Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5305 OF 2008
(Arising out of SLP (C) No.18068 of 2006)
National Insurance Co. Ltd. … Appellant
Versus
Abhaysing Pratapsing Waghela & Ors. … Respondents
J U D G M E N T
S.B. Sinha, J.
1. Leave granted.
2. What would the effect of dishonour of a cheque when
subsequently the amount of premium has been accepted in cash by the
insurer is the question involved herein.
3. First respondent was driving a moped on 27.1.1995. An accident
took place on the said date as the said vehicle was hit by a truck bearing
registration No.GJ 6T 7000 which was allegedly being driven in a rash
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and negligent manner. The said truck first dashed against an
Ambassador car and then hit the moped which was being driven by the
respondent as a result whereof he suffered severe injuries.
4. For the purpose of getting the said truck insured, a cheque was
tendered to the officers of the appellant company on 23.1.1995. As
noticed hereinbefore the accident took place on 27.1.1995. The cheque
when presented to the bank for clearance was allegedly dishonoured. On
30.1.1995, however, the amount of premium was paid in cash and
received.
5. The Motor Vehicle Accident Claims Tribunal as also the High
Court, however, opined that having regard to the fact that a cover note
had been issued by the appellant, it was legally obligated to reimburse
the claim of a third party.
6. Ms. Pankaj Bala Verma, learned counsel appearing on behalf of
the appellant, would submit that in terms of Section 64VB of the
Insurance Act, a contract of insurance issued would be valid only when
the cheque issued towards payment of the premium is honoured. The
learned counsel would urge that cheque is an instrument in terms
whereof payment is guaranteed and it is accepted as a valid payment only
on that premise but when it is dishonoured, the contract being without
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consideration need not be performed. It was furthermore contended that
the learned Tribunal as also the High Court committed a serious error
insofar as they failed to correctly read the Motor Input Advice cum
Receipt showing that the insurance was valid from 23.1.1995 to
22.1.1996. It was submitted that no cover note, in fact, was issued; and
what was issued was merely a money receipt which itself shows that the
same was valid subject to the realization of the amount.
7. Strong reliance in this behalf was placed on Deddappa & Ors. V.
Branch Manager, National Insurance Company Ltd. [(2008) 2 SCC 595].
8. Mr. Jatin Zaveri, learned counsel appearing on behalf of the
respondent, on the other hand, contended that a cover note, in fact, was
issued on 23.1.1995 in favour of the insurer. The learned counsel
submitted that not only the said fact was admitted in the pleadings of the
insurance company but also the witness examined on behalf of the
appellant took the same stand before the Tribunal as also before the High
Court. Our attention in this behalf has also been drawn to the grounds of
appeal taken in the Special Leave Petition.
9. The objection taken by the appellant in its written statement reads
as under :
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“It is hereby submitted that in this case
applicant had not produced any documentary
evidence pertaining to policy of involved
vehicle except Cover Note, and in legal sense
cover note is not authentic document, more
over this cover note which was produced by the
applicant shows cheque payment and if cheque
does not realized then the contract of insurance
does not exists and hence replying opponent
does not liable to pay compensation and it is
established principal that if replying opponent
does not received premium that its liability does
not exists. And in this regard replying
opponent reserves it all right without prejudice
this averments.”
10. Appellant, therefore, proceeded on the basis that a cover note was,
in fact, issued. Yet again, a similar contention has been raised before the
Tribunal as would appear from the following excerpts from the award:
“However, as per the contention raised by the
Ld. Advocate for the applicant, the contract of
insurance and policy the alleged vehicle were
not in existence as on the date/date of
occurrence; that the cheque issued was
dishonoured and, therefore, the cover note it
had issued becomes ineffective and as such, no
policy obliging to pay the compensation by the
insurer exists on the day of occurrence and
therefore, the opponent No.3 cannot be held
liable to indemnify the third party and/or the
Insurer be absolved of its obligations to third
party because of non-receiving of the premium.
In support thereof, the Ld. Advocate for the
opponent No.3 placed strong reliance on the
propositions of law laid down in 2002 (1) AJR
168, 1991 ACJ 650.”
