Citation Codes

Equivalent Citations

citation codes

Case Number

M.A Nos. 697 and 696 of 2000

Attorney(S)

Vijay Sunderam
R.P Gupta with Jitendra Sharma
B.N Malhotra

Judges

Arun Mishra
A.P Shrivastava, JJ.

Acts

section 173(4) of the Motor Vehicles Act. Intimation
MOTOR VEHICLES ACT

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Smart Summary

Summary of Opinion delivered by Arun Mishra, J.

Factual and Procedural Background

These consolidated appeals were preferred by claimants seeking enhancement of compensation awards and imposition of liability on the insurer arising from two fatal motor-accident claim cases decided by the IVth Additional Motor Accidents Claims Tribunal, Morena (Claim Case Nos. 78/99 and 79/99; referred to in the opinion as M.A. No. 697/2000 and M.A. No. 696/2000).

M.A. No. 697/2000 (Tejsingh): On 17-6-1993, Shri Tejsingh (age 23) died when his motorcycle was dashed by a bus (MP-07/9750). He was described as an agriculturist and contractor, claimed earnings of Rs. 1,800 per month, and claimants (widow and sister) sought Rs. 43,20,000. The Tribunal found the bus driver negligent, exonerated the insurer on the ground that the policy/cover note had been cancelled following dishonour of a cheque, and awarded Rs. 1,68,000 with interest at 12% per annum from filing of the claim petition.

M.A. No. 696/2000 (Raghupati): On 4-1-1993, Raghupati (age 20), a bus cleaner, fell from the roof while unloading luggage and died. He was claimed to earn Rs. 1,800 per month (plus an allowance). Dependants included widow, minor son and mother. The Tribunal again found the insurer not liable due to alleged cancellation of cover note/policy and awarded compensation (less than claimed).

Both appeals challenge the quantum awarded by the Tribunal and the Tribunal's conclusion to exonerate the insurer on the ground of (alleged) prior cancellation of the cover note/policy following dishonour of a premium cheque.

Legal Issues Presented

Whether the quantum of compensation awarded by the Claims Tribunal in each case is inadequate, requiring enhancement (including appropriate assessment of income, applicable multiplier and heads of damages).
Whether the insurer is liable to indemnify third-party victims where a cover note/policy had been allegedly cancelled due to dishonour of premium cheque but the insurer's intimation of cancellation was not effectively communicated to the insured (and related procedural requirements for such intimation).

Arguments of the Parties

Claimants' Arguments

In M.A. No. 697/2000 (Tejsingh): Tribunal undervalued income and applied an incorrect multiplier. The Tribunal found annual income at Rs. 42,000 and dependency at Rs. 24,000 but then made an unexplained further deduction of Rs. 12,000; multiplier of 13 was applied for age 23 whereas a multiplier of 17 should have been used; insurer should be saddled with liability because intimation of cancellation was not served.
In M.A. No. 696/2000 (Raghupati): Tribunal assessed monthly income at Rs. 1,200 which was too low; correct income is Rs. 1,800 per month inclusive of allowance; multiplier of 13 was wrongly applied at age 20 — multiplier of 16 should apply; insurer should be liable as cancellation intimation was not served.

Owner's / Driver's Arguments

Vehicle was insured and, in absence of effective notice of cancellation to the insured, the insurer remains liable. Intimation of cancellation was not served; cancellation/cover-note issues were not effectively communicated.
Intimation of cancellation to registering authority was given to Datia while the correct registering authority was Gwalior (reference to section 173(4) of the Motor Vehicles Act).

