The main legal point established in the judgment is that the insurance company's liability to indemnify the third party under the Motor Vehicles Act continues despite non-payment of premium and cancellation of the policy, provided the cancellation is proven and intimation is duly given to the insured and concerned authorities.

1. The Appellant-United India Insurance Co. has preferred this Civil First Miscellaneous Appeal under section 173 of Motor Vehicles Act, 1988 against the award dated 10.10.2003 passed by the Presiding Officer of Motor Accident Claims Tribunal, Jammu (hereinafter referred to as the Tribunal in short) in File No.55/Claims of 1999 entitled Bashir Ahmed Vs. United India Insurance Co. Ltd. and others.

2. The brief and admitted facts of the case are that the claimant-respondent No.1 herein Bashir Ahmed received grievous injuries as a result of hit by a rashly and negligently driven Truck bearing Registration No.JKC-2799 by its driver respondent No. 3 on 09.01.1998. He preferred a claim of Rs.14.70 lacs as compensation from the driver, owner of the truck and Insurance Company with which the said truck was insured. The owner and driver of the truck did not contest the claim but the insurance company-appellant herein contested the said claim petition on the ground that there was no privity of contract between the owner and the Insurance Company. It is alleged by the Insurance Company that the owner of the vehicle got his vehicle insured with the appellant-Insurance Company on 28.04.1997 and a policy No.111407/24/1/126/97 was issued which was valid from 28.04.1997 to 27.04.1998. The premium was paid through a cheque which was dishonoured by the banker and as such no premium was received by the Insurance Company. The Insurance Company had cancelled the insurance policy on 15.07.1997, as such the insurance Company-appellant not liable to indemnify the insurer. After trial the learned Tribunal awarded an amount of Rs.1,71,000/- along with interest at the rate of 9% per annum vide impugned order. Being aggrieved by this award, the appellant-Insurance Company has preferred this appeal.

3. I have heard the learned counsel for the appellant and respondent No.1-claimant and have also perused the record of the case.

4. The contentions of the learned counsel for the appellant is two fold namely that the Insurance Company was not liable to pay a compensation amount on the ground that no premium was received by the Insurance Company from the insured and there was no privity of contract between them and quantum of compensation is not properly assessed by the Tribunal. On the other hand, the learned counsel for the claimant-respondent No.1 has contended that there is no evidence on the file to show that the intimation in respect of cancellation of insurance policy was sent to the owner nor the Regional Transport Officer has been informed about the same. She has further stated that the Insurance Company is not able to trace the owner and the insurance policy remained with the owner of the vehicle. It is further contended that the compensation has been properly assessed by the Tribunal.

5. It is an admitted fact that the owner of the vehicle had insured the vehicle by payment of a cheque as premium and the appellant-Insurance Company issued a policy. The Insurance Company has alleged that the Company could not get the premium amount of the insurance policy as the cheque which has been issued by the owner of the vehicle for premium was dishonoured and accordingly policy was cancelled.

6. The Tribunal has framed a specific issue in respect as to whether the Insurance Company is liable to indemnify the owner of offending vehicle. The Tribunal after relying upon case reported in 2001 ACJ 670, 2001 ACJ 585 and 2002 ACJ 1845 held as under:-

Non-payment of premium and subsequent cancellation of policy is matter between the owner and the company of the insurance company is not absolved of its obligation to third parties under the policy because it did not receive the premium. It had issued the policy of insurance on receipt of cheque towards premium which was dishonoured later on. In this connection, it has been held by the Honble Supreme Court in a case reported in 1998 ACJ 123 as under:

"We have, therefore, this position Despite bar created sections 64-VB of the In

Click Here to Read the rest of this document