JUDGMENT
Anand Byrareddy, J.
1. The insurer is in appeal challenging the liability fastened, on it.
2. The brief facts as would be necessary for disposal of this appeal are as follows:
One Irayya Suresh Haladevarmath died as a result of an accident caused by a truck belonging to the third respondent herein, on 7.5.2002. His parents, the respondents 1 and 2 herein filed a claim petition seeking compensation on the death of their son. It is seen that the offending vehicle was covered under a policy of insurance issued by the appellant, on 15.1.2002., It however, transpires that on 5.2.2002, the cheque which was issued towards payment of premium, by the insured is said to have been dishonoured. This fact was intimated to the insured -third respondent. He was also intimated of the cancellation of policy for want of premium, by a registered letter dated 13.2.2002, by the appellant. In terms of Rule 10 of Third Party Insurance Rules, the appellant, had also intimated the concerned Regional Transport Officer, Kolhapur, as regards the cancellation of policy. Documents in respect of such despatch of intimation of cancellation of policy, by registered post, have been produced in evidence and marked as Ex.R1 to R17. In the face of this sequence of events, the tribunal held that the appellant was liable to satisfy the claim towards compensation notwithstanding the contention that the policy was cancelled for want of premium, prior to the date of accident. It is this, which is under challenge.
3. The counsel for the appellant would submit that the policy stood cancelled and the appellant has taken steps in the manner known to law to intimate the due cancellation of the policy not only to the third respondent who was the insured but also to the concerned Regional Transport Authority and has produced the necessary documents in support of this contention. The tribunal has, however, fastened the liability on the insurer which is wholly out of place and the counsel would submit that the appeal be allowed.
4. Per contra, the counsel for the claimants and the counsel for the insured would submit that notwithstanding the alleged cancellation of the policy, which fact was never intimated to the third respondent as the third respondent was never served with a copy of the notice of dishonour of cheque, the third respondent has remained unaware of the cancellation of the policy and the claim of the appellant that there was due notice of cancellation of policy is incorrect. The tribunal has thus held in favour of the respondents following the ratio of the judgments in the following cases:
(a) Oriental Insurance Company Limited v. Inderjit Kaur and Ors. where a bus had mat with an accident, its policy of insurance was issued by the appellant on 30.11.1989, the premium for the policy has been paid by cheque, the cheque having been dishonoured, a letter has been sent by the appellant to the insured, on 23.1.1990 stating that since the cheque had not been encashed, the premium of the policy has not been received and therefore, the appellant would not be at risk. The premium was thereafter, paid in cash, on 2.5.1990. In the meantime, on 9.4.1990, an accident had taken place whereby the bus had collided with a truck, whose driver died. A claim petition came to be filed and the appellant denied the claim asserting that under Section, 64-VB of the Insurance Act, 1938, no risk was assumed by an insurer unless the premium thereon had been received in advance. The tribunal, having rejected the appellant’s contention and awarded compensation, the same was carried in appeal. The appeal was summarily dismissed by the High Court and the appellant was before the supreme Court. The Supreme Court held that despite the bar created by Section 64-VB of the Insurance Act, the appellant, an authorised insurer, had issued a policy of insurance to cover the bus without receiving the premium therefor. By reason of the provisions of Section 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 to avoid or cancel the policy for the reason that the cheque issued in payment of the premium thereon had not been honoured.
(b) New India Assurance Co. Ltd., v. Rula and Ors. where the appellant had insured a truck and issued an insurance policy in terms of the requirements of the Motor Vehicles Act, 1988. The insurance policy was issued on 8.11.1991 and on the same day, the truck had mat with an accident, in which three labourers had died. The legal representatives of the deceased had laid claims for compensation which were contested by the appellant on the ground that the truck was not covered by any insurance policy since the policy was issued on the basis of a cheque dated 8.11.1991 towards payment of premium and since the cheque was dishonourned on 16.11.1991, the insurance policy itself was cancelled and therefore, the insurance company was not liable. It was contended before the Supreme Court that the policy of insurance represents a contract between the insurer and the insured, for consideration in the form of premium and if the premium is not paid, the contract would not be valid as there cannot be any contract without consideration. The appellant had relied upon the provisions of the Contract Act, 1872 and contended that since the cheque through which premium was sought to be paid to the appellant was dishonoured by the bank when it was presented for encashment, there was a failure of consideration and as such, no contract of insurance came into existence as between the insurer and the insured. It was also contended that under Section 64-VB of the Insurance Act, 1938, no risk would be assumed unless premium was received in advance. The supreme court repelled these contentions and held that the subsequent cancellation of the insurance policy on the ground that the cheque through which premium was paid was dishonoured, would not affect the rights of the third, party which had accrued on the issuance of the policy on the date on which the accident took place. If on the date of accident, there was a policy of insurance in respect of the vehicle in question, a third party would have a claim against the insurance company and the owner of the vehicle would have to be indemnified in respect of the claim of that party. Subsequent cancellation of the insurance policy on the ground of non-payment of premium would not affect the rights already accrued in favour of the third party.
