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Citation Codes
Equivalent Citations
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Case Number
Advocates
  • Praveen Jain, for Appellant;
  • Anurag Sharma, for Respondent No. 1;
  • Subhash Jain, for Respondent No. 3;
  • Anurag Sharma, for Appellant;
  • Praveen Jain, for Respondent No. 3
Judges
  • Mr. Mohammad Rafiq
Acts
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Citation Codes
Equivalent Citations
citation codes
Case Number
Advocates
  • Praveen Jain, for Appellant;
  • Anurag Sharma, for Respondent No. 1;
  • Subhash Jain, for Respondent No. 3;
  • Anurag Sharma, for Appellant;
  • Praveen Jain, for Respondent No. 3
Judges
  • Mr. Mohammad Rafiq
Acts
See more information ...
Smart Summary

Concise Analytical Summary of the Provided Opinion

Factual and Procedural Background

These two appeals arise from the same award passed by the Motor Accident Claims Tribunal (MACT), Tonk. The first appeal was preferred by the National Insurance Company Ltd. against the MACT award dated 26.9.2000 which had awarded Rs. 1,42,000/- to the claimant-respondents as compensation for the loss of Truck No. RND 6065 and the cement loaded therein, which were burnt in an accident involving Tanker No. HNU 885 insured with the appellant-insurer. A separate appeal was filed by the claimant seeking enhancement of the compensation amount.

Key chronological facts proven in the record (as described in the opinion):

  • A first cover note was issued by the insurance company on 5.10.1992 for the period 5.10.1992 to 4.10.1993.
  • The accident occurred in the night between 8/9.10.1992 at about 2:00 a.m. on 9.10.1992.
  • The insurer's evidence indicates a cheque dated 3.10.1992 was dishonoured and, according to the insurer, intimation of that dishonour was sent on 9.10.1992.
  • The owner deposited cash and a new cover note was issued at 4:35 p.m. on 9.10.1992.

Legal Issues Presented

  1. Whether the National Insurance Company could be held liable to indemnify third-party claimants for the accident occurring at 2:00 a.m. on 9.10.1992 when the insurer says the premium cheque had been dishonoured and (according to the insurer) notice of dishonour was sent on 9.10.1992.
  2. Whether the compensation awarded by the Tribunal (Rs. 1,42,000/-) for the loss of the truck and goods and for loss of business should be enhanced.

Arguments of the Parties

Appellant (National Insurance Company) — Principal Arguments

  • The insurer contended that it could not be fastened with liability because the vehicle was insured on 5.10.1992 by issuance of a cover note but the cheque for premium was dishonoured on 9.10.1992; the accident occurred at 2:00 a.m. on 9.10.1992 before the insurer had received valid premium.
  • The insurer argued they deposited premium in cash and issued a new cover note only at 4:35 p.m. on 9.10.1992, after the accident; therefore the vehicle was not insured at the time of the accident.
  • The insurer relied on several Supreme Court judgments (including Deddappa v. Branch Manager, National Insurance Co. Ltd.; Oriental Insurance Co. Ltd. v. Nanjappan; National Insurance Co. Ltd. v. Seema Malhotra) to support its contention that, on the facts, it should not be held liable as the policy was effectively avoided/cancelled or otherwise not subsisting at the time of the accident.
  • The insurer also argued that the Tribunal wrongly relied upon another Supreme Court decision referenced in the record (noted as 2000 WLC (SC) 275).

Claimant-Respondent and Non-claimant Respondent No. 3 — Principal Arguments

  • The claimant and the non-claimant respondent argued that the insurance company cannot escape responsibility because there was a contract of insurance when the accident took place and the insurer did not prove that the owner had been informed of the cheque's dishonour prior to the accident.
  • They asserted that no proof was produced before the Tribunal demonstrating that the owner had actually been informed of the dishonour of the cheque before the accident.
  • They relied on several Supreme Court authorities (including Oriental Insurance Company Ltd. v. Inderjit Kaur and others) which, in their submission, support the proposition that insurers remain liable to third parties notwithstanding their rights to avoid a policy where procedural or notice requirements were not complied with.

