JUDGMENT
Kalyan Jyoti Sengupta and Aniruddha Bose, JJ.
1. Both the appeals are disposed of by a common judgment.
2. The insurance company preferred appeal against order passed under Section 140 of Motor Vehicles Act, 1988 (F.M.A. No. 685 of 2005) while the kins of the victim have preferred an appeal against judgment and award passed finally by the learned Tribunal under Section 166 of the said Act against the insurance company.
3. The grievance in substance of the insurance company is that on the date of the incident the insurance policy was not renewed. The cheque which was issued for payment was subsequently dishonoured. Since there has been no consideration, therefore, the contract for insurance is void and the insurance company cannot be fastened with liability in the instant case.
4. The kins of the victim who have preferred separate appeal against the final order have questioned by ventilating their grievances that the multiplier factor has been overlooked by the learned Tribunal as provided in the statute. The multiplier factor should have been 11 in place and stead of what has been followed by the learned Tribunal.
5. It is also the grievance of the kins that the learned Tribunal has not granted statutory interest payable on the amount of compensation.
6. From the scheme of the provisions of Section 140 of the said Act the order passed thereunder, in our view, is an interim measure and merges with the final order passed under Section 166 of the Motor Vehicles Act, 1988.
7. It is pertinent to record herein that insurance company has not preferred any appeal against the final order. But the basic question raised herein is squarely entertain-able both in case of Section 140 as well as Section 166 of Motor Vehicles Act, 1988 as it goes to the very root of the matter as to whether the insurance company can be made liable for making payment or not.
8. The learned Counsel for the insurance company contends that there has been no insurance contract because of dishonour of cheque. In support of his submission he has relied on two decisions of the Supreme Court in National Insurance Co. Ltd. v. Seema Malhotra and Tamil Nadu State Trans. Corporation Ltd. v. S. Rajapriya . Latest Supreme Court decision was relied upon on the point of interest. He says that it is for the Tribunal to decide as to what multiplier method would be followed or what rate of interest should be granted and this depends upon each and every individual fact and circumstances of the case and no strait-jacket formula can be laid down. Even the superior court cannot substitute the act of discretion in place of that of the Tribunal.
9. Mr. Banik, learned advocate, while pressing his client’s appeal and opposing the appeal of the insurance company contends that from the facts and circumstances of this case it will appear that when the accident took place there was no whisper as to coverage. The cheque was dishonoured on a date subsequent to the date of occurrence. Intimation of such dishonour was given by a letter. He contends that insurance contract is related to insurance company and the insured and the third party has nothing to do with the non-payment of consideration. Once the policy is issued it is under the statutory provision, the insurance company is bound to pay compensation to the third party. In support of this submission, he has relied on a decision of the Full Bench of Kerala High Court in Oriental Insurance Co. Ltd. v. Sivankutty 2006 ACJ 106 (Kerala).
10. Before we deal with rival contentions of both the learned Counsel, we think it fit to narrate the sequence of events which led to filing of this case.
11. On 1.8.2000 the respondent No. 7, the owner of the offending vehicle issued a cheque in favour of the appellant insurance company (in short ‘the company’) for Rs. 7,430 towards renewal of policy from 1.8.2000 to 31.7.2001.
12. On 11.8.2000 the company had addressed a letter to the Regional Transport Authority, Motor Vehicle Department, intimating him that on the dishonour of the cheque issued by the owner of the vehicle it was not holding any risk, if any accident took place during the stipulated period with a copy to the respondent No. 7.
13. On 30.9.2000 the owner of the vehicle, respondent No. 7, obtained fresh policy on payment of premium, which was valid from 30.9.2000 to 29.9.2001.
14. It is also an admitted position that prior to 1.8.2000 this vehicle was insured and valid insurance certificate was there.
15. On the aforesaid facts as stated by the insurance company the aforesaid case was defended before the learned Tribunal and the learned Tribunal, however, did not accept the contention of the insurance company. Learned Tribunal held ultimately while disposing of the application under Section 166 of the said Act and directed the insurance company to pay compensation relying on a decision of the Supreme Court in Oriental Insurance Co. Ltd. v. Inderjit Kaur , wherein it has been held that by reason of the provisions of Sections 147(5) and 149(1) of Motor Vehicles Act the insurance company is also liable.
16. Learned Counsel for the respondent submits that the decisions cited by him here are the recent decisions and these decisions should have been applied to hold that there is no contractual obligation to indemnify the damages.
