IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE S.SIRI JAGAN & THE HONOURABLE MR. JUSTICE K.RAMAKRISHNAN FRIDAY, THE 23RD DAY OF AUGUST 2013/1ST BHADRA, 1935 MACA.No. 2910 of 2009 ( ) ------------------------------------ AGAINST THE AWARD IN OPMV 270/2007 of MOTOR ACCIDENTS CLAIMS TRIBUNAL PALA. ..... APPELLANT(S)/PETITIONER: ---------------------------------------------- WILSON, S/O.CHACKO, VADAKKAMURIYIL HOUSE, THALANADU P.O., KOTTAYAM DISTRICT. BY ADVS.SRI.S.PRASANTH SRI.JAGADEESH LAKSHMAN RESPONDENT(S)/RESPONDENTS: ---------------------------------------------------- 1. VASANTHA KUMAR, VASANTHA BHAVAN, KARAKULAM P.O., RANNI. 2. O.S.SURESH, S/O.SAHADEVAN, OLANICKEL HOUSE, KIZHATHADIYOOR P.O., PALA. 3. THE ORIENTAL INSURANCE CO.LTD, BRANCH, KOTTAYAM. R1 BY ADV. SRI.VINOY VARGHESE KALLUMOOTTILL R3 BY ADV. SRI.GEORGE CHERIAN (THIRUVALLA) THIS MOTOR ACCIDENT CLAIMS APPEAL HAVING BEEN FINALLY HEARD ON 23-07-2013, THE COURT ON 23/08/2013 DELIVERED THE FOLLOWING: tss S.SIRI JAGAN & K.RAMAKRISHNAN, JJ.
M.A.C.A. No.2910 of 2009
Dated this, the 23rd day of August 2013 Judgment Ramakrishnan, J.
The claimant in OP(MV) No.270/2007 on the files of the Motor Accidents Claims Tribunal, Pala, is the appellant herein. The appellant filed the application for compensation for the injuries and consequential disabilities sustained by him in a motor vehicle accident caused on account of the rash and negligent driving of a vehicle driven by the second respondent (who has been deleted from the party array as per order in IA No.2959/12), owned by the first respondent and insured with the third respondent. The above said case was tried along with a number of other claim petitions arising out of the same accident, jointly and after considering the evidence on record, the Tribunal found that the accident occurred due to the rash and negligent driving of the vehicle by the second respondent and awarded a total compensation of Rs.2,04,560/- under various heads as follows :
Head Amount Medical expenses 54,700.00 Loss of earnings 10,000.00 Bystander's expenses 6,000.00 Extra nourishment 250.00 Damages to clothing 250.00 Transport to hospital 1,000.00 Pain and sufferings 20,000.00 Permanent partial disability resulting in loss of earning capacity 87,360.00 Loss of amenities 25,000.00 Total 204,560.00
The third respondent insurance company contended that the policy was issued on 6.4.2006 and the premium was paid by cheque by the first respondent from the account maintained by the first respondent with his bank namely, M/s.Vijaya Bank dated 5.4.2006 and the same was dishonoured by Ext.B1 intimation sent by HDFC Bank and this was intimated to the owner, namely the first respondent, by the insurer as per their registered notice dated 27.4.2006, repudiating the policy, the sending of which notice was evidenced by Ext.B4 postal receipt dated 28.4.2006 and since the accident occurred on 6.12.2006, after the repudiation of the policy, relying on the decision reported in Deddappa v. Branch Manager, National Insurance Company Limited (AIR 2008 SC 767), the tribunal exonerated the insurance company from liability, making the owner of the vehicle alone liable for payment of the amount. Dissatisfied with the quantum of compensation awarded and also the finding, exonerating the insurance company from liability, the appellant has come to this court with the above appeal.
2. Heard the learned counsel for the appellant, the learned counsel for the first respondent and the third respondent insurance company. The appellant filed IA No.1941/13 for reception of additional evidence and the same was allowed, making the document produced along with the application as Ext.A35, on the side of the appellant.
3. The counsel for the appellant submitted that the Tribunal has deducted 1/3rd for his personal expenses from the monthly income for the purpose of assessing compensation under the head 'loss of earning and loss of earning capacity', which is unsustainable in law, Further, the monthly income fixed by the Tribunal is also low. According to the counsel for the appellant, the Tribunal was not justified in exonerating the insurance company from liability as there is no evidence to show that the insurer had informed all the authorities under the Motor Vehicles Act regarding the repudiation of the policy, which they are bound to do. In this case, the Regional Transport Officer, who issued the registration certificate was not informed about the repudiation of the policy and the document produced by him before this Court, i.e. Ext.A35 will go to show that a temporary permit was issued on the previous day of the accident, which, in turn, would go to show that if really the insurer had informed about the cancellation of the policy to the registering authority, then, they would not have issued the temporary permit. Further, once the policy is issued, the liability of the third party is covered. They cannot repudiate that liability by merely sending a letter to the insured alone, especially, when it affects the public, who are travelling in a public service vehicle. He sought to distinguish the decision reported in Deddappa's case (supra) on the ground that in that case, the insurance company had informed the Regional Transport Officer also and the Supreme Court has held that since the insurance company had informed the repudiation of the policy long prior to the accident to all concerned, they are entitled to get exoneration from liability. In this case, that was not done. Under such circumstances, the insurance company must pay the amount to the third party, who sustained injury on account of the user of the motor vehicle in respect of which the policy was issued by them earlier, the repudiation of which has not been informed to the Regional Transport Officer concerned under Section 147(4) of the Motor Vehicles Act. This aspect has not been considered by the Tribunal, is the contention of the appellant.
