in the negative for the following reasons:

Admittedly, the insurance policy was issued in favour of the appellant insured and the risk was covered. The appellant insured had deposited the premium amount by way of cheque and the insurance policy was in force w.e.f. 26.3.2004 to 25.3.2005. The accident occurred on 13.4.2004 at 11 a.m. near Malan, Tehsil Palampur, District Kangra. The cheque was sent for collection; was dishonoured on the ground ''insufficiency of funds'' on 13.4.2004. The insurer-respondent No. 2 intimated the owner-insured-appellant about the said fact on 15.4.2004 through the medium of a letter, which was sent through registered post. In response to the said letter, the owner-insured-appellant deposited the amount of Rs. 14,584 in cash on 16.4.2004 itself.

The insurer-respondent No. 2 has not led any evidence to the effect that the insurance policy was cancelled on 13.4.2004, i.e., the date of accident, or intimation was sent on the said date, i.e., on 13.4.2004, to the insured-owner. The admitted case of the insurer-respondent No. 2 is that it received information qua dishonouring of the cheque on 13.4.2014 and intimated the owner-insured appellant on 15.4.2004.

Thus, admittedly, the insurance policy was not cancelled either on 13.4.2004 or on 15.4.2004. The witness examined by insurer-respondent No. 2, S.K. Dhiman, RW 1, has not deposed anything about the cancellation of the insurance policy, but has stated that in terms of the policy, the bouncing of the cheque was automatic cancellation of the insurance policy.

In my considered view, on this ground the Tribunal has fallen in error in holding that the insurance policy was not in force on 13.4.2004, that too at 11 a.m.

Admittedly, no notice of cancellation was issued and the witness so examined by the insurer-respondent No. 2 has stated that non-payment of premium or bouncing of cheque in itself is a ground for automatic cancellation of insurance policy, is devoid of any force for the following reasons:

In terms of section 64-VB of the Insurance Act, 1938 (hereinafter referred to as ''the Insurance Act'') read with the provisions of sections 147 and 149 of the M.V. Act, the insurer has to intimate the insured, which has not been done in the present case, and if intimation is not given and during that period the accident happens, it is the insurer who is liable.

The Apex Court in the case titled as New India Assurance Co. Ltd. Vs. Rula and Others, , has held that the insurer has to mandatorily intimate the owner by way of notice about the cancellation of insurance policy and if the accident occurs between the period till the cancellation is conveyed, it is the insurer, who is liable. It is apt to reproduce para 11 of the judgment herein:

"(11) This 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 insurance policy on the ground of non-payment of premium would not affect the rights already accrued in favour of the third party."

The matter again came up for consideration before the Supreme Court in Deddappa and Others Vs. The Branch Manager, National Insurance Co. Ltd., and the same principle has been laid down. It is apt to reproduce paras 26 to 28 of the judgment herein:

"(26) We are not oblivious of the distinction between the statutory liability of the insurance company vis-�-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.

(27) A beneficial legislation as is well known should not be construed in such a manner so as to bring within its ambit a benefit which was not contemplated by the legislature to be given to the party. In Regional Director, Employees'' State Insurance Corporation, Trichur Vs. Ramanuja Match Industries, , this court held:

''We do not doubt that beneficial legislations should have liberal construction with a view to implementing the legislative intent but where such beneficial legislation has a scheme of its own there is no warrant for the court to travel beyond the scheme and extend the scope of the statute on the pretext of extending the statutory benefit to those who are not covered by the scheme.''

We, therefore, agree with the opinion of the High Court.

(28) However, as the appellant hails from the lowest strata of society, we are of the opinion that in a case of this nature, we should, in exercise of our extraordinary jurisdiction under Article 142 of the Constitution of India, direct the respondent No. 1 to pay the amount of claim to the appellants herein and then recover the same from the owner of the vehicle, viz., respondent No. 2, particularly in view of the fact that no appeal was preferred by him. We direct accordingly."

In the case titled as United India Insurance Co. Ltd. Vs. Laxmamma and Others, , the Apex Court has discussed the law developed on the issue and ultimately held that if cancellation order is not made and conveyed and if the accident occurs till the cancellation is made, the insurer is liable. It is profitable to reproduce para 19 of the judgment herein:

"(19) In our view, the legal position is this: where the policy of insurance is issued by an authorised insurer on receipt of cheque towards payment of premium and such cheque is returned dishonoured, the liability of authorised 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 authorised 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 authorised insurer to cover a vehicle on receipt of 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."

It is worthwhile to mention herein that the insured-owner-appellant has immediately responded to the notice, dated 15.4.2004, and deposited the amount in cash, which is admitted by the insurer-respondent No. 2. Thus, there was no occasion for the Claims Tribunal to saddle the owner-insured-appellant with liability.

In the given circumstances, I am of the considered opinion that the findings returned by the Tribunal to the effect whereby the insurer-respondent No. 2 has been discharged from liability and owner-insured-appellant has been directed to satisfy the award are wrong, illegal, perverse and erroneous and are accordingly set aside and the insurer-respondent No. 2 is saddled with liability and is directed to satisfy the award within eight weeks. If the amount has been deposited by the insured-owner-appellant, that be refunded through account payee cheque after deposition of the amount by the insurer-respondent No. 2 before the Registry of this court. Issue Nos. 2 and 4 are decided accordingly.

The appeal is accordingly allowed and the impugned award is modified, as indicated hereinabove. Send down the records after placing copy of the judgment on record.