Himachal Pradesh High Court
Mittar Singh vs Gian Chand And Ors. on 20 June, 2005
Equivalent citations: IV(2005)ACC52, 2006ACJ959
Author: Deepak Gupta
Bench: Deepak Gupta
JUDGMENT Deepak Gupta, J.
1. By this judgment three appeals being F.A.O. Nos. 367, 368 and 369 of 1997 are being disposed of as they arise out of the same accident and similar awards. The questions involved in all the three cases are identical.
2. Facts necessary for decision of these appeals are that on 25.11.1996 the claimants in all the three cases were travelling in bus No. HP 18-4445. This bus is owned by appellant Mittar Singh. The bus was being driven by Ravinder Singh, respondent No. 2. The claimants filed separate claim petitions for grant of compensation. The owner and driver in their reply did not dispute the factum of the accident. It was averred that the accident took place due to sudden mechanical defect. It was also stated that the vehicle was insured with Oriental Insurance Co. Ltd., respondent No. 3 and as such the insurance company was liable to pay the compensation.
3. The insurance company in its reply took up the plea that the vehicle in question was not insured with it at the time of the accident. It was averred that cover note was issued in favour of the appellant on 19.10.1996. An amount of Rs. 12,951 was paid by the owner of the bus by cheque to the insurance company. This cheque was dishonoured when it was sent for collection. Thereafter, the insurance company cancelled the policy and communicated this fact to the insured vide letter dated 14.11.1996. Admittedly, this letter was received by the insured on 23.11.1996. It was submitted that the insured then paid the fresh premium only on 26.11.1996 at Jagadhri. Thereafter, the vehicle was inspected and fresh policy of insurance was issued which was effective from 11.12.96 to 10.12.1997. Thus, the stand of the insurance company is that on 25.11.1996 there was no insurance policy in force and as such the insurance company was not liable.
4. The Tribunal came to the conclusion that the accident had occurred due to rash and negligent driving of the driver of the truck. The Tribunal ordered payment of compensation to the claimants. The Claims Tribunal accepted the plea of the insurance company and held that there was no valid policy of the insurance on the date of accident and hence exonerated the insurance company and held the owner and driver liable to pay the compensation assessed.
5. These appeals have been filed by the owner. Mr. Kuldeep Singh Kanwar, learned senior counsel appearing for the owner submitted that the finding of the Tribunal that there was no policy of the insurance existing on the date of the accident, i.e., 25.11.1996 is totally incorrect. He submits that in fact appellant had received the letter dated 14.11.1996 only on 23.11.1996. He also submits that though this letter is dated 14.11.1996, it was posted on 22.11.1996. He further submits that on 23.11.1996 itself the appellant had got a draft prepared and delivered it to the insurance company at Jagadhri on the same day. As such the original cover note would be revalidated and there was an effective policy on the date of accident. In the alternative he submits that even if it be assumed that insured had not paid the insurance premium on 23.11.1996 then also insurance company would still be liable since the insurance company has not given any explanation as to when the policy was cancelled and also why the cheque bounced. He submits that the insurance company by retaining the original cheque and not returning the same accepted the premium.
6. On the other hand, Mr. Deepak Bhasin, learned Counsel appearing for the insurance company has supported the award of the Tribunal.
7. Before considering the rival contentions of the parties it would be necessary to take into consideration the relevant evidence especially the documentary evidence. Exh.
R1 is the original cover note issued on 19.10.1996 which was valid from 19.10.1996 to 18.10.1997. Exh. R2 is the letter dated 14.11.1996 sent by the insurance company to the appellant. By this letter the appellant has been informed that since the cheque issued by him has been dishonoured on 17.10.1996 the policy stands cancelled from its inception due to non-receipt of premium. The owner has been further informed that in case he sends a demand draft or pays cash in lieu of the dishonoured cheque within seven days of the receipt of the letter the policy would be considered to be effective from its inception subject to the insured giving a declaration that no loss has occurred in respect of the risks insured under the cover note during the period of cancellation and renewal of policy.
