Karnataka High Court
Iffco Tokio General Insurance Co.Ltd vs Gangamma W/O Mahantgouda And Ors on 19 June, 2023
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NC: 2023:KHC-K:1252
MFA No. 200097 of 2017
IN THE HIGH COURT OF KARNATAKA,
KALABURAGI BENCH
DATED THIS THE 19TH DAY OF JUNE, 2023
BEFORE
THE HON'BLE MR. JUSTICE R.NATARAJ
MISCL. FIRST APPEAL NO. 200097 OF 2017 (MV-D)
BETWEEN:
IFFCO TOKIO GENERAL INSURANCE CO. LTD.,
NO.102, FIRST FLOOR, RAGAVA KRISHNA COMPLEX,
K.C. ROAD, BELLARY
NOW REPRESENTED BY ITS AUTHORIZED
SIGNATORY
...APPELLANT
(BY SRI S. S. ASPALLI, ADVOCATE)
AND:
1. GANGAMMA W/O MAHANTAGOUDA
AGE: 28 YEARS, OCC: HOUSEHOLD
Digitally signed by
SHILPA R TENIHALLI R/O TAVARGERA, NOW R/O BHOGAVATHI
Location: HIGH COURT
OF KARNATAKA TQ. MANVI DIST.RAICHUR-504101
2. AKBAR KHAN S/O GULAB KHAN
AGE: MAJOR, OCC: DRIVER OF EICHER
MINI LORRY NO.MH-20/AT-3222
R/O CHIKALTHAN TQ.KANNADA
DISTRICT AURANGABAD (MH)-431001
3. AABA SAHEB S/O VISHWAS RAO
AGE:36 YEARS, OCC: OWNER OF EICHER
MINI LORRY NO.MH-20/AT-3222
R/O CHIKALTHAN TQ. KANNADA
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NC: 2023:KHC-K:1252
MFA No. 200097 of 2017
DISTRICT AURANGABAD (MH)-431001
...RESPONDENTS
(BY SRI ARUNKUMAR A. ADVOCATE FOR RESPONDENT NO.1;
NOTICE TO R2 & R3 IS HELD SUFFICIENT)
THIS MFA IS FILED UNDER SECTION 173(1) OF THE
MOTOR VEHICLES ACT, 1988 PRAYING TO SET ASIDE THE
JUDGMENT AND AWARD DATED 20.10.2016 IN MVC
NO.174/2013 PASSED BY THE I ADDL. DISTRICT JUDGE AND
MACT., RAICHUR, BY ALLOWING THE ABOVE APPEAL AND ETC.
THIS APPEAL, COMING ON FOR ADMISSION, THIS DAY,
THE COURT DELIVERED THE FOLLOWING:
JUDGMENT
The insurer is in appeal challenging the liability fastened on it to pay the compensation awarded by the I Additional District Judge and Motor Accident Claims Tribunal, Raichur (henceforth referred to as 'the Tribunal') in MVC No.174/2013 vide judgment and award dated 20.10.2016.
2. The appellant herein shall henceforth be referred to as the 'insurer' of Eicher Mini Lorry involved in the accident. Respondent No.1 shall henceforth be referred to as the 'claimant', while respondent Nos.2 and 3 shall -3- NC: 2023:KHC-K:1252 MFA No. 200097 of 2017 henceforth be referred to as 'driver' and 'owner' of the said Eicher Mini Lorry.
3. A claim petition under Section 166 of the Motor Vehicles Act, 1988 (for short 'the M.V. Act') was filed by the claimant claiming compensation from the driver, owner and insurer of a medium goods vehicle bearing registration No.MH-20/AT-3222 (henceforth referred to as 'the offending vehicle') which dashed against Sri Mahantha Gouda, who died due to the injuries suffered in the accident.
4. The claim petition was resisted by the insurer contending that the vehicle was not covered by a policy of insurance as the cheque drawn by the insured towards payment of the premium was dishonoured before the date of the accident.
5. Despite service of notice, the driver and owner of the offending vehicle did not chose to appear and they were placed ex parte before the Tribunal. -4-
NC: 2023:KHC-K:1252 MFA No. 200097 of 2017
6. The Tribunal after considering the oral and documentary evidence, awarded compensation of Rs.9,96,000/- along with interest at 6% per annum from the date of the petition till realization to the claimant and held that the insurer can not avoid liability to pay the compensation since it did not cancel policy of insurance prior to the date of the accident and therefore, it was liable to indemnify the insured against the claim for compensation.
