Case Note & Summary
The case arises from a motor accident on 18th May 2000, where the deceased Laxman Kadve was driving his jeep when a travel bus driven rashly and negligently collided with his jeep, causing his death. The legal heirs of the deceased filed a claim petition before the Motor Accident Claims Tribunal, Nagpur. The insurance company, National Insurance Co. Ltd., contested the claim on the ground that the policy issued to the owner of the bus had been cancelled prior to the accident due to dishonour of the cheque issued for premium. The cheque was returned unpaid with endorsement 'not arranged for', and the policy was cancelled on 11th January 2000. The insurance company argued that it was not liable to pay compensation as the vehicle was not insured on the date of accident. The Tribunal, however, directed the insurance company to first pay the awarded amount and then recover the same from the owner of the offending bus. The insurance company appealed against this direction. The High Court, after considering the facts and submissions, upheld the Tribunal's order, holding that the insurance company is liable to pay compensation to third parties even if the policy was cancelled due to dishonour of cheque, as the cancellation was not communicated to the third party. The court affirmed the 'pay and recover' direction, allowing the insurance company to recover the amount from the owner.
Headnote
A) Motor Accident Claims - Pay and Recover - Insurance Policy Cancellation - Cheque Dishonour - The insurer is liable to pay compensation to third parties even if the policy was cancelled due to dishonour of cheque, as the cancellation was not communicated to the third party. The insurer must pay the awarded amount and then recover from the owner. (Paras 1-3)
Issue of Consideration
Whether the insurance company is liable to pay compensation to third parties when the policy was cancelled due to dishonour of cheque before the accident, and whether the direction to pay and recover from the owner is justified.
Final Decision
The appeal is dismissed. The judgment and award dated 24th December 2019 passed by the Member, Motor Accident Claims Tribunal-3, Nagpur in MACP No. 501 of 2000 is confirmed. The appellant/insurance company is directed to pay the awarded amount to the claimants and then recover the same from the owner of the offending bus.
Law Points
- Motor Accident Claims
- Pay and Recover
- Insurance Policy Cancellation
- Cheque Dishonour
- Liability of Insurer
- Third Party Rights
