Kerala High Court
Smt.Prasanna.B vs Kabeer.P.K on 22 June, 2013
Author: C.K. Abdul Rehim
Bench: C.K.Abdul Rehim
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR.JUSTICE C.K.ABDUL REHIM
&
THE HONOURABLE MR. JUSTICE K.P.JYOTHINDRANATH
TUESDAY, THE 7TH DAY OF NOVEMBER 2017/16TH KARTHIKA, 1939
MACA.No. 2017 of 2013 ()
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AGAINST THE AWARD IN O.P(MV) NO. 2196/2008 DATED 22.06. 2013 ON THE FILES OF
M.A.C.T.,ERNAKULAM
APPELLANT(S)/PETITIONER:
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SMT.PRASANNA.B, AGED 53 YEARS,
W/O.ARAVINDAKSHAN, MARUVELICHIRA VEETIL, EDACOCHIN,
COCHIN -6.
BY ADVS.SRI.K.JANARDHANAN
SRI.K.J.MANU RAJ
RESPONDENT(S)/RESPONDENTS:
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1. KABEER.P.K.
S/O.KOSU, 9/135, PUTHENPURAKKAL HOUSE, NETTOOR, MARADU,
ERNAKULAM 682 304.
2. ICICI LOMBARD MOTOR INSURANCE CO. LTD.,
ZENITH HOUSE, KSHAVARAO KHADE MARG, OPP. TORACE COURSE,
MAHALAKSHMI, MUMBAI - 34.
R2 BY ADV. SRI.R.AJITH KUMAR VARMA,SC, ICICI
R BY SRI.K.B.RAMANAND
THIS MOTOR ACCIDENT CLAIMS APPEAL HAVING BEEN FINALLY HEARD ON
07-11-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
hmh
C:R:
C.K. ABDUL REHIM, J.
& K.P. JYOTHINDRANATH, J.
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M.A.C.A. No. 2017 OF 2013
------------------------------------------------- Dated this the7th day of November, 2017 REFERENCE ORDER C.K. ABDUL REHIM, J.
The petitioner (claimant) before the Tribunal is the appellant in the above appeal. The Tribunal had exonerated the insurer from the liability for payment of the compensation, based on the finding that the cheque issued for obtaining the policy was dishonoured subsequently. Exts.B3 and B4 documents were produced to prove that the dishonour of the cheque and cancellation of the policy was properly intimated to the owner of the vehicle and also to the Regional Transport Officer, Ernakulam, through 'certificate of posting', on 23.05.2008. Ext.B5 is the copy of the cancelled certificate of the policy. The accident in question occurred much after that, on 12.08.2008. The Tribunal found that the owner of the vehicle has taken another policy after 2-3 months from the M.A.C.A. No. 2017 OF 2013 2 date of dishonour of the cheque. Holding that the owner (insured) was well aware about cancellation of the policy, the Tribunal found that there was no valid policy issued by the 2nd respondent at the time of the accident and therefore the 2nd respondent insurance company had no liability to pay the compensation. The appellant/claimant is challenging the above said finding. Inter alia, she is challenging the quantum of compensation awarded on the ground of its inadequacy.
2. A preliminary objection was raised by the standing counsel appearing for the 2nd respondent insurance company with respect to maintainability of the above appeal filed at the instance of the claimant, challenging her locus standi. It was contended that the appellant is not a 'person aggrieved', because there is already an award in favour of her passed against the 1st respondent.
