Madhya Pradesh High Court
United India Insurance Co. Ltd. vs Mangaliya And Ors. on 7 February, 2006
Author: P.K. Jaiswal
Bench: P.K. Jaiswal
JUDGMENT P.K. Jaiswal, J.
1. This order shall also govern disposal of M.A. No. 422 of 2000 United India Insurance Co. Ltd. v. Javitri, M.A. No. 424 of 2000 United India Insurance Co. Ltd. v. Rajawati, M.A. No. 425 of 2000 United India Insurance Co. Ltd. v. Katori, M.A. No. 426 of 2000 United India Insurance Co. Ltd. v. Ratan Singh, M.A. No. 427 of 2000 United India Insurance Co. Ltd. v. Veerawati, M.A. No. 428 of 2000 United India Insurance Co. Ltd. v. Meena, M.A. No. 430 of 2000 United India Insurance Co. Ltd. v. Sudama Bai, M.A. No. 468 of 2000 National Insurance Co. Ltd. v. Rajabeti, M.A. No. 469 of 2000 National Insurance Co. Ltd. v. Meena, M.A. No. 470 of 2000 National Insurance Co. Ltd. v. Mohan Bai, M.A. No. 471 of 2000 National Insurance Co. Ltd. v. Veeramati Bai, M.A. No. 472 of 2000 National Insurance Co. Ltd. v. Ratan Singh, M.A. No. 473 of 2000 National Insurance Co. Ltd. v. Katori, M.A No. 474 of 2000 National Insurance Co. Ltd. v. Savitri and M.A. No. 475 of 2000 National Insurance Co. Ltd. v. Sudama Bai. All the aforesaid appeals under Section 173 of the Motor Vehicles Act, 1988 (hereinafter for short referred to as 'the Act') arise out of a common award dated 22.3.2000 passed under Section 168 of the Act by the First Additional Motor Accidents Claims Tribunal, Morena (for short 'the Tribunal'), directing payment of compensation of Rs. 1,07,000 in Claim Case No. 39 of 1998 (old Claim Case No. 62 of 1991) on the death of the deceased Suresh Chand; Rs. 57,000 in the Claim Case No. 42 of 1998 (old Claim Case No. 58 of 1991) on the death of the deceased Babulal; Rs. 1,35,000 in Claim Case No. 43 of 1998 (old Claim Case No. 60 of 1991) on the death of Dinesh alias Sobaran; Rs. 57,000 in Claim Case No. 44 of 1998 (old Claim Case No. 60 of 1991) on the death of deceased Mata Prasad alias Matadin; Rs. 1,03,000 in Claim Case No. 45 of 1998 (the old Claim Case No. 65 of 1991) on the death of deceased Munnalal; Rs. 1,33,000 in Claim Case No. 46 of 1998 (old Claim Case No. 64 of 1991) on the death of the deceased Gopal; Rs. 55,000 in Claim Case No. 47 of 1998 (old Claim Case No. 59 of 1991) on the death of deceased Brijendra Singh and Rs. 1,47,000 in Claim Case No. 69 of 1999 (old Claim Case No. 72 of 1991) on the death of the deceased Gambhir Singh, in respect of 8 cases of death.
