2026 Supreme(Online)(Kar) 27141
THE HIGH COURT OF KARNATAKA
D K SINGH AND T.M.NADAF
Reliance General Insurance Company Ltd. – Appellant
Versus
SUSMITA SUSARLA – Respondent
MFA 4312/2021
Where an insurer issues a policy on receipt of a cheque towards premium, and the cheque is dishonoured, the insurer is liable to indemnify third parties unless the policy is cancelled and intimation reaches the insured before the accident.
Headnote:(A) Motor Vehicles Act, 1988 - Sections 147(5) and 149(1) - Insurance Act, 1938 - Section 64VB - Liability of insurer - Dishonour of cheque towards premium - Policy of insurance issued on receipt of cheque towards premium; if cheque is dishonoured, the liability of the insurer to indemnify third parties subsists and it must satisfy the award of compensation unless the policy is cancelled by the insurer and intimation of such cancellation has reached the insured before the accident. (Paras 26, 27, 28, 30, 31)
(B) Evidence - Document - Original cover note (Ex.R16) indicating payment of premium in cash, countersigned by insurer’s manager, versus a copy (Ex.R4) with differing details - The court found the copy to be dubious and accepted the original document, especially as no action had been taken by the insurer against the insured for alleged forgery. (Paras 31, 32, 33)
(C) Motor Vehicles Act, 1988 - Sections 168 and 173 - Quantum of compensation - Future prospects - Calculation of loss of dependency - Deceased aged 35 years; 40% added for future prospects; 1/4th deducted for personal expenses; multiplier of 16 applied; income considered at Rs.15,00,000 per annum after tax deduction. (Paras 38, 39)
(D) Motor Vehicles Act, 1988 - Sections 168 and 173 - Conventional heads - Loss of consortium - Rs.40,000 each for five claimants; loss of estate and funeral expenses at Rs.15,000 each; 20% escalation on conventional heads allowed based on law. (Paras 40, 41)
Facts of the case:
The claimants, wife, children, and parents of the deceased, filed a claim petition under the Motor Vehicles Act after the deceased died in a road traffic accident on 11.06.2009. The tribunal awarded compensation of Rs.86,15,000/- with 6% interest. The insurer appealed, contending that the insurance policy was void ab initio because the cheque issued towards premium had been dishonoured. The claimants cross-objected seeking enhancement of compensation. The original cover note (Ex.R16) showed payment of Rs.12,000/- in cash, countersigned by the insurer’s manager, but a copy (Ex.R4) lacked these details. The cheque was issued after the accident, presented three months later, and dishonoured; cancellation was intimated four months after the accident.
Findings of Court:
The court held that the insurer was liable to pay compensation. It applied the legal position from the Supreme Court in United India Insurance Company Limited vs. Lakshmamma (2012) 5 SCC 234: where a policy is issued on receipt of a cheque towards premium, and the cheque is dishonoured, the insurer’s liability to indemnify third parties subsists unless the policy is cancelled and intimation reaches the insured before the accident. In this case, the cancellation occurred after the accident, so the insurer was liable. The court also found that the original document (Ex.R16) indicated payment in cash, which was not contradicted by the insurer’s failure to take action against the insured for forgery. Regarding quantum, the court increased the annual income to Rs.15,00,000/- (after tax deduction), added 40% for future prospects, applied a multiplier of 16, and awarded Rs.1,92,60,000/- as total compensation.
Issues: (i) Whether the appellant-insurer made out a case to exonerate it from liability to pay compensation? (ii) Whether the claimants have made out a case for enhancement of compensation?
Ratio Decidendi: The court held that where an insurer issues a policy upon receipt of a cheque towards premium, and the cheque is dishonoured, the insurer is liable to indemnify third parties unless the policy is cancelled and such cancellation reaches the insured before the accident. The insurer cannot avoid liability by claiming the policy is void ab initio if the cancellation occurs after the accident. Additionally, the court accepted the original cover note (Ex.R16) showing cash payment as genuine, given the insurer’s failure to take any action against the insured for alleged forgery.