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Apart from the same, even before us in the Special Leave Petition,
the appellant, after quoting a decision of the Madhya Pradesh High Court
in United India Insurance Company Ltd. V. Rattan Singh & Ors. [AIR
1993 MP 197], stated the following :
“Similar is the case in hand and is squarely
covered by this judgment. It is also a case
where it had not issued any policy but was
cover note and that too was cancelled when the
cheque was bounced and also prior to the date
of accident itself.”
11. A bare perusal of the receipt would show that not only the same
contains a column relating to “Class Code” but also a “Cover Note
Number”. No contention had been raised that the number purported to
be noted against the column of “Cover Note Number”, in fact,
represented the class code. “Class code” has been stated within a box
being 217, The purported “Cover Note” said to be bearing no. 279106 is
rubber stamped. It is not within the box meant to state the “Class Code”.
No material has been placed before the Tribunal to state the “Class
Code” number would not only be contained within the box but also
would be rubber stamped separately.
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12. We might have accepted the explanation of the appellant before us
that the said number 279106 is, in fact, continuation of the class code
No.217, but, as indicated hereinbefore, the stand taken by the appellant
not only before the courts below but also before us is otherwise.
13. The Motor Vehicles Act, 1988 (for short, “the Act”) was enacted
to consolidate and amend the law relating to motor vehicles. Chapter XI
of the Act provides for insurance of motor vehicles against third party
risks.
Section 145 of the Act is the definition section; clause (b) whereof
defines ‘certificate of insurance’ to mean a certificate issued by an
authorized insurer in pursuance of sub-section (3) of Section 147 and
includes a cover note complying with such requirements as may be
prescribed, and where more than one certificate has been issued in
connection with a policy, or where a copy of a certificate has been
issued, all those certificates or that copy, as the case may be.
Clause (d) of Section 145 defines ‘policy of insurance’ to include
‘certificate of insurance’.
Section 146 of the Act mandates that no person, except as a
passenger, shall use or cause or allow any other person to use, a motor
vehicle in a public place, unless there is in force in relation to the use of
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the vehicle by that person or that other person, as the case may be, a
policy of insurance complying with the requirements of this Chapter.
Section 147 provides for the requirements of policies and limits of
liability in the following terms :
“ (a) is issued by a person who is an authorised
insurer; or
(b) insurer the person or classes of persons
specified in the policy to the extent specified in
sub- section (2)-
(i) against any liability which may be incurred
by him in respect of the death of or bodily
injury to any person, including owner of the
goods or his authorised representative carried
in the vehicle or damage to any property of a
third party caused by or arising out of the use
of the vehicle in a public place;
(ii) against the death of or bodily injury to any
passenger of a public service vehicle caused by
or arising out of the use of the vehicle in a
public place.”
A proviso has been appended thereto, which reads as under :
“Provided that a policy shall not be required-
(i) to cover liability in respect of the death,
arising out of and in the course of his
employment, of the employee of a person
insured by the policy or in respect of bodily
injury sustained by such an employee arising
out of and in the course of his employment
other than a liability arising under the
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Workmen's Compensation Act, 1923 (8 of
1923) in respect of the death of, or bodily
injury to, any such employee-
(a) engaged in driving the vehicle, or
(b) if it is a public service vehicle engaged as
conductor of the vehicle or in examining
tickets on the vehicle, or
(c) if it is a goods carriage, being carried in the
vehicle, or
(ii) to cover any contractual liability.”
14. An insurance company, however, is entitled to deny its liability to
indemnify the owner of the vehicle on limited grounds as provided for
under sub-section (2) of Section 149 thereof.
15. One of the grounds which are available to the insurance company
to deny its statutory liability as envisaged under sub-section (2) of
Section 149 of the Act is that the policy is void on the ground that it was
obtained by the non-disclosure of a material fact or by a representation of
fact which was false in some material particulars.
