JUDGMENT

S.B. Sinha, J.

1. Leave granted.

2. What would the effect of dishonour of a cheque when subsequently the amount of premium has been accepted in cash by the insurer is the question involved herein.

3. First respondent was driving a moped on 27.1.1995. An accident took place on the said date as the said vehicle was hit by a truck bearing registration No.GJ 6T 7000 which was allegedly being driven in a rash and negligent manner. The said truck first dashed against an Ambassador car and then hit the moped which was being driven by the respondent as a result whereof he suffered severe injuries.

4. For the purpose of getting the said truck insured, a cheque was tendered to the officers of the appellant company on 23.1.1995. As noticed hereinbefore the accident took place on 27.1.1995. The cheque when presented to the bank for clearance was allegedly dishonoured. On 30.1.1995, however, the amount of premium was paid in cash and received.

5. The Motor Vehicle Accident Claims Tribunal as also the High Court, however, opined that having regard to the fact that a cover note had been issued by the appellant, it was legally obligated to reimburse the claim of a third party.

6. Ms. Pankaj Bala Verma, learned counsel appearing on behalf of the appellant, would submit that in terms of Section 64VB of the Insurance Act, a contract of insurance issued would be valid only when the cheque issued towards payment of the premium is honoured. The learned counsel would urge that cheque is an instrument in terms whereof payment is guaranteed and it is accepted as a valid payment only on that premise but when it is dishonoured, the contract being without consideration need not be performed. It was furthermore contended that the learned Tribunal as also the High Court committed a serious error insofar as they failed to correctly read the Motor Input Advice cum Receipt showing that the insurance was valid from 23.1.1995 to 22.1.1996. It was submitted that no cover note, in fact, was issued; and what was issued was merely a money receipt which itself shows that the same was valid subject to the realization of the amount. Strong reliance in this behalf was placed on Deddappa & Ors. V. Branch Manager, National Insurance Company Ltd. [(2008) 2 SCC 595].

7. Mr. Jatin Zaveri, learned counsel appearing on behalf of the respondent, on the other hand, contended that a cover note, in fact, was issued on 23.1.1995 in favour of the insurer. The learned counsel submitted that not only the said fact was admitted in the pleadings of the insurance company but also the witness examined on behalf of the appellant took the same stand before the Tribunal as also before the High Court. Our attention in this behalf has also been drawn to the grounds of appeal taken in the Special Leave Petition.

8. The objection taken by the appellant in its written statement reads as under:

"It is hereby submitted that in this case applicant had not produced any documentary evidence pertaining to policy of involved vehicle except Cover Note, and in legal sense cover note is not authentic document, more over this cover note which was produced by the applicant shows cheque payment and if cheque does not realized then the contract of insurance does not exists and hence replying opponent does not liable to pay compensation and it is established principal that if replying opponent does not received premium that its liability does not exists. And in this regard replying opponent reserves it all right without prejudice this averments."

9. Appellant, therefore, proceeded on the basis that a cover note was, in fact, issued. Yet again, a similar contention has been raised before the Tribunal as would appear from the following excerpts from the award: "However, as per the contention raised by the Ld. Advocate for the applicant, the contract of insurance and policy the alleged vehicle were not in existence as on the date/date of occurrence; that the cheque issued was dishonoured and, therefore, t