Subbu vs P. Veeran and The New India Assurance Company Ltd.

K.B.K. Vasuki, J.—The claimant is the Appellant herein. The appeal is filed against the award insofar as its dismissal against the second Respondent/Insurance Company.

The claimant/Appellant has filed the claim petition against the owner and insurer of the lorry, which hit against the Appellant in the course of accident at 9.30 a.m. on 27.05.1998 at Siruganur, in the course of which, the Petitioner sustained multiple injuries. The Tribunal though accepted the plea of the claimant regarding the date, time and place of the accident, involvement of the lorry, ownership and insurance of the vehicle, the manner of the accident, the nature of the injuries treatment undergone by her, the medical expenses incurred by her and the permanent disability suffered by her, directed the first Respondent/lorry owner to pay the compensation of Rs. 84,500/-and absolved the second Respondent/Insurance Company from its liability to indemnify the lorry owner on the ground that as on the date of the accident, the premium paid byway of cheque by the insured was dishonored and no premium was paid and no policy was in force on the date of the accident. Aggrieved against that portion of the award, thereby fixing the liability exclusively on the owner of the lorry, the claimant has come forward with this appeal.

The fact that the first Respondent insured the vehicle with the second Respondent and Ex.B1 policy was issued for the period between 27.04.1998 and 26.04.1999 and the premium for the policy was paid by the first Respondent by way of cheque for Rs. 3,144/-, dated 27.04.1998 and when the same was presented for collection on 21.05.1998, the same was dishonored on 22.05.1998 for want of sufficient funds and the same was intimated to the Regional Transport Officer on 08.06.1998 and the first Respondent, who duly received the intimation regarding the same on 12.06.1998 and the accident happened on 27.05.1998 are not seriously disputed.

The learned Counsel for the Insurance Company has by relying upon Section 64B of the Insurance Act, contended the Insurance Company could not in law have assumed any risk under the policy of insurance covering the vehicle until the premium is paid and inasmuch as the cheque given for payment of premium had been dishonored and as no premium had been paid till the date of accident, the Insurance Company was not at risk and not liable to pay any part of the compensation as awarded by the Court. The Tribunal has accepted such contention and absolved the Insurance Company from its liability to pay compensation on behalf of the insured. Whereas, the learned Counsel for the Appellant has seriously questioned the correctness of such finding. According to the Appellant, so long as the policy issued is in force, the insurance company''s liability continues and the bouncing of the cheque and subsequent intimation given by the Insurance Company to the RTO and the insured will not absolve the Insurance Company towards 3rd party risk who are entitled to act upon the representation in the form of insurance policy issued by the insurer.

Both the learned Counsel for the Appellant and the Insurance Company have relied upon the judgments of our Supreme Court and High Court in support of their respective contentions. The Supreme Court judgment relied on the side of the Appellant is reported in AIR 1998 SC 588 in Oriental Insurance Company Limited v. Inderjit Kaur and Ors. and Division Bench judgment of our High Court is reported in New India Assurance Company Limited Vs. V. Bommi and Others, . The learned Counsel for the Respondent relied upon the judgment reported in 2009 (2) TN MAC 241 (SC) in National Insurance Company Limited v. Parvathneni and Anr.

In my considered view, the observation made in the judgments cited above on the side of the Appellant is squarely applicable to the instant case. It is true that the Apex Court has in the judgment reported in 2009 (2) TN MAC 241 (SC) in National Insurance Company Limited v. Parvathneni and Anr., under identical circumstance observed that insured is liable to pay compensation when there is no policy and the insurer cannot be compelled to make payment and recover the same from the owner by the order of the Court in exercise of its jurisdiction under Article 142 of the Constitution of India. The Supreme Court has not agreed with such order passed by the Supreme Court on earlier occasion which is being followed by other High Courts, thereby the Insurance Company is fastened with the liability to satisfy the award in the absence of effective policy and then to recover the same from the insured under pay and recovery theory and raised the question as to whether such a direction can be given under Article 142 of the Constitution of India permitting the Court to create a liability, where there is none and directed the matter to be placed before Honourable the Chief Justice of India for constituting a larger bench to decide this question.

As rightly argued by the learned Counsel for the Appellant, till the view which has all along been followed is modified or reversed, the insured is liable to pay compensation for any risk arising during the subsistence of policy on the principle of pay and recover.

This Court finds much force in the argument advanced on the side of the learned Counsel for the Appellant, which is legally supported by the Apex Court in its judgment reported in AIR 1998 SC 588 in Oriental Insurance Company Limited v. Inderjit Kaur and Ors. and Division Bench judgment of our High Court reported in New India Assurance Company Limited Vs. V. Bommi and Others, . The Supreme Court has in paragraph 10 of the judgment gone to the extent of saying that the Insurance Company itself was responsible for its predicament by issuing policy of Insurance Company upon receipt of only a cheque towards the premium in contravention of the provisions of Section 64VB of the Insurance Act and the public interest, that a policy of insurance serves must clearly prevail over the interest of the Insurance Company and the Insurance Company by reason of the provisions of Sections 147(5) and 149(1) of the Motor Vehicles Act become liable to indemnify the third party in respect of the liability which that policy covered and to satisfy awards of compensation in respect thereof notwithstanding its entitlement to avoid or to cancel the policy for the reason that the cheque issued in payment of the premium thereon had not been honoured.

In the same judgment, the Supreme Court has in paragraph 9 referred to another passage in the case of Montreal Street Railway Company v. Normand in AIR 1917 Privy Council 142, wherein, the Privy Council has held "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 would work serious general inconvenience 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". Following the observation of privy council, the Supreme Court has held that the Insurance Company has become liable upon the issuance of policy despite the dishonor of cheque towards payment of premium and the dishonor of the cheque will not invalidate the issuance of policy of Insurance and the liability of the insurer under the said policy subsists cannot be avoided.

The same view is followed by the judgment of Supreme Court reported in New India Assurance Co. Ltd. Vs. Rula and Others, . Our High Court has also in New India Assurance Company Limited Vs. V. Bommi and Others, discussed the identical issue in the light of the earlier decision and has after a detailed analysis of the entire case laws on this aspect, ultimately observed that the insurer cannot absolve its liability to pay compensation to third party and the insurer have to work out its remedy against the insured. That being the well laid down legal dictum, unless and otherwise the same is modified the settled decision need not be deviated from and to that extent, the award in the present case needs modification and hence the insurance Company is directed to answer the award made in favour of the claimants but shall have the right to recover the same from the first Respondent insured.

Accordingly, the Civil Miscellaneous Appeal is disposed of.