Orissa High Court
The Divisional Manager, The National ... vs Tasri Pradhan And Ors., Nirasah Pradhan ... on 25 March, 2003
Equivalent citations: II(2004)ACC697, 2005ACJ1078, 96(2003)CLT462, 2003 A I H C 3188, (2003) 4 CIVLJ 838, (2004) 1 TAC 781, (2005) 2 ACJ 1078, (2003) 96 CUT LT 462, (2004) 2 ACC 697
Author: P.K. Mohanty
Bench: P.K. Mohanty
JUDGMENT P.K. Mohanty, J.
1. These three Miscellaneous Appeals, having arisen out of a common judgment involving common question of law and facts, on the prayer and on consent of the learned counsel for the parties, are taken up for hearing together and disposed of by this order.
2. The Insurer-National Insurance Company Ltd. assails the order of the learned Second Motor Accident Claims Tribunal, Sambalpur allowing the applications of the claimants under Section 140 of the Motor Vehicles Act, 1988 and directing payment under no fault liability. The main thrust of argument of Sri S.S. Rao, learned counsel for the appellant is that since the premium paid by the owner of the vehicle by way of two cheques, having bounced because of want of funds, the policy stood cancelled and, therefore, the insurer has no liability to cover under the said policy. Submission is, therefore, made that the appellant-insurer was not liable to pay any amount towards the no fault liability or any other liability covered under the policy, which became void, because of nonpayment of the premium.
3. The learned counsel has placed reliance on the decision in National Insurance Company Ltd. v. Seema Malhotra and Ors.; (2001) 3 Supreme Court Cases 151 in support of his contention. The Apex Court, in the aforesaid case observed that the essence of insurance business is the coverage of the risk by undertaking to indemnify the insured against loss or damage. They agree to pay the damages arising out of any accident by taking a chance that no accident might happen. Motivation of the insurance business is that the premium would turn to be the profit of the business in case no damage occurs. But to ask the Insurance Company to bear the entire loss or damages of somebody else without the Company receiving a pie towards premium is contrary to the principles of equity, though the Insurance Companies are made liable to third parties on account of statutory compulsions due to the initial agreement, entered between the insured and the Company concerned. The Apex Court ultimately held that in a contract of insurance, when an insured gives a cheque towards payment of premium or part of the premium, such a contract consists of a reciprocal promise. Thus, when the insured fails to pay the premium promised, or when the cheque issued by him towards the premium is returned dishonoured by the Bank concerned, the insurer need not perform his part of the promise and thus, the corollary is that the insured cannot claim performance from the insurer in such a situation.
4. The learned counsel for the claimants-respondents however, submits that this being an application arising out of a petition under Section 140 of the Motor Vehicles Act, the case is not covered by the decision of the Apex Court, since ultimately the merit has to be appropriately considered in an application under Section 166 of the Motor Vehicles Act. Sri Rao. however, referring to a decision of this Court in Divisional Manager, National Insurance Company Ltd. v. Raj Kishore Jethy and Ors.; 1999 A.C.J. 858 contends that even for no fault liability, the Tribunal is to be prima facie satisfied on the three, essential conditions :- (i), death or permanent disablement has been caused by the alleged accident; (ii) the offending vehicle and the risk involved were covered by a valid insurance policy at the material point of time; and (iii) the materials on record ex facie do not disclose any breach of material condition of the policy of insurance. It is submitted that since the risk involved were not covered by a valid insurance policy, the insurer-appellant cannot be saddled with the liability of the owner of the offending vehicle in any event.
5. In view of the conspectuous of the decisions referred to above, there being no dispute that the cheques issued by the owner of the vehicle had returned unpaid, because of lack of sufficient funds, the insurer-appellant is not liable to cover the liability.
6. In such view of the matter, the appeals are allowed, the impugned orders of the Tribunal in Misc. Appeal Nos. 629, 630 and 632 of 1996 are set aside, but, however, there shall be no order as to costs. The lower court records be transmitted to the Tribunal for proceeding with the case expeditiously. The amount deposited by the insurer-appellant may be refunded on proper application.