An insurance policy commences at the expressly stipulated time, not upon premium payment.

The two appeals arose from the same motor-vehicle accident and challenged the award dated 27.07.1999, by which the Motor Accident Claims Tribunal held the appellant-insurer liable to indemnify the insured and awarded compensation to the claimants.

The vehicle’s cover note was issued on 26.12.1995, but the insurance policy expressly stipulated that coverage would commence at 00:00 hours on 27.12.1995 and continue until midnight on 26.12.1996.

The accident occurred on 26.12.1995 at approximately 9:30 a.m., before the stipulated commencement of coverage.

The Tribunal nevertheless held that payment of the premium on 26.12.1995 made the policy operative on that date and fastened liability upon the insurer.

Whether an insurance policy issued on 26.12.1995 but expressly made effective from 00:00 hours on 27.12.1995 covered an accident occurring at 9:30 a.m. on 26.12.1995?

Whether payment of the premium and issuance of the cover note on 26.12.1995 could override the express commencement date stipulated in the policy?

Whether the insurer was liable to indemnify the insured for compensation arising from the accident, or whether liability rested solely upon the driver and owner?

The Court applied the contractual principle that an insurance policy constitutes a contract, and the insurer and insured are bound by its express terms and conditions.

Where no commencement time is specified, a policy obtained during the day may ordinarily be treated as commencing from the preceding midnight, as recognised in New India Assurance Co. Ltd. v. Ram Dayal and Others, (1990) 2 SCC 680.

However, where the policy or cover note contains a specific commencement date or time, that express stipulation governs, and coverage begins only from the time specified.

This principle was affirmed in M/s National Insurance Co. Ltd. v. Smt. Jijubhai Nathuji Dabhi, (1997) 1 SCC 66, New India Assurance Co. Ltd. v. Smt. Sita Bai and Others, (1999) 7 SCC 575, and Oriental Insurance Co. Ltd. v. Porselvi and Another, (2009) 15 SCC 116.

Thus, payment of premium or issuance of a cover note cannot displace an express contractual commencement date.

The policy and cover note were issued on 26.12.1995, but expressly provided that insurance would commence at 00:00 hours on 27.12.1995.

Since the accident occurred at 9:30 a.m. on 26.12.1995, the policy had not yet become operative.

The Court distinguished cases applying the previous-midnight rule because those cases concerned policies that did not specify a contrary commencement time.

Here, the parties had entered into a specific contractual arrangement, and both were bound by it.

The Tribunal therefore erred in treating payment of premium on 26.12.1995 as sufficient to activate coverage before the expressly agreed time.

The Tribunal’s finding on Issue No. 7 fastening liability upon the insurer was reversed, and the appellant-insurer was exonerated from the obligation to indemnify the insured.

The driver and owner were held jointly and severally liable to pay the compensation awarded to the claimants.

Any pending miscellaneous applications were also disposed of, and a copy of the judgment was directed to be placed on the connected case file.