Jammu & Kashmir High Court
Oriental Insurance Co. Ltd. vs Mst. Misra And Ors. on 14 February, 2005
Equivalent citations: 2005(3)JKJ50
JUDGMENT Hakim Imtiyaz Hussain, J.
1. This appeal under Section 173 of Motor Vehicles Act is directed against the award dated 30.04.2003 passed by Motor Accident Claims Tribunal, Srinagar (for short the Tribunal) in a claim petition No. 49 Claim of 1999 titled Mst. Misra and others v. Diyan Singh and others.
2. Mst. Misra widow of Gh. Mohd. Wani and Abida Nasreen, Tahira Bano, Manzoor Ahmad Wani, children of Gh. Mohd. Wani residents of Manasbal, Sumbal, Sonawari (at present Mehjoor Nagar Srinagar) filed a claim petition before the Tribunal on 24.03.1999 stating therein that Gh. Mohd. Wani died in a road traffic accident on 5.02.1999 at Pandrethan. The accident took place due to the rash and negligent driving of Diyan Singh - respondent No. 1 before the Tribunal who was driving a bus bearing registration No. JK02 4303 from Srinagar to Jammu. When the bus reached M.P.Check Post Pandrethan it hit cyclist Gh. Mohd. Wani who sustained fatal injuries and succumbed to the same on spot.
3. The Tribunal framed as many as four issues in the case which were as under:
1. "Whether the driver of the offending vehicle, respondent No. 1 was driving the vehicle bearing registration No. 4303-JK02 (Bus) on 05.02.1999, rashly and negligently and the vehicle hit the deceased who was coming from the opposite direction on a bicycle and as a result of injuries caused by the vehicle he succumbed to injuries ? O.P.P.
2. In case issue No. 1 is proved in affirmative to what amount of compensation are the petitioners entitled to, from whom and in what proportion ? O.P.P 2-A Whether the claim petition against the respondent No. 3 is not maintainable as the offending vehicle alleged to have caused the accident was not insured with the respondent No. 3 on the alleged date of accident ?O.P.R-3
3. Whether the driver of the offending vehicle was not holding a valid D/L at the time of occurrence, if so, what is the effect thereof? O.P.R-3.
4. Relief."
4. After the conclusion of the proceedings the Tribunal found the legal heirs of late Gh. Mohd. Wani entitled to a compensation of Rs. 4,16,040/-and therefore, passed an award for the said amount in their favour alongwith 9% interest from the date of application till its final realisation. The Tribunal directed the present appellant - Company to pay the amount. The Tribunal observed as under:
"Viewed thus the petitioners are held entitled to receive an amount of Rs. 4,16,040/- (Rupees Four Lakhs Sixteen thousand and fourty only/-) in all under different heads as enumerated hereto-fore with 9% interest from the date of application till its final realisation minus interim relief of Rs. 50,000/- if the petitioners have received the same. The petitioner No. 1 in addition to her aforementioned share is also entitled to receive an amount of Rs. 5,000/- (Rupees five thousand only/-) under head loss of consortium with 9% interest from the date of application till its final realisation.
The court fee shall be the first charge on the awarded amount. Copy of the award be forwarded to respondent No. 3 for immediate compliance. The Criminal file is sent down to the concerned court for proceeding with the same in accordance with the law. File after due completion be consigned to records."
5. Aggrieved of the said order of compensation the Oriental Insurance Company has filed the present appeal on the ground that the order impugned is not sustainable in the eye of law.
6. Heard. Considered. The only plea raised in the memorandum of appeal and vehemently argued by the learned counsel for the appellant before this Court was that the Insurance Company was not liable to pay the compensation amount on the ground that the vehicle in question was not duly registered with the appellant - Insurance Company. According to the learned counsel the owner of the vehicle had applied for the insurance of the vehicle and had paid a cheque as premium for the same but when the cheque was sent for encashment it got bounced due to which the Insurance Company did not receive the due premium from the owner of the vehicle, as such, there was no valid insurance for the vehicle.
7. The fact that the owner had insured the vehicle and that the Insurance Company had issued a policy to that effect is, however, not denied. What is denied is that the Insurance Company could not get the premium amount of the insurance policy as the cheque which had been tendered by the owner of the vehicle for such premium could not be encashed.
8. The Tribunal has raised a specific issue as issue No. 2-A on it and has discussed this aspect of the case in detail. The Tribunal has come to the conclusion that notwithstanding the fact that the Insurance Company could not get the premium for the Insurance Policy the interest of third party will remain uneffected. According to the Tribunal the dispute is inter se between the insurer and insured and third party rights cannot be taken away by the same. The Tribunal has further observed that at the most the insurer can seek legal remedy against the insured. Considering all these aspects the Tribunal decided the issue against the Insurance Company and in favour of the petitioners.
9. On going through the findings of the Tribunal on this issue I find that the Tribunal has dealt with the issue in detail and has come to a right conclusion that bouncing of the cheque will not effect the third party interests in the matter. The Tribunal has in this behalf referred to the Apex Court authority reported as National Insurance Company Ltd. v. Seema Malhotra, .
10. Requirement to obtain an Insurance Policy in respect of motor vehicles which ply in public places is provided by Section 146 of the Motor Vehicle Act. Section 147 of the said Act provides the requirements of policies and the limits of liability. When a valid insurance policy is issued under the Act conforming to the requirements of Section 147, the insurer, issuing the policy, is liable to indemnify 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. Under Section 149(1) of the Act, insurer is under a duty to satisfy judgments and awards against persons insured in respect of third party rights. It provides:-
"149. Duty of insurers 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 S. 147 in favour of the person by whom a policy has been effected, judgment or award in respect of any such liability as it required to be covered by the 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 thereunder, 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 judgments."
