Case Note & Summary
The appeal was filed by the original claimants under Section 173 of the Motor Vehicles Act, 1988, aggrieved by the judgment of the Motor Accident Claims Tribunal, Nagpur, dismissing their claim petition under Section 166 of the Act. The claimants sought compensation of Rs.6 lakhs for the death of their son Pramod, who died in a road accident on 29/03/1991 when his motorcycle was hit by a truck bearing No.PCT8531. The truck was owned by respondent No.1 and insured with respondent No.2, National Insurance Company. The insurance company contended that the policy was issued in the name of one Buta Singh, not the owner, and that the cheque for premium was dishonoured, leading to cancellation of the policy before the accident. The Tribunal dismissed the claim petition, holding that the insurance company had cancelled the policy due to dishonour of cheque. The claimants appealed. The High Court examined the evidence, noting that the insurance company failed to prove that the cancellation was communicated to the insured or that the policy was effectively cancelled. The court held that mere issuance of a cancellation letter is insufficient; the insurer must prove receipt by the insured. Since the insurance company did not examine any witness or produce postal receipt, it failed to discharge its burden. The court also noted that the insurer had earlier challenged an interim award of Rs.25,000/- but withdrew the appeal. Relying on the principle that third party rights are protected, the court allowed the appeal, set aside the Tribunal's order, and directed the insurance company to pay compensation of Rs.1,50,000/- with interest at 6% per annum from the date of petition till realization.
Headnote
A) Motor Vehicles Act - Insurance - Liability of Insurer - Dishonour of Cheque - Cancellation of Policy - The insurance company cannot avoid liability merely by showing that the cheque for premium was dishonoured and a cancellation letter was issued; it must prove that the cancellation was communicated to the insured and that the policy was effectively cancelled before the accident. In the absence of such proof, the insurer remains liable to third parties. (Paras 5-7) B) Motor Vehicles Act - Compensation - No Fault Liability - Interim Award - The Tribunal had awarded Rs.25,000/- as no fault liability, which was challenged by the insurer but later withdrawn. The appeal against the main award was allowed, and the insurer was directed to pay compensation with interest. (Paras 3, 8)
Issue of Consideration
Whether the insurance company can avoid liability on the ground that the cheque issued for premium was dishonoured and the policy was cancelled without proving that the cancellation was communicated to the insured and the claimants?
Final Decision
Appeal allowed. The judgment of the Motor Accident Claims Tribunal, Nagpur dated 30/09/2002 in Claim Petition No. 131/1991 is set aside. The respondent No.2 - National Insurance Company is directed to pay compensation of Rs.1,50,000/- with interest at 6% per annum from the date of petition till realization. The amount already paid under no fault liability shall be adjusted. No order as to costs.
Law Points
- Insurance policy cancellation requires proof of communication to insured
- Dishonour of cheque does not automatically cancel policy
- Third party rights protected under Motor Vehicles Act
- 1988
