Orissa High Court
National Insurance Co. Ltd. vs Madhab Chandra Das And Ors. on 10 February, 1993
Equivalent citations: 1994ACJ890
Author: A. Pasayat
Bench: A. Pasayat
JUDGMENT A. Pasayat, J.
1. National Insurance Co. Ltd. (hereinafter referred to as 'the insurer') calls in question the legality of the judgment passed by the Third Motor Accidents Claims Tribunal, Puri (in short, 'the Tribunal') holding it liable to pay the compensation awarded in favour of respondent Nos. 1 and 2 (hereinafter referred to as 'the claimants') in this appeal. The appeal has been filed under Section 110-D of the Motor Vehicles Act, 1939 (referred to as 'the old Act' hereinafter).
2. A brief reference to the factual position is necessary for disposal of this appeal. One Basudev Das (hereinafter referred to as 'the deceased') was an ice-cream seller, who lost his life in an accident wherein an auto-rickshaw bearing registration No. ORP 9530 was involved. Though the accident took place on 16.10.1978 the deceased breathed his last on 27.10.1978. The parents of the deceased (respondent Nos. 1 and 2) lodged a claim for compensation against Balaram Das (hereinafter referred to as 'the insured') and the insurer. Though there is some amount of dispute as to whether the appellant had insured the vehicle and whether Balaram Das was legally insured, for the sake of convenience I have used the terms 'insurer' and 'insured'. The insurer resisted the claim of the claimants on the ground that the vehicle was not validly insured and, therefore, it had no liability. The issue of a certificate of insurance was not disputed. Payment of premium, however, was disputed. According to the insurer, no amount was paid and in good faith the certificate of insurance was issued which was subsequently cancelled when it was detected that the premium had not been paid. The Tribunal looked into the various documents which were filed before it and observed that the certificate of insurance admittedly issued was valid from 13.9.1978 to 12.9.1979 and not from 23.5.1978 to 22.5.1979 as claimed by the insurer. A letter addressed by the Branch Manager, Bhubaneswar, of the insurer to the Regional Transport Officer, Puri, dated 23.5.1978, indicated that the insurance certificate in respect of the offending vehicle was being cancelled due to non-payment of insurance premium. The said letter was acknowledged on 7.11.1978 by the Regional Transport Officer, Puri, as evident from the endorsement in the letter itself which was marked as Exh. B by the Tribunal. It was also indicated that the original insurance certificate No. 395/77/78. I.Z. 400 and No. 419/77/78. I.Z. 400 related to the period from 13.9.1978 to 12.9.1979 and, therefore, the certificate of insurance was to be cancelled from the date of issue. It was also indicated that the proposal form had not been received. Placing reliance on Exh. A, it was stated that the concerned certificate issued in favour of one Rajkishore Ray was issued on 6.11.1978 in lieu of certificate No. 472/003/419/77/78. The Tribunal found it interesting that the letter which was purportedly written on 23.5.1978 was to the effect that the insurance certificate was valid from 13.9.1978 to 12.9.1979. No satisfactoiy explanation was given for this apparently confusing mention regarding the dates. It further observed that after the accident, no proceeding for cancellation of the certificate after compliance with the provisions of Section 105 of the old Act as required under Section 96(2) was commenced. A definite conclusion was arrived at that cancellation of the insurance certificate was not validly done and has no effect on the validity of the insurance certificate which was in force on the date of occurrence. It was also observed that there was no material to show that the original and the duplicate certificates were issued to the insured under mistake and there was no evidence regarding compliance with Section 104 of the old Act. Accordingly, the sum of Rs. 31,020/- with interest at the rate of 12 per cent per annum was awarded.
3. In support of the appeal, Mr. Roy, learned counsel, has strenuously urged that the Tribunal has confused between the certificate of insurance and a policy. There is no requirement under Section 105 for intimation to the registering authority about the cancellation of a certificate. The said provision only mandated an intimation to the registering authority within a prescribed time. The said provision cannot be said to be mandatory because in the subsequent statute which has replaced the old Act (Motor Vehicles Act, 1988, referred to hereinafter as 'the new Act') there is no provision corresponding to Section 105. Additionally, it is submitted that since no premium had been paid there was no valid agreement of insurance obliging the insurer to liquidate the award. Strong reliance is placed on a decision of the Apex Court in the case of United India Insurance Co. Ltd. v. Ayeb Mohammed 1991 ACJ 650 (SC). It is also pleaded that the rate of interest as awarded is extremely high.
