IMPORTANT POINT
Insurer must communicate policy cancellation before an accident; failure to do so results in liability for compensation.

JUDGMENT: (per Hon’ble Sri Justice N. Tukaramji)

We have heard Mr. Kota Subba Rao, learned counsel for the appellant/respondent No.2 and Mr. Chandra Sekhar Reddy Gopi Reddy, learned counsel for the claim petitioners.

2. This appeal has been filed by the respondent No.2/insurance company assailing the liability fastened in the decree and order dated 09.11.2015 in O.P.No.224 of 2009 on the file of the Chairman, Motor Accidents Claims Tribunal-cum-I Additional District Judge, Nalgonda.

3. The prime contest of the appellant/respondent No.2/insurer (hereinafter ‘the insurer’) is that as the cheque issued by the insured/respondent No.6 (hereinafter ‘the insured’) towards premium was dishonoured for want of sufficient funds and the same was intimated to the insured much prior to the accident, the policy stood cancelled, as such, fastening the liability to indemnify the owner is untenable. Further the cover note of the insurance policy is clearly specifying that the policy would be subject to realization of premium amount, thus the dishonour of the cheque automatically rescinds the insurance contract ab initio. Furthermore, as per the Section 64-VB of the Insurance Act, 1938 specifies that the insurer cannot be held liable under the policy unless the premium is received in advance. Therefore, the liability concluded by the tribunal against the insurer is unsustainable in law.

4. The relevant facts of the claimants’ case are that on 20.12.2008 at about 6.15 p.m., while Amrutham Manohar/deceased along with his family members was proceeding in Maruthi Wagonor Car bearing registration No. AP29-AF 6518 (for short, ‘the car’), one bus bearing registration No. AP-28-X-0578 came in a rash and negligent manner from opposite direction, dashed the car and caused his instantaneous death. Whereupon the family members of the deceased filed the claim petition seeking compensation of Rs.60 lakhs. The tribunal in the impugned order partly allowed the petition and granted Rs.44,00,000/- with interest at 7.5% per annum from the date of the petition till the date of realization against the insured and insurer of the bus/respondents 1 and 2.

5. Learned counsel for the insurer would submit that, upon dishonour of the cheque issued for premium amount, the insurance policy/Ex.B-2 stood cancelled ab initio, in terms of the categorical note on the policy itself. However the insurer got issued notice/Ex.B-8 on the insured to the address given by him under registered post. Therefore, presumption of service of notice shall be drawn under Section 27 of the General Clauses Act, 1897. Therefore, the insurer had discharged its responsibility and this position has been affirmed in the authority between Munagala Srinivasa Rao and others v. Rajendra Singh and others – 2010 ACJ 1107. Additionally pleaded that Section 64-VB of the Insurance Act, 1938 prescribes that insurance company cannot cover the risk under the policy until premium amount is received or is guaranteed from the insured. By placing reliance on judgment in Deddappa and others v. Branch Manager, National Insurance Company Limited - 2008 ACJ 581 submitted that cancellation of insurance policy once duly communicated to the insured, the insurer cannot be held liable. However in the peculiar circumstances of that matter, the Hon’ble Supreme Court by exercising extra-ordinary jurisdiction directed the insurer to pay the compensation first and to recover the amount from the insurer. Therefore, implored that the law though harsh, shall be applied without any departure as per the Maxim ‘Dura Lex Sed Lex’ and this position has been affirmed in the authorities between Vijay Narayan Thatte and others v. State of Maharashtra – 2009(6) ALD 59 (SC) and Narayan v. Babasaheb and others – 2016 (3) ALD 217 (SC). Further solicited that where suits are instituted or defended on behalf of a public corporation, public interest should not be permitted to be defeated on a mere technicality and the courts shall ensure that the injustic