4. The counsel for the first respondent also supported the submission made by the counsel for the appellant as regards the liability of the insurance company. On the other hand, he had contended that the amount awarded is just and proper.
5. Counsel for the insurance company submitted that since there was no policy as on the date of accident, which was repudiated by the company by intimating the insured long prior to the accident, the tribunal was perfectly justified in exonerating the insurance company from liability. While admitting that the cancellation of the policy was not intimated to the registering authority, he contended that that cannot be a necessary requisite for exoneration since the owner of the vehicle can get the permit from any of the offices of the registering authorities in the State by using the policy issued earlier, suppressing the fact of cancellation. So, according to him, the Tribunal was perfectly justified in exonerating the insurance company from liability. He had further contended that the amount awarded by the Tribunal is just and proper and no interference is called for.
6. Before going into the question regarding the liability of the insurance company, we may consider the amount of compensation payable to the appellant. The appellant claimed higher amount as monthly income. He had not produced any document to prove his income. Under such circumstances, the Tribunal was perfectly justified in notionally fixing the monthly income of the appellant as Rs.3,000/- per month. We do not find any reason to interfere with the same.
7. After fixing the monthly income as Rs.3,000/-, the Tribunal has deducted 1/3rd for his personal expenses for fixing the income for the purpose of assessing his loss of earning power and also loss of earning during the period of treatment. There is some force in the submission made by the counsel for the appellant that the Tribunal was not justified in deducting 1/3rd for the personal expenses in the case of personal injury cases. The deduction of 1/3rd will arise only in cases of death for the purpose of fixing the loss of dependency of dependants of the deceased and not in personal injury cases. This was so held in the decision reported in Nissam v. Premji Joy (2011(4) KLT 272). So, the Tribunal was not justified in deducting 1/3rd for the personal expenses of the appellant from the monthly income notionally fixed and assessing the compensation under the head loss of earning and loss of earning power. If the entire amount of Rs.3,000/- fixed by the Tribunal is taken as monthly income, then, he will be entitled to get Rs.15,000/- (3000 x 5) under the head loss of earning instead of Rs.10,000/- awarded by the Tribunal and Rs.1,31,040/- (3000 x 12 x 13 x 28/100) instead of Rs.87,360/- awarded by the Tribunal towards compensation for loss of earning capacity. We are not interfering with the amounts awarded by the Tribunal under other heads as they appear to be just and reasonable. So, in all, the appellant will be entitled to get additional compensation of Rs.48,680/-, over and above the amount awarded by the Tribunal.
9. The next interesting question which arises for consideration is whether, even if the insurance company has repudiated the policy by intimating the same to the insured, they are liable to indemnify the insured. The next question is whether 'persons concerned' mentioned in Deddappa's case (supra) means the insured alone or any other person other than the insured to be informed so as to exonerate the insurance company completely from the liability. Thirdly, even if the insurance company is exonerated from the liability to indemnify the insured, whether they are entitled to recover the same from the insured as contemplated under Section 149(4) of the Motor Vehicles Act.
10. In this case, admittedly, Ext.B5 policy was issued on 6.4.2006 and the premium was paid by the insured by way of a cheque drawn on an account maintained by the first respondent-insured, with M/s.Vijaya Bank on 5.4.2006, evidenced by Ext.B2 receipt. The insurer presented the cheque and it was dishonoured, which was intimated to the collecting bank namely, HDFC Bank. The insurer sent a registered notice dated 27.4.2006 evidenced by Ext.B3, repudiating the contract and that was sent on 28.4.2006, evidenced by Ext.P4 postal receipt. The accident occurred on 6.12.2006. So, according to the counsel for the insurance company, the policy was cancelled long prior to the accident, which fact was intimated to the insured and they are bound to inform only the insured as insured is the only contracting party with them in order to repudiate the contract. Once the contract is repudiated, there is no valid policy in force and as such, they cannot be made liable to pay the amount.
11. Section 64VB of the Insurance Act deals with the question as to when the risk will be covered in the case of issuance of a policy, which reads as follows :
"64VB. No risk to be assumed unless premium is received in advance :- (1) No insurer shall assume any risk in India in respect of any insurance business on which premium is not ordinarily payable outside India unless and until the premium payable is received by him or is guaranteed to be paid by such person in such manner and within such time as may be prescribed or unless and until deposit of such amount as may be prescribed, is made in advance in the prescribed manner.
(2) For the purposes of this Section, in the case of risks for which premium can be ascertained in advance, the risk may be assumed not earlier than the date on which the premium has been paid in cash or by cheque to the insurer.
Explanation - Where the premium is tendered by postal money order or cheque sent by post, the risk may be assumed on the date on which the money order is booked or the cheque is posted, as the case may be.
(3) Any refund of premium which may become due to an insured on account of the cancellation of a policy or alteration in its terms and conditions or otherwise shall be paid by the insurer directly to the insured by a crossed or order cheque or by postal money order and a proper receipt shall be obtained by the insurer from the insured and such refund shall, in no case, be credited to the account of the agent.
(4) Where an insurance agent collects a premium on a policy of insurance on behalf of an insurer, he shall deposit or despatch by post to the insurer, the premium so collected in full without deduction of his commission within twenty-four hours of the collection excluding bank and postal holidays.
(5) The Central Government may, by rules, relax the requirements of sub-section (1) in respect of particular categories in insurance policies.
(6) The Authority may, from time to time, specify, by the regulations made by it, the manner of receipt of premium by the insurer."