Appellant-Claimant in SBCMA No. 2024/2000 (Claim for Enhancement) — Principal Arguments

  • The claimant argued the Tribunal undervalued the truck. The claimant purchased the truck for Rs. 2,65,000/-, and the Tribunal applied depreciation to value it at Rs. 1,25,000/-. The claimant contended the Tribunal failed to appreciate the evidence properly and therefore the award for loss and business should be enhanced.
  • The claimant also argued that the Tribunal erred in awarding only Rs. 60,000/- for loss of business.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Oriental Insurance Company Ltd. v. Inderjit Kaur (1998) 1 SCC 371 The opinion records that the Supreme Court held that by reason of Sections 147(5) and 149(1) of the Motor Vehicles Act, 1988, an insurance company is liable to indemnify third parties in respect of liabilities covered by the policy and to satisfy awards of compensation notwithstanding its entitlement to avoid or cancel the policy where a premium cheque was not honoured; the insurer's remedies lie against the insured. The public interest served by insurance policies prevails. The Tribunal relied on this decision to fasten liability on the insurer; the court in the present opinion upheld the Tribunal's reliance and applied the principle to conclude insurer remained liable to third parties where no effective notice of cancellation before the accident was established.
Oriental Insurance Co. Ltd. v. Mahesh Prasad Rawat (2007 ACJ 1142) Cited by respondents; the opinion states the Supreme Court in that case rejected an insurer's appeal where the insurer did not prove receipt by the owner of notice of cancellation due to dishonour of cheques. The court treated this authority as supporting the proposition that, in absence of proof of notice of cancellation to the owner, insurer remains liable to third parties; it was used to reinforce the decision to uphold liability.
United India Insurance Co. Ltd. v. Devaiah (2007 ACJ 1659) Cited by respondents; the opinion notes the Supreme Court reiterated the view that lack of proof of notice leads to insurer's liability. The court observed the same view was reiterated in this case and relied on it to support the conclusion that the insurer had not discharged its burden to show prior notice to the owner.
Deddappa v. Branch Manager, National Insurance Co. Ltd. ((2008) 2 SCC 595) The opinion describes factual differences: there the premium cheque was dishonoured on 21.10.1997, the insurer cancelled the policy on 6.11.1997 and apprised the insured and the RTO; the accident occurred on 6.2.1998. The decision's facts included effective cancellation and notice prior to the accident. The court held this decision was distinguishable on facts and therefore did not help the appellant insurer in the present case.
Oriental Insurance Co. Ltd. v. Nanjappan (Civil Appeal No. 1012 of 2004, decided 13.2.2004) Described in the opinion as providing "the manner and mode in which an insurance company can recover the amount of compensation from the insured" — i.e., procedural mechanism for insurer to recover from the insured after paying third-party compensation. The court applied this authority to permit the appellant-insurer, although held liable to pay compensation, to recover the amount from the insured-owner in the mode and manner laid down in that decision.
National Insurance Co. Ltd. v. Seema Malhotra ((2001) 3 SCC 151; AIR 2001 SC 1197) The opinion records that this case involved a cheque for first premium dishonoured where the claim for compensation was raised by the insured himself (no third party); the Supreme Court held the insurer was not liable to pay the claim raised by the insured. The court treated this authority as distinguishable because Seema Malhotra concerned an insured's claim (not a third-party claim); accordingly it did not apply to defeat the third-party claim in the present matter.
2000 WLC (SC) 275 The opinion records that the Tribunal had relied on this judgment; the appellant contended the Tribunal wrongly relied on it. The text of the opinion does not set out the rule or principle from this authority. The opinion notes a dispute over reliance upon this authority but does not further elaborate any application of its principle beyond recording the parties' positions.
Shiva Devi Jadon v. Shiv Kumar Sharma (2007 ACJ 774) The opinion lists this case as cited by the respondents; the opinion does not state the specific rule or principle from this case. Cited by respondents in support of their position; the opinion does not detail additional application beyond noting it as cited authority.

