Karnataka High Court
The Oriental Insurance Company Limited vs Smt. Honnamma And Another on 21 January, 1998
Equivalent citations: 2000ACJ761, AIR1998KANT160, ILR1998KAR1776, 1998(2)KARLJ575, AIR 1998 KARNATAKA 160, (1998) ILR (KANT) 1776, (1998) 2 TAC 635, (2000) 1 ACJ 761, (1998) 3 CIVLJ 497
JUDGMENT
This appeal is filed by the Insurance Company to challenge the judgment and award dated 1-6-1994 in MVC No. 242 of 1990 passed by the District Judge and MACT, Karwar, whereunder a sum of Rs. 37,000/- together with interest 9% was awarded in favour of claimant-respondent 1 as against the total claim of Rs. 50,000/-.
2. I heard the learned Counsel for the appellant, Sri M. Sowri Raju, the learned Counsel for the contesting respondent 1, Smt. Preeti Dayananda and the learned Counsel appearing for the respondent 2-Owner, Sri M. Swayam Prakash.
3. The. facts of the case are interesting enough and are as hereunder:
That the respondent 2-Owner, had obtained cover note and policy in respect of his Car No. CNO 2727 on 3-3-1990 and as against the payment of premium of Rs. 128/- he had issued a cheque in favour of the appellant-Insurance Company for the like sum. That on the very day i.e., on 3-3-1990 at about 6.20 p.m. the non-party driver, one Ismail working under the respondent 2, owner had caused the accident on National Highway 17 at Muttalli Cross, Bhatkal Taluk, U.K. District resulting in death of one Biliyappa Naik, aged about 70 years, the husband of the respondent 1. That the respondent 1, the widow of the deceased Biliyappa Naik had filed a claim petition before the District Judge and MACT, Karwar (henceforth in brief as 'MACT') claiming a sum of Rs. 50,000/- under the Motor Vehicles Act. That the appellant on the one side and the respondent 2-Owner on the other had contested the claim of the respondent 1 before the MACT. The respondent 1-Claimant had adduced her side of the evidence in support of her claim and so also the appellant-Insurance Company had adduced its side of the evidence to deny the claim. Whereas the respondent 2-Owner did not choose to adduce any evidence from his side before the MACT.
3-A. That on appreciation of the evidence on record, both oral and documentary, the MACT had awarded a sum of Rs. 37,000/-as global compensation as against the claim of Rs. 50,000/- by the respondent 1.
4. Having been aggrieved with the impugned judgment and award, the appellant-Insurance Company is before this Court to challenge the same. As a matter of fact, the instant appeal by the Insurance Company is one point appeal, for what they had urged in the appeal memorandum is that as on the date of issue of the policy, on 3-3-1990, the respondent 2-Owner had issued a cheque, a'hd that, subsequently the said cheque came to be bounced and as such it could not be said that the premium was paid as against the issue of the policy by the appellant-Insurance Company and therefore, the insurance policy that came to be issued by the appellant-Insurance Company was void and therefore did not cover the risk to fasten the liability thereunder as against it.
5. The learned Counsel for the appellant, Sri M. Sown Raju while urging the said solitary ground submitted that bouncing of the cheque issued by the respondent 2-Owner was a subsequent event and whereas the accident in question had taken place on the very day and therefore according to him, it could not be argued by otherside that the risk was covered under the policy issued by the Insurance Company. In other words to say, the argument of Sri Sown Raju, is to the effect that without the premium being paid as on the date of issue of the policy as well as on the date of accident, the MACT had fallen into an error in fastening the liability on the appellant-Insurance Company also. According to him, the MACT would have fastened the liability only on the owner, the respondent 2 herein.
6. Yet another point Sri Sown Raju argued before me is that the respondent 2-Owner had paid the insurance premium of Rs. 128/- by a cheque that came to be dishonoured subsequently, only on 13-3-1990 but again suppressing the very fact of accident occurred in the hands of the non-party driver employed by him on the very day of issue of policy on 3-3-1993. According to him, the respondent 2-Owner was therefore guilty of suppression of material fact and therefore not entitled to be indemnified under the award.
7. On the other hand, the learned Counsel appearing for the respondent 1-Claimant, Smt. Preeti Dayananda, argued that no matter the cheque that came to be issued bounced subsequently, on 13-3-1990, the appellant-Insurance Company had issued a letter addressed to the respondent 2-Owner, Ex. R-5 stating therein that unless and until the amount under the cheque for Rs. 128/- was paid within 7 days from the date of the letter (date of letter dated 13-3-1990), the risk attached to the appellant-Insurance Company and the cover granted under the policy would stand cancelled and that in pursuance of the said letter Ex. R-5, the respondent 2-Owner very promptly had paid the sum under the cheque within the next two days on 15-3-1990. As it has been argued by her, I observed that the appellant-Insurance Company did say in so many words in Ex. R-5 that unless the amount under the cheque was not paid, the risk by the appellant-Insurance Company covered under the Insurance Company would stand cancelled. Hence, her submission is that in that said circumstances it is not available for the appellant-Insurance Company to argue against the Ex. R-5, for according to her, in the said Ex. P-5, the appellant-Insurance Company did confirm the covering of the risk under the policy if the sum of Rs. 128/- under the cheque was paid within 7 days. Incidentally, in support of her above submission she also cited before me a decision in Oriental Insurance Company Limited v Indrajit Kaur and Others , While taking me through the facts of the said reported case, she submitted that the facts of the case in the instant case in hand and the facts in the above reported case are almost the same. Therefore, she submitted that the instant appeal filed by the Insurance Company be dismissed and the order passed by the MACT be confirmed.