2. Facts giving rise to these appeals are thus:
On 8.8.1991 at about 5.30 p.m., the deceased and the injured persons were travelling as passengers in Tempo No. MPG 9947, which was going from Morena to Kadhiyahar on Morena-Ambah Road; truck No. CPW 7506, owned by Agrawal Construction Company, Morena, respondent No. 9, driven by one Lochan Singh, was coming from opposite direction, which dashed against the said Tempo causing severe multiple injuries to 16 passengers travelling in Tempo. Out of 16 passengers, 10 died as a result of the said accident. The legal representatives of the deceased persons and three injured persons presented 12 separate claim applications under Section 166 of the Act before the Tribunal against owner, driver and the insurer of the truck. The appellant and National Insurance Co. Ltd., respondent No. 11 (for short 'NICO'), were impleaded as insurers of the truck. The owner of the truck claimed indemnity because of insurance of the vehicle (truck). The appellant insurance company in reply to the claim petition stated that truck No. CPW 7506 was not insured with the company; the cover note covering the risk was void from very inception, as the insured-owner gave the cheque No. 974397 dated of Rs. 5,574, Exh. D6, towards the premium of insurance of the truck, of which a receipt, Exh. D7 and cover note, Exh. P17 were issued. The cheque was sent for collection and encashment by the State Bank of Indore, Morena Branch to UCO Bank, Noorabad Branch, which returned the cheque to the State Bank of Indore vide their memo No. 5891 dated 5.8.1991, Exh. D9, with the remark "jis seema tak ki vyavastha ki gayi hai us se adhik". On receipt of it, the appellant insurance company sent a letter dated 8.8.1991, Exh. D10, to the insured regarding dishonour of the cheque, informing that in view of the non-payment of insurance premium, cover note issued stands cancelled from its inception and, consequently, receipt No. 18219 issued to the owner-insured for payment as also the acceptance advice stand cancelled. This was delivered to the insured on 12.8.1991 as is evident from the letter dated 3.9.1991, Exh. P13, issued by the postal authorities. In between the owner also got the vehicle insured with NICO for the period from 8.8.1991 to 7.8.1992 after making payment of premium of Rs. 5,574 of which NICO issued policy No. 0303706 of 1991. As per cover note dated 8.8.1991, Exh. D5, the effective date and time of commencement of insurance was 8.8.1991 at 4 p.m. On 9.8.1991, the owner Umesh Agrawal for insured Agrawal Construction Company applied vide Exh. D1 to NICO that as the vehicle was insured from 25.6.1991 to 24.6.1992 with the appellant United India Insurance Co. Ltd., the amount of premium so paid be returned. In response to the application, NICO refunded the amount vide Exh. D2, dated 12.8.1991 stating thus:
At the request of the assured vide his letter dated 9.8.1991, it is hereby agreed and declared that the competent authority has 'cancelled' the above-mentioned policy since inception. Hence, a refund of premium of Rs. 5,573 (less Re. 1 stamp duty) is hereby allowed to the insured.
3. The Tribunal after appreciating the evidence on record and after hearing parties passed the impugned award and held that due to rash and negligent driving of truck bearing registration No. CPW 7506, the accident occurred and on the date of accident, i.e., on 8.8.1991, the offending vehicle was insured by appellant insurance company as well as by NICO, respondent No. 11 and, therefore, both the insurance companies are liable to pay the amount of compensation and directed that both the insurance companies as well as the owner and the driver of the offending vehicle are jointly and severally liable to pay the amount of compensation and further directed to deposit the amount within a period of 30 days from the date of award along with interest at the rate of 12 per cent per annum from the date of application till its realisation.
4. Learned Counsel for the appellant contended that the cheque given towards premium was dishonoured and the insurance company informed the insured that in view of non-payment of the premium the cover note issued stands cancelled from its inception and, therefore, the appellant insurance company is not liable to pay the amount of award. He further submitted that against the interim award, he filed a writ petition before a Division Bench of this Court and the Division Bench of this court in the case of United India Insurance Co. Ltd. v. Ratansingh , took the view that the interim award passed in all the cases directing the appellant United India Insurance Co. Ltd. to pay the limited amount of award could not be sustained and was quashed by holding that in view of Section 64VB of the Insurance Act, 1938 and the law laid down by Apex Court in the case of United India Insurance Co. Ltd. v. Ayeb Mohammed 1991 ACJ 650 (SC), the truck was not insured, as for assuming the risk, the premium was not received by the appellant insurance company because of bouncing of the cheque, on mere issuance of the cover note against the cheque so issued, there was no risk or contract, as there was no payment. In such circumstances, the appellant insurance company cannot be made liable to pay any amount of compensation either interim or final. The matter was remanded back to the Tribunal for determining the liability of the owner of the offending truck and NICO, on the effect of issue of policy and its subsequent cancellation, which will have to be decided by the Tribunal afresh after hearing parties in accordance with law. Tribunal by the order dated 21.8.1996 decided the matter afresh and passed the interim award against the owner, Agrawal Construction Company, respondent No. 9 and the insurer, NICO, respondent No. 11, has been exonerated.
