ORDER
Shivaprakash, J.
1. This appeal is presented by the Insurance Company against the award dated 6th August, 1993 passed in M.V.C. No. 929/89 by the Motor Accidents Claims Tribunal, Metropolitan Area, Bangalore. Under the award a sum of Rs. 35,000/- is awarded as compensation to the first respondent herein (claimant-petitioner before the Claims Tribunal) payable jointly and severally by the appellant insurance company, the owner and the driver of the vehicle in question who were the respondents before the Claims Tribunal with costs and current interest at 6% per annum from the date of presentation of the claim petition till the date of payment.
2. The facts of the case in brief are as follows: On 3-4-1989 on Easf End Main Road, 38th Cross, Jayangar, while the first respondent who is a minor was crossing the road, was hit by the Matador van owned by the second respondent. According to the second respondent the vehicle in question was covered by the insurance policy issued by the appellant in its favour.
3. The Tribunal after consideration of the entire evidence on record has allowed the claim petition and awarded the compensation fastening the liability jointly and severally on the appellant insurance company as well as the owner and the driver of the vehicle as stated above.
4. In this appeal the insurance company questions the correctness of the said award in so far as its liability is concerned on the ground that as on the date of the accident i.e., 3-4-1989 the insurance policy issued by it was not effective.
5. The insurance policy was issued on 10-8-1988 to commence from 26-10-1988 ending 25-10-1989. In terms of the policy the premium of Rs. 2742/- was required to be paid on or before 30-11-1988 by the insured-second respondent. It is not in dispute that the insured-second respondent did not pay the premium before the said date. However, it paid the premium amount on 19-5-1989 as submitted by the learned counsel and the same was accepted by the insurer-appellant.
6. Sri O. Mahesh, learned Counsel for the appellant, therefore, contended that since as on the date of the accident, the premium of Rs. 2742/- was outstanding, the policy did not cover the risk.
7. In the instant case while issuing the policy in question, it is not in dispute that the policy was issued in consideration of the bank guarantee furnished by the insured-second respondent. The Tribunal on the question of the liability of the insurance company has given its finding as follows:
“17. The next question that arises for consideration is whether the insurance company is liable to pay the compensation as it is pleaded that the premium was not paid to the policy taken. Ex. R1 is the policy. It shows that it was issued for the period covering from 26-10-1989 to 25-10-1990, but the correction shows that the policy coverage has to be read from 26-10-1988 to 25-10-1989, which means the period of accident, 3-4-1989, is covered. As per the particulars in this policy, it has been issued on Bank Guarantee on 27-3-1989. It also shows another date, 29-9-1989, and so the amount of premium might have been received on 29-9-1989. It is on the basis of this the 3rd respondent amended the written statement and contends that the risk was not covered on the date of the accident as the premium was paid only on 29-9-1989, six months after the policy was issued.”
8. The Tribunal has found that the policy was issued against the bank guarantee offered by the insured to the insurer, and the insurer has accepted the same and that the insurance company could have enforced the bank guarantee after accepting the risk against the bank guarantee, if the premium was not paid by the insured within the due date. The Tribunal has, therefore, held that it is not open for the insurer to repudiate the policy issued on the strength of the bank guarantee.
9. Sri O. Mahesh, learned Counsel for the appellant insurer relying upon the provisions of Section 64VB of the Insurance Act, 1938, submitted that the insurer could not have assumed risk unless premium was received in advance. The relevant portion of Section 64VB is reproduced below:
“64-VB. No risk to be assumed unless premium is received in advance.– (1) No insurer shall assume any risk in India in respect of any insurance business on which
premium is not ordinarily payable outside India unless and until the premium payable is received by him or is guranteed to be paid by the such person in such manner and within such time as may be prescribed or unless and until deposit of such amount as may be prescribed, is made in advance in the prescribed manner.”
(2) to (5)…..
10. In the instant case the fact that the insurance policy was issued in consideration of the guarantee furnished by the insured is not in dispute. As a matter of fact, the provisions contained in Section 64VB provides for issue of policy, against guarantee furnished by the insured regarding the premium to be paid. Since the insurance company on the basis of the guarantee furnished by the insured has assumed the risk, the contention of the learned Counsel for the insurance company, that the provisions of Section 64VB forbid the insurer from assuming risk has no merit.
11. The aforesaid provsions clearly enable the insurer to assume any risk in India in respect of any insurance business on which premium is not ordinarily payable outside India, if the premium payable is guaranteed to be paid by such person in such manner and within such time as may be prescribed. However, the learned Counsel contended that in terms of the guarantee, in the instant case the premium was required to be paid on or before 30-11-1988 and the same was not paid but was paid on 19-5-1989. If premium was not paid within the due date, the Insurer ought to have enforced the guarantee and recovered the premium. That is the very object of obtaining guarantee. If there is any lapse on the part of the insurer in enforcing the guarantee for recovery of the premium amount, that would not enure to the benefit of the insurer to repudiate the policy. The reasons given by the Tribunal on this aspect is legally correct.
12. In Asma Begum v. Nisar Ahmed, , a Division Bench of this Court, while considering the provisions of the aforesaid Section 64VB has held that “the risk on the part of the insurer commences only on the payment of the premium by the insured”. The facts of the said case are totally different. That was a case where premium, which was overdue, in renewal of a policy was paid at 11 a.m., whereas the accident had taken place at 10 a.m. i.e., before payment of the premium. It was in that context, this court held that since “the accident had occurred at 10 a.m. in Bangalore on 17-11-1983 and therefore, the policy was not in existence at the time of the accident and therefore the insurance company was not liable.” This decision on which reliance was placed by the learned Counsel for the appellant has no bearing on the question raised in this appeal.
13. Similarly, the decision in Bhajan Lal
Bishnoi v. Rajasthan State Road Transport
Corporation, 1991 Acc CJ 651 (Punj & Hat),
on which also the learned Counsel for the
Insurance Company relied, has no relevance
to the question raised in this case. That was a
case where the cheque issued by the insured in
payment of the premium had bounced and in
the absence of payment, the Supreme Court
held that the cover note issued by the insurer
in respect of the policy had become ineffective.
14. Before we conclude it is pertinent to notice the provisions of Rule 58 of the Insurance Rules, 1939. The relevant portion reads thus:
“58. Advance payment of premium.– For the purposes of sub-section (I) of Section 64VB of the Act, a risk in respect of a policy may be assumed before the premium payable in respect thereof is received.:
(i) if the entire amount of the premium is
guaranteed to be paid by a Banking Company
before the end of the calendar month next
succeeding to the month in which the risk is
assumed, if the premium due is not paid by the
insured before that date.”
15. From this Rule, it is evident that if the entire amount of the premium is guranteed to be paid, as in the instant case, the risk in respect of a policy could be assumed by the
insurance company before the premium payable in respect thereof is actually received.
16. We see no merit in this appeal. We dismiss the appeal at the admission stage.
17. Appeal dismissed.