The main legal point established in the judgment is that the contract for insurance comes into being from the date when the entire premium is paid, provided no advantage is taken from the policy without paying the full premium.

Rakesh Kumar Jain, J.

1. The Oriental Insurance Company Ltd. (for short, 'the Company') has assailed the validity of the order passed by the Permanent Lok Adalat (PUS), Sonepat Camp at Panipat dated 28.10.2013 by which an application filed by respondent No. 1 under Section 22C of the Legal Services Authorities Act, 1987 (for short, 'the Act') has been allowed.

2. In short, the facts of the case are that respondent No. 1 had purchased "Happy Family Floater Policy" of Rs. 1,00,000/- w.e.f. 18.10.2011 to 17.10.2012 from the petitioner. For the purpose of renewal of this policy for Rs. 1,50,000/- w.e.f. 18.10.2011 to 17.10.2012 respondent No. 1 handed over a cheque bearing No. 540425 of Rs. 3,715/- on 10.10.2012 out of the total premium of Rs. 5,124/- and also deposited Rs. 1409/- in cash. The policy was issued on 11.10.2012 for the period w.e.f. 18.10.2012 to 17.10.2013 and identity card was also issued in favour of the whole family. However, the cheque bearing No. 540425 dated 10.10.2012 was dishonored by the drawee bank. The petitioner cancelled the policy on 23.10.2012 on the ground that his cheque bearing No. 540425 dated 10.10.2012 was dishonored by the drawee bank. Petitioner sent this information to respondent No. 1 on 10.11.2012 which was received on 12.11.2012. Respondent No. 1 deposited a cheque of Rs. 3715/- drawn on 10.11.2012 with the petitioner which was not accepted and the amount of Rs. 1409/- deposited in cash also returned in February, 2013.

3. Aggrieved against the aforesaid action of the petitioner, respondent No. 1 filed an application under Section 22-C of the Act before the Permanent Lok Adalat (PUS) (for short, 'the Adalat') which has been allowed on the ground that there was clerical mistake in the cheque as it was wrongly mentioned Rs. 3750/- instead of Rs. 3715/- and as such there was no intention on the part of respondent No. 1 of not paying the premium by way of cheque in time. Accordingly, while allowing the application, it was also held that respondent No. 1 is entitled to the continuity of the policy from the beginning till date.

4. Counsel for the petitioner has submitted that since respondent No. 1 did not pay the premium of the policy as the cheque drawn by him on 10.10.2012 was dishonored by the drawee bank, therefore, there was no contract between the parties. As a result, thereof, petitioner had rightly cancelled the contract on 23.10.2012 and accordingly, intimated respondent No. 1 on 10.11.2012 and thereafter, any cheque deposited by respondent No. 1 is of no consequence. In support of his submission, he has referred to Section 64VB of the Insurance Act, 1938 (for short, the Act 1938') and also relied upon the judgment of the Supreme Court in the case of Deokar Exports Pvt. Ltd. vs. New India Assurance Company Ltd., 2009 AIR (SC) 2026. He has also pointed out that in the policy it was specifically mentioned that "in case of dishonor of premium cheque(s) the Company shall not be liable under the policy and the policy shall be void-ab-initio (from inception)."

5. On the other hand, counsel for respondent No. 1 has submitted that the contract between the parties was not terminated because the petitioner had retained the part payment of the premium i.e. amounts to Rs. 1409/- paid in cash and that the rest of the premium was paid on 29.10.2012 by way of cheque. It is also submitted that the petitioner has not sought any indemnification from the date when the policy was issued till the aforesaid payments were made, therefore, the decision in the case of Deokar Exports Pvt. Ltd. (supra) would not be applicable to his case. Rather he has relied upon the judgment of the Supreme Court in the case of National Insurance Co. Ltd. vs. Seema Malhotra, 2001 (1) PLR 826.

6. I have heard both the learned counsel for the parties, and perused the available record with the able assistance.

7. The question involved in this case is "as to whether the premium paid by an insured through cheque which is ultimatel