UNITED INDIA INSURANCE CO. vs N.MOHAN REDDY

THOUGH a telegram has been received from the respondent No. 1 stating that he is unable to appear at Bangalore and requesting for posting of the case at Delhi, we do not feel inclined to grant the said request for adjournment. The posting at Bangalore had been informed to the parties sufficiently early and this arrangement was made for the convenience of the parties in the four Southern States. It is not possible for us to accede to the Party''s request for posting at Delhi only. The request for adjournment is therefore refused.

THIS is an appeal by United India Insurance Company against the order of the State Commission, Andhra Pradesh in CD A No. 444/ 93 dated 14.6.94. The facts of the case are that Shri N. Mohan Reddy, respondent No. 1 herein purchased a mini truck medi um goods vehicle AEO-3337 under the self-employment scheme with the financial assistance of the respondent No. 2 herein namely the Allahabad Bank. The vehicle was hypothecated with the Allahabad Bank who paid the premium to the Insurance Company and insured the vehicle for the period from 14.3.89 to 13.3.1990. Later, Shri N. Mohan Reddy paid the premium for the succeeding year through a cheque signed by his brother to renew the insurance policy of the vehicle. The Insurance Company issued the policy covering the period from 14.3.90 to 13.3.91. The mini truck turned turtle while coming from Hyderabad to Warangal on 18.8.90 and was totally damaged. On receipt of information about this damage, the Insurance Company appointed a Surveyor and the vehicle was shifted by Shri Reddy to Hyderabad on 25.8.90 where repairs were undertaken. The complainant spent Rs. 32,836/-towards repair charges and asked for its reimbursement from the Insurance Company. The version of the Insurance Company is that although they issued the policy effective from 14.3.90 to 13.3.91 and received a cheque for a sum of Rs. 3,390/- but as the cheque was dishonoured, no consideration was received in the form of premium from the insured for his vehicle. Hence, the policy issued by them was not effective on 18.8.90 as it stood automatically cancelled as soon as the cheque issued by the complainant was returned with an endorsement ''refer to drawer''. They pointed out in this regard that since the payment by cheque is subject to realisation, the insurance under the cover note is deemed to have been cancelled from its very inception.

THE State Commission, Andhra Pradesh came to a view that as the Insurance Company did not inform about the dishonouring of the cheque to the respondent, he presumed that everything was alright. In their view the Insurance Company ought to have forwarded the dishonoured cheque to the respondent informing him that the cheque was not encashed and it was then for the complainant to pay the premium amount immediately to cover the risk of vehicle. On the ground that the Insurance Company did not intimate the cancellation of the policy nor informed the respondent about the dishonouring of the cheque, it was held by the State Commission that the officers of the opposite party were negligent in dealing with the matter and that there was no fault on the part of the respondent in not ascertaining about the encashment of the cheque. The State Commission has also noted that even after the report of the respondent about the accident, the opposite party kept quiet for a period of two months and did not intimate to the respondent about the cancellation of insurance. They held that the totality of the circumstances indicated that there was no opportunity for the respondent to make the payment, if any, to fulfill the conditions of Section 64 VB of the Insurance Act. The State Commission also held that the policy therefore, was in force on the date of accident and directed the Insu ranee Company to pay compensation for the mini truck which was covered by the insurance policy issued by them. As regards quantum of compensation, the State Commission directed that it should be equivalent to the expenditure incurred by the respondent and be paid within two months from the date, after verifying the bills produced by him.

WE have perused the records of this case carefully and heard the Counsel for the petitioner. We are unable to accept the view expressed by the State Commission that non-intimation of the dishonouring of the cheque and also non-intimation of the cancellation of the policy consequently, in the circumstances of this case, where it is admitted that the cheque was dishonoured and hence the premium had not been received by the Insurance Company, can make them liable to pay the compensation for the damaged vehicle as directed by the State Commission. The Supreme Court in S.L.P. No. 6043 decided on 1.4.91 titled "United India Insurance Company Ltd. v. Ayeb Mohammed and Ors." reported as 1991 ACJ 650, had held that: "The fact that the cheque had bounced was a matter within the knowledge of insured. At any rate there would be that presumption and therefore in ordinary circumstances no special notice would be required." taking into account this fact the Supreme Court further held that: "In the setting indicated we are of the view that the High Court not right in holding that in the absence of steps for cancellation of cover note*the risk would be subsisting." We, therefore/accept this appeal and set aside the order of the State Commission, Andhra Pradesh dated 14th July, 1993 and dismiss the complaint. There will be no order as to costs throughout.