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Judgment
Aruna Jagadeesan, J.—This Civil Miscellaneous Appeal is directed against the award dated 30.4.2004 made in MCOP. No. 222/2002 by
the learned Chief Judicial Magistrate I (MACT) Krishnagiri, granting an award of Rs. 56,000/- together with interest 9% p.a. as against the 1st
Respondent/Owner and negativing the claim as against the 2nd Respondent/Insurance Company.
On 24.8.2001, at about 09.00 hours, when the Appellant/ claimant was proceeding in his bicycle in Dharmapuri to Salem NH Road and while
coming opposite to Sri Ram Boarding Lodge, the lorry bearing Reg. No. TN-29-A-2300 belonging to the 1st Respondent dashed against the
claimant due to which he fell down from the cycle and sustained grievous injuries. Immediately, he had been taken to the Government Hospital,
Dharmapuri and was treated as an inpatient. He sustained fracture and suffered disability and therefore, he claimed a sum of Rs. 3,00,000/- as
compensation.
The 2nd Respondent Insurance Company resisted the claim by filing a counter contending that the lorry was not duly insured with the 2nd
Respondent at the time of the accident, as the premium paid by the 1st Respondent by way of cheque was dishonored. Hence, the policy insured
for the period from 21.8.2001 to 20.8.2002 was cancelled from the inception of the policy. The 1st Respondent obtained subsequent policy
commencing from 28.8.2001 for one year. Therefore, at the time of the accident i.e. on 24.8.2001, there was no privity of contract between the
1st Respondent/owner and the 2nd Respondent/Insurance Company and the 2nd Respondent is not liable to indemnify the 1st Respondent. The
Insurance Company also disputed the age and income of the claimant and prayed for dismissal of the claim petition as against the 2nd Respondent.
The 1st Respondent/owner remained expert before the Tribunal.
On the side of the claimant, he examined himself as PW.1 and the Doctor who assessed the disability suffered by the claimant as PW.2 Exs.P1
to P5 were marked. The Development Officer of the 2nd Respondent was examined as RW.1 and Exs.R1 to 7th Respondent were marked
through him.
On evaluating the evidence both oral and documentary, the Tribunal held that the accident occurred on account of the rash and negligent driving
of the driver of the lorry and as there was no contract between the 1st Respondent and the 2nd Respondent as it stood rescinded due to failure of
consideration on account of dishonour of cheque and intimation to the said effect was also given to the 1st Respondent, the Insurance Company
was not liable to compensate the claim for the accident. However, the Tribunal directed the 1st Respondent/owner to pay a compensation of Rs.
56,000/- (Rs. 21,000/- for the injuries + Rs. 20,000/- for the disability + Rs. 10,000/- for the pain and suffering + Rs. 5000/- for nutrition) with
9% interest p.a. Aggrieved against the said award, the claimant has filed this Civil Miscellaneous Appeal.
Mr. V. Kumaravelan, the learned Counsel for the Appellant contended inter alia that the subsequent cancellation of the insurance policy 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. He would further contend that if on the date of the accident there was a policy
of insurance in respect of the vehicle in question, the claimant who is a third party would have claim against the Insurance Company and the owner
of the vehicle would have to be indemnified in respect of the claim of that party.
Per contra, Mr. S. Arunkumar, the learned Counsel for the 2nd Respondent/Insurance Company strenuously contended that when the cheque
through which premium was paid was dishonoured, the contract between the owner of the vehicle and the Insurance Company stood rescinded
and the insurance policy having been cancelled and duly informed to the owner of the vehicle, the Insurance Company is not liable to compensate
the third party for the accident and therefore, the Tribunal rightly dismissed the claim as against the Appellant/claimant.
This Court heard the arguments advanced on both sides and perused the evidence placed on record.