It is clear from this section that in order to cover the risk by the insurer, the premium must be received in advance. This can be either in cash or by cheque.
12. But, the necessity for insuring a vehicle has been statutorily made compulsory on the insured by virtue of Section 146 of the Motor Vehicles Act, which reads as follows :
"146. Necessity for insurance against third party risk - (1) No person shall use, except as a passenger or cause or allow any other person to use, a motor vehicle in a public place, unless there is in force in relation to the use of the vehicle by that person or that other person, as the case may be, a policy of insurance complying with the requirements of this Chapter.
Provided that in the case of a vehicle carrying, or meant to carry, dangerous or hazardous goods, there shall also be a policy of insurance under the Public Liability Insurance Act, 1991 (6 of 1991).
Explanation - A person driving a motor vehicle merely as a paid employee, while there is in force in relation to the use of the vehicle, no such policy as is required by this sub-section, shall not be deemed to act in contravention of the sub- section unless he knows or has reason to believe that there is no such policy in force.
(2) Sub-section (1) shall not apply to any vehicle owned by the Central Government or a State Government and used for Government purposes unconnected with any commercial enterprises.
(3) The appropriate Government may, by order, exempt from the operation of sub-section (1) any vehicle owned by any of the following authorities, namely :-
(a) the Central Government or a State Government, if the vehicle is used for Government purposes connected with any commercial enterprise;
(b) any local authority ;
(c) any State transport undertaking.
Provided that no such order shall be made in relation to any such authority unless a fund has been established and is maintained by that authority in accordance with the rules made in that behalf under this Act for meeting any liability arising out of the use of any vehicle of that authority, which that authority or any person in its employment may incur to third parties."
13. The requirement of policies and limits of liability have been dealt with in Section 147 of the Motor Vehicles Act, which reads as follows :
"147. Requirements of policies and limits of liability - (1) In order to comply with the requirements of this Chapter, a policy of insurance must be a policy which -
(a) is issued by a person, who is an authorised insurer ; and
(b) insures the person or classes of persons specified in the policy to the extent specified in sub-section (2)
(i) Against any liability which may be incurred by him in respect of the death of or bodily injury to any person, including owner of the goods or his authorised representative carried in the vehicle or damage to any property of a third party caused by or arising out of the use of the vehicle, in a public place;
(ii) against the death of or bodily injury to any passenger of a public service vehicle caused by or arising out of the use of the vehicle in a public place :
Provided that a policy shall not be required -
(i) to cover liability in respect of the death, arising out of and in the course of his employment, of the employee of a person insured by the policy or in respect of bodily injury sustained by such an employee arising out of and in the course of his employment other than a liability arising under the Workmen's Compensation Act, 1923 (8 of 1923) in respect of the death of or bodily injury to, any such employee -
(a) engaged in driving the vehicle, or
(b) if it is a public service vehicle engaged as a conductor of the vehicle or in examining tickets on the vehicle, or
(c) if it is a goods carriage, being carried in the vehicle or
(ii) to cover any contractual liability.
Explanation - For the removal of doubts, it is hereby declared that the death of or bodily injury to any person or damage to any property of a third party shall be deemed to have been caused by or to have arisen out of, the use of a vehicle in a public place, notwithstanding that the person who is dead or injured or the property which is damaged was not in a public place at the time of the accident, if the act or omission which led to the accident occurred in a public place.
(2) Subject to the proviso to sub-section (1), a policy of insurance referred to in sub-section (1) shall cover any liability incurred in respect of any accident, up to the following limits, namely ;-
(a) save as provided in clause (b), the amount of liability incurred ;
(b) in respect of damage to any property of a third party, a limit of rupees six thousand ;
Provided that any policy of insurance issued with any limited liability and in force, immediately before the commencement of this Act, shall continue to be effective for a period of four months after such commencement or till the date of expiry of such policy whichever is earlier.
(3) A policy shall be of no effect for the purposes of this Chapter unless and until there is issued by the insurer in favour of the person by whom the policy is effected a certificate of insurance in the prescribed form and containing the prescribed particulars of any condition subject to which the policy is issued and of any other prescribed matters and different forms, particulars and matters may be prescribed in different cases.
(4) Where a cover note issued by the insurer under the provision of this Chapter or the rules made thereunder is not followed by a policy of insurance within the prescribed time, the insurer shall, within seven days of the expiry of the period of the validity of the cover note, notify the fact to the registering authority in whose records the vehicle to which the cover note relates has been registered or to such other authority as the State Government may prescribe.
(5) Notwithstanding anything contained in any law for the time being in force, an insurer issuing a policy of insurance under this section shall be liable to indemnify the person or classes of person specified in the policy in respect of any liability which the policy purports to cover in the case of that person or those classes of persons."
14. The liability of the Insurance Company once the policy is issued, has been dealt with under Section 149 of the Motor Vehicles Act, which reads as follows :
"149. Duty of insurers to satisfy judgments and awards against persons insured in respect of third party risks - (1) If, after a certificate of insurance has been issued under sub- section (3) of Section 147 in favour of the person by whom a policy has been effected, judgment or award in respect of any such liability as is required to be covered by a policy under clause (b) of sub-section (1) of Section 147 (being a liability covered by the terms of the policy) or under the provisions of Section 163Ais obtained against any person insured by the policy, then, notwithstanding that the insurer may be entitled to avoid or cancel or may have avoided or cancelled the policy, the insurer shall, subject to the provisions of this Section, pay to the person, entitled to the benefit of the decree any sum not exceeding the sum assured payable thereunder, as if he were the judgment debtor or in respect of the liability, together with any amount payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any enactment relating to interest on judgments.
