Calcutta High Court (Appellete Side)
Smt. Sova Dey & Ors vs National Insurance Company Ltd. & Anr on 6 February, 2026
1
2026:CHC-AS:208
IN THE HIGH COURT AT CALCUTTA
Civil Appellate Jurisdiction
Appellate Side
Present:
The Hon'ble Justice Biswaroop Chowdhury
F.M.A. 1442 of 2014
With
IA NO: CAN 1 of 2013 (Old No: CAN 7906 of 2013)
CAN 2 of 2016 (Old No: CAN 7428 of 2016)
SMT. SOVA DEY & ORS.
VERSUS
NATIONAL INSURANCE COMPANY LTD. & ANR.
For the appellants: Mr. Krishanu Banik, Adv.
Mr. Tathagata Banik, Adv.
For the respondent/insurance
company: Mr. Rajesh Singh, Adv. Last Heard on: January 27, 2026 Judgment on: February 06, 2026 Biswaroop Chowdhury,J:
The Appellants before this Court were the claimants in a case under Section 166 of the Motor Vehicles Act 1988 and is aggrieved by the Order dated 2nd day of November 2011 passed by Learned Additional District Judge 1st 2 2026:CHC-AS:208 Court Barasat North 24 Parganas in Misc Case No-1 of 2010 arising out of MAC case No-72/518 of 2009/2007.
The facts of the case in brief is that on 08-11-2003 at about 13.20 hours, the offending vehicle bearing No. WB-11A/3928 (Bus) which was proceeding along Kona Express Way towards Howrah side with a terrific high speed in a most rash and negligent manner endangering human life and safety to others, without blowing any horn, thereby disobeying and violating all traffic rules and regulations and when the said offending vehicle came near Sundarpara More under Jagachha Police Station directly dashed an Ambassador Car as a result of which the victim Kamakshya Dey, driver of the said Ambassador Car, got severe injuries on his person and the victim was removed to Howrah State General Hospital, where he was declared brought dead by the attending doctors of the said Hospital.
Most rash and negligent driving on the part of the driver of the said offending vehicle bearing No-WB-11A/3928 (Bus) was sole cause of the pathetic accident. Jagacha Police Station Started a criminal case against the driver of the said offending vehicle u/s 279/338/427/304A IPC.
The victim possessed a good and sound health at the time of accident and was maintaining his family with the amount he was earning. Due to the pathetic accident his whole family has been suffering much financially and also from mental pain and agony and they lost his reliable support and dependency 3 2026:CHC-AS:208 forever and they are deprived of the love and affection. This pathetic accident has forced them to lead uncertain lives without a source of income.
The Learned Trial Court by Judgment and Award dated 23rd day of July 2009 was pleased to dispose the claim case by observing and directing as follows:
„It is accordingly ordered that the case is allowed ex-parte against O.P. No-1 and on contest against O.P. No.-2 but without costs.
The claimant do get an award of Rs. 2,73,500/- together with interest thereon @6% P.A. from 27-03-2007 till payment.
The O.P. No. 2 is directed to issue an A/C payee cheques in respect of the aforesaid amount in favour of the claimant within 30 days from date, failing which the claimant shall have liberty to get the award executed through this tribunal.
On receipt of the cheque the same shall be made over to the claimant on payment of deficit court fees."
Pursuant to the Judgment and Award passed by the Learned Trial Court no appeal was filed by the Respondent no-1 National Insurance Company Ltd, and no application for execution of award was filed by the appellants/claimants till 02-11-2011.4
2026:CHC-AS:208 By Order dated 02-11-2011 the Learned Trial Court in Misc Case No- 1/10 was pleased to vary the Judgment and Award dated 23-07-2009 by observing and directing as follows:
„Upon considering the documents filed by the petitioner on 10-08-2011 it is very much found that the insurance policy bearing No. 150305/31/03/6304847 was issued in respect of the vehicle bearing registration No-WB-11-A-3928 in the name of Dipen Mallick on the basis of a premium Cheque No-18471, dated 12-09-2003 of Rs. 22,206/- drawn on Bank of Baroda, Bakshihat Bench. But the said cheque was dishonoured and uncleared for insufficient fund. Accordingly the said policy stands cancelled since inception and that the National Insurance Co. Ltd. is not on risk in respect of vehicle covered thereunder so the liability for payment of the awarded sum of Rs. 2,73,500/- with interest @6% per annum from 27-03-2007 till its payment in favour of the claimant rests with the owner of the said offending vehicle. Thus, the misc case succeeds.‟ „hence ORDERED that the misc case be and the same is allowed on contest against the Respondent No. 1 and ex-parte against Respondent No.2. the impugned judgment is varied to the extent that the liability of payment of the awarded sum rests on O.P. No-1 of MACC No-72/09.