For the purpose of getting the said lorry insured, a cheque was issued by the 1st Respondent dated 21.8.2001. The cover note is marked as
Ex.P3 on the side of the claimant. Ex.R2 insurance policy had been issued to the owner of the vehicle on the same day with validity from
21.8.2001 to 20.8.2002. According to RW.1, the Development Officer working in the Insurance Company, the cheque was presented with the
Tamil Nadu Mercantile Bank, Dharmapuri on 22.8.2001 and the same is said to have been returned unpaid and a phone message to the said effect
was received by the Insurance Company from the aforementioned Bank. RW.1 would further state that the policy was cancelled by them and the
intimation of the cancellation was sent on 24.8.2001 to the owner of the vehicle. Ex.R5 is the copy of such intimation dated 24.8.2001 and Ex.R6
is the receipt issued by the postal authority for having received the registered post on 24.8.2001. Admittedly, neither the proof for receipt of
intimation nor any postal acknowledgment had been filed by the Insurance Company to show that the owner had received such intimation. That
apart, the memo given by the Bank indicating the return of the cheque for insufficient funds or any other reason was also not filed by the Insurance
Company.
On a careful scrutiny of RW.1''s evidence, there is no indication as to on what date the memo was received by the Insurance Company from
the Bank and also the date of cancellation of the policy. Ex.R5 merely says that receipt No. 520614 dated 21.8.2001 was cancelled as the cheque
issued for the premium has been dishonoured by their Bankers. The accident had occurred on 24.8.2001 at 9.00 a.m. Even as per the documents
filed by the Insurance Company, the cancellation of the policy was intimated to the owner of the vehicle by letter dated 24.8.2001, presumably the
letter ought to have been dispatched only during working hours on 24.8.2001.
Mr. S. Arun Kumar, the learned Counsel for the 2nd Respondent would submit that in terms of Section 64VB of the Insurance Act, a contract
of insurance would be valid only when the cheque issued towards payment of the premium is honoured. The learned Counsel would contend that
as the cheque issued for the premium got dishonoured, the contract being without consideration need not be performed. Strong reliance in this
behalf was placed on Deddappa and Others Vs. The Branch Manager, National Insurance Co. Ltd., .
By relying upon the above cited case of the Honourable Supreme Court, the learned Counsel for the 2nd Respondent would contend that the
Insurance Company having cancelled the policy cannot be mulcted with the liability to settle the claim. Before adverting to the arguments advanced
by the learned Counsel on either side, it is relevant to refer to certain provisions of the Motor Vehicles Act. Section 146 of the said Act stipulates
the necessity for issuance of policy against third party risk. It reads as follows:
No person, except as a passenger, shall use or cause or allow any other person to use, a motor vehicle in a public place, unless there is in force in
relation to the use of the vehicle by that person or that other person, as the case may be, a Policy of Insurance complying with the requirements of
this Chapter.
Section 147(5) of the Act provides as under:
Notwithstanding anything contained in any law for the time being in force, an insurer issuing a policy of insurance under this section shall be liable to
indemnity the person or classes of persons specified in the policy in respect of any liability which the policy purports to cover in the case of that
person or those classes of persons.
Section 149 of the Act casts a duty on the insured to satisfy the Judgments and awards against persons insured in respect of third party risks. Sub-
section (1) of Section 149 is quoted below:
Duty of insured to satisfy Judgments and awards against persons insured in respect of third party risks:
(1) If, after a certificate of insurance has been issued under Sub-section (3) of Section 147 in favour of the person by whom a policy has been
effected, Judgment or award in respect of any such liability as is required to be covered by a policy under clause(b) of Sub-section (1) of Section
147 (being a liability covered by the terms of the policy) or under the provisions of Section 163A is obtained against any person insured by the
policy, then, notwithstanding that the insurer may be entitled to avoid or cancel or may have avoided or cancelled the policy, the insurer shall,
subject to the provisions of this section, pay to the person entitled to the benefit of the decree any sum not exceeding the sum assured payable
there under, as if he were the judgment debtor, in respect of the liability, together with any amount payable in respect of costs and any sum payable
in respect of interest on that sum by virtue of any enactment relating to interest on Judgment.
The contract of insurance in respect of a motor vehicle has, therefore, to be construed in the light of the above provisions of the Motor
Vehicles Act. In New India Assurance Co. Ltd. Vs. Rula and Others, , the Honourable Supreme Court held that the subsequent cancellation of
the Insurance policy 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. It held, placing reliance on its decision rendered by
a three-Judge Bench decision in Oriental Insurance Co. Ltd. Vs. Inderjit Kaur and Others, that if on the date of the 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. It also held that 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.