5. Against the said order dated 21.8.96, an appeal was filed by the owner of the offending vehicle - Agrawal Construction Company, respondent No. 9. In the appeal, the learned single Judge has held that the offending truck was insured with NICO and premium had been paid on the date of accident, i.e., on 8.8.1991, the contract was in existence. On the date when the accident had taken place, NICO cannot be absolved of its liability and held that NICO is jointly and severally liable for the payment of the interim award along with the owner of the truck. See Agrawal Construction Co. v. Veer Sati 1999 ACJ 1477 (MP). Against the said interim award dated 9.11.1997 of learned single Judge, an L.P.A. was filed by NICO, respondent No. 11, vide L.P.A. No. 379 of 1998, which was dismissed on 6.8.2003. The dismissal order reads as under:
This appeal is filed against the interim award. It is stated that after the interim award, final award has been passed and in that case, both the insurance companies have been held jointly liable, whereas, in this case only the appellant company has been held jointly and severally liable for payment of compensation. Since it is settled position that any finding recorded in interim award is not binding and since the final order has been passed against which M.A. Nos. 468 to 475 of 2000 have been preferred, this L.P.A. has rendered infructuous and is dismissed. As regards the question of finding regarding liability of insurance company is concerned, that question shall be considered in the pending appeals.
Against the order of the Division Bench dated 28.8.1992 in the case of Ratansingh, , a review petition was filed by respondent No. 9, the owner of the vehicle vide M.C.C. No. 366 of 1992, which was disposed of on 8.10.1992. However, it was observed that in case the owner wanted to give additional evidence, it could produce it before the Tribunal. With the above observation, the review was dismissed by the court by holding that it was not possible to review the order passed on 28.8.1992.
6. Learned Counsel for the appellant contended that the Division Bench of this Court while exonerating the insurance company for payment of interim compensation, very specifically held that the insurer is not liable to pay either the amount of interim or final award and in view of the above, the Tribunal committed an error in holding that the insurance company is liable to indemnify the insured. He submitted that the order passed by the Tribunal is contrary to the decision of the Division Bench in the case of Ratansingh, .
7. On the other hand, learned Counsel for the respondents contended that intimation of cancellation of policy was served after the date of accident on 12.8.1991 and hence, the liability of the insurer subsists with respect to the third party to make the payment of compensation. He further submitted that the case of Ratansingh, , was decided on the basis of the decision of the Apex Court in the case of Ayeb Mohammed, 1991 ACJ 650 (SC) and during the pendency of the claim before the Tribunal, the said decision of the Apex Court was overruled in the case of Oriental Insurance Co. Ltd. v. Inderjit Kaur and the Tribunal in the light of the decision of the Supreme Court in the case of Inderjit Kaur (supra) held that the appellant insurance company was held liable to pay the amount of compensation.
8. The earliest decision of the Apex Court as regards liability of the insurance company in the cases of motor insurance covering third party risk when the cheque issued towards the payment of premium is dishonoured was in Ayeb Mohammed, 1991 ACJ 650 (SC). In the said decision, the Apex Court held that "the High Court was not right in holding that in absence of steps for cancellation of the cover note, the risk would be subsisting". Thus, the insurer's stand that the cheque covering the premium having bounced and in absence of payment of premium the cover note had become ineffective and there was no policy which obliged the insurer to pay the compensation, was upheld. The said decision was overruled by the three-Judge Bench of the Supreme Court in Inderjit Kaur's case, . That was a case where the policy of insurance was issued by the appellant insurance company on 30.11.1989. The premium for policy was paid by cheque. Cheque was dishonoured. The letter intimating such dishonour and disowning of risk was sent to the insurer on 23.1.1990. Thereafter premium was paid by cash on 2.5.1990. In the meanwhile, on 19.4.1990 the accident had taken place which gave rise to the claim for damages. The Supreme Court after considering the provisions in Chapter XI of the Motor Vehicles Act, 1988, which provides for the insurance of motor vehicles against third party risks, viz., Sections 146, 147(5) and 149(1), held in paras 8 and 9 as follows:
(8) We have, therefore, this position. Despite the bar created by Section 64VB 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.
(9) 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 insurance premium. Its remedies in this behalf lay against the insured.
9. The Apex Court in the case New India Assurance Co. Ltd. v. Rula , following the decision in Inderjit Kaur's case, , held that the insurer is not absolved of liability to third party if the cheque issued towards payment of premium is dishonoured and policy is cancelled after accrual of liability; that payment of premium is not the concern of third party and that subsequent cancellation of policy due to dishonour of cheque would not affect the rights of third party. That was a case where the issuance of policy by receiving the cheque towards payment of premium and the occurrence of accident was on the same day, viz., on 8.11.1991 and the dishonour of the cheque was thereafter on 16.11.1991.