8. Exh. R3 is the copy of the envelope which shows that this letter was dispatched from Jagadhri/Yamuna Nagar on 22.11.96 and reached Dadahu on 23.11.1996. Exh. R4 is a transfer voucher which shows that after transferring an amount of Rs. 12,981 from the account of one Gupta Sweet Shop a draft for the said amount has been prepared in favour of Oriental Insurance Co. Ltd. Exh. R5 is a copy of the cheque issued by the proprietor of Gupta Sweet Shop in favour of Oriental Insurance Co. Ltd. Exh. R6 is the copy of the draft dated 23.11.1996. Exh. R7 is the copy of the ledger account of Gupta Sweet Shop from which account the draft has been prepared. It would be pertinent to mention that in this account on 22.11.1996 the balance amount shown is only Rs. 329. On 23.11.1996 an amount of Rs. 12,981 has been debited and the balance shown is Rs. 12,652. Obviously this balance will have to be in the negative. On 26.11.96 an amount of Rs. 13,000 has been credited in this account. Exh. R8 is a copy of letter dated 26.11.1996 sent by the Branch Manager, Jagadhri to the Branch Office of the insurance company at Nahan. This letter was admittedly handed over to the appellant for being given to the Branch Office at Nahan. This letter reads as follows:
In connection with the above, we wish to inform you that we had covered the risk w.e.f. 19.10.1996 after the receipt of premium by cheque. Thereafter, the cheque was returned to us dishonoured and we had requested the insured to deposit the premium by demand draft/cash. Today, the insured approached us with demand draft but the vehicle was not available for re-inspection.
You are, as such, requested to kindly depute some surveyor from your end for re-inspection of vehicle. The report may please be sent to us for our doing the further needful in the matter. The address of the insured is as under:
C/o Sh. Chandan Singh Tomar, V&P.O.Dadahu (Distt. Sirmaur)
9. Exh. R9 is the cover letter sent by the Nahan Branch of insurance company to the Branch Office at Jagadhri enclosing the inspection report, Exh. RIO. A fresh certificate of insurance is Exh.
RII which shows that a fresh policy had been issued covering the vehicle from 11.12.1996 to 10.12.1997. Exh. R12 is a copy of the notification of the insurance company dated 3.2.1996 which shows that the insurance company follows a five-day week and that Saturdays are holidays in the company.
10. RW 1 is the appellant. According to him after receipt of letter, Exh. R2, he had immediately got the draft prepared and he had personally delivered it at Jagadhri on 23.11.1996 itself. He states that he was not issued any receipt by the officials of the insurance company on the ground that he already has a copy of the letter which is sufficient proof. He admits that the original cheque which he had issued for payment of premium had bounced. According to him no re-inspection of the vehicle was done in his presence. When confronted with letter, Exh. R8, on which his signature appears he stated that after the accident he had gone to Jagadhri on 26.11.1996 when he was handed over this letter. He denied suggestion that after the inspection a fresh policy was issued to him. He has denied the suggestion that the draft was actually prepared on 26.11.1996 and in connivance with the officials of the bank the same has been ante-dated to 23.11.96.
11. RW 2 is Khajan Singh Negi, Branch Manager of the Himachal Pradesh State Cooperative Bank at Dadahu. According to him before a draft is prepared a transfer voucher is filled, in case the payment is made by cheque and in case the payment is in cash then cash voucher is prepared. According to him Jitender Kumar Gupta, Sweet Shop owner of Dadahu had issued cheque No. A-l 19541 in favour of Oriental Insurance Co. Ltd. This cheque was received by the appellant Mittar Singh. Thereafter, the draft was prepared, copy of which is Exh. R6. He states that the draft was prepared in terms of voucher, Exh. R4. He further states that the draft was not ante-dated. He admits that the entry with regard to the transfer is made on the scroll book of the bank. He then states that in his branch there is no scroll book and only nationalised banks maintain the scroll book. He however states that entries are made in a register and has produced the copy of the same which is Exh. R7. In fact Exh. R7 is not a copy of the register but copy of the account of Gupta Sweet Shop, Dadahu. He has denied the fact that the entries in Exh. R7 are forged entries. He stated that he knows Mittar Singh since Mittar Singh has an account in his bank and stays in Dadahu.
12. Insurance company has examined O.P. Gulati, Branch Manager, Oriental Insurance Co. Ltd., Jagadhri as RW 3. He has stated that the cover note, Exh. Rl, was cancelled and that the appellant had come to the office at Jagadhri on 26.11.1996 along with the draft. Since the vehicle had not been brought for inspection, therefore, the company had issued a letter, Exh. R8. The letter was handed over to the appellant for transmission to the Branch Office at Nahan. The appellant had appended his signatures on the said letter. He has also proved the receipt of Exhs. R9 to R11. He also states that the amount could not have been received on 23.11.1996 since it was a holiday and the offices of the insurance company are closed.