In Oriental Insurance Co. Ltd. Vs. Inderjit Kaur and Others, , the Honourable Supreme Court opined that a policy of insurance which was
issued in public interest would prevail over the interest of the insurance Company. In that case, a bus met with an accident. The policy of insurance
was issued on 30.11.1989. A letter stating that the cheque had been dishonoured was sent by the Insurance Company to the insurer on
23.1.1990. The premium was paid in cash on 2.5.1990. The accident took place on 19.4.1990. Despite noticing Section 64-VB of the Insurance
Act, but having regard to the underlying public policy behind the statutory scheme in respect of insurance as evidenced by Section 147 and Section
149 of the Act and in particular, having regard to the fact that policy of insurance to cover the bus without receiving the premium had already been
issued, the Honourable Supreme Court held that the Insurance Company was liable to indemnify the insured.
In Deddappa and Others Vs. The Branch Manager, National Insurance Co. Ltd., , the Honourable Supreme Court noticed the
aforementioned decision and analysed the same and held that if the contract of insurance was cancelled and all concerned have been intimated
thereabout, (emphasis supplied), then the Insurance Company would not be liable to satisfy the claim.
In yet another decision of the Honourable Supreme Court in National Insurance Company v. Abhaysing Pratapsing Waghela and Ors. 2008
(2) TN-MAC 448 SC cheque towards premium was issued on 23.1.1995, the accident took place on 27.1.1995, the cheque was dishonoured
and cash was paid on 30.1.1995. The cover note was issued by the Insurance Company on 23.1.1995 and it was contended that the contract of
insurance would be valid only when the cheque issued towards payment of premium is honoured, but when it is dishonoured the contract being
without consideration need not be performed. Negativing the said contention, the Motor Accident Claims Tribunal as also the High Court, opined,
having regard to the fact that a cover note had been issued by the Insurance Company that it was legally obligated to reimburse the claim of a third
party. The same was challenged before the Honourable Supreme Court and it was held that the said findings cannot be faulted, as the cover note
having bee issued would come within purview of definition of contract of insurance in terms of Section 145(b) of the Motor Vehicles Act and when
it remained valid on the date of the accident and was cancelled only after accident took place, the Insurance Company is liable to indemnify the
owner. The Honourable Supreme Court further held as under:
Indisputably, the 1st Respondent is a third party in relation to the contract of insurance which had been entered into by and between the Appellant
and the owner of the vehicle in question. We have noticed hereinbefore that a document was produced before the Tribunal. Even according to the
Appellant, although it was only a Motor Input Advice Cum Receipt, it contained the Cover Note No. 279106. We, therefore, have to suppose
that a Cover Note had, in fact, been issued. If a Cover Note had been issued which in terms of Sub-section (b) of Section 145 of the Act would
come within the purview of definition of contract of insurance; it also would come within the purview of the definition of a insurance policy. If a
Cover Note is issued, it remains valid till it is cancelled. Indisputably, the insurance policy was cancelled only after the accident took place. A
finding of fact, therefore, has been arrived at that prior to the deposit of the premium of insurance in cash by the owner of the vehicle, the Cover
Note was not cancelled.
It is in the aforementioned situation, we are of the opinion that the judgment of the High Court cannot be faulted. No doubt, a contract of insurance
is to be governed by the terms thereof, but a distinction must be borne in mind between a contract of insurance which has been entered into for the
purpose of giving effect to the object and purport of the statute and one which provides for reimbursement of the liability of the owner of the
vehicle strictly in terms thereof. In that limited sense, a contract of insurance entered into for the purpose of covering a third party risk would not be
purely contractual. We may place on record that an ordinary contract of insurance does not have a statutory flavour. The Act merely imposes an
obligation on the part of the insurance Company to reimburse the claimant both in terms of the Act as also the contract. So far as the liability of the
Insurance Company which comes within the purview of Sections 146 and 147 is concerned, the same sub serves a constitutional goal, namely,
social justice. A contract of insurance covering the third party risk must, therefore, be viewed differently, vis-a-vis a contract of insurance qua
contract.
In 2009 (1) TN-MAC 608 DB (Oriental Insurance Company Limited, Cuddalore v. M. Pushpan and 5 Ors.), a Division Bench of this Court
relying upon the various decisions of the Honourable Supreme Court held that non payment of premium would not affect the rights already accrued
in favour of the third party.
