*THE HON’BLE MR JUSTICE R. KANTHA RAO + C.M.A.No.648 of 2001 % Dated 15.09.2010 # National Insurance Company Ltd. rep. by its B.M., Ongole. …Appellant And Oburi (oguri) Umamaheswara Rao and two others …Respondents ! Counsel for the Appellant: Mr.Ravi Shanker Jandhyala ^ Counsel for the Respondents:Mr.Nutalapati Krishna Murthy <GIST: > HEAD NOTE: ? Cases referred 1 2001 ACJ 638 2 1998 ACJ 123 3 2008 ACJ 581 4 AIR 2000 SC 1082 5 2009 ACJ 2556 6 2008 ACJ 2697 7 2009 ACJ 1867 8 2008 ACJ 284 9 2008 ACJ 222 10 2009 ACJ 2262 11 (2008) 7 SCC 526 12 2007 (3) ALT 568 13 2009 (4) ALD 711 142009(4) SCJ 122 THE HON’BLE MR JUSTICE R. KANTHA RAO C.M.A.No.648 of 2001 Date:15.09.2010 Between: National Insurance Company Ltd. rep. by its B.M., Ongole. …Appellant And Oburi (oguri) Umamaheswara Rao and two others …Respondents THE HON’BLE MR JUSTICE R. KANTHA RAO C.M.A.No.648 of 2001 JUDMENT: The National Insurance Company Limited, Ongole-2nd respondent before the Motor Accidents Claims Tribunal-cum- Additional District Judge, Ongole preferred the present appeal against the award dated 31.07.2000 passed by the Tribunal in O.P.No.26 of 1997. I have heard the learned counsel appearing for the appellant and the respondents. The question involved in the present appeal is as to when the cheque issued by the insured to the insurer towards payment of premium under the policy was dishonoured and in consequence thereof, the insurer cancels the insurance policy, whether the insurer is still liable to pay compensation to the claimants. It is the contention of the appellant-insurance company that the 3rd respondent-owner of the offending vehicle issued a cheque on 09.02.1996 towards premium amount and when it was presented it was dishonoured on 27.02.1996 and thereafter they informed the same to the owner under a letter by registered post on 04.03.1996, the letter was returned from the concerned with the endorsement that ‘the addressee was not found’, thereafter they issued another letter to the address given by the insured and subsequently on 27.02.1996 the cover note was canceled and therefore, the appellant-insurance company is not liable to indemnify the owner since the accident took place on 01.12.1996 i.e. 10 months after the cancellation of the cover note. On the other hand, the learned counsel appearing for the respondent would submit that since the owner of the offending vehicle had not received the information allegedly conveyed by the appellant-insurance company about the dishonour of the cheque and also cancellation of cover note is not informed to the R.T.A., the appellant-insurance company cannot disown its liability and therefore, it is liable to pay compensation to the claimants by indemnifying the owner of the vehicle. The learned Tribunal below however held that despite the bar created under Section 64-VB of the Insurance Act by reason of the provision of Section 147(5) and 149(1) of the Motor Vehicles Act, the insurance company is liable to indemnify the owner of the vehicle towards third party risk. In support of his contention, the learned counsel appearing for the respondent-owner of the vehicle relied upon the following decisions: i) NATIONAL INSURANCE COMPANY LTD. v. SEEMA MALHOTRA AND OTHERS[1] ii) ORIENTAL INSRUANCE COMPANY LTD. v. INDERJIT KAUR AND OTHERS[2] iii) DADDAPPA AND OTHES v. BRANCH MANAGER, NATIONAL INSURANCE CO.LTD.[3] iv) NEW INDIA ASSURANCE COMPANY LTD. v. RULA AND OTHERS[4] v) NATIONAL INSURANCE COMPANY LTD. v. SK. AHMEDUNNISA AND OTHERS[5] vi) NATIONAL INSURANCE COMPANY LTD. v. ABHAYSING PRATAPSING WAGHELA AND OTHERS[6] vii) UNITED INDIA INSURANCE CO.LTD. v. SANDHYA DEVI AND OTHERS[7] viii) NEW INDIA ASSURANCE CO.LTD. v. SONA DEVI AND OTHERS[8] ix) ORIENTAL INSURANCE CO.LTD. v. KASHAMMA AND OTHERS[9] x) ORIENTAL INSRUANCE CO.LTD. v. NEELU DEVI AND OTHERS[10] xi) NATIONAL INSURANCE CO.LTD. v. YELLAMMA AND ANOTHER[11]. and contended that since the appellant insurance company failed to establish that the notice regarding the dishonour of cheque and cancellation of cover note was received by the insured and in view of the fact that no opportunity was given to the insured to remit the premium, after the alleged dishonour of cheque, the appellant is still liable to pay the compensation to the third parties. I have gone through the judgments relied upon by the learned counsel appearing for the respondents. The facts of the cases covered by the said decisions were altogether different from the facts of the present case and moreover, the learned counsel in my view does not appear to have properly understood the settled legal position on this aspect as on today. In the present case, the appellant insurance company could be able to demonstrate before the learned Tribunal below by letting evidence viz. Ex.B-1 cheque issued by the insured to the appellant insurance company, Ex.B-2 cheque return memo, Ex.B-3 letter from Andhra Bank, Inkollu to Indian Overseas Bank, Chirala returning the cheque, Ex.B-4 letter of Indian Overseas Bank, Chirala, dated 01.03.1996 to the appellant insurance company, Ex.B-5 pay slip in favour of the appellant insurance company, Ex.B-6 copy of the letter addressed to the owner of the vehicle informing that the cheque issued by him towards premium was dishonoured for want of funds and the cover note No.18069 dated 09.02.1996 and policy No.6301631 stood cancelled and Ex.B-7 the returned envelop and acknowledgement with endorsement ‘no such addressee’. The question