Mr. B.P. Ray, learned counsel appearing for the claimants, however, submitted that on analysis the Tribunal has come to a definite conclusion that there was no intimation regarding any cancellation. In any event, no material was produced before the Tribunal to show that the insured had knowledge about cancellation of the policy, or the certificate of insurance, as the case may be. No material was placed by the insurer to show that the premium had not been paid. Therefore, the Tribunal was justified in its conclusion about the liability of the insurer.
4. It is true that in the new Act there is no provision corresponding to Section 105 of the old Act. Absence of such a provision would not render the provision of Section 105 of the old Act to be directory. Whether a provision is directory or mandatory would depend on several factors. There is no universal rule to aid in determining whether mandatory enactments shall be considered directory only or obligatory with an implied nullification for disobedience. It is the duty of the court to try to get at the real intention of the legislature by carefully attending to the whole scope of the statute to be construed. (See H.N. Rishbud v. State of Delhi AIR 1955 SC 196).
There are no ready tests or invariable formulae to determine whether a particular provision in a statute is mandatory or directory. The broad purpose of the statute is important. The object of the particular provision must be considered. The link between the two is most important. The weighing of the consequence of holding a provision to be mandatory or directory is vital and, more often than not, determinative of the very question whether the provision is mandatory or directory. Proof of prejudice is necessary to invalidate the act complained of. (See Dalchand v. Municipal Corporation, Bhopal AIR 1983 SC 303). The difference between a mandatory rule and a directory rule is that while the former must be strictly observed, in the case of the latter, substantial compliance may be sufficient to achieve the object regarding which the rule is enacted. (See Shiarif-ud-Din v. Abdul Gani Lone AIR 1980 SC 303). The determinative factor is the intent of the law-maker. (See Ramchandra Keshav Adke v. Govind Joti Chavare AIR 1975 SC 915; State of Mysore v. V.K. Kangan AIR 1975 SC 2190 and Govind Lal Chaggan Lal Patel v. Agriculture Produce Market Committee AIR 1976 SC 263). The use of the term 'shall' does not conclude the matter. The word 'shall' does not always mean that provision is obligatory and not permissive. The term 'shall' is construed as 'may' under certain circumstances. The use of the term 'shall' in a statute, though generally taken in a mandatory sense, does not necessarily mean that in every case it shall have that effect, that is to say, that unless the words of the statute are punctiliously followed, the proceeding or the outcome of the proceeding would be invalid.
5. So far as the old Act is concerned, Section 94 mandated insurance. Sub-section (1) thereof prescribed prohibition on use of a motor vehicle in a public place by any person except as a passenger, unless there is in force in relation to the use of the vehicle by that person a policy of insurance complying with the requirements of Chapter VIII of the Act relating to the insurance of motor vehicles against third party risks. The prohibition also applies to causing or allowing any other person to use the vehicle. Section 94(1) makes it imperative to insure all vehicles which are to be used in public places. The object is to provide for indemnification by insurer of damages awarded to any victim of an accident arising out of use of the vehicle in a public place. The same is intended to mitigate any difficulty that may arise in enforcing collection against the driver or the owner, as the case may be, due to unsound financial condition. In that context, intimation in terms of Section 105 to the registering authority assumes great significance. The intention is to ensure strict compliance with requirement of Section 94(1) of the old Act, corresponding to Section 146(1) of the new Act.
6. The result of non-compliance of a provision throws light on the question whether it is directory or mandatory. In any event, we are not very much concerned with that question in the present appeal. The terms 'certificate of insurance' and 'policy' are found in several provisions of the Act. Section 93, Clause (b) of the old Act defined 'certificate of insurance' to mean a certificate issued by an insurer in pursuance of Sub-section (4) of Section 95 and includes a 'cover note' complying with such requirements as may be prescribed. Similar definition exists in Clause (b) of Section 145 of the new Act. The term 'policy' was not defined in the old Act. But it is too well-known that the policy is the basic document which incorporates the terms of agreement between the insured and the insurer. In the new Act Section 145, Clause (d) defines policy of insurance to include certificate of insurance. The responsibility of compensating a person who suffered injury or had met death lies primarily on the person responsible for such act which has resulted in the injury or the death. In case of driver of a vehicle, by application of the principle of vicarious liability, the owner of the vehicle is made liable. The insurer undertakes to indemnify the insured in respect of a vehicle for a consideration which is commonly known as premium. The terms of an indemnification are embodied in the document known as policy. The said document prescribes the extent of liability, the circumstances in which the indemnification may be refused and many other aspects with which we are not presently concerned.