13. This is the entire evidence in the case. It is quite obvious that the owner has set up a false case. In fact it is doubtful whether the draft was in fact prepared on 23.11.1996. The first question is why the draft was not got prepared by the appellant from his own account? The Branch Manager has admitted that the appellant has an account in his bank. The only inference can be that this was done because there was no money in his account. The transfer voucher, Exh. R4, shows that an amount of Rs. 12,981 was transferred for preparation of bank draft of Rs. 12,981 in favour of Oriental Insurance Co. Ltd. No amount has been charged for preparation of the draft which is against normal banking practice. The most interesting document is Exh. R5 which is a cheque issued in favour of Oriental Insurance Co. Ltd. for a sum of Rs. 12,981. This cheque has been issued by the proprietor of Gupta Sweet Shop. The draft had been prepared against the transfer voucher, therefore, there was no necessity of issuing this cheque. Why the cheque which was issued in favour of Oriental Insurance Co. Ltd. was handed over to the bank? The Bank Manager has produced this cheque in court. The account statement, Exh. R7, also shows that on 22.11.1996 there was only an amount of Rs. 329 in the account of Gupta Sweet Shop. It shows that on 23.11.1996 further amount of Rs. 12,981 was debited under cheque No. A-119541 which was in the name of Oriental Insurance Co. Ltd. This cheque was not admittedly handed over to Oriental Insurance Co. Ltd. nor was it presented for payment by the said company. Then how this amount was debited to the account of Gupta Sweet Shop has not been explained. The draft was prepared against transfer voucher No. 46, Exh. R4. There is no mention of this transfer voucher in the statement of account, Exh. R7. This clearly shows that this account statement is not correct and in fact the draft was not prepared on 23.11.1996.
14. Even assuming that the cheque was prepared on 23.11.1996, if the appellant chose not to hand it over to the insurance company he cannot be heard to say that the insurance company should be burdened with the liability to pay compensation. His story that he had handed over the cheque to an official of the insurance company on 23.11.1996 cannot be believed. 23.11.1996 was Saturday. As per the statement of RW 3 and as per Exh. R12 it stands proved on record that the office of the insurance company were not open on Saturdays. No person, especially after cancellation of his policy, will handover the draft towards payment of premium without obtaining a receipt. The appellant has failed to prove that he had handed over the draft to the insurance company on 23.11.1996.
15. It appears that after the accident occurred the appellant went to the office of the insurance company at Jagadhri on 26.11.1996 with the draft. On that date letter, Exh. R8, was handed over to him for onward transmission to Branch Office, Nahan. A perusal of this letter clearly shows that the appellant had come to Jagadhri only on 26.11.1996. Since the vehicle was not available for re-inspection the Branch Office at Nahan was requested to depute some surveyor to inspect the vehicle. The appellant has received this letter and his signatures are found on Exh. RX. Therefore, his version cannot be accepted.
16. Mr. Kuldeep Singh Kanwar, senior counsel appearing for the appellant has referred to various judgments. I do not feel it necessary to refer to the judgments of the High Courts cited since there are numerous judgments of the Apex Court on this point. The first of these is United India Insurance Co. Ltd. v. Ayeb Mohammed 1991 ACJ 650 (SC). In this case, a two-judge Bench of Apex Court held that once the cheque was dishonoured and in absence of payment the cover note became ineffective. It was further held that since the fact that cheque had bounced was a matter within the knowledge of the insured, no special notice would be required to be issued to the insured.
17. This point also came up for consideration before the Apex Court in Oriental Insurance Co. Ltd. v. Inderjit Kaur 1998 ACJ 123 (SC). In this case the premium for the policy was paid by cheque. The policy was issued on 30.11.1989. A letter was sent by the insurance company to the insured on 23.1.1990 informing him that the cheque had been dishonoured and that the company was not at risk. The premium was paid in cash on 2.5.1990. In the meantime on 19.4.1990 the accident took place. A three-Judge Bench of Apex Court considered the provisions of Section 64-VB of the Insurance Act as well as Sections 147 and 149 of the Motor Vehicles Act. The Apex Court held that the observations in the case of United India Insurance Co. Ltd. v. Ayeb Mohammed 1991 ACJ 650 (SC), did not lay down good law. The Apex Court held as follows:
(8) We have, therefore, this position. Despite the bar created by Section 64-VB of the Insurance Act, the appellant, an authorised insurer, issued a policy of insurance to cover the bus without receiving the premium therefor. By reason of the provisions of Sections 147(5) and 149(1) of the Motor Vehicles Act, the appellant became liable to indemnify third parties in respect of the liability which that policy covered and to satisfy awards of compensation in respect thereof notwithstanding its entitlement (upon which we do not express any opinion) to avoid or cancel the policy for the reason that the cheque issued in payment of the premium thereon had not been honoured.
