Madhya Pradesh High Court
M.P. Electricity Board vs Smt. Saroj Bai Soni And Ors. on 6 December, 1996
Equivalent citations: 1997(2)MPLJ698
ORDER S.K. Dubey, J.
1. This is an appeal Under Section 173 of the Motor Vehicles Act, 1988 (for short 'the Act') against the award dated 30-6-1994 passed in M. V. Case No. 150/94, by the XIth Additional Motor Accidents Claims Tribunal, Jabalpur.
2. Facts giving rise to this appeal are these. Rajendra Kumar, while he was going on his scooter No. MPK 6822 was dashed by a truck No. CPJ 8795 owned by the appellant, Madhya Pradesh Electricity Board, insured by respondent No. 6 and driven by Mahendra Singh, driver, during the course of his employment with the appellant. Respondent No. 1, the widow and respondents Nos. 2 to 5, filed an application for compensation for the death of Rajendra Kumar on 4-4-1988.
3. The owner, driver and insurer contested the application for compensation. The insurer disowned the liability on the ground that though the truck was insured by Insurance Policy (Ex. D. 1), which covered the risk from 1-1-1988 to 31-12-1988, the payment of premium was guaranteed by the appellant vide Bank guarantee dated 29-12-1987. The amount of premium was to be paid by February, 1988; but the appellant paid the premium by Cheque No. 206388 which on encashment was deposited in the account of the Company on 2-7-1988 of which the Bank issued a certificate (Ex. D. 3). It was also contended that as the premium was not paid and received by the insurer by February, 1988, therefore, in view of Section 64VB of the Insurance Act, 1938, the Tribunal on the evidence adduced by the parties after holding that the accident was caused due to rash and negligent driving of the driver of the truck, awarded the compensation of Rs. 1,18,000/- with interest thereon at the rate of 12 percent per annum from the date of application, that is, 15-6-1988, till payment, which was ordered to be paid by the owner and driver jointly or severally. The insurer was not found liable to pay the compensation or to indemnify the insured as on the date of the accident risk was not assumed because of non-payment of premium.
4. Learned counsel for the appellant, contended that admittedly a continuing bank guarantee was issued in favour of the insurer to the extent of Rs. 10 lacs to secure the payment of premium of various vehicles of the Board and other risks. The premium against the insurance policy (Ex. D.1) issued for truck No. CPJ 8795 was also secured which covered the risk from 1-1-1988 to 31-12-1988. Therefore, when the payment of premium was guaranteed and the insurer had accepted the bank guarantee, in case of default of the premium within the time specified the amount of premium could have been secured by encashment of the bank guarantee. Therefore, the insurer cannot avoid the liability to pay the compensation or to indemnify the appellant Board. A Division Bench decision of Karnataka High Court in United India Insurance Co. v. Murugan alias Krishnan, AIR 1994 Kant. 192 was pressed into service.
5. Learned counsel for respondent No. 6, submitted that effect of Section 64VB of the Insurance Act, 1938 is to secure advance payment of premium by Insurance Company before the assumption of risk. It places a prohibition upon an insurer that unless the payment of premium is received by the Company in advance or the same is guaranteed to be paid by such person in such manner and within such time as may be prescribed, there can be no assumption of risk on the part of the insurer. Therefore, in the case, the risk would only be assumed when the payment of premium was received, till then there was no concluded contract of insurance. Counsel cited the decisions, United India Insurance Co. v. Ayab Mohammad, 1991 ACJ SC 650; Ramcharan Goyal v. United India Insurance Co., 1996 ACJ 141 M.P.; Oriental Insurance Co. v. Syaribai, 1995 ACJ 663; Karnatak and Oriental Fire and General Insurance Co. Ltd. v. Panvel Industrial Co-operative Estates Ltd., 1992 ACJ 503 Bom.
6. The question for our consideration is whether the Insurance Company in view of Section 64VB could not have assumed the risk when the payment of premium was guaranteed by a continuing bank guarantee. Before we deal with the question, it would be appropriate to refer Section 64VB of the Insurance Act, 1938 and also Rule 58 of the Insurance Rules, 1939 which we quote.
"64VB. No risk to be assumed unless premium is received in advance. -
(1) No insurer shall assume any risk in India in respect of any insurance business on which premium is not ordinarily payable outside India unless and until the premium payable is received by him or is guaranteed to be paid by such person in such manner and within such time as may be prescribed or unless and until deposit of such amount as may be prescribed, is made in advance in the prescribed manner.
(2) For the purpose of this section, in the case of risk for which premium can be ascertained in advance, the risk may be assumed not earlier than the date on which the premium has been paid in cash or by cheque to the insurer.