Said O.P. No-1 is directed to issue an A/C payee cheque in respect of the aforesaid amount i.e. Rs. 2,73,500/- together with interest thereon @6% per annum from 27-03-2007 till its payment in favour of the claimant within 30 5 2026:CHC-AS:208 days from date failing which the claimant shall have liberty to get the award executed through this Tribunal.‟ The claimants/appellants being aggrieved by the Order dated 02-11- 2011 passed by the Learned Trial Court has come up with the instant appeal.
It is the contention of the appellants that the Learned Tribunal ought to have considered that the insurer cannot be absolved of its obligation to third parties under the policy merely because it did not receive the premium. It is further contended that the Learned Judge erred in Law and fact in allowing the Misc Case No. 1 of 2010 by passing the impugned order without considering the principle laid down by the Hon‟ble Apex Court of India in case i) New India Assurance Company Ltd. VS Rula. Reported in AIR 2000 S.C. 1082. Oriental Insurance Company Ltd. V Inderjit Kaur and ors. Reported in AIR 1998 S.C.
588. It is also contended that the impugned order was passed without considering the object of social Welfare Legislation i.e. Motor Vehicles Act 1988.
Heard Learned Advocates for the appellants, and Learned Advocate for the respondent no-1 National Insurance Company Limited. Perused the materials on record.
Learned Advocate for the appellant submits that the Learned Trial Judge erred in varying the award when the claim case was already disposed and there was no scope to vary the order. Learned Advocate further submits that the Learned Trial Judge ought not to have entertained the application of Insurance Company at a belated stage and vary the award. Learned Advocate also 6 2026:CHC-AS:208 submits that the Learned Trial Judge ought to have kept the Award passed earlier intact and granted liberty to the Insurance Company to recover the compensation sum awarded from the vehicle owner.
Learned Advocate relies upon the following Judicial Decisions:-
National Insurance Co. Ltd. VS Abhaysing Pratapsingh Waghela and ors.
Reported in 2018 ACJ-2697.
New India Assurance Co. Ltd. VS Rule and Ors.
Reported in AIR-2000 S.C. 1082.
Oriental Insurance Co. Ltd VS Inderjit in AIR-1998 SC. P-588. National Insurance Co. Ltd. VS Balkar Ram and Ors.
Reported in AIR ONLINE. 2013 S.C. (91) Smt. Anima Paul VS National Insurance Company Ltd. 1998(2) CLJ 305.
Rajendra Kumar and ors. VS Rambhai and others.
Reported in 2003 (1) TAC 492(SC).
New India Assurance Co. Ltd. VS Sailendranath Bera and anr. Reported in 2004(3) TAC 9(Cal).7
2026:CHC-AS:208 Budhia Swain and others VS Gopinath Deb and others. Reported in AIR-1999. S.C. 2089.
Learned Advocate for the respondent no-1 submits that the Learned Trial Judge rightly varied the order by directing the opposite party vehicle owner to pay the awarded sum as there was no contract of Insurance when the accident took place. Learned Advocate further submits that the decisions relied upon by the Learned Advocate for the appellant deals with matters where vehicle owner was not there in Court and intimation of dishonour of cheque was given after accident. Learned Advocate also submits that the vehicle owner was heard before the award was varied thus the order passed by the Learned Trial Judge should not be interfered.
Before proceeding to decide the issue it is necessary to consider the decisions relied upon by the Learned Advocates for the parties.