(9) The policy of insurance that the appellant issued was a representation upon which the authorities and third parties were entitled to act. The appellant was not absolved of its obligations to third parties under the policy because it did not receive the premium. Its remedies in this behalf lay against the insured.
(11) It must also be noted that it was the appellant itself who was responsible for its predicament. It had issued the policy of insurance upon receipt only of a cheque towards the premium in contravention of the provisions of Section 64-VB of the Insurance Act. The public interest that a policy of insurance serves must, clearly, prevail over the interest of the appellant.
18. In New India Assurance Co. Ltd. v. Rula , the Supreme Court was again dealing with a similar point. In that case the vehicle was insured on 8.11.1991 and met with an accident on same day at midnight. The cheque was later on dishonoured on 16.11.1991. The facts of this case were different from the earlier case as in this case at the time of accident the insurance company had not cancelled the policy of insurance. Apex Court after considering the provisions of Contract Act and Motor Vehicles Act held as follows:
(8) The contract of insurance in respect of motor vehicles has, therefore, to be construed in the light of the above provisions. Section 146(1) contains a prohibition on the use of the motor vehicle without an insurance policy having been taken in accordance with Chapter 11 of Motor Vehicles Act. The manifest object of this provision is to ensure that third party, who suffers injuries due to the use of the motor vehicle, may be able to get damages from the owner of the vehicle and recoverability of the damages may not depend on the financial condition or solvency of the driver of the vehicle who had caused the injuries.
(9) Thus, any contract of insurance under Chapter 11 of the Motor Vehicles Act, 1988 contemplates a third party who is not a signatory or a party to the contract of insurance but is, nevertheless, protected by such contract. As pointed out by this court in New Asiatic Insurance Co. Ltd. v. Pessumal Dhanamal Aswani 1958-65 ACJ 559 (SC), the rights of the third party to get indemnified can be exercised only against the insurer of the vehicle. It is thus clear that the third party is not concerned and does not come into the picture at all in the matter of payment of the premium. Whether the premium has been paid or not is not the concern of the third party who is concerned with the fact that there was a policy issued in respect of the vehicle involved in the accident and it is on the basis of this policy that the claim can be maintained by the third party against the insurer.
The Apex Court followed the judgment in Inderjit Kaur's case, and held thus:
(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 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. Subsequent cancellation of the insurance policy on the ground of non-payment of premium would not affect the rights already accrued in favour of the third party.
19. A similar point was raised before the Apex Court in National Insurance Co. Ltd. v. Seema Malhotra . In this case the policy was issued on 21.12.1993 against a cheque issued on the same date. The vehicle met with an accident on 31.12.1993 and the insured also died in the accident. The cheque was dishonoured on 10.1.1994. The widow and children of the insured filed a claim with regard to the loss of the vehicle before the Consumer Protection Commission. The Jammu & Kashmir State Consumer Protection Commission rejected the claim on the ground that since the cheque had bounced there could be no legal contract between the parties. The matter was then taken up by the claimants before the High Court of Jammu and Kashmir. The High Court directed that the claim should be assessed and after deducting the amount of premium the balance amount should be paid to the claimants. The insurance company aggrieved against the said judgment filed an appeal before the Supreme Court. After considering the entire law on the subject the Apex Court held as follows;
(17) In a contract of insurance when an insured gives a cheque towards payment of premium or part of the premium, such a contract consists of reciprocal promise. The drawer of the cheque promises the insurer that the cheque, on presentation, would yield the amount in cash. It cannot be forgotten that a cheque is a bill of exchange drawn on a specified banker. A bill of exchange is an instrument in writing containing an unconditional order directing a certain person to pay a certain sum of money to a certain person. It involves a promise that such money would be paid.
(18) Thus, when the insured fails to pay the premium promised, or when the cheque issued by him towards the premium is returned dishonoured by the bank concerned the insurer need not perform his part of the promise. The corollary is that the insured cannot claim performance from the insurer in such a situation.
(19) Under Section 25 of the Contract Act an agreement made without consideration is void. Section 65 of the Contract Act says that when a contract becomes void any person who has received any advantage under such contract is bound to restore it to the person from whom he received it. So, even if the insurer has disbursed the amount covered by the policy to the insured before the cheque was returned dishonoured, the insurer is entitled to get the money back.