The aforesaid decision of the Honourable Supreme Court squarely covers the present case also. In this case, the policy of insurance was
issued on 21.8.2001 and its validity period is from 21.8.2001 to 20.8.2002. The cheque issued towards premium was returned unpaid and
admittedly the intimation regarding cancellation of policy was sent to the owner by letter dated 24.8.2001. There is absolutely no evidence to show
the date on which the owner of the vehicle has received the said intimation. Neither there is any evidence to show the date on which the Insurance
Company cancelled the policy.
In the aforementioned situation, in the absence of any definite evidence to show the actual date of cancellation of the insurance policy made by
the 2nd Respondent/Insurance Company, the intimation of cancellation being sent to the owner of the vehicle only on 24.8.2001 i.e. on the date of
the accident, the accident having occurred at 9.00 a.m. even before the issuance of letter of intimation of cancellation of policy, I am of the
considered view that the policy issued would remain valid till it is cancelled. Cancellation of contract of insurance having been sent only on
24.8.2001 and the accident having occurred on the same date i.e. on 24.8.2001, I am of the opinion that the Insurance Company would be liable
to indemnify the owner of the vehicle and satisfy the claim made by the Appellant/ claimant. Hence, the 2nd Respondent/ Insurance Company
cannot avoid its liability. Therefore, the findings of the Tribunal is liable to be set aside.
On appreciation of the evidence on record, the Tribunal has rightly come to the conclusion that the accident occurred due to the rash and
negligent driving of the lorry. Therefore, the findings regarding the negligence as arrived at by the Tribunal stand confirmed.
The next question to be decided is the quantum of compensation determined by the Tribunal, which according to the claimant is inadequate and
not in accordance with law. The claimant who examined himself as PW.1 has stated that he was running a rice mill on his own and was getting a
monthly income of Rs. 5000/-. Due to the injuries sustained by him, he is unable to do his physical activities and unable to look after the business
as he was doing before. But, during the cross examination, he has admitted that there is no proof to show the rice mill run by him on his own and
the income derived through such business. In the claim petition, his age is given as 55 years.
PW.2 Dr. Elago, who has examined him and issued disability certificate Ex.P4 after perusing the medical records and the X-ray report,
assessed his disability as 35% on the ground that there is post traumatic stiffness of metatarsal joints 2 to 5 due to mal union of metatarsal bones. It
also resulted in restriction of movements of right foot. He has stated that the claimant had difficulty in sitting, squatting on the ground, walking
continuously and driving vehicles. According to him, the claimant cannot do any hard work. Admittedly, he has assessed the disability only with
regard to the disability said to have been suffered by the claimant with regard to the right limb. It is not his case that in view of such disability, he is
totally incapacitated to do any work. It cannot also be disputed that the claimant is carrying on the business even after the accident.
Considering the nature of the injuries sustained by the claimant and the evidence of the Doctor, he is entitled to Rs. 35000/- for the loss of
earning capacity, Rs. 15,000/- for the pain and suffering, Rs. 2500/- for transportation expenses and Rs. 2500/- for extra nourishment. He is also
entitled to Rs. 6000/- for the loss of earning during the period of treatment. Though he claimed that he incurred expenses of Rs. 30,000/- for
medical expenses, but no documents were filed to substantiate the same. However, taking into consideration the nature of the injuries and the
period of treatment, he is entitled to Rs. 5000/- for medical expenses and Rs. 5000/- for attender''s charges. In all, the claimant is entitled to a sum
of Rs. 71,000/- as total compensation and the Insurance Company is liable to indemnify the 1st Respondent/owner in respect of the award of
compensation passed by this Court.
In view of the discussions made above, the view taken by the Tribunal exonerating the 2nd Respondent/ Insurance Company is erroneous and
that needs to be corrected by setting aside the order which is under challenge. The Appellant is entitled to a sum of Rs. 71,000/- as total
compensation enhancing the award passed by the Tribunal from Rs. 56,000/-.
In the result, this Civil Miscellaneous Appeal is allowed setting aside the impugned order of the Tribunal and it is directed that the 2nd
Respondent/Insurance Company shall deposit a sum of Rs. 71,000/- with interest at 9% p.a. before the Tribunal within a period of eight weeks
from the date of receipt of a copy of this order. On such deposit being made, the Appellant is permitted to withdraw the entire award amount with
interest. No costs.