7. Section 103 of the old Act deals with the need of a certificate of insurance. A bare reading of Clauses (a) and (b) makes it clear that the certificate of insurance and the policy are two different documents. This is also because Clauses (a) and (b) deal with the situation when a policy prescribed in the certificate has been issued and when it is not issued. Section 105 of the Act deals with the duty of the insurer to notify the registering authority regarding cancellation or suspension of a policy within a specified time. Section 104 casts a duty on the insured to surrender the certificate of insurance when the period of cover under a policy of insurance issued is terminated or suspended, before expiry by efflux of time by any means. The surrender has to be done within seven days after such termination or suspension. A conspectus of Sections 103, 104 and 105 makes it clear that a policy precedes a certificate of insurance. Though there is no specific procedure prescribed as to how a certificate of insurance is to be cancelled, some light is thrown on this aspect by Section 96(2)(a). It has been provided therein that the insurer can take a defence of its non-liability when either before or not later than 14 days after happening of the accident, it has commenced proceeding for cancellation of the certificate after compliance with the provisions of Section 105. Accordingly, after due intimation has been given to the registering authority within the time prescribed in Section 105, a proceeding can be initiated for cancellation of certificate of insurance. Once the policy is terminated or suspended, it has effect on the certificate of insurance. Therefore, a duty has been cast on the insured to surrender the certificate of cancellation of policy.
8. From the facts situation as depicted by the Tribunal in the award it is clear that no information was given to the registering authority within the prescribed time. There is also no definite material about cancellation of the policy, which is evident from Exh. B, which refers to cancellation of 'insurance certificate'. There is no material to show regarding the procedure adopted for cancellation of policy and/or insurance certificate. Therefore, the conclusion of the Tribunal cannot be faulted, though it seems to have confused between a certificate of insurance and a policy while making a reference to the requirements of Section 105.
9. A further question that needs determination is whether in the absence of payment the cover note becomes ineffective and there was no policy which obliged the insurer to pay the compensation. The view expressed in United India Insurance Co. Ltd. 's case, 1991 ACJ 650 (SC), is categoric. It has been observed that when the premium has not been paid and the cheque which covered the premium was not honoured, a cover note became ineffective and there was no policy which obligated the insurer to pay the compensation. The Apex Court observed that it would not be correct to hold that in the absence of steps for cancellation of cover note, the risk would be subsisting. When a cheque issued has bounced, it is within the knowledge of the insured and at any rate that would be the presumption and, therefore, no special notice is required to be issued to the insured. The principle that can be culled out from the view of the Supreme Court is that when the premium has not been paid, the cover note becomes ineffective and there can be no existence of policy which obliges the insurer to pay the compensation. The question whether premium has been paid has to be established by the person who claims to have made payment.
10. Coming to the facts of the case, I find that there is material to show that the premium was paid. A plea has been taken that in good faith the certificate of insurance was issued without receipt of payment. Such a plea has been rightly turned down by the Tribunal. Once the certificate of insurance has been issued, normal presumption would be that the premium had been received. The position, however, may be different in the case of a cheque where it has bounced, as indicated above. But where the dispute is whether the amount was paid in cash or not, the person who asserts that no payment was made, though acknowledgement and/or certificate had been issued, has to prove it. The normal presumption would be against it. Since no acceptable material has been placed before the Tribunal to prove absence of payment, the plea raised in that regard so as to nullify the effect of certificate of insurance issued, cannot be accepted, Great emphasis has been laid on the subsequent cancellation of the certificate of insurance. As indicated above, circumstances relating to such cancellation are shrouded in mystery. I do not think it appropriate to accept the plea that the subsequent cancellation proved nonpayment.
11. So far as the quantum is concerned, nothing has been shown to me as to how the quantification is irrational. Therefore, I do not think it appropriate to modify the compensation awarded.
12. So far as the rate of interest is concerned, it is noticed that the grant of interest is discretionary. That aspect was dealt with in M.A. No. 330 of 1982; decided on 18.2.1986. That appeal was filed by the insurer for consideration of the effect of Exh. B. This court made it clear that interest at 12 per cent per annum would be clear. Therefore, I do not find any scope for taking a different view in the matter. The amount due may be paid to the claimants as expeditiously as practicable.
The appeal fails and is dismissed.