11. The question whether an insurer can avoid the liability to pay the compensation amount to a third party in respect of a motor accident claim on the ground that he had not received the premium amount due to issue the insurance policy came under consideration before the Supreme Court in Oriental Insurance Co. Ltd. v. Inderjit Kour AIR 1998 SC 589. The Apex Court held:- (para 7 & 8) "7. We have therefore, this position. Despite the bar created by Section 64VB of the Insurance Act, the appellant, an authorised insurer, issued a policy of insurance to cover the bus without receiving the premium therefore. 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.
8. 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 the behalf lay against the insured."
12. Rights of third party in such cases was again considered by the Apex court in New India Assurance Co. Ltd v. Rula and others , where the court held that the third party is not concerned and does not come into the picture at all in the matter of payment of premium. The court held:-(para 9) "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 Court further observed: (para 11) "The subsequent cancellation of the Insured 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 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 Insurance Policy on the ground of non-payment of premium would not affect the rights already accrued in favour of the third party."
13. In National Insurance Co. Ltd. u. Seema Malhotra , the Supreme Court had an occasion to consider the issue again. It was a case from this State. The insured had entered into an insurance contract with the Insurance Company on 21.12.1993, by insuring his Maruti Car. He issued a cheque for the premium amount but before the company could collect the amount of the cheque, the vehicle met with an accident in which the insured got killed on 31.12.1993. On 10.1.1994 i.e. after the accident took place, the concerned bank sent an intimation to the insurance company that the cheque was dishonoured. On receiving the intimation the company cancelled the Insurance Policy with immediate effect. The legal heirs of the deceased made a claim for the loss of the vehicle before the State Consumer Protection Commission. The Commission rejected the claim on the ground that the company had not received the premium for the insurance contract. Division Bench of this Court, on appeal, reversed the finding of the Commission holding that the Company was still liable because it chose to cancel the policy with effect from the date of bouncing of the cheque, whereas the liability was incurred prior to it. The Apex court on Special Leave Petition reversed the order of the High Court on the ground that the insurer has no liability to the insured unless and until the premium payable is received by insurer. The court referred to the various provisions of the Contract Act and held:-
15. Sections 51,52 and 54 of the Indian Contract Act can profitably be referred to for the purpose of deciding the point. They are subsumed under the sub-title 'performance of reciprocal promises" in the said Act. Section 1 deals with a contract concerning reciprocal promises to be simultaneously performed and ink such a contract the promise is absolved from performing his promise unless the promisor is ready or willing to perform his part of the promise. Section 52 says that where the order in which reciprocal promises are to be performed has not been expressly provided in the contract such promise shall be performed in that order which the nature of the transaction warrants it. Illustration (b) given to Section 52 highlights the utility of the provision. That illustration is as follows: A and B contract that A shall make over his stock-in-trade to security for the payment for the money. A's promise need not be performed until the security is given, for, the nature of transaction requires that A should have security before he delivers up his stock.
16. Section 54 of the Contract Act is to be read in that background. It is extracted below:
"When a contract consists of reciprocal promises, such that one of them cannot be performed, or that its performance cannot be claimed till the other has been performed, and the promisor of the promise last mentioned fails to perform it, such promisor cannot claim the performance of the reciprocal promise, and must make compensation to the other party to the contract for any loss which such other party may sustain by the non-performance of the contract."
17. In a contract of insurance when an insurer 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, insurer is entitled to get the money back.
20. However, if the insured makes up the premium even after the cheque was dishonoured but before the date of accident. It would be a different case as payment of consideration can be treated as paid in the order in which the nature of transaction required it. As such an even did not happen in this case the insurance company is legally justified in refusing to pay the amount claimed by the respondents."
14. The Apex Court has thus laid down in express terms that where the insured fails to pay the premium promised, the insurer need not perform his part of the promise.
The Tribunal has referred to the said authority of the Apex Court but found that notwithstanding the said authority the interest of the third party will remain unaffected by the bouncing of the cheque.
15. I find that the Tribunal has not properly appreciated the facts and circumstances of the present case.
In the present case admittedly the insurance contract between the insured and the insurer in respect of the vehicle in question was entered into on 22.5.1998. The insured had given a cheque for the premium amount but the same got bounced due to which the contract was cancelled by the Company from inception on 15.7.1998. Vide letter dated 15.7.1998 the insured was informed that 'the Company shall not be liable for any loss/damage as such'. The accident took place on 5.2.1999. There is no material on record to show that during this period the insured had either paid the premium or the policy cancelled had been revived by the Company or that the insured had entered into fresh insurance contract with the insurer. Thus, on 05.02.1999 when the accident took place there was no insurance contract between the insured and the insurer as such, the insurer-Company was not bound to satisfy the award.
16. Liability of a Insurance Company to satisfy judgment and award passed against an owner of the vehicle arises only when there is an insurance contract between the Company and the owner. If there is no such contract the Company cannot be held to indemnify third party for the claim on the ground that earlier the Company or the owner had entered into any such contract which had been revoked or cancelled by the Company much before the liability arose.
17. Under these circumstances I find that the Tribunal has not taken the correct view in the matter and that its order directing the appellant-Company to pay the award money to the claimants cannot stand. The order of the Tribunal to that extent is set aside. The amount money shall be paid to the claimants by the owner of the vehicle.
Order accordingly.