3. Leave alone the above mentioned dispute, a larger question is involved in the present appeal regarding liability of the insurer against the claim of a third party, when the cheque issued for obtaining the policy was dishonoured. One of the earliest decisions of the hon'ble appex court on this point is, Oriental Insurance Co.Ltd. v.Inderjit Kaur & Ors.(1998 M.A.C.A. No. 2017 OF 2013 3 (1) KLT SN 23 = 1998(1) SCC 371). It is a case where the accident occurred after the insurer had sent a letter intimating about the dishonour of the cheque. Three judge's bench of the Hon'ble Supreme Court held that, under Sections 147(5) and 149(1) of the Motor Vehicles Act the insurer became liable to indemnify the third parties in respect of the liability which that policy had covered, to satisfy the award of compensation, notwithstanding the entitlement of the company to avoid or cancel the policy for the reason of dishonour of the cheque. It is held that, the company will not be absolved from its obligation to the third parties under the policy, merely because it did not received the premium. The finding is that, the remedies on that behalf lies only against the insured. The conclusion was that, the insurance company is liable to indemnify the third parties in respect of the liability which the policy covered, despite the bar created under Section 64-VB of the Insurance Act. However, the court had left open the question of entitlement of the insurer to avoid or cancel the policy as against the insured when the cheque was dishonoured.
4. In a subsequent decision of the apex court in New M.A.C.A. No. 2017 OF 2013 4 India Assurance Co.Ltd.v.Rula and others, (AIR 2000 SC 1082= (2000) 3 SCC 195) an identical question was dealt with. On the facts in that case, the accident had taken place before cancellation of the policy and the policy was canceled subsequently. The Hon'ble Supreme Court observed that, the subsequent cancellation of the insurance policy on the ground of dishonour of the cheque issued for payment of premium, would not affect the rights of the third parties which had approved on the issuance of the policy. If as on the date of the accident there was a policy of insurance in respect of the vehicle in question, the third party would have a claim aginst the insurance company and the owner of the vehicle would have to be indemnified in respect of the claim of that third party, is the findings.
5. In National Insurance Co.Ltd.v.Seema Malhotra and others.(2001 (1) KLT 822 (SC) = (2001)3 SCC 151) the question again came up for consideration before the appex court . There also the accident took place within a few days of issuance of the policy, even before the dishonour of the cheque. By reversing the findings rendered by the High Court, the apex court observed that, under Section 25 of the M.A.C.A. No. 2017 OF 2013 5 Contract Act an agreement made without consideration is void. Section 65 of the Contract Act provides that, when a contract becomes void any person who has received any advantage under such contract is bound to restore it to the person from whom he received it. So, even if the insurer had disbursed the amount covered by the policy to the insured before the cheque was returned dishonoured, the insurer is entitled to get the money back.
6. In a later decision rendered by the Hon'ble Supreme Court in the year 2008, Deddappa and others v Branch Manager, National Insurance Co.Ltd ((2008) 2 SCC 595= 2008 (1) KLT 296) the matter was elaborately considered. That is a case where the insurer had cancelled the policy when the cheque issued for payment of premium was dishonoured and the cancellation was communicated to the owner of the vehicle and an intimation was sent to the RTO concerned. The appex court after considering the dictum contained in Inderjit Kaur(supra) Rula(supra) and Seema Malthotra(supra) observed that, " we are not oblivious of the distinction between the statutory liability of the insurance company vis-a- vis a third party in the context of Sections 147 and 149 of the M.A.C.A. No. 2017 OF 2013 6 Act and its liabilities in other cases. But the same liabilities arising under a contract of insurance would have to be met if the contract is valid. If the contract of insurance has been cancelled and all concerned have been intimated thereabout, we are of the opinion, the insurance company would not be liable to satisfy the claim".
7. Summarising the earlier decisions on the point, in the year 2012, the Honourable Supreme Court in United India Insurance Co.Ltd.v.Laxmamma and others (2012 KHC 4273 = AIR 2012 SC 2817) held that, the legal position remains that where the policy of insurance is issued by an authorizd insurer on receipt of a cheque towards payment of the premium and such cheque is returned dishonoured, the liability of the authorized insurer to indemnify third parties in respect of the liability which that policy covered subsists and it has to satisfy the award of compensation, by reason of the provisions of Section 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 (emphasis supplied) before the accident. The court clarified that, "in other words, where the policy of M.A.C.A. No. 2017 OF 2013 7 insurance is issued by an authorized insurer to cover a vehicle on receipt of the cheque paid towards premium and the cheque gets dishonoured, and before the accident of the vehicle occurs such insurance company cancels the policy of insurance and sends intimation (emphasis supplied) 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".