Insurer's Arguments

The insurer relied on the fact that the premium cheque given on behalf of the insured was dishonoured and that a cover note (No. 72541) had been issued on 3-8-1992 but cancelled on 24-8-1992 after intimation of dishonour; the insurer contended that cancellation relieved it of liability because the policy stood cancelled before the accidents.
The insurer maintained that notice of cancellation was sent by registered post to the insured's correct address and that the registered post endorsement demonstrates service efforts; it argued that the owner deliberately did not accept the notice and that the owner’s alternative claim of cash payment was not proved.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
M. Nageswara Rao v. New India Assurance Co. Ltd., 2004 ACJ 1554 (Division Bench, Andhra Pradesh High Court)	Notices of dishonour/cancellation must be proved to have been served on the insured so that the insured has an opportunity to remit premium; administrative action by insurer must observe audi alteram partem in this context.	The Court cited and followed this decision to support the view that cancellation uncommunicated to the insured cannot relieve the insurer of third-party liability.
National Insurance Co. Ltd. v. Seema Malhotra, 2001 ACJ 638 (SC)	A decision addressing insurer's obligations on cancellation and notice (referenced in discussion); specifically, issues relating to Chapter XI of the Motor Vehicles Act were discussed in subsequent jurisprudence.	The Court stated its inability to follow Seema Malhotra for the reasons set out in M. Nageswara Rao (i.e., because the insurer failed to prove service of notices to the insured).
Oriental Insurance Co. Ltd. v. Inderjit Kaur, 1998 ACJ 123 (SC)	Once a cover note/policy is issued, the insurer becomes liable to indemnify third-party liability (policy in force vis-à-vis third parties until effective cancellation is communicated).	The Court relied on this principle to conclude that, absent effective communication of cancellation, the insurer remains liable to third parties.
New India Assurance Co. Ltd. v. Rula, 2000 ACJ 630 (SC)	If on the date of the accident there was a policy in force, subsequent cancellation due to dishonour of cheque does not absolve the insurer of liability to third parties.	The Court cited this authority to hold that where cancellation was not effectively communicated, the insurer remained liable to third parties and could not rely on subsequent dishonour to escape liability.

Court's Reasoning and Analysis

The Court proceeded in two main strands of analysis: (A) reassessment of quantum of compensation in each appeal; and (B) determination of insurer's liability given the insurer's pleaded cancellation of the cover note/policy.

A. Quantum of Compensation

M.A. No. 697/2000 (Tejsingh):

The Tribunal's finding that Tejsingh's income was Rs. 42,000 per annum from agriculture and contracting was examined. The Court found that the deceased had a half share in agricultural land and reduced the annual income assessment to Rs. 30,000 from both sources.
Applying a one-third deduction for the deceased's personal expenses, the court calculated annual dependency loss at Rs. 20,000.
Because the widow is one of the claimants, the appropriate multiplier for age 23 was held to be 17 (instead of the multiplier 13 applied by the Tribunal), producing a dependency loss of Rs. 20,000 × 17 = Rs. 3,40,000.
Additional conventional heads awarded: funeral expenses Rs. 2,000; loss of estate Rs. 2,500; loss of expectancy of life Rs. 5,000; loss of consortium to the widow Rs. 5,000. Total computed by the Court: Rs. 3,54,500.
Interest on the enhanced amount was awarded at 6% per annum from the date of filing of the claim petition till realization.

M.A. No. 696/2000 (Raghupati):

The Court accepted evidence (CW-1) that Raghupati received Rs. 1,500 per month salary plus Rs. 10 per day allowance and found the Tribunal's assessment of Rs. 1,200 per month to be low. The Court assessed income at Rs. 1,800 per month inclusive of allowance.
After making one-third deduction for personal expenses, the calculated annual dependency loss was Rs. 14,400 (monthly dependency Rs. 1,200; annual Rs. 14,400).
Given the dependants (widow, child and mother) and the deceased's age 20, the Court applied multiplier 16 (instead of the multiplier 13 used by the Tribunal), giving dependency loss Rs. 14,400 × 16 = Rs. 2,30,400.
Additional heads were added: funeral expenses Rs. 2,000; loss of estate Rs. 2,500; loss of expectancy of life Rs. 5,000; loss of consortium to the widow Rs. 5,000. The Court's computed total in the reasons is Rs. 2,44,500.
Interest on the enhanced amount was awarded at 6% per annum from the date of filing of the claim petition till realization.

B. Liability of the Insurer

The insurer's defence was that the cover note issued on 3-8-1992 was cancelled on 24-8-1992 after the premium cheque (dated earlier) was dishonoured and that intimation of cancellation had been sent by registered post to the insured, thereby absolving the insurer of liability for accidents occurring after cancellation.