With regard to the decisions relied upon by Learned Advocate about the scope of review this Court is of the view that the facts of the case is slightly different. Here the Learned Trial Court/Tribunal did not vary the compensation amount awarded on merits but due to non-disclosure of a material fact shifted the liability from one party to another.
In the case of Oriental Insurance Co. Ltd. VS Inderjit Kaur (supra) where the notice of dishonour of cheque was issued prior to accident, and subsequently premium was paid the Hon‟ble Supreme Court upon discussing 8 2026:CHC-AS:208 the provisions contained in Chapter 11 of the Motor Vehicles Act 1988 was pleased to observe as follows:
„Chapter 11 of the Motor Vehicles Act, 1988, provides for the insurance of motor vehicles against third party risks. Section 146 thereunder states that no person shall use or cause or allow any other person to use a motor vehicle in a public place unless there is in force in relation to the use of the vehicle a policy of insurance that complies with the requirements of the Chapter. Section 147 sets out the requirements of policies and the limits of liability. A policy of insurance, by reason of this provision, must be a policy which is issued by a person who is an authorised insurer. Sub-section 5 reads thus:
"(5) Notwithstanding anything contained in any law for the time being in force, an insurer issuing a policy of insurance under this section shall be 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." Section 149 refers to the duty of insurers to satisfy judgments and awards against persons insured in respect of third party risks.
Subsection (1) thereof reads thus:
"(1) if, after a certificate of insurance has been issued under sub-section (3) of section 147 in favour of the person by whom a policy has been effected, judgment or award in respect of any such liability as is required to be covered by a 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 9 2026:CHC-AS:208 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 judgment. "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 with out receiving the premium therefor. By reason of the provisions of Section 147(5) and 149(1) of the Motor Vehicles Act, the appellant became liable to identify 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.
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. 10
2026:CHC-AS:208 We may note in this connection the following message in the case of Montreal Street Railway Company VS. Normandin, A.I.R. 1917 Privy Council 142;
"When the provisions of a statute relate to the performance of a public duty and the case is such that to hold null and void acts done in neglect of this duty would work serious general inconvenience or injustice to persons who have no control over those entrusted with the duty and at the same time would not promote the main object of the Legislature, it has been the practice to hold such provisions to be directory only, the neglect of them, though punishable, not affecting the validity of the acts done.‟ It must also be noted that is was the appellant itself who was responsible for its predicament. It had issued the policy of insurance upon receipt only of a cheque towards the premium in contravention of the provisions of Section 64-VB of the Insurance Act. The public interest that a policy of insurance serves must, clearly, prevail over the interest of the appellant.‟ In the case of United India Insurance Co. Ltd VS Laxmamma and ors. (supra) where the information of dishonour of cheque was given after the accident by the Insurer to the insured the Hon‟ble Supreme Court observed as follows:
'19. In our view, the legal position is this: where the policy of insurance is issued by an authorized insurer on receipt of cheque towards payment of premium and such cheque is returned dishonoured, the liability of authorized 11 2026:CHC-AS:208 insurer to indemnify third parties in respect of the liability which that policy covered subsists and it has to satisfy award of compensation by reason of the provisions of Sections 147(5) and 149(1) of the M.V. Act unless the policy of insurance is cancelled by the authorized 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 authorized insurer to cover a vehicle on receipt of the cheque paid towards premium and the cheque gets dishonored 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.
20. Having regard to the above legal position, insofar as facts of the present case are concerned, the owner of the bus obtained policy of insurance from the insurer for the period April 16, 2004 to April 15, 2005 for which premium was paid through cheque on April 14, 2004. The accident occurred on May 11, 2004. It was only thereafter that the insurer cancelled the insurance policy by communication dated May 13, 2004 on the ground of dishonour of cheque which was received by the owner of the vehicle on May 21, 2004. The cancellation of policy having been done by the insurer after the accident, the insurer became liable to satisfy award of compensation passed in favour of the claimants.‟ 12 2026:CHC-AS:208 In the case of National Insurance Co. Ltd. VS Balkar Ram and Ors.
