An insurance company cannot avoid liability to a third party for a claim covered by a policy, even if the policy was issued without receiving the full premium.

P. K. MOHANTY, J.

( 1 ) THE insurer, United india Insurance Co. Ltd. , is the appellant against the judgment/award of the Joint labour Commissioner-cum-Workmen's compensation Commissioner, Cuttack fixing the liability of compensation on the insurance company.

( 2 ) THE claimants were the legal heirs of the deceased Abdul Habib alias Habibur raheman Khan, who was helper in the bus bearing registration No. ORF 2155, which met with the accident on 24. 1. 1994 at about 4 a. m. , having overturned. The deceased was employed by opposite party no. 1, Managing Partner of Kulamani travels, in the offending bus and was receiving monthly wages of Rs. 900 and was aged about 35 years. The claimants were his widow and children. On receipt of notice of claim application, the opposite party "no. 1. the ovmer of the vehicle and. opposite party No. 2, the insurer (appellant herein) had filed their written statements denying liability and the entire claim of the petitioners.

( 3 ) THE insurer, opposite party No. 2, took the specific plea that the insurance cover having been cancelled due to bouncing of the cheque partly paid towards premium, the insurer is not liable to compensate and cover the liability of the owner. However, the Workmen's Compensation Commissioner found that the deceased was working as a helper in the bus in question and thus, was a workman and the death occurred in the course of employment under opposite party No. 1. Accordingly, an amount of Rs. 70,942 as compensation was determined and the opposite party No. 2 being the insurer, the liability was ordered to be covered by it, hence this appeal.

( 4 ) THE main question that calls for determination is, as to whether in the facts and circumstances of the case , the insured bus owner having not paid the premium in full and the part premium paid by cheque having bounced and the insurance company having cancelled the policy, the insurer has any liability under the policy to any employee of the alleged insured in view of the provisions of section 64-VB of the Insurance Act. Mr. A. K. Choudhury, learned counsel on behalf of Mr. B. P. Mohanty for the respondents-claimants, however, contend ed that the bouncing of cheque,if any, has no relevance so far as third parties are concerned. It may be between the insured and the insurer. The cover note having been issued, the third parties have no scope to know what transpires between the insured and the insurer and as to whether at any relevant point of time the policy has been cancelled by the insurance company.

( 5 ) BEFORE considering the rival contentions of the learned counsel for the parties, the provisions of section 64-VB of the Insurance Act, 1938 which are quoted below, need consideration:"section 64-VB. 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. Explanation. 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. (3) Any refund of premium which may become due to an insured on account of the cancellation of a policy or alteration in its terms and conditions or otherwise shall be paid by the insurer directly to the insured by a crossed or order cheque or by postal money order and a proper receipt shall be obtained by the insurer from the insured, and su