The Court examined the documentary evidence of service. The registered envelope/notice (Ex. D/8) carried postman endorsements stating "incomplete address" and that searches for the addressee's whereabouts could not locate him; there was no endorsement evidencing delivery, nor a specific note that the insured was informed to collect the notice from the post office or that he had refused receipt. The Court held that such endorsements do not amount to effective service of the cancellation intimation.

The Court emphasized the necessity of informing the insured of cheque dishonour and cancellation so that the insured has an opportunity to remit the premium and keep the policy operative for third-party liability. It relied on the Division Bench decision in M. Nageswara Rao (2004 ACJ 1554) and the Supreme Court precedents cited (Oriental Insurance v. Inderjit Kaur; New India Assurance v. Rula), to the effect that where a policy/cover note existed on the date of the accident and cancellation was not effectively communicated to the insured, the insurer remains liable to third-party victims. The Court expressly declined to follow Seema Malhotra on the particular facts where service of notice was not proved.

Applying these legal principles to the factual record before it, the Court concluded that cancellation had not been effectively communicated to the insured, and therefore the insurer could not escape liability to third parties.

Holding and Implications

Core Ruling: Appeals partly allowed.

Direct orders and effects on the parties (as recorded by the Court):

In M.A. No. 697/2000 (Tejsingh): The Court enhanced compensation to Rs. 3,54,500 with interest on the enhanced amount at 6% per annum from the date of filing of the claim petition till realization.
In M.A. No. 696/2000 (Raghupati): The reasons section contains a computation totaling Rs. 2,44,500, but the Court's final order paragraph records an award of Rs. 2,54,500 with interest on the enhanced amount at 6% per annum from the date of filing of the claim petition till realization. (Both figures are present in the opinion: computed total in para. 18 and the final awarded figure in para. 20.)
The liability of the respondents (owner, driver and insurer) is held to be joint and several to make payment of compensation to the claimants.
No costs were awarded.

Implication: The decision enforces that an insurer cannot avoid third-party liability merely by cancelling a policy after receipt of evidence of cheque dishonour unless cancellation/intimation is effectively communicated to the insured so as to afford the insured an opportunity to remedy the situation. Beyond the immediate orders for enhancement and the confirmation of joint-and-several liability, the opinion applies and follows existing precedents rather than announcing a new legal principle.

Appeals partly allowed.

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Shivadevi Jadon And Another v. Shivkumar Sharma And Others

The Order of the Court was delivered by

Arun Mishra, J.:— These appeals have been preferred by the claimants for enhancement of compensation and for saddling the liability on the insurer. They are aggrieved by an award dt. 12-7-2000, passed by the IVth Addl. Motor Accidents Claims Tribunal, Morena, in Claim Case Nos. 78/99, and 79/99.

2. Briefly stated facts are that on 17-6-1993 when Shri Tejsingh was going from Joura to Morena on his motor-cycle (CIR-2140), which was dashed by Bus (MP-07/9750), driven by Shri Ramsingh, owned by Shri Shiv Kumar and insured with the National Insurance Co. Ltd.

3. Report of the accident was lodged. Case was registered against the driver at Crime No. 122/93. Shri Tejsingh succumbed to the injuries. His age was 23 years. He was an agriculturist and Contractor. It was claimed that he was earning a sum of Rs. 1800/- per month. Widow and sister of the deceased were the dependent upon him. Compensation of Rs. 43,20,000/- was claimed.

4. The owner of the bus in the written statement contended that the deceased himself drove the motor-cycle in rash and negligent manner. The owner and the insurer of motor-cycle were also the necessary party. As the vehicle was insured, liability is that of the insurer.

5. The insurer; the National Insurance Co. Ltd. filed a written statement contending that the deceased himself was negligent. The vehicle was not insured. A cheque was given by Shri Vasudeo Prasad Sharma to Shri Sudhir Kumar Dubey, Development Officer, Datia Branch on 3-8-1992 containing the premium of Rs. 12,020/-. Cover Note No. 72541 was issued. However, as the cheque was not honoured by the Bank, intimation was sent by registered post on 24-8-1992 to Shri Shiv Kumar Sharma regarding dishonour of the cheque and cancellation of the cover note and the policy. Once the cancellation was intimated, there was no liability on the part of the insurer. Accident had taken place subsequent to cancellation of the policy, as such responsibility vis-à-vis is that of the third party.