(supra) the Hon‟ble Supreme Court upon considering the decision of United India Insurance Co. Ltd. VS Laxmamma and Ors. (supra) observed as follows:
„The Appellant/Insurance Company assailed the award passed by the Tribunal essentially on the ground that the cover note for the Policy of insurance was issued on 07-04-2000 for which a cheque was submitted by the owner. However the cheque was dishonoured by the bank on 17-04-2000 subsequently the vehicle which was insured with the appellant-insurance company met with an accident on 19-04-2000. The appellant-insurance Company, therefore contended that as the policy of insurance could not be held to be a valid document in view of the fact that the cheque towards the policy had been dishonoured even before the accident had taken place the insurance company was not liable to indemnify the claimants by paying the amount which fell into its share as per the Tribunal‟s award and it is the owner which is liable to pay the entire amount of compensation to the respondents/claimants.
However we compliment M.S. Kiran Suri, Learned Counsel for the appellant for cutting short the controversy by fairly pointing out the ratio of the judgment (2012) 5 SCC-234 titled United India Insurance Co. Ltd. VS Laxmanna and ors. wherein it has been held that the insurance company is liable to satisfy the award if the intimation regarding the dishonour of the cheque and cancellation of policy is communicated to the policy-holder after the date of the accident. Thus the defence of the insurance company that the policy of insurance 13 2026:CHC-AS:208 was not valid since the cheque had been dishonoured prior to the accident on 17- 04-2000 the intimation to the policy - holder had been given by the insurance company on 26-04-2000 in view of which the insurance Company cannot be allowed to contend that the Policy-holder was not holding a valid policy of insurance in regard to the vehicle which met with an accident. Admittedly the policy-holder had already issued another cheque substituting the cheque which had earlier been dishonoured.
In that view of the matter and following the ratio of the judgment referred to hereinabove this appeal has no substance and accordingly it is dismissed. No order as to costs.
In the case of National Insurance Co. Ltd. VS Abhaysingh Pratap Sing Waghela (supra) where the insurance policy was cancelled only after accident took place the Hon‟ble Supreme Court observed as follows:
16. "Indisputably, the first respondent is a third party in relation to the contract of insurance which had been entered into by and between the appellant and the owner of the vehicle in question. We have noticed hereinbefore that a document was produced before the Tribunal. Even according to the appellant, although it was only a Motor Input Advice cum Receipt, it contained the Cover Note No. 279106. We, therefore, have to suppose that a Cover Note had, in fact, been issued. If a Cover Note had been issued which in terms of clause (b) of sub-
Section 1 of Section 145 of the Act would come within the purview of definition of certificate of insurance; it also would come within the purview of the definition of 14 2026:CHC-AS:208 a insurance policy. If a Cover Note is issued, it remains valid till it is cancelled. Indisputably, the insurance policy was cancelled only after the accident took place. A finding of fact, owner of the vehicle, the cover note was not cancelled.
17. It is in the aforementioned situation, we are of the opinion, that the judgment of the High Court cannot be faulted. No doubt, a contract of insurance is to be governed by the terms thereof, but a distinction must be borne in mind between a contract of insurance which has been entered into for the purpose of giving effect to the object and purport of the statute and one which provides for reimbursement of the liability of the owner of the vehicle strictly in terms thereof. In that limited sense, a contract of insurance entered into for the purpose of covering a third party risk would not be purely contractual. We may place on record that an ordinary contract of insurance does not have a statutory flavour. The Act merely imposes an obligation on the part of the insurance company to reimburse the claimant both in terms of the Act as also the Contract. So far as the liability of the insurance company which comes within the purview of Section 146 and 147 is concerned, the same subserves a constitutional goal, namely, social justice. A contract of insurance covering the third party risk must, therefore, be viewed differently vis - vis a contract of insurance qua contract.
18. In National Insurance Co. Ltd. V. Laxmi Narain Dhut [(2007) 3 SCC 700], this Court opined:
"23. As noted above, there is no contractual relation between the third party and the insurer. Because of the statutory intervention in terms of Section 15 2026:CHC-AS:208 149, the same becomes operative in essence and Section 149 provides complete insulation.
24. In the background of the statutory provisions, one thing is crystal clear i.e. the statute is beneficial one qua the third party. But that benefit cannot be extended to the owner of the offending vehicle. The logic of fake license has to be considered differently in respect of third party and in respect of own damage claims."