Court's Reasoning and Analysis

The court undertook a fact-driven analysis tied closely to the timing of the accident, the insurer's actions and the evidence on record:

  1. The first cover note was issued on 5.10.1992 for the period 5.10.1992 to 4.10.1993; the accident occurred at about 2:00 a.m. on 9.10.1992.
  2. The insurer's case was that a cheque dated 3.10.1992 had been dishonoured and that intimation of the dishonour was sent to the owner on 9.10.1992; however, the insurer did not establish the precise time on 9.10.1992 when such intimation was dispatched or that the notice was actually delivered to the owner prior to the accident.
  3. The record shows the owner obtained a new cover note at 4:35 p.m. on 9.10.1992 by depositing cash. From these facts the court drew two inferences expressly stated in the opinion:
    • When the incident took place at 2:00 a.m. on 9.10.1992, the intimation of dishonour of the cheque had certainly not been sent by the insurer to the owner before the accident.
    • The owner learned of the cheque's dishonour only when he got a new cover note at 4:35 p.m. on 9.10.1992.
  4. The Tribunal had relied on Oriental Insurance Co. Ltd. v. Inderjit Kaur to hold that an insurer is liable to indemnify third parties notwithstanding entitlement to avoid or cancel a policy where premium payment via cheque failed; the court reviewed that principle and related authorities which emphasize public interest and that the insurer's remedy lies against the insured.
  5. The court considered authorities relied upon by the insurer (notably Deddappa) and found them distinguishable on facts because in those cases cancellation and notice had been effectively given prior to the accident and/or the insurer had notified RTO and the insured as required.
  6. The court also noted authorities (Mahesh Prasad Rawat; United India v. Devaiah) where the Supreme Court rejected insurer appeals when the insurer failed to prove that cancellation/notice had been communicated to the owner. The present facts aligned more closely with those authorities.
  7. On the basis of the settled proposition of law and the proven facts, the court concluded that the tribunal did not err in holding the insurer and the non-claimant owner liable jointly and severally to compensate the claimants.
  8. With respect to the claimant's appeal for enhancement, the court examined the claimant's evidence (including surveyor's statement, NAW1 and documents Ex.10–Ex.15) and found no basis to enhance the award; the Tribunal's valuation and award for loss of business were held to be just and reasonable on the record.

Holding and Implications

Core Ruling: The court held that the Tribunal did not err in ordering compensation and therefore the appeal of the insurance company is partly allowed to the limited extent that the insurer may recover the amount of compensation from the insured-owner in the manner laid down in Oriental Insurance Co. Ltd. v. Nanjappan, and the claimant's appeal for enhancement is dismissed.

More specifically, the court's formal dispositional conclusions (as recorded in the opinion) are:

  • S.B. Civil Misc. Appeal No. 398/2001 (Branch Manager, National Insurance Co. v. Sua Lal Sharma) is partly allowed only to the limited extent that the appellant-insurance company shall be entitled to recover the amount of compensation from the insured-owner of the vehicle as per the mode and manner laid down in Oriental Insurance Co. Ltd. v. Nanjappan.
  • S.B. Civil Misc. Appeal No. 2024/2000 (Sua Lal Sharma v. Dhan Singh) is dismissed.
  • There shall be no order as to costs.

Implications:

  • Direct effect on the parties: The insurer and the non-claimant owner are liable jointly and severally to pay the compensation awarded by the Tribunal to the claimants. The insurer is entitled to pursue recovery from the insured-owner using the procedure established in Oriental Insurance Co. Ltd. v. Nanjappan.
  • The claimant's request for enhancement of the award was denied; the Tribunal's valuation and business-loss award stand.
  • The opinion treats existing Supreme Court authorities as governing the allocation of responsibility in cases of dishonoured premium cheques and absent proof of effective notice to the insured; it does not purport to create a new legal principle beyond applying and distinguishing prior decisions on the facts.

Note: This summary is limited strictly to the content and statements contained in the provided opinion. No facts, principles, or interpretations not explicitly present in the opinion have been introduced.

Show full summary ...

    National Insurance Company v. Sua Lal Sharma And Ors.

    Mohammad Rafiq, J.:— Since both these appeals arise out of the same award passed by the Motor Accident Claims Tribunal, Tonk, they were heard together and are being disposed of by this common order.

    2. First of the above appeals has been preferred by the National Insurance Company Ltd. against the award dated 26.9.2000 passed by MACT Tonk whereby it awarded a sum of Rs. 1,42,000/- to the claimant-respondents as compensation for the loss of Truck No. RND 6065 and the cement loaded therein, which were burnt as a result of the accident involving Tanker No. HNU 885 insured with the appellant insurance company. Another appeal has been filed by the claimant for enhancement of the amount of compensation.

