P.A. Mohammed, J.

This appeal has been filed by the third respondent, M/s. New India Assurance Company Ltd., in O.P. (M.V.) No. 610/89 of the M.A.C. Tribunal, Kozhikode. The main point arises for decision in this appeal relates to the liability of the appellant to indemnify the owner of the offending vehicle for the compensation awarded by the Tribunal.

2. The claimant filed the above application claiming a total compensation of Rs. 75,000/- for the personal injuries sustained by him in the accident occurred on 27.2.1989. The offending vehicle involved in the accident was bus No. KRZ 664 owned by the first respondent and the accident was caused due to the rash and negligent driving of the bus by the second respondent. The respondents 1 and 2 contested the claim petition denying negligence as alleged. They also objected to the quantum of compensation claimed. The appellant denied the liability to indemnify the owner of the vehicle on the ground that at the time of accident there was no valid insurance inasmuch as the cheque issued by the owner towards the premium on obtaining policy was dishonoured. Subsequently the policy was cancelled on 21.10.1988. The Tribunal after the enquiry awarded a sum of Rs. 19,950/- with 12% interest as compensation payable to the claimant. On the question of liability, the Tribunal found that the appellant was liable to indemnify the owner though the policy of insurance was cancelled. Being dissatisfied with the above finding, this appeal has been preferred by the insurer.

3. Sub-ss.(1) and (2) of S.64-V B of the Insurance Act, 1938 are as follows:

"S.64-V B. No risk to be assumed unless premium is received in advance.

(1) No insurer shall assume any risk in India in respect of any insurance business on which premium is not ordinarily payable outside India unless and until the premium payable is received by him or is guaranteed to be paid by such person in such manner and within such time as may be prescribed or unless and until deposit of such amount as may be prescribed, is made in advance in the prescribed

manner.

(2) for the purposes of this Section, in the case of risks for which premium can be ascertained in advance, the risk may be assumed not earlier than the date on which the premium has been paid in cash or by cheque to the insurer.

The Explanation to this Section provides that where the premium is tendered by postal money order or cheque sent by post, the risk may be assumed on the date on which the money order is booked or the cheque is posted, as the case may be. In view of this explanation, we cannot agree to the position that the risk would be covered only on encashing cheque towards the payment of premium. The bouncing or dishonouring of cheque is a posterior action whereas the posting of cheque is an anterior action. When the cheque is posted the risk may be assumed and thus the liability to indemnify arises.

4. The counsel for the appellant places reliance on the decision of the Supreme Court in United India Insurance Co. Ltd. v. Ayeb Mohammed (1991 ACJ 650). In that case, the Supreme Court said that the High Court was not right in holding that in the absence of steps for cancellation of the cover note, the risk would be subsisting. The fact that cheque had bounced was a matter within the knowledge of the insured and hence no special notice to the insured was required. That means the liability of the Insurance Company ceased to exist.

5. What is contended by the appellant is that in view of the above decision of the Supreme Court there was no liability on the part of the insurer for indemnification since the dishonouring of cheque was within the knowledge of the owner of the vehicle. But this contention is seriously opposed by the counsel for the respondents by specifically pointing out that the decision in Ayeb Mohammed's case, supra (1991 ACJ 650) had been overruled by a larger Bench of the Supreme Court having three judges in Oriental Insurance Co. Ltd. v. Inderjit Kaur & Ors