17. We are unable to accept this contention on the facts and circumstances of this case. It has been held by Supreme Court in its earlier decisions and following the same the Full Bench of Kerala High Court in the case as cited by Mr. Banik has also held that the third party is not concerned with the non-payment of the premium. Contractual rights and obligations between the insurance company and the assured are binding upon both the sides and it does not affect third party. Admittedly, in this case the victim was the third party. The decision in Seema Malhotra’s case , by Apex Court was extensively dealt by the Full Bench of Kerala High Court. After exhaustively having taken note of the Apex Court decision Full Bench of Kerala High Court ruled in para 20 as follows:
…The position is that the liability of 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 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.
18. Even in Seema Malhotra’s case 2001 ACJ 638 (SC), this basic principle of law of the position of third party vis-a-vis the insurance policy has not been diluted. In para 2 at p. 638 of this judgment the Supreme Court has taken note of this legal position as follows:
There is no dispute that the insurer is liable as against third parties because it is covered by the statutory provisions contained in Chapter XI of the Motor Vehicles Act.
19. Accordingly, we are of the view that the Supreme Court decisions cited by the learned advocate for the insurance company are of no assistance in this case. We respectfully follow the ratio laid down by the Kerala Full Bench and apply in this case also.
20. Factually, however, we take note in this case specifically that because of dishonour of cheque which resulted in the non-payment does not render the contract ipso facto invalid or void. The insurance company is concerned with the recovery of consideration money provided under the statute, namely, the Negotiable Instruments Act. Under the statutory provision it is possible to recover entire amount of consideration with interest. It is true until and unless cheque is encashed no payment can be said to have been made but that does not mean consideration is not there. According to us the insurance company without taking action for recovery in accordance with law of the amount of dishonoured cheque, revoking the contract, such action would be illegal revocation so far the third party is concerned. As such we cannot say that the insurance company was justified to cancel the insurance policy. Moreover, we find a document whereby the insurance company intimated to the owner of the vehicle on 10.1.2001 about cancellation. Accordingly, in our opinion the policy is deemed to have remained valid and subsisting until 10.1.2001.
21. Factually, in this case we are of the view that on the date of occurrence the insurance policy was valid and subsisting although dishonour of cheque took place.
22. It does not appear from any document that insurance company served any notice under Section 138 of the Negotiable Instruments Act. They gave an intimation of cancellation of the insurance policy before the accident took place.
23. We think that the learned Tribunal has correctly held that the insurance company is liable.
24. Subsequently, it is found that fresh insurance policy was obtained by the owner of the vehicle. This fact, however, should not be overlooked by us. So we hold that insurance company is entitled to recover the amount of compensation. As such we allow insurance company to initiate recovery proceeding to recover the amount of compensation, if so advised.
25. Now coming to the question of multiplier factor we are of the view that the learned Tribunal has patently adopted mistaken multiplier factor having regard to the age of the victim. The age of the victim on the date of the accident was within the age group which enables one to get the benefit of multiplier factor 11. Accordingly, we find substance in the submission of Mr. Banik regarding multiplier factor. It is true that the learned Tribunal has not given any reason as to why the aforesaid multiplier factor has not been followed.
26. It is settled position of law that statutory guidelines have to be followed as a matter of rule. There are exceptional circumstances where this factor may be departed from. Since no extraneous facts and circumstances have been established nor the Tribunal made any endeavour to find out those circumstances we find that the multiplier factor should be 11. As such quantum of payment has to be ascertained afresh upon multiplying the aforesaid adopted method.
27. We think that the learned Tribunal has not granted any interest as required to be under the law, namely, Section 171. Therefore, we allow interest at the rate of 9 per cent from 12.12.2001 till the date of making payment. The period from the date of filing the application and till the aforesaid dates it appears from the records that time was unnecessarily taken for hearing and adjournments were sought for. So we feel that during this period this interest should not be allowed.
28. Accordingly, claim is modified as per the following particulars:
Rs. 67,680 x 11 = Rs. 7,44,480
On account of loss to
estate, consortium,
funeral expenses Rs. 9,000
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Total Rs. 7,53,480
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This amount is subject to adjustment of any payment paid under Section 140 of the said Act.
29. We, therefore, direct the insurance company to pay the aforesaid modified amount of compensation together with interest which is calculated from the date hereinabove mentioned up to the date of passing of this order.
30. This amount shall be deposited with the learned Tribunal within 8 weeks from the date of receipt of copy of the judgment and order and liberty is given to recover the same from the owner of the vehicle who has not come forward in this proceeding either in this Court or before the Tribunal.
31. Let copy of the judgment and order be forwarded to the owner of the vehicle who will be at liberty to take steps in accordance with law as may be advised.
32. Let the lower court records be sent down to the court below.
33. After making payment of the aforesaid compensation amount before learned Tribunal and on production of necessary documents of deposit the insurance company, appellant herein would be entitled to withdraw the statutory deposit.
34. If urgent xerox certified copy of this judgment and order is applied for the same will be supplied to the applicant upon compliance of all the formalities.