(c) Mittar Singh v. Gian Chand and Ors. in which, the claimants were travelling in a bus, the bus having met with an accident, the same was found insured. The insurance company had taken a plea that the vehicle was not insured with it at the time of the accident. It was contended that the cover note was issued in favour of the appellant on 19.10.1996 and an amount of Rs. 12,951/- was paid by the owner of the bus by cheque to the insurance company. The cheque having been dishonoured when it was sent for collection, the insurance company cancelled the policy and communicated this fact to the insured within one month from the date of issuance of such a cover note. The same having bean received on 23.11.1996, the insured had paid a fresh premium on. 26.11.1996 and thereafter, the vehicle was inspected and a fresh policy of insurance was issued which was effective from 11.12.1996 to 10.12.1997. Therefore, the insurance company contended that, as on 25.11.1996, there was no insurance policy in force and as such, the insurance company is not liable. It was contended that the letter of the insurance company though was dated 14.11.1996, it was posted on 22.11.1996 and that on 23.11.1996 itself, the appellant had got a draft prepared and delivered it to the insurance company on the same day and as such the original cover note would be revalidated and there was an effective policy on the date of accident. In the alternative, it was contended, which the High Court of Himachal Pradesh accepted, that even if it was to be assumed that the insured had not paid the insurance premium on 23.11.1996, then also insurance company would still be liable since the insurance company has not given any explanation as to when the policy was cancelled and as to why the cheque was dishonoured. It was also contended that the insurance company, by retaining the original cheque and not returning the same, is deemed to have accepted the premium.
5. The counsel would further submit that in the instant case, the third respondent not having been served with a notice and there being no document of any such service being placed on record, it cannot be accepted that there was cancellation of the policy to the knowledge of the third respondent and therefore, the appellant would necessarily have to be held liable to make the payment of compensation. The counsel would also place reliance on the Head Note reported in 2001 civil Law Journal 409 and would contend that the Head Note would squarely cover the facts and circumstances of this case.
6. Insofar as the reliance placed by the respondents on the judgments is concerned, they would turn on facts which are different from the case on hand.
In the case of INDERJIT KAUR supra, though a letter was issued by the insurance company to state that the cheque which was issued, towards payment of premium, stood dishonoured, the later payment made by the insured in cash, was accepted and therefore, there was no effective cancellation of the policy and the accident having occurred in the meantime, the insurer was held liable.
In the case of RULA supra, it was again found that the policy of insurance having been issued on 6.11.1991 and the accident also having occurred on 8.11.1991, the policy having been cancelled at a later point of time namely, on 16.11.1991, the same would not affect the rights of a third party and therefore, the insurer was held liable.
Insofar as the case in GIAN CHAND supra is concerned, the High Court of Himachal Pradesh has found as a fact that there was no effective cancellation of the policy as on the date of accident and therefore, the insurance company was held liable.
These judgments would not aid the contentions of the respondents and the contention on behalf of the appellant to the effect that there was no premium paid and hence, the policy stood cancelled in terms of the intimation by way of registered post which is duly evidenced, has to be accepted. There was no obligation on the part of the appellant to meat the claim towards compensation since there was no effective policy as on the date of accident. In the light of the judgments of the Supreme Court which have been considered hereinabove, the Head Note sought to be relied upon by the respondents in support of their contentions would not be tenable as the facts are not evident from a reading of the Head Note and it is unfair on the part of the counsel for the respondents to rely on this short note judgment when the ratio of the judgment is not reflected therein.
7. Hence, the award stands modified to absolve the appellant from any liability to satisfy the claim towards compensation. The claimants are left to their remedies as against the owner of the vehicle.
The amount in deposit to foe refunded to the appellant.