The main legal point established in the judgment is the concept of pay and recover, the nature of the insurance contract, and the welfare measure of the Motor Vehicles Act.

1. The Insurance Company is on appeal as against the award in a case of injury, where the Tribunal granted a relief of awarding compensation at Rs.68,806/- payable at 7.5% per annum interest by the Insurance Company to be recovered from the owner of the vehicle. The accident had occurred on 31.7.2005.

2. Admittedly, as on the date of the accident, a policy was there in existence, however, the policy contain a clause that in case of dishonour of premium of cheque, the document, namely, the policy stands automatically cancelled ab initio. The policy contains a cheque No.039617 dated 8.7.2005.

3. As far as the present case is concerned, the defence taken by the Insurance Company is that the owner of the vehicle, who had gone in for Insurance with the appellant herein issued a cheque for a sum of Rs.10,958/-. Unfortunately the cheque given by the insured was dishonoured by Syndicate Bank, Bangalore. Ex.R.5 is the return memo from the Bank and Ex.R.6, the advise slip. The Insurance Company sent a notice to the owner of the vehicle, the insured, under Ex.R.7 dated 1.8.2007. The letter sent was, however, returned as unclaimed. In the context of the Act that the cheque evidencing payment was dishonoured, thereby, going by the clause in the insurance policy, the contract has come to an end automatically, the question of any coverage by the Insurance Company did not arise. Since the date of cancellation was 01.08.2005 and the accident had occurred on 31.7.2005 and when dishonouring of the cheque, the contract had also come to an end automatically, the appellant is not bound to make the payment.

4. In support of the said contention, learned counsel for the appellant placed reliance on the decision reported in 2001 ACJ 638 (National Insurance Co. Ltd., V. Seema Malhotra and others). The Apex Court while considering the issue on the dishonour of the cheque and the nature of contract, particularly with reference to the insurance contract held that under Section 65 of the Indian Contract Act if the insurer has disbursed the amount covered by the policy to the insured before the cheque was returned dishonoured, the insurer is entitled to keep the money back and if the insured makes up a premium even after the cheque was dishonoured, but before the date of accident, since the policy is in existence, the question of the Insurance Company refusing to meet the liability is totally unjustified. Hence, in a case of a premium paid through the cheque it being Bill of Exchange drawn on a specified banker, hence, it involves a promise to make the payment. When the insured fails to pay the premium or the cheque was returned dishonoured by the Bank concerned, the insurer need not perform his part of the promise, consequently, the corollary is that the insured cannot claim performance from the insurer in such a situation.

5. In the background of this, learned counsel appearing for the appellant pointed out that on the facts of this case that the cheque was presented on 10.7.2005 and the bank informed on 13.7.2005 that the same was returned on account of want of funds, which led to the cancellation of the policy, the question of a liability, as such, being imposed did not arise. Consequently, the Insurance Company is not bound to make the payment.

6. Per contra, learned counsel appearing for the first respondent/claimant placed reliance on the decision reported in (1988) 1 SCC 371 (Oriental Insurance Co. Ltd., V. Inderjit Kaur and others) as well as the decision of the Full Bench of the Kerala High Court reported in I (2006) ACJ 38 (FB) (Oriental Insurance Company Limited V. A.B.Sivankuty & Ors.) in support of the contention that as far as the situation like the one on hand is concerned, the third party not having any knowledge about what transpired between the insured and the insurer, the benefit of the award granted under the welfare measure Act, like, Motor Vehicles Act, could not be denied at all. Consequently, going by the decision of th