(2) No sum shall be payable by an insurer under sub-section (1) in respect of any judgment or award unless before the commencement of the proceedings in which the judgment or award is given, the insurer had notice through the court or as the case may be, the Claims Tribunal of the bringing of the proceedings, or in respect of such judgment or award so long as execution is stayed thereon pending an appeal and an insurer to whom notice of the brining of any such proceedings is so given shall be entitled to be made a party thereto and to defend the action on any of the following grounds, namely ;
(a) that there has been a breach of a specified condition of the policy, being one of the following conditions, namely ;-
(i) a condition excluding the use of the vehicle -
(a) for hire or reward, where the vehicle is on the date of the contract or insurance a vehicle, not covered by a permit to ply for hire or reward or
(b) for organised racing and speed testing, or
(c) for a purpose not allowed by the permit under which the vehicle is used, where the vehicle is a transport vehicle or
(d) without side-car being attached where the vehicle is a motor cycle ; or
(ii) a condition excluding driving by a named person or persons or by any person who is not duly licensed or by any person who has been disqualified for holding or obtaining a driving licence during the period of disqualification ; or
(iii) a condition excluding liability for injury caused or contributed to by conditions or war, civil war, riot or civil commotion ; or
(b) that the policy is void on the ground that it was obtained by the non-disclosure of a material fact or by a representation of fact which was false in some material particular.
(3) Where any such judgment as is referred to in sub- section (1) is obtained from a Court in a reciprocating country and in the case of a foreign judgment is, by virtue of the provisions of Section 13 of the Code of Civil Procedure,1908 (5 of 1908) conclusive as to any matter adjudicated upon by it, the insurer (being an insurer registered under the Insurance Act (4 of 1938) and whether or not he is registered under the corresponding law of the reciprocating country) shall be liable to the person entitled to the benefit of the decree in the matter and to the extent specified in sub-section (1) as if the judgment were given by a Court of India.
Provided that no sum shall be payable by the insurer in respect of any such judgment unless before the commencement of the proceedings in which the judgment is given, the insurer had notice through the court concerned of the bringing of the proceedings and the insurer to whom notice is given is entitled under the corresponding law of the reciprocating country, to be made a party to the proceedings and to defend the action on ground similar to those specified in sub-section (2).
(4) Where a certificate of insurance has been issued under sub-section (3) of Section 147 to the person by whom a policy has been effected, so much of the policy as purports to restrict the insurance of the persons insured thereby by reference to any conditions other than those in clause (b) of sub-section (2) shall, as respects such liabilities as are required to be covered by a policy under clause (b) of sub- section (1) of Section 147, be of no effect :
Provided that any sum paid by the insurer in or towards the discharge of any liability of any person, which is covered by the policy by virtue only of this sub-section shall be recoverable by the insurer from that person.
(5) If the amount which an insurer becomes liable under this section to pay in respect of a liability incurred by a person insured by a policy exceeds the amount for which the insurer would apart from the provisions of this section be liable under the policy in respect of that liability, the insurer shall be entitled to recover the excess from that person.
(6) In this section, the expression "material fact" and "material particular" means respectively a fact or particular of such a nature as to influence the judgment of a prudent insurer in determining whether he will take the risk and if so, at what premium and on what conditions, and the expression "liability covered by the terms of the policy" means a liability which is covered by the policy or which would be so covered by for the fact that the insurer is entitled to avoid or cancel or has avoided or cancelled the policy.
(7) No insurer to whom the notice referred to in sub-section (2) or sub-section (3) has been given shall be entitled to avoid his liability to any person entitled to the benefit of any such judgment or award as is referred to in sub-section (1) or in such judgment as is referred to in sub-section (3) otherwise than in the manner provided for in sub-section (2) or in the corresponding law of the reciprocating country as the case may be."
15. So, it is clear from the above provisions of the statute that there is a duty cast on the owner of the vehicle to insure his vehicle before the same is put on road and this has been made with an intention to safeguard the interest of third parties who are likely to use the vehicle and in case any injury or death has been caused on account of the user of the vehicle in a public place, to cover the risk of such persons in such events. Further, Section 147(4) of the Motor Vehicles Act imposes a responsibility on the insurer to inform the registering authority about the cancellation or variation effected in the cover note and also to such other authority as the State Government may prescribe. Still further, Section 147 (5) of the Act says that notwithstanding anything contained in any law for the time being in force, an insurer, issuing a policy of insurance under this section shall be liable to indemnify the person or classes of persons specified in the policy in respect of any liability, which the policy purports to cover in the case of that person or those classes of persons. So, it is made clear that once the policy has been issued, then, the liability has been cast on the insurer to indemnify the person or classes of persons specified in the policy in respect of any liability which the policy purports to cover. Apart from the same, Sub-section (1) of Section 149 of the Act says that if after a certificate of insurance has been issued under Sub-section 3 of Section 147 of the Act, in favour of the person for whom the policy has been effected, they are bound to satisfy the award passed, notwithstanding that the insurer may be entitled to avoid or cancel the policy. Further, Section 149(4) of the Act gives a right to the insurer to recover the amount from the insured if they were made liable to pay the amount by virtue of the liability imposed on them under Section 147 of the Act, if there was any violation of contract committed by the insured.
16. This aspect has been considered by the Honourable Supreme Court in the decision reported in Oriental Insurance Company Limited v. Inderjit Kaur (AIR 1998 SC 588) wherein it has been observed that "if a policy has been issued receiving a cheque and though it was bounced, they cannot absolve themselves from the liability as they have issued the policy in contravention of Section 64VB of the Insurance Act. The public interest that a policy of insurance serves must, clearly prevail over the interest of the appellant."
