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2020 Supreme(Mad) 1781
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
K. Murali Shankar, J.
The Branch Manager, The Oriental Insurance Company Limited, Pudukottai – Appellant
Versus
Mareeswaran & Another – Respondents
C.M.A(MD)No. 592 of 2015 & M.P.(MD)No. 1 of 2015
Decided On : 22-12-2020
Advocate Appeared:
For the Appellant :K. Bhaskaran, Advocate.
The liability of the insurer to indemnify third parties subsists unless the policy of insurance is cancelled by the insurer and intimation of such cancellation has reached the insured before the accident.
Headnote:
Motor Vehicles Act, 1988 - Liability of Insurer - Sections 147(5) and 149(1) - Doctrine of pay and recovery - [MOTOR VEHICLES] - [Sections 147(5) and 149(1)] - The court discussed the application of the doctrine of pay and recovery in the context of liability of the insurer. It emphasized the legal principle that the liability of the insurer to indemnify third parties subsists unless the policy of insurance is cancelled by the insurer and intimation of such cancellation has reached the insured before the accident. The court highlighted the necessity for the insurer to prove that they have sent the mandatory notice to the owner and the driver of the offending vehicle, informing about the dishonored cheque and consequent cancellation of the insurance policy. The court's decision was influenced by the interpretations of key legal provisions and their application in the present case.
Fact of the Case:
The appeal was filed against the award passed in a motor accident claims case, questioning the liability of the insurer to pay compensation due to the cancellation of the insurance policy.
Finding of the Court:
The court found that the insurer failed to substantiate that they had sent the mandatory notice to the owner and the driver of the offending vehicle, informing about the dishonored cheque and consequent cancellation of the insurance policy. The court held that the appeal was devoid of merits and dismissed it.
Issues: The main issue was whether the tribunal erred in mulcting liability on the insurer by invoking the doctrine of pay and recovery, despite the evidence presented by the insurer regarding the cancellation of the insurance policy.
Ratio Decidendi: The court emphasized the legal principle that the liability of the insurer to indemnify third parties subsists unless the policy of insurance is cancelled by the insurer and intimation of such cancellation has reached the insured before the accident. The court found that the insurer failed to prove that they had sent the mandatory notice to the owner and the driver of the offending vehicle, leading to the dismissal of the appeal.
Final Decision: The Civil Miscellaneous Appeal was dismissed, and the parties were directed to bear their own costs.
JUDGMENT :
(Prayer: Civil Miscellaneous Appeal filed under Section 173 of the Motor Vehicles Act, 1988, to set aside the award of Rs.151,500/- (Rupees One Lakh Fifty One Thousand Five Hundred Only) passed in M.C.O.P.No.254 of 2012, dated 02.12.2014 on the file of the Motor Accidents Claims Tribunal Cum Sub Judge, Valliyoor.)
1. The Civil Miscellaneous Appeal has been preferred against the award passed in M.C.O.P.No.254 of 2012, dated 02.12.2014 on the file of the Motor Accidents Claims Tribunal Cum Subordinate Judge, Valliyoor.
2. The Appellant/insurer, who was made liable along with the owner of a Motorcycle to pay a compensation of Rs.1,51,500/- with interest at 7.5% per annum, to the claimant, who suffered injuries, consequent to an accident occurred on 30.07.2012 involving the Motor Cycle bearing registration No.TN 02 AL 4546, questioning the liability mulcted on it, more particularly, the application of 'doctrine of pay and recovery.
3. Admittedly, the appellant has not challenged the finding of the tribunal that the Motor-cyclist was responsible for the accident.
4. It is not in dispute that the Motor Cycle bearing registration No.TN 02 AL 4546 is owned by the second respondent/first respondent. According to the claimant, the said two wheeler was insured with the Appellant/second respondent at the time of accident and as such, the Appellant as well as the second respondent are liable to pay the compensation.
5. The main defence of the Appellant/Insurance Company is that the Insurance Policy for the Motor Cycle bearing registration No. TN 02 AL 4546 was issued for the period from 26.04.2012 to 25.04.2013 on receipt of a cheque dated 25.04.2012, that the said cheque when presented for collection was dishonored for want of sufficient funds in the bank account of the owner of the vehicle, that the intimation regarding dishonor of cheque and cancellation of Insurance Policy was given to the owner and the same was also intimated to the concerned Regional Transport Office, that the accident was allegedly occurred on 30.07.2012 two months after the intimation of the cancellation of the Insurance Policy and that therefore, the Policy issued is 'void ab initio' and as such the Appellant/Insurance Company is not liable for the claim.
6. The only point that arises for consideration is whether the tribunal erred in mulcting liability on the Appellant/insurer by invoking the doctrine of pay and recovery, in spite producing the evidence to show that the dishonor cheque, which was issued for payment of premium and consequent cancellation of insurance policy was intimated to the owner of the vehicle and the concerned Regional Transport Office and that therefore, there was no insurance coverage on the date of accident.
7. The learned counsel for the Appellant has relied upon the following decisions of the Honourable Supreme Court;
(i) AIR 2000 SCC 1082:
New India Assurance Vs. Rula and others;
“13. This decision, which is a 3-Judge Bench decision, squarely covers the present case also. The subsequent cancellation of the Insurance Policy in the instant case on the ground that the cheque through which premium was paid was dishonored, would not affect the rights of the third party which had accrued on the issuance of the Policy on the date on which the accident took place. 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.”
(ii) 2012 AIR SCW 2657:
United India Insurance Co.Ltd., Vs. Laxmamma and others.
“26. In our view, the legal position is this: where the policy of insurance is issued by an authorised insurer on receipt of cheque towards payment of premium and such a cheque is returned dis