Result: MFA No. 4312/2021 (appeal by insurer) was dismissed. MFA Crob No. 152/2021 (cross-objection by claimants) was allowed in part, and the compensation was enhanced to Rs.1,92,60,000/- with 6% interest from the date of petition till realisation. The appellant-insurer was directed to deposit the balance compensation within six weeks. No order as to costs. (Paras 43 and 44) (A) Motor Vehicles Act, 1988 - Sections 147(5) and 149(1) - Insurance Act, 1938 - Section 64VB - Liability of insurer - Dishonour of cheque towards premium - Policy of insurance issued on receipt of cheque towards premium; if cheque is dishonoured, the liability of the insurer to indemnify third parties subsists and it must satisfy the award of compensation unless the policy is cancelled by the insurer and intimation of such cancellation has reached the insured before the accident. (Paras 26, 27, 28, 30, 31)
(B) Evidence - Document - Original cover note (Ex.R16) indicating payment of premium in cash, countersigned by insurer’s manager, versus a copy (Ex.R4) with differing details - The court found the copy to be dubious and accepted the original document, especially as no action had been taken by the insurer against the insured for alleged forgery. (Paras 31, 32, 33)
(C) Motor Vehicles Act, 1988 - Sections 168 and 173 - Quantum of compensation - Future prospects - Calculation of loss of dependency - Deceased aged 35 years; 40% added for future prospects; 1/4th deducted for personal expenses; multiplier of 16 applied; income considered at Rs.15,00,000 per annum after tax deduction. (Paras 38, 39)
(D) Motor Vehicles Act, 1988 - Sections 168 and 173 - Conventional heads - Loss of consortium - Rs.40,000 each for five claimants; loss of estate and funeral expenses at Rs.15,000 each; 20% escalation on conventional heads allowed based on law. (Paras 40, 41)
Facts of the case:
The claimants, wife, children, and parents of the deceased, filed a claim petition under the Motor Vehicles Act after the deceased died in a road traffic accident on 11.06.2009. The tribunal awarded compensation of Rs.86,15,000/- with 6% interest. The insurer appealed, contending that the insurance policy was void ab initio because the cheque issued towards premium had been dishonoured. The claimants cross-objected seeking enhancement of compensation. The original cover note (Ex.R16) showed payment of Rs.12,000/- in cash, countersigned by the insurer’s manager, but a copy (Ex.R4) lacked these details. The cheque was issued after the accident, presented three months later, and dishonoured; cancellation was intimated four months after the accident.
Findings of Court:
The court held that the insurer was liable to pay compensation. It applied the legal position from the Supreme Court in United India Insurance Company Limited vs. Lakshmamma (2012) 5 SCC 234: where a policy is issued on receipt of a cheque towards premium, and the cheque is dishonoured, the insurer’s liability to indemnify third parties subsists unless the policy is cancelled and intimation reaches the insured before the accident. In this case, the cancellation occurred after the accident, so the insurer was liable. The court also found that the original document (Ex.R16) indicated payment in cash, which was not contradicted by the insurer’s failure to take action against the insured for forgery. Regarding quantum, the court increased the annual income to Rs.15,00,000/- (after tax deduction), added 40% for future prospects, applied a multiplier of 16, and awarded Rs.1,92,60,000/- as total compensation.
Issues: (i) Whether the appellant-insurer made out a case to exonerate it from liability to pay compensation? (ii) Whether the claimants have made out a case for enhancement of compensation?
Ratio Decidendi: The court held that where an insurer issues a policy upon receipt of a cheque towards premium, and the cheque is dishonoured, the insurer is liable to indemnify third parties unless the policy is cancelled and such cancellation reaches the insured before the accident. The insurer cannot avoid liability by claiming the policy is void ab initio if the cancellation occurs after the accident. Additionally, the court accepted the original cover note (Ex.R16) showing cash payment as genuine, given the insurer’s failure to take any action against the insured for alleged forgery.