The reason for coming to such a conclusion has been discussed in paragraph nos.8 and 9 of the said decision which reads as follows :
"8. The policy of insurance that the appellant issued was 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.
9. We may note in this connection the following passage in the case of Montreat Street Railway Company v. Normandin (AIR 1917 Privy Council 142);
"When the provisions of a statute relate to the performance of a public duty and the case is such that to hold null and void acts done in neglect of this duty would work serious general inconvenience or injustice to persons who have no control over those entrusted with the duty and at the same time would not promote the main object of the Legislature, it has been the practice to hold such provisions to be directory only, the neglect of them, though punishable, not affecting the validity of the acts done."
17. But, in paragraph 7 of the Judgment, it was observed as follows :
"7. We have, therefore, this position. Despite the bar created by Section 64VB of the Insurance Act, the appellant, an authorised insurer, issued a policy of insurance to cover the bus without receiving the premium therefor. By reason of the provisions of Ss.147(5) and 149(1) of the Motor Vehicles Act, the appellant became liable to indemnify third parties in respect of the liability which that policy covered and to satisfy awards of compensation in respect thereof notwithstanding its entitlement (upon which we do not express any opinion) to avoid or cancel the policy for the reason that the cheque issued in payment of the premium thereon had not been honoured."
18. But, in the decision reported in New India Assurance Company Limited v Rula and others (2000) 3 SCC 195), a two Bench decision of the Honourable Supreme Court has observed that if any right has been accrued in favour of a third party prior to the cancellation of the policy, that would remain unaffected by cancellation, irrespective of any provision to the contrary contained in the Contract Act or the Insurance Act. In the same decision, it has been held that there is prohibition of user of motor vehicle under Section 146 of the Motor Vehicles Act without a statutory insurance policy and the object behind is to enable the third party suffering injuries from use of the motor vehicle to get damages irrespective of the financial capacity or solvency of the driver or the owner of the vehicle." Further, in the same decision, it has been held that "any contract of insurance under Chapter XI of the Motor Vehicles Act contemplates a third party, who is not a signatory or a party to the contract of insurance, but is nevertheless protected by such contract. Therefore, the third party is not concerned and does not come into the picture at all in the matter of payment of premium and whether premium has been paid or not, is not the concern of the third party who is concerned only with the fact that there was a policy issued in respect of the vehicle involved in the accident and it is on the basis of this policy that the claim can be maintained by the third party against the insurer." It is further held in the same decision that "despite the bar created by Section 64VB of the Insurance Act, the appellant issued the policy of insurance to cover a motor vehicle without receiving the premium therefor. By reason of the provisions of Section 147(5)and 149(1) of the Motor Vehicles Act, the appellant became liable to indemnify third parties in respect of the liability which that policy covered. The subsequent cancellation of the insurance policy in the instant case on the ground that the cheque through which premium was paid was dishonoured, would not affect the rights of the third party which had accrued on the issuance of the policy on the date on which the accident took place. That was a case where the policy was cancelled after the accident took place.
19. In the decision reported in Deddappa's case (supra), it has been held that where the cheque issued by the insured towards premium was dishonoured and as a result, the policy of insurance was cancelled and intimation of cancellation was given to the insured much prior to the accident, the insurer was not liable to pay compensation. But, in that case, the cancellation of the policy was informed to the Regional Transport Authority and the accident took place long after the cancellation of the policy. In that decision, in paragraph 25, it has been observed relying on the observations made in the decision in New India Assurance Company Limited v. Harshadbhai Amrutbhai Modhiya and another (2006) 5 SCC 192) that if the contract is not valid or void for want of consideration, then, the insurer should not be mulcted with the liability to indemnify the insured as there is no valid policy, relying on the observation made in paragraph 23 of that judgment, which reads as follows :
"It was further observed :-
The law relating to contracts of insurance is part of the general law fo contract. So said Roskil, L,J. in Cehave v. Bremer. This view was approved by Lord Wilberforce in Reardon Smith v. Hansen-Tangen (All ER p.576 h) wherein he said :
"It is desirable that the same legal principles should apply to the law of contract as a whole and that different legal principles should not apply to different branches of that law."
A contract of insurance is to be construed in the first place from the terms used in it which terms are themselves to be understood in their primary, natural, ordinary and popular sense. (See Colinvaux's Law of Insurance, 7th Edn. para2-
01). A policy of insurance has therefore to be construed like any other contract. On a construction of the contract in question, it is clear that the insurer had not undertaken the liability for interest and penalty, but had undertaken to indemnify the employer only to reimburse the compensation, the employer was liable to pay among other things under the Workmen's Compensation Act. Unless one is in a position to void the exclusion clause concerning liability for interest and penalty imposed on the insured on account of his failure to comply with the requirements of the Workmen's Compensation Act of 1925, the insurer cannot be made liable to the insured for those amounts."
It is further observed in the said decision as follows :
"26. We are not oblivious of the distinction between the statutory liability of the Insurance Company vis-a-vis a third party in the context of Sections 147 and 149 of the Act and its liabilities in other cases. But the same liabilities arising under a contract of insurance would have to be met if the contract is valid. If the contract of insurance has been cancelled and all concerned have been intimated thereabout, we are of the opinion, the insurance company would not be liable to satisfy the claim.
