Point of Law :
when Insurer failed to prove that notices were served on insured about cancellation of policy, Insurer cannot avoid its liability. But, in the case on hand, as discussed supra, the Insurer has proved about service of notices on the owner as well as RTO under Exs.B5 and B6. Thus, the said decision is not at all applicable to the facts of the present case.

JUDGMENT:

Aggrieved by the award and decree dated 06.09.2018 in M.V.O.P. No.2 of 2015 passed by the Motor Accidents Claims Tribunal - cum - Principal District Judge, Karimnagar (for short ‘the Tribunal’), appellant - M/s. Liberty General Insurance Limited preferred the present appeal challenging the liability as well as quantum of compensation.

2. Vide the aforesaid award, the Tribunal has awarded an amount of Rs.5,50,000/- towards compensation with proportionate costs and interest at 7.5% per annum thereon from the date of petition till the date of realization against respondent Nos.1 and 2 jointly and severally as against the claim of Rs.10,00,000/- made by respondent Nos.1 to 4 - claimants for the death of deceased - Mohd. Nawaz caused in a road accident occurred on 04.05.2014.

3. Heard Mr. A. Ramakrishna Reddy, learned counsel for the appellant - Insurer and Mr. Mahboob Hussain, learned counsel for respondent Nos.1 to 4 - claimants and Mr. Kailashnath P.S.S., learned counsel for respondent No.6 - owner of the crime vehicle.

4. The learned counsel for the appellant - Insurer would contend that the Tribunal failed to appreciate the contention of the Insurer that it is not liable to pay compensation to the claimants, because the cheque issued by respondent No.6 - Owner of the crime vehicle was dishonoured for the reason “Insufficient Funds” and, therefore, as on the date of accident, the policy/cover note issued in favour of the crime vehicle is not in existence. He would further contend that the Tribunal also failed to appreciate the contention of the Insurer that due to dishonour of cheque, the policy was cancelled right from its inception on account of dishonour of cheque issued towards premium, as such, the question of covering the risk does not arise. Without considering the said aspects, the Tribunal gave the finding to pay the compensation amount initially to the claimants and then recover the same from the owner.

5. The learned counsel for the Insurer further contended that the cheque in question was issued on 28.02.2014 by the owner and it was dishonoured on 11.03.2014. Insurer also informed about the dishonour of cheque as well as cancellation of policy through a letter dated 13.03.2014 to the owner as well as the Regional Transport Authority (RTA). Despite the same, owner did not take any steps for payment of premium. But, the Tribunal without appreciating the said aspects gave the aforesaid finding of depositing the compensation initially and recover the same from the owner. Thus, the finding given by the Tribunal that the Insurer has not offered any reason for not presenting the cheque in the bank immediately on receipt of the same is erroneous. As per the provisions of the Negotiable Instruments Act, 1881 (for short ‘N.I. Act’) validity of cheque will be for three (03) months, and the Insurer can deposit the same within the said period of three (03) months. It is for the drawer of cheque to ensure that instrument is duly honoured on its presentation by maintaining the balance.

6. The learned counsel for the Insurer would also contend that the Tribunal failed to consider that policy exists if the cheque is honoured, and it does not exist in the event of dishonour of cheque. In fact, in the policy, it is specifically mentioned that “in the event of dishonour of cheques, insurance cover provided under this documents automatically stands cancelled from inception irrespective of whether a separate communication is sent or not”. But, the Tribunal erred in holding that Ex.B1 cover note did not find any such clause that it would automatically stands cancelled in the event of dishonour of cheque. The learned counsel would further contend that as per Insurance Regulatory and Development Authorities (IRDA) (Manner of receipt of premium) Regulations, 2002, exercise of powers under sub-section 163 of Section 64-VB and Section 114A of the Insurance Act, 1938, rules framed in consultation with Insurance Advisory Committee, the IRDA