6. Learned Claims Tribunal has held that the accident was the outcome of rash and negligent driving of Shri Ramsingh, the driver of the bus. Owing to the injuries sustained in the accident Shri Tejsingh died. He was not negligent. The vehicle was not insured as on the date of the accident, as such the insurer has been exonerated from making the payment of compensation. Compensation of Rs. 1,68,000/- has been awarded along with interest @ 12% per annum from the date of filing of the claim petition till realization.

7. In M.A No. 696/2000, same vehicle was involved in the accident. The date of accident is different. Accident took place on 4-1-1993 when Raghupati, who was the cleaner in the bus went on the roof of the bus to unload the luggage, all of a sudden, bus was started by the driver; Lokendra. Raghupati fell down, sustained injuries and died on the spot. Report of the accident was lodged. Age of Raghupati was 20 years. It was claimed that he was earning a sum of Rs. 1800/- per month. Widow, minor son and mother of the deceased were dependent upon him. Compensation of Rs. 17,38,000/- was claimed.

8. The driver and owner in their written statement contended that there was no negligence on the part of the driver. False case was registered by the police as against the driver. Vehicle was insured with the National Insurance Co. Ltd., as such liability, if any, was that of the insurer.

9. Insurer has taken the plea that it was not liable as the cheque which was given was dishonoured. Intimation of cancellation of cover note was issued.

10. Dissatisfied with the quantum of compensation, these appeals have been preferred for enhancement of compensation and for saddling the liability on the insurer.

11. The cross-objection has also been preferred by the owner. There was delay in filing the cross-objection. However, filing of the cross-objection is superfluous as the claimants have taken the ground agitated in the cross-objection in the appeals itself.

12. Shri Vijay Sunderam, learned counsel appearing on behalf of the claimants has submitted that in M.A No. 697/2000, the learned Claims Tribunal has awarded inadequate compensation. Insurer ought to have been saddled with the liability to make the payment of compensation to third party. Intimation of cancellation was not served. Hence, the liability of the insurer subsists with respect to the third party to make the payment of compensation. Liability of the respondents be held to be joint and several to make the payment of compensation. He has further submitted that the deceased was earning a sum of Rs. 42,000/- per annum is the finding recorded by the learned Claims Tribunal, dependency was worked out at Rs. 24,000/- per annum. Rs. 12,000/- has been further deducted which was not proper, appropriate multiplier at the age of 23 years, the age of the deceased, was 17, whereas multiplier of 13 was applied, as such inadequate compensation has been awarded. He has prayed for enhancement of compensation.

13. Shri Vijay Sunderam, learned counsel appearing on behalf of the claimants has further submitted that in M.A No. 696/2000 earning of the deceased was Rs. 1800 per month. Income has been wrongly assessed at Rs. 1200/- per month. Multiplier of 13 has been applied at the age of 20 years, which is not proper. Thus, the compensation be suitably enhanced.

14. Shri R.P Gupta with and Shri Jitendra Sharma learned counsel appearing on behalf of the owner have submitted that the vehicle was insured. Intimation of cancellation was not served at any point of time, as such in the absence of intimation being given of cancellation of policy and cancellation of cover note/policy and dishonour of the cheque, the insured was deprived of depositing the amount. Thus, there was no effective cancellation vis-a-vis to liability of the insurer to third party. Intimation was also not given to the registering authority as contemplated under section 173(4) of the Motor Vehicles Act. Intimation was given to the registering authority, Datia, whereas the intimation was required to be given to Registering Authority, Gwalior.