27. A beneficial legislation as is well known should not be construed in such a manner so as to bring within its ambit a benefit which was not contemplated by the Legislature to be given to the party. In Regional Director, Emnployees State Insurance Corporation, Trichur v. Ramanuja Match Industries (AIR 1985 SC 278), this Court held :
"We do not doubt that beneficial legislations should have liberal construction with a view to implementing the legislative intent but where such beneficial legislation has a scheme of its own, there is no warrant for the Court to travel beyond the scheme and extend the scope of the statute on the pretext of extending the statutory benefit to those who are not covered by the scheme."
20. But, the question whether the liability under Sections 146, 147 and 149 of the Motor Vehicles Act can be disclaimed by the insurance company in case of cancellation of policy was considered by the Full Bench of this Court in Oriental Insurance Company Limited v. A.B.Sivankutty and others (2005 KHC 1327), wherein it was held that the liability of the Insurance Company in respect of damages for third party risk continues for the entire period covered by the policy in spite of the cheque issued towards payment of premium was dishonoured and consequently, policy was cancelled by the Insurance Company. This Court had considered the decision reported in Inderjit Kaur's case (supra) and the subsequent decisions on this aspect, including the one reported in Rula's case (supra). In paragraphs 12 and 13 of the Judgment, the purpose and intention of the Legislature for enacting Sections 146, 147 and 149 has been considered as follows :
"12. It is worthy to bear in mind that Chap.11 of the Motor Vehicles Act, 1988 makes insurance of motor vehicles against third party risks compulsory and no vehicle can be put on the road without a valid policy of insurance covering risks that may occur to third parties out of use of such motor vehicle. The Insurance Company while issuing policy of insurance receiving cheque towards premium, enables the owner of the motor vehicle to ply the motor vehicle on the public roads. Whether the cheque is cashed and if not whether the policy is cancelled are all matters within the knowledge of the contracting parties, namely, insurer and insured. The menace caused to the general public by the Insurance Company enabling the use of such motor vehicles by issuance of policy of insurance is however not abated by their cancelling the policy behind the back of the beneficiaries who are the public at large in as much as the policy without any endorsement of cancellation remains in the possession of the insured who can continue to use the vehicle on the strength of the said policy till the period shown therein expires without any impediment in the use of the vehicle being caused by the authorities concerned. It is apposite to remember the observations of the Supreme Court in Para.10 of the decision in Inderjit Kaur's case. The Apex Court observed :
10. It must also be noted that it was the appellant itself who was responsible for its predicament. It had issued the policy of insurance upon receipt only of a cheque towards the premium in contravention of the provisions of S.64VB of the Insurance Act. The public interest that a policy of insurance serves must, clearly prevail over the interest of the appellant."
13. The Apex Court has laid much stress on the need to interpret the provisions of the Motor Vehicles Act, which is a beneficial legislation, in a meaningful manner in United India Insurance Company Ltd. v. Lehru and others (2003 (3) SCC 338), while rejecting the defence of the Insurance Company built on the exclusion clause in S.149(2)(a)(ii) of the Motor Vehicles Act. The Supreme Court in Para.12 of the said judgment, quoted with approval, the observations made by that court in Para.13 of the Judgment in Skandia Insurance Co. Ltd v. Kokilaben Chandravadan(1987(2) SCC 654). The said observation is as follows :
"13. In order to divine the intention of the Legislature in the course of interpretation of the relevant provisions, there can scarcely be a better test than that of probing into the motive and philosophy of the relevant provisions, keeping in mind the goals to be achieved by enacting the same. Ordinarily, it is not the concern of the Legislature whether the owner of the vehicle insures his vehicle or not. If the vehicle is not insured, any legal liability arising on account of third party risk will have to be borne by the owner of the vehicle. Why then has the Legislature insisted on a person using a motor vehicle in a public place to insure against third party risk by enacting S.94? Surely, the obligation has not been imposed in order to promote the business of the insurers engaged in the business of automobile insurance. The provision has been inserted in order to protect the members of the community travelling in vehicles or using the roads from the risk attendant upon the user of motor vehicles on the roads. The law may provide for compensation to victims of the accidents who sustain injuries in the course of an automobile accident or compensation to the dependants of the victims in the case of a fatal accident. However, such protection would remain a protection on paper unless there is a guarantee that the compensation awarded by the courts would be recoverable from the persons held liable for the consequences of the accident. A court can only pass an award or a decree. It cannot ensure that such an award or decree results in the amount awarded being actually recovered from the person held liable who may not have the resources. The exercise undertaken by the law courts would then be an exercise in futility. And the outcome of the legal proceedings which, by the very nature of things involve the time cost and money cost invested from the scarce resources of the community would make a mockery of the injured victims, or the dependants of the deceased victim of the accident, who themselves are obliged to incur not inconsiderable expenditure of time, money and energy in litigation. To overcome this ugly situation, the Legislature has made it obligatory that no motor vehicle shall be used unless a third party insurance is in force. To use the vehicle without the requisite third party insurance being in force, is a penal offence. The Legislature was also faced with another problem. The insurance policy might provide for liability walled in by conditions which may be specified in the contract of policy. In order to make the protection real, the Legislature has also provided that the judgment obtained shall not be defeated by the incorporation of exclusion clauses other than those authorised by S.96 and by providing that except and save to the extent permitted by S.96, it will be the obligation of the insurance company to satisfy the judgment obtained against the persons insured against third party risk (vide S.96). In other words, the Legislature has insisted and made it incumbent on the user of a motor vehicle to be armed with an insurance policy covering third party risks which is in conformity with the provisions enacted by the Legislature. It is so provided in order to ensure that the injured victims of automobile accidents or the dependants of the victims of fatal accidents are really compensated in terms of money and not in terms of promise. Such a benign provision enacted by the Legislature having regard to the fact that in the modern age, the use of motor vehicles notwithstanding the attendant hazards, has become an inescapable fact of life, has to be interpreted in a meaningful manner, which serves rather than defeats the purpose of the legislation. The provision has, therefore, to be interpreted in the twilight of the aforesaid perspective."