8. The learned Counsel for the respondent 2-Owner, Sri Swayam Prakash had supported the impugned judgment and award passed by the MACT. Of course, the reason is obvious that in passing the same, the MACT had fastened the liability also on the appellant-Insurance Company.
9. Before taking up their respective contentions put forth before me as above, it appears to me that it is relevant to examine what is provided for under Section 64-VB of the Insurance Act (henceforth in brief as the 'Insurance Act') in the matter of payment of insurance premium by way of cheque as it had been done by the respondent 2-Owner in the case in hand. The said provision of law in the 'Insurance Act' reads as follows:
"64-VB. 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 purposes of this section, in the case of risks 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 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".
10. From the above provision of law, in sub-section (2) of Section 64-VB of the Insurance Act, it is clear that for the purpose of the said section i.e., under Section 64-VB of the Insurance Act, the premium can be paid either in cash or by way of cheque by the insured as a guarantee payment and further more the cheque can as well be sent by poit. But it is to be noted that under sub-section (1) of Section 64-VB, the Insurance Company should not assume risk under a policy without the premium paid in advance; interestingly enough in the instant case the appellant-Insurance Company had assumed risk on itself by issue of proper cover note and an insurance policy. That being the position, it appears to me that it cannot be argued by the appellant-Insurance Company now that it is not liable to compensate the respondent 1-Claimant-third party under the policy.
11. Now I advert to the decision of the Hon'ble Supreme Court referred to above and very well by relied upon the learned Counsel for the contesting respondent 1-Claimant in detail as an interesting point had come up before me for consideration. I have gone through the decision of the Hon'ble Supreme Court in its entirety. Having done so, it also appears to me that the facts in the instant case in hand and the facts in the reported case are almost on the similar lines. To demonstrate that it is so I feel it proper to narrate succinctly the facts of the case particularly with reference to the sequence of events in the case in hand as well as in the reported case of the Hon'ble Supreme Court. They are as hereunder:
In the case in hand.--The issue of cover note and policy was on 3-3-1990. The cheque for Rs. 128/- towards premium as against the policy was issued by the respondent 2-Owner herein on 3-3-1990. At about 6.20 p.m. on the very day i.e., 3-3-1990, the accident had taken place resulting in the death of the husband of the respondent 1. The cheque subsequently bounced whereupon the appellant-Insurance Company addressed a letter to the respondent 2-Owner on 13-3-1990 calling upon to pay the said premium amount under the cheque within 7 days from that date. That the sum under the cheque was paid in cash immediately after two days therefrom on 15-3-1990 by the respondent 2-Owner.
Facts in the reported case.--That the bus met with an accident causing death of driver of a truck. The policy in respect of the bus was issued by the Insurance Company (also the appellant before the Supreme Court) on 30-11-1989. That the premium for the policy was paid by way of cheque which was later dishonoured. A letter stating that it had been dishonoured was sent by the Insurance Company on 21-3-1990 stating therein that the cheque had not been encashed and in the process the premium on the policy had not been received and therefore that the Insurance Company was not at risk. That the premium was paid in cash on 2-5-1990 and whereas the accident in question had taken place earlier to date on 19-4-1990.
12. From the above narrations, it is crystal clear that the facts vis-a-vis the sequence of events in the instant case in hand as well as in the reported case are almost similar. In the said reported case, the Hon'ble Supreme Court held that when policy was issued by the Insurance Company upon issue of a cheque towards the premium and when the cheque had bounced subsequently, the Insurance Company is liable to indemnify the third party in respect of the liability covered by the policy since the policy issued remained in force without the cancellation of the same for default in the payment of the premium on bouncing of the cheque.
13. In Paras 10 and 11 of the above judgment, the Hon'ble Court held as hereunder:
"10. 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.
11. 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".
13-A. The learned Counsel for the appellant-Insurance Company tried to distinguish the above decision on the short ground that in the instant case the accident took place on the very day of issue of cover note and the policy, whereas in the reported case the accident in question had taken place nearly 5 months after the issue of policy. I do not think that the marginal difference as to the facts have any bearing as long as the sequence of events as culled out by me in Para 10 almost go similar.
14. Hence, I am of the view that the above reported decision of the Hon'ble Supreme Court relied upon by the Counsel for the respondent 1-Claimant fully covers the case in hand. That being the position, I have no other go than to follow the law laid down by the Apex Court in deciding the matter before me.