Result: MFA No. 4312/2021 (appeal by insurer) was dismissed. MFA Crob No. 152/2021 (cross-objection by claimants) was allowed in part, and the compensation was enhanced to Rs.1,92,60,000/- with 6% interest from the date of petition till realisation. The appellant-insurer was directed to deposit the balance compensation within six weeks. No order as to costs. (Paras 43 and 44) (A) Motor Vehicles Act, 1988 - Sections 147(5) and 149(1) - Insurance Act, 1938 - Section 64VB - Liability of insurer - Dishonour of cheque towards premium - Policy of insurance issued on receipt of cheque towards premium; if cheque is dishonoured, the liability of the insurer to indemnify third parties subsists and it must satisfy the award of compensation unless the policy is cancelled by the insurer and intimation of such cancellation has reached the insured before the accident. (Paras 26, 27, 28, 30, 31)
(B) Evidence - Document - Original cover note (Ex.R16) indicating payment of premium in cash, countersigned by insurer’s manager, versus a copy (Ex.R4) with differing details - The court found the copy to be dubious and accepted the original document, especially as no action had been taken by the insurer against the insured for alleged forgery. (Paras 31, 32, 33)
(C) Motor Vehicles Act, 1988 - Sections 168 and 173 - Quantum of compensation - Future prospects - Calculation of loss of dependency - Deceased aged 35 years; 40% added for future prospects; 1/4th deducted for personal expenses; multiplier of 16 applied; income considered at Rs.15,00,000 per annum after tax deduction. (Paras 38, 39)
(D) Motor Vehicles Act, 1988 - Sections 168 and 173 - Conventional heads - Loss of consortium - Rs.40,000 each for five claimants; loss of estate and funeral expenses at Rs.15,000 each; 20% escalation on conventional heads allowed based on law. (Paras 40, 41)
Facts of the case:
The claimants, wife, children, and parents of the deceased, filed a claim petition under the Motor Vehicles Act after the deceased died in a road traffic accident on 11.06.2009. The tribunal awarded compensation of Rs.86,15,000/- with 6% interest. The insurer appealed, contending that the insurance policy was void ab initio because the cheque issued towards premium had been dishonoured. The claimants cross-objected seeking enhancement of compensation. The original cover note (Ex.R16) showed payment of Rs.12,000/- in cash, countersigned by the insurer’s manager, but a copy (Ex.R4) lacked these details. The cheque was issued after the accident, presented three months later, and dishonoured; cancellation was intimated four months after the accident.
Findings of Court:
The court held that the insurer was liable to pay compensation. It applied the legal position from the Supreme Court in United India Insurance Company Limited vs. Lakshmamma (2012) 5 SCC 234: where a policy is issued on receipt of a cheque towards premium, and the cheque is dishonoured, the insurer’s liability to indemnify third parties subsists unless the policy is cancelled and intimation reaches the insured before the accident. In this case, the cancellation occurred after the accident, so the insurer was liable. The court also found that the original document (Ex.R16) indicated payment in cash, which was not contradicted by the insurer’s failure to take action against the insured for forgery. Regarding quantum, the court increased the annual income to Rs.15,00,000/- (after tax deduction), added 40% for future prospects, applied a multiplier of 16, and awarded Rs.1,92,60,000/- as total compensation.
Issues: (i) Whether the appellant-insurer made out a case to exonerate it from liability to pay compensation? (ii) Whether the claimants have made out a case for enhancement of compensation?
Ratio Decidendi: The court held that where an insurer issues a policy upon receipt of a cheque towards premium, and the cheque is dishonoured, the insurer is liable to indemnify third parties unless the policy is cancelled and such cancellation reaches the insured before the accident. The insurer cannot avoid liability by claiming the policy is void ab initio if the cancellation occurs after the accident. Additionally, the court accepted the original cover note (Ex.R16) showing cash payment as genuine, given the insurer’s failure to take any action against the insured for alleged forgery.
