Madhya Pradesh High Court
Sunder Lal vs Haider Ali And Ors. on 19 August, 1996
Equivalent citations: 1998ACJ35
JUDGMENT R.D. Shukla, J.
1. This order shall dispose of M.A. Nos. 38 and 133 of 1992, Nos. 471 and 472 of 1991 as all the four appeals arise out of judgment and award dated 27.9.1991 of IVth Motor Accidents Claims Tribunal, Indore, passed in Claim Case Nos. 2 and 3 of 1987, whereby the claimant Haider Ali has been awarded a total compensation of Rs. 24,500/- for sustaining injuries in a motor accident on 13.7.1986 and Hussaini has been awarded a compensation of Rs. 10,500/- for sustaining injuries in the same accident.
2. The brief history of the case is that Haider Ali and Hussaini were travelling on a scooter. Haider Ali was driving it while Hussaini was a pillion rider. They met with an accident. Motor vehicle No. MBI 9212 was coming from opposite direction. The same was being driven rashly and negligently. It dashed against the scooter, and resulted in injuries to Haider Ali and Hussaini. Both of them filed separate claim petitions (Haider Ali filed Claim Case No. 2 of 1987 and Hussaini filed Claim Case No. 3 of 1987) for compensation. The learned Tribunal awarded compensation as above with a direction that the insurance company is not liable for making payments. The owner of the vehicle on the date of accident, i.e., Sunder Lai was directed to pay the compensation. Hence, these four appeals. Two appeals (M.A. Nos. 471 and 472 of 1991) have been filed by both the claimants with a prayer that the insurance company be directed to make payment of compensation on behalf of the insured (owner of the vehicle). M.A. Nos. 38 and 133 of 1992 have been filed by owner of the vehicle with the same relief.
3. The facts leading to controversy are as follows:
Earlier Jagdish Prasad Mukati was the owner of vehicle (Matador) No. MBI 9212 and the vehicle was earlier insured with the insurance company, i.e., respondent No. 3 herein. The same was renewed on 14.9.1985 as Jagdish had issued a cheque bearing No. 379123 of Rs. 1,539/- drawn on Cooperative Bank, Rau. The insurance company issued certificate of insurance on the basis of that cheque and covered the risk beginning from 14.9.85 to 13.9.1986. This vehicle was transferred to Sunder Lai on 22.2.1986. Sunder Lal, on the basis of certificate issued in favour of Jagdish Mukati, approached insurance company for issuance of transfer certificate of the policy. The same was done on an extra premium of Rs. 5/- and a certificate Exh. D/4 was issued whereby Sunder Lal Devi Lal Sahu was taken to be the insured and the date of expiry of insurance policy was accepted to be 13.9.1986. The cheque issued by Jagdish Prasad was dishonoured on 14.10.1985. The insurance company sent the information to Jagdish Prasad Mukati on 25.10.1985. It appears no evidence had been adduced as to whether the notice was served on Jagdish.
The insurance company again issued a notice to Jagdish Prasad Mukati on 28.11.1985 vide Exh. D/6 and disclaimed the insurance of the vehicle. Similar letters were issued to the present owner of the vehicle Sunder Lal on 26.9.1986 vide Exh. D/7 (after the accident). On the basis of above facts insurance company, inter alia, pleaded that they are not bound to make good the loss as insurance was obtained on misrepresentation of facts. Drawer of the cheque Jagdish Prasad Mukati had special knowledge about the fact of absence of credit in his favour with the Cooperative Bank and, therefore, the insurance was ineffective and void.
4. As against it the owner of the vehicle submitted that insurance company endorsed the transfer and issued a certificate in the name of the owner of the vehicle. The information as to non-payment was given after the accident and, therefore, the insurance company is bound to make good the loss.
5. The contention of the insurance company found favour before the learned Tribunal, who vide impugned judgment and award directed the owner of the vehicle to make payment of compensation. Hence, these appeals.
6. The contention of the learned Counsel for the appellant, i.e., owner of the vehicle as well as claimants is that the owner of the vehicle (Sunder Lai here) was a bona fide transferee of the vehicle with notice to insurance company and since the insurance company has accepted the transfer and issued fresh certificate, therefore, they are bound to make good the loss. It has further been submitted that if any misrepresentation has been made by Jagdish Prasad Mukati, then the insurance company has got a remedy against Jagdish Prasad Mukati and not against the appellant (Sunder Lal, owner of the vehicle).
As against it, learned Counsel for the respondent insurance company has submitted that since the contract was void from the very inception, the insurance company was not bound to make payment. Learned counsel, thereafter, referred to a case of the hon'ble Supreme Court in United India Insurance Co. Ltd. v. Ayeb Mohammed 1991 ACJ 650 (SC), in support of his contention.
7. What comes out in the case is that Jagdish Prasad Mukati issued a cheque with no balance in his account. He had special knowledge about the balance in his favour. Thus he has obtained insurance certificate on the basis of misrepresentation of the fact about the existence of balance in his favour with the bank concerned. Such contract would be voidable at the option of the other party, i.e., insurance company here.
But, so far as Sunder Lal is concerned, he is a bona fide purchaser with consideration to Jagdish Prasad Mukati (there is no dispute about it) and that he produced certificate before the insurance company for transfer. The same was transferred in his favour and a new certificate in his name vide Exh. D/4 was issued. Thus, what comes out is that there was new contract between insurance company and Sunder Lai with respect to the coverage of third party risk. Though it is true that Jagdish Prasad Mukati who has committed misrepresentation, could not claim any right on the basis of policy so obtained, but here in this case a third party comes in, who bona fide purchased the vehicle, brings it to the notice of insurance company. Insurance company after having considered the request of the transferee (Sunder Lal here) issued a new certificate after charging nominal fee of Rs. 5/- for transfer. Sunder Lai here could not have known as to whether there has been any misrepresentation or fraud committed by Jagdish Prasad Mukati. He not only believed Jagdish Prasad Mukati, but further believed insurance company who issued a new certificate. He acted on this belief and remained quiet and happy taking it to be that insurance company shall pay the compensation, if any such exigency arises. Now, therefore, after the accident insurance company cannot be allowed to say that the transfer policy in favour of Sunder Lai was illegal. The insurance company has a remedy against Jagdish Prasad Mukati, who on misrepresentation and fraud obtained a certificate, but not against Sunder Lal. So far as Sunder Lai is concerned he has got a right to force the company for making payment of compensation. In the case referred by learned Counsel for the insurance company, the person who committed misrepresentation was itself a party in a claim petition and that person/party was to be compensated, which has been denied by Lordships of the Supreme Court. Here the facts are different. The bona fide transferee of the vehicle acted in good faith by bringing it to the notice of the insurance company who after charging premium of Rs. 5/-accepted the transfer and issued new transfer certificate. Thus, it was a new contract between him and the insurance company, which insurance company is bound to comply.
8. It may further be observed that the insurance company is entitled to file suit for the recovery of the amount against Jagdish Prasad Mukati who has committed misrepresentation and fraud by issuing cheque without having any balance with the bank but they are bound to make payment of compensation, so far as these two claimants are concerned.
The insurance company may claim condonation of delay as they were prosecuting the case before the Tribunal and thereafter in the High Court. If any such application is filed the court concerned shall take into consideration this fact for grant of extension of limitation if prayed for. However, Jagdish Prasad Mukati would be free to raise defence and objection available to him under the law including rebuttal of fact of alleged misrepresentation and fraud.
9. As a result, all the four appeals succeed. The insurance company is made liable to pay compensation, as awarded by the learned Tribunal. In the facts and circumstances, parties shall bear their own costs.