Oriental Insurance Co. Ltd. vs Ramkhilawan Dhruv and Others

Nawal Kishore Agarwal, J.—This is insurer''s appeal against the award dated 2-1-2010 passed by the IXth Addl. Motor Accident Claims Tribunal, Raipur (for short ''the Tribunal'') in claim case No. 71/09. The only question falls for consideration of this court is: whether the appellant/The Oriental Insurance Company Limited (insurer) is absolved of its obligations to the third party under the policy of insurance because the cheque given by the owner of the vehicle towards the premium got dishonoured and subsequent to the accident, the insurer cancelled the policy of insurance.

As against compensation of Rs. 21,79,000/- claimed by the claimant/Ramkhilawan Dhruv by filing application u/s 166 of the Motor Vehicles Act, 1988 (for short ''MV Act'') for the injuries sustained by him in the motor accident on 28-11-2007, the Tribunal awarded a total sum of Rs. 20,000/- along with interest @ 6 percent per annum from the date of application till its actual payment.

The Tribunal, on a close scrutiny of the evidence led, held: the accident had occurred due to collusion between TATA-DI-207 bearing registration No. CG-08-B-1203, being driven by respondent No. 2/Rajesh, and Swaraj Mazda bearing registration No. CG-04-ZA-1687 being driven by claimant/Ramkhilawan Dhruv; both the drivers have contributed to the cause of accident to the extent of 50:50; assessed the amount of compensation as Rs. 40,000/-; after deducting 20,000/- towards contributory negligence of claimant himself: awarded Rs. 20,000/- to the claimant holding appellant/insurance company also liable for payment of compensation.

Shri Sudhir Agrawal, learned counsel for the appellant submits that having regard to the undisputed fact that the cheque issued by the respondent/owner of the vehicle towards the premium for insurance of vehicle was dishonoured, the contract of insurance became void and the insurer could not be compelled to perform its part of promise under the policy. According to Shri Agrawal, no liability can be fastened on the insurers qua third party if the policy of insurance is rendered void for want of consideration to the insurer.

Per contra, Shri Abhishek Sharma, learned counsel appearing for respondent No. 2 & 3 supported the award impugned and would submit in the facts and circumstances of the case the Tribunal has rightly fastened the liability upon the appellant/insurance company.

I have heard the learned counsel appearing for the parties and perused the award impugned including records of Tribunal.

Indisputably, the accident had occurred on 28-11-2007; the policy was cancelled by the appellant/insurance company on 12-12-2007 i.e. subsequent to the accident.

The Supreme Court in case of United India Insurance Co. Ltd. Vs. Laxmamma and Others, after considering its earlier judgments in cases of Oriental Insurance Co. Ltd. Vs. Inderjit Kaur and Others, National Insurance Co. Ltd. Vs. Seema Malhotra and Others, and Deddappa and Others Vs. The Branch Manager, National Insurance Co. Ltd., has held: where the policy of insurance is issued by an authorized insurer on receipt of cheque towards payment of premium and such cheque is returned dishonoured, the liability of authorized 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 Section 147(5) and 149(1) of the MV Act unless the policy of insurance is cancelled by the authorized insurer and intimation of such cancellation has reached the insured before the accident, and observed in para 19 as under:

In our view, the legal position is this: where the policy of insurance is issued by an authorized insurer on receipt of cheque towards payment of premium and such cheque is returned dishonoured, the liability of authorized 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 Section 147(5) and 149(1) of the MV Act unless the policy of insurance is cancelled by the authorized 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 authorized insurer to cover a vehicle on receipt of the 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.

In the instant case, indisputably, the accident had occurred on 28-11-2007 whereas the policy was cancelled by the appellant/insurance company on 12-12-2007 i.e. subsequent to the accident Therefore, applying the ratio of law laid down by the Supreme Court in the case referred hereinabove in the facts and circumstances of the present case, the Tribunal has not committed any error in fastening the liability of payment of compensation upon the appellant/insurance company to the claimant. However, the Tribunal has fallen in error in not granting liberty to the appellant/insurance company to prosecute its remedy to recover the amount paid to the claimant from the insured in accordance with law. For the reasons mentioned hereinabove, the appeal is allowed in part. The award passed by the Tribunal is modified to the extent that appellant shall be at liberty to prosecute its remedy to recover the amount paid to the claimant from the insured. Rest of conditions mentioned in the awards shall remain intact. No order as to costs.