Case Note & Summary
The Oriental Insurance Co. Ltd. appealed against the judgment and award dated 7th November 2008 passed by the Motor Accident Claims Tribunal, Akola in M.A.C.P. No. 27 of 2007. The Tribunal had partly allowed the claim petition and directed the owner of the offending vehicle to pay compensation of Rs. 1,95,000 with interest at 7% per annum to the claimants, but in the peculiar circumstances, directed the appellant insurance company to pay the amount to the claimants in the first place and granted liberty to recover the same from the owner with interest. The insurance company challenged only this pay-and-recover direction. The facts reveal that the owner issued a cheque dated 21st August 2006 towards premium for the insurance policy, which was dishonoured for want of sufficient funds. The bank intimated the appellant on 28th September 2006, and the appellant intimated the owner on 4th October 2006 about the dishonour. The accident occurred on 5th October 2006. The appellant contended that since the cheque was dishonoured, there was no valid policy and thus no liability to pay. The court considered the legal position that under the Motor Vehicles Act, the insurer is liable to indemnify third-party claimants even if the premium is not paid, as the policy remains valid until cancelled after proper notice. The court upheld the Tribunal's direction, holding that the insurance company must pay the compensation to the innocent third-party claimants and then recover the same from the owner. The appeal was dismissed.
Headnote
A) Motor Vehicle Insurance - Dishonoured Cheque - Pay and Recover - Section 149, Section 147 Motor Vehicles Act, 1988 - The insurer is liable to indemnify third-party claimants even if the premium cheque was dishonoured, as the policy is valid until cancellation after notice. The Tribunal's direction to pay first and recover from the owner is upheld to protect innocent third parties. (Paras 1-3)
Issue of Consideration
Whether the Motor Accident Claims Tribunal can direct the insurance company to pay compensation to third-party claimants and then recover the same from the insured owner when the cheque issued for premium was dishonoured before the accident.
Final Decision
The appeal is dismissed. The direction of the Tribunal that the appellant insurance company shall pay the amount of compensation to the claimants in the first place and then recover the same from the owner of the vehicle with interest is upheld.
Law Points
- Motor vehicle insurance
- dishonoured cheque
- pay and recover
- third-party liability
- Section 149 Motor Vehicles Act
- 1988
- Section 147 Motor Vehicles Act
Case Details
2017 LawText (BOM) (12) 111
First Appeal No. 109 of 2009
Mr. Lalit Limaye for appellant, Mrs. Jyoti Dharmadhikari for respondent nos. 1 to 3
The Oriental Insurance Co. Ltd.
Vijay Ramchandra Kale, Dhiraj s/o Ramchandra Kale, Smt. Meerabai w/o Ramchandra Kale, Nitin s/o Motiram Paturde
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Nature of Litigation
First appeal against judgment and award of Motor Accident Claims Tribunal in a motor accident claim petition.
Remedy Sought
The appellant insurance company sought to set aside the direction to pay compensation to claimants first and then recover from the owner.
Filing Reason
The insurance company challenged the Tribunal's direction to pay compensation to third-party claimants and recover from the owner, contending that the policy was void due to dishonour of the premium cheque.
Previous Decisions
The Motor Accident Claims Tribunal, Akola partly allowed M.A.C.P. No. 27 of 2007 on 7th November 2008, directing the owner to pay Rs. 1,95,000 with interest, but directed the insurance company to pay first and recover from the owner.
Issues
Whether the insurance company can be directed to pay compensation to third-party claimants and recover from the owner when the premium cheque was dishonoured before the accident.
Submissions/Arguments
The appellant argued that since the cheque issued by the owner for premium was dishonoured, there was no valid insurance policy and thus no liability to pay compensation.
The respondents (claimants) supported the Tribunal's order, seeking compensation from the insurer.
Ratio Decidendi
Under the Motor Vehicles Act, 1988, the insurer is liable to indemnify third-party claimants even if the premium cheque is dishonoured, as the policy remains valid until cancelled after proper notice. The Tribunal's direction to pay first and recover from the owner is valid to protect innocent third parties.
Judgment Excerpts
By partly allowing the petition, though owner of the offending vehicle, ori.respondent no.1, is directed to pay amount of compensation to the extent of Rs.1,95,000/ with interest at the rate of 7% P.A. upon it from the date of petition till its realization, inclusive amount of no fault liability of Rs.50,000/, looking to the peculiar circumstance, appellant is directed to pay said amount to claimants in the first place, and is granted liberty to recover the same from, the owner of the vehicle with interest.
Procedural History
The Motor Accident Claims Tribunal, Akola passed the judgment and award on 7th November 2008 in M.A.C.P. No. 27 of 2007. The insurance company filed First Appeal No. 109 of 2009 before the Bombay High Court, Nagpur Bench. The appeal was reserved on 22nd November 2017 and pronounced on 4th December 2017.
Acts & Sections
- Motor Vehicles Act, 1988: Section 149, Section 147