Result: MFA No. 4312/2021 (appeal by insurer) was dismissed. MFA Crob No. 152/2021 (cross-objection by claimants) was allowed in part, and the compensation was enhanced to Rs.1,92,60,000/- with 6% interest from the date of petition till realisation. The appellant-insurer was directed to deposit the balance compensation within six weeks. No order as to costs. (Paras 43 and 44) (A) Motor Vehicles Act, 1988 - Sections 147(5) and 149(1) - Insurance Act, 1938 - Section 64VB - Liability of insurer - Dishonour of cheque towards premium - Policy of insurance issued on receipt of cheque towards premium; if cheque is dishonoured, the liability of the insurer to indemnify third parties subsists and it must satisfy the award of compensation unless the policy is cancelled by the insurer and intimation of such cancellation has reached the insured before the accident. (Paras 26, 27, 28, 30, 31)
(B) Evidence - Document - Original cover note (Ex.R16) indicating payment of premium in cash, countersigned by insurer’s manager, versus a copy (Ex.R4) with differing details - The court found the copy to be dubious and accepted the original document, especially as no action had been taken by the insurer against the insured for alleged forgery. (Paras 31, 32, 33)
(C) Motor Vehicles Act, 1988 - Sections 168 and 173 - Quantum of compensation - Future prospects - Calculation of loss of dependency - Deceased aged 35 years; 40% added for future prospects; 1/4th deducted for personal expenses; multiplier of 16 applied; income considered at Rs.15,00,000 per annum after tax deduction. (Paras 38, 39)
(D) Motor Vehicles Act, 1988 - Sections 168 and 173 - Conventional heads - Loss of consortium - Rs.40,000 each for five claimants; loss of estate and funeral expenses at Rs.15,000 each; 20% escalation on conventional heads allowed based on law. (Paras 40, 41)
Facts of the case:
The claimants, wife, children, and parents of the deceased, filed a claim petition under the Motor Vehicles Act after the deceased died in a road traffic accident on 11.06.2009. The tribunal awarded compensation of Rs.86,15,000/- with 6% interest. The insurer appealed, contending that the insurance policy was void ab initio because the cheque issued towards premium had been dishonoured. The claimants cross-objected seeking enhancement of compensation. The original cover note (Ex.R16) showed payment of Rs.12,000/- in cash, countersigned by the insurer’s manager, but a copy (Ex.R4) lacked these details. The cheque was issued after the accident, presented three months later, and dishonoured; cancellation was intimated four months after the accident.
Findings of Court:
The court held that the insurer was liable to pay compensation. It applied the legal position from the Supreme Court in United India Insurance Company Limited vs. Lakshmamma (2012) 5 SCC 234: where a policy is issued on receipt of a cheque towards premium, and the cheque is dishonoured, the insurer’s liability to indemnify third parties subsists unless the policy is cancelled and intimation reaches the insured before the accident. In this case, the cancellation occurred after the accident, so the insurer was liable. The court also found that the original document (Ex.R16) indicated payment in cash, which was not contradicted by the insurer’s failure to take action against the insured for forgery. Regarding quantum, the court increased the annual income to Rs.15,00,000/- (after tax deduction), added 40% for future prospects, applied a multiplier of 16, and awarded Rs.1,92,60,000/- as total compensation.
Issues: (i) Whether the appellant-insurer made out a case to exonerate it from liability to pay compensation? (ii) Whether the claimants have made out a case for enhancement of compensation?
Ratio Decidendi: The court held that where an insurer issues a policy upon receipt of a cheque towards premium, and the cheque is dishonoured, the insurer is liable to indemnify third parties unless the policy is cancelled and such cancellation reaches the insured before the accident. The insurer cannot avoid liability by claiming the policy is void ab initio if the cancellation occurs after the accident. Additionally, the court accepted the original cover note (Ex.R16) showing cash payment as genuine, given the insurer’s failure to take any action against the insured for alleged forgery.