The same view was reiterated in Oriental Insurance Co. Ltd. v. Meena Variyal & Ors. [(2007) 5 SCC 428] stating:
"14. The object of the insistence on insurance under Chapter XI of the Act thus seems to be to compulsorily cover the liability relating to their person or properties of third parties and in respect of employees of the insured employer, the liability that may conductor and the one carried in a goods vehicle carrying goods."
This Court in Oriental Insurance Co. Ltd. v. Sudhakaran K.V. and Ors. [2008(8) SCALE 402] held:
"14. The provisions of the Act and, in particular, Section 147 of the Act were enacted for the purpose of enforcing the principles of social justice. It, however, must be kept confined to a third party risk. A contract of insurance which is not statutory in nature should be construed like any other contract." 16
2026:CHC-AS:208 This Court in Oriental Insurance Co. Ltd. v. Inderjeet Kaur [(1998) 1 SCC 71] held that once a certificate of insurance is issued, the insurance company would not be absolved of its obligations to third parties Yet again in Deddappa & Ors. V. Branch Manager, National Insurance Co. Ltd. [2008) 2 SCC 595], having regard to the provisions contained in Section 54(v) of the Insurance Act, 1938, in the fact situation obtaining therein, it was opined:
"A contract is based on reciprocal promise. Reciprocal promises by the parties are condition precedents for a valid contract. A contract furthermore must be for consideration."
In the case of New India Assurance Co. Ltd. VS Rula and Ors (supra) the Hon‟ble Supreme Court upon considering the decision of Oriental Insurance Co. Ltd. VS Inderjeet Kaur and Ors. (1998) 1 SCC. P-371 was pleased to observe as follows:
„It was in the background of the above statutory provisions that the provisions of Section 64-VB upon which reliance has been placed by Learned Counsel for the appellant were considered by this Court in Oriental Insurance Co. Ltd. VS Inderjeet Kaur and Ors. (1998) 1 SCC 371 in which it was laid down as under:
"We have therefore this position. Despite the bar created by Section 64- VB of the Insurance Act, the appellant, an authorized insurer issued a policy of insurance to cover the bus without receiving the premium therefore. By reason of the provisions of Section 147(5) and 149(1) of the Motor Vehicles Act, the 17 2026:CHC-AS:208 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."
This decision which is a 3-Judge Bench decision squarely covers the present case also. The subsequent Cancellation of the Insurance 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 accrued in favour of the third party. The above decision of this Court was relied upon by the High Court in negativing the contention raised by the appellant. The High Court in the circumstances was fully justified in dismissing the appeals. We find no infirmity in the judgment of the High Court. Consequently the appeals are dismissed. There will be no order as to costs.‟ 18 2026:CHC-AS:208 Upon considering the Judicial decisions it is clear that once the Insurance Policy is issued and the cancellation of same is not communicated and received by the Insured the third party liability continues to exist.
In case where the intimation of dishonour of cheque and cancellation of Policy is given prior to accident as was the case of Oriental Insurance Co. Ltd. VS Inderjit Kaur and Ors (supra) the Insurance Company has to satisfy the award and may recover the same from the insured.
As the Motor Accident claim Legislation is a Welfare legislation Tribunals and Courts have to see that the compensation amount reaches to the victims or their legal heirs without delay and without any unnecessary hardship. When after adjudicating compensation cases insured/vehicle owners are directed to pay it may take considerable time for them to arrange the compensation amount and when there is failure to pay the amount the victims or their families will again have to knock the doors of Court to get the compensation realized. Thus after suffering injury in accident or losing near relation in accident, and after pursuing case in Court of Law if the victim or their family is unable to get the compensation realized the object of the welfare legislation will be frustrated. On the other hand if the Insurer/Insurance Company is directed to make the payment they can do so within a short period and pursuant to payment may either settle the matter with the insured to repay the compensation by granting instalments or recover the same by instituting recovery proceeding.