7. Being aggrieved by the aforesaid finding of the Tribunal regarding liability, the insurer is in appeal.
8. Learned counsel for the appellant / insurer contended that the policy of insurance specifically provided that "in the event of dishonour of premium cheque, policy stands automatically cancelled ab initio". He submitted that the insured had passed on a cheque for the premium i.e., Rs.19,110/- on 31.08.2012 and a policy of insurance was issued in respect of the offending vehicle covering the risk from 31.08.2012 to 30.08.2013. He contended that -5- NC: 2023:KHC-K:1252 MFA No. 200097 of 2017 the cheque was tendered for encashment on 01.09.2012 and it was dishonoured on 04.09.2012. The accident occurred on 05.09.2012. A notice of termination of the insurance policy was issued to the owner of the offending vehicle on 06.09.2012. Learned counsel contended that receipt of the premium is a condition precedent for the policy to come into force and since the cheque issued towards payment of the insurance premium was dishonoured, there was no contract of insurance between the insurer and hence, the Tribunal committed an error in fastening liability on the insurer to pay the compensation awarded by it to the claimant.
9. Learned counsel relied upon the judgment of Andhra Pradesh High Court in New India Assurance Company Ltd. v. Kotana Appanna and Others1. He also referred to the judgment of the Hon'ble Apex Court in the case of United India Insurance Company Limited v. Laxmamma and Others2 where it was held as follows: 1
1998(1) ALD 394 2 [(2012) 5 SCC 234] -6- NC: 2023:KHC-K:1252 MFA No. 200097 of 2017 "26. In our view, the legal position is this:
where the policy of insurance is issued by an authorised insurer on receipt of cheque towards the payment of premium and such a cheque is returned dishonoured, the liability of the authorised insurer to indemnify the third parties in respect of the liability which that policy covered subsists and it has to satisfy the award of compensation by reason of the provisions of Sections 147(5) and 149(1) of the MV Act unless the policy of insurance is cancelled by the authorised 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 authorised 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."-7-
NC: 2023:KHC-K:1252 MFA No. 200097 of 2017 He, therefore, contended that in the case on hand, the insurer had acted diligently in taking steps to terminate the insurance policy by issuing a notice of termination on 06.09.2012 immediately after receipt of acknowledgement of the dishonour of the cheque drawn by the insurer towards payment of the premium. Learned counsel also invited the attention of this Court to Section 64VB of the Insurance Act, 1938 (for short, 'the Act of 1938') and submitted that the risk proposed to be covered by a policy of insurance may be issued not later than the date on which premium has been paid in cash or by cheque to the insurer. Learned counsel pointed to the words "has been paid" found in sub-section (2) of Section 64VB of the Act of 1938 and submits that the clause mentioned in the policy of insurance is in line with sub-section (2) of Section 64VB of the Act of 1938. He therefore submits that there is no subsisting policy of insurance as on the date of the accident and consequently, the insurer was not liable to indemnify the owner of the offending vehicle.-8-
NC: 2023:KHC-K:1252 MFA No. 200097 of 2017
10. Per contra, the learned counsel for the claimant / respondent No.1 submitted that under Section 146 of the M.V. Act, a vehicle brought for use on a public road is to be covered by a policy of insurance complying with requirements of Chapter XI of the M.V. Act. He submitted that if the cheque drawn by the insured towards payment of the premium is dishonoured, the insurer was bound in law to intimate the insured i.e., owner of the offending vehicle about dishonour so that he does not bring on the road for use. He submits that a third party would be unaware whether the vehicle plying on the road is covered by a policy of insurance or not. He, therefore, submits that the dishonour of cheque drawn by the insured would give rise to a cause of action for the insurer to proceed against the insured to recover the premium or cancel the policy of insurance. He submits that between the date of dishonour and the cancellation of the policy, if there is no incident, there would be no consequence. However, if in between these two dates if there is any incident, the insurer is under an obligation to indemnify the owner -9- NC: 2023:KHC-K:1252 MFA No. 200097 of 2017 against the risk. He submitted that the cheque in question was issued on 31.08.2012 and the insurer has chosen to cover the risk from 31.08.2012 itself. The insurer must have waited for enchasment of the cheque and thereafter it must have covered the risk. He submits that the insurer has covered the risk with effect from 31.08.2012 till 31.08.2013. It is deemed that the insurer has undertaken to cover the risk and therefore, it is liable to pay the compensation. He submits that the insurer can always proceed under the Central Motor Vehicle Rules, 1989 to recover the compensation in accordance with law. He relied upon the judgments of the Hon'ble Apex Court in the case of Oriental Insurance Co. Ltd. v. Inderjit Kaur and Others3 and in Deddappa and others v. Branch Manager, National Insurance Co. Ltd.4 and contended that until the insurer takes steps to intimate the insured about the dishonour of the cheque and also take steps to intimate officers of the concerned Regional 3 AIR 1998 SC 588 4 2008(1) TAC 417 (SC)
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NC: 2023:KHC-K:1252 MFA No. 200097 of 2017 Transport Office (RTO), the insurer is under continuing obligation to indemnify the owner against the risk in respect of the motor vehicle.