20. Mr. Kuldeep Singh Kanwar, the learned senior counsel has further relied upon a decision of Andhra Pradesh High Court in M. Nageswara Rao v. New India Assurance Co. Ltd. , in which Andhra Pradesh High Court has held that since the insurance company had failed to prove that the letter cancelling the policy had been served upon the insured it could not escape its liability. In the present case the insured had admitted the receiving of that letter. This judgment is not applicable since in that case the court held that the insurance company in terms of the policy had failed to cancel the policy.
21. A reading of the various judgments of the Apex Court makes it abundantly clear that the insurance company cannot escape its liability to pay compensation to third parties even if it has cancelled the policy because the third parties who benefit under the terms of the contract cannot be put to risk. The insurance companies, once they accept premium in cheque and issue a cover note or a policy of insurance take the risk of paying the amount of compensation, if any, payable to third parties even if the cheque bounces. Third party insurance is compulsory under the Motor Vehicles Act. The purpose of this is that people who suffer in accidents are able to recover the amount of compensation from the insurance companies. Therefore, as has been held by the Apex Court in Inderjit Kaur's case and in Rula's case , it is the insurance company who was responsible for its predicament. However, both in Inderjit Kaur's case (supra) and in Rula's case (supra) the Supreme Court has made it abundantly clear that the insurance company is not absolved of its obligations to third parties under the policy because it does not receive premium. The remedy of the insurance company lies against the insured. It is, thus, obvious that though the insurance company may not be able to avoid its liability as far as third parties are concerned it can take steps to recover the amount from the insured. The Supreme court in Seema Malhotra's case , has clearly held that when the insured fails to pay the premium promised he cannot claim performance from the insurer in such a situation. The cases of third parties stand on a different footing from the cases by the insured. The insured cannot be heard to say that he must be indemnified even if the cheque issued by him for payment of premium has been dishonoured.
22. The present three appeals are by the insured. The insured has already deposited the amount which is payable under the award. The third parties did not come up in appeal. Since the amount has been deposited by the insured it would serve no useful purpose to modify the award and hold the insurance company liable to pay the amount to the third parties with liberty reserved to it, to recover this amount from the insured. It would just lead to multiplicity of litigation. Therefore, though the insurance company may have been liable to pay the amount to the third parties, in the peculiar facts of the case, since the insured has already deposited the awarded amounts, the appeals are without any merit and deserve to be dismissed.
23. There is one more reason for rejecting these appeals. Out of the same accident many cases were decided. In some of the cases the award was less than Rs. 10,000. No appeal lay against the awards where the amount awarded was less than Rs. 10,000. The appellant insured preferred a petition under Article 227 of the Constitution of India. This petition was decided by a single Judge of this court in case titled as Mittar Singh v. Ashish Kumar . The relevant observations of this court are as follows:
(14) It may be noticed here that the motor vehicle met with an accident on 25.11.1996 and according to the learned Counsel, the insurance company is liable to indemnify him in respect of his liability. Having gone through the impugned award, I am in complete agreement with the findings recorded by the learned Motor Accidents Claims Tribunal that the insurance company denied that the demand draft was received by its office at Jagadhri on 23.11.1996. It has been found on appreciation of evidence that the bank-draft, Exh. R6, was actually delivered by the owner at the office at Jagadhri on 26.11.1996 concealing the fact of the accident having taken place a day earlier, i.e., on 25.11.1996. Letter, Exh. R8, fully makes out that the draft was delivered on 26.11.1996 and was further directed to be delivered for transmission to the branch at Nahan. It just cannot be believed that the draft was delivered on 23.11.1996 itself. Had it been so, the owner should have obtained a receipt of acknowledgment.
(15) It has been further found on appreciation of evidence that the insurance company had no knowledge of the accident having taken place on 25.11.1996 when letter, Exh. R8 was issued on 26.11.1996. The contention of Mr. Kuldip Singh that insurance cover became effective from the date it was issued, is thus rejected. Since the cheque was dishonoured, the cover note became ineffective automatically.
24. Mr. Kuldeep Singh Kanwar, the learned senior counsel has contended that since the decision was given in a petition under Article 227, therefore, the same cannot bind this court. I am afraid I cannot accept this argument. The appellant chose to file a petition under Article 227 and contested it to the hilt. After the decision has gone against the appellant, appellant cannot say that such a decision should not have been given in a case which was filed by him. The appellant himself invoked the jurisdiction of this court and invited the findings which went against him. He is bound by these findings.
25. No other point has been argued.
26. As a result of the above discussion, all the appeals are dismissed with costs which are assessed at Rs. 1,500 in each appeal. The costs shall be paid to the claimants who have been unnecessarily dragged to this court.