15. Incidentally, I should not miss yet another point, the learned Counsel for the appellant, Sri Sowri Raju argued before me. The said point is that the respondent 2-Owner had paid the insurance premium of Rs. 128/- by cash on 15-3-1990 after the cheque issued by him (as against the premium) on 3-3-1990, came to be bounced, by suppressing the material fact of the accident caused by his driver by use of the car on 3-3-1990 resulting in the death of the husband of the respondent 1-Claimant. To this limb of the argument, I only say that this was not at all the issue before the MACT. It is equally not the issue either before this Court; nevertheless, I do find some arguable point in that argument of his. In this regard I should point out here that when such an issue was raised and argued before the Hon'ble Supreme Court in the above reported case, the Hon'ble Supreme Court did not choose to express any opinion as to the entitlement of the Insurance Company to avoid or cancel the insurance policy issued by it earlier, in view of the provision of Sections 147(5) and 149(1) of the Motor Vehicles Act, 1988 to indemnify the liability to the third parties and further in view of the fact of issue of policy on the Insurance Company covering the risk despite the bar created under Section 64-VB of the Insurance Act. The Hon'ble Supreme Court did so while discussing that aspect of the case before it in Para 10 of its judgment quoted in Para 10 hereinabove. By taking the que from the above reported decision of the Hon'ble Supreme Court, I do not want to express any opinion on the said issue raised before me, particularly when the same was not ever raised before the MACT and that the same was arised before me for the first time.
16. In that view of the matter, I do not find any merit in the appeal. The appeal is therefore liable to be dismissed.
17. Therefore, it is just and proper for the appellant-Insurance Company to indemnify to compensate the respondent 1-Claimant by paying the entire sum together with interest at 9% in full satisfaction of the impugned award passed by the MACT. All the more in my considered view liberty should be given to the appellant-Insurance Company to initiate appropriate proceedings before the proper Court at their discretion, if the appellant-Insurance Company were to feel that in satisfying the said award, it has got a cause of action under the 'Insurance Act' or under the Motor Vehicles Act or in any other law for that matter, for I have accepted the argument of its learned Counsel that in paying insurance premium in cash on 15-3-1990 on bouncing of his cheque, the respondent 2-Owner had suppressed the material fact that his vehicle i.e., car bearing registration No. CNO 2727 had already met with an accident in the hands of his driver resulting in the death of the husband of the respondent 1-Claimant, much earlier on 3-3-1990. In the facts and circumstances, it cannot be ruled out that the respondent 2-Owner had suppressed the same with ulterior motive to fasten the appellant-Insurance Company with the liability under an award in a future claim by the L.Rs or L.Rs of the deceased in respect of the accident in question: in all probability a neat operation in silence to trap; of course, it is my guess-work.
18. The above liberty to the appellant-Insurance Company, I felt it appropriate to grant for the reason firstly that the Hon'ble Supreme Court on the above reported case did not choose to express any opinion on the entitlement of the Insurance Company to avoid the liability for the reason that the cheque issued in payment of premium thereon came to be dishonoured and secondly that by following the said decision of the Hon'ble Supreme Court, I did not express any opinion on that point either as the same was not an issue either before the MACT or before this Court. However, it appears to me that the appellant-Insurance Company nevertheless cannot proceed against the respondent 2 with the liberty herein without satisfying the award as the Hon'ble Supreme Court in an unambiguous term held in the above reported case that the Insurance Company is bound to compensate the third party-Claimant with the covering of the third party risk under the policy already issued by it.
19. At this stage, the learned Counsel appearing for the contesting respondent 1-Claimant submitted that her client is in her death-bed due to some ailment and that therefore, the sum awarded by the MACT is very badly needed for the purpose of her treatment and therefore she prayed that this Court to direct the appellant-Insurance Company to deposit the sum under the award as expeditiously as possible, preferably within a period of one week. I do understand the good intention in such a special request made by the learned Counsel for the appellant. That apart, I can also understand that the respondent 1-Claimant should be in her advanced age.
20. In the result, I pass the following:
ORDER
(i) The appeal fails and accordingly dismissed without there being any order as to cost.
(ii) The appellant-Insurance Company is ordered to pay the entire amount together with interest worked out at the rate of 9% and the cost as awarded by the MACT within a period of two weeks from this date after giving deduction for any amount paid by it either before this Court or before MACT consequent upon passing of the impugned Judgment or award.
(iii) The liberty is given to appellant-Insurance Company to proceed against the respondent 2-Owner at their discretion if it has got actionable claim under any law in the above circumstances of the case but only on satisfying the impugned award herein directed to be satisfied within a week.
(iv) The Registry is directed to supply a carbon copy or xerox copy of the order herein passed forthwith to the learned Counsel for the appellant-Insurance Company to facilitate him to expedite the deposit of the sum under the award in view of certain urgency in that direction was expressed by the learned Counsel for the respondent 1-Claimant. The Registry is further directed to return the L.C.R. to the MACT on priority basis after transfer of any amount in deposit before this Court, made by the appellant-Insurance Company in the appeal, to the MACT.