8. On a scanning of the legal precedents referred as above, the position which remains settled now is that, if the insurer had cancelled the policy before the accident and if due intimation has been given with respect to such cancellation to the insured and to the motor vehicle authorities concerned, there is no liability for the insurer to indemnify the insured with respect to claims of third parties.
9. Inspite of the postilion remaining settled as mentioned above, there exists difference of opinion on a further aspect as to whether the insurer can be exonerated from the liability if he proves that he had sent the intimation with respect to the cancellation or as to whether he can be M.A.C.A. No. 2017 OF 2013 8 absolved only if it is proved that such intimation had in fact received by the insured. In this regard, learned counsel for the appellant had drawn our attention to the judgment of a Division Bench of this Court in M.A.C.A No. 2471 of 2015, dated 16.11.2015. The observation made therein is to the effect that, if the cheque came to be dishonoured for want of sufficiency of funds or for such other reasons, the policy could be cancelled and the position had to be intimated to the insured and also to the RTO. It is further held that unless and until the process is completed, serving intimation to the insured and the RTO concerned, the policy will be valid. Once the process is completed, there is no liability which can be fastened on the insurance company. On the facts of the said case it is evident that, the insurance company had send such intimation by way of "certificate of posting". But the learned Judges observed that, "the 'certificate of posting ' issued by the authorities of the postal department is of course a piece of evidence to hold that the intimation was sent. But the same is not a proof so as to infer that the said communication was served/ received at the other end i.e. to the addressee. The burden is upon the insurance company, who seeks to plead the M.A.C.A. No. 2017 OF 2013 9 fact, and as such, it was obligatory for the insurance company to have established that the intimation was duly served to the insured as well as to the RTO. This has not been satisfied, in so far as the insurance company has not produced any document as to the service of notice of cancellation to the RTO".
10. We are of the opinion that, if the insurance company is burdened with proof for establishing that the intimation regarding the cancellation of the policy was actually served on the insured as well as on the RTO, there is a chance for the vehicle owners, atleast in exceptional cases, playing fraud on the company by issuing cheques for payment of premium with the clear knowledge that the cheque will be dishonoured for insufficiency of funds and thereafter purposefully avoiding service of the intimation, by playing crooked methods. On the other hand, we are of the opinion that, the insurer should be absolved from the liability if it is proved that the policy was duly cancelled and intimation with respect to such cancellation of the policy is duly send to the insured as well as to the RTO, through regular methods of service, acceptable under law. We are of the opinion that, if M.A.C.A. No. 2017 OF 2013 10 the insurer discharges such burden of the proof that the intimation regarding cancellation of the policy was send in the address of the insured given in the proposal submitted while taking the policy and also to the RTO concerned, the company should be absolved from the liability, even towards third parties.
11. However, we take note of the fact that in Laxmamma case (supra) the Hon'ble appex court had used both the phrases, "reached the insured before the accident" as well as " sends intimation thereof to the owner" in paragraph 19 of the said judgment. Considering the lack of clarity on the above said aspect and also considering the judgment rendered by a bench of coherent jurisdiction in MACA No. 2471 of 2015, we are of the opinion that the point requires decision from a Bench having larger strength. Hence we are inclined to refer the matter for the decision of a Full Bench.
12. Accordingly, the above question is referred for decision of a Full Bench. The Registry shall place the matter before the Honourable Chief Justice for appropriate orders. It is made clear that the contention of the 2nd respondent in the appeal with respect to locus standi of the appellant to institute M.A.C.A. No. 2017 OF 2013 11 the appeal against the finding of exonerating the insurance company, is left open for consideration after the reference is answered.
Sd/-
C.K. ABDUL REHIM, JUDGE.
Sd/-
K.P. JYOTHINDRANATH, JUDGE.
// True copy // PA to Judge hmh