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High Court Of Madhya Pradesh
S. K. DUBEY, R. C. LAHOTI
UNITED INDIA INSURANCE CO.LTD. - Appellant
Versus
RATANSINGH - Respondents
M. P. 895 Of 1992
Decided On : 08/28/1992
MOTOR VEHICLES ACT - INSURANCE - LIABILITY OF INSURER - NO FAULT LIABILITY - ASSUMPTION OF RISK - PREMIUM PAYMENT - S. 64 VB OF INSURANCE ACT, 1938 - INTERIM COMPENSATION - AWARD QUASHED.
Fact of the Case:
A truck insured with the petitioner insurance company met with an accident, resulting in the death of 10 passengers and injuries to 3 others. The legal representatives of the deceased and the injured persons filed claim applications under S. 166 of the Motor Vehicles Act, 1988, along with applications for interim award of compensation under S. 140. The Tribunal passed interim awards directing the petitioner to pay compensation of Rs. 25,000/- in respect of each death and Rs. 12,000/- in respect of each disablement, with interest at 12% per annum.
Finding of the Court:
The petitioner challenged the interim awards on the ground that the truck was not insured with the company at the time of the accident, as the cheque issued by the insured towards the premium had been dishonored. The court held that the petitioner was not liable to pay compensation as the risk had not been assumed due to non-payment of premium, as required under S. 64 VB of the Insurance Act, 1938.
Issues: 1. Whether the petitioner was liable to pay compensation under the interim awards, despite the dishonor of the cheque issued towards the premium. 2. Whether the provisions of Chapter X of the Motor Vehicles Act, 1988, which provide for no-fault liability, override the requirement of premium payment under S. 64 VB of the Insurance Act, 1938.
Ratio Decidendi: 1. The court interpreted S. 64 VB of the Insurance Act, 1938, and held that an insurer cannot assume risk unless and until the premium is received in advance. The court reasoned that the purpose of the section is to secure advance payment of premium before the assumption of risk. 2. The court held that the mere issuance of a cover note against a dishonored cheque does not constitute a contract of insurance and does not bind the insurer to pay compensation. 3. The court distinguished the case of Ayab Mohammed (1991 ACJ 650), where the insurer had received the cheque as valid payment but failed to present it for encashment, from the present case, where the cheque was dishonored due to insufficient funds.
Final Decision: The court quashed the interim awards passed by the Tribunal and directed the cases to go back to the Tribunal for determining the liability of the owner of the offending truck and the other insurance company, NICO.
( 1 ) THIS order shall also govern disposal of Misc. Petition Nos. 896/1992 (United India Insurance Co. Ltd. v. Mahila Katori), 897 of 1992 (United India Insurance Co. Ltd. v. Mahila Javitri), 898; 1992 (United India Insurance Co. Ltd. v. Udhalsingh); 899/1992 (United India Insurance Co. Ltd. v. Chotu); 900/1992 (United India Insurance Co. Ltd. v. Mahila Veermati); 901/1992 (United India Insurance Co. Ltd. v. Smt. Kiran); 902/1992 (United India Insurance Co. Ltd. v. Smt. Sudamabai), 905/1992 (United India Insurance Co. Ltd. v. Mahila Meena); 906/1992 (United India Insurance Co. Ltd. v. Mahila Rajabeti); 907/1992 (United India Insurance Co. Ltd. v. Mangaliya) and 908/1992 (United India Insurance Co. Ltd. v. Smt. Mayadevi ).
( 2 ) ALL the aforesaid petitions under Art. 227 of the Constitution of India arise out of the interim award passed under S. 140 of the Motor Vehicles Act 1988 (for short, the 'act') by the Motor Accidents Claims Tribunal, Morena (for short, the 'tribunal') directing payment of fixed sum of compensation of Rs. 25,000/- in respect of nine cases of death and Rs. 12,000/- in respect of three cases of disablement on the principle of 'no fault liability. '
( 3 ) THE facts giving rise to these petitions are thus : On 8-8-1991 at about 5-30 p. m. the deceased and the injured persons were travelling as passengers in Tempo No. MPG 9947 which was going from Morena to Kadhiyahar on Morena-Ambah Road; truck No. CPW 7506, owned by M/s Agrawal Construction Company, Morena, driven by one Lochansingh, was coming from the opposite direction, which dashed against the said Tempo causing severe multiple injuries to 16 passengers travelling in the tempo. Out of sixteen passengers, 10 died as a result of the said accident. The legal representatives of the deceased persons and three injured persons presented 12 separate claim applications under S. 166 of the Act before the Tribunal against the owner, driver and the insurer of the truck. The petitioner and the respondent, National Insurance Company (for short, 'nico') were impleaded as insurers of the truck. Except in claim case No. 64/1991, out of which M. P. No. 907/1992 has arisen, the owner, driver and the insurer of the tempo were not made parties to the other claim cases. Along with the application u/s. 166, the claimants also filed applications under S. 140 for interim award of a fixed compensation on the principle of 'no fault liability. '
( 4 ) THE owner of the truck claimed indemnity because of insurance of the vehicle (truck ). The petitioner/company in reply to the application u/s. 140 stated that the truck (No. CPW 7506) was not insured with the company; the cover note covering the risk was void from its inception, as the insured owner gave cheque No. 974397 of Rs. 5,574/- towards premium of insurance of the truck, of which a receipt and a cover note were issued; the cheque was sent for collection and encashment by the State Bank of Indore, Morena Branch, to U. Co. Bank, Moorabad Branch, which returned the cheque to State Bank of Indore vide their memo dated 5-8-1991 with the remark "jis Seema Tak Ki Vyavstha Ki Gayi Hai Us Se Adhik. " On receipt of it, the petitioner/company sent a letter dated 8-8-91 to the insured regarding dishonour of the cheque, informing that in view of the non-payment of the premium the cover note issued stands concelled from its inception and, consequently, receipt No. 18219 issued to the owner/insured for payment as also acceptance advice stand cancelled. This letter was delivered to the insured on 12-8-1991 as is evident from the certification of the postal authorities. In between the owner also got the vehicle insured with the NICO for the period from 8-8-1991 to 7-8-1992 after making payment of premium of Rs. 5,574/- of which NICO issued Policy No. 030706/91, but the owner Umesh Agrawal for insured Agrawal Construction Co. Ltd. , applied on 9-8-1991 vide Annexure R-8 (1) to NICO that as the vehicle was insured from 25-6-1991
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