15. Shri B.N Malhotra, learned counsel appearing on behalf of the insurer in both the appeals, has supported the award. He has submitted that the cancellation was made, registered notice was sent on the correct address given by the owner. Owner had taken the plea that the amount was deposited in cash which plea has not been found to be proved by the learned Claims Tribunal. Cheque which was given by Shri Vasudeo on behalf of the insured was dishonoured and intimation of the same was given to the insured i.e the owner. He has deliberately not accepted the notice and got endorsement made of the postman that it was an incomplete address. On efforts being made whereabouts could not be found. Thus, the endorsement makes it clear that it was a case of an evidence of service of notice. Thus, it should be taken that cancellation was to the knowledge of the owner. Hence, learned Claims Tribunal is right in concluding that the insurer is not liable to make payment of compensation as policy stood cancelled before the date of accident in both the cases.

16. First we come to the question of quantum of compensation:

In M.A No. 697/2000: Shri Tejsingh has died. He owned agriculture land in area more than 5 hectares and was also contractor. Finding has been given that his income was Rs. 42,000/- per month from both the sources. As the income from agriculture remains Rs. 12,000/-, that amount was further reduced and after making deduction towards self expenditure. It appears that the deceased was having half share in the aforesaid agriculture land. As the deceased was having half share in the agriculture land, it would be proper to assess his income at Rs. 30,000/- per annum from both the sources, ⅓rd deduction has to be made towards self expenditure of the deceased which amount he would have spent on himself had he been alive. Thus, loss of annual dependency comes to Rs. 20,000/-. The age of the deceased was 23 years, multiplier of 13 has been applied, whereas multiplier of 17 is applicable as widow is one of the claimants, we apply the multiplier of 17. Thus, the compensation on account of loss of dependency comes to Rs. 20,000 × 17 = Rs. 3,40,000/-. In addition, the claimants are entitled for a sum of Rs. 2,000/- on account of funeral expenses, Rs. 2,500/- for loss of estate and Rs. 5,000/- for loss of expectancy of life. A further sum of Rs. 5000/- is awarded to the widow on account of loss of consortium. Thus, total compensation comes to Rs. 3,40,000 + Rs. 2000 + Rs. 2500 + Rs. 5,000 + Rs. 5,000 = Rs. 3,54,500/- (Three Lakh Fifty Four Thousand Five Hundred only). The compensation enhanced by us to carry interest @ 6% per annum from the date of filing of the claim petition till realization.

Coming to M.A No. 696/2000: The deceased Raghupati was a cleaner on the bus. Smt. Kamladevi (CW-1) has stated that the deceased used to receive Rs. 1500/- per month by way of salary and Rs. 10/- per day allowance. The assessment of the income made by the learned Claims Tribunal at Rs. 1200/- per month is on lower side. It would be proper to assess the income of the deceased at Rs. 1800/- per month inclusive of allowance. Making ⅓rd deduction which amount deceased would have spent on himself, had he been alive, loss of monthly dependency comes to Rs. 12,000/-, annual Rs. 14,400/-, multiplier at the age of 20 years which is applicable is 16, whereas multiplier of 13 has been applied which is on lower side, we apply the multiplier of 16 as widow, child and mother of the deceased are the claimants. Thus, the compensation on account of loss of dependency comes to Rs. 14,400 × 16 = 2,30,400/-. In addition, the claimants are entitled for a sum of Rs. 2,000/- on account of funeral expenses, Rs. 2,500/- for loss of estate and Rs. 5,000/- for loss of expectancy of life. A further Sum of Rs. 5000/- is awarded to the widow on account of loss of consortium. Thus, total compensation comes to Rs. 2,30,400 + Rs. 2000 + Rs. 2500 + Rs. 5,000 + 5,000 = Rs. 2,44, 500/- (Two Lakh Forty Four Thousand Five Hundred only). The compensation enhanced by us to carry interest @ 6% per annum from the date of filing of the claim petition till realization.