19
2026:CHC-AS:208 In the conduct of recovery proceedings it may be possible for Insurance Companies to engage its officers and employees to pursue the recovery case for long period and to make all necessary enquiries for realization of the amount paid which may not be possible for the victims of accident or their relatives. A victim of accident or their relatives if made to institute a recovery case to realize compensation from vehicle owner/insured they will be in a helpless situation even after obtaining award of compensation which is not the object of a welfare legislation. Moreover the vehicle owner/insured who has to enter into contract of Insurance with Insurance Companies under the Law can be approached by the Insurance Companies for settlement before initiating recovery proceedings which is not possible for third party victims. It is held in different judicial pronouncements that Tribunals are not required to adhere rigidly to the doctrine of stare decis so that they can consider the claim more sympathetically. The contribution of the Tribunals should be to ensure that the benefits reach the helpless person.
It is once again necessary to quote the observation of the Hon‟ble Supreme Court in the case of National Insurance Co. Ltd. VS Abhaysing Pratapsing Waghala and ors (supra) at the cost of repetition.
17. It is in the aforementioned situation, we are of the opinion, that the judgment of the High Court cannot be faulted. No doubt, a contract of insurance is to be governed by the terms thereof, but a distinction must be borne in mind between a contract of insurance which has been entered into for the purpose of 20 2026:CHC-AS:208 giving effect to the object and purport of the statute and one which provides for reimbursement of the liability of the owner of the vehicle strictly in terms thereof. In that limited sense, a contract of insurance entered into for the purpose of covering a third party risk would not be purely contractual. We may place on record that an ordinary contract of insurance does not have a statutory flavour. The Act merely imposes an obligation on the part of the insurance company to reimburse the claimant both in terms of the Act as also the Contract. So far as the liability of the insurance company which comes within the purview of Section 146 and 147 is concerned, the same subserves a constitutional goal, namely, social justice. A contract of insurance covering the third party risk must, therefore, be viewed differently vis - vis a contract of insurance qua contract.
18. In National Insurance Co. Ltd. V. Laxmi Narain Dhut [(2007) 3 SCC 700], this Court opined:
"23. As noted above, there is no contractual relation between the third party and the insurer. Because of the statutory intervention in terms of Section 149, the same becomes operative in essence and Section 149 provides complete insulation.
24. In the background of the statutory provisions, one thing is crystal clear i.e. the statute is beneficial one qua the third party. But that benefit cannot be extended to the owner of the offending vehicle. The logic of fake license has to be considered differently in respect of third party and in respect of own damage claims."21
2026:CHC-AS:208 The same view was reiterated in Oriental Insurance Co. Ltd. v. Meena Variyal & Ors. [(2007) 5 SCC 428] stating:
"14. The object of the insistence on insurance under Chapter XI of the Act thus seems to be to compulsorily cover the liability relating to their person or properties of third parties and in respect of employees of the insured employer, the liability that may conductor and the one carried in a goods vehicle carrying goods."
This Court in Oriental Insurance Co. Ltd. v. Sudhakaran K.V. and Ors. [2008(8) SCALE 402] held:
"14. The provisions of the Act and, in particular, Section 147 of the Act were enacted for the purpose of enforcing the principles of social justice. It, however, must be kept confined to a third party risk. A contract of insurance which is not statutory in nature should be construed like any other contract."
This Court in Oriental Insurance Co. Ltd. v. Inderjeet Kaur [(1998) 1 SCC 71] held that once a certificate of insurance is issued, the insurance company would not be absolved of its obligations to third parties Yet again in Deddappa & Ors. V. Branch Manager, National Insurance Co. Ltd. [2008) 2 SCC 595], having regard to the provisions contained in Section 54(v) of the Insurance Act, 1938, in the fact situation obtaining therein, it was opined:
22
2026:CHC-AS:208 "A contract is based on reciprocal promise. Reciprocal promises by the parties are condition precedents for a valid contract. A contract furthermore must be for consideration."
Thus in case of issuance of policy where the cancellation of the same is communicated by the Insurance Company to the vehicle owner prior to accident the Insurance Company is liable to satisfy the award with regard to compensation of third party and may recover the same from the insured/vehicle owner in accordance with Law. On the other hand if communication is made after the accident the Insurance Company cannot be absolved of payment to third party victim.