11. I have bestowed my anxious consideration to the arguments advanced by the learned counsel for the insurer as well as the learned counsel for the claimant.
12. As rightly contended by the learned counsel for the claimant, Section 146 of the M.V. Act casts an obligation on the owner of a motor vehicle to obtain a policy of insurance complying with the requirements of Chapter XI of the M.V. Act. It is not without a purpose, but is to ensure that no third party is put to the risk of proceeding against the owner of the vehicle. Section 64VB of the Act of 1938 also mandates that the insurer cannot assume the risk from the date prior to the date of receipt of the premium either by cash or through a cheque. Therefore, there is an obligation cast upon the insurer to ensure that prior to the policy of insurance being issued, the amount of premium is paid. In the case on hand, the
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NC: 2023:KHC-K:1252 MFA No. 200097 of 2017 period of insurance commenced from 31.08.2012 to 31.08.2013. A cheque for payment of the premium was issued by the insured to the insurer on 31.08.2012. No doubt, the insurer had reserved its right by proclaiming that the dishonour of premium cheque, would result in automatic cancellation of the policy ab initio. However, the insurer which was required to cover the risk only after receipt of the premium chose to cover the risk even before the premium was received. Therefore, once the cheque issued towards premium was dishonoured, the insurer was under a bounden duty to ensure that the insurer had immediate notice of such dishonour of cheque and appropriate Regional Transport Office is tipped off about the cancellation of policy of insurance so the authorities could take appropriate steps. In the present case, the dishonour of cheque was properly notified to the insured on 06.09.2012 while the accident happened on 05.09.2012. The notice of dishonour of cheque was received by the insurer on 06.09.2012. Therefore, the insurer could not have avoided its liability despite the fact
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NC: 2023:KHC-K:1252 MFA No. 200097 of 2017 that insurer took steps to intimate the owner as well as the RTO on 06.09.2012. The very same set of circumstances came up for consideration before this Court in MFA No.7043/2014, where after considering Section 64VB of the Insurance Act, it was held that the insurer had issued a policy of insurance to cover the vehicle without receiving the premium. Therefore, it was held that by virtue of Sections 147(5) and 149(1) of the Motor Vehicles Act, the insurer was liable to indemnify the third parties in respect of the risk which that policy covered and to satisfy award of compensation in respect thereof notwithstanding its entitlement to cancel the policy due to dishonour of cheque towards premium.
13. In the facts and circumstances of this case, the insurer had taken risk of issuing policy even before receipt of premium and before the insurer could cancel the policy of insurance, the accident happened. Thus, between the date of issuance of the policy till its cancellation in accordance with law, the insurer is deemed to be bound to
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NC: 2023:KHC-K:1252 MFA No. 200097 of 2017 satisfy the judgments and awards passed against the insured in respect of third party risks. Consequently, the judgment and award passed by the Tribunal fastening the liability on the insurer is just and proper and does not call for any interference. Hence, the appeal lacks merit and is accordingly dismissed.
14. It is open for the insurer to proceed against the owner to recover the compensation paid by it to the claimants in accordance with law and in the same proceedings.
Any amount in deposit is ordered to be transferred to the Tribunal for necessary orders.
Sd/-
JUDGE SMA/SRT LIST NO.: 1 SL NO.: 27 * Corrected vide Chamber order dated 19/07/2023