10. Mr. Vijay Sunderam, the learned Counsel appearing on behalf of the owner has submitted that the vehicle was insured. Intimation of cancellation was not given to the Registering Authority, R.T.O., Morena as contemplated under Section 147(4) of the Act and Rule 274 of the Motor Vehicles Rules, 1974. He also submitted that under Section 147 of the Act, notice to the registering authority is mandatory. He also submitted that after cancellation of policy and dishonouring of the cheque, the insured was directed to deposit the amount as the appellant refused to receive the amount from the insured and, therefore, the learned Tribunal has not committed any error in holding that the insurance companies are liable to indemnify the award. He also submitted that on the date of accident, vehicle was insured with NICO, respondent No. 11 and the Tribunal after considering oral and documentary evidence in paras 89 and 91 of its award held that on the date of accident, the offending truck was insured by respondent No. 11.
11. As observed earlier, on 25.6.1991 contract of insurance of offending vehicle was complete as premium was paid by the insured, respondent No. 9, through cheque and after receipt of it, the cover note was issued. The cheque was dishonoured on 5.8.1991 and intimation about dishonouring of cheque was received by insurance company on 8.8.1991. Appellant insurance company on 8.8.1991 issued a letter by registered post to truck owner about the dishonour of cheque. Accident took place on 8.8.1991 at 5.30 p.m. as per F.I.R., Exh. P4. The said letter was received by the respondent No. 9 on 12.8.1991, i.e., subsequent to the accident and the dishonour of cheque. The vehicle was also insured by NICO, respondent No. 11, on 8.8.1991 at 4 p.m. and cover note vide Exh. D5 was issued. Accident took place on 8.8.1991, therefore, the appellant and respondent No. 11 both the insurance companies were bound to indemnify the insured and I am of the considered view that the learned Tribunal has not committed any error in directing the appellant and respondent No. 11 for making payment of compensation amount. Even otherwise, the dishonouring of cheque after issuance of certificate of insurance which includes the cover note, does not affect the right of third party in view of the provisions of Section 147(5) and Section 149(1) of the Act. They are quoted below:
Section 147(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(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 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 judgments.
From the perusal of the above provisions of Sections 147(5) and 149(1) of the Act, it is clear that if insurance policy was issued on tender of cheque, which later on was dishonoured by bank, even then, notwithstanding the provisions of Section 64VB of Insurance Act, the liability of the insurance company for paying compensation amount to the third party continues and it is bound to make the payment of compensation amount.
12. A Division Bench of this Court in Ishwar Singh v. Ashok Kumar , has held considering Sections 147(5) and 149(1) of the Act and Section 64VB of the Insurance Act, 1938, that dishonouring of cheque after issuance of certificate of insurance which includes the cover note does not affect the rights of the third party and that the insurance company can recover the amount from the insured. That was a case where the accident had occurred on the very next day of issuance of cover note by the insurance company, receiving the cheque towards payment of premium and the cheque was dishonoured thereafter. In a Full Bench decision of Kerala High Court in Oriental Insurance Co. Ltd. v. Sivankutty 2006 ACJ 106 (Kerala), it has been held that the liability of the insurance company in damages for third party risks continues for the entire period covered by the policy in spite of the cheque issued towards payment of premium was dishonoured and consequently the policy was cancelled by the insurance company. The remedy of the insurance company lies against the 'insured' to have the amount paid by them by way of compensation for third party risks to be got reimbursed.
13. For the reasons stated above, the learned Tribunal has not committed any error in directing both insurance companies, i.e., the appellant and the respondent No. 11 to indemnify the award. Both the insurance companies are equally liable to pay the amount of compensation. The Tribunal had not erred in not absolving the insurance company. However, the Tribunal should have given an option to the appellant and NICO, the insurance company to recover the amount of compensation paid by them from the owner of the vehicle.
14. In result, the Misc. Appeal Nos. 420, 422, 424, 425, 426, 427, 428, 430, 468, 469, 470, 471, 472, 473, 474 and 475 of 2000 are partly allowed to the extent that appellant insurance companies shall pay the amount of compensation to the claimants, but they would be entitled to recover the same from the owner of the vehicle. Award is modified to this extent, but without any order as to costs.