In this matter although Learned Trial Judge by his order dated 02-11- 2011 held that the Premium cheque No. 18471 dated 12-09-03 of Rs. 22,206/- drawn on Bank of Baroda Bakshirhat Branch was dishonoured, nowhere in the said order there is findings that communication of dishonour of cheque and cancellation of policy was communicated and received by the vehicle owner/insured either before the accident or after the accident. It is also not clear as to whether the communication of cancellation of Policy was made at all. In the facts and circumstances the order dated 02-11-2011 passed by the Learned Trial Court cannot be sustained and the same should be set aside. The ground taken by the Insurance Company that the vehicle owner was present when order dated 02-11-2011 was passed cannot be accepted as the same 23 2026:CHC-AS:208 does not change the legal position in terms of the Judicial decisions discussed above.
As Motor Vehicles Claim Legislation is a Welfare legislation, it is to be remembered that the third parties who have no knowledge about payment of premium and cancellation of Insurance Policies are on the road with the impression that necessary care and precaution will be taken by the vehicle owner/insured and the insurance companies regarding insurance. Thus for the laches of the Insurance Companies or Vehicle owner third party victims of accidents should not suffer.
Insurance Companies should prior to the expiry of policy of Insurance of Vehicle owners/Insured give notice well in advance to enable the vehicle owners/insured to make payment of premium and some reminders be given if necessary.
In the event such premium is not paid even before due date, upon final reminder to the insured the matter should be reported to the Transport Authority and Police Authority so that the vehicle is not brought on the road prior to getting the same insured. The Transport Authority and Police Authority upon receiving the intimation from Insurance Companies shall issue necessary direction upon the vehicle owner/insured not to bring the vehicle on road prior to payment of premium, and getting the vehicle insured. Similarly in case of dishonour of cheques and cancellation of policies in the event vehicle owners upon having knowledge of the same do not pay the premium and renew the 24 2026:CHC-AS:208 policy intimation should be given to the Transport Authority and Police Authority where the vehicle is registered, and the where the vehicle owner resides.
Thus the function of the Insurance Company is not merely to see that cancellation of Insurance Policy is intimated to the vehicle owner but in the event of non-payment of premium after reminder, the said vehicle is not brought on road. For this purpose the Regional Transport Authorities and Police Authorities shall be intimated forthwith.
Hence this Appeal FMA No-1442 of 2014 stands allowed. Order dated 02/11/2011 passed in Misc Case No-1/10 arising out of MACC No-518/07 by the Learned Additional District Judge 1st Court at Barasat North 24 Parganas is set aside. The Judgment and Award passed in MACC-No-518/07 on 23rd day of July 2009 is restored. The Respondent No-1 National Insurance Company Ltd. is directed to pay the awarded sum to the claimants/appellants as directed by the Learned Trial Court by Order dated 23rd day of July 2009 along with interest from the date of filing of claim case till today. The deposit shall be made before the Registrar General High Court Calcutta within 8 weeks from the date of communication of this Order.
With regard to the issue of recovery from the vehicle owner as there is no findings with regard to the communication of policy cancellation the respondent no-1 National Insurance Company Ltd. is permitted to conduct enquiry in this regard give the vehicle owner a reasonable opportunity of being 25 2026:CHC-AS:208 heard and proceed in accordance with Law. It is hereby made clear that in the event recovery proceeding is instituted the parties will be entitled to raise relevant points of Law.
Let a copy of this Order be sent to the Registrar General High Court at Calcutta for communicating the same to the Learned Motor Accident claim Tribunals/District Judges in the State of West Bengal and Andaman and Nicobar Island.
Order be also Communicated to the Secretary Transport Department Government of West Bengal, and Director General of Police West Bengal and Police Commissioner Calcutta for circulating the same to the Regional Transport Authority of Districts and Police Stations and Insurance Companies, so that Insurance Companies can do the needful if premium is not paid and policy not renewed by vehicle owners, by intimating the respective authorities as observed above.
Copy of this order be also sent to the Government Pleader High Court Calcutta for information.
Urgent photostat certified copy of this order, if applied for, should be made available to the parties upon compliance with the requisite formalities.
(Biswaroop Chowdhury, J.)