JUDGMENT:

S.B. Sinha, J.

1. Leave granted.

2. Respondent No.2 was the owner of a Mini Bus. An insurance policy in respect of the said vehicle was sought to be taken by him. For the said purpose, the second respondent issued a third party cheque towards payment of insurance premium.

3. The Development Officer of the appellant by inadvertence issued a cover note. However, when the said mistake came to his notice, the respondent No.2 was contacted by the Development Officer. He was asked to pay the amount of premium. It was not tendered and in stead the respondent No.2 is said to have returned the original cover note and took back the cheque. The original cover note as also all the duplicate copies thereof was cancelled.

4. The said insurance cover was issued for the period 3.9.1991 to 2.9.1992. On or about 12.9.1991, the said vehicle met with an accident. First respondent who suffered an injury therein filed a claim petition in terms of the provisions contained in Section 166 of the Motor Vehicles Act, 1988 (the Act). An award for a sum of Rs.43,000/- was made. The Tribunal, in its award, categorically held :

"The petitioners have produced Ex.P.7 the Xerox copy of the cover note Ex.R.1. There is all the chances of the owner of the vehicle having taken Xerox copy of the cover note Ex.R.1 and returning the original cover note Ex.R.1 to the insurance company as deposed by RW.1. If really the cover note was not cancelled, the original cover note should have been with the insured and respondent No.3 could not have produced the original cover note Ex.R.1. Hence, the case of 3rd respondent that the owner of the vehicle had given third party cheque and that later he had taken back the cheque and returned the original cover note Ex.R.1 to the insurance company and that the insurance company has cancelled cover note is more probable. As Ex.P.7 is the Xerox copy of the original cover note Ex.R.1 and as the original cover note Ex.R.1 and its copies Exs.R.2 to R.4 have been produced by the insurance company, the argument of the learned counsel for the petitioners that respondent No.3 is liable to pay the compensation cannot be accepted. Hence, from the above discussion, I hold that there was no valid insurance policy as on the date of the accident and as such the respondent No.3 is not liable to pay any compensation to the petitioners."

5. Second Respondent did not prefer any appeal thereagainst. Rirst Respondent only preferred an appeal questioning the quantum of compensation.

6. The High Court, by reason of the impugned judgment, while enhancing the amount of compensation to a sum of Rs.1,50,000/-, held :

"The above provision disclose that a policy can be issued against the issuance of cheque and the liability commences from the date of issuance of cheque and not from the date of its encashment. There is no provision in law that the consideration for policy should flow only from the insured and not from the third party. The development officer has acted in a hasty manner. No attempt was made to present the cheque for encashment. If the cheque was encashed it was well and good for the insurer otherwise steps could have been taken for cancellation of the policy Ex.R.1. The reason that the cheque is not issued by the insured is not a ground for valid cancellation. The endorsement of cancellation is vague, it does not bear the date. The officer who has made endorsement of cancellation is not examined. The endorsement of the insured is not taken on the policy to substantiate that the cancellation was with due notice and knowledge by the insured. Therefore, under the above circumstances, the very cancellation of the policy for untenable reason is bad in law. The accident has occurred within 15 days from the date of issue of cover note. Hence, the insurer is liable to pay the compensation."

7. Mr. Dua, learned counsel appearing on behalf of the appellant, would submit that keeping in view the provisions contained in Section 65(v)(b) of the Insurance