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IN THE HIGH COURT OF JHARKHAND AT RANCHI

Misc. Appeal No. 73 of 2012

M/s. United India Insurance Company Ltd., Ranchi

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Appellant

Versus

1. Savitri Devi

2. Sanjay Kumar Jha

3. Bibha Jha

4. Mansi Kumari

5. Soni Kumari

6. Suraj Kumar

7. Chandra Bhushan Singh

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Respondents

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CORAM :HON’BLE MR. JUSTICE GAUTAM KUMAR CHOUDHARY

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For the Appellant

: Mr. D.C. Ghose, Advocate

For the Respondents

: Mr. Jay Prakash Pandey, Advocate

CAV ON 09. 02.2022

PRONOUNCED ON 07.04. 2022

1.

The Insurance Company has preferred the appeal against the award of

compensation in Compensation Case No.171/ 1998 under Section 166 of the

Motor Vehicle Act, 1988 whereby and where under the insurance company

has been held liable for paying the compensation amount to the claimants.

2.

The appeal has been preferred on the ground that the offending vehicle

was not under its insurance cover on the date of accident 7.6.1998.

3.

As per the claimant’s case the motor vehicle accident took place on

07.06.1998 involving a jeep bearing registration No. BR-14 P-1548. The

interest of the owner of the vehicle Chandra Bhusan Singh in the said vehicle

was under its insurance cover from 5.5.1998 to 4.5.1999. Thereafter the

cheque for a sum of Rs.7215 for payment of premium was submitted to the

insurance company for its renewal, but the same was dishonoured due to

insufficiency of fund. It was written by the State Bank of India with a remark,

“insufficient fund” consequently, the Insurance Company cancelled insurance

policy and intimated the owner of the vehicle (O.P.1) about it. It is argued that

since the vehicle was not under its insurance cover at the relevant time of

accident therefore it was not liable for paying the compensation amount.

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4.

Learned Tribunal as noted that the offending vehicle was under the

insurance cover of O.P. No.2 United India Insurance Company at the relevant

time of accident and the said insurance policy was issued on payment of

premium of Rs.7215 through a cheque issued by the O.P. No.1 being the

owner of the vehicle. The insurance company presented the cheque to the

bank which was returned back with endorsement of insufficiency of fund. On

22.04.99 after about one year insurance company intimated the owner of the

vehicle regarding dishonour of the cheque to registered letter (Ext B). It was

against this background that the Tribunal on the basis of ratio decided by

Hon’ble the Apex court in Inderjit Kaur & Ors. 1998(2) TAC 615 (SC)

held the insurance company liable to pay the compensation amount.

5.

The short question that falls for consideration is whether on account of

delay in intimation of the cancellation of the insurance policy to the owner of

vehicle the insurance company shall be liable for payment of the

compensation amount?

6.

Liability of the insurance company to indemnify the insured in cases of

motor vehicle accident is founded on the contractual liability with the insured

during the subsistence of the insurance policy. It has been held in Deddappa v.

National Insurance Co. Ltd., (2008) 2 SCC 595 that ordinarily a liability

under the contract of insurance would arise only on payment of premium, if

such payment was made a condition precedent for taking effect of the

insurance policy but such a condition which is intended for the benefit of the

insurer can be waived by it. It was opined : (SCC p. 200, para 13)

“13. … If, on the date of accident, there was a policy of insurance in

respect of the vehicle in question, the third party would have a claim

against the Insurance Company and the owner of the vehicle would have to

be indemnified in respect of the claim of that party. Subsequent

cancellation of the insurance policy on the ground of non-payment of

premium would not affect the rights already ac