    3. Shri Ganesh Joshi, learned counsel for the appellant-National Insurance Company has argued that the liability of compensation could not be fastened on the appellant because the vehicle in question was insured with them on 5.10.1992 but the cheque of premium amount was dishonoured on 9.10.1992 with the intimation that same was given to the non-claimant, owner of the vehicle. However, without disclosing the fact that this vehicle was met with an accident during night intervening between 8/9.10.1992 and he deposited the amount on 9.10.1992 and got the new cover note issued for the period from 9.10.1992 to 8.10.1993 at 4.35 p.m on that day. It was argued that all these facts were brought in the affidavit of their witness Sukumar Raja and the copy of the policy was placed on record. Evidence clearly proved that incident took place at 2.00 a.m in the morning of 9.10.1992 whereas cover note/policy was issued at 4.35 p.m on 9.10.1992 Learned counsel therefore argued that the vehicle at the time of accident cannot taken to have been insured with the appellant so as to held them liable to make payment of compensation. It was argued that Tribunal has wrongly relied on the judgment of Supreme Court in 2000 WLC (SC) 275. Learned counsel relied on recent judgments of Supreme Court in Deddappa v. Branch Manager, National Insurance Co. Ltd. = (2008) 2 SCC 595 : 2008 (2) RLW 1358 (SC), Oriental Insurance Co. Ltd. v. Nanjappan: Civil Appeal No. 1012 of 2004 (arising out of SLP (C) No. 6631 of 2003) decided on 13.2.2004 and National Insurance Co. Ltd. v. Seema Malhotra, (2001) 3 SCC 151 : AIR 2001 SC 1197 : RLW 2001 (1) SC 164.

    4. On the other hand, Shri Anurag Sharma, learned counsel appearing for the claimant-respondent No. 1 and Shri Subhash Jain, learned counsel appearing for non-claimant respondent No. 3 opposed the appeal and argued that insurance company cannot escape from its responsibility because it had the contract of insurance when the accident took place. Even if the cheque was dishonoured, information of its being dishonoured was not given to the owner of the vehicle. It was argued that no such proof was produced before the Tribunal that the owner had actually been informed about dishonour of the cheque given by him. Learned counsel cited judgments of Supreme Court in Oriental Insurance Company Ltd. v. Inderjit Kaur, (1998) 1 SCC 371, Shiva Devi Jadon v. Shiv Kumar Sharma: 2007 ACJ 774, Oriental Insurance Co. Ltd. v. Mahesh Prasad Rawat: 2007 ACJ 1142 and United India Insurance Co. Ltd. v. Devaiah: 2007 ACJ 1659.

    5. Shri Anurag Sharma, learned counsel for appellant-claimant in SBCMA No. 2024/2000 argued that the Tribunal has failed to appreciate the evidence in true perspective while awarding merely a sum of Rs. 1,42,000/- as compensation. Tribunal further failed to appreciate that claimant purchased the said truck from one Shri Ummed Singh for sale consideration of Rs. 2,65,000/- and it was totally damaged due to fire. Tribunal could not have therefore arrived at the value of Rs. 1,25,000/- after applying the principle of depreciation. Similarly, Tribunal further erred in law in awarding only a sum of Rs. 60,000/- for the loss of business suffered by the claimant. Amount of compensation is therefore deserve to be suitable enhanced.

    6. I have given my thoughtful consideration to the arguments aforesaid and perused the impugned judgment as also the respective cases citing precedence.

    7. It is evident from the facts of the case that the first cover note was issued by the insurance company on 5.10.1992 according to which, the vehicle was insured for the period from 5.10.1992 to 4.10.1993 Though the accident took place in the night intervening between 8.10.1992 and 9.10.1992 at 2.00 a.m on 9.10.1992 but the intimation about dishonour of the cheque dated 3.10.1992, as per the evidence on record was sent by the insurance company to the owner of the vehicle on 9.10.1992 itself. It is also evident from the record that office of the insurance company had again issued a cover note of the same vehicle at 4.35 p.m on 9.10.1992 by accepting amount of premium in cash. Though what is contended by the insurance company is that intimation of the dishonour of the cheque was sent to the owner of the vehicle on 9.10.1992 itself but neither the point of time when such intimation was sent has been indicated nor proved nor it has been shown that whether such information was actually delivered to the owner on that day but from the facts of the case, two inferences can be safely drawn, one: when the incident took place at 2.00 a.m on 9.10.1992 itself, the intimation of the dishonour of the cheque was certainly not sent by the insurance company to the owner before the accident took place and two: that when owner got another cover note issued for insurance of the same vehicle by depositing the amount of premium in cash at 4.35 p.m on 9.10.1992, then only he actually came to know of the fact that his earlier cheque has been dishonoured.