Result: MFA No. 4312/2021 (appeal by insurer) was dismissed. MFA Crob No. 152/2021 (cross-objection by claimants) was allowed in part, and the compensation was enhanced to Rs.1,92,60,000/- with 6% interest from the date of petition till realisation. The appellant-insurer was directed to deposit the balance compensation within six weeks. No order as to costs. (Paras 43 and 44)
| Table of Content |
|---|
| 1. dispute over insurance liability for cheque dishonour after accident. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15) |
| 2. arguments on liability despite dishonoured cheque and cash payment. (Para 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25) |
| 3. insurer liable as cancellation occurred after accident. (Para 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36) |
| 4. compensation enhanced; insurer ordered to deposit balance. (Para 37 , 38 , 39 , 40 , 41 , 42 , 43) |
CAV JUDGMENT
(PER: HON'BLE MR. JUSTICE T.M.NADAF)
The appeal in MFA.No.4312/2021 and MFA.Crob.No.152/2021 are by the Insurer and the claimant respectively, calling in question the judgment and award dated 16.01.2021 in MVC.No.451/2010 passed by the Court of Small Causes and Motor Accident Claims Tribunal, Bengaluru (SCH-09)1.
2. The Insurer is in appeal calling in question the liability fastened on it on the premise that the cheque issued towards the premium covering the insurance policy gets dishonoured accordingly in terms of the endorsement stated in the policy, the policy becomes void ab initio and there is no liability on the insurance to make good any compensation. The claimant is in cross objection seeking for enhancement of compensation.
3. The parties are referred to as per their rankings before the Tribunal.
4. The date of accident, death of deceased Tenneti Sasikanth on 11.06.2009 and involvement of the vehicle are not in dispute. The dispute raised by the Insurer is with respect to fastening of the liability on ground of non-existence of insurance policy in view of dishonour of check issued towards payment of premium amount and so far as claimants are concerned on the quantum of compensation.
5. Heard Sri.Ashok N. Patil, learned counsel appearing for the Insurer in appeal as well as cross objection; Sri. Keerthi Kumar D.Nayak, learned counsel appearing for the claimants in the appeal as well as cross objection and Ms.Prutha Bharathi, learned counsel for respondent No.6 and respondent No.1 in cross objection.
6. Further this Court requested Sri. A.N.Krishnaswamy, learned Senior panel counsel for the Insurance Company to assist the Court on the above grounds raised by Sri.Ashok Patil, in view of peculiar facts involved in the case on hand.
7. It is the case of the claimants before the Tribunal that husband of claimant No.1, father of claimant Nos.2 to 4 and son of claimant No.5 by name Tenneti Sasikanth died in an road traffic accident occurred on 11.06.2009, due to the actionable rash and negligent driving by the driver of the Scorpio, bearing No. AP-7-TT-4889. It was the case of the claimants that the deceased Tenneti Sasikanth was travelling as an inmate in the Scorpio from Rajamundry to Vishakapatnam. When the vehicle reached near Nutanagunte Palyam, on NH-5 near Kasimkota Mandalam, Vishakapatnam, A.P, the driver of the Scorpio drove the same in rash and negligent manner with high speed and dashed against a lorry bearing registration No.KA-01-AD-4666, which was proceeding ahead of the Scorpio. As a result of the accident, the deceased Tenneti Sasikanth succumbed to the injuries on the spot and another person by the name Chandu suffered grievous injuries and was admitted to Yalamanchili, Government Hospital. According to the claimants, the deceased was holder of Master degree in Computer Applications from Andhra University and he has completed his Sun Certified Enterprise Architect (SCEA) course in the year 2003. His academic performance is excellent and he was brilliant, intelligent and dynamic in his profession. He earlier worked in VJIL Consulting Services as System Executive for a gross annual salary of Rs.1,24,080/- and later joined BEA Systems Inc. at East Havn, USA as Development Relations Engineer for an yearly salary of USA $72,000 p.a. Thereafter, he joined NISCO in USA with annual salary of $1,10,000/- p.a. Thereafter, he continued in Indian operations of NISO as a Managing Director which was lat
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