IN THE HIGH COURT FOR THE STATE OF TELANGANA

AT HYDERABAD

THE HON’BLE SRI JUSTICE C.V.BHASKAR REDDY

M.A.C.M.A.No.331 of 2019

DATE: 07.01.2026

Between:

Bajaj Allianz General Insurance Co. Ltd.

…..Appellant

AND

Ch. Srilatha and another

….Respondents

JUDGMENT:

The appellant-insurance company has filed this appeal, under

Section 173 of the Motor Vehicles Act, 1988, challenging the judgment and decree dated 14.08.2018 passedin M.V.O.P.No.152 of 2012 by the Chairman, Motor Vehicle Accidents Claims Tribunal- cum-I Additional District Judge, Karimnagar (hereinafter referred to as “the Tribunal”), whereby the Tribunal awarded compensation of Rs.1,00,000/- with interest @ 7.5% per annum in favour of the respondent No.1 herein/claimant, for the injuries sustained by her in

a road accident.

2. The brief facts of the case are that on 05.11.2011 at about 5:00 P.M., the claimant, along with her husband and a relative, was standing by the roadside in Vavilalapalli locality, Karimnagar. A Maruti Zen car bearing No.AP-01-M-6789, driven in a rash and negligent manner, struck the claimant and her husband, injuring them. The vehicle thereafter hit three parked motorcycles and a tree. The claimant was admitted in Spring Hospital, Karimnagar, from 05.11.2011 to 09.11.2011 for treatment of multiple injuries, including a fracture of the right iliac wing and tibial eminence. Based on eyewitness information, the Traffic Police registered Crime No.87/2011 under Sections 337 and 279 of IPC and filed a charge sheet against the driver of the offending vehicle. The claimant filed the claim petition seeking compensation of Rs.3,00,000/-.

3. Before the Tribunal, respondent No.1 i.e., owner of the crime vehicle remained ex parte. Respondent No.2-insurance companyi.e., the appellant herein alone contested the claim, denying the manner of accident and its liability. It was contended that the premium cheque issued by the insured was dishonoured due to insufficient funds, resulting in cancellation of the policy ab initio, and consequently there was no subsisting contract of insurance or privity of contract to indemnify the third-party claim and prayed to dismiss the claim petition.

4. The Tribunal, after hearing the parties and perusing oral and documentary evidence, held that the accident occurred due to the rash and negligent driving of the offending vehicle and awarded a total compensation of Rs.1,00,000/- with interest @ 7.5% per annum, directing both the owner i.e., respondent No.2 herein and the insurer i.e., the appellant herein to be jointly and severally liable to pay the compensation.Challenging the same, the appellant-insurance company filed the present appeal.

5. Considered the submissions of learned counsel for the parties and perused the record.

6. The main contention of the appellant-insurance company is that on the date of the accident, i.e., 05.11.2011, no valid insurance policy was in force. It is argued that the cheque issued by the owner/insured (Respondent No.2 herein) for the premium was dishonored on 21.10.2011 due to "Insufficient Funds". The appellant contends that a notice was sent to the owner and the RTO on 04.11.2011 (Ex.B-4 and Ex.B-6), one day prior to the accident, stating that the policy was void ab initio. Consequently, the appellant argues that the Tribunal erred in fastening liability on the insurer when the policy stood cancelled from its inception.

7. It is settled law that while an insurer may avoid contractual liability toward the insured due to non-payment of premium, the statutory liability towards third parties under the Motor Vehicles Act remains distinct. The Tribunal noted that the insurance company issued the policy (Ex.B-1) upon receipt of a cheque, which constitutes a representation upon which third parties are entitled to act. Under Section 64-VB of the Act, while risk generally attaches only after receipt of premium, the "pay and recover" doctrine is frequently applied to ensure that innocent third-party victims, like the claimant h