Case Note & Summary
The New India Assurance Company Limited appealed against the judgment of the Motor Accident Claims Tribunal which held the Insurance Company jointly and severally liable with the owner of the vehicle to pay compensation to the claimants. The accident occurred on 9-5-1994. The insurance policy had been issued on 6-12-1993 upon payment of premium by cheque. The cheque was dishonoured, and the Insurance Company sent a letter by Registered Post Acknowledgment Due on 31-12-1993 informing the insured that the policy was cancelled due to dishonour of the cheque. Thus, on the date of the accident, there was no valid insurance policy in existence. The Tribunal had relied on the Supreme Court judgment in Oriental Insurance Co. Ltd. v. Inderjit Kaur and Ors. (AIR 1998 SC 588) to hold the insurer liable. However, the High Court distinguished that case because in Inderjit Kaur, the accident occurred before the insurer communicated the cancellation, whereas in the present case, the cancellation was communicated five months before the accident. The High Court held that the Insurance Company was not liable as the policy stood cancelled prior to the accident. The appeal was allowed, and the Insurance Company was exonerated from liability. The claimants were directed to recover the compensation from the owner of the vehicle.
Headnote
A) Motor Vehicles Act - Insurance - Liability of Insurer - Cheque Dishonour - Cancellation of Policy - Where the premium cheque was dishonoured and the insurer cancelled the policy and informed the insured by registered post before the accident, the insurer is not liable to pay compensation to third parties. The judgment in Oriental Insurance Co. v. Inderjit Kaur (AIR 1998 SC 588) distinguished on facts as in that case the accident occurred before the insurer communicated cancellation. (Paras 3-6)
Issue of Consideration
Whether the Insurance Company is liable to pay compensation when the insurance policy was cancelled due to dishonour of the premium cheque prior to the accident.
Final Decision
Appeal allowed. The judgment of the Tribunal holding the Insurance Company liable is set aside. The Insurance Company is exonerated from liability. The claimants are entitled to recover the compensation amount from the owner of the vehicle.
Law Points
- Insurance policy cancellation due to cheque dishonour
- insurer's liability when policy cancelled before accident
- distinction from Oriental Insurance Co. v. Inderjit Kaur
