The main legal point established in the judgment is the obligation of insurance companies to indemnify third parties in cases of dishonoured cheques and the cancellation of insurance policies, as per the provisions of the Insurance Act and the Motor Vehicles Act.

G. P. MITTAL, J.

CM APPL.13045/2006 (delay)

1. For the reasons as stated in the application, delay of 85 days in filing the appeal is condoned.

2. Application stands disposed of.

CM APPL.13044/2006 (stay)

1. By an order dated 18.07.2007, the execution of the impugned award had been stayed, if the award had not been satisfied.

2. As per the report made by the Registry, the amount was deposited with the Claims Tribunal and was duly paid to the Claimants.

3. The application is, therefore, dismissed as having become infructuous.

MAC. APP. 811/2006

1. The appeal is directed against the judgment dated 25.03.2006 whereby compensation of Rs.4,60,000/- was awarded by the Motor Accident Claims Tribunal (the Claims Tribunal) in favour of Respondents no.1 to 3 for the death of Raj Kumar, who suffered fatal injuries in a motor vehicular accident which occurred on 04.08.2004.

2. The sole ground of challenge raised by the learned counsel for the Appellant is that during inquiry before the Claims Tribunal, the Appellant sufficiently established that the cheque in respect of premium for the policy issued to cover the risk in respect of vehicle no.HR-47G-0376 was dishonoured. The Insurance Company also duly intimated the insured about dishonour of the cheque. That having been done, the Insurance Company had no liability to pay the compensation. In any case, even if the Appellant was obliged to discharge third party liability, it ought to have been permitted to at least recover the amount of compensation paid from the insured.

3. The Claims Tribunal while relying on the judgments of the Supreme Court in National Insurance Company Limited v. Seema Malhotra & Ors., (2001) 3 SCC 151 and Oriental Insurance Company Ltd. v. Inderjit Kaur & Ors. (1998) 1 SCC 371, held that once the policy of insurance was issued only on receipt of a cheque towards premium in contravention of provision of Section 64-VB of the Insurance Act, the Insurance Company was obliged to indemnify third parties. The Claims Tribunal further relied on the judgment of Andhra Pradesh High Court in M. Nageswara Rao v. New India Assurance Company Limited & Ors., 2004 ACJ 1554 where it was held that where the cheque is dishonoured, the drawer has to be informed about the dishonour of the cheque and given an opportunity to make good the loss sustained by the drawee. Since the Insurance Company had failed to prove that any such notice was issued to the insured, the Insurance Company is not exempted from indemnifying the insured.

4. Before adverting to the law on the subject, it will be appropriate to analyse the facts leading to the dishonour of the cheque and the steps taken by the Appellant to inform the insured about the dishonour of the cheque and subsequent cancellation of the Insurance Policy. Respondent Kailash Chand was the owner (and the insured) of vehicle no. HR-47G-0376. In its written statement, the Appellant Insurance Company stated that the cover note no.330027 dated 02.08.2004 issued by it became invalid on account of dishonour of the cheque issued towards premium. The Appellant got the information of the dishonour of the cheque vide memo of the Bank dated 13.08.2004 and the same was informed to the insured on 01.09.2004. Thus, it was pleaded that the Insurance Company had no liability at all as the contract of Insurance on account of non-payment of the premium became void.

5. The insured filed an Affidavit in the shape of reply and stated that the risk was covered for the period 03.08.2004 to 02.08.2005 by the cover note dated 02.08.2004. The accident occurred on 04.08.2004. The cheque given towards premium was not dishonoured because of ‘Insufficient Funds’ but due to alleged difference in signatures.

6. In his cross-examination, the insured as R1W1 admitted having come to know about the dishonour of the cheque on 02.09.2004 when he received a letter from the insurance company. He stated that he did not check his statement of account for the period 03.08.2004 to