FAO No. 4562 of 2009 (O&M) 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH FAO No. 4562 of 2009 (O&M) Date of decision: 26.9.2011 Reliance General Insurance Company Ltd. ...Appellant Versus Smt.Saroj and others ...Respondent CORAM: HON'BLE MR.JUSTICE JITENDRA CHAUHAN Present: Mr.Subhash Goyal, Advocate for the appellant Mr.Ashish Aggarwal, Advocate for respondent No.5- Owner *** JITENDRA CHAUHAN, J.(Oral) The present appeal has been filed by the appellant-Insurance Company against the award dated 1.6.2009, passed by learned Motor Accident Claims Tribunal, Gurgaon (for short 'the Tribunal') vide which the claim petition of the claimants was allowed. I have heard learned counsel for the parties and perused the case file. The dispute pertains to the validity of the Insurance Policy Ex.R-1 issued in favour of the respondent by the appellant-Insurance Company. The appellant issued the Insurance Policy Certificate dated 25.8.2007 in favour of the respondent against the vehicle bearing registration No.HR-46-D-0067, which was valid from 25.8.2007 to 24.8.2008. The respondent issued a cheque No.945057 dated 25.8.2007 FAO No. 4562 of 2009 (O&M) 2 towards premium against the policy issued. The said cheque issued by the respondent was dishonoured by the banker with the report 'insufficient funds'. The appellant- Insurance Company informed the policy holder i.e. the owner, regarding dishonour of the said cheque, vide notice dated 1.11.2007 (Ex.R2), which was received by him on 15.11.2007. The accident in question took place on 24.9.2007. The owner -policy holder has failed to place on record any document that there were sufficient funds in his account and the cheque was wrongly dishonoured by the Banker. It is further clear from the evidence that on receipt of the notice, respondent issued another cheque in pursuance thereof, another policy commencing from 15.11.2007 to 14.11.2008 was issued. From the facts, it is clear that regarding first policy i.e. Dated 25.8.2007 till the date of accident i.e. 24.9.2007, no premium had been paid towards the policy issued by the appellant. Learned counsel for the appellant has placed reliance upon the judgment delivered in re: National Insurance Co. Ltd. vs. Seema Malhotra 2001(2) RCR (Civil), 456 wherein the Hon'ble Supreme Court has held as under:- “In a contract of insurance when an insurer gives a cheque towards payment of premium or part of the premium, such a contract consists of reciprocal promise. The drawer of the cheque promises the insurer that the cheque, on presentation, would yield the amount in cash. It cannot be forgotten that a cheque is a Bill of Exchange drawn on a specified banker. A Bill of Exchange is an instrument in writing FAO No. 4562 of 2009 (O&M) 3 containing an unconditional order directing a certain person to pay a certain sum of money to a certain person. It involves a promise that such money would be paid. Thus, when the insured fails to pay the premium promised, or when the cheque issued by him towards the premium is returned dishonoured by the bank concerned the insurer need not perform his part of the promise. The corollary is that the insured cannot claim performance from the insurer in such a situation. Under Section 25 of the Contract Act an agreement made without consideration is void. Section 65 of the Contract Act says that when a contract becomes void any person, who has received any advantage under such contract is bound to restore it to the person from whom he received it. So, even if the insurer has disbursed the amount covered by the policy to the insured before the cheque was returned dishonoured, insurer is entitled to get the money back. However, if the insured makes up the premium even after the cheque was dishonoured but before the date of accident it would be a different case as payment of consideration can be treated as paid in the order in which the nature of transaction required it. As such an event did not happen in this case the insurance company is legally justified in refusing to pay the amount claimed by the respondents.” Similar view has also been taken in re:Deddappa and others vs. The Branch Manager, National Insurance Co. Ltd. 2008(1) RCR (Civil) 402. FAO No. 4562 of 2009 (O&M) 4 Learned counsel for the respondent has relied upon the judgment delivered in National Insurance Co. Ltd. vs. Abhaysing Pratapsing Waghela and ors. 2008(4) RCR (Civil) 173, wherein the Hon'ble Supreme Court has held that despite the fact that cheque was dishonoured, but the insurance cover was not cancelled by the Insurance company, it was held that liability of the Insurance company towards third party would not be affected by such later cancellation. In the instant case, the insurance policy came into force on 25.8.2007. The accident took place on 24.9.2007. The cheque was dishonoured on 14.12.2007. An intimation regarding dishonour of the cheque was sent on 27.10.2007. Once a certificate of insurance i.e. Cover note is issued by the company in favour of the policy holder-owner, the insurance company would not be absolved of its obligation to third party till the policy is specifically rescinded by way of intimation regarding dishonouring of cheque for any reason whatsoever. The policy holder has reason to believe that on the date of the accident, he had a valid policy. In view of the above legal position, the present appeal is allowed and the appellant-Insurance Company is granted rights to recover the money from the owner of the offending vehicle. 26.9.2011 (JITENDRA CHAUHAN) gsv JUDGE Note: Whether to be referred to the Reporter? Yes/No.