    8. Tribunal while fastening the liability on the insurance company relief on judgment of Supreme Court in Oriental Insurance Company Ltd. v. Inderjit Kaur wherein, Supreme Court held that insurance company by reason of the provisions of Sections 147(5) and 149(1) of the Motor Vehicle Act, 1988, became liable to indemnify third parties in respect of the liability covered by the policy and to satisfy awards of compensation in respect thereof notwithstanding its entitlement to avoid or cancel the policy for the reason that the cheque issued in payment of the premium thereon had not been honoured. It was further held that in policy of insurance that the insurance company made a representation upon which the authorities and third parties were entitled to act. The appellant was not absolved of its obligations to third parties under the policy because it did not receive the premium. Its remedies in this behalf lay against the insured, for the insurance company itself was responsible for its predicament having issued the policy of insurance upon receipt only of a cheque towards the premium in contravention of the provisions of Section 64-VB of the Insurance Act. Public interest that a policy of insurance serves must, clearly, prevail over the interest of the insurance company.

    9. In Oriental Insurance Co. Ltd. v. Mahesh Prasad Rawat, supra, Supreme Court rejected the appeal of the insurance company disputing its liability on the ground that neither receipt of sending notice of cancellation of the contract by the insurer sent to the owner due to dishonour of cheques was proved nor any document to show that cancellation thereof was notified to the insured was proved. It was held that it was for the insurer and insured to settle the inter se dispute between themselves.

    10. Same view was reiterated in United India Insurance Co. Ltd. v. Devaiah supra.

    11. Coming now to the judgment cited by the counsel for the appellant, in Deddappa and others supra, facts were entirely different. That was a case in which cheque dated 15.10.1997 was dishonoured on 21.10.1997 and the insurance company cancelled the contract of insurance on 6.11.1997 and cancellation thereof was apprised to the insured so also copy of the same was also sent to the RTO along with memo issued by the bank with regard to dishonour of the cheque whereas, accident took place on 6.2.1998 Similarly, judgment of Supreme Court in Oriental Insurance Co. Ltd. v. Nanjappan supra also cannot come to the rescue of the appellant because that merely provides the manner and mode in which insurance company can recover the amount of compensation from the insured, owner of the vehicle primarily holding the insurance company liable to make good the amount of compensation. Judgement of Supreme Court in National Insurance Co. Ltd. v. Seema Malhotra is also distinguishable on facts because in that case, cheque issued by the insured for payment of first premium was dishonoured by the drawee bank and the claim for compensation was raised by the insured himself, no third party being involved. In those facts, it was held by the Supreme Court that insurer was not liable to pay claim raised by the insured.

    12. In view of settled proposition of law aforesaid and on the facts of the case which are proved by evidence in the present case, I am of the considered view that the Tribunal did not commit any error in holding the appellant insurance company and non-claimant owner liable to make compensation to the claimant respondents jointly and severally.

    13. As regards SBCMA No. 2024/2000 filed by the appellantclaimant for enhancement of compensation, on perusal of the evidence adduced by the claimant including the statements of Surveyer-Mukesh Kumar, NAW1-Sualal and documents Ex. 10 to Exh. 15, I am not pursuaded to uphold the arguments of the learned counsel appearing for the appellant-claimant that the compensation deserves to be enhanced. In my view, amount of compensation awarded by the Tribunal for the loss and damage to the truck and loss of business is just and reasonable.

    14. The appeal of the insurance company however deserves to be allowed in part.

    15. The appeal being S.B Civil Misc. Appeal No. 398/2001 (Branch Manager, National Insurance Co. v. Sua Lal Sharma) is therefore partly allowed to the limited extent that appellant-Insurance Company shall be entitled to recover the amount of compensation from the insured-owner of the vehicle as per the mode and manner laid down by the Supreme Court in Oriental Insurance Co. Ltd. v. Nanjappan, supra, in the terms as indicated therein.

    16. Whereas, S.B Civil Misc. Appeal No. 2024/2000 (Sua Lal Sharma v. Dhan Singh) is dismissed.

    There shall be no order as to costs.

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    Comments

    National Insurance Company v. Sua Lal Sharma And Ors.
    (May 30, 2008)