therefore arises whether it is necessary that the insured has to actually receive the communication (letter) sent by the insurance company. Admittedly, the insurance company sent Ex.B-7 to the address given by the insured and it was returned with the endorsement ‘no such addressee’. To substantiate his contention, the learned counsel appearing for the appellant insurance company relied on the following decisions: i) UNITED INDIA INSURANCE CO.LTD. v. A. NARAYANA REDDY AND OTHERS[12] wherein the learned single Judge of this Court referring to Sections 147 and 149 of Motor Vehicles Act, Section 64-VB of the Insurance Act, Sections 51, 52, 54 and 25 of the Contract Act held that the insurer has no liability to insured unless and until the premium payable is received by the insurer and when the cheque issued towards premium is dishonoured, insurer can repudiate the contract of insurance and the insurer can do so even after the accident. ii) MUNAGALA SRINIVASA RAO AND ANOTHER v. S. RAJENDRA SINGH AND OTHERS[13] wherein antoher single Judge of this Court referring to various judgments of the Apex Court, held that the liability of the insurance company would not arise in case of cancellation of policy on account of dishonour of cheque relating to the amount of premium and when the accident occurred after communication of cancellation of policy, cover containing ‘cancellation endorsement’ of policy sent to insured address found in policy but returned with postal endorsement ‘not known’, presumption of due service under Section 27 of General Clauses Act can be drawn, the presumption is rebuttable, unless contrary is proved, owner of lorry arrayed as party respondent, remaining ex parte, inference can be drawn that offending vehicle not covered by policy of insurance as on date of accident, insurance company cannot be held liable to pay compensation. iii) SUBODH S. SALASKAR v. JAYPRAKASH M. SHAH AND ANOTHER[14] the Supreme Court held as follows: “30 days time ordinarily must be held to be sufficient for service of notice under Section 27 of the General Clauses Act, under Section 27 of the General Clauses Act, a notice must be deemed to have been served in the ordinary course, unless contrary is proved. When the service of notice is sought to be effected by speed post, ordinarily service takes place within a few days. Even under Order V, Rule 9(5) C.P.C. summons is presumed to be served if it does not come back within thirty days. In such a situation, no occasion for the court to hold that service of notice could not be effected within a period of thirty days. Presumption of service, under the statute, would arise not only when it is sent by registered post in terms of Section 27 of General Clauses Act but such a presumption may be raised also under Section 114 of Evidence Act. Even when a notice is received back with an endorsement that the party has refused to accept, still then a presumption can be raised as regards the valid service of notice. Such a notice should be construed liberally.” If the ratio laid down in the above judgments is applied to the facts of the present case, the appellant insurance company could be able to prove that it had sent a letter to the insured conveying the information about the dishonour of cheque as well as cancellation of cover note and policy. The said letter was returned with endorsement that “no such addressee”. The said letter was sent by the insurance company on 27.02.1996 and the accident in the present case occurred on 01.12.1996 i.e. ten months after the cancellation of the policy by the insurance company and after conveying the said information to the insured by means of a letter. As has already been noticed the actual receipt of the notice or information sent by the insurance company by the insured is not a requirement under law. It is enough if the information is sent by the insurance company to the address furnished by the insured in the cover note or the policy. In the present case, the appellant insurance company substantially complied with the above requirement. Therefore, under law it is deemed that there is valid service of the letter on the insured. Thus, it is no longer open to the insured to contend that since he did not actually receive the letter sent by the insurance company, the insurance company is still liable to pay compensation to the claimants. The learned Tribunal below in my considered view was under misconception of fact situation as well as the legal position relating to the question involved. The Tribunal’s decision that the insurance company is liable to indemnify the owner of the vehicle in the facts and circumstances of the present case is wholly erroneous and the said finding is liable to be set aside in this appeal. Consequently, the order passed by the Tribunal to the extent holding that the appellant insurance company is liable to indemnify the owner (third respondent herein) and thereby to pay compensation to the claimants is set aside. The appeal is allowed. There shall be no order as to costs. _______________ R. KANTHA RAO, J Date:15.09.2010. Note: L.R.Copy to be marked. B/O ccm THE HON’BLE MR JUSTICE R. KANTHA RAO C.M.A.No.648 of 2001 Date:15-09-2010 [1] 2001 ACJ 638 [2] 1998 ACJ 123 [3] 2008 ACJ 581 [4] AIR 2000 SC 1082 [5] 2009 ACJ 2556 [6] 2008 ACJ 2697 [7] 2009 ACJ 1867 [8] 2008 ACJ 284 [9] 2008 ACJ 222 [10] 2009 ACJ 2262 [11] (2008) 7 SCC 526 [12] 2007 (3) ALT 568 [13] 2009 (4) ALD 711 [14] 2009(4) SCJ 122