16. Indisputably, the first respondent is a third party in relation to the
contract of insurance which had been entered into by and between the
appellant and the owner of the vehicle in question. We have noticed
hereinbefore that a document was produced before the Tribunal. Even
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according to the appellant, although it was only a Motor Input Advice
cum Receipt, it contained the Cover Note No. 279106. We, therefore,
have to suppose that a Cover Note had, in fact, been issued. If a Cover
Note had been issued which in terms of clause (b) of sub-Section 1 of
Section 145 of the Act would come within the purview of definition of
certificate of insurance; it also would come within the purview of the
definition of a insurance policy. If a Cover Note is issued, it remains
valid till it is cancelled. Indisputably, the insurance policy was cancelled
only after the accident took place. A finding of fact, therefore, has been
arrived at that prior to the deposit of the premium of insurance in cash by
the owner of the vehicle, the cover note was not cancelled.
17. It is in the aforementioned situation, we are of the opinion, that the
judgment of the High Court cannot be faulted. No doubt, a contract of
insurance is to be governed by the terms thereof, but a distinction must
be borne in mind between a contract of insurance which has been entered
into for the purpose of giving effect to the object and purport of the
statute and one which provides for reimbursement of the liability of the
owner of the vehicle strictly in terms thereof. In that limited sense, a
contract of insurance entered into for the purpose of covering a third
party risk would not be purely contractual. We may place on record that
an ordinary contract of insurance does not have a statutory flavour. The
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Act merely imposes an obligation on the part of the insurance company
to reimburse the claimant both in terms of the Act as also the Contract.
So far as the liability of the insurance company which comes within the
purview of Sections 146 and 147 is concerned, the same subserves a
constitutional goal, namely, social justice. A contract of insurance
covering the third party risk must, therefore, be viewed differently vis-à-
vis a contract of insurance qua contract.
18. In National Insurance Co. Ltd. v. Laxmi Narain Dhut [(2007) 3
SCC 700], this Court opined:
“23. As noted above, there is no contractual relation
between the third party and the insurer. Because of
the statutory intervention in terms of Section 149, the
same becomes operative in essence and Section 149
provides complete insulation.
24. In the background of the statutory provisions,
one thing is crystal clear i.e. the statute is beneficial
one qua the third party. But that benefit cannot be
extended to the owner of the offending vehicle. The
logic of fake license has to be considered differently
in respect of third party and in respect of own damage
claims.”
The same view was reiterated in Oriental Insurance Co. Ltd. v.
Meena Variyal & Ors. [(2007) 5 SCC 428] stating:
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“14. The object of the insistence on insurance under
Chapter XI of the Act thus seems to be to
compulsorily cover the liability relating to their
person or properties of third parties and in respect of
employees of the insured employer, the liability that
may arise under the Workmen's Compensation Act,
1923 in respect of the driver, the conductor and the
one carried in a goods vehicle carrying goods.”
This Court in Oriental Insurance Co. Ltd.v. Sudhakaran K.V. and
Ors. [2008 (8) SCALE 402] held:
“14. The provisions of the Act and, in particular,
Section 147 of the Act were enacted for the
purpose of enforcing the principles of social
justice. It, however, must be kept confined to a
third party risk. A contract of insurance which is
not statutory in nature should be construed like
any other contract.”
This Court in Oriental Insurance Co. Ltd. v. Inderjeet Kaur [(1998)
1 SCC 71] held that once a certificate of insurance is issued, the
insurance company would not be absolved of its obligations to third
parties
Yet again in Deddappa & Ors. V. Branch Manager, National
Insurance Co. Ltd. [(2008) 2 SCC 595], having regard to the provisions
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contained in Section 54(v) of the Insurance Act, 1938, in the fact
situation obtaining therein, it was opined :
“A contract is based on reciprocal promise.
Reciprocal promises by the parties are
condition precedents for a valid contract. A
contract furthermore must be for
consideration.”
19. We, therefore, in the facts and circumstances of the case, are
unable to agree with the contention of the learned counsel for the
appellant.
In any event, this is a case where this Court should not exercise its
discretionary jurisdiction under Article 136 of the Constitution of India
as only a sum of Rs.46,000/- is awarded in favour of respondent No.1.
20. In our opinion, the impugned judgment does not warrant any
interference. The Appeal is dismissed with costs. Counsel’s fee assessed
at Rs.25,000/-.
….…………………….J.
[S.B. Sinha]
….…………………….J.
[Cyriac Joseph]
1
New Delhi;
August 29, 2008