21. In that case, the Full Bench of this Court had relied on the larger Bench decision in Inderjit Kaur's case (supra) and held that in spite of the fact of cancellation of the policy for non-payment of premium by the insurance company, their liability to pay the amount covered by the policy in respect of third party continues and they can recover the amount from the insured, invoking Section 149(4) of the Act.
22. This aspect has been considered by the Allahabad High Court also in the decision reported in National Insurance Company Limited v. Jitendra Kumar and another (2009 KHC 6338), wherein it was held that the insurance company will inform all concerned inclusive of the Regional Transport Authority and the appropriate police authority dealing with traffic simultaneously with the information of cancellation of insurance. As soon as an insurer enters into a contract with the insured under the Act, it becomes statutorily liable to the third parties. The provision in the concerned chapter of the Act itself is a beneficial piece of legislation for the third parties. Insurance company is not merely under contractual obligation but also under statutory obligation to pay compensation. Benefits under the statute cannot be frustrated by means of solitary intimation of the insurer to the insured about cancellation of the insurance contract for dishonour of the cheques for payment of premia. In paragraph 10 of the said decision, it has been observed as follows :
"From the plain reading of several provisions of the Act, it appears to us that the insurance of the vehicle to run at the public places is mandatory in nature. Therefore, it is implied that the insurance company will inform all concerned - inclusive of the Regional Transport Authority and the appropriate police authority dealing with traffic simultaneously with the information of cancellation of the insurance coverage to the owner/insured. Insurance is an assurance. As per the scheme of the Act, such assurance is to be given not only to the insured but also to the third parties, who sustained injury or succumbed to death due to road accident and their legal representatives. They are not aware about the import period and extent of the contract between the insurer and the insured. They are also not aware about any default. They presuppose that when a vehicle runs in the public place, it has all valid documents to run. One of such valid documents is contract of insurance between the insurer and insured to cover the third party risk. In that way, knowledge or information for not having valid insurance coverage by the authority deals with traffic is mandatory in nature. Insurers cannot be allowed to wait and watch like usual commercial enterprises and take defence of not having insurance coverage only after the accident when the claim will arise. As soon as an insurer enters into a contract with insured under the Act, it becomes statutorily liable to the third parties. On the other hand, the Act itself is a beneficial piece of legislation for the third parties. Therefore, whenever we sit in this jurisdiction, we should not be forgetful about predominant effect of such Act. Interest of the affected persons will be considered at first. Equity follows law by applying the maxim of Acquitas sequitur legem but sometimes, law follows equity by the maxim of Lex aliquando sequitur aequitatem particularly when equity emerges into the law relevant for the purpose, Therefore, it is essential for the insurer to take a defence before the Tribunal that it had not only cancelled the insurance coverage and informed the insured but also simultaneously intimated all concerned to prevent the vehicle from plying on the road otherwise, it cannot avoid the liability to pay compensation to the third parties specially in the form of stop gap arrangement and recover from the owner i.e., insured. When the insurance coverage under the Act is compulsory, it has two-fold duty of prevention in the absence of coverage by notice to the appropriate authorities, their liability can be extinguished and the authorities will be strictly liable to ensure seizure of such vehicle from the public place for not having insurance coverage. Notice to them means notice to public. In the absence of the same, an insurance company cannot be discharged from their liability to make payment of compensation to a third party even as a stop gap arrangement. Facilities under the statute cannot be frustrated by means of solitary intimation of the insurer to the insured about cancellation of insurance contract for dishonourment of requisite cheques. It is "strict liability" of the insurer under the law. An insurance company is doing business about risk as per its own policy. Therefore, if the insurance company is allowed to avoid the risk, the same will go against their own policy of business particularly when they are entitled to get back their money even by way of land revenue in case the contract does not seem to be in existence for any reason. There is, in general, no duty for the sufferer to anticipate that another will be negligent and to avoid the effects of that negligence by anticipation. The position of a sufferer and the position of an insurer cannot be equated at all."
23. The binding nature of conflicting views has been considered in the decision reported in Raman Gopi v. Kunju Raman Uthaman (2011(4) KLT 458 (FB) and it has been observed as follows :
"When confronted with a like situation wherein the decisions of co-equal benches are of conflicting nature on a legal issue, the law laid down by the Full Bench in Joseph's case (2001(1) KLT 958(FB) will have to be followed. The later decision will prevail. A decision of the Apex Court on a declaration of law is binding on all High Courts and subordinate courts, in the light of Art.141 of the Constitution. Of course, what is relevant is the ratio decidendi. The judgments of the Apex Court which have followed the binding decisions of the Constitution Bench or other Benches will thus be binding on other courts. The only exception pointed out is wherein a Bench of smaller strength did not follow an earlier binding decision in a situation wherein the binding decisions of the earlier benches of the Apex Court are not brought to its notice. It is apparent that in such cases, the decision of the Bench of smaller strength will be without the colour of a binding precedent underArt.141 of the Constitution. It may not be proper for the High Courts or subordinate courts to criticise and characterise a decision of the Apex Court which has laid down a point of law as per incurium. Such is not the function of the High Court or subordinate courts."
