This Civil Miscellaneous Appeal has been preferred by the Insurance Company against the order of the Motor Accident Claims Tribunal, West Godavari at Eluru in O.P.No.150 of 1997. The respondents-claimants filed an application under Section 166 of the Motor Vehicle Act, 1899 claiming compensation of Rs.1,00,000/- due to the death of a lady by name Abbisetti Varalakshmi, a student aged about 19 years. The Tribunal awarded compensation of Rs.1,00,000/- as prayed for, making the owner of the vehicle and the insurance company liable to pay the compensation amount.

2. Being aggrieved by the same, the Insurance Company preferred the present appeal contending that there was no insurance coverage to the accident vehicle as on the date of accident. The Insurance Company further contended that long prior to the accident, the owner of the vehicle issued a cheque towards premium for the policy and the cheque was bounced and the amount was not paid towards premium at any time subsequently. Therefore, there was no valid insurance coverage as on the date of accident. Therefore, the insurance company is not liable to indemnify the loss of the owner of the vehicle on account of cancellation of the insurance policy issued in favour of the owner of the vehicle on account of non-payment of the premium. The said plea was raised before the Tribunal. But, the Tribunal rejected the same by relying on a judgment in New India Assurance Co. Ltd., v. Rula1, wherein the Supreme Court held as follows: "if on the date of accident, there was a policy of insurance in respect of the vehicle in question, the 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 insurance policy on the ground of non-payment of premium would not affect the rights already accrued in favour of the third party."

3. In the case covered by the above decision, the claimants made a claim for compensation due to a motor accident against the insurance company. The claim was allowed by the Tribunal as well as the High Court making the insurance company liable. In the said case, the insurance company insured the vehicle on 08.11.1991 and issued a policy. On the night of the same day, the vehicle met with an accident resulting in death of three persons travelling in the same. The owner of the truck gave a cheque towards the premium of the policy, but the cheque was dishonoured on 08.11.1991. In those circumstances, the Supreme Court held as indicated above.

4. In the case on hand, the insurance company relied on Exs.B.1 to B.3 documents. Ex.B.1 is the attested xerox copy of receipt dated 14.02.1996 for Rs.4,758/-. Ex.B.2 is the attested xerox copy of advice, dated 16.02.1996 of the State Bank of Hyderabad informing that there is no amount in the account. Ex.B.3 is the attested xerox copy of the cheque for Rs.4,758/-. The accident occurred on 20.05.1996. The accident took place about three months after bouncing of the cheque. It is contended by the Insurance Company that the policy issued by the company is the result of contract between the owner of the vehicle and the insurance company. The Tribunal, while observing that Section 2 (d) of the Indian Contract Act defined a term 'consideration', which is an act in pursuance of the promise made by the promisor to constitute consideration, held that it cannot be said that the insurance company is not at all liable to pay any compensation. The Tribunal further observed that since there was valid fitness certificate and permit to the truck and the driver of the truck was having valid licence as on the date of accident, the insurance company cannot avoid the liability. Having issued the insurance policy believing the promise made by the owner of the vehicle about the payment of premium and after making the payment, the insurance company can proceed against the owner of