Case Note & Summary
The appeal arises from a claim petition under the Employees Compensation Act filed by the appellants, who are the legal heirs of the deceased worker. The deceased died in a motor vehicle accident on 13th May 2015 involving a vehicle owned by respondent No.2. The insurance policy for the vehicle was issued by respondent No.3 (Bajaj Allianz General Insurance Co.), but the premium cheque was dishonoured. The insurance company cancelled the policy on 23rd August 2014, well before the accident. The Commissioner for Workmen's Compensation and Judge, Labour Court (II), Aurangabad partly allowed the claim petition but dismissed the claim against the insurance company on the ground that there was no valid and effective insurance policy on the date of the accident. The appellants challenged this dismissal. The appellants argued that dishonour of cheque cannot be a ground to cancel the insurance policy, and that no intimation of cancellation was given to the RTO, so the policy remained valid. They relied on precedents including Eknath Shantaram Kunkolienkar v. Anthony Fernandes and Oriental Insurance Co. Ltd. v. Gitabai. The insurance company contended that the policy was cancelled long before the accident and that they had informed the owner. The court held that the insurance company failed to prove that the cancellation was communicated to the RTO as required under the Motor Vehicles Act. Therefore, the policy was not validly cancelled, and the insurance company is liable to pay compensation to the claimants. The court further held that even if the policy was cancelled, the insurance company would still be liable to pay compensation to third parties and could recover the amount from the owner. The appeal was allowed, and the insurance company was directed to pay compensation to the appellants with liberty to recover from the owner.
Headnote
A) Insurance Law - Motor Vehicle Insurance - Cancellation of Policy for Dishonour of Cheque - Liability to Third Parties - The court considered whether an insurance policy can be cancelled merely due to dishonour of the premium cheque without following statutory procedure. Held that dishonour of cheque alone does not automatically cancel the policy; the insurer must give notice to the insured and to the RTO. In the absence of such intimation, the policy remains valid and the insurer is liable to pay compensation to third parties, with a right to recover from the owner. (Paras 1-5) B) Insurance Law - Workmen's Compensation - Pay and Recover - Even if policy is cancelled, insurance company is liable to pay compensation to claimants and may recover the amount from the vehicle owner. The court applied the principle that the insurer must indemnify the third party and then seek recovery from the insured. (Para 5)
Issue of Consideration
Whether the insurance company is liable to pay compensation to the claimants when the insurance policy was cancelled due to dishonour of the cheque paid as premium, and whether the cancellation was valid and effective.
Final Decision
Appeal allowed. The order of the Commissioner dismissing the claim against the insurance company is set aside. The insurance company is directed to pay compensation to the appellants with liberty to recover the same from the vehicle owner.
Law Points
- Insurance policy cancellation due to dishonour of cheque
- liability of insurance company to third parties
- requirement of intimation to RTO for valid cancellation
- pay and recover principle