It is further observed in the same decision as follows :
"In the light of the decision of the Supreme Court in Bengal Immunity Co. Ltd's case (AIR 1955 SC 661), the law declared by the Supreme Court is binding in all courts in India except the Supreme Court. The decisions of the Apex Court in Raghubir Singh's case (1989(2) KLT 168(SC) and Central Board of Dawoodi Bohra Community's case (2005(1) KLT 486 (SC) have laid down the circumstances wherein the decisions of larger Benches will have to be followed by Benches of lesser strength. Therefore, those guidelines will act as a pointer for the High Courts and subordinate courts while examining the binding nature of a decision of the Apex Court, under Art.141 of the Constitution whenever there are conflicting decisions. The caution expressed by the Apex Court in various cases mentioned above, that the High Court cannot refuse to follow a binding decision of the Apex Court, is important in this context. The application of the rule of sub silentio and that of per incuriam should be guarded and the courts cannot criticise the decisions of the Apex Court merely on the assumption that an earlier binding decision of the Apex Court was not brought to the notice of a later Bench."
It is also observed in the said decision as follows :
"A Division Bench in case of conflict between the decision of a Division Bench of two Judges and the decision of a larger Bench and in particular, a Constitution Bench, would be bound by the latter decision."
Per incuriam and sub-silentio have been explained in the said decision as follows :
"Per incuriam means a decision rendered by ignorance of a previous binding decision such as a decision of its own or of a court of co-ordinate or higher jurisdiction or in ignorance of the terms of a statute or of a rule having the force of law. A ruling making specific reference to an earlier binding precedent may or may not be correct, but cannot be said to be per incuriam. A decision passes sub-silentio, in the technical sense that has come to be attached to that phrase, when the particular point of law involved in the decision is not perceived by the court or present to its mind."
24. In Deddappa's case (supra), it has been held that if the insurer had informed all concerned about the cancellation of the policy and if the cancellation of the policy has been effected prior to the accident, then, the insurance company has to be exonerated from the liability distinguishing the three Bench decision of the Honourable Supreme Court in Inderjit Kaur's case (supra).
25. We are not going into those aspects now regarding the binding nature of the later Division Bench decision of the Honourable Apex Court because, in this case, admittedly, the insurer had not informed the Regional Transport Authority concerned about the cancellation of the policy. Merely because they have informed the insured alone they cannot claim exoneration from their liability to pay the amount to the third parties, which, they are bound to honour by virtue of Sections 147(5) and 149(1) of the Act. They are not entitled to contend that their liability is extinguished on account of cancellation of the policy, long prior to the accident. Further, in this case, it is seen from the documents produced before this Court, namely, Ext.A35 that the temporary permit was granted to this vehicle in the name of the first respondent from 5.12.2006 to 24.12.2006 on 5.12.2006, i.e., one day prior to the date of accident. If the insurer had informed about the cancellation of policy to the Regional Transport Officer concerned, then, they would not have issued the permit and the vehicle would not have been put on road, which would have prevented the unfortunate incident, resulting in injuries to several persons carried in the vehicle. A third party is entitled to board a public transport vehicle with the honest belief that the owner, the insurance company and the Regional Transport Authority must have properly complied with their respective duties, cast on them by the statute. Therefore, if a policy has already been issued, the cancellation thereof by the insurance company cannot affect the right of third parties, to claim payment of compensation by the insurance company as per the policy unless the cancellation of the policy has been communicated to all the persons concerned including the Regional Transport Authority and the Traffic Police appropriately. So, the lapses on the part of the insurance company in not informing the Regional Transport Officer concerned, who would not have issued the temporary permit if it was brought to their notice that there was no valid policy in force, would make the insurance company liable to pay the damages caused to the third party as per the policy issued by them in favour of the insured.
26. But, the insured cannot take the stand that he cannot be mulcted with the liability to return the amount. The repudiation made by one of the parties to the contract is binding on the other contracting party unless it was challenged by the other contracting party that it was not properly done. That was not done in this case. The insured has no case that he had paid the premium at any point of time before the repudiation and cancellation of the policy. Since insurance is "an uberima fide contract" (contract in good faith), the defaulting party cannot take advantage of the lapse of the insurance company. So, the insured cannot be exonerated from his liability to pay the amount to the insurer, which they were compelled to pay by virtue of the compulsory nature of the statutory provisions under Sections 146, 147 and 149 of the Act, but, they can pay the same to the injured third party and recover the same from the insured. So, the finding of the Tribunal that the Insurance Company is exonerated from their liability, relying on the decision reported in Deddappa's case (supra) without considering the principles laid down in that decision and without considering the question as to whether the insurer had informed all concerned regarding the cancellation of the policy to prevent the vehicle being put on road, is unsustainable in law and that finding is liable to be set aside and the insurer is liable to pay the amount to the appellant. But, they are entitled to recover the amount from the insured under Section 149(4) of the Act and the insured is liable to pay the amount to the insurance company, for which purpose, they need not initiate separate proceedings to recover the amount. So, the finding of the Tribunal that the Insurance Company is fully exonerated from the liability, is set aside and the insurance company is directed to pay to the appellant, the amount awarded by the Tribunal including the additional amount of Rs.48,680/-, awarded by this Court with 9% interest on the additional amount from the date of petition till the date of payment. Two month's time is granted to the insurance company to pay this amount. The insurance company can recover the amount from the insured under Section 149(4) of the Act.
With the above modification of the impugned award of the Tribunal, the appeal is disposed of.
S.SIRI JAGAN, JUDGE K.RAMAKRISHNAN,JUDGE sta
Source : https://indiankanoon.org/doc/189320443/