Explanation. - Where the premium is tendered by postal money order or cheque sent by post, the risk may be assumed on the date on which the money order is booked or the cheque is posted, as the case may be.
(3) Any refund of premium which may become due to an insured on account of the cancellation of a policy or alteration in its terms and conditions or otherwise shall be paid by the insurer directly to the insured by a crossed or order cheque or by postal money order and a proper receipt shall be obtained by the insurer from the insured, and such refund shall in no case be credited to the account of the agent.
(4) Where an insurance agent collects a premium on a policy of insurance on behalf of an insurer, he shall deposit with, or despatch by post to, the insurer, the premium so collected in full without deduction of his commission within twenty-four hours of the collection excluding bank and postal holidays.
(5) The Central Government may, by rules, relax the requirements of Sub-section (1) in respect of particular categories of insurance policies."
"Rule 58. Advance payment of premiums. - For the purposes of Sub-section (1) of Section 64VB of the Act, a risk in respect of a policy may be assumed before the premium payable in respect thereof is received :
(i) if the entire amount of the premium is guaranteed to be paid by a Banking Company before the end of the Calendar month next succeeding to the month in which the risk is assumed, if the premium due is not paid by the insured before that date;
(ii) if an advance deposit is made with the insurer to the credit of the insured sufficient to cover the payment of the entire amount of the premium together with the premium, if any, due from the insured in respect of any other risk already assumed against such deposit, such deposit being agreed to be adjusted towards the premium before the end of the month next succeeding to the month in which the risk is assumed, if the premium due is not paid by the insured before that date."
7. A bare look at Section 64VB shows that its object is to assume the risk only on receipt of payment of premium. Sub-section (1) prescribes the mode of payment of premium which speaks that no insurer shall assume any risk in India in respect of any insurance business on which premium is not ordinarily payable outside India unless and until the premium payable is received by him or is guaranteed to be paid by such person in such manner and within such time as may be prescribed or unless and until deposit of such amount as may be prescribed is made in advance in the prescribed manner.
8. In the present case the insurer admitted the issuance of policy-Ex. D.1 as the payment of premium was guaranteed by the Bank guarantee, which was to be paid by February, 1988 and was not paid within the said time. In the circumstances, if premium was not paid within due date, as the payment of premium was guaranteed, the insurer Company could have enforced the Bank guarantee and recovered the premium which was the object of obtaining the guarantee but that was not done and the late payment was accepted without any objection or intimating that the risk would be assumed only from the date of receipt of premium. Therefore, failure on the part of the insurer to enforce the Bank guarantee for recovery of premium would not give any benefit or right of defence to the insurer to contend that risk was not assumed or the policy stood repudiated. To say so, we take support from the decision of Karnataka High Court in case of United India Insurance Co. v. Murugan (supra).
9. Besides, Rule 58 reveals that entire amount of premium as guaranteed to be paid, as in the present case is, the risk in respect of the policy could be assumed by the Insurance Company before the payment of premium in respect thereof is received. Therefore, also the insurer cannot contend that the risk was not assumed as the amount of premium was not paid in the manner and time prescribed. In fact it was the lapse on the part of the insurer not to enforce the Bank guarantee for the recovery of the premium amount which would not enure to the benefit of the insurer to repudiate the policy particularly when the premium was received late to assume the risk for the period commencing which is contained in the policy.
10. The decisions relied by the learned counsel for insurer, in our opinion, are of no help and are distinguishable on facts. The said cases do not relate to the assumption of risk by the insurer if premium is guaranteed to be paid by the Bank guarantee. The cases relate to the payment of premium by cheque which were dishonoured. Therefore, it was held in those cases that cheque had bounced hence in the absence of the payment of premium the cover note of policy issued became ineffective.
11. As an upshot, the respondent No. 6 is directed to deposit the compensation with interest thereon at the rate of 12 percent per annum from the date of the application till deposit less the amount already deposited, within a period of two months from the date of supply of certified copy failing which the amount shall carry interest at the rate of 15 percent per annum. The amount deposited by the appellant, in view of the proviso to Section 173 shall be reimbursed by the respondent No. 6. On deposit, the Tribunal shall disburse the amount to the respondents Nos. 1 to 5, keeping in mind the guidelines laid down by the Supreme Court in General Manager, Kerala State Road Transport Corporation v. Susamma Thomas, 1994 MPLJ 520 (SC) = AIR 1994 SC 1632 and Lilaben Udesing Gohel v. Oriental Insurance Co., (1996) 3 SCC 608.
12. Accordingly the appeal is allowed with no order as to costs.