17. Coming to question of liability of the insurer in both the appeals. Though the case was set up by the insurer that the amount was paid in cash to the insurer, thereafter the cover note was issued and in the cover note it was not mentioned that the payment was made by cheque which is usual where the payment is made by cheque. We find that case set up of payment by cash is rightly rejected. Cover note was issued on 3-8-1992 and it appears that the cheque given by Shri Vasudeo Prasad Sharma was dishonoured, after receipt of the intimation of dishonour of the cheque, cover note was cancelled on 24-8-1992 by the insurer and intimation was sent to the insured Shri Shiv Kumar Sharma by registered post. However, the said notice was not served on Shri Shiv Kumar Sharma as on the registered envelop or notice (Ex. D/8) it was mentioned by the postman that incomplete address was mentioned as such the envelop was referred back to the sender. On the back part of the envelop, it was further endorsed that search was made to find out, but, whereabouts could not be ascertained as per the address given. Address was given as Shri Shiv Kumar Sharma, Amkhu, Gwalior. It was not mentioned by the postman that the intimation was given to the insured to collect it from the post office or there was refusal to accept the notice. It was necessary to inform the dishonour of the cheque to the insured so that insurer was able to take steps to deposit the amount with the insurer to cover the liability in case of dishonour of the cheque. It cannot be said to be a service of notice intimating the cancellation of the cover note. Though cancellation was made, but, it was not communicated. In the similar circumstances in M. Nageswara Rao v. New India Assurance Co. Ltd., 2004 ACJ 1554, Division Bench of Andhra Pradesh High Court had held that it was necessary to prove that the notices were served on the insured so as to give him an opportunity to remit the premium amount for cheque that is dishonoured. The question has been considered thus:

“20. We are also of the firm view that even for an administrative action by a Public Sector Undertaking the principle audi alteram partem has to be applied. In this case, though the insurance company produced Exh. B-3 and Exh. B-4 said to have been issued by them, it failed to prove that they served these notices on the insured. Hence, we express our inability to follow the judgment in National Insurance Co. Ltd. v. Seema Malhotra, 2001 ACJ (638) (SC), for the reasons given supra. We are inclined to follow the other two judgments, namely, Oriental Insurance Co. Ltd. v. Inderjit Kaur, 1998 ACJ (123) (SC) and New India Assurance Co. Ltd. v. Rula, 2000 ACJ (630) (SC), wherein their Lordships specifically dealt with the provisions of Chapter XI of the Motor Vehicles Act dealing with the insurance policies of the vehicles to be put to use in public places and the consequences that will emanate from such a policy. Even assuming for a moment that the principle laid down in Seema Malhotra's case (supra), is to be accepted in the light of the observations of their Lordships in para 20 of the judgment, those observations are squarely applicable to the facts of the case as the insured was not given opportunity to remit the premium amount for cheque that is dishonoured.”

18. In Oriental Insurance Co. Ltd. v. Inderjit Kaur, 1998 ACJ (123) (SC) the Apex Court has laid down that once cover note/policy is issued, the insurer became liable to indemnify the third party liability. In the instant case, as cancellation was not informed to the insured, in our opinion vis-a-vis to third party insurer continues to liable.

19. In New India Assurance Co. Ltd. v. Rula, 2000 ACJ 630 the Apex Court has relied upon Indrajit Kaur's case (supra) and held that if on the date of accident there was a policy, cancellation subsequently due to dishonour of the cheque would not come to rescue of the insurer, it continues to be liable to make the payment to third party. In the instant case, as there was no effective communication of cancellation of policy which was necessary, we find that it is open to the third party to recover the compensation even from the insurer, apart from driver and owner of the vehicle.

20. Resultantly the appeals are partly allowed to the aforesaid extent. In M.A No. 697/2000, compensation of Rs. 3,54,500/- along with interest on enhanced amount at the rate of 6% per annum from the date of filing of the claim petition till realization and M.A No. 696/2000 compensation of Rs. 2,54,500/- along with interest on the enhanced amount @ 6% per annum from the date of filing of the claim petition till realization, is awarded. Liability of the respondents is held to be joint and several to make the payment of compensation. No costs.

Appeals partly allowed.

Shivadevi Jadon And Another v. Shivkumar Sharma And Others

Summary of Opinion delivered by Arun Mishra, J.

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Claimants' Arguments

Owner's / Driver's Arguments

Insurer's Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

A. Quantum of Compensation

B. Liability of the Insurer

Holding and Implications

Shivadevi Jadon And Another v. Shivkumar Sharma And Others

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